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M/s Antifriction Bearing Corp. Ltd. Versus Commissioner of Customs (Import) , Mumbai-I

2016 (6) TMI 264 - CESTAT MUMBAI

Valuation - Includability - Documentation fees and royalty towards technical knowhow - Collaboration agreement for licence and technical assistance - Held that:- 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 appellants’ end. The agreement no where suggests that there is any link between quantum of import and the payment terms related thereto provided in the agreement. Since the agreement is, t .....

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MEMBER (TECHNICAL) For the 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 b .....

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indra 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 have cited same Tribunal decision. But in view of clear provision of the agreement and Hon'ble Apex Court decision, same are not applicable here. As per their own admission, the importer in their reply dated 25th October, 2000, have stated that the imported goods are manufactured as per their design and specificatio .....

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h version. As per the adjudicating authority this documentation fees per sheet charged by Collaborator for supply of document is not related to import of goods and is not covered under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. In the original order, it was also contended that there is no condition of sale in the agreement that royalty is payable on indigenous value addition, so it is not related to imported goods. Hence, the royalty cannot be covered under Rule, 9(1)(c) for addition .....

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ppellant is before us. 3. Ms. Padmavati Patil, learned Counsel for the appellant submits that the appellant have a collaboration with foreign company who is also supplier of certain goods such as Rollers and Cages. However, the agreement is for technical know-how for the manufacture of final product by the appellant. The royalty is nothing to do with its import. She has taken us to the agreement and from the agreement it is pointed out that the scope is that M/s NSK Ltd., the foreign Collaborato .....

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s 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 .....

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manufacture of final product by the appellant. On perusal of the agreement, we find that it is an agreement for licence and technical assistance. The relevant portion and clauses of the agreement are reproduced below:- WHEREAS, Licensee has been engaged, inter alia, in the manufacture and sale of its bearings and desires to upgrade the process and product technology for achieving higher productivity and lowering rework and scrap rate of parts/products; WHEREAS, Licensee further desires to manuf .....

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e and sole of them; 1.1. "Licensed Products" means all Ball and Tapered Roller Bearings of Standard International type that are manufactured by the Licensee under the Technical Documents and Know-How (as defined hereinafter). 1.5. "Know-How" means all information and knowledge, tangible or intangible reasonably necessary to enable Licensee to 'manufacture and assemble the Licensed Products, which is possessed and controlled by NSK at the date of the execution of this Agre .....

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e of the product Rs.A Less: Excise duty and other 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 b .....

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furnish or replace, at no charge to Licensee, those items of the Technical Documents which are later found to be deficient damaged or to contain defects that would affect the normal use of the Technical Documents. NSK will furnish or replace such items of Technical Documents within thirty (30) days of receipt of such notification by Licensee. 3.5. Licensee shall pay NSK the Technical Documents fee at the rate of Thirty thousand (30.000) Yen for the Japanese version and Forty thousand (40,000) Y .....

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ment. The number of Engineers and the period during which they will be dispatched shall be determined by mutual consent between the parties. 4.2. For such technical services, Licensee shall pay the following within thirty (30) days after the date of receipt of invoice from NSK: 4.2.1. Round-trip Economy-class-airfare between Japan and the airport nearest Licensees facilities. 4.2.2. First-class hotel accommodation, food and all other expenses for each NSK Engineer, and 4.2.3. Technical Delegati .....

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r a period of seven (7) years from the first date of commencement of commercial production based on the Technical Documents end/or Know-How provided under this Agreement. 6.2. Payment Method: NSK shall bear any withholding taxes imposed upon the payments made to NSK hereunder, provided, however, that Licensee shall pay such taxes on behalf of NSK, and after deducting them from the payments made to NSK, shall promptly forwarded of NSK due receipts from the competent authorities as evidence of the .....

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ng 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 ma .....

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ter by giving the following findings:- I have carefully gone' through the various documents produced and certificate and random copies of invoices and Bills of Entry furnished by M/s. The Antifriction Bearings Corpn. Ltd., Mumbai from the foreign supplier M/s. NSK, Ltd., Japan. It is observed that there is only the Licence and technical Assistance between M/s. The Antifirction Bearing Corporation Ltd. (i. e. the Indian Company) and the foreign collaborators M/s. NSK Ltd. Oksaki, Tokyo Japan. .....

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no relationship under Rule 2(2) of Customs Valuation Rules, 1988. As per the Agreement two types of payments are there, one is technical documentation charges at the rate of 30,000 yen per sheet for Japanese version and 4000 yen for the English version to be paid after date of receipt of invoice from NSK. This shows that these payments are nothing but documentation fees per sheet charged by the collaborator for supply of documents. This payment is not related to import of goods from the Collabo .....

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