2018 (4) TMI 1347 - AT - Customs

Valuation - import of digital device (media) with contents - inclusion of royalty fee in the assessable value of goods imported - rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules 2007 - whether the assessable value, as enhanced by the original authority and upheld by the first appellate authority, is in consonance with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007? Held that - From the facts on record, it would appear that the import is not only of the media but also of the contents therein. For ease of conveyance, the contents are supplied in digital beta tapes and the replication thereof merely enables distribution. The contention of the appellant that the assessable value should be restricted only to the media as declared by them, on their own computation, is not tenable. It, therefore, necessarily follows that the value of the goods must include a value for the contents. The royalties are related to the number of episodes. There is also no justification to conclude that the said royalty/licence fee may include consideration for reproduction or distribution rights. Extended period of limitation - suppression of facts - Held that - reliance placed in the case of M/s Continental Foundation Joint Venture Sholding, Nathpa HP Versus Commissioner of Central Excise, Chandigarh-I 2007 (8) TMI 11 - SUPREME COURT OF INDIA , Where it was held that when the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact - extended period not invocable. Confiscation - redemption fine - Held that - The goods having been cleared in the normal course, the proceedings for recovery and confiscation were initiated much later. The imports were effected without any bond that could cover recovery of fine - redemption fine set aside - confiscation also set aside. Appeal allowed in part.

Issues Involved:
1. Inclusion of royalty fee in the assessable value of imported goods.
2. Applicability of Rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
3. Correctness of invoking Rule 3 of the Customs Valuation Rules.
4. Validity of the extended period for invoking customs duty.
5. Justification for the imposition of redemption fine.

Issue-wise Detailed Analysis:

1. Inclusion of Royalty Fee in the Assessable Value:
The primary issue in dispute is whether the royalty fee paid by the appellant should be included in the assessable value of the imported goods. The appellant argued that the royalty/licence fee was not a condition of sale for the imported goods and thus should not be added to the assessable value. They cited Rule 10(1) of the Customs Valuation Rules, which states that charges for the right to reproduce imported goods should not be added to the price paid or payable for the imported goods. The appellant relied on various judgments, including Saregama India Ltd v. Commissioner of Customs and Commissioner of Customs (CSI Airport) v. Star Entertainment Pvt Ltd, to support their claim that the royalty fee should not be included.

2. Applicability of Rule 10 of Customs Valuation Rules:
The appellant contended that the provisions of Rule 10 of the Customs Valuation Rules were incorrectly invoked. They argued that the licence fee was not related to the imported goods and was not a condition of sale. The appellant emphasized that the imported goods were to be re-exported after usage, indicating that these goods were loaned rather than sold. They argued that the licence merely vested them with rights to exploit the goods for a limited period, and the goods were returnable upon expiry of that tenure.

3. Correctness of Invoking Rule 3 of the Customs Valuation Rules:
The appellant argued that invoking Rule 3 was incorrect as the goods were not sold but loaned for a limited period. They contended that the assessable value should be restricted only to the media (digital beta tapes) and not include the contents therein. However, it was determined that the import included both the media and the contents, and thus the value of the goods must include a value for the contents.

4. Validity of the Extended Period for Invoking Customs Duty:
The appellant claimed that the extended period for invoking customs duty was not justified. They cited the decision of the Hon'ble High Court of Bombay in Commissioner of Customs (CSI Airport) v. Star Entertainment Pvt Ltd, which noted that mere omission to give correct information is not suppression of facts unless it was deliberate to evade payment of duty. However, the tribunal found that the extended period was applicable as the facts and circumstances of the case were materially different.

5. Justification for the Imposition of Redemption Fine:
The tribunal found that the imposition of a redemption fine was not justified. The goods had been cleared in the normal course, and the proceedings for recovery and confiscation were initiated much later. The tribunal relied on the decision of the Hon'ble High Court of Bombay in re Finesse Creations, which stated that the concept of redemption fine arises only if the goods are available for redemption. Since the goods were not available, the imposition of a redemption fine was not warranted.

Conclusion:
The tribunal concluded that the assessable value must include a value for the contents of the imported goods, and the enhancement of value by the original authority was justified. The appellant's claim for not invoking the extended period was not accepted, and the imposition of a redemption fine was found to be unjustified. The impugned order was modified to the extent of removing the redemption fine.

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