Distribution fees paid to non-resident for rights to distribute a service has nothing to do with the Imported Goods, therefore enhancement of Assessable Value of Imported Goods to the extent of remittance of distribution fees is untenable
Multi Screen Media Pvt. Ltd., Mumbai (the Appellant) imported 72 consignments of Digi beta tapes/beta tapes/video tapes (Imported Goods) by courier through CSI Airport, Mumbai, during June to December, 2007 on payment of Customs duty.
During the Departmental investigations, it was found that the Appellant had entered into the Service Agreement namely “Programme Acquisition and Service Agreement” and the Distribution Agreement with MSM Satellite Singapore Pvt. Ltd. (Foreign Entity). Foreign Entity was engaged in broadcasting of channels from Singapore and they regularly sent foreign movies, programmes and other contents acquired by them to the Appellant for the purpose of distribution to channels, for which the Appellant remitted Rs. 19.76 Crores to Foreign Entity towards their share of distribution fees.
The Revenue contended that such distribution fees will be included in the Assessable value of Imported Goods in terms of Rule 10(1)(c) of the Customs Valuation Rules, 2007 (the Valuation Rules) as distribution fee is a condition of sale of Imported Goods. Therefore a Show Cause Notice was issued, which was adjudicated by the Commissioner of Customs, CSI, Mumbai (the Commissioner). The Commissioner ordered for re-assessment of Imported Goods resulting in enhancement of value of Imported Goods to the extent of remittance of distribution fees and confirmed the demand of differential Customs duty of Rs. 4.83 Crores along with interest, penalty and also held that the Imported Goods are liable for confiscation. Being aggrieved, the Appellant preferred an Appeal before the Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai held as under:
Hence, the Order enhancing the value of the Imported Goods to the extent of remittance of distribution fees and demanding Customs duty thereon under the Valuation Rules was set aside by the Hon’ble Tribunal as being unsustainable in law.