2006 (12) TMI 42 - HC - Customs

Valuation (customs) Petitioner( a firm) engage in input and distribution of feature films - as per petitioner royalty paid is not included in the assessee value of product after considering the details authority decided that royalty is a part of assessable value of the products.

Summary

Issues:
Challenge to the inclusion of royalty in the assessable value of imported goods.

Analysis:
The petitioner, engaged in importing and distributing feature films, contested the inclusion of $12,500 as royalty in the assessable value of imported goods. The petitioner argued that the actual value of the feature film was $10,200, comprising $1,000 for the print and $20 for the trailer. The dispute centered around whether the royalty amount should be considered in the valuation of the imported goods.

The determination of the value of imported goods for duty purposes is governed by Section 14 of the Customs Act and the Customs Valuation Rules of 1988. Rule 3 of the 1988 Rules states that the transaction value, i.e., the price actually paid or payable for the goods, should be considered. Rule 9(1)(c) specifically addresses royalties and license fees related to imported goods, which should be added to the transaction value if they are a condition of the sale. However, certain payments, such as charges for the right to reproduce or distribute the imported goods, should not be included in the customs value.

The court examined the invoice provided by the petitioner, which indicated the separate values for the film materials and the royalty. It was noted that the petitioner imported the feature film primarily for exploitation, with the royalty amount being a condition of the sale for the right of reproduction and distribution. Considering the statutory provisions and the specific circumstances of the case, the court concluded that the $12,500 royalty was integral to the importation for exploitation purposes and should be included in the valuation of the imported goods.

As a result, the court dismissed the writ petition challenging the inclusion of royalty in the assessable value of the imported goods, emphasizing the importance of considering all relevant factors and statutory provisions in determining the customs value of imported goods.