2001 (4) TMI 473 - Commissioner - Central Excise

Summary

Issues:
1. Valuation of imported goods under Customs Valuation Rules ('CVR') 1988.
2. Addition of royalty and technical know-how fee to transaction value.
3. Comparison of imported goods for valuation purposes.
4. Impact of termination of agreement on valuation of goods.
5. Examination of invoice value for related party transactions.

Issue 1: Valuation of imported goods under Customs Valuation Rules ('CVR') 1988.
The appeal in this case revolves around the valuation of imported goods under the CVR 1988. The appellant, a manufacturer of Tyre Cord Fabric, imported Nylon 66 Yarn from Du Pont Singapore and Du Pont USA at varying prices. The lower authority added royalty and technical know-how fees to the transaction value, which the appellant contested. The appellant argued that the lower authority's valuation under Rule 6 was incorrect as it compared goods not comparable to those imported. The appellant presented evidence of subsequent imports at the same price, indicating normal transaction values. The judgment ordered a revaluation under Rule 7 or 7A, and not to consider the loaded price post the termination of the agreement.

Issue 2: Addition of royalty and technical know-how fee to transaction value.
The lower authority added royalty and technical know-how fees to the transaction value as per Rule 9(1)(c) of the Valuation Rules. However, the appellant contended that these fees were not related to the imported goods and should not be loadable on the assessable value. The judgment referred to previous decisions by the Hon'ble Supreme Court and CEGAT, supporting the appellant's argument that such fees should not impact the valuation of imported goods. The judgment allowed the appeal on this ground, disallowing the addition of royalty and technical know-how fee to the invoice value.

Issue 3: Comparison of imported goods for valuation purposes.
The appellant challenged the lower authority's valuation under Rule 6, highlighting that the goods used for comparison were not comparable to the imported goods. The judgment acknowledged this discrepancy and ordered a revaluation under Rule 7 or 7A to determine the correct value of the imported goods. The incorrect comparison for valuation purposes was a crucial point in the appeal, leading to a favorable decision for the appellant.

Issue 4: Impact of termination of agreement on valuation of goods.
The termination of the Technology and Financial Collaboration Agreement between the appellant and Du Pont USA had implications on the valuation of goods. The judgment noted that post-termination, certain fees were no longer payable and should not be added to the transaction value. The appellant's argument that the termination affected the payment of certain fees was accepted, leading to a decision in favor of the appellant on this issue.

Issue 5: Examination of invoice value for related party transactions.
The judgment emphasized the need to separately examine the acceptability of the invoice value for related party transactions post the termination of the agreement. It was clarified that the valuation should not consider the relationship between the importer and the overseas supplier post the termination. This separate examination of invoice value for related party transactions was crucial in ensuring a fair valuation process.

This detailed analysis of the judgment provides insights into the various issues raised in the appeal and the reasoning behind the decision delivered by the Commissioner of Customs (Appeals), Chennai.