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TMI Blog2016 (3) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... is the case of the Revenue that this amount needs to be included in the value of the goods imported in order to discharge the appropriate customs duty. The adjudicating authority agreed with the contention raised by the appellant importer and set aside the show-cause notice for loading of the value. On an appeal, the first appellate authority set aside the impugned order and directed the value to be loaded by know-how fees and royalty paid as per the provisions of Rule 9(1)(c) of the Customs Valuation Rules, 1988. 3. Learned Counsel would take us through the agreement and the facts of the case and submit that the appellant had not paid any amount as royalty or technical assistance to their own company at Philippines for the imported goods that are components and raw materials. She would submit that the first appellate authority has only relied upon the judgement of the Honble Supreme Court in the case of Essar Gujarat Ltd. - 1996 (88) ELT 609 (SC) which has been distinguished by the Apex Court in the case of Essar Steel - 2015 (319) ELT 202 (SC). It is her submission that the Apex Court in the case of Commissioner of Customs vs. Ferodo India Pvt. Ltd. - 2008 (224) ELT 23 was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the imported goods under Rule 9(1)(c) of CVR, 1988." 6.1 It can be seen from the above reproduced findings of the first appellate authority, he has placed reliance on the decision of Essar Gujarat Ltd. and provisions of Rule 9(1)(c) of Customs Valuation Rules, 1988. 6.2 We find that the learned Counsel was correct in bringing to our notice that the Apex Court in an identical/similar set of facts in the case of Ferodo India Pvt. Ltd. (supra) was considering the scope of the Rule 9(1)(c) and Rule 9(1)(e) of the Customs Valuation Rules, 1988, we reproduce the relevant paragraphs. "3. The buyer is the manufacturer of brake liners and brake pads in India. On 8-9-1995, a technical assistance and trade mark agreement (TAA for short) was entered into between the respondent (buyer/licensee) and M/s. T & N International Ltd., U.K. (foreign collaborator/licensor). Under the said agreement, the licensor claimed to be in possession of certain secret processes, formula and information. Under the agreement, the licensor agreed to permit manufacture of brake liners and brake pads (licensed products) by the licensee. Under the agreement, the licensor agreed to disclose the relevant secret pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase 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 fees which are also paid to the foreign supplier. Rule 9(1)(c) stipulates that payments made towards technical know-how must be a condition pre-requisite for the supply of imported goods by the foreign supplier and if such condition exists then such royalties and fees have to be included in the price of the imported goods. Under Rule 9(1)(c) the cost of technical know-how is included if the same is to be paid, directly or indirectly, as a condition of the sale of imported goods. At this stage, we would like to emphasis the word indirectly in Rule 9(1)(c). As stated above, the buyer/importer makes payment of the price of the imported goods. He also incurs the cost of technical know-how. Therefore, the Department in every case is not only required to look at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what was termed as royalty/licence fee was in fact not such royalty/licence fee but some other payment made or to be made as a condition pre-requisite to the sale of the imported goods. It is important to bear in mind that Rule 9 refer to cost and services. Under Rule 9(1), the price for the imported goods had to be enhanced/loaded by adding certain costs, royalties and licence fees and values mentioned in sub-rule 9(1)(a) to 9(1)(d). It refers to all other payments actually made or to be made as a condition of sale of the imported goods. In the present case, the Department invoked Rule 9(1)(c) on the ground that royalty was related to the imported goods, having failed it cannot fall back upon Rule 9(1)(e) because essentially we are concerned with the addition of royalty etc. to the price of the imported goods. Further, in the present case, the Department has accepted the transaction value of the imported goods. 25. Rule 4(3)(b) of the CVR, 1988 provides for an opportunity for the importer to demonstrate that the transaction value closely approximates to a test value. A number of factors, therefore, have to be taken into consideration in determining whether one value closely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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