2009 (2) TMI 124 - AT - Customs

Import of Goods Valuation Amount paid towards royalties for technical know how for manufacture and sale of goods using imported goods Under the Rule 9(1)(c) of customs valuation rules, the cost of technical know-how and payment of royalty is includible in the price of the imported goods it the said payment constitutes a condition pre-recjuisite for the supply of the imported goods by foreign supplier - Held that the royalty is not paid as a condition of sale of the goods under import. Commissioner has wrongly relied upon the ration of judgment of Essar Gujarat Ltd. Case since the facts are not similar Order of demand and penalty set-aside.

Summary

The appellate tribunal CESTAT, Chennai, consisting of Ms. Jyoti Balasundaram and Shri P. Karthikeyan, heard an appeal from M/s. Faiveley Transport India Limited regarding the inclusion of royalty payments in the assessable value of goods imported from Graham White Manufacturing Corporation, USA. The tribunal found that the impugned order did not provide essential facts to support the decision to include royalty in the assessable value. The Commissioner (Appeals) had relied on the Customs Valuation Rules, 1988, and the License Agreement between the parties, but the tribunal determined that the royalty payments were not a condition for the sale of the imported goods. The tribunal referenced a previous judgment involving a similar case and concluded that the Commissioner's decision was incorrect. As a result, the tribunal set aside the impugned order and allowed the appeal, also disposing of the stay application. The decision was dictated and pronounced in open court.

The key issues covered in the judgment include the interpretation of the Customs Valuation Rules, 1988, the consideration of royalty payments in the assessable value of imported goods, and the determination of whether such payments were a condition for the sale of the goods. The tribunal's analysis focused on the absence of evidence linking the royalty payments to the pricing of the imported goods, as well as the lack of a contractual requirement for the payment of royalties as a condition of sale. The tribunal's decision was influenced by a previous judgment involving a similar case, which established a precedent for the inclusion of royalty payments in the value of imported goods. The outcome of the case highlights the importance of establishing a direct connection between royalty payments and the pricing of imported goods to justify their inclusion in the assessable value. The judgment serves as a reminder of the need for clear and substantiated reasoning in customs valuation cases to ensure compliance with relevant regulations and legal standards.