2014 (3) TMI 561 - AT - Customs

Valuation of goods - Stay application - addition of technical assistance fees and royalty paid - additions on the ground that applicant (importer) and the foreign suppliers are related persons - Held that - Prima facie technical assistance and the administrative assistance service obtained by the applicant for the manufacture/administrative control of the business in India is not related to the transactional value of the imported goods. Moreover, the royalty paid by the applicant to the foreign related person is on the manufactured goods in India not on the imported goods. These payments are not the condition of sale of the imported goods. Therefore, prima facie these amounts paid by the applicant towards the service received by the related persons are not addable in the assessable value - Accordingly, the applicant has made out a case for stay of operation of the impugned order. Therefore, we stay of operation of the impugned order till final disposal of the appeal - Stay granted.

Summary

Issues:
1. Stay of operation of the impugned order regarding inclusion of technical assistance fees and royalty paid to foreign supplier in transaction value.

Analysis:
The case involved a dispute over the inclusion of technical assistance fees and royalty paid by an importer to their foreign supplier in the assessable value of imported goods. The lower authorities had determined that these payments were to be added to the transaction value due to the relationship between the importer and the foreign suppliers. The matter was referred to the GATT Valuation Cell in Mumbai for examination. The applicant, seeking a stay of the impugned order, argued that the agreements with the foreign suppliers were for technical know-how and administrative services, not related to the sale of imported goods, hence should not be included in the assessable value.

The applicant, M/s. Sungwoo Gestamp Hitech Pvt. Ltd., imported various components and materials from foreign suppliers. The agreements with the suppliers involved payment for technical assistance and administrative services, including royalty on the net sale value of manufactured components. The applicant contended that these payments were not conditions of the sale of imported goods and should not influence the transaction value. The authorities, however, concluded that the technical and administrative services were essential for manufacturing the imported goods, making them a condition of sale, and hence, should be included in the assessable value.

Upon reviewing the agreements, the Tribunal found that the technical and administrative services obtained by the applicant were not directly related to the transactional value of the imported goods. The royalty paid was on the goods manufactured in India, not on the imported goods, and these payments were not conditions of the sale of imported goods. Consequently, the Tribunal held that the amounts paid by the applicant to the related foreign persons for services received were not to be added to the assessable value. Therefore, the Tribunal granted a stay of operation of the impugned order until the final disposal of the appeal, finding merit in the applicant's case.

In conclusion, the Tribunal granted the stay of operation of the impugned order, emphasizing that the technical and administrative services obtained by the applicant from related foreign suppliers were not to be included in the assessable value of imported goods. The appeal was scheduled for final hearing, ensuring a comprehensive review of the matter.