2022 (4) TMI 1006 - AT - Customs

Valuation - inclusion of amount paid in the nature of payment of royalty, in the transaction value or not - condition of sale or not - HELD THAT - It is seen that there is no agreement between the appellant or the foreign supplier. It is then difficult to understand whether the royalty is a condition for sale of the imported goods. In the present case, the appellant contends that they have made provision for royalty but they have not actually paid any amount and that the amount was reversed in the year 2014 15. The learned counsel for the appellant has produced the financial statements for the respective years. They have also furnished the Chartered Accountant s certificate. Besides these, the entries in the ledger / books of accounts have to be examined. The matter requires to be remanded to the adjudicating authority who shall look into the aspect whether the appellant has paid royalty to the foreign supplier or not. In case, the appellant has not paid such amount, there is no question of including the same in the transaction value. Appeal allowed by way of remand.

Summary

Issues: Customs Valuation - Inclusion of Royalty Amount in Transaction Value

Issue 1: Customs Valuation - Inclusion of Royalty Amount in Transaction Value

The case involved the appellant, a company involved in importing goods from related companies, facing scrutiny by the Special Valuation Branch (SVB) regarding the declared value of the imported goods. The SVB examined various imports made by the appellant from related suppliers and issued orders accepting the declared prices as the transaction value for specific periods. The appellant challenged the inclusion of royalty amount in the transaction value, arguing that no actual payment was made to the foreign supplier, as evidenced by financial statements and a Chartered Accountant's certificate. The authorities, however, directed to include the royalty amount in the invoice value based on entries in the books of accounts for a particular year.

Analysis: The Tribunal considered whether the royalty amount of ?28.14 lakhs, provisioned but not paid to the foreign supplier, should be included in the transaction value. The appellant contended that no actual payment was made, supported by financial statements and a Chartered Accountant's certificate. The Tribunal noted the absence of an agreement between the appellant and the foreign supplier regarding royalty, leading to doubts about its inclusion as a condition of sale. It was decided to remand the matter to the adjudicating authority to verify if the appellant had indeed paid the royalty, emphasizing that without payment, inclusion in the transaction value was unwarranted.

Conclusion: The Tribunal set aside the impugned order and remanded the case to the adjudicating authority for further examination on whether the appellant had actually paid the royalty amount to the foreign supplier. If no payment was confirmed, the royalty amount should not be included in the transaction value, thus disposing of the appeal accordingly.