2019 (6) TMI 278 - AT - Customs

Valuation - inclusion of technical know- how fees and royalty charges payable or paid by the Appellant to their foreign suppliers in the assessable value - HELD THAT - The original authority finds that 15% of marks up are added to cover the expenses and profit margin and therefore the relation has not influenced the prices. The original authority also finds that the technical know-how fees is more relatable to the technology imparted than to the goods imported and that it is not a pre-condition for import of goods. It is also pertinent to note that the Appellant are also procuring 39% of the parts/components required from the domestic market. We find that Commissioner (Appeals) has not gone into the facts of the case and has not given any reasoning for the conclusion drawn therein. As far as the relationship has not influenced the pricing pattern there is no justification for inclusion of royalty and technical know-how in the assessable value of the imported products - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether technical know-how fees and royalty charges payable or paid by the Appellant to their foreign suppliers are required to be included in the assessable value of imported goods.
2. Whether the payment made towards royalty and technical know-how is a precondition for the supply of imported goods.
3. Whether the technical know-how fee paid in relation to the manufacture of catalyst can be added to the value of the imported goods.

Analysis:

Issue 1:
The case involved a dispute regarding the inclusion of technical know-how fees and royalty charges in the assessable value of imported goods. The original adjudicating authority concluded that the Appellants and their supplier were related, and the declared invoice value for the imported goods should be accepted under the Customs Act, 1962. The Commissioner of Customs filed an appeal challenging this decision, arguing that the technical know-how provided by the supplier should be included in the assessable value. The Commissioner (Appeals) set aside the original order, leading to the current appeal.

Issue 2:
The Appellant argued that the technical know-how agreement was presumptive in nature, and the payment was for the supplier's role in assisting in the manufacture of the final product, not related to trademarks or patents. The Appellant cited relevant cases to support their position. The department sought to add technical know-how fees and royalty charges to the assessable value, but the Commissioner (Appeals) did not definitively establish whether such payments were a precondition for the supply of imported goods. The Tribunal found that without a clear conclusion on this matter, the addition was not justifiable.

Issue 3:
In a similar case involving the manufacture of catalyst, the Tribunal ruled that the technical fee paid to the foreign supplier was only for the manufacture of the final product, not directly related to the imported goods. The Tribunal noted that there was no obligation to import solely from the foreign supplier and that the technical know-how fee was not a condition of sale. The Tribunal also considered the pricing pattern and the nature of the technical fee in relation to the imported goods. Ultimately, the Tribunal allowed the appeal, stating that the technical know-how fee could not be added to the value of the imported goods.

In conclusion, the Tribunal set aside the impugned order, emphasizing that if the relationship between the parties did not influence pricing patterns, there was no justification for including royalty and technical know-how fees in the assessable value of the imported products.