TMI Blog2012 (11) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the payment of royalty is relatable to the imported goods and is a condition for sale of goods cannot be sustained in law. The appellant is liable to pay royalty to the foreign collaborator even when the appellant imports the components from anybody else and do not at all import the components from the foreign collaborator. Thus there is no nexus between the royalty payment and the import of components. There is no evidence which has been produced by the department indicating that the payment of royalty is a condition for the sale of imported components or it is relatable to the imported components. Thus the contention of the Revenue that the royalty amount is to be added with the transaction value to arrive at the assessable value of the goods in importation is rejected - in favour of assessee. - C/560/11 - A/673/2012-WZB/C-I(CSTB) - Dated:- 30-10-2012 - SHRI ASHOK JINDAL, AND SHRI P.R. CHANDRASEKHARAN, JJ. Appearance: Shri T. Vishwanathan, Advocate for Appellant Shri Navneet, Addl. Commissioner (AR) for Respondent Per: P.R. Chandrasekharan The appeal and stay application are directed against Order-in-Appeal No. 112/MCH/AC/SVB/2011 dated 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction value does not arise. He relies on the judgment of this Tribunal in the case of BASF Strenics Pvt. Ltd. reported in 2006 (195) ELT 206 (Tri-Mum), wherein it was held that Rule 9(1)(c) and Rule 9(1)(d) cannot have any application where the goods are used by the importer for further manufacture and such manufactured goods are sold subsequently. He also relied on the judgment of the Apex Court in the case of Ferodo India Pvt. Ltd. 2008 (224) ELT 23 (SC), wherein it was held that if the licence fee and royalty payment is not related to the imported goods or the material in addition to the declared value for the purpose of assessment of the goods is not required to include under Rule 9(1) of the Customs Valuation Rules, 1988. He also relied on the judgment of this Tribunal in the case of Bridgestone India Pvt. Ltd. 2012 CESTAT-MUM, wherein a similar view was taken by this Tribunal. 4. The learned Addl. Commissioner (AR) appearing for the Revenue, on the other hand, contends that in respect of 3 agreements out of 10 namely the agreement with ABB Switzerland Ltd. for the manufacture of Higher Power Rectified System, agreement with ABB Italy Ltd. for the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In consideration thereof the appellant has to pay the royalty to the Licensor as the percentage of the net sale price of the licence products in the Indian market. Nowhere in the agreement is there any condition that the appellant is required to import any components from the licensor. In fact, in 7 of the agreements, we find that there is no condition at all with respect to import/purchase of any components from the foreign collaborator. The appellant is free to import the components either from the collaborator or from anybody else. If that be so, the condition that the payment of royalty is relatable to the imported goods and is a condition for sale of goods cannot be sustained in law. The appellant is liable to pay royalty to the foreign collaborator even when the appellant imports the components from anybody else and do not at all import the components from the foreign collaborator. Thus there is no nexus between the royalty payment and the import of components. 6.1 In respect of only 3 agreements, we find that there is a clause relating to purchases which has been reproduced above. As per the said clause, there is no condition that the appellant should purchase the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported from the related suppliers only. We find that the impugned agreement provides for payment of running royalty under the know-how agreement and relates to goods manufactured and sold indigenously. Such payment of royalty to BASF, Germany is for using BASF technology and has also been approved by the R.B.I. In view of the foregoing, we are of the view that the amount of royalty in question cannot be added to the declared value under the said sub-rule (c) either. 6.3 Similarly in the case of Ferodo India (P) Ltd. (supra), the Hon'ble Apex Court held as follows: - 18. Royalties and licence fees related to the imported goods is the cost which is incurred by the buyer in addition to the price which the buyer has to pay as consideration for the purchase of the imported goods. In other words, in addition to the price for the imported goods the buyer incurs costs on account of royalty and licence fee which the buyer pays to the foreign supplier for using information, patent, trade mark and know-how in the manufacture of the licensed product in India. Therefore, there are two concepts which operate simultaneously, namely, price for the imported goods and the royalties/licence fee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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