Custom, Excise & Service Tax Tribunal
M/S. Rane Brake India Ltd vs Commissioner Of Customs ... on 15 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
C/41069/2015
[arising out of Order-in- Appeal C.Cus.II 194/2015, dated 27.02.2015 passed by the Commissioner of Customs (Appeals-II), Chennai]
M/s. RANE BRAKE INDIA LTD.
APPELLANT
Versus
COMMISSIONER OF CUSTOMS (PORT-IMPORT), CHENNAI-III
RESPONDENT
Appearance:
For the Appellant Shri S. Murugappan, Adv.
For the Respondent Shri K. Veerabhadra Reddy, JC (AR) CORAM:
Honbe Shri D.N. Panda, Judicial Member Honble Shri B. Ravichandran, Technical Member Date of hearing/decision 15-06-2016 FINAL ORDER NO. 41006 / 2016 Per D.N. Panda:
Appellant being aggrieved by the order of adjudication dated directing royalty, lump sum payment (license fee) and technical assistance fee paid to the supplier (related party) shall be includible in the import value of the goods, approached the learned Commissioner (Appeals) for redressal. But the appeal was rejected. The goods imported were:- (i) Bronze Powder; (ii) Potassium Nitrate; (iii) Rock Wool; (iv) Stainless Steel Fibre; (v) Phenolic Resin; (vi) Bronze Fibre; (vi) Cashew Powder; (vii) Graphite; (viii) Vermiculite; (ix) Barium Sulphate; (x) Ceramic Fibre; (xi) Friction Dust; (xii) Iron Oxide; (xiii) Mica; (xiv) Glass Fibre; (xv) Silicon Oxide; (xvi) Tin Powder; and (xvii) Slaked Lime.
Learned Commissioner (Appeals) without threadbare examination of the relevant terms of agreement between the parties in respect of the above three payments as is enumerated by the adjudicating authority in para 33 of his order, reached to a conclusion that the adjudication conclusion is proper.
2.1 Appellant submitted that the Rule 10(1)(c)of the Customs Valuation (Determination of Value of Imported Goods) Rule, 2007 shall have no application because none of the three payments relate to the import of the goods. Neither of the authorities below have examined the three agreement that was supplied to them in reply to question No.21 of the questionnaire. (Ref: copy of questionnaire existing in page 193 of the appeal folder). Had they examined the agreements they could have rightly understood as to whether these three payments have any implication on the import value. The appellate authority without examining the substance of the matter has recorded as under:-
To put it aptly, these raw materials are unique and are tailor-made for this technical-knowhow and therefore, these raw materials and technical-knowhow are a paired phenomenon, which cannot be separated thus creating the condition necessary for the addition of the value of the consideration under Rule 10 (1) (c)/10 (1) (e) ibid. This shows that the imported goods have nexus with the lump sum/royalty paid for the technical-knowhow and the technical fee and the existence of condition of sale. The appellant has split the value of these goods and have categorized them as value of physical goods and as technical-knowhow/technical fee. 2.2 It is further explained by the learned counsel that Rule 10 (1) (c) has a limited scope and confined to the imported goods without being expanded to finished good made out of such imported goods. Therefore, the royalty agreement, technical-knowhow agreement as well as technical fee agreement should be read in the context of imported goods. Placing reliance on notes to Rule 10 (1) (c), of the valuation Rules he says that, the said rule has defined its scope and confined to the charges that shall be payable to the exporter for the import of the goods but not to the manufacture of the goods. Both the authorities acted arbitrarily without depicting proper clause of the agreement that has guided them to reach to the conclusion that all the three payments should be includible in the import value.
3. Revenue on the other hand says that all the agreements were examined threadbare and both the authorities have recorded their observation properly. It is also the Revenues submission that the condition of sale is inferred from the documents and that relates to the output manufactured. In view of the proper finding by both the authorities, the payment made in respect of the aforesaid three items were included to the imported value of the goods. That is justified.
4. Heard both sides and perused the records.
5. Invoking of Rule 10 (1) (c) of the Valuation Rules is challenged by the appellant. There is reference in page 11 and 12 of the adjudication order about four agreements. The first one is 27.01.2005; second one is 27.01.2010; third one is 08.09.2011; and fourth one is 01.01.2012. Learned adjudicating authority has depicted only a summary of the agreement in few lines without properly bringing out relevant clauses that is contributory to the valuation sought to be made in terms of Rule 10 (1) (c) of the Valuation Rules. In absence of proper clause of the agreement being depicted in the order and without demonstrating the manner how such clauses warrant valuation to be made in terms of that Rule arbitrary valuation has been made. In stead of objective evaluation of the agreements and thread bare examination of any evidence on record to invoke above Rule the authority drew inference superficially and arbitrarily. This is not acceptable to law. Therefore, order of both the authorities suffers from legal infirmity. The appellate authority committed grave error in law in approving the adjudication order whimsically. It may be stated that whim and caprice is alien to Justice.
6. To do Justice to both sides, it is considered proper that following directions should be given to the original authority to redo the exercise of valuation granting fair opportunity to the appellant and determine the value of the imported goods objectively in accordance with law:-
(i) The authority shall bring the controversy in clear terms upon examination of the respective documents borne by the record;
(ii) Respective clause of the agreement for consideration of application of Rule 10 (1) (c) of the Valuation Rules should be clearly depicted and that should be brought to the notice of the appellant for appropriate defence;
(iii) The object of Rule 10 (1) (c) is to be properly understood in the context of the Valuation Rules with the note thereon;
(iv) There should be no confusion as to the definition of goods used in Rule 10 (1) (c) since the terms goods used therein is only related to imported goods; and
(v) Unerringly it should be brought to record as to whether any of the payments as per agreements have any bearing on the imported goods. So also whether payments made to related parties in respect of imports have any nexus to the value of imports.
6.1 Entire controversy should be brought to the notice of the appellant for defence and its submissions shall be recorded para-wise. Each para is to be dealt under touch stone of law and evidence upon objective examination of the facts and conclusion drawn without being subjective.
7. Aforesaid guidelines are not exhaustive but are mere examples. If the authority has any material to be used against the appellant that should be brought to the notice of the appellant and considering reply, reasoned and speaking order shall be passed. It should be remembered that the format of the agreement shall not be decisive but substance of the transaction shall be decisive. The substance should be backed by tangible evidence and demonstrated from the facts and circumstances of the case.
8. Having understood that the special valuation issues affects several consignments due to provisional assessment, re-adjudication be completed by 29th July, 2016 without any delay.
9. The appellant is entitled to the reasonable opportunity of hearing and a reasoned and speaking order passed. With the aforesaid directions, the matter is remitted to the learned adjudicating authority, setting aside the appellate order.
(Dictated and pronounced in open court)
(B. RAVICHANDRAN) (D.N. PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
ksr
16-06-2016
DRAFT
Remarks
I
II
III
Date of dictation
15.06.2016
Draft Order - Date of typing
16.06.2016
Fair Order Typing
16.06.2016
Date of number and date of dispatch
17. 06.2016
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C/41069/2015