Top Stories Royalty is not payable in Instances of Trading of imported Finished Goods and on Goods repacked in India: CESTAT [Read Order] The bench observed that addition of payment made towards royalty can be made only in cases where the goods have been manufactured from the raw material imported by using the trade secret license under license agreement By Amal Michael – On March 1, 2024 6:03 pm – 2 mins read
A two member bench of Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that royalty is not payable in instances of trading of imported finished goods and on goods repacked in India and it is only for use of technology to produce the products in India. The bench observed that royalty is payable only for use of technology to produce the products in India. The tribunal observed that royalty cannot be added to the finished goods imported by the appellant for trading purpose. The Assessee, Chem Rend Chemicals Co Pvt Ltd is engaged in trading of various types of industrial standard mould release agent and dye lubricant. Assessee used to import raw material from M/s. Chem Trend, USA for manufacture of finished goods.
Thereafter, Assessee had entered into an agreement dated 01.01.2010 for 5 years for use of trade secrets and other. Intellectual Property Rights in connection with the manufacture and sale of specified products in India by paying royalty @ 3.7% and 4% of net sale volume of the finished goods manufactured and sold to customers. In 2007, Assistant Commissioner of Customs, Special Valuation Branch ( SVB ) Mumbai passed an ex parte order rejecting the declared invoice value and for loading of declared invoice price by 100% under the provisions of Rule 8 read with Rule 9 of the Customs Valuation Rules, 2007. Thereafter, when the office of the Appellant was shifted to Bangalore on 02.06.2007, the Appellant stopped import from Chem Trend, Singapore and started to import from Chem Trend, USA.
Assessee contended that that royalty is payable only in cases where the goods are manufactured from the raw materials by using the trade secrets licensed under the license agreement. Revenue contended that the Royalty is not payable in instances of trading of imported products and on goods repacked in India but only for use of technology to produce the products in India. Revenue contended that the appellate authority had upheld the rejection of invoice value and remanded the matter for redetermination of the assessable value. Revenue further contended that the assessee had not paid royalty goods traded and on goods repacked in India. Revenue contended that assessee had escaped assessment in doing so.
The bench comprising P.A. Augustian ( Member, Judicial ) and R. Bhagya Devi ( Member, Technical ) observed that addition of payment made towards royalty can be made only in cases where the goods have been manufactured from the raw material imported by using the trade secret license under license agreement. The royalty is not payable in instances of trading of imported finished goods and on goods repacked in India and it is only for use of technology to produce the products in India.
The bench further observed that in this case the royalty has been paid for use of technology to produce the products and it is payable on the net value of the goods manufactured in India and therefore, royalty cannot be added to the finished goods imported by the appellant for trading purpose.
The bench set aside the impugned order. Assessee was represented by G.Shivadass and Ms. Neethu James. Revenue was represented by K.A. Jathin. To Read the full text of the Order CLICK HER