2017 (4) TMI 204 - AT - Customs

Valuation - royalty - loading of invoice value - goods imported from related foreign supplier - Held that - It is to be noted that only those royalty license fees are required to be added to the invoices wherein the payments are made as a condition of the sale of goods being imported and also subject to the condition that such royalty is included in the price actually paid or payable - the appellant is required to pay the license fee of 0.5 % of the appellant s sale revenue from products - Since condition of Rule 10(1)(C) of the Valuation Rules is clearly not satisfied we find absolutely no justification for such loading of invoice value by the royalty amount. The consultancy charges are not to be included to the invoice values for import of the goods as product consultancy charge which has got nothing to do with the imported goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Loading of invoice value with royalty payments made to foreign suppliers
- Loading of invoice value with management fees paid for corporate services

Analysis:
1. Loading of invoice value with royalty payments:
The appellant challenged the loading of invoice value with royalty payments made to foreign suppliers. The Commissioner (Appeals) upheld the loading based on the decision in Matsushita Television & Audio (India) Ltd. vs. CC, Delhi. However, the appellant argued that the case of Commissioner of Customs vs. Ferodo India P Ltd. distinguished the Matsushita case, indicating no justification for such loading. Rule 10 of the Customs Valuation Rules, 2007 allows adding royalties only if they are a condition of the sale of goods being valued. The agreement showed the license fee applied only to products manufactured by the appellant, not the imported goods. The Tribunal, following Ferodo India P Ltd., set aside the loading of invoice value with royalty payments.

2. Loading of invoice value with management fees:
The second issue involved loading the invoice value with management fees paid for corporate services. The Commissioner (Appeals) justified this based on Rule 10(1)(e) of the Valuation Rules. However, the service agreement revealed that the appellant paid for independent corporate services such as coordination, accounting, consultancy, marketing, and sale support, unrelated to the imported goods. The Tribunal referenced the case of Expert Industries Pvt. Ltd. vs. CC Bangalore, stating that charges unrelated to imported goods should not be included in the assessable value. Consequently, the Tribunal held that the consultancy charges should not be included in the invoice values for the import of goods.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that loading invoice values with royalty payments and management fees lacked justification as per the relevant legal provisions and agreements.