2015 (2) TMI 597 - AT - Customs

Waiver of pre deposit - Valuation - Inclusion of entire value of technical knowhow and royalty - Held that - On the one hand there is no evidence to show that the payments of technical knowhow and royalty is a result of condition of sale of the imported goods. On the other hand the Deputy Commissioner observed that the price is not influenced by the relationship. In view of the above, the appellant has made out a prima facie case for complete waiver of pre-deposit and stay against recovery. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

Summary

Issues:
1. Addition to the assessable value based on technical knowhow and royalty.
2. Interpretation of Rule 10(c) regarding the conditions for making additions to the assessable value.
3. Relationship between the sale, technical knowhow fees, and royalty paid.
4. Influence of relationship on pricing and determination of arms length price.

Analysis:
The case involved an importer-appellant who imported goods from overseas suppliers, triggering a referral to the Special Valuation Branch due to the relationship between the appellant and the foreign suppliers. The order-in-original added the cost of technical knowhow and royalty paid by the appellant, leading to an appeal by the importer against the enhancement of value. The crux of the matter was whether the addition to the assessable value was justified based on the relationship and payments made by the appellant.

The learned counsel argued that the addition to the assessable value was incorrect, citing Rule 10(c) which allows additions only when royalty and technical knowhow are paid as a condition of sale. He emphasized that there was no direct link between the sale and the technical knowhow fees and royalty paid by the appellant. The counsel pointed out that the appellant had not yet commenced manufacturing operations, indicating a lack of connection between the imported goods, royalty, and technical knowhow fees. Additionally, the counsel highlighted discrepancies in pricing between sales to unrelated buyers and fellow subsidiaries, suggesting that the relationship did not influence pricing and that the price was at arms length.

The Tribunal found merit in the appellant's arguments, noting the absence of evidence showing that the payments of technical knowhow and royalty were conditions of sale. Moreover, the Deputy Commissioner himself acknowledged that the price was not influenced by the relationship. Consequently, the Tribunal concluded that the appellant had established a prima facie case for a complete waiver of pre-deposit and granted a stay against recovery during the appeal's pendency. This decision was based on the lack of evidence linking the payments to the sale conditions and the acknowledgment that the relationship did not impact pricing, supporting the appellant's position for a waiver and stay against recovery.