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CASE NO.: Appeal (civil)  2757 of 2006

PETITIONER: M/s WEP Peripherals Ltd

RESPONDENT: Commissioner of Customs, Chennai

DATE OF JUDGMENT: 21/02/2008

BENCH: S. H. Kapadia & B. Sudershan Reddy

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 2757 OF 2006 with Civil Appeal Nos. 4519/06 and 3679/05

KAPADIA, J.          Civil Appeal No. 2757/06:

This civil appeal is filed by the assessee against order dated 24.1.2006  in appeal No. C/276/04 delivered by the Customs, Excise and Service Tax  Appellate Tribunal ("CESTAT").

2.      This matter is a sequel to the decision just delivered in the case of   Commissioner of Customs  v.  M/s Ferodo India Pvt. Ltd. (Civil Appeal  No. 8426/02). Appellant is the manufacturer of Printers. The integral part of  a printer is what is called as a shuttle. In the present case, we are concerned  with Technical Assistance Agreement ("TAA"). Appellant imports shuttles  which are used in the manufacture  of printers. Unlike M/s Ferodo India  Pvt. Ltd. case (supra) there is no related party transaction in the present  case. In the present case, the parties are at arm’s length. The adjudicating  authority has accepted the transaction value.

3.      The only question which arises for determination in this civil appeal is  whether the adjudicating authority was entitled to load the royalty/licence  fee payment on to the price of the imported goods, viz, the shuttle(s) by  taking its peak price. In the present case, the importer/buyer used to  negotiate with the foreign supplier on quarterly basis. During the period  under consideration, the importer received an order for bulk supply.  Therefore, there was lowering of price. This factor was not at all considered  by the adjudicating authority under rule 9(1)(c). In fact, during the enquiry  before the adjudicating authority, the appellant-importer placed  correspondence between it and the foreign supplier which indicated that the  appellant had received a bulk order for printers and, therefore, it had to  lower its price which fact had not at all been considered by the adjudicating  authority while invoking rule 9(1)(c). In the present case, there is nothing to  indicate that royalty payment was a condition pre-requisite to the sale of  shuttle. The only ground on which the adjudicating authority has held  against the appellant herein is that the shuttle is an integral part of the  printer. This view has been accepted also by the Tribunal, erroneously. The  Tribunal also failed to consider that the appellant had received a bulk order  for which it gave a price discount. The correspondence between the foreign  seller and the importer was placed before the adjudicating authority before  conclusion of the enquiry. There was no reason to reject the said  correspondence, particularly when it was placed before the arguments stood  concluded. Moreover, in the present case, the royalty payment was not based  on value. The royalty was payable at the rate of $ 50/70 per piece. In view of

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the law laid down by us in M/s Ferodo India Pvt. Ltd. (supra), the  appellant succeeds.  

4.      For the aforestated reasons, and particularly in the light of the law  discussed in the earlier judgment in the case of M/s Ferodo India Pvt. Ltd.  (supra), we set aside the impugned judgment of the Tribunal as erroneous.

5.      Accordingly, Civil Appeal No. 2757/06 filed by the assessee is  allowed with no order as to costs.

Civil Appeal No. 4519/06:

6.      This appeal is filed by the assessee-importer against order dated  26.4.2006 by the CEGAT in Application for rectification of mistake in  Appeal No. C/276/04 (Final Order No. 103/06). Since we have set aside the  impugned order of the Tribunal in Civil Appeal No. 2757/06 as erroneous,  the present  appeal is also allowed with no order as to costs.  

Civil Appeal No. 3679/05:

7.      This appeal is filed by the assessee, M/s Daikin Airconditioning India  Pvt. Ltd., against order dated 21.3.2005 by the CESTAT. In the light of our  judgment in the case of  CoC  v.  M/s Ferodo India Pvt. Ltd. (Civil Appeal  No. 8426/02) this appeal is allowed with no order as to costs.