2006 (10) TMI 56 - AT - Customs

Valuation(Customs) Alleged that the royalty and know how fees paid by holding company to parent company are includible in the assessable value After considering the submissions authority allow the with consequential relief

Summary

Issues: Valuation of imported liquid hand wash, influence of relationship between importer and supplier on price, consideration of royalty and technical know-how fees in valuation.

In the present appeal, the dispute revolves around the valuation of liquid hand wash imported by the appellant from their affiliate company in Turkey. The authorities below increased the price by 40% of the invoice price, citing the relationship between the importer and supplier as related companies. They argued that the price list submitted only showed inter-company prices, lacking evidence that the same prices were available to non-related buyers. The original adjudicating authority also noted the payment of royalty and technical know-how fees to the holding company, which has control over both the importer and supplier, as a factor in enhancing the assessable value.

The appellant's advocate argued that the mere relationship between the importer and supplier should not lead to the rejection of the transaction value unless evidence shows that the relationship influenced the price. He referenced a previous Tribunal order in a similar case involving the same importer and a related company in China, where an identical enhancement was set aside. The advocate highlighted that the department had previously accepted declared invoice prices for finished products imported from related companies in different countries.

The Revenue representative reiterated the reasons given by the authorities below, emphasizing the relationship between the importer and supplier.

Upon considering the arguments from both sides, the Tribunal found that the relationship between the importer and supplier alone is not sufficient to reject the transaction value unless it is shown to influence the price. The Tribunal noted that the absence of evidence showing such influence means the inter-company price list cannot be deemed inaccurate. Additionally, the payment of royalty and technical know-how fees to the parent holding company, controlling various associated companies in different countries, was deemed irrelevant to loading the assessable value. Referencing a previous decision in the appellant's case, the Tribunal concluded that royalty charges unrelated to the development of the imported product should not be considered in the assessable value for fully finished imported products.

As a result of the analysis, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.