M/S MATSUSHITA TELEVISION & AUDIO (I) LTD. versus COMMISSIONER OF CUSTOMS

Citation: [2007] 5 S.C.R. 46 · Decided: 12-04-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed
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Judgment (excerpt)

A 
MIS MATSUSHITA TELEVISION & AUDIO (I) LTD. 
11. 
COMMISSIONER OF CUSTOMS 
APRIL 12, 2007 
B 
(S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] 
_/ 
Customs Valuation (Determination of Imported Goods) Rules, 1988-
rr. 4(2) and 9(/)(c)-Agreement of technical know-how assistance-The 
c assistance also extended to supply of components and to approval of 
components duly imported-Agreement to pay royalty to the company 
imparting assistance by the company taking assistance-Import of components 
by company taking assistance (Assessee Company)-The royalty payment 
was included in the assessable value of the components-Propriety of-Held: 
Royalty payment was rightly included in the assessable value of the 
D components-Royalty payment under the agreement related not only to the 
domestic production of the goods, but also to imports. 
~ 
Appellant-assessee is a joint venture of a company 'M'. Predecessors 
of the appellants had entered into an agreement with company' M' for obtaining 
technical know-how assistance. Technical assistance was also extended to 
E supply of the components and also to the approval of the components (brought 
out items) duly imported. In terms of the agreement, appellants were required 
to pay royalty to company 'M' at 3% on net ex-factory sale price of the colour 
-
receiver manufactured by them towards technical assistance rendered by 
company 'M'. The Adjudicating Authority loaded the assessable value of the 
F said components with the cost of royalty payment holding that royalty payment 
,>--
was related to compone·nts. The order was subsequently confirmed by the 
Commissioner (Appeals) and also by Tribunal. 
The question for consideration in the present appeal was whether the 
royalty payment was connected with the imported components of Colour TV 
G and if so whether such royalty payment was includible in the assessable value 
of such components? 
\.-
Dismissing the appeal, the Court 
HELD: Under Rule 9(1) (c) of the Customs Valuation (Determination of 
H 
46 
MATSUSHITA TELEVISION & AUDIO (I) Lill.•·. COMMNR. OF CUSTOMS 
47 
Imported Goods) Rules, 1988, only such royalty which is relatahle to the A 
imported goods and which is a condition of sale of such goods alone could be 
added and which is a condition of sale of such goods alone could be added to 
the declared price. However, in the present case, payment of continuing royalty 
was payable at the rate of 3% of the net ex-factory sale price of the colour 
T.V. exclusive of taxes, freight and insurance but including the co5t of imported B 
components. The royalty payment was to be computed not only on the domestic 
element of the net sale price of the colour T.V. but also on the cost of imported 
~ 
components. A bare reading of the agreement shows that payment under the 
said agreement related not only to the production of the goods in India but 
also to imports. In the present case, the cost of imported components was 
expressly included in the net ex-factory sale price of the colour T. V. Further, c 
when payment to company 'M' was at the rate of 3% of the sales turnover of 
the final product, including cost of imported components, it became a condition 
ofsale of the finished goods. Hence, in this case both the conditions of Rule 
9(l)(c) of the Rules are satisfied. [Para 71 [54-B-El 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 526 of 2002. 
D 
\ 
From the Judgment and Order No. 307/01-A dated 24.08.2001 of The 
Cu~toms Excise & Gold (Control) Appellate Tribunal, Principal Bench, New 
-
Delhi in Appeal No. C/120/2001-A. 
Dushyant Dave and Vibha Datta Makhija for the Appellant. 
E 
Mathai M. Paikeday, Shishir Pinaki, K.K. Sentilvelan and B. Krishna 
-
Prasad for the Respondent. 
The Judgment of the Court was delivered by 
F 
KAPADIA, J. I. This civil appeal under Section 35L(B) of the Central 
Excise A.ct, 1944, is directed against the Order passed by the Central Excise 
& Customs & Gold Control Tribunal (for short, 'CEGAT') dated 24.8.01. By 
the said Order the CEGAT (Tribunal) has dismissed the assessee's appeal. 
2. A short question which arises for detennination in this civil appeal G 
is: whether the royalty payment was connected with the imported components 
...} 
of Colour TV and if so whether such royalty payment was includible in the 
assessable value of such components. 
3. Appellants-assessee is a joint venture of M/s. Matsushita Electric H 
48 
SUPREME COURT REPORTS 
(2007] 5 S.C.R. 
A Industrial Co. Ltd., Japan, (for short,
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