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Case Law Details

Case Name : Atlas Copco India Ltd. Vs. Commissioner of Customs, Import (CESTAT Mumbai)
Appeal Number : [2014-TIOL-2269-CESTAT-Mum]
Date of Judgement/Order :
Related Assessment Year :

Royalty paid for technical know-how will not form part of assessable value of imported goods if it has nothing to do with imports of raw materials

Atlas Copco India Ltd. (the Appellant) imported parts and components (imported goods) from their related foreign entity Atlas Copco Air Power, Belgium and other related parties for the manufacture of the various compressed air and gas equipments, construction and mining equipments etc. (final products). The Appellant paid royalty to their related foreign supplier for providing technical knowhow for the manufacture and sale of final products.

The Adjudicating Authority vide Order dated April 26, 1995 (OIO), held that since the technical know-how payment/ royalties are not related to imported goods and prices of imported goods are not influenced by the relationship, the transaction value under Rule 4 of Erstwhile Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 are to be accepted. Accordingly, ordered to accept gross invoice value as transaction value after disallowing commission/ discounts.

The Revenue appealed against the OIO but it was rejected by the Commissioner of Customs (Appeals), Bombay and further by the Hon’ble Tribunal, which was then accepted by the Revenue and the issue attained finality for the previous period.

Thereafter, for renewal of the earlier OIO,  the Appellant made a representation dated June 21, 2010 which was disposed of by the Assistant Commissioner of Customs, GATT Valuation Cell, Mumbai and the earlier OIO was maintained.

Being aggrieved, the Revenue preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed the appeal by way of remand and by relying on the decision of the Hon’ble Supreme Court in case of Matsushita Television and Audio India Ltd. [ 2007-TIOL-64-SC-CUS], held that the amount of royalty or any lump sum payment is to be examined for inclusion in the assessable value of the imported goods. Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai.

The Hon’ble CESTAT, Mumbai after observing Rule 10(1)(c) of Customs Valuation (Determination of price of Imported Goods) Rules, 2007 (“the Valuation Rules”), which provides that royalty is includible in the value of imported goods only in case if the said royalty is related to the imported goods and relying upon the decision in case of Frodo India Pvt. Ltd. Vs. CC (Import), NhavaSheva [2014-TIOL-552-CESTAT-Mum], held that since in the instant case, the royalty is required to be paid only on the sale of final products and not for import of the goods, hence will not form part of assessable value of the imported goods.

It was further held by the Hon’ble Tribunal that the Order passed by the Lower Appellate Authority ignoring the vital fact that the same issue has already been settled in favour of the Appellant for the previous period, suffers from serious infirmity. Accordingly, the matter was decided in favour of the Appellant.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email:

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June 2024