3M ELECTRO AND COMMUNICATION Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THIS appeal filed by the assessee is against an order of the Commissioner (Appeals) upholding the proposal of the Deputy Commissioner of Customs (Special Valuation Branch) to add technical know -how fee paid by the assessee to the overseas supplier of the goods imported by the former, to the transaction value of the said goods under Rule 9(1)(c) of the Customs Valuation Rules for the purpose of payment of duty. An amount of 3,00,000 French Francs (FF) was paid by the assessee to the supplier as technical know -how fee under an agreement dated 7.6.1994, whereunder such fee was payable as consideration for transfer of technical know -how required for the manufacture of products in India. Under another agreement dated 28.1.2000, which was entered into between the same parties apparently after expiry of the period of the earlier agreement, the assessee was required to pay 5,00,000 French Francs as technical know -how fee to the supplier. Royalty as a percentage on the domestic/export sales of the products was also required to be paid by the assessee to the supplier under each of the agreements, but these payments are not part of the present dispute. The case of the appellants as putforth by their counsel today is that the payment of technical know -how fee had no relation to the capital goods and inputs imported by the assessee from the supplier of technical know -how. It is their further case that such payment of technical know -how was not a condition for purchase of the capital goods and inputs from the supplier. On this basis, it is argued that the technical know -how fee paid by the assessee to the supplier was not addable to the transaction value of the imported capital goods and inputs under Rule 9(1)(c) ibid. Contextually, it is pointed out that, though 3,00,000 FF were paid to the supplier under the first agreement, no payment was made of the amount of 5,00,000 FF under the second agreement. On these facts, it is also submitted that the proposal to add a sum of 5,00,000 FF to the transaction value of the goods imported by the assessee after 28.1.2000 is unwarranted. Reverting to the question whether the amount of 3,00,000 FF was addable to the transaction value of the capital goods and inputs imported by the assessee from the supplier of technical know -how, the learned Counsel submits that the sine qua non of Rule 9(1)(c) was not satisfied in this case and therefore such addition is ruled out. In this connection, reliance has been placed on the apex Court's judgment in Commissioner of Customs v. Ferodo India Pvt. Ltd.

(2.) THE apex Court's ruling in the above case is squarely applicable to the facts of the present case. We have gone through the relevant agreements and have not found anything therein which suggests that technical know -how fee was required to be paid by the appellants to their foreign collaborators as a condition precedent for import of capital goods and/or inputs. Again, no such relation between the payment of technical know -how fee and the imported goods as contemplated under Rule 9(1)(c) is discernible from any of these agreements, nor has any such thing been brought out in the orders of the lower authorities. If there was any "relation", it was between the technical know -how fee and the products manufactured in India. In the circumstances, the appellants are justified in claiming support from the cited judgment of the apex Court. In this case, there is no evidence of the sum of 5,00,000 FF having been paid by the appellants to the foreign party and therefore, in any case, there can be no proposal for inclusion of such amount in the assessable value of the capital goods or inputs imported during the material period. As regards the sum of 3,00,000 FF, we have already held in favour of the assessee.

(3.) IN the result, the impugned order is set aside and it is held that the technical know -how fee paid by the assessee to the foreign supplier is not to be added to the price of the imported capital goods or inputs under Rule 9(1)(c) of the Customs Valuation Rules for the purpose of payment of customs duty on such goods. The appeal is allowed. (Dictated and pronounced in open court)