2009 (8) TMI 436 - AT - Customs

Valuation- Royalty and technical know how- Vide the impugned order the Commissioner of Customs (Appeals) has accepted the contention of the Revenue that royalty of and technical know-how/option fee is required to be added to the assessable value of S-Ibuprofen imported by the appellants herein from Japan under Rule 9(1)(c) of the Customs Valuation Rules 1988. Held that- We have gone through the entire agreement and find that the payment by the assessees cannot be said to be in relation to the imported goods but only in relation to the final products to be manufactured by them in India. The learned SDR has not been able to bring to our notice any clause in the relevant agreements which would establish that the payment was in relation to the imported goods. We therefore accept the contention of the assessees that the payments of royalty and technical know-how/option fee are not includible in the declared price of goods imported set aside the impugned order and allow the appeal.

Summary

Issues:
1. Inclusion of royalty and technical know-how/option fee in the assessable value of imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

Analysis:
The judgment by the Appellate Tribunal CESTAT, CHENNAI, involved the issue of whether royalty and technical know-how/option fee should be added to the assessable value of imported goods under Rule 9(1)(c) of the Customs Valuation Rules, 1988. The Commissioner of Customs (Appeals) had accepted the Revenue's contention that royalty and fees needed to be included in the assessable value of "S-Ibuprofen" imported by the appellants from Japan. The Tribunal carefully examined the Option/License Agreement between the parties, focusing on the clauses related to the grant of the option and the definitions of licensed product, licensed technology, license fee, and royalty.

Upon reviewing the agreement, the Tribunal found that the payments made by the assessees were not in relation to the imported goods but rather in relation to the final products to be manufactured in India. The Tribunal noted that there was no clause in the agreements establishing that the payments were specifically for the imported goods. As a result, the Tribunal accepted the contention of the assessees that the royalty and technical know-how/option fee should not be included in the declared price of the imported goods. Consequently, the impugned order was set aside, and the appeal was allowed.

This detailed analysis of the judgment highlights the crucial interpretation of the contractual terms, the distinction between payments for imported goods versus final products, and the ultimate decision by the Tribunal to exclude royalty and technical fees from the assessable value of the imported goods. The judgment provides clarity on the valuation rules concerning such additional fees and royalties in the context of customs valuation.