Royalty on Net Sales for Manufacturing Know-How by Owens Corning Not Addable to Customs Value of Imports u/r 10(1)(c) of CVR: CESTAT

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that royalty payments linked to net sales, paid for manufacturing know-how, are not to be added to the customs value of imported goods. The case involved Owens Corning, which paid royalty to a foreign entity based on its sales in India. The customs department had sought to add this royalty to the value of imported raw materials. However, the CESTAT held that under Rule 10(1)(c) of the Customs Valuation Rules, royalty is addable only if it is a condition of the sale of the imported goods. The tribunal found that the royalty was for the license to manufacture the finished product in India and was not a prerequisite for the sale of the imported raw materials, thereby deleting the demand for additional customs duty.