2015 (2) TMI 179 - AT - Customs

Valuation of goods - Enhancement in value of goods - inclusion of value of a taxable service rendered in India - The television programmes have been aired from Singapore - Held that - Distribution fees was for acquiring non-exclusive rights for satellite delivered, advertiser supported, television service. Thus the payment was made for the rights to distribute a service and has nothing to do with the goods imported by the appellant from the foreign entity. The letter dated 28-12-2007 addressed to the Standard Chartered Bank also make it clear that the amount of ₹ 19,76,02,857/- remitted was towards the distribution fees required to be remitted in terms of the Distribution Agreement. The Chartered Accountant s certificate dated 28-12-2007 for remittance under section 195 pf the Income Tax Act also confirms this factual position. Thus, there is no evidence, whatsoever, adduced by the Revenue to show that the said remittance was towards the royalty/licence fee paid for the contents of the digi-beta tape imported by the appellant so as to form a part of the taxable value of the goods imported. From the Service Tax Returns filed by the appellant with the Service Tax Authorities, it is seen that the appellant is registered under the taxable category of Broadcasting Services and the distribution fees collected has been declared to the department for the purposes of payment of service tax thereon. This also makes the position clear that the distribution fees pertained to services rendered in India, part of which was remitted to the foreign television channel. Therefore, the question of including consideration for the service rendered in the value of the goods imported does not arise at all. Thus it appears that the adjudicating authority mis-directed himself in including the value of a taxable service rendered in India in the value of the goods imported. The television programmes have been aired from Singapore and the tapes were not required for broadcasting the programmes. The requirement of the tapes was for the limited purpose of obtaining certification from CBFC and technical quality checks and has nothing to do with the distribution activity. Therefore, from whatever angle one may look at the transaction, there is nothing on record to show that the remittance made to the foreign entity had anything to do with the goods supplied. Therefore, the impugned order enhancing the value of the goods to the extent of remittance of distribution fees and demanding customs duty thereon under CVR is clearly unsustainable in law. Accordingly we set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
1. Re-assessment of imported beta tape masters under Customs Valuation Rules, 2007.
2. Inclusion of distribution fee in the assessable value of imported goods.
3. Demand of customs duty, interest, and penalty based on re-assessment.
4. Interpretation of Programme Acquisition and Service Agreement.
5. Application of Rule 10 (1) (c) of the Customs Valuation Rules, 2007.
6. Consideration of royalties/license fees for goods supplied.
7. Compliance with Service Tax regulations.
8. Nexus between distribution fee and import of digi-beta tapes.
9. Adjudication of the impugned order and penalties imposed.

Analysis:
1. The appeal challenged the re-assessment of beta tape masters imported by the appellant, involving a significant amount under Customs Valuation Rules, 2007. The Commissioner of Customs had demanded differential customs duty, interest, and penalties based on the re-assessment, which was the primary issue in contention.

2. The core issue revolved around the inclusion of a distribution fee in the assessable value of the imported goods. The department argued that the distribution fee remitted to a foreign entity formed part of the intrinsic value of the tapes, making it liable for inclusion under Rule 10 (1) (c) of the Customs Valuation Rules, 2007.

3. The appellant's counsel contended that the distribution fee was not related to the goods imported but was for services rendered under a Programme Acquisition and Service Agreement. The appellant highlighted the non-exclusive rights granted for distribution of television channels, emphasizing the distinction between services provided and goods imported.

4. The Tribunal analyzed the Programme Acquisition and Service Agreement, determining that the distribution fee was for acquiring non-exclusive rights for a television service and not for the goods imported. The Tribunal also considered the appellant's compliance with Service Tax regulations, indicating that the distribution fees were related to services rendered in India, not the imported goods.

5. Ultimately, the Tribunal found no evidence linking the distribution fee to the goods imported, concluding that the impugned order enhancing the value of the goods based on the distribution fee was legally unsustainable. The Tribunal set aside the order, allowing the appeal and disposing of the stay petition accordingly. The judgment emphasized the lack of nexus between the distribution fee and the import of digi-beta tapes, leading to the decision in favor of the appellant.