2014 (5) TMI 944 - AT - Customs

Valuation of goods - Inclusion of royalty in assessable value of goods - Held that - it is clear that the department could not bring out that the royalty of 100 Euros and royalty @ 2% per vehicle and 15 million Euros as per Technical Assistance and Engineering of Training Services Agreement are condition for the sale of imported goods. In these circumstances, inclusion of the aforesaid amounts in the assessable value is not sustainable in law. - Decided in favour of assessee.

Summary

Issues: Valuation of imported goods under Customs Act, 1962 and Customs Valuation Rules, 2007.

Analysis:
The appellant appealed against an order setting aside the lower adjudicating authority's decision and allowing the department's appeal. The case involved the valuation of goods imported from a supplier. The appellant contended that certain royalties and fees were not payable due to specific conditions not being met. The Revenue argued for the inclusion of these amounts in the assessable value under Rule 10(1)(c) of the Customs Valuation Rules. The Commissioner (Appeals) relied on trade agreements to enhance the value, but the Tribunal found that the department failed to establish the royalties and fees as conditions for the sale of imported goods, leading to the appeal being allowed.

The appellant's contentions regarding royalties, including those related to vehicle production milestones and spare parts sales, were considered. The Tribunal analyzed various agreements, such as the Technology License Agreement and Technical Assistance Engineering and Training Services Agreement, to determine the conditions for royalty payments. It was found that the department could not prove that the royalties and fees were mandatory conditions for the sale of imported goods, leading to the rejection of their inclusion in the assessable value.

The Tribunal's decision highlighted the importance of establishing royalties and fees as essential conditions for the sale of imported goods to justify their inclusion in the assessable value. The judgment emphasized the need for clear evidence linking such payments to the sale transaction. By setting aside the Commissioner (Appeals) order and allowing the appeal, the Tribunal clarified the criteria for determining the assessable value of imported goods under the Customs Valuation Rules.