TMI Blog2016 (6) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner ; Ms. Padmavati Patil, Advocate For the Respondent : Shri Ahibaran, Addl. Commr. (A.R.) ORDER PER: RAMESH NAIR: The appeal is directed against Order-in-Appeal No. 264/2004 MCH dated 15.06.2004 passed by the Commissioner of Customs (Appeals), New Customs House, Mumbai-I, whereby the learned Commissioner (Appeals) disposed of appeal by passing the following order- I have gone through the records of the case. As per the agreement, royalty is calculated on the basis of indigenous value addition. So, as per settled legal position same is not includible. As per clause, 13.9 of agreement: 13.9 Supply of Components and Material: Subject to NSK and licensee reaching agreement on term of purchase and upon Licensees request, NSK shall sell and supply to Licensee components or material required to produce Licensed Products. This clearly shows that knowhow supplied is related to imported goods and a condition of sale. As per S.C. decision in Mahindra Mahindra Ltd., 1995 (76) ELT 481 (S.C.), apparent tenor of the agreement reflects real state of affairs. The importer have failed to show that the apparent is not real. The importer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that the royalty was payable on net ex-factory sales price of the products and the same has no relation to the import of goods. The royalty payment is based on the quantum of sale of the final product. Therefore any consideration of royalty payable on the quantity of sale of finished goods cannot be related to imported goods. The lump-sum payment of 30,000 Yen 40,000 Yen as the case may be is in respect of the documents of technical know-how which has no relation with the import of goods. She submits that the case is identical to the case of Kimberly Clark Lever Ltd. Vs. Commissioner of Customs (import), Mumbai vide Order No. A/86040/16/CB dated 16.02.2016 passed by this Tribunal. 4. On the other hand Shri Ahibaran, learned Addl. Commissioner (A.R.) reiterates the findings of the impugned order. He further submits that the appellant had no option but to buy the goods of the foreign collaborator, therefore the lump-sum amount payable under the name of technical knowhow is includible in the value of imported goods. In support of his submission reliance placed on the judgment of Tribunal in the case of Commissioner of Customs (I), Mumbai Vs. Mahendra Suiting Ltd. - 2008 (22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes RS.B Less: Landed cost of imported components Rs.C Less: Cost of Standard Bought-out Components Rs.D Net ex-factory sale price of the product Rs.A-Rs.B-Rs.C-Rs.D 2.1. NSK hereby grants licensee a non exclusive Licence to use the Technical Documents and/or Know-How under agreement to manufacture assemble, use and sell the Licensed Products in the Territory. 3. ARTICLE III - TECHNICAL DOCUMENTS 3.1. The area of the Technical Documents shall be the following:- 3.1.1.Product Drawings, Component Drawings and specifications thereof 3.1.2. Manufacture and assemble. 3.1.3. Quality assurance. 3.1.4. Product Application. 3.2. The Technical Documents shall be in the English or Japanese Language, as the case may be, and shall include all revisions, changes, improvements and modifications made by NSK upto the date of execution of this Agreement. 3.3. One (1) reproducible copy of Technical Documents shall be furnished to Licensee. 3.4. NSK will furnish or replace, at no charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deducting them from the payments made to NSK, shall promptly forwarded of NSK due receipts from the competent authorities as evidence of the payment of such withholding taxes. Licensee shall remit the net amount of above payments directly to the designated bank account of NSK in Yen. Conversion, if necessary, shall be made at the official exchange rate prevailing on the date of remittance. 6.3. Time of Payment: Licensee shall submit to NSK a report describing the respective quantities of the Licensed Products I land licensed Products II manufactured, assembled and sold by Licensee for the annual period or pro rata share of such ending March 31st of each year during the term hereof. The report shall be submitted to NSK within sixty (60) days after March 31st of each year. NSK will thereupon furnish an invoice in the corresponding amount. Upon receipt of NSK's invoices, Licensee shall forthwith pay NSK within thirty (30) days to an account at a bank designated by NSK. From the above terms of the agreement, it is clear that the agreement and the payment terms provided therein is related to the technical knowhow for the manufacture of final product at the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus Royalty, is payable only on indigenous value addition of 'the product sold. Thus this payment has no relation to imported goods. Also as observed earlier there is no condition of sale in the Agreement. As this Royalty payment cannot be covered under Rule 9(1)(c) for addition to invoice value. The Indian Company under the collaboration agreement is receiving technical assistance to improve quality of Bearings, manufactured by them to match the world class on International standard. The Indian company is importing certain component like Rollers, cages from the collaborator as they conform to their design and other source is still not known to them. The components imported from the collaboration/supplier are as per International/market price. There is no third party import of these components or instruments supplied by the collaborator for quality control/improvement in quality. The prices of these goods are as per market, price. As there is no addition to be made to imported goods, the invoice value of the imported components from the foreign collaborator/supplier can be accepted as transaction value under Customs Valuation Rules, 1988. In the above findings, we d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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