Paragraph numbers below are the court’s original numbering, recovered from the source text.
25. Paragraph 10 of the agreement, therefore, had two components: (i) Services to be provided outside India; and (ii) Technical Services. Noticing G the terms subject to which the licence was granted in favour of EGL as also the agreements with Midrex and VA, this Court observed : " … This agreement with V.A. recites that the plant, when it was bougl).t, had a rated capacity of 8,00,000 tpy DRI under the prevailing operatU.g conditions based on the Midrex Process. It was recited that t~e H [2007) 7 S:C.R. Collaborator (V.A.) was holding construction licence and rights to use patents from Midrex for marketing, sale, design and construction of the Midrex Plants at Hazira, India. The services that were to be rendered by V.A. would also :nclude technical services in connection with the Midrex Process and engineering services necessary for this purpose. The Collaborator agreed to use Midrex construction and process licence for this project at Hazira, India. It was recorded that EGLs contract with Midrex had been annexed to the contract with the Collaborator."
26. In the aforementioned fact situation, a contention raised on behalf C of the EGL that the pre-condition for obtaining a licence was not the condition of sale was rejected, holding that without the same, the plant would be of no use to EGL, wherefor the overriding clause was inserted showing that the same was a condition of sale.
27. It was in the aforementioned premise, payments made to Midrex by D way of licence fee was hdd to be liable to be added to the price actually paid to TIL for purchase of the plant by EGL. Construing the provisions of Section 14 of the Act read with Rule 9 of the Rules, it was held : "18. The entire purpose of Section 14 is to find out the value of the goods which are being imported. The EGL in this case was purchasing a Midrex Reduction Plant in order to produce sponge iron. In order to produce sponge iron, it was essential to have technical know-how from Midrex .. It was also essential to have an operating licence from them. Without these, the plant would be of no value. That is why the precondition of a process licence of Midrex was placed in the agreement with TIL. It will not be proper to view that agreement with TIL in isolation in this case. The plant would be of no value if it could not be inade functional. EGL wanted to buy the plant in a working condition. This could only be achieved by paying not only the price of the plant, but also the fees for the licence and the technical know-how for making the plant operational. Therefore, the value of the plant will comprise not only the price paid for the plant but also the price payable for the operation licence and the technical know-how. Rule 9 should be construed bearing this in mind."
28. This Court noticed several curious aspects of the three agreements, but ultimately held that whereas the amounts payable in terms of clauses H IO. l. l.l, IO. l. l.2 and 10. l.2 .1 were to be taken into consideration for the coMMNR. oF cusroMs (PORT). CHENNAI "· TOYOTA KIRLOSKAR MOTOR PVT. L ro. is.a. SINHA. J.J t 11 purpose of determining the transactional value, 10% of the amount, however, A for payment of engineering and consultancy fee as specified under the1 agreement was held to be payable by way of guess work.
29. Therefore, law laid down i11 Essar Gujarat Limited (supra) and J.K Corporation Limited (supra) are absolutely clear and explicit. Apart from the fact that Essar Gujarat Limited (supra) was determined on the peculiar facts' B obtaining therein and furthermore having regard to the fact that the entire plant on "as is where is" basis was transferred subject to transfer of patent as also services and technical know-how needed for increase in the capacity of the plant, this Court clearly held that the post-importation service charges ' were not to be taken into consideration for determining the transactional C value.
30. The observations made by this Court Essar Gujarat Limited (supra) in paragraph 18 must be understood in the factual matrix involved therein. The ratio of a decision, as is well-known, must be culled out from the facts involved in a given case. A decision, as is well-known, is an authority for 10 what it decides and not what can logically be deduced therefrom. Even in Essar Gujarat Limited (supra), a clear distinction has been made between the charges required to be made for pre-importation and post-importation. All charges levied before the capital goods were imported were held to be considered for the purpose of computation of transaction value and not the post importation one. The said decision, therefore, in our opinion, is not an ,E authority for the proposition that irrespective of nature of the contract, licence fee and charges paid for technical know-how, although the same would have nothing to do with the charges at the pre-importation stage, would have to be taken into consideration towards computation of transaction value in terms of Rule 9(1)(c) of the Rules.
31. The transactional value must be relatable to import of goods which a' fortiori would mean that the amounts must be payable as a condition of import. A distinction, therefore, clearly exists between an amount payable as a condition of import and an amount payable in respect of the matters governing the manufacturing activities, which may not have anything to do 0 with the import of the capital goods.
32. Article 4 provided for additional assistance in respect of the matters specifically laid down therein. Technical assistance fees have a direct nexus with the post-import activities and not with importation of goods. [2007] 7 S.C.R~
33. It is also a matter of some significance that technical assistance and know-how were required to be given not as a condition precedent, but as and when the respondent makes a request therefor and not otherwise. Appendix C of the agreement relates to manufacture of local parts which evidently has nothing to do with the import of the capital goods. Appendix D again is B attributable to construction of plant; production preparation; and pilot production and production model, wherewith the import of capital goods did not have any nexus.
