Case Law Details
Doosan Bobcat India Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
The issue is whether the amount of Rs.28.14 lakhs in the nature of payment of royalty can be included in the transaction value and whether it is a condition of sale. From the facts narrated above, it is seen that there is no agreement between the appellant or the foreign supplier. It is then difficult to understand whether the royalty is a condition for sale of the imported goods. In the present case, the appellant contends that they have made provision for royalty but they have not actually paid any amount and that the amount was reversed in the year 2014 – 15. The learned counsel for the appellant has produced the financial statements for the respective years. They have also furnished the Chartered Accountant’s certificate. Besides these, the entries in the ledger / books of accounts have to be examined. In such circumstances, we deem it fit that the matter requires to be remanded to the adjudicating authority who shall look into the aspect whether the appellant has paid royalty to the foreign supplier or not. In case, the appellant has not paid such amount, there is no question of including the same in the transaction value.
In the result, the impugned order is set aside to this effect and the matter is remanded to the adjudicating authority who shall reconsider the issue as per the above directions.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that M/s. Doosan Bobcat India Pvt. Ltd. (formerly known as M/s. Doosan Infracore India Pvt. Ltd.), the appellant herein, is a registered company under the Companies Act. They imported excavator, machine tools and parts and accessories from M/s. Doosan Infracore Co. Ltd. South Korea. The supplier being related company, the Special Valuation Branch (SVB) took up the matter for examination. Accordingly, the Assistant Commissioner as per Order in Original No. 7731/2008 dated 4.6.2008 held that the price declared was on par with contemporaneous imports made by unrelated buyers and therefore accepted the declared price as the transaction value in terms of Rule 3(3)(a) of Customs Valuation Rules, 2007. The imports made from 4.6.2008 to 3.6.2011 were finalized accordingly.
2. The appellant made some more imports from China, the supplier being M/s. Doosan Infracore Co. Ltd. China, a related company. The SVB examined the correctness of the declared value and after considering the imports, passed the Order in Original No. 11272/2010 dated 5.3.2010 holding that the declared invoice price of the imports made can be accepted as the transaction value upto 4.3.2013. It was therein held that no royalty was made to the foreign supplier and was not included in the transaction value. For the imports made by the appellant from M/s. Doosan Infracore Co. Ltd., Korea, it was held that the Order in Original No. 7731/2008 dated 4.6.2008 and 11272/2010 dated 5.3.2010 should continue and the order was held to be valid till 3.6.2014.
3. The company by name M/s. Doosan International India Pvt. Ltd., imported skid steer loads compressor, parts and accessories from related supplier viz M/s. Doosan Trading Ltd. Ireland. The SVB examined the value declared and the Deputy Commissioner (SVB) as per Order in Original No. 8046/2008 dated 19.8.2008 accepted the declared price as the transaction value. The issue was again examined and the Commissioner of Customs (SVB) as per Order in Original No. 16063/2011 dated 26.5.2011 held that the pricing pattern has not undergone any change and the transaction value as declared in the invoice was accepted.
4. The company M/s. Doosan International India Pvt. Ltd. subsequently got amalgamated with M/s. Doosan Infracore India Pvt. Ltd. Consequently, the SVB vide order No. 11272/2010 dated 5.3.2010 issued to M/s. Doosan Infracore India Pvt. Ltd. which was valid upto 3.6.2014 was taken up for review. The Deputy Commissioner of Customs (SVB) passed the review order No. 26120/2014 dated 4.6.2014 wherein he observed that the royalty amount of Rs.28.14 lakhs shown in the balance sheet for the year 2012 – 13 was net of taxes and not includible in the declared value. The Commissioner of Customs, aggrieved by such order filed appeal before the Commissioner of Customs (Appeals) and vide Order in Appeal No. 124/2015 dated 30.1.2015 the impugned Order in Original No. 26120/2014 dated 4.6.2014 was set aside and directed the adjudicating authority to reconsider the matter on various issues. He also ordered to collect EDD @ 5% of the value of goods. Against such order, the appellant filed appeal before the Tribunal. The Tribunal vide Final Order No. 42209/2017 dated 20.9.2017 while remanding the matter to the adjudicating authority directed that the only issue to be examined by the adjudicating authority is with reference to the payment of royalty and no other payments made to the foreign suppliers can be considered in the readjudication. The Tribunal also ordered that the EDD should be 1% and not 5% as ordered by the Commissioner of Customs (Appeals).
