2014 (12) TMI 899 - AT - Customs

Determination of assessable value of goods - inclusion of BU fees and legal and professional fees paid by the appellant - Held that - The impugned orders do not specify, under which clause of Rule 10 (1), the service charges are includible in the assessable value of the goods imported. It would be relevant at this juncture to peruse the said rule 10 of CVR, which reads as under. Clauses (a) to (d) of Rule 10(1) have no application to the facts before us as they relate to totally different situations and operate in different fields. If at all, only clause (e) would be relevant. The crucial factor for application of the said clause is that the payment should have been made as a condition of sale of the goods imported. There is nothing in the two agreements stipulating such a condition. While the service agreement is for rendering of certain management consultancy services, the secondment agreement is for deputation of staff. These have nothing to do with the import of raw materials. There is also no restriction placed on the appellant that the raw materials should be procured only from the related foreign entity and from nobodyelse. In the absence of any nexus, even remotely, between these two agreements and the import of raw materials, we do not find any justification whatsoever to relate the payments made for the services received to the value of the goods imported. In the case of allegation of under valuation, it is for the Revenue to lead evidence which has not been done in the instant case. - Decided in favour of assessee.

Summary

Issues:
Inclusion of BU fees and legal and professional fees in the assessable value of imported raw materials.

Analysis:
The appeal challenged the inclusion of BU fees and legal and professional fees paid to foreign entities in the assessable value of imported raw materials. The appellant argued that these payments were for services unrelated to the import of raw materials and were not a condition of sale for the goods. The department contended that without these services, the appellant could not operate their plant in India. The key issue was whether there was a nexus between the services rendered and the imported raw materials.

The Tribunal examined the agreements between the parties and the Customs Valuation Rules (CVR), specifically Rule 10(1) regarding the addition of costs and services to the transaction value of imported goods. The Tribunal noted that clauses (a) to (d) of Rule 10(1) were not applicable to the case at hand. The relevant clause was (e), which required payments to be made as a condition of sale of the imported goods for inclusion in the assessable value. The Tribunal found no such condition in the agreements related to the services provided, emphasizing that the services were for management consultancy and staff deputation, unrelated to the import of raw materials.

Ultimately, the Tribunal held that there was no nexus between the services provided and the import of raw materials. It concluded that the impugned order, which upheld the inclusion of the fees in the assessable value, was legally unsustainable. The appeal was allowed, and the impugned order was set aside, granting consequential relief to the appellant.

In summary, the judgment focused on interpreting the Customs Valuation Rules to determine the inclusion of fees paid for services in the assessable value of imported goods. The Tribunal emphasized the requirement of a direct nexus between the services and the imported goods for such inclusion, which was lacking in this case. The decision highlighted the importance of evidence and justification for linking additional costs to the value of imported goods, ultimately ruling in favor of the appellant based on the absence of a valid connection between the services rendered and the imported raw materials.