CESTAT sets aside customs appeal order on royalty valuation under Rule 10(1)(c) as premature without final assessment

CESTAT Mumbai set aside the Commissioner of Customs (Appeals) order regarding royalty inclusion in imported goods valuation under Rule 10(1)(c) of Customs Valuation Rules, 2007. The tribunal held that appeal against Special Valuation Branch advisory was premature as no final assessment order existed under section 18 or duty recovery notice under section 28 of Customs Act, 1962. The proceedings did not pertain to goods under import or already imported and cleared, making it unacknowledgeable under Customs Act. Appeal was allowed by way of remand to first appellate authority for disposal according to proper statutory framework.

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Issues involved:
The issues involved in the judgment are the valuation of goods imported by the appellant, specifically regarding the inclusion of royalty paid under Rule 10(1)(c) of the Customs Valuation Rules, 2007.

Details of the Judgment:

Valuation of Goods and Inclusion of Royalty:
The appellant, M/s Endress Hauser Flowtec (India) Private Limited, challenged the direction of the Commissioner of Customs (Appeals) to add royalty paid by the appellant in the invoice value of the imported goods. The appellant contended that their relationship with the supplier did not influence the price, and the royalty payable under the agreement should not impact the value for assessment. The impugned order directed the addition of royalty based on the agreement for the use of trademark and logo, payable on the turnover of goods manufactured in India. However, the appellate authority's direction lacked details of imported consignments affected, and the proceedings did not pertain to goods under import or already imported and cleared. The Tribunal found that the Special Valuation Branch (SVB) had overstepped its mandate by including the royalty in the assessable value without proper notice under the Customs Act, 1962. The Tribunal set aside the impugned order and remanded the appeal to the first appellate authority for proper disposal in accordance with the Customs Act, 1962.

Jurisdiction of Special Valuation Branch (SVB):
The judgment delved into the jurisdiction of the Special Valuation Branch (SVB) or GATT Valuation Cell (GVC) in investigating the acceptability of prices declared for goods transacted between related persons. The SVB's role was scrutinized, and it was found that the SVB was not empowered to assess duty or enhance the value in the assessment of goods under the Customs Act, 1962. The Tribunal highlighted the lack of competence of the SVB to finalize assessments or recover short-paid duties, emphasizing that the SVB's role was advisory and not quasi-judicial. The Tribunal concluded that the SVB's quantification order was relevant for finalization of assessment under the Customs Act, 1962, which falls under the purview of the proper officer, not the SVB.

Appellate Remedies and Premature Appeal:
The Tribunal also examined the appellate remedies available and found that the appeal before the first appellate authority was premature. The opinion of the Deputy Commissioner, Special Valuation Branch (SVB), was not binding on the proper officer responsible for assessment. The Tribunal emphasized that the appeal should have been initiated after finalization, and premature appeals disrupt the scheme of the Customs Act, 1962. Therefore, the Tribunal set aside the impugned order and allowed the appeal by way of remand for proper disposal by the first appellate authority.

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