R. STAHL PVT. LTD. Vs. CC

JUDGEMENT

(1.) THE appellants imported components of explosion proof systems form M/s. R. STAHL SCHALTGERATE GmbH (West Germany) for the purpose of manufacture of the licensed products listed in Appendix I to the Licence Agreement dated 21.4.1989 entered into between them. Article 2(A)(a) of the Licence Agreement reads thus: "Licensor (German Company) hereby grants the licensee (appellant) an exclusive right for the manufacture, fabrication, assembly, sale and installation of the Licensed Products in the Exclusive Territory and to use the patents and trademarks registered by Licensor." Article 3 of the Agreement laid down the Licensor's obligations to provide technical information and services to the licensee. Clause (a) of Article 3 reads thus:

(2.) THE Deputy Commissioner of Customs (Special Valuation Branch) held that the technical know -how fee of DM 1,00,000/ - was liable to be included in the transaction value of the components imported by the appellants, under Rule 9(1)(c) of the Customs Valuation Rules, 1988. This view of the original authority was upheld by the first appellate authority. Hence the present appeal.

(3.) HEARD both sides. Ld. Consultant for the appellants submitted that the technical know -how fee (licence fee) paid by them to the German company had no nexus to the imported components inasmuch as that was a fee paid by the appellants (licensee) to the German company (licensor) for transfer of technical know -how and information to manufacture, fabricate, assemble, erect, test, sell and operate the licensed products. The technical know -how fee was connected to the licensed products and not to any components thereof. It was further submitted that the technology transfer between the German Company and the appellants was not a condition of sale of the imported components. Therefore, the fee paid by the appellants to the German company for transfer of technology was not includible in the assessable value of the components under Rule 9(1)(c) of the Customs Valuation Rules. Ld. consultant relied on the following decisions.