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2016 (9) TMI 569 - AT - CustomsValuation - transaction value - Rule 3 (3) (a) of Customs Valuation (Determination of value of import goods) Rules, 2007 - related party - Rule 2 of Customs Valuation (Determination of value of import goods) Rules, 2007 - the case applicable involving the similar issue is Matushita Television & Audio Ltd. Vs. CC 2007 (4) TMI 5 - SUPREME COURT OF INDIA - Held that - letter submitted from the related supplier certifying the prices charged in the invoices for the supply of the goods at international prices which are computed on the basis of all costs and representative profit - transaction value acceptable. Assessable value - royalty - Rule 10 (1) (c)of Customs Valuation (Determination of value of import goods) Rules, 2007 - Rule 9 (1) (c)of Customs Valuation Rules, 1988 - Held that - the royalty payment is includible in the assessable value of the goods. The value of imported goods is thus, included in the net sale price of appellant s manufactured goods - appeal allowed - decided in favor of Revenue.
Issues Involved:
1. Relationship between parties under Rule 2 of Customs Valuation Rules, 2007. 2. Enhancement of invoice value by royalty under Rule 4 read with Rule 9(1)(c) of Customs Valuation Rules, 2007. 3. Acceptability of transaction value under Rule 3(3)(a) of Customs Valuation Rules, 2007. 4. Inclusion of royalty payments in assessable value under Rule 10(1)(c) of Customs Valuation Rules, 2007. 5. Applicability of principles of res judicata. 6. Relevance of case laws cited by both parties. Detailed Analysis: 1. Relationship between parties under Rule 2 of Customs Valuation Rules, 2007: M/s. HHPL and Husco International, USA were found to be related in terms of Rule 2 of Customs Valuation (Determination of value of import goods) Rules, 2007. This relationship was a key factor in the valuation of the imported goods. 2. Enhancement of invoice value by royalty under Rule 4 read with Rule 9(1)(c) of Customs Valuation Rules, 2007: The invoice value of goods imported by M/s. HHPL was enhanced by adding a royalty equal to 3% of the importer’s selling price of the licensed products as defined in the license agreement dated 01/04/2007. This enhancement was made under Rule 4 read with Rule 9(1)(c) of the Customs Valuation Rules, 2007, for the period from 10/10/2007 till the expiry of three years from the date of the order. 3. Acceptability of transaction value under Rule 3(3)(a) of Customs Valuation Rules, 2007: The Assistant Commissioner, GATT Valuation Cell, accepted the transaction value of the goods under Rule 3(3)(a) of Customs Valuation Rules, 2007. This acceptance was based on the certification from Husco International Ltd. UK that the prices charged were at international prices computed on the basis of all costs and representative profit. Additionally, the importer demonstrated a price difference/margin of about 7 to 11% in prices at which goods were procured by group companies vis-à-vis prices at which such goods were sold to Husco India. 4. Inclusion of royalty payments in assessable value under Rule 10(1)(c) of Customs Valuation Rules, 2007: The Assistant Commissioner’s order included royalty payments in the assessable value of the goods under Rule 10(1)(c) of Customs Valuation Rules, 2007. The inclusion was based on the earlier order-in-original, which had not been appealed against by the importer, and the consistent invoicing pattern followed by the importer. The Commissioner (Appeals) later modified this order, holding that there was no case for the addition of royalty payment in the assessable value of the goods. 5. Applicability of principles of res judicata: The Revenue argued that the principles of res judicata applied since M/s. HHPL had accepted the earlier order dated 30/06/2008. However, the Tribunal, relying on the decision in the case of Hewlett Packard (MANU/CC/0178/1998), held that the principle of res judicata does not apply in taxation matters, allowing M/s. HHPL to appeal against the subsequent order. 6. Relevance of case laws cited by both parties: - Revenue’s Arguments: - The Revenue relied on the decision of the Hon’ble Apex Court in the case of Matushita Television & Audio Ltd. (2007 (211) ELT 200 (SC)), where it was held that royalty payments connected with imported components and forming a condition of sale should be added to the transaction value. - The Revenue also cited other cases like Mahindra & Mahindra Ltd. (1995 (76) ELT 481 (SC)), Skoda Auto India Ltd. (2014 (313) ELT 600 (Tri-Mum)), General Motors India Ltd. (2009 (235) ELT 364 (T)), and others to support their argument for the inclusion of royalty in the assessable value. - Importer’s Arguments: - The learned Counsel for M/s. HHPL argued that the Tribunal in the case of Hewlett Packard had established that the principle of res judicata does not apply in such cases. - The Counsel also relied on the decision of the Apex Court in the case of Ferodo India (2008 (224) ELT 23 (SC)) and Essar Steel to argue that the transaction value under Rule 3(3)(a) should be accepted without adding the royalty value. Conclusion: The Tribunal concluded that the royalty payments should be included in the assessable value of the imported goods, relying on the decision of the Hon’ble Apex Court in the case of Matushita Television & Audio Ltd. The appeals filed by the Revenue were allowed, and the cross-objections were disposed of accordingly.
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