2025-VIL-1698-CESTAT-DEL-CU
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CUSTOMS CESTAT Cases

Customs - Valuation, Payment of Royalty towards know-how, Condition of Sale, Extended Period of Limitation – Import of various Information Technology Goods from related foreign supplier – Appellant paid royalty to foreign supplier towards know-how for the manufacture of finished goods - Dept held that the royalty paid is includible in the transaction value of the imported components under Rule 10(1)(c) of the Customs Valuation (Determination of the Value of Imported Goods) Rules 2007 - Whether the royalty paid by Ericsson India to LM Ericsson Sweden towards know-how for the manufacture of finished goods is includible in the transaction value of the imported components under Rule 10(1)(c) of the 2007 Valuation Rules – HELD - Mere inclusion of value of imported goods cannot lead to addition of royalty paid on finished goods in the transaction value of the imported goods - Where the royalty payments pertain to post-importation activities and are not a condition of sale of the imported goods, such royalty cannot be added to the value of the imported goods under Rule 10(1)(c). The Technical Agreements between the parties did not stipulate that payment of royalty is a sine qua non for import of components. The royalty was paid for technical know-how related to the manufacture/assembly of the finished goods and did not have a direct nexus with the imported components. Therefore, the royalty is not includible in the transaction value of the imported components – The impugned order is set aside and the appeal is allowed - Whether the extended period of limitation under section 28 of the Customs Act was correctly invoked – HELD - The extended period of limitation could not have been invoked in the present case as there was no willful suppression of facts by the appelalnts with an intent to evade payment of customs duty. Ericsson India had disclosed the royalty payments in its financial statements which were submitted to the Special Valuation Branch, and its belief that the royalty was liable to service tax and not customs duty was a bona fide one - Mere non-disclosure or failure to declare does not amount to willful suppression, and there must be a positive act on the part of the assessee to evade payment of duty. In the absence of any such evidence, the extended period of limitation could not have been invoked.
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