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2017 (9) TMI 1138 - AT - CustomsValuation - royalty - includibility - whether royalty paid by the Appellant to LME for grant of access to proprietary Ericsson knowhow and Ericson IPR for undertaking the manufacture/ assembly of Radio Base Station (RBS), Mobile Switching Centers (MSC) and Base Station Controllers (BSC) used in GSM (Global System for Mobile communication) networks is includible in the value of components imported from Ericsson AB, Sweden (hereinafter referred to as EAB)? Held that: - in terms of the erstwhile license agreement dated 23/12/2008, royalty was to be paid at the rate of 5 per cent of the net selling price of the licensed products, from which cost of imported components were to be excluded along with taxes. However, in the new license agreement w.e.f. 01/04/2012 the royalty amount of 5.75 per cent was to be paid on the sale value of the licensed products after exclusion of taxes but including the cost of the imported components. Since the significant percentage of the imported components have been procured from EAB Sweden, revenue has taken the stand that such royalty is to be considered as the condition of sale of the components by EAB to the appellant. The issue is similar to the judgement of Hon’ble Supreme Court in Matsushita Television & Audio (I) Limited v/s Commissioner of Customs [2007 (4) TMI 5 - SUPREME COURT OF INDIA], where it was held that royalty in relation to the sale only includible in assessable value. Before adding the royalty amounts to the value of imported components, it is necessary for the department to examine both the technical assistance agreement as well as the pricing agreement. Before taking the final view in the matter, it is necessary to re-examine the matter of both license agreement as well as supply contract simultaneously, to see if the enhanced royalty was in the guise of adjustment of the price of components. Appeal allowed by way of remand.
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