2014 (11) TMI 22 - AT - Customs

Valuation of goods - Inclusion of technical know how fees and royalty - Held that - The department has sought to load royalty relating to the technical know-how as per Rule 10(l)(c). Undisputedly the appellants have imported components for the manufacture of Dis Brake Systems for two wheelers - explanation only added that such royalty would be includable in the case even if the imported goods have undergone the said process after importation of such goods. The department could not show that the royalty and other charges were for the to the imported goods and they were as a condition of sale of such imported goods. Undisputedly the royalty on technical know-how was paid only for the manufacture sub-assembly of Dis Brake Systems. Therefore the royalty and other charges are not includible and the impugned order is not sustainable and is set aside - Decided in favour of assessee.

Summary

Issues: Valuation of imported goods for customs duty purposes based on inclusion of royalty and other charges as per Rule 10(1)(c) of the Customs Valuation Rules, 2007.

Analysis:
1. Background: The appellant appealed against an Order-in-Appeal upholding the lower adjudicating authority's decision regarding the valuation of imported components for Dis Brake Systems. The case involved the inclusion of royalty as an additional consideration for imported goods.

2. Appellant's Contention: The appellant, a manufacturer of Dis Brake Systems, argued that the royalty paid was for technical know-how related to sub-assembly manufacturing, not for the imported goods themselves. The appellant emphasized that the royalty was not on the value of the imported goods but for the operation of technical know-how.

3. Department's Argument: The department contended that post the addition of an explanation to Rule 10(1)(c), royalties and other charges related to imported goods must be included in the assessable value. The department highlighted the change in the situation due to the explanation, emphasizing that such charges should be added to the price paid for the imported goods.

4. Legal Interpretation: The Tribunal analyzed Rule 10(1)(c) and the added explanation, which stated that royalties and fees related to imported goods, paid as a condition of sale, should be included in the assessable value. However, it was noted that the department failed to demonstrate that the royalty and charges were for the imported goods and were a condition of sale for those goods.

5. Decision: After careful consideration, the Tribunal found that the royalty paid for technical know-how was solely for manufacturing sub-assemblies of Dis Brake Systems, not for the imported goods themselves. As the charges were not related to the imported goods as a condition of sale, the Tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeal.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the legal interpretation of relevant rules, and the ultimate decision reached by the Tribunal regarding the valuation of imported goods for customs duty purposes.