In re R. Stahl Private Limited (CAAR Mumbai)
The Customs Authority for Advance Rulings (CAAR), Mumbai considered an application seeking an advance ruling on whether payments made towards technical know-how in the nature of royalty/licence fees should be excluded from the transaction value of imported goods under Rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
The applicant is an Indian company engaged in the manufacture and supply of explosion-protected electrical and electronic equipment. It is a wholly owned subsidiary of a German company and manufactures products in India using technical know-how provided by a related group entity. To use this know-how, it entered into a licence fee arrangement and a licence agreement in June 2023. The agreement grants a non-transferable, non-assignable and non-exclusive licence to use the technical know-how for manufacturing and distribution of specified products. The agreements are stated to be standalone arrangements and do not incorporate earlier agreements.
The applicant also described the history of proceedings before the Special Valuation Branch (SVB). Earlier, the SVB had directed loading of technical know-how fees into the transaction value. Subsequently, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the technical information licence fee was not includible in the assessable value of imported components, and the order was accepted by the department. The applicant thereafter sought renewals of the SVB orders, following which the declared transaction value was accepted under the Customs Valuation Rules, 2007. The applicant also submitted declarations in accordance with the applicable CBEC circular relating to renewal of the earlier order.
