2016 (8) TMI 1119 - AT - Customs

Valuation- Payment of royalty or technical knowhow license fee - Held that - We find that the adjudicating authority in the Order-in-Original has mentioned that there is no royalty and technical knowhow or license fee paid/payable . The learned Commissioner (Appeals) also passed the order on this findings made out in the Order-in-Original, whereas from the Books of Account, it is clear that there is payment of royalty or technical knowhow license fee during the period 1999-2000 and 2000-01. From this, it appears that the records of the appellant have not been verified properly. Even if it is assumed that the adjudicating authority has given the order after verification of this aspect, but nothing was discussed in the Order-in-Original. Therefore, the matter needs to be reconsidered. However, we made it clear that if the royalty or technical knowhow fees said to have been paid as appearing in the Books of Account of the appellant if related to the present transaction, then only it will be the relevant factor for valuation. However, if it is found that the royalty payment shown in the Books of Account is not related to the present transaction and related to some other transaction, the same cannot be relevant for the valuation in the present case. Thus we remand the matter to the adjudicating authority to verify the Books of Account and to give a clear finding whether there is royalty payment and if there is, whether it is related to this transaction or otherwise and thereafter to pass a reasoned order. The appeal is disposed of by way of remand to the adjudicating authority.

Summary

Issues: Valuation of imported goods under Customs Act, 1962 and Customs Valuation Rules, 1988 based on royalty payment.

Issue 1: Valuation of imported goods under Customs Act, 1962 and Customs Valuation Rules, 1988:
The case involved M/s Colgate Palmolive (India) Ltd. importing goods from M/s Colgate Palmolive PTY Ltd., Australia, and their affiliates worldwide. The issue arose when the Customs authority examined the import under Section 14(1) of the Customs Act, 1962, and the Customs Valuation Rules, 1988, due to the relationship between the supplier and importer as related parties. The adjudicating authority initially accepted the declared transaction value without any adjustments under Rule 9 of the Customs Valuation Rules, 1988. However, discrepancies arose regarding the payment of royalty appearing in the balance sheet but not acknowledged in the adjudication order. The Revenue appealed the decision, arguing that royalty payments were indeed made by the importer, as evidenced in the company's annual reports. The Commissioner (Appeals) set aside the initial order, emphasizing the discrepancy between the adjudicating authority's findings and the actual royalty payments recorded in the Books of Account.

Issue 2: Interpretation of findings and verification of royalty payments:
The appellant contended that the adjudicating authority had correctly verified the documents and found no royalty payment related to the import transaction. Conversely, the Revenue argued that the royalty payments recorded in the Books of Account were not properly verified to establish their connection to the import transaction. The Commissioner (Appeals) upheld the Revenue's argument, emphasizing the importance of accurately verifying the royalty payments in relation to the specific transaction under consideration. The Tribunal noted the discrepancy between the findings of the lower authorities and the actual royalty payments recorded in the Books of Account, indicating a lack of proper verification. The Tribunal emphasized the need for a clear determination of whether the royalty payments were indeed related to the import transaction or another transaction for accurate valuation under the Customs Valuation Rules, 1988.

Judgment:
The Tribunal, after considering both parties' arguments, concluded that the matter required further scrutiny and remanded it to the adjudicating authority for a detailed verification of the Books of Account. The Tribunal highlighted the significance of establishing the relationship between the royalty payments and the import transaction to ensure accurate valuation under the Customs Valuation Rules, 1988. The appeal was disposed of by remanding the case for a thorough examination and a reasoned decision based on the verified information regarding the royalty payments and their relevance to the import transaction.