By TIOL News Service

MUMBAI, AUG 31, 2016: THE Commissioner (Appeals) held that the royalty payment is not related to the imported goods.

Despite detailed discussions and findings in favour of the appellant, in the operative portion of the order, the Commissioner (Appeals) upheld the order of the original authority and rejected the appeal. Therefore, this shows non-application of mind on the part of the Commissioner is what the appellant pleads before the CESTAT.

Below reproduced are the findings of the lower appellate authority -

"I have carefully gone through the case records and the submissions of the appellant as well as the record of the personal hearing. I find that the lower authority has passed the impugned order on the ground that the appellant failed to comply with the directions of the department to submit relevant documents. The lower authority has also given opportunities for personal hearing which the appellant did not avail of. The appellant has argued that the loading is arbitrary. They have further submitted that the lower authority has failed to take into account the direction issued by the Commissioner (Appeals) vide order dated 21/07/95. The lower authority's order is also contradictory as in the first part of the order he has stated that appellant has submitted various documents and in the later part he has stated that the appellant has not submitted any documents. I agree with arguments of the appellant and it definitely appears the lower authority was in haste to issue the order without taking into consideration the directions of the Commissioner (Appeals). The lower authority has failed to establish there is relationship in terms of Rule 2 (2) of the CVR, 1988.

While on the fact of it, the lumpsum payment of 30,000 pound appears addable to the value of the imported goods, since the collaborator has outlined (Schedule 2) that components have to be purchased from them. However, in the same condition, it has been mentioned that the price of the imported components shall not exceed the charges that the collaborator will make available to other companies. It is therefore clear that the lumpsum payment will not be addable to the price of imported goods. The lower authority in any case has failed to make out a case of under invoicing in the import price of the appellant. The royalty payment is a post importation activity and hence, not related to the imported goods".

The AR had nothing to add.

The Bench took a closer look at the findings and observed -

"5. …, we observe that the learned Commissioner (Appeals) giving a detailed discussion expressed his view that the royalty payment is a post importation activity and hence not related to the imported goods. However, in the operating portion, the Commissioner (Appeals) has rejected the appeal and upheld the order-in-original. This clearly shows that the discussion and findings and operating portion of the order are apparently contradictory. Therefore, there is a clear non-application of mind on the part of the Commissioner. For this reason alone, the order cannot be sustained…."

Setting aside the impugned order, the appeal was allowed by way of remand.

(See 2016-TIOL-2246-CESTAT-MUM )