Xiaomi Technology India Pvt. Ltd. Vs Principal Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that royalty and licence fees paid by Xiaomi India under exclusive agreement is includible in the transaction value as per section 14 of the Customs Act, 1962 read with rule 10(1)(c) of the Customs Valuation Rules. Accordingly, differential duty confirmed.
Facts- The intelligence gathered by the officers of the Delhi Zonal Unit of the Directorate of Revenue Intelligence, indicated that M/s. Xiaomi Technology India Pvt. Ltd. (Xiaomi India) based at Bengaluru was allegedly evading customs duty by way of non-inclusion of royalty and license fee (paid by Xiaomi India under exclusive agreements with IPR holders) to the assessable value of the goods imported.
Based on the investigation it appeared that Xiaomi India had paid royalty and license fee under the provisions of the agreements entered into between the parties and this fact was not disclosed by Xiaomi India to the Customs department. Royalty and license fee is includible in the transaction value as per sec. 14 of the Customs Act, 1962 read with Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and Explanation to Rule 10(1)(c) and (e).
Hence three Show Cause Notices were issued to the Xiaomi India along with four of its ‘Contract Manufacturers’ and others, for the period 01.04.2017 to 30.06.2020, u/s. 28(4) of the Customs Act, 1962 making them answerable to Commissioners of Customs at ACC, Chennai, Bangalore and New Delhi. The same have been adjudicated by the Principal Commissioner of Customs (Air Cargo) Chennai-VII on being appointed as the Common Adjudicating Authority by the Board. [i.e. the Adjudicating Authority, ‘AA’ for short], by the impugned order after being appointed as the common Adjudicating Authority. After due process the assessable value of mobile phones were redetermined and differential customs duties demanded. The goods were found liable for confiscation and penalties were also imposed. Aggrieved by the orders Xiaomi India, along with others are before us in appeal.
