1997 (2) TMI 260 - AT - Customs

Summary

Issues involved:
1. Interpretation of Customs Valuation Rules regarding inclusion of royalty and lump-sum fees in assessable value.
2. Control exercised by foreign collaborator over manufacturing operations.
3. Applicability of Supreme Court judgments on valuation of imported goods.

Issue 1 - Interpretation of Customs Valuation Rules:
The case involved an agreement between M/s. Himson Textiles and M/s. Reiter-Scragg Ltd. for manufacturing and selling machines, with provisions for royalty and lump-sum fees. The Assistant Collector of Customs considered them related persons under Rule 2(2) of the Customs Valuation Rules, 1983. The Commissioner of Customs (Appeals) set aside the loading of CIF value, citing the Supreme Court's decision that royalty payment does not form part of assessable value unless specific infirmities exist.

Issue 2 - Control by Foreign Collaborator:
The Department sought to add royalty to the transaction value under Rule 9(1) of the Customs Valuation Rules, contending that the collaborator exercised control over manufacturing operations. The Supreme Court precedent in Collector of Customs v. Essar Gujarat Ltd. was cited to support adding license and technical services fees to the assessable value.

Issue 3 - Applicability of Supreme Court Judgments:
The Respondents argued that royalty payments were not related to the imported goods and should not be included in the assessable value. They referenced the Supreme Court's decision in Union of India v. Mahindra & Mahindra Ltd. and a Tribunal decision in Varma Trafag Instruments Pvt. Ltd. to support their position. The Tribunal, following the Supreme Court's decision in Essar Gujarat Ltd., directed the Assistant Commissioner to redetermine the value based on the actual fees paid by the Respondents.

Separate Judgment:
The Commissioner (Appeals) decision was set aside, directing the determination of assessable value in line with the Supreme Court's ruling in Essar Gujarat case, which incorporated the GATT concept of transaction value for imported goods. The Tribunal emphasized the importance of considering recent Supreme Court decisions in customs valuation matters.