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2014 (5) TMI 203 - AT - CustomsIncludility of Royalty paid in assessable value of goods imported - Determination of duty Liability - Collaboration agreement and consultancy service agreement – No condition of sale - Nexus of Payment either with import of goods or with value of imported goods – Rule 10(1)(e) of Valuation Rules, 2007 - Held that:- Not a single clause in collaboration agreement dated 01/07/2004 and consultancy service agreement dated 01/01/2009, is found which compels assessee to procure the raw material from the foreign licensor or the group companies - There is no condition of sale incorporated in these agreements - Secondly, the royalty is computed excluding the cost of imported materials - Royalty is based on the indigenous value addition, which clearly shows that the payments made by assessee for the collaboration and the consultancy service have nothing to do with the imports undertaken by assessee - Assessee is importing only a small portion of its raw material requirements and even if he does not import any material, the royalty payments would be higher as assessee has to compute the royalty on the net sale value minus cost of imported raw materials -Thus, the payments made by the appellant has no nexus or relationship either with the import of goods or with the value of imported goods - Therefore, the conclusion drawn by the lower appellate authority is completely misconceived and has no basis whatsoever. Explanation in Rule 10(1)(e) is meant for different purpose altogether - The said explanation applies to goods imported which require further processing before being put to use - It is in that context the payments, if any, made for such processing is deemed as a condition of sale and includable in the value of the goods imported - That has nothing to do with the manufacturing processes undertaken subsequent to the importation and sale in India - Relying upon SGL Carbon India Pvt. Ltd. vs. Commissioner of Customs (Imports), Mumbai [2013 (11) TMI 885 - CESTAT MUMBAI] and Maruti Udyog Ltd. vs. Commissioner of Customs, Mumbai [2013 (12) TMI 90 - CESTAT MUMBAI] - If there is no nexus between the goods imported and the royalty payments made and if such payments are not a condition of sale, then royalty payments cannot be included in the assessable value of the goods imported - The royalty payments made to foreign collaborator or the consultancy service charges paid are not addable to the value of the goods imported by assessee from the foreign collaborator or the group entities - Therefore, impugned order passed by the lower appellate authority is set aside and order passed by AO dated 16/08/2011 is restored – Decided in favour of assesse.
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