2016 (11) TMI 846 - AT - Customs

Valuation - 20% loading was done on the declared CIF value - Rule 8 of the Customs Valuation Rules, 1988 - foreign collaboration agreement - Rule 9 (1) (c) of the Customs Valuation Rules - Held that - It is seen that the price of imports made by the appellants are roughly the same as price at which they have been procured by the foreign collaborator from other parties. Further, we have been informed that these items are in the nature of plastic granules. It can be seen that plastic granules would not be covered by the technology transfer agreement as the contract product defined in the agreement mean only injection moulded parts sub-assemblies and related items. Out of it a plastic injection moulds. Similarly, in case of stamping foil the price at which the goods have been supplied to the appellant is slightly higher than the price at which the same have been procured by the foreign collaborator. It is apparent that the relationship has not influenced the price on the goods. In so far as addition of royalty under Rule 9 (1) (c) is concerned neither order-in-original nor grounds of appeal filed before the Tribunal have anything to show that the purchase of goods was a condition of transfer of technical know-how fee. In the absence of that assertion and evidence thereof demand under Rule 9 (1) (c) cannot be accepted. The appeal filed by the Revenue is dismissed.

Summary

Issues: Customs valuation rules application, relationship between parties influencing price, technical know-how fee addition under Rule 9 (1) (c).

Customs Valuation Rules Application:
The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Customs (Appeals), Mumbai. The original adjudicating authority had held that the parties involved were joint ventures and related, leading to a 20% loading on the declared CIF value under Rule 8 of the Customs Valuation Rules, 1988. Additionally, technical know-how fees were directed to be added under Rule 9 (1) (c) of the Customs Valuation Rules. The Commissioner (Appeals) set aside the original order, stating that the data provided by the Revenue could not be relied upon, as there were discrepancies in the information provided.

Relationship Between Parties Influencing Price:
The Commissioner (Appeals) observed that the appellants and the supplier were related under Rule 2 (2), which was not disputed. The declared value was enhanced by 20% under Rule 8, but the basis for this enhancement was not disclosed, leading to a perception of arbitrariness. The appellants argued that the supplier was not the manufacturer of the imported raw materials and procured them from third-party suppliers. The comparison chart submitted by the appellants showed that the price charged by the supplier was higher than the procurement price after including expenses. The Commissioner (Appeals) noted that the price was not affected by the relationship, and the declared price needed to be accepted under Rule 4 (3) (a).

Technical Know-How Fee Addition under Rule 9 (1) (c):
The Tribunal found that the relationship did not influence the price of goods. Regarding the addition of royalty under Rule 9 (1) (c), it was noted that there was no evidence to show that the purchase of goods was a condition for the transfer of technical know-how fee. Without such evidence, the demand under Rule 9 (1) (c) could not be accepted. Consequently, the appeal filed by the Revenue was dismissed, and the cross objection was also disposed of.

This detailed analysis of the judgment highlights the application of Customs Valuation Rules, the influence of the relationship between parties on pricing, and the considerations for adding technical know-how fees under the relevant rule.