Circular No. 86/2002- CUS.
12th December, 2002
F.No. 467/ 113/ 2001- Cus. V
Government of India
Ministry of Finance and Company Affairs,
Department of Revenue
( Central Board of Excise and Customs )
Subject : Valuation treatment of royalty/license fees payable on imported films- regarding.
Representations have been received from the importers of foreign films, namely, Foreign Film Chamber of India, Motion picture Association of America, stating that Customs duty on imported cinematographic film is leviable only on the cost of the print, plus freight and insurance charges as per Customs Notification No. 205/77-Cus, dated, 24.9.1977 and therefore, the remittance to foreign producers/ suppliers of royalty, license fee, profit sharing etc. in connection with the import of cinematographic film is exempt from duty.
2. The matter has been examined. The subject notification No. 205/77-Cus., dated 24.9.1977 as amended by Notification No. 103/86-Cus., dated 17.02.1986 has since been rescinded vide Notification No. 47/96-Cus., dated 23.07.1996, as part of the budget day notifications for the year 1996-97. Further, as per Rule 9(1)(c) of the Customs Valuation Rules, 1988, royalties and license fee related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of sale of the goods being valued shall be added to the price actually paid or payable for the imported goods, to the extent that such royalties and fees are not included in the price actually paid or payable. This would mean that Customs duty should be based on the intrinsic value of the product. Which shall include the payment on account of royalty/license fee directly related to the imported goods. As the Customs duty exemption Notification 205/77-Cus., dated 24.9.1977 is no more in force, the imported Cinematographic Films shall be leviable to the appropriate rate of Customs duty on the value determined as above.
3. All the Chief Commissioner of Customs are requested to issue necessary instructions to the concerned assessing officers in their jurisdiction to strictly follow the above said instructions and difficulties, if any, may be brought to the notice of the Board immediately.