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M/s. H & M Hennes & Mauritz Retail Private Limited Versus Commissioner of Customs

2016 (9) TMI 318 - AUTHORITY FOR ADVANCE RULINGS

Valuation - import of goods from third party and sale in India under the brand name of foreign holding company - principal to principal relationship - applicability of Section 14 of the Act read with the Customs Valuation (Determination of Values of Imported Goods) Rules, 2007? – Held that: - applicant and the overseas third party manufacturers do not qualify as “related entities‟ in as much as none of the conditions specified in Rule 2(2) of the Customs Valuation (Determinations of Value .....

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lue of the said goods for levy of Customs Duty under the Act read with the Rules – Held that: - the applicant will pay the Trademark License fee in lieu of grant of right to exploit and use of associated trademark for sale of said goods; that such Trademark License fee will be payable on the basis of the sales made by the applicant in India; that said activities for which the applicant will pay the license fee are post importation activities and are not related to the sale of goods by the third .....

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alue of the said goods for levy of Customs Duty under the Act read with the Rules – Held that: - payment not made under condition for sale – payment do not qualify as payment under Rule 10 (1)( c)of the Rules and need not be added to the transaction value. - There is no Agreement between third party manufacturers and H & M GBC where the third party manufacturers agreed to supply the goods to only such party who enters into an Agreement with the H&M GBC under the Foreign Collaboration Agreeme .....

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so referred to as applicant) is an Indian wholly owned subsidiary comprising of M/s H&M Hennes & Mauritz GBC AB, Sweden ( H&M GBC ) holding 99% of equity shares of the applicant and M/s H&M Hennes & Mauritz International AB, Sweden ( H&M AB ) holding the remaining 1% shares of the applicant. Applicant is in the process of setting up its business of single brand retail trading of various products viz. Clothes and Apparel, Footwear, Cosmetics and Accessories, Handbags, Home .....

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ction of the H&M Group and the maintenance and ownership of the H&M brand and trademarks. H&M AB has granted global exclusive rights to H&M GBC to exploit H&M concept and associated trademarks, and to implement the marketing and brand strategies as defined by H&M AB throughout the globe. H&M GBC, resident in Sweden, is the operational head office company of the H&M Group. H&M GBC is responsible for all operational activities within H&M Group‟s supply .....

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icant on a principal to principal basis (from the third party manufacturers) and the goods will be imported into India in the name of the applicant only for which purchase orders will be placed on the third party manufacturers. Further, the invoice raised by the third party manufacturers on the applicant will form the basis of the value of the said goods for the purpose of Customs Valuation. 3. Pursuance to import of the said goods, applicant proposes to market and sell the said goods in India o .....

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consideration for this agreement will form part of the Trademark License Agreement and a consolidated consideration will be paid by the applicant to H&M GBC for both the Agreements. b. Trademark License Agreement: Applicant has entered into a Trademark License Agreement with H&M GBC which is effective from 01.04.2014 for the use of the trademark rights with respect to the H&M Concept‟ for distribution and retailing of the said goods in India. The Agreement allows the applicant .....

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in terms of the Sales and Business Support Agreement. 4. As regards the said goods proposed to be imported by the applicant, the applicant would place a purchase order for the said goods on the overseas third party manufacturers. On the basis the purchase order, the required goods will be exported by the overseas third party manufacturers directly to the applicant. The said goods will be cleared into India by the applicant. For said goods, the overseas third party manufacturers will issue separ .....

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ority; A. Whether the value on the invoice raised by the overseas third party manufacturer on the applicant is the Transaction Value and on which Customs Duty is required to be paid in terms of Section 14 of the Act read with the Customs Valuation (Determination of Values of Imported Goods) Rules, 2007? B. Whether the Trade Mark/ License Fee and the payment made in terms of the foreign collaboration agreement by the applicant to H&M GBC does not qualify as payment under Rule 10 (1)( c)of the .....

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from the disclosure/submissions made by the applicant that the applicant and the overseas third party manufacturers do not qualify as related entities‟ in as much as none of the conditions specified in Rule 2(2) of the Customs Valuation (Determinations of Value of Imported goods) Rules, 2007 (in short Valuation Rules)is satisfied; that it is also clear that the price paid by the applicant to the overseas third party manufacturers will be based on the purchase invoices and is the sole cons .....

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Valuation Rules prescribe that royalties and license fee paid by the buyer of the goods, directly or indirectly, as a condition of sale, is includible in the Transaction Value; that therefore, for inclusion of royalties and license fee, it must clearly be established to be a condition of sale‟ of the goods; that in the present case, import of the said goods from overseas third party manufacturers and payments of Trademark License fee by the applicant to H&M GBC are independent transact .....

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d goods; that such Trademark License fee will be payable on the basis of the sales made by the applicant in India; that said activities for which the applicant will pay the license fee are post importation activities and are not related to the sale of goods by the third party manufacturers to the applicant. Further, the said payment of Trademark License Fee is a not condition for sale between the third party manufacturers and the applicant; that royalties and license fee to be includible in the .....

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applicant as a condition of sale of said goods by overseas third party manufacturers to the applicant; that submissions made with regard to the payment of Royalties and License fees supra is also mutatis mutandis applicable to the payment of sale and business support fee. 9. Revenue submits that as a matter of abundant precaution, the possibility of any Agreement between the third party manufacturers and H&M GBC needs to be enquired into whereby the third party manufacturers might have agree .....

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