2022-VIL-334-CESTAT-DEL-CU

CUSTOMS CESTAT Case

Customs – Valuation, includability of Royalty - Rules 3 and 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 – Manufacture of product – Technical assistance – Payment of royalty – Appellant is engaged in manufacture of industrial fans – Appellant imported various parts from overseas supplier for manufacture of final products – Adjudicating authority decided that licence fee paid by Appellant to its holding company under technical aid agreement needs to be added to assessable value of imported goods in terms of Rule 10(1)(c) of the Rules – Commissioner (Appeals) rejected Appellant’s appeal – Whether licence fee/royalty paid by Appellant to its holding company can be added to assessable value of imported goods – HELD – In terms of Rule 3 read with Rule 10(1)(c) of the Valuation Rules, 2007, royalty and license fee related to imported goods which the buyer is required to pay as a condition of sale of goods has to be included in assessable value of imported goods – Technical Aid Agreement entered into between Appellant and its holding company mandated that goods were to be manufactured strictly in accordance with specifications provided by technology provider – Agreement nowhere states that Appellant cannot import any goods until license fee is paid to holding company in terms of agreement – Goods were not imported under agreement and any royalty under agreement cannot be related to it – Further, there is no condition that the importer has to obtain the approval of the technology provider either for import or for procuring components domestically - Royalty paid by appellant on final products under technical aid agreement cannot be said to be a condition for sale and added to the assessable value of the imported goods – Royalty paid by appellant to its holding company cannot be added to assessable value – Impugned order passed is set aside and appeal is allowed

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