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Sandvik Asia Pvt. Ltd. Versus Commissioner of Customs (Import) Mumbai

2015 (11) TMI 1504 - CESTAT MUMBAI

Valuation of goods - Determination of assessable value - Inclusion of royalty amount for use of the trademark - Held that:- royalty is not related to the imported raw material; the royalty is related to the finished goods. Only because imported goods are contained in the finished goods, it cannot be said that royalty is related to the imported goods. The royalty is only paid for using the Trademark i.e. Sandvik on the products manufactured and sold in India. Therefore, we are of the view that th .....

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nt that they have imported the goods from other suppliers and sourced locally too. This establishes that even the second condition under Rule 10 (1) (c), that royalty is paid as a condition of the sale of imported goods, is not met. In any case it is not as if the imported raw materials were sold by the appellant under the brand name Sandvik.

There is no finding by Commissioner that the buyer had adjusted price of imported goods in the guise of enhanced royalty. Nor that the appellant .....

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alty - Decided in favour of assessee. - Appeal No. C/87161/2013-Mum. - Final Order No. A/837/2015-WZB/CB - Dated:- 1-4-2015 - Mr. Anil Choudhary, Member (Judicial) And Mr. P.S. Pruthi, Member (Technical) For the Petitioner : Shri T. Viswanathan, Advocate For the Respondent : Shri Ahibaran, Additional Commissioner (A.R) ORDER Per : P.S. Pruthi This is an appeal filed by the appellant Sandvik Asia Pvt. Ltd. against the impugned Order-in-Appeal in which the Commissioner (Appeals) upheld the order o .....

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88 and 2007. For many years starting from 1992, it was held by the Customs that the relationship between exporter and appellant has not influenced the price of the imported goods. Special Valuation Branch (SVB) orders of 1992, 2006, 2009 continued to hold this view. However, at the time of review of the preceding SVB order of 2009 which was expiring in April 2012, the Customs Authorities took the view that the royalty paid by them to their Associate Companies in terms of the Trade Mark License A .....

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cture of the finished goods, they have used the raw materials imported from related persons as well as from unrelated persons. The Deputy Commissioner held that since royalty is determined on the net sale price of the goods manufactured and sold in India, without deducting the cost of raw materials, royalty is directly related to imported goods and is therefore includible in the value of the imported goods under Rule 10 (1) (c ). The Deputy Commissioner, however, extended the benefit of non-incl .....

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has been taken into account in determination of royalty, which is not correct. (iii) Inclusion of royalty in the value of imported goods is subject to conditions in Rule 10(1) (c ) which reads as under: Rule 10 (1)- In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, - (a).. (b).. (c) Royalties and licence fees related to the imported goods, that the buyer is required to pay, directly or indirectly, as a condition of the sale o .....

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dvik brand on the products manufactured and sold in India. According to him, the royalty would be payable even if the goods were made exclusively from goods manufactured out of inputs procured from indigenous sources. (iv) The Ld. Counsel relied on the decision of the Tribunal in the case of Commissioner of Customs, Vs. Ferodo India Pvt. Ltd. 2008 (224) E.L.T. 23 (S.C.). He also placed reliance on Tribunals decision in the case of CC (Import) Vs. Bridgestone India Pvt. Ltd. 2012-TIOL-166-CESTAT .....

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ourt to conclude that royalty payment was a condition of the sale of the goods. 5. The Ld. AR reiterated the findings of the Commissioner. He drew our attention to Article 4.1 of the Agreement with M/s. Sandvik Mining and Construction which lays down that Royalty is expressed as a percentage of the invoice price to external customer net of any discount. Hence, according to him, the determination of royalty takes into account the cost of imported raw material and is therefore includible in value .....

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a very casual manner. However, it would serve no purpose to remand the case because the issue can be decided in view of the facts on record. 7. During arguments the Ld. Counsel pointed to an order passed by the same Commissioner (Appeals) in the case of M/s. Seco Tools India (Pvt.) Ltd. vide Order S/49-28/Cus/Mum/2011/NCH dt. 13.2.2012 in which it was held that payment of royalty for use of trademark was not towards import of goods and had no nexus whatsoever. We have seen that Order of Commissi .....

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satisfied for invoking Rule 10(1) (c) are :- (i) Royalty is related to the imported goods; and (ii) Royalty is paid as a condition of sale of imported goods. From the facts it is clear us that the royalty is not related to the imported raw material; the royalty is related to the finished goods. Only because imported goods are contained in the finished goods, it cannot be said that royalty is related to the imported goods. The royalty is only paid for using the Trademark i.e. Sandvik on the produ .....

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t imports the raw materials from Sandvik. The appellants have made a statement that they have imported the goods from other suppliers and sourced locally too. This establishes that even the second condition under Rule 10 (1) (c), that royalty is paid as a condition of the sale of imported goods, is not met. In any case it is not as if the imported raw materials were sold by the appellant under the brand name Sandvik. 8.2. Reliance is placed on the decision of Tribunal in the case of Commissioner .....

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s. Therefore, the Tribunal in this case held that even if royalty is paid on a basis that is inclusive of raw material value, it cannot be said that the royalty payment is related to the imported goods. The case of BASF (supra) was affirmed by the Hon ble Supreme Court in the case of Ferodo India Pvt. Ltd. (supra), in which BASF were also a party. In this case, the Apex Court also distinguished the case of Matsushita (supra) relied upon by Revenue. It was held by the Supreme Court that In the c .....

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