COMMISSIONER OF CUSTOMS (PORT), KOLKATA versus M/S. J.K. CORPORATION LIMITED

Citation: [2007] 2 S.C.R. 196 · Decided: 02-02-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

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Judgment (excerpt)

A 
B 
COMMISSIONER OF CUSTOMS (PORT), KOLKATA 
MIS. J.K. CORPORATION LIMITED 
FEBRUARY 2, 2007 
[S.B. SINHA AND MARKANDEY KAT JU, JJ.] 
Customs Act, 1962-ss. 14 & 14(JA)-Customs Valuation 
(Determination of Price of Imported Goods) Rules, 1988-rr. 4, 9 & 12-
C Import of plant and machinery-Assessable value-Determination of-Amount 
paid for any post-importation service or activity viz. post-importation 
technical assistance-Heid: Would not form part of the assessable value if it 
is separately identifiable from the amount payable for the imported goods. 
Respondent entered into a collaboration agreement with two Korean 
D companies, Mis Samsung and M/s Chei! for manufacture of Polyester 
Oriented Yarn. The said agreement is in two parts - Part-A providing for 
supply of licence, knowhow and technology, while Part-B providing for supply 
of equipment as a µart of necessary plant and machinery and equipment for 
manufacture of Polyester Oriented Yarn. Pursuant to the said agreement, 
Respondent imported plant and machinery manufactured by the said Korean 
E companies. 
The question which arises for consideration in this appeal, is as to 
whether customs duty would be payable on the purchase price of the goods by 
adding the value of licence and technical knowhow, etc. to the value of the 
F imported goods. 
Dismissing the appeal, the Court 
HELD: 1.1. The basic principle of levy of customs duty is that the value 
of the imported goods has to be determined at the time and place of importation. 
The value to be determined for the imported goods would be the payment 
G required to be made as a condition of sale. Assessment of customs duty must 
have a direct nexus with the value of goods which was payable at the time of 
importation. If any amount is to be paid after the importation of the goods is 
+ 
complete, inter alia by way of transfer of licence or technical knowhow for 
the purpose of setting up of a plant from the machinery imported or running 
H 
196 
COMMNR OF CUSTOMS (PORT), KOLKATA r. J.K. CORPN. LTD. 
J 97 
thereof, the same would not be computed for the said purpose. Any amount A 
paid for post-importation service or activity, would not, therefore, come within 
the purview of determination of assessable value of the imported goods so as 
to enable the authorities to levy customs duty or otherwise. The Customs 
Valuation (Determination of Prices of Imported Goods) Rules, 1988 have been 
framed for the purpose of carrying out the provisions of the Customs Act, B 
1962. The wordings of Sections 14 and 14(1A) of the Act are clear and 
explicit. The Rules and the Act, therefore, must be construed, having regard 
to the basic principles of interpretation in mind. [Para 9) )201-B-Dj 
)-. 
1.2. Rule 12 provides that the Interpretative Notes specified in the 
Schedule appended thereto would apply for construction thereof. They are C 
statutory in nature being integral part of the Rules themselves. What would, 
therefore, be excluded for computing the assessable value for the purpose of 
levy of custom duty, inter alia, has clearly been stated in Interpretative note 
to Rule 4, namely, any amount paid for post-importation activities. The said 
provision, in particular, also apply to any amount paid for post-importation 
technical assistance. What is necessary, therefore, is a separate identifiable D 
amount charged for the same. On the Revenue's own showing, the sum of US 
$ 14,00,000.00 was required to be paid by way of remuneration towards 
services to be offered by the companies in respect of matters specified in Part-
-~ 
A of the said Memorandum of Agreement. The said sum represents amount 
of licence or amount to be paid by the respondent for the licence for the E 
manufacturing process for production of goods which were covered by the 
patents held by Mis. Samsung as also for technical knowhow. No part of the 
knowhow fee was to be incurred by the respondent either for the purpose of 
fabrication of the plant and machinery or for any design in respect whereof 
Mis. Samsung held the patent right. Noticeably the said Memorandum of 
Agreement specifically contemplates that the plant and machinery to be F 
supplied thereunder may be procured from other independent manufacturers 
and suppliers who might not have anything to do with the knowhow or licence 
provided thereunder by Samsung. Knowhow, being process knowhow, is 
covered by the patent held by Mis. Samsung. The payment of US $ 
14,00,000.00 also entitles the

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