Tribunal affirms inclusion of fees in imported goods' value.

The Tribunal upheld the decision to include the licence fee, franchise fee, and royalty in the assessable value of the imported goods under Rule 9(1)(c) of the Customs Valuation Rules. The fees were deemed related to the importation of goods as per the terms of the Franchise Agreement, making them a condition of sale and subject to duty payment. Citing legal precedents and the specifics of the agreement, the Tribunal dismissed the appeal, affirming that these fees were to be added to the invoice value for duty calculation.

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Issues:
1. Inclusion of licence fee, franchise fee, and royalty in the assessable value of imported goods.

Detailed Analysis:

Issue 1: Inclusion of licence fee, franchise fee, and royalty in the assessable value of imported goods

The case involved a Franchise Agreement where the appellants obtained technical know-how and rights to use patents, trademarks, and brand names from a Malaysian company for their Fast Food Restaurants in India. The agreement required payment of various fees, including a franchise fee, licence fee, and royalty based on the monthly gross sales of the licensed product. The Special Valuation Branch (SVB) found the appellants related to the Malaysian company and proposed adding these fees to the transaction value of the imported goods under Rule 9(1)(c) of the Valuation Rules.

The Tribunal examined the terms of the Franchise Agreement and found that the fees paid by the appellants to the foreign supplier were related to the importation of the goods. The agreement mandated the purchase of licensed products only from the supplier and ensured that the products met specified standards. The franchise fee was for the right to use the brand name, while the licence fee was for technical know-how necessary for manufacturing the licensed products in India. These fees were considered a condition of sale of the goods and were to be added to the invoice value for duty payment under Rule 9(1)(c) of the Customs Valuation Rules.

Referring to a previous case, the Tribunal held that the appellants were not entitled to exclude the fees from the assessable value of the imported goods. Additionally, a Supreme Court case was cited where royalty collected for trademark use was included in the assessable value under the Central Excise Act. Based on these precedents and the specific terms of the Franchise Agreement, the Tribunal sustained the order to include the fees in the assessable value and dismissed the appeal.

In conclusion, the Tribunal upheld the decision to include the licence fee, franchise fee, and royalty in the assessable value of the imported goods, citing the terms of the Franchise Agreement and relevant legal precedents.

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