The case pertains to the valuation of imported goods and the ...

Royalty Payments Excluded from Imported Goods Valuation; Repackaging Not Manufacturing per CESTAT Decision.

August 23, 2024

Case Laws     Customs     AT

The case pertains to the valuation of imported goods and the inclusion of royalty payments for determining the transaction value. The key points are: The transaction value declared by the importer was initially accepted u/r 3(3)(a) of the Customs Valuation Rules, 2007 (CVR 2007). However, the revenue authorities later sought to include royalty payments made to a group company (Ajinomoto Japan) for using their trademark, citing Rules 10(1)(c) and 10(1)(e) of CVR 2007. The appellant contended that the royalty payment was not a condition of sale for the imported goods from Ajinomoto Thailand but was for the license to use the trademark. The CESTAT examined the Supreme Court's decision in Commissioner of Customs vs M/S Ferodo India Pvt. Ltd., which held that royalty/license fees related to the imported goods should be attributed to the price. However, the CESTAT found that the revenue authorities lacked jurisdiction to determine whether the repackaging process amounted to manufacture under the Central Excise Act. The nexus between the imported goods and the domestically sold goods appeared too remote to retain the character of a customs duty. The CESTAT held that the revenue failed to establish that the royalty payment was a condition of sale or that there was any flow back or indirect payment from the appellant to Ajinomoto Japan or Thailand. Consequently, the CESTAT set aside the impugned order and allowed the appeal.

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