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2019 (10) TMI 459 - AT - Customs


Issues Involved:
1. Rejection of declared value and enhancement of the same.
2. Confiscation of goods and imposition of redemption fines.
3. Imposition of personal penalties under Section 112(a) of the Customs Act, 1962.
4. Inclusion of royalties and license fees in the assessable value.
5. Determination of whether payments made were a condition of sale for the imported goods.

Detailed Analysis:

1. Rejection of Declared Value and Enhancement:
The Commissioner of Customs (Appeals) upheld the orders of the Joint Commissioner, which rejected the declared values of the imported goods and reassessed them at significantly higher amounts. The declared values were found to be ?286, ?12,386, and ?243, while the reassessed values were ?6,49,182, ?6,13,840, and ?7,21,990 respectively. The reassessment was based on the inclusion of license fees/royalties paid for reproduction and distribution rights, which the appellants had not included in the declared value.

2. Confiscation of Goods and Imposition of Redemption Fines:
The goods were confiscated under Section 111(m) of the Customs Act, 1962, due to misdeclaration of value. However, the appellants were allowed to redeem the goods upon payment of fines. The fines imposed by the Joint Commissioner were ?1,75,000, ?1,50,000, and ?2,00,000 respectively, which were subsequently reduced by the Commissioner (Appeals).

3. Imposition of Personal Penalties:
Personal penalties were imposed on M/s Moser Baer India Ltd. and the courier companies involved (Federal Express and DHL Express) under Section 112(a) of the Customs Act, 1962. The penalties ranged from ?25,000 to ?75,000, which were also reduced by the Commissioner (Appeals).

4. Inclusion of Royalties and License Fees:
The main contention was whether the royalties and license fees paid for the right to reproduce and distribute the imported goods should be included in the assessable value. Rule 10(1)(c) of the Customs Valuation Rules mandates the inclusion of such fees if they are a condition of the sale of the goods. The appellants argued that these fees were for post-importation activities and should not be included. However, the interpretative notes to Rule 10(1)(c) clarify that charges for the right to reproduce imported goods in the country of importation are not to be added, whereas payments for distribution rights should be included if they are a condition of sale.

5. Condition of Sale:
The agreements between the appellants and the licensors clearly stipulated that the payment of license fees was a condition for the sale of the imported goods. The agreements specified that the entire license fee had to be paid before the delivery of the goods, making the payment a precondition for the sale. This aligns with the interpretative note 2 to Rule 10(1)(c), which states that payments for distribution rights must be included in the assessable value if they are a condition of sale.

Conclusion:
The Tribunal upheld the orders of the lower authorities, confirming the rejection of the declared values and the reassessment of the same. The confiscation of goods and the imposition of redemption fines and personal penalties were also upheld. The inclusion of royalties and license fees in the assessable value was justified as these payments were found to be a condition of sale. The appeals were dismissed, and the Tribunal found no merit in the appellants' arguments regarding the exclusion of these fees from the assessable value or the limitation period for invoking extended time for recovery.

 

 

 

 

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