RANE NASTECH LTD. Vs. CC

JUDGEMENT

(1.) THE appellants are a Joint Venture (JV) company which was established in February 1997 with (1) M/s. Rane (Madras) Ltd. (2) M/s. NSK Ltd., Japan and (3) M/s. Torrington Co., U.S.A. as its partners and reconstituted in December 2000 with (1) M/s. Rane Investments Ltd. and (2) M/s. NSK Ltd., Japan as its partners. The JV company was established for the purpose of manufacture of solid and energy -absorbing "steering columns" and "steering joint assemblies" for automobiles, for which purpose the company entered into "Licence and Technical Assistance Agreements" with M/s. NSK Ltd., Japan, M/s. Nastech Europe Ltd., UK and M/s. Torrington Co., USA. The agreement with NSK Ltd., Japan was entered into on 23.2.1997 and, thereunder, M/s. NSK Ltd., were to provide technical documents (vide Article III) and technical assistance (vide Article IV) to the appellants for manufacture of steering columns and steering joint assemblies (licensed products) for Maruti, Honda, Teclo and Hyundai cars. A similar Licence and Technical Assistance Agreement with Nastech Europe Ltd. executed on 12.12.1997 provided for grant of technical documents and assistance by the said company to the appellants for manufacture of steering columns and steering joint assemblies for Ford vehicles. The appellants also entered into a similar agreement with Torrington Co., USA on 12.12.1997, which provided for grant of similar technical know -how and assistance by Torrington Co. to the appellants for manufacture of steering columns and steering joint assemblies for Ford Escort model and Fiat Uno model cars. During October 1997 to December 20?0, the appellants imported components/spares, capital goods, tools etc. from their collaborators for the purpose of manufacturing steering columns and steering joint assemblies for automobiles. A total amount of USD 1,65,000/ - was payable as technical documents fees by them to the foreign collaborators under the Licence and Technical Assistance Agreements. The Dy. Commissioner (Special Valuation Branch) held that this fee was addable to the transaction value of the imported goods, under Rule 9(1)(c) of the Customs Valuation Rules, 1988. The first appellant authority, after a perusal of the Licence and Technical Assistance Agreements concurred with the view taken by the lower authority and held that the amount was relatable to the imports and, therefore, addable to the transaction value of the goods under Rule 9(1)(c). The present appeal is against the order passed by the Commissioner (Appeals).

(2.) HEARD both sides. Ld. counsel for the appellants submitted that the technical documents fees payable by them to their foreign collaborators was not at all related to the goods imported and that such payment was not a condition of sale of the said goods. Therefore, it was argued, Rule 9(1)(c) was not applicable. Counsel pointed out that the appellants had substantially reduced the quantum of imports under the above agreements over the years. In the year 1999 -2000, the imports were to the extent of 79% of the total material cost. The import content of the total material cost for the manufacture of the licensed products was gradually reduced over the years and, accordingly, it was approximately 45% in 2003 -2004. However, the payments due to the technical collaborators remained the same, irrespective of the reduction in the quantum of imports. On this basis, earned Counsel contended that the technical know -how fee had no relation to the imported components. It was also submitted that the appellants were not required to pay technical know -how fee as a condition of sale of the components imported. Ld. counsel relied on the Tribunal's larger bench decisions in the cases of S.D. Technical Service v. CC 2003 (56) ELT 970 (LB) : 2003 (109) ECR 387 (T -LB) and Panalfa Dongwon India Ltd. v. CC 2003 (56) RLT 962 (LB) : 2003 (109) ECR 254 (T -LB). He argued that, as there was no relation between the technical know -how fee and the import of components and as the appellants were not liable to pay the fee, directly or indirectly, as a condition of sale of the said goods, the fee was not includible in the assessable value of the goods under Rule 9(1)(c). Ltd. DR reiterated the findings of the Commissioner (Appeals).

(3.) WE have carefully examined the terms and conditions of the Licence and Technical Assistance Agreements and have considered the submissions of both sides. The provisions of three Licence and Technical Assistance Agreements are part materia. Steering columns and Steering joint assemblies are the "licensed products" and it is for the manufacture of these products that technical documents and assistance were provided to the appellants by their foreign collaborators. This position is crystal clear from the provisions of the Agreements. Each agreement defines "Know -how" as "all information and knowledge, tangible or intangible, reasonably necessary to enable Licensee to manufacture and assemble Steering Columns and to assemble Steering Joints". This "know -how" is part of the licence granted to the appellants by each of their technical collaborators. For instance, Article 2.1 of one of the Agreements reads thus: