2005 (1) TMI 157 - AT - Customs

Exclusion of Indian manufacturing payments from assessable value upheld by tribunal.

The tribunal held that lump-sum and running royalty payments for manufacturing goods in India should not be included in the assessable value of imported ... Valuation (Customs) - Royalty Issues:1. Inclusion of technical know-how fees and royalty in the assessable value of imported goods.2. Interpretation of Rule 9 of the Customs (Valuation) Rules, 1988.3. Applicability of previous legal precedents in determining the value of imported goods.Issue 1: Inclusion of technical know-how fees and royalty in the assessable value of imported goodsThe appellants, a company incorporated under the Company Act, 1956, import goods from their principals. The Deputy Commissioner of Customs found that payments towards technical know-how fees and royalty for manufacturing indigenous products in India were not includible in the assessable value. However, the Department appealed, arguing that such fees should be included. The Commissioner of Customs (Appeals) held that the payments related to the design of contract products and delivery of design information should be included in the assessable value. The tribunal, after considering both sides, held that such lump-sum and running royalty payments for manufacturing goods in India should not be included in the value of imported goods, citing legal precedents such as IGFL Refractories Ltd. v. Commissioner of Customs, Calcutta and Daewoo Motors India Ltd. v. CC, New Delhi. The tribunal also emphasized that the facts of the case were different from the Maruti Udyog Ltd. case, and based on the agreements for the products, found no obligation to import certain components, thus upholding that the royalty should not be added to the assessable value.Issue 2: Interpretation of Rule 9 of the Customs (Valuation) Rules, 1988The tribunal analyzed Rule 9 of the Customs (Valuation) Rules, 1988, which governs the determination of value for imported goods. It was established that lump-sum and running royalty payments under agreements for manufacturing goods in India should not be included in the assessable value. The tribunal referred to legal decisions and previous cases to support this interpretation, highlighting that the specific circumstances of the case did not warrant the inclusion of technical know-how fees and royalty in the assessable value. The tribunal further emphasized that the agreements for the products indicated no obligation to import certain components, reinforcing the decision that the royalty should not be added to the assessable value.Issue 3: Applicability of previous legal precedents in determining the value of imported goodsThe tribunal considered previous legal precedents, such as the case of IGFL Refractories Ltd. v. Commissioner of Customs, Calcutta and Daewoo Motors India Ltd. v. CC, New Delhi, in determining the value of imported goods. It was noted that these precedents established that lump-sum and running royalty payments for manufacturing goods in India should not be included in the assessable value. Additionally, the tribunal cited a Larger Bench decision that settled the issue of technical know-how related to Indian manufacture license not being permissible to be added to the value of imported goods. Based on these precedents and the specific facts of the case, the tribunal set aside the order impugned and allowed the appeal by restoring the order of the original authority.---