Tribunal Upholds Inclusion of Royalty in Transaction Value for Imported Components

The Tribunal rejected the appeal by M/s. Matsushita Television & Audio India Ltd., affirming that the transaction value of the imported components of colour T.V. receivers should include the royalty paid for technical assistance to their collaborator, M/s. Matsushita Electric Industrial Co. Ltd. The Tribunal found a nexus between the royalty payment and the imported components, distinguishing this case from previous precedents. The loading of the value of imported components by 2% and 1.58% for the years 1996-97 and 1997-98, respectively, was upheld under relevant customs rules and the Customs Act.

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Issues Involved:
1. Whether the transaction value of components of colour T.V. receiver imported by M/s. Matsushita Television & Audio India Ltd. is to be loaded on account of royalty paid by them to their collaborator.

Summary:

Issue 1: Loading of Transaction Value Due to Royalty Payment

The appeal by M/s. Matsushita Television & Audio India Ltd. concerns whether the transaction value of imported components of colour T.V. receivers should include the royalty paid to their collaborator, M/s. Matsushita Electric Industrial Co. Ltd. (MEI). The Appellant argued that the royalty was paid for technical assistance and not related to the imported goods or as a condition of their sale. They cited several precedents, including *Escorts Ltd. v. Collector of Customs, Madras* and *Collector of Customs, Bombay v. Maruti Udyog Ltd.*, to support their claim that royalty payments should not be included in the assessable value of imported components.

The Revenue countered that the royalty payment was indeed related to the imported components, as evidenced by Clause 7.02 of the Agreement, which required MEI to assist in manufacturing by selling components and approving components purchased from other sources. The Assistant Commissioner had ordered the loading of the value of imported components by 2% and 1.58% for the years 1996-97 and 1997-98, respectively, under Rule 4(2) read with Rule 9(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, and Section 14(1) of the Customs Act. This was confirmed by the Commissioner (Appeals).

The Tribunal observed that the Technical Assistance Agreement was related to the components, as MEI not only sold components but also approved components from other sources. This established a nexus between the royalty payment and the imported components. The Tribunal distinguished the present case from precedents like *Mahindra & Mahindra* and *Birla Yamaha*, noting that in those cases, the royalty was not related to the import of components. The Tribunal concluded that the royalty payment for technical assistance was related to the imported components and upheld the loading of the transaction value.

Conclusion:

The Tribunal rejected the appeal, affirming that the transaction value of the imported components should include the royalty paid for technical assistance, as it was related to the imported goods and a condition of their sale.

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