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2016 (9) TMI 874 - CESTAT MUMBAI

2016 (9) TMI 874 - CESTAT MUMBAI - TMI - Valuation - royalty/ value of designs, drawings etc. - assessable value - Rule 9(i)(b)(iv) of the Customs Valuation Rules, 1988 - collaboration agreement - whether royalty/ value of designs, drawings includible in the assessable value? - Held that: - all the specifications of the shoe are supplied by the appellant to the vendor in the shape of catalogue and real shoe approved by the appellant as well as the foreign collaborator. A design need not be two d .....

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st of product manufactured abroad. - Matter remanded back to the original adjudicating authority for determination of appropriate quantum of the value to be added - appeal disposed off - decided against appellant. - APPEAL No. C/1003/04 - Dated:- 1-9-2016 - Mr. Ramesh Nair, Member (Judicial) And Mr. Raju, Member (Technical) Shri.T Vishwanathan, Advocate for appellant Shri.D.K. Sinha, Asst. Comm. (AR) for respondent ORDER Per Raju 1. The appeal has been filed by M/s.Proline Sport Systems. The .....

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of goods required to fill the order received from M/s.Cravatex Ltd. (the licensee) or its representative; and (c) sell the goods only to the licensee. 2. Our company has on right to (a) use the Trademarks on any goods other than those ordered by the licensee or (b) to sell the goods to any person other than the licensee. Our company will not display goods or refer to the goods in any advertising or promotional materials or activities. 3. Our company will comply with all of the licensee s directi .....

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similar marks). Our company will sign all documents and do all acts required by licensee in order to protect the Trademarks and respective owner s and licensee s right to use the Trademarks. 7. Any use of the trademarks or similar marks by our company in violation of this arrangement will constitute infringement of the trademarks and will subject our company to all civil remedies available at low and all administrative and criminal penalties. 8. Respective owners of Trademarks and Licensee are t .....

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le with the foreign company relating to design, marketing, sourcing, production and retail developments of contract products as well as information relating to materials used in the manufacture thereof. The contract also provides as follows: Article 2 Technical assistance to be rendered by the foreign company The scope of technical assistance to be rendered by the Foreign Company will cover the following: a) To assist the Indian company to design, manufacture, source, assemble, sell, distribute, .....

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the term of this agreement. 8.2 The Indian company will not engage any third party manufacturer, or place any order for manufacture of the contract products with any third party manufacturer, unless: a) The Indian company has provided the foreign company with all information as the foreign company may reasonably request concerning the prospective manufacturer; b) The foreign company has provided its prior written consent to the appointment of the manufacturer; and c) The manufacturer has signed .....

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he Indian company will at its own expense, if so required by the foreign company, provide the foreign company with three samples of the licensed product. The foreign company will send the samples to the address (es) specified by the foreign company. Within thirty calendar days of receipt of the samples, the foreign company will notify the Indian company in writing of the foreign company s approval or disapproval of the licensed product and will mark its approval upon and will return to the India .....

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eign collaborator a lump sum of US $ 6.00 lakhs, which was later revised to US $ 5.00 lakhs. The appellants were also required to pay 5% of the wholesale value of the product sold as running royalty which was to be adjusted against the lump sum royalty payable. In the above circumstances, the original adjudicating authority examined the collaboration agreement and held that the lump sum royalty of US $ 6.00 lakhs needs to be added in terms of Rule 9 (i) (b) (iv) of the Customs Valuation Rules, 1 .....

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dor strictly in accordance with the quality specification of the foreign collaborator. He argued that the appellants were required to get footwear manufactured by these vendors in accordance with the prescribed quality specifications, with the trademark of FILA affixed on the footwear. The imported goods were of quality specifications, required by the foreign collaborator and were bearing the trade mark when the same were imported from the foreign vendor. Before placing orders to foreign manufac .....

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to the vendor abroad along with catalogue of the shoe. The foreign vendor thereafter manufactures shoe as per the specimen. The said shoes manufactured by the foreign vendor, thereafter is approved by the appellant. The approved samples of the footwear thereafter is sent to foreign collaborator. After receiving the approval of the foreign collaborator, the said shoe is manufactured by the foreign vendor. In this set of arrangements, the learned counsel argued that there is no supply of any desi .....

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-Del) and the decision of the Tribunal in the case of Totalfinaelf India Ltd. 2008 (22) E:T 581 (Tri-Mum) to assert that it is improper to add only one of the two royalty. 3. The learned AR relies on the impugned order. He argued that the appellants are supplying footwear samples to the vendor abroad and the vendor is required to copy the said footwear. He argued that in these circumstances, it is same as supplying the design. He argued that design need not be on paper and in two dimensions. A s .....

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the Customs Valuation Rules. 4. We have gone through the rival submissions. We find that the foreign collaborator is the owner of the brand named and of the technical details of the shoes imported by the appellant. The appellant had entered into an agreement with the foreign collaborator for manufacture of shoes as per the specification of the foreign collaborator in terms of the collaboration agreement. The foreign collaborator has supplied to the appellant all the technical information as def .....

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mine the shoe for the specifications. After the shoe is approved by the foreign collaborator, the appellants permit the vendor to manufacture and supply the same to the appellant. In these circumstances, it is obvious that all the specifications of the shoe are supplied by the appellant to the vendor in the shape of catalogue and real shoe approved by the appellant as well as the foreign collaborator. A design need not be two dimensional it can be three dimensional piece of the product which can .....

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