34. We may furthermore notice that Interpretative Note appended to Rule 4 also plays an important role in a case of this nature which reads as C under: "Note to Rule 4 Price actually paid or payable The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. The payment need not necessarily take the form of a transfer of money. Payment may be made by way of letters of credit or negotiable instruments. Payment may be made directly or indirectly. An example of an indirect payment would be the settlement by the buyer, whether in whole or in part, of a debt owed by the seller. Activities undertaken by the buyer on his own account, other than those for which an adjustment is provided in Rule 9, are not considered to be an indirect payment to the seller, even though they might be regarded as of benefit to the seller. The costs of such activities shall not, therefore, be added to the price actually paid or payable in determining the value of imported goods. The value of imported goods shall not include the following charges or costs, provided that they are distinguished from the price actually paid or .payable for the imported goods: (a) Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment; (b) The cost of transport after importation; (c) Duties and taxes in India. COMMNR OF CUSTOMS (PORT). CHENNAh'. TOYOTA KIRLOSKAR MOTOR PVT. LID. (S.B. SINHA, J.] J 13 The price actually paid or payable refers to the price for the A imported goods. Thus the flow of dividends or other payments from the buyer to the seller that do not relate to the imported goods are not part of the customs value."
35. The said rule clearly states that the charges or costs envisaged thereunder were not to be included in the value of the imported goods subject B to satisfying the requirement of the proviso that charges were distinguishable from the price actually paid or payable for the imported goods.
36. Interpretation of the said rule came up for consideration before a Bench of this Court in Tata Iron & Steel Co. Ltd v. Commissioner of Central Excise & Customs, Bhubaneswar, Orissa, [2000] 3 SCC 472, wherein it was C held: " … This part of the Interpretative Note cannot be so read as to mean that those charges which are not covered in clauses (a) to (c) are available to be included in the value of the imported goods. To illustrate, if the seller has undertaken to erect or assemble the D machinery after its importation into India and levied certain charges for rendering such service the price paid therefor shall not be liable to be included in the value of the goods if it has been paid separately and is clearly distinguishable from the price actually paid or payable for the imported goods. Obviously, this Interpretative Note cannot be E pressed into service for calculating the price of any drawings or technical documents though separately paid by including them in the price of imported equipments. Clause (a) in the third para of the Note to Rule 4 is suggestive of charges for services rendered by the seller in connection with construction, erection etc. of imported goods. The F value of documents and drawings etc. cannot be charges for construction, erection, assembly etc. of imported goods. Alternatively, even on the view as taken by the Tribunal on this Note, foe drawings and documents having been supplied to the buyer-importer for use during construction, erection, assembly, maintenance etc. of imported goods, they were relatable to post-import activity to be undertaken by G the appellant…"
37. Yet again a three-Judge Bench of this Court in Union of India'and Ors v. Mahindra and Mahindra Ltd., Bombay, [1995] Supp. 2 SCC 372, opined: " … Ordinarily the Court should proceed on the basis that the apparent "'"' tenor of the agreements reflect the real state of affairs. It is, no doubt, open to the Revenue to allege and prove that the apparent is not the real and that the price for the sale of the CKD packs is not the true price, and the price was determined by reckoning or taking into consideration the lump sum payment made under the collaboration agreement in the sum of 15 mH!ion French Francs …. " It was furthermore held : "9. On an evaluation of the relevant clauses in the collaboration c agreements and the attendant circumstances, we are of the view that j_ the concurrent judgments of the High Court at Bombay do not merit interference in this appeal. The crucial aspects appearing in the case are that the parties were dealing at arms length, that the seller and the buyer have no interest in the business of each other, that, ordinarily, the technical know-how of the machine can take in the assembly thereof, that the CKD packs and spares were supplied to the respondents by the collaborator not at a concessional price but at the price at which they were sold to others, that, as agreed to by the respondents, the option was entirely with the respondents to order the parts as per their requirements, that there was no obligation on the respondents to purchase CKD packs at all, that long before the supply of the CKD packs and spares, the royalty due to the collaborators was paid, that there is no material to show that the supply of the CKD packs or spares weighed with the parties in fixing the payments under the collaboration agreement but, .on the other hand, the collaboration agreement for the technical know-how and the supply of CKD packs and spares are independent commercial transactions; in other words, there existed no nexus between the lump sum payment under the agreement for the technical know-how and the determination of the price for supply ofCKD packs or spares. It is by highlighting the above aspects that the learned Single Judge and the Division Bench concluded that the contention that the price quoted in the invoices tendered by MaI:iindra & Mahindra (respondents) does not reflect the correct price because a part of the value of imported packs and components was already received by foreign collaborator while determining the consideration of 15 million French Francs cannot be accepted, and the collaboration agreement does not 'f support the claim nor was there any material available to the Assistant COMMNR. OF CUSTOMS (PORT), OIENNAI v. TOYOTA KIRLOSKAR MOTOR PVT. LTD. [S.B. SINHA,!.] 115 Collector to warrant such a conclusion, and; therefore, resort to Section A 14(1)(b) of the Act and Rule 8 of the Customs Valuation Rules is clearly incorrect and unsustainable and the Assistant Collector was bound to accept the price mentioned in the invoices for the purpose of assessing the customs duty."
38. It may be true, as has been contended by the learned Additional B. Solicitor General, that Rule 9(l)(c) of the rules had not been taken into consideration therein, but the same does not make much difference.
39. For the views we have taken, we are of the opinion that the.CESTAT cannot be said to have committed any error in arriving at its decision in the impugned judgment. There is, thus, no merit in this appeal, which is dismissed C accordingly. In the facts and circumstances of the case, there shall, however, be no order as to costs. A.KT. Appeal dismissed.