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2012 (12) TMI 353 - AT - CustomsTransaction value for the purpose of levy of customs duty - whether royalty and licence fees is to be included in the assessable value? Held that - The agreement between the foreign supplier and the Indian importer states that the Indian importer has to pay royalty towards the Video Rights of the imported goods, i.e. master Digi beta tapes containing the feature films. From the master tapes, the appellant makes VCDs/DVDs of the films and sells the same in the domestic market on which royalty is payable to the foreign supplier. The value declared at the time of importation is not the cost of film but only the cost of media in which the film is recorded and the same is not the value of the goods imported. As decided in COMMNR. OF CUSTOMS EXCISE, NEW DELHI VERSUS M/S. LIVING MEDIA (INDIA) LTD. 2011 (8) TMI 41 - SUPREME COURT OF INDIA royalty is paid for the supply of the goods as a condition of sale has to be necessarily included in the transaction value for the purpose of levy of customs duty - the appellant has not made out any case for complete waiver of pre-deposit thus directed to make a pre-deposit of Rs. 80 (Eighty) lakhs within a period of eight weeks and report the compliance.
Issues:
- Assessment of duty on imported recorded media - Inclusion of royalty payments in assessable value - Confiscation of goods and imposition of penalty - Applicability of Customs Valuation Rules Assessment of Duty on Imported Recorded Media: The case involved an appeal against an Order-in-Original passed by the Commissioner of Customs, Mumbai, regarding the under-assessment of duty on imported recorded media containing foreign feature films. The appellant, a company engaged in importing such media, was found to have under-declared the value by not including royalty payments made to overseas suppliers. The adjudicating authority confirmed the duty demand along with interest and imposed penalties. The appellant contended that the royalty payments were for manufacturing and marketing rights in India, not related to the imported media's value. The Revenue argued that such payments were a condition of sale for the supply of master tapes, citing a Supreme Court judgment and a Tribunal stay order in a similar case. Inclusion of Royalty Payments in Assessable Value: The Tribunal analyzed the agreement between the appellant and the foreign supplier, noting that the royalty was for the 'Video Rights' of the imported goods, i.e., master Digi beta tapes containing feature films. The Tribunal referred to the Supreme Court's decision, stating that royalties and license fees related to imported goods that the buyer must pay as a condition of sale should be added to the transaction value for customs duty levy. Therefore, the Tribunal upheld the inclusion of royalty payments in the assessable value of the imported goods, emphasizing that the value declared at the time of importation was nominal and did not reflect the actual value of the goods. Confiscation of Goods and Imposition of Penalty: The adjudicating authority had also ordered the confiscation of the imported media and imposed a substantial penalty on the appellant under the Customs Act. The Tribunal directed the appellant to make a pre-deposit of a specified amount within a given timeframe, citing a previous Tribunal decision in a similar case and the Supreme Court's ruling. Upon compliance with the pre-deposit, the balance amount of dues adjudged, including duty, interest, and penalties, would be waived, and recovery stayed during the appeal's pendency. Applicability of Customs Valuation Rules: The case revolved around the interpretation and application of the Customs Valuation Rules, specifically Rule 9(1)(c) of the Customs Valuation Rules, 1988, and Rule 10(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007. The Tribunal's decision was based on the provisions of these rules, the Supreme Court's precedent, and the specific circumstances of the case, emphasizing the necessity of including royalty payments in the assessable value for customs duty purposes. This detailed analysis of the judgment provides insights into the legal complexities surrounding the assessment of duty on imported goods, the inclusion of royalty payments in assessable value, and the applicable Customs Valuation Rules governing such matters.
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