The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) set aside an order affirming the inclusion of ‘royalty’ in transaction valuation, ruling that the first appellate authority lacked jurisdiction due to the absence of finalized provisional assessments.
Henkel Adhesives Technologies India Pvt Ltd,appellant-assessee,entered into agreements with M/s Henkel AG & Co, KGaA and M/s Henkel Technologies ( Korea ) Ltd for industrial adhesives and technical assistance. The Special Valuation Branch ( SVB ) investigated the relationship’s impact on pricing, leading to provisional assessments of the bills of entry.
A show-cause notice was issued on 24th September 2019 proposing additions to the declared value. An order dated 27th November 2019 finalized the assessments, ruling that the royalty should not be included in the transaction value.
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The jurisdictional Commissioner of Customs appealed the decision, and the Commissioner of Customs (Appeals), affirmed the addition of royalty. This order is now being contested, despite the absence of specific reference to the bills of entry in the appeal, and the first appellate authority’s decision to finalize the assessments.
The two member bench comprising Ajay Sharma ( Judicial Member ) and CJ Mathew ( Technical Member ) heard the assessee’s counsel and the Authorized Representative regarding the inclusion of ‘royalty’ under rule 10 of the Customs Valuation Rules, 2007. Although the show-cause notice and the impugned order referred to these provisions, the tribunal had doubts due to the lack of details on imports and the empowerment under the statute.
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The assessee presented some bills of entry, but since they were not mentioned in the show-cause notice, the bench could not consider them. It was noted that the entire dispute was about an assessment without addressing the duty liability from the finalization of the bills of entry.
The appellate tribunal pointed out that appeals should stem from a final assessment under section 17 or section 18 of the Customs Act, 1962. In this case, the ‘proper officer’ should have either accepted the declared duty or reassessed it, including provisional assessments. Since the finalization of the provisional assessments had not occurred, the first appellate authority’s decision was made without jurisdiction.
As a result, the tribunal set aside the impugned order and clarified that the decision did not affect any remedies related to the finalization of the provisional assessments by the ‘proper officer’.
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