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2024 (10) TMI 686 - AT - CustomsValuation of imports made from the related suppliers - royalty can be added to the transaction value of the imported items as per Rule 10(1)(c) of the Customs Valuation Rules, 2007 or not - HELD THAT - The Hon ble Supreme Court in the matter of CC Vs. M/s Ferodo India Pvt Ltd 2008 (2) TMI 12 - SUPREME COURT examined the issue regarding includability of Royalty in the assessable value of imported goods and after considering the judgment in M/s. Matsushita Television Audio (I) Ltd., 2007 (4) TMI 5 - SUPREME COURT referred by the Appellant, it is held that technical know-how and payment of Royalty is includible in the price of imported goods, if the payment constitute a condition pre-requisite for supply of imported goods by foreign supplier. In the present appeal, the facts have clearly proved that the pricing was at arm s length and the relationship had not influenced the price, which has been accepted by the department in past transactions between the same parties. The issue is squarely covered by the decision of the Hon ble Supreme Court in the matter of CC vs M/s Ferodo India Pvt Ltd. Thus Commissioner (Appeals) has rightly held that there is no question of adding the royalty to the transaction value. The appeal filed by the Revenue is not sustainable, hence liable to be rejected - the appeal filed by the Revenue is dismissed.
Issues:
Whether royalty can be added to the transaction value of imported items as per Rule 10(1)(c) of the Customs Valuation Rules, 2007, when the imports are made from related suppliers. Analysis: The appeal involved a dispute regarding the inclusion of royalty payments in the assessable value of imported goods under Rule 10(1)(c) of the Customs Valuation Rules, 2007. The appellant contended that the royalty paid was for the license of technical know-how for manufacturing final products and not for the imported goods meant for trading. The appellant referred to specific clauses in the license agreement to support this argument. The Tribunal examined the agreement and found that the respondent paid royalty to the overseas supplier based on the net sale value of the manufactured products, including the value of imported goods. The Tribunal also considered the judgment of the Supreme Court in the case of M/s. Matsushita Television & Audio (I) Ltd. Vs. Commissioner of Customs, which emphasized that royalty payments related to imported goods should be included in the declared price. The appellant relied on various decisions to support their case, including M/s Bosch Chassis Systems India Pvt Ltd vs CC, M/s Fujitsu Ten India Pvt Ltd vs C.C, Commr.C.Ex Mumbai vs M/s Herbalife International Pvt Ltd, and M/s Husco Hydraulics Pvt Ltd vs CC (Import), Mumbai. However, the respondent argued that the royalty payment to the overseas supplier was only due upon the sale of finished goods and not a condition for importing raw materials. The respondent highlighted that the past transactions had been accepted as arm's length pricing by the department. The Tribunal considered the contract between the parties and the past practices in determining the transaction value of imported goods. The Tribunal noted that the issue had been settled over time, and the royalty payment was not a condition for the sale of imported goods. The Tribunal also referred to the Supreme Court's decision in Commissioner of Customs Vs. Ferodo India Pvt. Ltd., which emphasized the inclusion of technical know-how payments only if they were a condition for the supply of imported goods. In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) that the royalty payment should not be added to the assessable value of imported goods under Rule 10(1)(c) of the Customs Valuation Rules, 2007. The Tribunal relied on the Supreme Court's judgment in CC Vs. Feroda India Pvt. Ltd. and the precedent set in the case of M/s. Schunk Metal and Carbon (India) Private Limited to dismiss the appeal filed by the Revenue. This detailed analysis of the judgment highlights the key arguments presented by both parties, the legal principles applied by the Tribunal, and the precedents relied upon to reach the final decision.
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