2006 (11) TMI 81 - AT - Customs

Tribunal rules royalty payment not part of assessable value, impacts transaction value.

TATA YAZAKI AUTO CORPN. LTD. Versus COMMR. OF CUS. (IMPORTS), MUMBAI

The Tribunal found that the 5% royalty payment was not required to be added to the assessable value of imported components as it was not directly related ... Valuation (Customs)- As per Deputy Commissioner contended that royalty paid on finished good no includible in assessable value- Respective Authority after considering all the fact rejected the order of Deputy Commissioner. Issues:1. Whether payment of 5% royalty is required to be added while determining the assessable value of the imported components.2. Challenge against the order by Revenue and Commissioner (Appeals) setting aside the decision.3. Interpretation of the technical assistance and joint venture agreement in relation to the payment of royalty.4. Application of Rule 9(1)(c) of the Customs Valuation Rules, 1988 regarding the addition of royalty to the value of imported goods.Analysis:1. The case involved a Joint Venture Company engaged in the manufacture and sale of automotive wire harnesses. The issue was whether the 5% royalty payment should be included in the assessable value of imported components. The Deputy Commissioner accepted the declared transaction value, finding no nexus between the royalty payment and the assessable value.2. The Revenue challenged the Deputy Commissioner's decision, leading to the appeal. The Commissioner (Appeals) set aside the initial decision, prompting the appellants to appeal against this order.3. The appellant argued that the royalty payment was not directly related to the imported components but rather to the finished goods for sale in India and export. They contended that the royalty was for the rights to produce finished goods in India, not a condition of sale for the imported components. The Commissioner (Appeals) was criticized for not considering the agreements comprehensively and making inconsistent findings.4. Rule 9(1)(c) of the Customs Valuation Rules, 1988 was central to the dispute. The Tribunal analyzed the agreement clauses and previous decisions to determine that the royalty paid was not a condition of sale for the imported goods. The Tribunal emphasized that the royalty related to the finished products and not the imported components. Citing various precedents, the Tribunal concluded that the royalty payment did not influence the invoice price and should be treated as part of the transaction value.5. The Tribunal found that the royalty payment was not a condition of sale for the imported components and was related to the finished goods' manufacture. Therefore, the appeal was allowed, and the Commissioner (Appeals) order was set aside based on the interpretation of Rule 9(1)(c) and the agreements between the parties.This detailed analysis of the judgment highlights the key legal arguments and conclusions reached by the Tribunal in resolving the issues raised in the case.