2005 (4) TMI 203 - AT - Customs

Exclusion of Royalties from Customs Valuation Rules

The Tribunal consistently held that royalties, technical fees, and technical know-how fees were not includible in the assessable value under Rule 9(1)(c) ... Valuation (Customs) - Royalty Issues Involved:1. Whether the Royalties/Technical Fee/Technical Know-how fee/Licence fee paid by the appellants to their foreign suppliers is includible in the assessable value under Rule 9(1)(c) of the Customs Valuation Rules, 1988.Detailed Analysis:Issue 1: CC, Chennai v. Ibex Gallegher P. Ltd. (C/391/01)Summary:The Revenue appealed against the order of the Commissioner of Customs (Appeals), Chennai, which held that the royalty payable by the respondent was not related to the imported goods and thus not includible in the assessable value under Rule 9(1)(c). The Tribunal upheld the Commissioner's findings, emphasizing that the payment of royalty was not a condition of sale of the imported goods. The Tribunal cited interpretative notes to the Customs Valuation Rules and distinguished the case from the Daikin Shriram Air Conditioning Pvt. Ltd. case, noting the absence of a condition that components must be procured only from the foreign supplier.Key Points:- The royalty was for technical and marketing assistance, not a condition of sale.- The Tribunal rejected the Revenue's appeal, emphasizing that royalty related to product manufacture and services in India, not the imported goods.Issue 2: Buhler (I) Ltd. v. CC, Bangalore (C/34/03)Summary:The appellant challenged the inclusion of a lump sum technical know-how fee in the assessable value. The Commissioner (Appeals) had ruled that the fee was related to the imported goods. However, the Tribunal found that the fee was for technical know-how for manufacturing licensed products and not a condition of sale of the imported components. The Tribunal allowed the appeal, stating that the technical know-how fee was not related to the imported goods.Key Points:- The technical know-how fee was for manufacturing licensed products, not related to imported components.- The Tribunal allowed the appeal, emphasizing the fee was not a condition of sale.Issue 3: Hensel (I) Ltd. v. CC, Chennai (C/52/03)Summary:The appellant contested the inclusion of technical know-how fees in the assessable value. The Commissioner (Appeals) had ruled that the fees were related to the imported goods. The Tribunal disagreed, noting that the technical know-how was for production of end products from imported components, but not a condition of sale of the imported goods. The Tribunal allowed the appeal, stating that the technical know-how fee was not includible in the assessable value.Key Points:- Technical know-how was for end products, not a condition of sale of imported components.- The Tribunal allowed the appeal, rejecting the inclusion of the fee in the assessable value.Issue 4: Featherlite Products (C/271/03)Summary:The appellant challenged the inclusion of a lump sum payment for design drawings and manufacturing data in the assessable value. The Tribunal found that the agreement was for delivery of design drawings and manufacturing data for mechanisms in India, not related to the imported goods. The Tribunal allowed the appeal, stating that the payment was not a condition of sale of the imported goods.Key Points:- The agreement was for design drawings and manufacturing data, not related to imported goods.- The Tribunal allowed the appeal, stating the payment was not a condition of sale.Issue 5: SRF Ltd. v. CC, Chennai (C/467/04)Summary:The appellant contested the inclusion of a technical know-how fee in the assessable value. The Tribunal found that the fee was for technical assistance and licensing, not related to the imported capital goods. The Tribunal allowed the appeal, emphasizing that the payment was not a condition of sale of the imported goods.Key Points:- The technical know-how fee was for licensing and technical assistance, not related to imported capital goods.- The Tribunal allowed the appeal, stating the fee was not a condition of sale.Conclusion:In all cases, the Tribunal consistently held that royalties, technical fees, and technical know-how fees were not includible in the assessable value under Rule 9(1)(c) of the Customs Valuation Rules, 1988, as they were not conditions of sale of the imported goods. The appeals by the Revenue were rejected, and the appeals by the appellants were allowed, providing consequential relief.