5. Subsequently, the Deputy Commissioner of Customs (SVB) passed Order in Original (Denovo) No. 64397/2018 dated 12.7.2018. It was held, in such order, that the royalty amount shown to have been paid in the financial statements during 2012 – 13 should be added to the invoice value. The appeal filed before the Commissioner of Customs (Appeals) was rejected upholding the order passed by the adjudicating authority. Aggrieved by such order, the appellant is now before the Tribunal.
6. The learned counsel Shri Hari Radhakrishnan appeared and argued for the appellant. He submitted that merely because the amount of royalty to the tune of Rs.28.14 lakhs was stated in the financial statements for the year 2012 – 13, the authorities below have directed to include the said amount as royalty in the invoice value. The authorities below failed to see that no such payment towards royalty was actually paid to the foreign supplier and that the amount had been reversed as shown in statements in the financial years 2014 – 15. Though evidences were produced before the authorities below, they failed to appreciate the same. The appellant had produced the Chartered Accountant’s certificate to establish that the royalty amount of Rs.28.14 lakhs shown in the balance sheet for the year 2012 – 13 was never paid to the foreign supplier and the book entries made was also reversed later in the financial year 2014 – 15. However, the said evidence was not at all considered by the authorities below.
7. As per letter dated 11.7.2018 sent to the Deputy Commissioner of Customs (SVB), the appellant had furnished the financial statement for the year 2012 – 13 and 2013 – 14 along with the Chartered Accountant’s certificate dated 11.10.2017. However, it is observed in the order that the appellant has not produced any concrete evidence to establish that the royalty was not paid to the foreign supplier. It is submitted by the learned counsel that the financial statements for the year 2012 – 13 and the Chartered Accountant’s certificate is sufficient evidence to prove that although provision was made for payment, actual payment has not been effectuated. As the appellant has not paid any royalty to the foreign supplier, the same cannot be included in the transaction value. He further argued that the adjudicating authority has stated in the order that it is not convincible that there was no agreement for payment of royalty. He explained that it is true that the appellant and foreign supplier did not have any agreement. But this cannot be construed that the appellant has made payment of royalty. The financial statements would clearly show that the provision made for payment of royalty was later reversed and not effectuated at all. The royalty proposed to be included in the transaction value has no nexus to the goods imported. He relied upon the decision in the case of Commissioner of Customs Vs. Ferodo India Pvt. Ltd. – 2008 (314) ELT 23 (SC) and Syngenta India Ltd. Vs. Commissioner of Customs – 2014 (314) ELT 473 (Tri.)
8. The learned counsel submitted that though the Show Cause Notice is issued by DRI, the appellant is not contesting the issue in this regard as to whether DRI is ‘the proper officer’ for issuing the Show Cause Notice.
9. The learned AR Shri R.Rajaraman supported the findings in the impugned order. He adverted to para 5 of the impugned order and argued that though the appellant contend that they have not paid any royalty to the foreign supplier, it is seen that they have made entries in the books of accounts for the year 2012 – 13 as to the payment of Rs.28.14 lakhs to the foreign supplier under the heading ‘Royalty’. They have not furnished any strong evidence to prove that the said amount has not been paid to the foreign supplier. In any case, the matter requires to be remanded to the adjudicating authority to look into the documents produced by the appellant as to whether they have actually paid the royalty to the foreign supplier or not.
10. Heard both sides.
11. The issue is whether the amount of Rs.28.14 lakhs in the nature of payment of royalty can be included in the transaction value and whether it is a condition of sale. From the facts narrated above, it is seen that there is no agreement between the appellant or the foreign supplier. It is then difficult to understand whether the royalty is a condition for sale of the imported goods. In the present case, the appellant contends that they have made provision for royalty but they have not actually paid any amount and that the amount was reversed in the year 2014 – 15. The learned counsel for the appellant has produced the financial statements for the respective years. They have also furnished the Chartered Accountant’s certificate. Besides these, the entries in the ledger / books of accounts have to be examined. In such circumstances, we deem it fit that the matter requires to be remanded to the adjudicating authority who shall look into the aspect whether the appellant has paid royalty to the foreign supplier or not. In case, the appellant has not paid such amount, there is no question of including the same in the transaction value.
12. In the result, the impugned order is set aside to this effect and the matter is remanded to the adjudicating authority who shall reconsider the issue as per the above directions. The appeal is disposed of in the above terms.
(Pronounced in court on 20.04.2022)
