2014 (10) TMI 754 - AT - Customs

Valuation of goods - Addition of royalty for technical know how fees - Held that - Under Rule 9(1)(c), the cost of technical know-how and payment of royalty is includible in the price of the imported goods if the said payment constitutes a condition pre-requisite for the supply of the imported goods by the foreign supplier. If such a condition exists then the payment made towards technical know-how and royalties has to be included in the price of the imported goods. On the other hand, if such payment has no nexus with the wording of the imported goods then such payment was not includible in the price of the imported goods - provisions of Rule 10(1)(c) of Customs Valuation Rule (CVR), 2007 are pari materia to Rule 9(1)(c) of the CVR, 1988 - Decided in favour of assessee.

Summary

Issues:
1. Whether the element of royalty for technical know-how for manufacturing activity in India should be included in the assessable value of imported goods.

Analysis:
The case involved an appeal against an Order-in-Appeal where the lower adjudicating authority had ordered the inclusion of the element of royalty for technical know-how in the assessable value of goods imported for manufacturing in India. The appellant argued that the royalty and remuneration were paid only for goods manufactured in India and not for trading purposes. The Technology License Agreement was specifically related to manufacturing in India and did not apply to trading. The appellant relied on the judgment in the case of Commissioner of Customs v. Ferodo India Pvt. Ltd., where it was held that the cost of technical know-how and royalty is includible in the price of imported goods if it constitutes a condition for the supply of goods. The Tribunal noted that Rule 10(1)(c) allows for the inclusion of royalties and license fees in the assessable value if it is a condition of sale of the goods. The Tribunal found that the provisions of Rule 10(1)(c) were similar to Rule 9(1)(c) of the CVR, 1988, and held that the learned Commissioner (Appeals) order was not sustainable. Consequently, the appeal was allowed, and the stay petition was disposed of.

In conclusion, the Tribunal set aside the lower adjudicating authority's decision to include the element of royalty for technical know-how in the assessable value of imported goods meant for manufacturing in India. The judgment emphasized the importance of the nexus between the payment of royalty and the imported goods, as established in previous legal precedents. The decision was based on a thorough analysis of relevant Customs Valuation Rules and the specific circumstances of the case, ultimately providing relief to the appellant based on the interpretation of applicable laws and precedents.