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Issues:
Inclusion of royalty paid to foreign collaborators in the value of imported goods for duty assessment. Analysis: The appeal addressed the issue of whether the royalty paid by the appellants to foreign collaborators should be included in the value of the imported goods for determining the duty on those goods. The agreement specified running royalty payments for tobacco and cigarettes. The impugned order stated that under Rule 9(1) of the Customs Valuation Rules, 1988, the running royalty should be part of the imported goods' value for assessment purposes. The Tribunal found that the assertion of the collaborators being related persons was factually incorrect and beyond the appeal's scope. The department did not present any grounds or evidence at lower levels to establish a relationship influencing prices. The appellants were a public limited company with a shareholding by M/s. Philip Morris International Finance Corporation, a subsidiary of M/s. Philip Morris International Finance Corporation Inc., USA. However, since no single entity held over 5% of shares in the appellants' company, the relationship clauses of the Customs Valuation Rules were deemed inapplicable. Regarding the transaction value, it was determined that the price between the appellants and the supplier constituted the sole consideration, as per Rule 4 of the Customs Valuation Rules, 1988. The department did not claim any additional payments beyond the invoice price. Rule 4(2) allows the rejection of transaction value in specific cases, which did not apply here. Citing a Supreme Court decision, it was concluded that the transaction value could not be disregarded in this scenario. The Tribunal ruled that the royalty should be included in the imported goods' value only if it pertained to goods manufactured in India with the collaborators' assistance. Since the royalty was for tobacco and cigarettes, not the imported goods, Rule 9(1)(c) was deemed inapplicable. Following a precedent set by the Tribunal in a previous case, the appeal was allowed, overturning the addition of royalty to the assessable value of the imported goods. The judgment was agreed upon by both members, and the appeal was disposed of on 1-12-2005.
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