Lakshmikumaran and Sridharan Attorneys Secures Favorable CESTAT Ruling for Ericsson India
The leading law firm in India, Lakshmikumaran and Sridharan Attorneys represented Ericsson India Private Limited before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi in the matter Ericsson India Private Limited vs. Additional Director General (Adjudication), Directorate of Revenue Intelligence, New Delhi, pronounced on 14 October 2025.
Issue Before the Tribunal
The central issue before the Tribunal was whether royalties paid by Ericsson India to its parent company for technical know-how used in the manufacture of telecom equipment, were includible in the assessable value of imported components from another group company under Rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
The Department contended that the royalty payments constituted a condition of sale, being intrinsically linked to the imported components, and therefore warranted inclusion in the transaction value. In contrast, Ericsson India argued that the royalty pertained exclusively to post-importation activities, such as manufacturing and technical assistance, and was not a condition for the import of components.
Tribunal’s Analysis and Findings
After analyzing the Technical Co-operation Agreements, supply contracts, and relevant judicial precedents, including Ferodo India Pvt. Ltd. v. Commissioner of Customs and J.K. Corporation Ltd. v. Commissioner of Customs (Port), Kolkata, the Tribunal ruled in favor of the Appellant, setting aside the order of the Directorate of Revenue Intelligence. The Tribunal’s key findings are summarised below:
- Nature of Royalty: The inclusion of the value of imported goods in the royalty calculation formula does not alter the fundamental nature of the royalty, which is attributable to the finished goods.
- Not a Condition of Sale: Royalty paid for the transfer of technical know-how (manufacturing methods) and technical know-what (raw material specifications), being related to post-importation activities, does not constitute a ‘condition of sale’ of the imported goods, and therefore is not includible in the transaction value under Rule 10(1)(c).
- No Element of Suppression: Where the element of royalty was duly disclosed before the Special Valuation Branch through financial statements, the extended period of limitation cannot be invoked on grounds of suppression of facts.
The Lakshmikumaran and Sridharan Attorneys team representing Ericsson India Private Limited comprised Mr. V. Lakshmikumaran ( Managing Partner), Mr. Anurag Kapur ( Partner), Ms. Rubel Bareja ( Principal Associate ), and Ms. Anisha Arya ( Associate ).
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