TMI Blog2016 (9) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... 6824 & 87379/15 - A/89044-89047/16/CB - Dated:- 2-8-2016 - Mr.Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical) Shri.Mihir Deshmukh, Advocate for appellant Shri.MK Sarangi, Jt. Comm. (AR) for respondent ORDER M/s.Husco Hydraulics Pvt. Ltd. (M/s.HHPL in short) entered into agreements with M/s.Husco International, INC, USA. There were two agreements. License agreement dated 01/04/2007 and engineering service agreement dated 01/01/2007. In terms of these agreements, M/s.HHPL imported certain goods from M/s.Husco International, Inc. USA. The case was picked up by the Mumbai Customs (GATT) Special Valuation Branch, NCH, Mumbai and after examining the contract it was held vide order No.108/AC/SVB/BR/2008-09 dated 30/06/2008 that (i) HHPL and Husco International, USA are related in terms of Rule 2 of Customs Valuation (Determination of value of import goods) Rules, 2007. (ii) Invoice value of goods imported was enhanced by royalty equal to 3% of the importer s selling price of the licensed products defined in the license agreement dated 01/04/2007 under Rule 4 read with Rule 9 (1) (c) of the Customs Valuation Rules, 2007 for the period from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the royalty payment is includible in the assessable value of the goods. I find that the present order is a renewal order and is therefore based on the earlier order-in-original. I find that no change in the terms and conditions of license agreement has been brought about by the party at the present stage. Moreover, from the documents available, I find that the said order-in-original has not bee appealed against by the party. Further, the importer has vide affidavit confirmed that they are following consistent invoicing pattern for the Husco group products being imported by them. Hence, in the light of the above facts and circumstances, I find that the issue of addition of the payment of royalty as per the said license agreement has attained finality and hence, I dont find any reason to interfere with the said order at this stage . The matter was agitated before the Commissioner (Appeals). The Commissioner (Appeals) modified the order-in-original dated 07/08/2014 and held that there was no case for addition of royalty payment in assessable value of the goods under Rule 10 (1) (c) of the Customs Valuation Rules, 2007. Aggrieved by the said order, the Revenue has fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, it became a condition of sale of the finished goods. Hence, in this case both the conditions of Rule 9(1)(c) of the Valuation Rules, 1988, are satisfied. 2.2 The learned AR also relied on the decision of the Hon ble Apex Court in the case of Mahindra Mahindra Ltd. - 1995 (76) ELT 481 (SC). We find that in the said case the royalty payments were held to be not includable in the assessable value. Thus, this case does not further the arguments of the Revenue. 2.3 The learned AR also relied on the decision of the Skoda Auto India Ltd., Vs. CC, Navasheva - 2014 (313) ELT 600 (Tri-Mum), where lump sum payments received were held addable to the assessable value. We find that in the said case there was evidence produced linking the royalty payments to CIF value of the imported car kits. In the instant case, no such direct evidence has been produced and thus, this case does not further the arguments of the learned AR. 2.4 The learned AR also relied on the decision of the Tribunal in the case of General Motors India Ltd. - 2009 (235) ELT 364 (T). In the said case also license fee was found not related to the imported goods and therefore, held to be not includable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use the appellants did not appeal against the Assistant Commissioners Order dated 11-2-1992, their right to come-up in appeal against a subsequent order dated 5-8-1996 is not in any way blocked, particularly because it is nobodys case that the appeal is not in time or that there is a lack of jurisdiction. The order dated 11-2-1992 which they had not contested was based under a different set of circumstances. The order currently under dispute is on different set of circumstances, and one of them is that the quantum of shareholding has changed between HP USA and HPI. In view of these discussions, we cannot accept this ground of appeal also. 3.1 The learned Counsel argued that the order-in-original clearly accepts the transaction value under Rule 3 (3) (a) of the Customs Valuation Rules, 2007. Further, it includes the royalty payments solely for the reason that there are no change in condition of license agreement on the basis of which the earlier order dated 30/06/2008 was passed. He argued that it is improper to add any value to a transaction value accepted under Rule 3 (3) (a) of the Customs Valuation Rules, 2007. 3.2 The learned Counsel also argued that the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment in the assessable value of the goods as per the relevant provisions of Customs Valuation Rules was elaborately discussed in the earlier order-in-original. I find that the learned Assistant Commissioner of Customs has passed a speaking order and held that the royalty payment is includible in the assessable value of the goods. I find that the present order is a renewal order and is therefore based on the earlier order-in-original. I find that no change in the terms and conditions of license agreement has been brought about by the party at the present stage. Moreover, from the documents available, I find that the said order-in-original has not bee appealed against by the party. Further, the importer has vide affidavit confirmed that they are following consistent invoicing pattern for the Husco group products being imported by them. Hence, in the light of the above facts and circumstances, I find that the issue of addition of the payment of royalty as per the said license agreement has attained finality and hence, I don t find any reason to interfere with the said order at this stage . 4.2 The purpose of entire exercise is to find the correct assessable value of the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related; (c) substitute values shall not be established under the provisions of clause (b) of this sub-rule. (4) If the value cannot be determined under the provisions of sub-rule (1) the value shall be determined by proceeding sequentially through rule 4 to 9. 4.3 Rule 3 (1) can be invoked in respect of the transaction value accepted under Rule 3 (3) (a) as well. Rule 3 (3) deals with the transaction between related parties. The order-in-original clearly holds that the transaction value is acceptable under Rule 3 (3) (a). Having held that the value of the goods can be determined under Rule 3 (1) read with Rule 12. 4.4 We find that the orders of assessment dated 30/06/2008 was accepted by the HHPL. The Revenue has argued that the principle of res judicata applies to the instant case as HHPL have accepted the said order. M/s.HHPL have relied on the decision of Tribunal on exact same issue in the case of Hewlett Packard reported in MANU/CC/0178/1998. Para 25 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes a condition of sale. The learned Counsel has relied on the decision of the Hon ble Apex Court in the case of Ferodo India (supra). However, it is seen that Hon ble Apex Court has not differed with the decision in the case of Matushita Television Audio Ltd. Further there was no assertion by the Revenue in that case to the effect that royalty is collected on the price inclusive of the value of imported goods. 4.7 The decision of the Hon ble Apex Court in the case of JK Corporation - 2007 (208) ELT 485 is not relevant as in that case the one time know-how fee was paid for the installation of plant and machinery. The facts were substantially different from the facts in the case of Matushita Television Audio Ltd. (supra). 4.8 In the instant case it is undisputed that the royalty is paid on a value inclusive of the value of the imported goods. Clause 5 of the Article of definition section of the license agreement defines net sale as follows: This agreement is made and entered into as of this first day of April, 2007, by and between Husco International, Inc. a Delaware Corporation having offices in Waukesha, Wisconsin, USA (hereafter called HUSCO ) and HUSC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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