2014 (1) TMI 367 - AT - Customs

Determination of assessable value of the goods imported - Import of automobile parts - Application of Rule 9(l)(c) - Held that - payments of royalty/licence fees was entirely relatable to the manufacture of brake liners and brake pads (licensed products). The said payments were in no way related to the imported items. In the present case, no effort was made by the Department to examine the pricing arrangement. No effort was made by the Department to ascertain whether there exists a price adjustment between cost incurred by the buyer on account of royalty/licence fees payments and the price paid for imported items. No effort was made by the Department to ascertain enhancement of royalty/licence fees by reducing the price of the imported items. In the circumstances, we find no infirmity in the impugned judgment of the Tribunal. In this case, the Department has gone by TAA alone. On reading TAA in entirety, we are of the view that there was no nexus between royalty/licence fees payable for the know-how and the goods imported for the manufacture of licensed products. The Department itself has invoked Rule 9(1)(c) - Following decision of Commissioner of Customs v. Ferodo India Pvt. Ltd. 2008 (2) TMI 12 - Supreme Court - Decided in favour of assessee.

Summary

Issues:
Challenge to confirmation of adjudication order loading transaction value by 3% under Customs Valuation Rules.

Detailed Analysis:
The appellant contested the confirmation of the adjudication order which required loading the declared invoice value by 3% under Customs Valuation Rules. The issue revolved around determining the assessable value of imported goods by M/s. Tata Yutaka Autocomp Ltd. under the Customs Act and Valuation Rules. The appellant imported automobile parts and faced the loading of declared value by 3% based on terms of the License and Technical Agreement, which required approval for sourcing parts from India and payment of 3% running royalty to the foreign supplier. The appellant argued that the value addition was unjustified as they provided worksheets showing cost breakdown and relied on a previous court decision.

Detailed Analysis:
The opposing view presented by the learned AR emphasized that the royalty payment should be included in the transaction value as it was a cost incurred by the appellant for imported goods from their parent company in Japan. The Tribunal carefully examined the agreement terms, specifically Article 14.1.2, which outlined the royalty payment structure. Referring to a previous court decision, the Tribunal highlighted the concept of including royalties and license fees in the price of imported goods if they were a condition for the sale. The Tribunal analyzed the agreement and concluded that the royalty was paid for goods manufactured by the appellant to their principal supplier of raw material.

Detailed Analysis:
The Tribunal compared the case law cited by the learned AR with a previous Supreme Court decision regarding royalty payments. The Supreme Court decision stated that royalty payment should not be included in the assessable value unless it was a condition pre-requisite for the sale of imported goods. Since there was no evidence to support such a condition in the present case, the Tribunal followed the Supreme Court decision and set aside the impugned order, allowing the appeal with consequential relief. The Tribunal's decision was based on the lack of nexus between royalty payments and the imported goods' value, as per the agreement terms and relevant legal principles.

This comprehensive analysis of the judgment provides a detailed overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision.