https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=770314 https://www.taxtmi.com/caselaws?id=770314 Valuation - Calculation of Customs duty - Inclusion of Design and Drawing charges / Royalty paid to the supplier are connected to the imported components in the transaction value of imports - Rule 10 [1] [b] [iv] of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - HELD THAT:- It would appear that the original authority has presumed that addition is mandated by Rule 10(1)(b)(iv) of CVR, 2007 while the lower authority felt that the charges are includible in assessable value of the imported goods in terms of Rule 10(1) (e) of CVR,2007. Neither in Section 14 of the said Act nor in the Valuation Rules is there any provision which provides that the cost of designs and drawings/Royalty required for procurement or manufacture of goods in India by the importer or which relates to post-importation activities for assembly, construction, erection, operation and maintenance of the plant are to be included in the price of equipments for determining their transaction value and consequently their assessable value for the purpose of levy of customs duty under the said Act. As per sub-rule (1), value of certain costs of goods and services are includible only if the same, as provided in the further sub-rule (b) when such goods and services are supplied by the buyer i.e., the importer, either free or at reduced costs and such goods and services are used for the production of import goods and in which case, as provided in clause (iv), if such goods and services are in the form of Designs and Development that are necessary for the production of imported goods. However, in the present case, no goods and services were supplied by the appellants that are used in the form of Design and Development in the production of import goods. On the other hand, the Design and Drawings supplied by the foreign supplier are meant for the production of customized wet processing textile machines and not related to imported goods. The condition of sale too is absent. As the design and Development charges were not paid for production of standardized products but rather for customer specific products it could not have been paid as a condition of sale in any manner. It is pertinent to note that in terms of the cited clauses 8 and 12 of the agreement, the Appellant has a discretion not to buy certain raw materials from their parent company and will have to pay royalty on manufactured goods whether or not there are imports from the overseas supplier in a given period. This shows that the royalty payment is not related to and is not the condition of sale for the imported goods and therefore, Rule 10(1)(c) conditions are not satisfied. Hence, royalty is not includible in the value of the imported goods. In the case of Brembo Brake India Pvt. Ltd. vs. CC, [2014 (11) TMI 22 - CESTAT MUMBAI], it was held that royalty and other charges not includible in assessable value if Payment of royalty and other charges not for imported goods and not a condition of sale of goods. Conclusion - Design and Drawing Charges / Royalty, is not includible in the transaction values of imported goods in terms of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Appeal allowed. Case-Laws Customs Fri, 02 May 2025 00:00:00 +0530