2016 (12) TMI 827 - AT - Customs

Valuation - technical assistant and royalty agreement - royalty - whether value of royalty to be included in assessable value? - Held that - though the appellants have been held to be related to the collaborator, but declared value has not been examined under Rule 4(3) of the Customs Valuation Rules, 1988 for acceptance or otherwise in reference to test value. The Commissioner (Appeals) has observed that since there is no third party sale of these items, the Dy. Commissioner should have examined the provisions of relevant agreement. The Commissioner (Appeals) has thereafter allowed the appeal of the Revenue. This essentially means that the Commissioner (Appeals) has remanded the matter back to the original adjudicating authority. Import of Neopolitan chocolates, cocoa butter and cocoa butter flavor - related party transaction - foreign collaborator agreement - valuation to be done under Rule 4(3) of the Customs Valuation Rules or under Rule 9(1)(c) of the Customs Valuation Rules? - Held that - So far as Neopolitan chocolates is concerned, it is a finished goods and it is totally unrelated to the collaboration agreement and, therefore, it cannot be a subject matter to the current dispute on account of the agreement entered into by the appellant. The Order-in-Original clearly held that the appellant and the foreign collaborator are related. However, these imports are not from the foreign collaborator and thus unless it is held that the supplier of these goods is related to the appellant, no charge under Rule 4(3) of the Customs Valuation Rules can be made. This argument regarding purchases not being made from foreign collaborator equally applies to the import of cocoa powder and cocoa butter flavors. Furthermore, Revenue has not shown that there is any restrictive clause or condition for import of cocoa butter and cocoa butter flavor from the foreign collaborator in the agreement. In these circumstances, Rule 9(1)(c) of the Customs Valuation Rules cannot be invoked - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Change of name application by the appellant.
2. Dispute regarding technical knowhow and royalty agreement.
3. Inclusion of technical knowhow and royalty payments in assessable value.
4. Appeal against the Commissioner (Appeals) order.

Issue 1: Change of name application by the appellant
The appellant, formerly known as M/s Cadbury (India) Ltd., applied for a change of name to M/s Mondelez India Foods Pvt. Ltd. The appellant also converted to a Private Limited Company and submitted a Certificate of Incorporation issued by the Govt. of India, Ministry of Corporate Affairs. The change of name in the cause title was allowed, and the miscellaneous application was disposed of accordingly.

Issue 2: Dispute regarding technical knowhow and royalty agreement
The appellant had an agreement with Cadbury Schweppes Overseas Ltd., UK for technical assistance and royalty agreement. The Dy. Commissioner of Customs, GATT Valuation Cell, examined the case and concluded that the relationship between the appellant and the collaborator did not influence the price and payments related to imported goods. However, the Revenue challenged this decision before the Commissioner (Appeals), arguing that the technical knowhow supplied was essential for processing imported goods. The Commissioner (Appeals) allowed the Revenue's appeal, remanding the case back to the original adjudicating authority.

Issue 3: Inclusion of technical knowhow and royalty payments in assessable value
The Revenue contended that the technical knowhow and royalty payments should be included in the assessable value of imported goods as per Rule 9(1)(c) of the Customs Valuation Rules, 1988. They argued that the payments were related to the condition of sale of goods and should be considered in the valuation. The Commissioner (Appeals) agreed with this argument and remanded the case for further consideration.

Issue 4: Appeal against the Commissioner (Appeals) order
The appellant challenged the order of the Commissioner (Appeals), arguing that the relationship with the collaborator did not impact the transaction value. They contended that the import of finished chocolates and other items was unrelated to the collaboration agreement. The Tribunal reviewed the submissions and found that the imports were not from the foreign collaborator, and therefore, the Customs Valuation Rules could not be invoked. Consequently, the impugned order was set aside, and the appeal was allowed on 14.12.2016.