2023 (9) TMI 90 - AT - Customs

Valuation - inclusion of value of technical know how fee or royalty paid by the Respondent to the foreign collaborator in the assessable value of the imported goods or not - HELD THAT - On perusal of the agreement, it is seen that the Royalty or Technical Knowhow Fee based on the net sales price of all domestic sales of the licensed articles. Further, the respondent is permitted to purchase components from other parties also. There is no restriction that the appellant has to procure the raw materials / capital goods only from the foreign supplier. It is very much evident that the Technical Knowhow Fee is not a condition of sale of the imported goods. In COMMISSIONER OF CUS. (PORT), CHENNAI VERSUS TOYOTA KIRLOSKAR MOTOR P. LTD. 2007 (5) TMI 20 - SUPREME COURT , it has been categorically need that the Royalty paid by the appellant to their foreign collaborator does not satisfy the twin conditions of Rule 9(1)(c) cannot be included in the assessable value of the imported goods. Moreover, it is also brought forth that the Department has not filed any appeal against the orders passed in the earlier round of valuation which has been accepted. For this reason also, the appeal cannot sustain - the impugned order does not call for any interference. The appeal filed by the Department is dismissed.

Summary

Issues Involved:
The appeal concerns whether the Royalty or Technical Knowhow fees should be included in the assessable value of imported goods for duty calculation.

Department's Argument:
The Department appealed against the Commissioner (Appeals) decision upholding that the Royalty/Technical Knowhow Fee should not be included in the assessable value of imported goods. The Department argued that the terms of the existing agreement did not warrant the inclusion of these fees in the invoice value, as per Rule 10(1)(c) of the Customs Valuation Rules, 2007.

Respondent's Argument:
The Respondent contended that the Royalty and lumpsum fee should not be included in the assessable value of the imported goods. They highlighted that the transaction value was at arm's length, and the Technical Knowhow Fee was not a condition of sale. The Respondent provided evidence to support their claim, including the agreement terms and pricing details.

Tribunal's Decision:
Upon reviewing the agreement and relevant case law, the Tribunal found that the Royalty or Technical Knowhow Fee did not meet the criteria to be included in the assessable value. Citing precedents such as M/s. HIS Automotive Ltd. and M/s. Daewoo Motors India Ltd., the Tribunal concluded that the Royalty paid by the appellant did not satisfy the conditions of Rule 9(1)(c) and thus should not be added to the value of the imported goods.

Final Verdict:
The Tribunal dismissed the Department's appeal, noting that the Department had accepted previous valuation orders and had not appealed against them. Therefore, the impugned order was upheld, and the appeal by the Department was deemed unsustainable. The Royalty and Technical Knowhow fees were not to be included in the assessable value of the imported goods.