2008 (10) TMI 240 - AT - Customs

Loading of value valuation - We find that the ld. Commissioner vide his earlier remand order has asked the lower adjudicating authority to justify the reasons for enhancement of the price and the quantum of the enhancement. As such, in remand proceeding all that the lower adjudicating authority was required to do was to ascertain whether payment of royalty and technical know-how fee paid to the supplier has influenced the price or not and if so the quantum thereof. The lower authority however simply ascertained the amount of technical know-how fee and royalty paid by the importer and loaded the same to transaction value. - we find that the Commissioner (Appeals) has rightly observed that the lower adjudicating authority has not carried out the directions in the remand order and has gone beyond that. Further, the new grounds now given by the Revenue in its appeal at second appellate authority stage to justify the loading, is not allowable

Summary

Issues: Appeal against Order-in-Appeal setting aside loading of value, Royalty payments inclusion in imported goods value.

Analysis:
1. Loading of Value Issue:
The appeals were against the Order-in-Appeal setting aside the loading of value done by the adjudicating authority. The ld. Commissioner (Appeals) found the impugned order unsustainable due to lack of reasons for ordering the loading of invoice value. The Commissioner directed to determine loading as per the earlier order, limiting it to 2.9% related to royalty payments only. The Tribunal agreed that the loading beyond 2.9% was unjustified as the collaboration agreement and import of goods were independent transactions. No evidence suggested a connection between royalty payments and imported goods' value. The Tribunal referred to legal precedents stating that royalties not related to imported goods cannot be added to the invoice value.

2. Royalty Payments Inclusion Issue:
The issue revolved around whether royalty payments should be included in the value of imported goods. Rule 9(1)(c) of the Customs Valuation Rules, 1998 governs the inclusion of royalties and license fees in the value of imported goods. The Tribunal emphasized that for such inclusion, the royalties must be related to the imported goods and a condition of their sale. In this case, the Tribunal found no direct or indirect relationship between royalty payments and imported goods. The collaboration agreement allowed the appellants to import goods from any source, indicating independence between the transactions. The Tribunal cited legal judgments to support the position that unless royalties are related to imported goods and a condition of sale, they cannot be added to the value of imported goods.

3. Judgment Analysis:
The Tribunal examined the submissions by both parties and the records. It noted that the lower adjudicating authority failed to justify the enhancement of the price and the quantum of enhancement in compliance with the remand order. The authority simply loaded the technical know-how fee and royalty paid by the importer without demonstrating how it influenced the transaction value. Merely being related does not automatically imply an influence on the price. The Tribunal found no valid reasons for the enhancement in the lower authority's findings, leading to the dismissal of the Revenue's appeal. The Tribunal emphasized that creating new grounds at the appellate stage to justify loading was not permissible, as the lower authority had not fulfilled the remand order's directions adequately.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision to set aside the loading of value and dismissed the Revenue's appeal regarding the inclusion of royalty payments in the imported goods' value. The judgment emphasized the need for a direct relationship between royalties and imported goods, as well as the importance of justifying any enhancements in the transaction value with valid reasons.