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TMI Blog2017 (11) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods), Rules, 2007 (hereinafter referred to as" the Valuation Rules, 2007) and accepted the declared invoice values as transaction value under Rule 3(3)(a) of the Valuation Rules, 2007. Other SVB authorities also decided the matters of different group companies of Akzo Nobel operating in India. Various group companies viz. M/s Akzo Nobel Coatings India Pvt. Ltd., Akzo Nobel Car Refinishes India Pvt. Ltd. and Akzo Nobel Chemicals (India) Ltd. got merged, pursuant to amalgamation held under Section 391 to 394 of the Indian Companies Act, 1956, duly approved by the Hon'ble High Court at Kolkata, Karnataka and Mumbai vide their orders dated 24.04.2012, 18.04.2012 and 11.05.2012 respectively. These companies were amalgamated with the business of the Appellant with effect from 01.04.2011 for joint operations in India. SVB-Delhi proceeded to renew the said order and also to incorporate activities undertaken by all above three mentioned entities post amalgamation. Appellant submitted various document to SVB. After analysis of information provided by the Appellant, SVB accepted the declared invoice values subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. CC v. Toyota Kirloskar Motor P Ltd. - 2007 (213) ELT 4 (SC); ii. Commissioner of Customs v. Ferodo India Pvt. Ltd. - 2008 (224) E.L.T. 23 (S.C.); iii. Commissioner of Customs, Mumbai v. BASF Strenics Pvt. Ltd. - 2006 (195) ELT 206; iv. ABB Ltd. v. CC, 2013 (288) ELT 296; viii. The Ld. Counsel further submitted that the lower authority has relied on the case of Matsushita Television and Audio (I) Ltd. Vs CC, 2007 (211) ELT 200 (SC) but the same is not applicable to the present case where suppliers and licensers are different and there is no evidence of indirect payments. 5. The Ld. DR justified the impugned order. DR vide his written submission dated 19.09.2017 submitted as follows: 5.1 Akzo Nobel NV and its group companies hold 73% of the share capital of the appellant. The appellant was paying royalty to the Foreign Suppliers in terms of the IP royalty agreement on account of trademarks of imported goods. 5.2 The related persons have been defined in Rule 2 (2) of the Customs Valuation Rules, 2007 which provides that persons shall be deemed to be "related" if they are officers of Directors of one another's business; they are legally recognized partners in busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated and dependent on the invoice sale value of the product sold by the importer (appellant). The I.P License Agreements also revealed that the foreign supplier which is related to the importer (appellant) is entitled to a certain percentage of ht royalty and such royalty includes the value of the imported goods. This royalty amount i.e. paid to the foreign supplier is over and above the invoice value for determining the amount of royalty to be paid to the foreign supplier. The cost of the imported goods is not deducted from the Net Sale Value (NSV) of the importer's goods when sold in India. Purchase price of the importer's goods have been included in the Net Sale Value (NSV) and are the basis for the calculation of royalty to be paid by the appellant to group companies abroad. It is therefore clear that the royalty that is being paid, is directly related to the imported goods has not been deducted from the royalty calculation method. 5.5 Royalty is being paid by the appellant importer on its Net Sale Value (NSV) of the goods sold in India and there is no provision to exclude the assessable value of the goods which are imported by the importer from their related foreign supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the imported goods as embedded in the value of goods sold in India, has to be included in the transaction value for determining the Customs duty payable thereon. 5.6 The undersigned has strongly relied upon CESTAT's co-ordinate Bench decision in the case of Commissioner of Customs, New Delhi Vs. Avaya Global Connect Ltd. reported as 2016 (337) E.L.T. 402 (Tri. - Del.) which is squarely applicable to the present case. Specific attention is requested to paragraphs 4, 5 and 6 of this decision that correctly expround the applicable law. Similarly, Revenue has also relied upon paragraph 11 of CESTAT's decision in the case of Avenue Supermarket Pvt. Ltd. reported as 2017TIOL-3128-CESTAT-DEL. to support its case. CESTAT's decision in the case of Universal Music India Pvt. Ltd. Vs. Commissioner reported as 2009 (235) E.L.T 829 (Tribunal) (paragraph 7) also supports the above proposition in favour of Revenue. 5.7 Similarly, the decision of the Hon'ble Supreme Court of India in the case of Commissioner of Custom Excise, New Delhi Vs. Living Media India Ltd. reported as 2011 (271) E.L.T. 3 (S.C.) (paragraphs 32 and 33) is also applicable to the facts of the present case. The Avaya Glob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading were imported from other related group companies and not from AKZO Noble International BV Netherlands to whoever royalties are paid. Hence, it is their claim that the royalty cannot be held to be paid as a condition of the sale of goods by the principal. But the facts remain that the appellant as well as the suppliers of raw materials and finished goods are both subsidiaries of the principal in Netherlands. The question of adding of royalty amount to the assessable value of the goods imported from related persons was considered by the Hon'ble Supreme Court in the case of Matsushita Television & Audio (I) Ltd. Vs CC (supra). Apex court also has occasion to consider the same issue again in the case of Ferodo India Pvt. Ltd. 8. From the impugned order we find that the show cause notice as well as impugned order has relied upon the judgment of the Hon'ble Supreme Court in Matsushita Television & Audio (I) Limited v/s Commissioner of Customs (supra) in which the Apex Court held as follows:- 7. The question which arises for consideration in this civil appeal is : whether royalty payment was connected with the imported components. Under Rule 9(1)(c) of the Valuation Rules, 1988 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, formula and information to the licensee. Under the agreement, the licensee was required to import/buy raw material and capital goods from the licensor. Under the agreement, the licensee was obliged to pay a licence fee along with royalty, based on the net sales value of licensed products sold, consumed or otherwise disposed of." The Apex Court further observed as follows: "18. Royalties and licence fees related to the imported goods is the cost which is incurred by the buyer in addition to the price which the buyer has to pay as consideration for the purchase of the imported goods. In other words, in addition to the price for the imported goods the buyer incurs costs on account of royalty and licence fee which the buyer pays to the foreign supplier for using information, patent, trade mark and know-how in the manufacture of the licensed product in India. Therefore, there are two concepts which operate simultaneously, namely, price for the imported goods and the royalties/licence fees which are also paid to the foreign supplier. Rule 9(1)(c) stipulates that payments made towards technical know-how must be a condition pre-requisite for the supply of imported goods by the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricing arrangement was not produced before the Department. In our view, the Consideration Clause in such circumstances is of relevance. As stated above, pricing arrangement and TAA are both to be seen by the Department. As stated above, in a given case, if the Consideration Clause indicates that the importer/buyer had adjusted the price of the imported goods in guise of enhanced royalty or if the Department finds that the buyer had misled the Department by such pricing adjustments then the adjudicating authority would be justified in adding the royalty/licence fees payment to the price of the imported goods. Therefore, it cannot be said that the Consideration Clause in TAA is not relevant. Ultimately, the test of close approximation of values require all circumstances to be taken into account. It is keeping in mind the Consideration Clause along with other surrounding circumstances that the Tribunal in the case of Matsushita Television (supra) had taken the view that royalty payment had to be added to the price of the imported goods." 10. What emerges upon careful consideration of the decisions of the Apex Court in Ferodo as well as Matsushita TV cases (supra) is that before addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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