2010 (4) TMI 659 - AT - Customs

Tribunal Upholds Inclusion of Third-Party Payments in Imported Spares Value

The Tribunal upheld the decision to include payments made to a third party in the assessable value of imported spares, as the payments were deemed a ... Valuation – Agency commission – 8% to 10% of FOB value of goods paid to Indian company, an agent of foreign supplier – Submission that agent renders full scale maintenance service for machinery and that such service having no direct nexus to goods imported – No agreement between agent and importer - The US based supplier could have collected the additional amount of 8% to 10% from the appellant and paid to M/s. Voltas Ltd. as part of agreement between the two - as a buyer, the appellant paid part of the amount to a third party at the direction and stipulation of the supplier of the goods, the same cannot be treated as having no nexus to the value of the imported goods - Counsel for the Department that the payment made to M/s. Voltas Ltd. has a direct nexus to the value of the goods imported – No reason to interfere in order holding inclusion of such payment Issues involved:Customs Valuation - Inclusion of third-party payments in assessable value.Analysis:The case involved an appeal against the Commissioner (Appeals) order regarding the inclusion of payments made to a third party, M/s. Voltas Ltd., in the assessable value of imported spares. The appellants imported spares from M/s. Harnischfeger Corporation, U.S.A., and paid an additional 8% to 10% of the FOB value to M/s. Voltas Ltd. The original authority added this amount to the assessable value, considering it as agency commission. The appellants contested this decision, arguing that the payments to M/s. Voltas were for services unrelated to the imported goods and should not be included in the assessable value.The appellants relied on various decisions, including those of the Hon'ble Supreme Court, to support their argument that payments to a third party can only be included in the assessable value if they directly relate to the imported goods. They contended that the payments to M/s. Voltas were not linked to the value of the spares imported and should not be considered for valuation purposes. The Department, however, supported the lower authorities' decision, emphasizing that the payments to M/s. Voltas were a condition of sale and had a direct nexus to the imported goods.Upon careful consideration of the submissions and examination of the records, the Tribunal found that there was an agency/distributor agreement between M/s. Voltas Ltd. and the American supplier, establishing M/s. Voltas as the agent of the supplier. The Tribunal observed that the payments to M/s. Voltas were mandatory for the import of spares and were not specifically linked to any services rendered. The Tribunal referenced the Supreme Court's guidelines on customs valuation, stating that post-importation activities should not be part of the assessable value, but in this case, the payments to M/s. Voltas were considered a condition of sale.The Tribunal concluded that the payments to M/s. Voltas were made as a condition of sale of the imported goods, as per Rule 9(1)(e) of the Customs Valuation Rules. It rejected the appellant's argument that the payments had no nexus to the value of the imported goods, emphasizing that the payments were part of the agreement between the American supplier and M/s. Voltas. Therefore, the Tribunal upheld the lower authorities' decision to include the payments to M/s. Voltas in the assessable value and rejected the appeal.