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TMI Blog2013 (12) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant was examined by the Special Valuation Branch in Mumbai Customs to determine whether the relationship between the appellant and SMC has influenced the price of the imported goods and whether the technical know-how fees and royalty are includible in the assessable value of the goods imported from SMC. 2.1 The Dy. Commissioner of Customs, GATT Valuation Cell passed an order dated 28-9-2000 wherein, after examining the agreements 15-12-1998 and 3-8-1999 came to the conclusion that the relationship had not influenced the price at which the goods were supplied by SMC to the appellant and, therefore, he held that the transaction value can be accepted. Inasmuch as the licence fees and the royalty were not related to the goods imported but to the goods manufactured and sold in India, he held that the same are not includible in the value of the imported goods for the purpose of levy of customs duty. The said order of the Dy. Commissioner of Customs was reviewed by the Commissioner of Customs, Mumbai and the Revenue filed an appeal against the said order before the Commissioner (Appeals). The lower appellate authority held as follows : "In the present case, admittedly there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence Agreement was relatable directly to indigenous manufacture of components and vehicles to Suzuki's patents, designs and specifications. Similarly, use of the trade mark "MARUTI-SUZUKI" was also for marketing of the indigenously manufactured goods in India. Neither the royalty nor the trade mark "MARUTI-SUZUKI" had anything to do with import of components, assemblies and vehicles from Japan. One can understand the logic behind payment of royalty. When Suzuki transferred the technical know how and permitted Maruti to use its patents and designs, Suzuki had naturally expected to be compensated for it. When the indigenisation programme of Maruti progressed, import of components from Suzuki would gradually go on decreasing. That would reduce Suzuki's profits which it would have earned in exporting components from Japan to Maruti. Naturally, Suzuki would expect to be compensated on that count also. These compensations, after negotiation between the two parties, resulted in the clause relating to payment of royalty under the Licence Agreement. But the essential point is that these payments were relatable directly to manufacture of goods in India and they had no nexus with import of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant and therefore, in the present case alone, the department cannot take a different stand. 3.4 In the light of these decisions, the ld. Counsel submits that the order passed by the adjudicating authority is correct in law and needs to be restored and the order passed by the appellate authority should be set aside. 4. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, reiterates the findings of the lower appellate authority and argued that the royalty was paid towards technical know-how in connection with the manufacture of finished goods by way of using the imported materials, parts and components and the technical assistance obtained through these agreements are invariably and integrally utilised on the imported raw materials/components and, therefore, it can be related to the imported goods. He also submits that the method of calculating royalty is less material than the purpose of payment and if one examines the purpose of payment, it will be evident that the royalty paid is in relation to the imported goods and, therefore, it is clearly a condition of sale for the imported goods. He relies on the judgment of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relatable to the indigenization programme of the appellant since it is on the "deleted portion of the CKD components", that is, on the value of the components which have not been imported. Thus, higher the indigenization, higher the payment of royalty. This is for the reason that, had the appellant imported these components rather than manufacturing indigenously, SMC would have been able to earn profits by way of sale of imported components. In other words, the payment of royalty is not relatable with the imported components. In a situation where 100% indigenization is achieved, royalty would be still be payable even when no components are imported in terms of the licence-agreement. If that be so, the royalty paid has no nexus with the imported goods per se and it cannot be said that payment of royalty is a condition for sale of goods so as to invoke the provisions of Rule 9(1)(c) of the Customs Valuation Rules, 1988 or its successor rules. 5.2 The lower adjudicating authority in his order dated 28-9-2000 has recorded a finding that the agreement dated 2-10-1982 and the subsequent agreements dated 15-12-1998 and 3-8-1999 are identical in wordings and all the terms and conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters is a virtue as it promotes certainty in taxation which is a cannon of taxation. 5.4 The Revenue has placed reliance on the decision of the Hon'ble Apex Court in the case of Essar Gujarat case (supra). In that case, the importer imported a plant and also obtained technical know-how for running the plant by paying royalty. In that context, the Hon'ble Apex Court held that there is a direct nexus between the royalty payment and the imported plant and therefore, the value had to be loaded to the price thereof. In the case before us, no such nexus exists. In the absence of such nexus, technical know-how fee charged in respect of post importation activities can not be included in the assessable value of the imported goods as held by the Hon'ble Apex Court in the of Prodelin India (P) Ltd. [2006 (202) E.L.T. 13 (S.C.)]. No efforts has been made by the Department in the instant case to ascertain whether there was a price adjustment between the cost incurred by the appellant on account of royalty/licence fee and the price paid for imported items. The department has merely relied on the consideration clause in the Licence agreement only without establishing the fact that what was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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