By S.S. Selvanayagam
The Court of Appeal issued a Writ of Certiorari quashing the order of the Customs seeking Customs duty and other levies on royalty/licence fees from Nestlé Lanka Ltd.
The Bench comprised Justices Sathya Hettige (President) and Anil Goonaratne.
Petitioner Nestlé Lanka contended that it is not obliged to pay Customs duty on the royalties in terms of the Customs Ordinance as the royalties or licence fees are not paid by the petitioner as a buyer either directly or indirectly as a condition of sale of goods to it.
It cited the Director General of Customs and Deputy Director General of Customs K. Ranjan as Respondents.
Sanjeeva Jayawardena with Suren de Silva appeared for the Petitioner. Assistant Deputy Solicitor General A. Gnanathasan appeared for the Respondents.
Petitioner stated that Nestlé SA of Switzerland owns 90.82% of the capital of it and is the beneficial owner of Intellectual Property of the Nestlé Group and the Nestlé SA SPN and Nestec SA have entered into General License Agreements with its subsidies in various parts of the world to proceed with its business.
Petitioner stated there is no license fee or royalties paid to the seller whatsoever on any such sales and the license fees and royalties if any, are paid only on subsequent sales to a third party if effected after the goods have arrived in Sri Lanka.
Petitioner maintained once the seller Nestlé companies abroad sell the products to the petitioner, there is no further contractual relationship between the petitioner and seller abroad.