By TIOL News Service

MUMBAI, APRIL 27, 2016: THIS is a Revenue appeal.

Revenue is aggrieved by the order of Commissioner (A) on the ground that first appellate authority has not enhanced the value of goods imported by the importer respondent despite the fact that the goods were imported from their sister/related company.

The Bench noted that the appellate authority had inter alia recorded the following findings:

"11. I find that the Appellants are manufacturers of goods in India. They are required to utilize the raw material in the manufacture of their goods and upon the sale of the goods, they are required to compute the royalty payment as per the above definition and article to the supplier. I find that there is no express/implied condition in the Agreement inferring that the appellant is under any contractual obligation to import the raw material for manufacturing the final products from the Licensor/Bekaert, Belgium the related supplier only. The Appellant is free to import the raw material from the licensor or any anybody else. The Licensee is liable to pay royalty to the Licensor (Bekaert, Belgium) even when the licensee (the Appellant) imports the raw material from anybody else and do not at all import the same from the related foreign supplier. In such a situation, the condition that the payment of royalty is relatable to the imported goods and is a condition for sale of goods cannot be sustained in law. Thus, there is no nexus between the royalty payment and the import of components."

Observing that as against the recorded factual findings of the Commissioner(A), the revenue had not controverted the facts as also the following, the CESTAT held -

"The finished goods are manufactured by Technical knowhow from their sister/related company; nothing was brought to our notice that the agreement for technical knowhow between the importer respondent and their related person supplying the goods or finding that raw material needs to be purchased from the related person only. In the absence of any such restrictive Clause, we find that the first appellate authority was correct in coming to a conclusion that the loading of value by an amount paid as royalty seems to be incorrect, is, in our view the correct decision and does not require any interference."

The impugned order was upheld and the Revenue appeal was rejected.

(See 2016-TIOL-996-CESTAT-MUM)