2016 (6) TMI 811 - AT - Customs

Valuation - inclusion of royalty, lump sum payment (license fee) and technical assistance fee paid to the supplier (related party) - Rule 10(1)(c)of the Customs Valuation (Determination of Value of Imported Goods) Rule, 2007 - Held that - In absence of proper clause of the agreement being depicted in the order and without demonstrating the manner how such clauses warrant valuation to be made in terms of that Rule arbitrary valuation has been made. In stead of objective evaluation of the agreements and thread bare examination of any evidence on record to invoke above Rule the authority drew inference superficially and arbitrarily. This is not acceptable to law. Therefore, order of both the authorities suffers from legal infirmity. - Matter remanded back for fresh decision.

Issues:
- Inclusion of royalty, lump sum payment, and technical assistance fee in the import value of goods.
- Application of Rule 10(1)(c) of the Customs Valuation Rules.
- Examination of relevant terms of agreement between parties.
- Proper valuation of imported goods.
- Legal infirmity in the orders of the authorities.
- Directions for revaluation and re-adjudication.

Issue 1: Inclusion of Royalty, Lump Sum Payment, and Technical Assistance Fee:
The appellant contested the inclusion of royalty, lump sum payment, and technical assistance fee in the import value of goods. The learned Commissioner (Appeals) upheld the decision without thorough examination of the relevant terms of agreement. The appellant argued that these payments did not relate to the import of goods and should not be included. The Revenue maintained that the agreements were examined properly, and the payments were rightly included based on the condition of sale inferred from the documents.

Issue 2: Application of Rule 10(1)(c) of the Customs Valuation Rules:
The appellant challenged the invocation of Rule 10(1)(c) and argued that the rule's scope is limited to charges payable for the import of goods, not for the manufacture of goods. The authorities were criticized for not properly depicting relevant clauses of the agreement guiding the inclusion of the payments in the import value. The appellate authority was accused of whimsically approving the adjudication order without objective evaluation.

Issue 3: Proper Valuation of Imported Goods:
The judgment highlighted the necessity for a fair valuation process, emphasizing the importance of clear examination of documents, depiction of relevant agreement clauses, and understanding the scope of Rule 10(1)(c). The authorities were directed to objectively determine the value of imported goods, ensuring no confusion regarding the definition of goods and examining the nexus of payments with imports.

Issue 4: Legal Infirmity in Orders:
The judgment criticized the authorities for arbitrary valuation and superficial inference drawing, emphasizing the need for objective evaluation and proper examination of evidence. The appellate authority's approval of the adjudication order was deemed erroneous and whimsical, emphasizing the importance of justice and adherence to law.

Issue 5: Directions for Revaluation and Re-adjudication:
To rectify the legal infirmities and ensure a just outcome, the judgment provided detailed directions for revaluation and re-adjudication. The original authority was instructed to reexamine the controversy, depict relevant agreement clauses, understand the application of Rule 10(1)(c), and objectively determine the value of imported goods. The appellant was granted a reasonable opportunity for defense, emphasizing the need for a reasoned and speaking order based on tangible evidence.

In conclusion, the judgment remitted the matter to the learned adjudicating authority, setting aside the appellate order, with a deadline for re-adjudication to be completed without delay, ensuring a fair and just resolution based on objective evaluation and adherence to legal principles.

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