Whether the assessment of Perfume and Deodorants imported by the assessee be loaded by 20% of the value as technical know-how fees paid and 1% of the value as royalty paid to their parent company?

PJ/Case Law /2016-17/3417

Case-HINDUSTAN LEVER LTD. Versus COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI
Citation-2017 (345) E.L.T. 316
Brief Facts-This appeal is directed against Order-in-Appeal No. 26/2005 (JNCH), dated 31-1-2005 passed by the Commissioner of Customs (Appeals), Mumbai-II.
The issue falls for consideration after filtering out unnecessary details are whether the assessment of Perfume and Deodorants imported by the appellant is to be loaded by 20% of the value as technical know-how fees paid and 1% of the value to be loaded on the royalty paid by the appellant to their parent company Unilever PLC or otherwise.
Appellant’s Contention-Learned Counsel for the appellant takes through the entire records. It is the submission that the adjudicating authority has correctly came to a conclusion that the perfume and deodorants are imported by the appellant is nothing to do with the agreement for payment of technical know-how fee and the royalty. It is her submission that the consignment in question of perfume and deodorants were imported for trading purposes and the amount of technical know-how fees and royalty is paid for manufacturing items of Unilever group. She would submit that addition of technical know-how charges and royalty charged in the assessable value of the imported goods is not sustainable and the reliance placed on the case of EssarGujarat by the appellate authority, is incorrect. It is also her submission that there is no condition stipulated in the collaboration agreement, which binds the appellant to any condition of sale of the imported goods.
Respondent’s Contention-Learned AR appearing for the Revenue brings to our notice the relationship of the appellant with the supplier of the goods by drawing our attention to the chart as reproduced by the adjudicating authority in the Order-in-Original. He would submit that the appellant as well as the supplier i.e. Calvin Klein Cosmetic International, Switzerland are both part of Unilever Group which holds share in both the entities and hence they become interconnected undertakings and the value has been correctly loaded.
Reasoning Of Judgement-On consideration of the submissions of both the sides and perusal of the records, the Tribunal found that the impugned order of the first appellate authority is unsustainable for more than one reason.
Firstly, it is undisputed that the consignment of imported goods is perfume and deodorants which have been imported for trading purposes; the agreement entered into by the appellant with Unilever Inc. is in respect of transfer of technical know-how of some other products and royalty payment is also for other products which are not the imported one. Hence, the claim that imported consignment is only for trading purposes, needs acceptance irrespective of source of procurement, which has been controverted by the first appellate authority, but the adjudicating authority has stated clearly by going through agreement. The Tribunal found that the adjudicating authority was correct on this point as he has recorded in the Order-in-Original that the appellant had enclosed copies of purchase orders raised by foreign supplier, to purchase unrelated buyers for supply of Calvin Klein perfume in various variants and pack sizes on an agreed price as cited in the purchase order. She has also gone through the copies of the invoices along with Bill of Entry, copies of the order forms in respect of sale to unrelated parties in South Africa and Argentina and came to a conclusion that the prices charged to such unrelated buyers are comparable to the imported consignment, which the importer has declared. She has also recorded that any minor difference in price could be attributed to the differences in quantity and freight rates. As against such a factual finding, there is nothing on record to show that the prices were not comparable and they were influenced due to technical know-how agreement.
Secondly, the Tribunal in the case of Saregama Industries and Another - 2016-TIOL-2397-CESTAT-MUM = 2016 (345)E.L.T.236 (Tribunal) in similar set of facts, held that the amount paid for technical know-how fee and the royalty charges are not to be included in the assessable value of the imported goods, if such payment is for the goods to be manufactured out of the technical know-how, which is transferred by an agreement. The ratio is squarely applicable in the case in hand.
In view of the foregoing facts and circumstances of the case, the Tribunal held that the impugned order was unsustainable and liable to be set aside. The impugned order was set aside and the appeals were allowed.
(Operative potion of order pronounced in Court)
Decision-Appeal allowed
Comment-The gist of the case is thatthe perfume and deodorants imported by the assessee were loaded by 20% of value as technical know-how fees paid and 1% of value loaded on royalty paid by assessee to its parent company. It was held that consignment of perfume and deodorants was imported for trading purposes and agreement entered into by assessee with parent company was in respect of transfer of technical know-how of some other products and royalty payment was also for other products which were not imported one. Hence, the amount paid for technical know-how fee and royalty charges would not be included in assessable value of imported goods in accordance with Section 14 of Customs Act, 1962.

Prepared By - Praniti Lalwani

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PJ/Case Law /2016-17/3417

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