2018 (1) TMI 1025 - AT - Customs

Tribunal Upheld Decision Excluding Trademark License Fee from Assessable Value

CC, New Delhi Versus Luxottica India Eyewear Pvt. Ltd.

The Tribunal upheld the decision of the Original Authority, dismissing the Revenue's appeal. It was ruled that the trademark license fee paid by the ... Valuation - royalty/license fees - includibility - Rule 10(1)(c ) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - trademark licence fee as a condition of sale of goods that the respondent got from RBSOIL, which RBSOIL got from Luxotica, Itlay. This amount was not being directly paid to Luxotica, Itlay, but being paid to IBSOIL. Held that: - One of the conditions for addition of value under Rule 10(1)(c ) is that payment of licence fee should be “condition of the sale of the imported goods”. This aspect has been examined in great detail by the Original Authority. Relying on the terms of the agreement, it was concluded that the respondent accepted and acquired exclusive distributorship rights for the sale of the imported eyewear products with the express approval of the seller of those goods “Luxottica” subject to the terms and conditions mentioned therein - the payment made by the respondent for the right to distribute or resell the imported goods should not be added to the price paid or payable for such goods, if such payments are not a condition of the sale for export to the country of importation of the said goods - amount not includible. Appeal dismissed - decided against Revenue. Issues:1. Dispute regarding loading of certain value in the assessable value of imported goods by the respondent.2. Inclusion of trademark license fee in the assessable value as per Customs Valuation Rules.Analysis:Issue 1:The case involved a dispute over the loading of a certain value in the assessable value of imported goods by the respondent, M/s. Luxottica India Eyewear Pvt. Ltd. The Revenue contended that an amount paid by the respondent on account of trademark license fee should be included in the transaction value of the imported goods. The dispute centered around whether this fee was a condition of sale and thus should be considered for valuation purposes.Issue 2:The key legal provision in question was Rule 10(1)(c) of the Customs Valuation Rules, which deals with the inclusion of royalties and license fees related to imported goods. The Revenue argued that the trademark license fee paid by the respondent was a condition of sale and should be added to the assessable value. The Original Authority carefully examined the facts, agreements, and legal provisions to determine if the payment of the license fee should indeed be included in the assessable value of the imported goods.Detailed Analysis:The respondent imported eyewear products from Luxottica Group through a subsidiary, RBSOIL. The dispute arose from a trademark license fee of Rs. 5.71 crores paid by the respondent to RBSOIL, which the Revenue claimed should be included in the assessable value as per Rule 10(1)(c). However, the Original Authority found that the payment for distribution rights had no direct relationship to the imports, and the consideration paid was for being appointed as a sub-distributor, not as a fee or royalty related to the imported goods.The Original Authority analyzed the conditions under Rule 10(1)(c) and concluded that the payment of the license fee did not meet the criteria for inclusion in the assessable value. It was determined that the payment was not a condition of the sale of the imported goods but rather for the right to distribute or resell the goods. The decision emphasized that even without the distributorship agreement, the respondent would have imported the goods, indicating that the payment was not directly linked to the import process.In the final judgment, the Tribunal upheld the decision of the Original Authority, dismissing the appeal by the Revenue. It was established that the payment made by the respondent for distribution rights should not be added to the price paid or payable for the imported goods unless it was a condition of the sale for export to the country of importation. The analysis of the legal provisions, agreements, and factual circumstances led to the conclusion that the trademark license fee was not a mandatory condition for the sale of the imported goods, thus not warranting inclusion in the assessable value.In conclusion, the judgment provided a detailed analysis of the legal provisions, agreements, and factual context to determine whether the trademark license fee should be included in the assessable value of the imported goods. The decision highlighted the importance of fulfilling the conditions under Rule 10(1)(c) and clarified that the payment for distribution rights was not directly tied to the import process, leading to the dismissal of the Revenue's appeal.