COMMISSIONER OF CUSTOMS (PORT), CHENNAI versus M/S. TOYOTA KIRLOSKAR MOTOR PVT.LTD.

Citation: [2007] 7 S.C.R. 94 · Decided: 17-05-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
COMMISSIONER OF CUSTOMS (PORl), CHENNAI 
v. 
MIS. TOYOTA KIRLOSKAR MOTOR PVT.LTD. 
MAY 17,2007 
[S.B. SINHA AND MARKANDEY KA TJU, JJ.] 
Central Excise and Salt Act, 1944. 
Sections 2(22), 2(23), 14(1) and 156-Capital goods and parts imported 
C under agreement for setting up an automobile manufacturing plant-Disputes 
arising between revenue authorities and importer regarding proper 
transaction valve of goods imported-Whether payments to be made under 
agreement towards royalty and technical know-how to be included for 
arriving at proper transaction value of goods imported-Agreement providing 
D that technical assistance and know-how not to be given as condition 
precedent, but as and when importer makes a request therefor and not 
otherwise-Held, distinction clearly exists between an amount payable as a 
condition of import and an amount paya_ble in respect of matters governing 
the manufacturing activities which has nothing to do with import of capital 
goods-Technical assistance fees has direct nexus with post-import activities 
E and not with importation of goods-Jn the facts held, payment towards 
royalty and technical know-how is not a condition of sale of imported goods 
and cannot be added for arriving at the value of transaction of the imported 
goods-Customs Valuation (Determination of Price of Imported Goods) Rules, 
1988-Rules 3, 4, and 9(J)(c). 
F 
Respondent Company, K for the purpose of establishing an automobile 
manufacturing plan entered into an agreement with Japanese Company, T and 
was given manufacturing licence for licensed products of T and respondent 
imported some capital goods and parts thereof from company T. Under the 
agreements between respondent and T, royalty and know-how fees were to be 
G paid. Dispute arose between the appellant-revenue and respondent regarding 
the valuation of the said capital goods and parts imported by the respondent. 
According to the Revenue, payment for royalty and know-how were to be added 
to the invoice value of the goods so as to arrive at proper transaction value, in 
terms of Rule 9(1)(c) of the Customs Valuation (Determination of Price of 
H 
94 
COMMNR. OF CUSTOMS (PORT), CHENNAI v. TOYOTA KIRLOSKAR MOTOR PVT. LTD. 
95 
Imported Goods) Rules, 1988. 
A 
The Assessing Authority passed order treating royalty and technical 
know-how to be relatable to the imported goods and an inherent condition ~f 
sale and incl11ded the payment for the same in the assessable value of imported 
goods under Rule 9(1)(c) of the 1988 Rules. Appeal preferred by respondent 
against the order of the Assessing Authority before the Commissioner of B 
Customs was dismissed holding that royalty is to be added only to the value of 
component parts falling under category of other than Unit Local Parts and. 
Technical know-how is to be added only to the value of capital goods and tools. 
imported from related supplier during the tenure of the agreement and should 
be apportioned to the total value of such goods and is not to be added to the . C 
value of the components. Aggrieved by the order of the Commissioner of· 
Customs, both parties preferred appeal before the Customs, Excise and Service · 
Tax Appellate Tribunal (CEST AT). The Tribunal allowed the appeal of the . 
respondent and dismissed the appeal of the appellant-Revenue holding that 
all payments towards royalty and technical know-how under the agreement 
are towards assistance rendered in India for setting up the plant and none of D 
it is in relation to the goods under import and such payment is not a condition 
of sale of the lmported goods and cannot be added for arriving at the value of 
transaction of the imported goods. Hence, the present appeal by the Revenue. -
Appellant-Revenue inter alia contended that agreements entered between 
respondent and T must be read in their entirety and are relevant for 
determining the conditions of import; and that grant of licence and know-how 
technology being sine qua non for running the automobile manufacturing 
plant set up by he respondent, clauses of the agreement have been rightly 
invoked for the purpose of determination of the transaction value of the capital 
goods. 
Respondent inter alia contended that only costs which were required to 
be incurred by importer before importation of the capital goods should be taken 
into consideration for determination of the transaction value ofimparted goods; 
E 
F 
that as per a conjoint reading of the provisions of Section 1

Excerpt shown. Read the full judgment & AI analysis in Lexace.