2017 (6) TMI 32 - AT - Customs

Valuation - technical know-how fees - royalty - includibility - Rule 9(1)(c) of the said Rules - Held that - In the judgment of the Hon ble Supreme Court in the case of Ferodo India Pvt. Ltd. 2008 (2) TMI 12 - Supreme Court , identical issue was under consideration before the Apex Court and it was held that royalty/license fee shall not be a condition prerequisite to the sale of the imported goods and hence not includible in the assessable value thereof - appeal dismissed - decided against Revenue.

Summary

Issues involved:
1. Addition of technical know-how fees and running royalty to the assessable value of imported auto parts.
2. Interpretation of Rule 9(1)(c) of the Customs Valuation Rules, 1988.
3. Dispute regarding whether technical know-how fees and royalty are a condition of sale for the imported goods.
4. Comparison with the judgment of the Hon'ble Supreme Court in the case of Commissioner of Customs Vs. Ferodo India Pvt. Ltd.

Detailed Analysis:
1. The main issue in this case was the addition of technical know-how fees and running royalty to the assessable value of imported auto parts. The original authority had ordered the addition of these fees to the invoice value, but the Commissioner (Appeals) set aside this decision. The department appealed against this order.
2. The interpretation of Rule 9(1)(c) of the Customs Valuation Rules, 1988 was crucial in determining whether the technical know-how fees and royalty should be included in the assessable value. The rule states that fees related to the imported goods that the buyer is required to pay as a condition of sale should be added to the assessable value.
3. The dispute revolved around whether the technical know-how fees and royalty were indeed a condition of sale for the imported goods. The department argued that these fees were essential for the sale of the goods, while the respondent contended that there was no such condition attached to the import of the goods.
4. The judgment of the Hon'ble Supreme Court in the case of Ferodo India Pvt. Ltd. was cited as a precedent. The court held that royalty and license fees should not be included in the assessable value if they are not a condition prerequisite to the sale of the imported goods. The judgment emphasized the need to consider the pricing arrangement between the buyer and the foreign collaborator to determine if the fees should be added to the price of the imported goods.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner (Appeals) based on the interpretation of Rule 9(1)(c) and the precedent set by the Supreme Court judgment. The tribunal found that the technical know-how fees and royalty were not a condition of sale for the imported goods and therefore should not be added to the assessable value. The appeal of the department was dismissed, and the original decision was upheld.