CET Power Solutions India Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
Summary: CESTAT Chennai held that royalty paid by CET Power Solutions India Pvt. Ltd. to its foreign collaborator for technology transfer, patents, trademarks, technical know-how and post-import manufacturing rights could not be added to the assessable value of imported goods under Rule 10(1)(c) or Rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Tribunal held that two cumulative conditions must exist for inclusion under Rule 10(1)(c): the royalty must relate to the imported goods and its payment must constitute a condition of sale of those goods.
The Department failed to establish either requirement. The royalty was calculated at 2% of the net selling price of finished products manufactured and sold in India, and none of the agreements made purchase or supply of imported components conditional upon payment of royalty. The Tribunal also noted the appellant’s procurement data, which showed substantial procurement from indigenous and unrelated sources and further weakened the Revenue’s contention that royalty was intrinsically connected with imports.
Relying upon Supreme Court decisions in Ferodo India Pvt Ltd and Toyota Kirloskar Motor Pvt Ltd, and CESTAT Chennai decisions in Ajinomoto India Pvt. Ltd. and BBL Daido Pvt Ltd, the Tribunal held that payments for post-import manufacture, technology and intellectual-property exploitation cannot be loaded into customs value merely because imported components are used in manufacturing. The de novo Order-in-Original and consequential Order-in-Appeal were therefore held legally unsustainable. Order-in-Appeal No. 824/2015 dated 03.09.2015 was set aside and the appeal was allowed with consequential relief. cet-power-solutions-701940
