2013 (12) TMI 1089 - AT - Customs

Valuation of goods - Royalty and licence fee paid by the importer - Import from assessee s foreign collaborator - Commissioner held that Technical Assistance and Licence Agreement dated 15-4-1996 did not have a clause whereby or wherein the importer-appellant is legally obliged to pay licence fee as a condition of sale of the imported goods - Held that - royalty has to be paid @ 3% on net sale value of the rubber products manufactured and sold by the Licensee in India. Similarly, licence fee has to be paid @ 1% of the net sale value of the rubber products manufactured and sold by the Licensee bearing the trade mark. In other words, these payments are liable to be made in respect of the goods manufactured and sold in India and not in respect of the goods under importation. The goods under importation may be raw materials or components for the manufacture of the goods in India but the royalty and the licence fee are not payable on the imported goods but on the goods manufactured and sold in India. It is evident that the payments made by way of royalty or licence fee has nothing to do with the imported goods nor is it a condition of sale for the imported goods. As already discussed earlier, these payments are required to be made in respect of the rubber products manufactured and sold by the licensee in India. The provisions of Rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 are not attracted and, therefore, we do not find any infirmity in the order passed by the lower appellate authority. - Decided against the revenue.

Issues: Valuation of imported goods, inclusion of royalty and license fee in assessable value, interpretation of Customs Valuation Rules.

Valuation of Imported Goods: The case involved a dispute regarding the valuation of goods imported by M/s. Bridgestone India Pvt. Ltd. from their foreign collaborator, M/s. Bridgestone Corporation, Japan. The Customs department contended that the royalty and license fee paid by the importer should be included in the assessable value of the imported goods. This contention was based on the joint venture agreement between the two parties, which indicated payments made by the importer to the foreign supplier. The department ordered that the declared invoice value of the goods be increased by 4% under the Customs Act, 1962 and relevant Customs Valuation Rules.

Inclusion of Royalty and License Fee: The appellate authority allowed the importer's appeal, stating that the Technical Assistance and License Agreement did not legally obligate the importer to pay license fees as a condition of sale of the imported goods. The department challenged this decision, arguing that the agreement dated 1-4-2005 contained clauses related to royalty and license fees, which should be added to the assessable value of the imported goods under the Customs Valuation Rules. The importer contended that the payments were not related to the imported goods but to goods manufactured and sold in India, and thus should not be included in the valuation of the imported goods.

Interpretation of Customs Valuation Rules: The Tribunal analyzed the clauses of the License and Technical Assistance Agreement dated 1-4-2005, which specified the payment of royalty and license fees based on the net sales value of rubber products manufactured and sold in India. The Tribunal concluded that these payments were not related to the imported goods but to goods manufactured and sold domestically. Therefore, the Tribunal held that the Customs Valuation Rules did not require the inclusion of royalty and license fees in the assessable value of the imported goods. The appeal was dismissed, and the stay application was also disposed of accordingly.

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