2007 (9) TMI 63 - AT - Customs

Royalty charges paid to obtain the right to reproduce imported goods in the country of importation shall not be added to the price actually paid or payable for the imported goods in determining the custom value, as per the Interpretative Note to Rule 9(1)(c) of Customs (Valuation) Rules

Summary

Issues: Revenue's appeal against the order of the Commissioner of Customs (Appeals) setting aside the adjudication order enhancing the declared value of imported compact audio discs and DVDs by 50%.

The judgment by the Appellate Tribunal CESTAT, Mumbai, involved the Revenue's appeal against the order of the Commissioner of Customs (Appeals) setting aside the adjudication order passed by the Deputy Commissioner, which had enhanced the declared value of pre-recorded compact audio discs and DVDs imported by the respondents by 50%. The Tribunal noted that the issue in dispute had been settled in favor of the importers in their own case by a previous Tribunal order. The Tribunal referred to the agreement between the importers and Sony Corporation of America, highlighting that the royalty payment was not a condition of sale for export to India. The Tribunal emphasized that the interpretative notes to Rule 9(1)(c) of the Customs Valuation Rules, 1988, clarified that payments for rights to distribute or resell imported goods should not be added to the price paid if not a condition of sale for export. The Tribunal found that the payment of royalty was not a condition of sale for export to India, as the importers were not restricted to purchasing CDs from other sources and had started manufacturing CDs in India. The Commissioner's finding supporting this contention was upheld by the Tribunal.

The Tribunal further analyzed the terms and conditions of the present contract between the importers and their suppliers, finding no significant differences from the agreement with Sony Corporation of America. The Tribunal distinguished the decisions relied upon by the Jt. CDR, stating that they were not directly relevant to the issue at hand, which was covered by the Tribunal's earlier order in the importer's case. The Tribunal also referenced a decision holding that charges for the right to reproduce imported goods in the country of importation should not be added to the customs value. Based on the precedent set by the Tribunal's earlier order in the importer's case, the Tribunal rejected the Revenue's appeal, concluding that there was no justification to interfere with the impugned order.

In summary, the Tribunal's judgment upheld the Commissioner of Customs (Appeals) order, emphasizing that the payment of royalty was not a condition of sale for export to India based on the agreement between the importers and Sony Corporation of America. The Tribunal relied on interpretative notes to the Customs Valuation Rules and previous decisions to support its findings, ultimately rejecting the Revenue's appeal.