2016 (12) TMI 1430 - AT - Customs

Valuation - related party transaction - fee paid to the foreign collaborator - Held that - after examining the third party imports to different countries, the transaction value was accepted. It is seen that in the appeal before the Commissioner (Appeals), the Revenue as well as Royle Extrusion Systems Ltd. have not challenged this issue. In view of that it is not open to either party to challenge that Royle Extrusion Systems Ltd. and foreign collaborator are related and that relationship has affected the import price in terms of Rule 4 (3) of the Customs Valuation Rules. Includability of fee paid to the foreign collaborator in terms of technical collaboration agreement in terms of Rule 9 of the Customs Valuation Rules - Held that - rule 9 relates to the supply of engineering, development, art work, design work and plans and sketches, etc. by the buyer to the supplier. In the instant case, it is the supplier who has sent the technical know-how to the buyers. Thus, Rule 9 (1) (b) (iv) has been wrongly invoked in this case. We set aside the impugned order and remand the matter back to the original adjudicating authority for deciding the issue afresh after giving an opportunity to the appellants - appeal disposed off - matter remanded back.

Summary

Issues:
1. Determination of related parties affecting import price under Rule 4 (3) of the Customs Valuation Rules.
2. Includability of fee paid to foreign collaborator under Rule 9 of the Customs Valuation Rules.

Analysis:
1. The first issue involves the determination of related parties affecting the import price under Rule 4 (3) of the Customs Valuation Rules. The Deputy Commissioner concluded that the appellant and the foreign collaborator were related based on an agreement. However, after examining third-party imports to different countries, the transaction value was accepted. The Commissioner (Appeals) added an amount to the invoice value, which was challenged by both the Revenue and the appellant. The Tribunal found that neither party challenged the relationship between the appellant and the foreign collaborator affecting the import price. Therefore, this issue was not open for challenge.

2. The second issue concerns the includability of the fee paid to the foreign collaborator under Rule 9 of the Customs Valuation Rules. The order-in-original did not specify the sub-rule examined, but it appeared to be under Rule 9 (1) (c) regarding the condition of sale of goods. The Commissioner (Appeals) sought to add amounts to the transaction value invoking Rule 9 (1) (b) (iv) and 9 (1) (d) (iv), which was found to be incorrect. Rule 9 (1) (b) (iv) pertains to the supply of certain goods and services by the buyer to the supplier, not the other way around as in this case. The Tribunal noted that the Commissioner (Appeals) went beyond the prayer made by the Revenue and did not consider the applicability of various case laws cited in the order-in-original. Consequently, the Tribunal set aside the order and remanded the matter back to the original adjudicating authority for a fresh decision after providing an opportunity to the appellants.