Valeo Friction Materials India Ltd. Vs Commissioner of Customs (CESTAT Chennai)
We find that the issue of inclusion of Royalty in transaction value is no more Res Integra in view of the ratio of the decision in the case of Kruger Ventilation Industries (North India) Private Limited Vs. Commissioner of Customs, [2022 (5) TMI 496-CESTAT NEW DELHI] which was affirmed by the Hon’ble Supreme Court, as relied upon by the Ld. Counsel for the Appellant. We also find that the ratio of the following decisions supports the cause of the Appellant:-
i. Commissioner of Customs, Chennai Vs. M/s. GH Induction, India Pvt. Ltd. [2023 (9) TMI 90-CESTAT CHENNAI] wherein it was held that Royalty is not addable to the Transaction Value of the imported goods as the technical knowhow was for the post import (manufacturing) activity.
ii. Commissioner of Customs (Sea), Chennai Vs. M/s. Remy Electricals India Ltd. [2017 (6) TMI 32-CESTAT CHENNAI ]
iii. Commissioner of Customs (Imports), Chennai Vs. M/s. Vestas Wind Technology India Pvt. Ltd. [2023 (7) TMI 589-CESTAT CHENNAI] wherein it was held that royalty is not includible in the Transaction Value as there is no evidence to establish that the licence fee paid is a condition of sale of the imported goods.
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 raw materials from Valeo, France and will have to pay royalty on manufactured goods whether or not there are imports from the 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. We find that in the case of Brembo Brake India Pvt. Ltd. Vs. Commissioner of Customs [2014 (302) E.L.T. 551 (Tri.-Mumbai)], it was held that royalty and other charges are not includible in assessable value if Payment of royalty and other charges not for imported goods and not a condition of sale of goods.
