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TMI Blog2025 (2) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... orted Goods) Rules, 2007 (CVR). 2.1 The issue involved pertained to finalisation of assessments in respect of imports of capital / other goods and whether payments made towards technical assistance by the Appellant to their related foreign supplier viz., M/s. Sungwoo Hitech Company, Korea during the disputed period 2007-08 to 2012-13 are to be included or otherwise to the transaction value of imported goods. 2.2 Being a related party transaction, the goods imported from the foreign supplier were subjected to verification by the SVB, Chennai. The lower authority held that the importer and Appellant were related under Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR) and though accepting the declared value as transaction value under Rule 3 read with Rule 9 of CVR for assessment, ordered for inclusion of technical fee of Rs.6,49,02,869/- paid to the related supplier abroad, in terms of Rule 10(1)(c) of CVR. Upon appeal by the Appellant, the impugned Order-in-Appeal C.Cus. II No. 138/2014 dated 31.10.2014 though upheld the addition of technical fee paid to Transaction value as sustainable, set aside the acceptance of declared values and ordered that Royal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer Adjudicating Authority and stressed that the value declared could not be accepted as transaction value as the Technical Fees and Royalty amount were includible in the transaction value in terms of Rule 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. She has submitted that on reading various clauses of the agreement, there is a direct nexus between payment of royalty and importation of raw materials. She has prayed for maintaining the impugned order and setting aside the appeal filed. 5. Heard both sides and carefully considered the submissions and evidences on record. 6. The issue that arises for decision in this appeal is: - i. Whether Royalty / Technical fees paid to the foreign supplier is required to be added to the transaction value in terms of Rule 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007? 7. For ease of reference, Rule 10 of CVR refers to 'Cost and Services' and clause (1) of the same reads as under: - "In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, - ... ... (c) royalties and licence fees related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding travel expenses and as per Article 6, the Appellant shall pay to the supplier USD 260 per person per each working day. 11. We have considered the submissions of the Ld. Counsel for the Appellant who have averred that these services which were to be provided under the Agreement are post-importation services and could not be related to imported goods and so, not justified to add to the value of the goods imported and the Department has not adduced any reason to suggest that the condition of sale has been satisfied. It was further submitted that the amount payable as per the Agreement was clearly on account of technical assistance provided by the foreign Co. for the manufacture of final products by the Appellant. 12. Whereas, the Ld. Lower Adjudicating Authority has justified inclusion of payment made towards technical assistance in the transaction value observing that the technical assistance rendered by the Foreign Company was for manufacturing process and without which the Indian Company comes to a standstill and as such, this amount warrants addition under Rule 10(1)(c) of the CVR. Further, the Ld. Appellate Authority in the impugned order dated 31.10.2014 has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessable value of imported goods and held that the payment towards Royalty does not form part of the assessable value of imports and the relevant extracts of which have been reproduced below: - "20. Further, relying on the following decision of higher judicial fora, the appellant has argued that the royalty payment is only for providing technical assistance for manufacture and sale of licenced products and import of raw materials is incidental to such manufacture and sale. There is no condition of sale attached to importation of raw materials and having not met the required conditions of Rule 10(1)(c), payment of royalty amounts cannot be added to the transaction value of import of raw materials. In the case of Commissioner of Customs Vs. Ferrodo India Pvt. Ltd. [2008 (224) ELT 23 (SC)], it was held as follows:- "23. In the case of Matsushita Television & Audio India Ltd. v. CoC reported in 2007 (211) E.L.T. 200 (S.C.) the question which arose for determination was whether royalty amount was attributable to the price of the imported goods. In that case, the appellant was a joint venture company of MEI, Japan and SIL for obtaining technical assistance and know-how. Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken the view that royalty payment had to be added to the price of the imported goods. 26. For the aforestated reasons, we find no infirmity in the impugned orders of the Tribunals. Accordingly, the civil appeals filed by the Department are hereby dismissed with no order as to costs." Further, we find that in the case of Commissioner of Customs (Port), Chennai Vs. Toyota Kirloskar Motor Pvt. Ltd. [2007 (213) ELT 4 (SC)], it was held as follows: - "31. The transaction value must be relatable to import of goods which a fortiori would mean that the amounts must be payable as a condition of import. A distinction, therefore, clearly exists between an amount payable as a condition of import and an amount payable in respect of the matters governing the manufacturing activities, which may not have anything to do with the import of the capital goods." 21. In view of aforesaid discussions and the judicial precedents cited above, we are inclined to hold that Royalty payment is not includible in the transaction value of imported raw materials. Thus, the issue of inclusion of Royalty payment in the transaction value of the imported raw materials is decided in favour of the Appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the manufacture of Dis Brake Systems for two wheelers. The department has sought to load the assessable value as per Rule 10(l)(c) which is reproduced for convenience of the reference :- Rule 10(1)(c). - Royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; The following explanation has been added to Rule 10(l)(c). "Where the royalty, licence fee or any other payment for a process, whether patented or otherwise, is includible referred to in clauses (c) and (e) such charges shall be added to the price actually paid or payable for the imported good, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods". From the above it is clear that the royalty and the other charges can be included : (i) In case of imported goods (ii) As condition sale of goods And the explanation only added that such royalty would be includable' in the case even if the imported goods have undergone the said process after import ..... X X X X Extracts X X X X X X X X Extracts X X X X
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