TMI Blog2022 (5) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... fee related to imported goods which the buyer is required to pay directly or indirectly as a condition of sale of the goods has to be included, to the extent that such royalty and fees are not included in the price payable or paid has to be added. It is also undisputed that the ex-factory price of the goods did not include the miscellaneous charges which were indicated in the invoices and that they need to be included. The only dispute is factual - whether they were included or not in the Bill of Entry. Learned Counsel has demonstrated before us that they were indeed included in the values in the Bill of Entry. However, these charges were included under a different column and the figure 0 was indicated against the column Miscellaneous Charges . The net effect of the valuation insofar as these charges is concerned is that the miscellaneous charges were included by the appellant in the Bill of Entry. Therefore, there are no reason or justification to add them again to the assessable value. Includibility of royalty/license fee paid by the appellant to its holding company as a percentage of its total sales turnover in the assessable value - HELD THAT:- As per Rule 10(1)(c ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and decided by the Deputy Commissioner are as follows: (i) Whether the buyer and seller are related persons in terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 [ Valuation Rules ]; (ii) Whether the transaction between the buyer and seller are influenced by such relationship; and (iii) Whether any addition is required to be made to the assessable value of the imported goods under Rule 10 of the Valuation Rules. 3. On the first issue, the adjudicating authority found that the importer (appellant herein) and the overseas supplier were related persons. On the second issue, the adjudicating authority decided that there is no evidence on record that can establish that the relationship has influenced the transaction value and, therefore, the transaction value needs to be accepted in terms of Rule 3(3)(a) of the Valuation Rules. On the third question as to whether any additions have to be made under Rule 10 of the Valuation Rules, the adjudicating held that the licence fee paid by the appellant to M/s Kruger Asia Holding Pte. Ltd., Singapore, its holding company, under the technical aid agreement, needs to be added to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been imposed in the agreement restricting import of goods from any suppliers. It is purely an independent activity and has no relationship to the raw material by the appellant; (ii) It is undisputed that there is no influence of the relationship between the appellant and exporter on the transaction value; (iii) SVB Mumbai had, under similar set of circumstances, accepted the pricing of the identical goods in case of another subsidiary company by order-in-original No. 411/AC/SVB/BRA/2007-08 dated 28.09.2007; (iv) The goods were imported by another associate enterprise and not from the holding company to which the license fee was being paid; (v) The terms of license agreement do not require import of goods from either the overseas supplier who supplied the goods or from any other supplier in the world; (vi) The appellant has also been procuring raw materials from other suppliers outside India and also from some local vendors; (vii) The SVB Mumbai has evaluated the identical transaction of another India associated enterprises of the appellant and has accepted the declared price of the identical goods; and (viii) The appellant has already included the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case would mean the price actually paid or payable for the goods when sold for export to India. The amount payable to the supplier was US $ 4,084,475 which was correctly taken as assessable value. (vi) Learned Departmental Representative also placed reliance on the judgment of the Supreme Court in Matsushita Television Audio (I) Ltd. Vs. Commissioner of Customs [ 2007 (211) ELT 200 (SC) ]; and (vii) He also placed reliance on Commissioner of Customs Vs. Avaya Global Connect Ltd. [ 2016 (337) ELT 402 (Tri.-Del.) ], paragraphs 5 and 6 of which are reproduced below: 5 . We have considered the contentions of both sides and have perused the Transfer of Technology Agreement and the Supply Agreement entered into by the appellant with Lucent Technologies. We find that the Supply Agreement duly states that it is consistent with the Transfer of Technology Agreement. The facts which have been recorded by the primary adjudicating authority in para 19 of its order are reproduced below for the sake of convenience. 19 ........Initially components for making cards were imported by the importers from the Foreign suppliers and these components were used for making cards in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But in the present case, Royalty payments on cards continued on the same basis when the cards began to be imported instead of being manufactured. In the case of J.K. Corporation Ltd. (supra) the ratio laid down by Supreme Court was that any amount paid for post-importation service or activity would not come within the purview of determination of assessable value of the imported goods. In the present case royalty is not paid for post-importation service or activity; only the determination of royalty was done based upon the number of ports activated. In the case of Toyota Kirloskar Motor Pvt. Ltd. (supra), the Supreme Court laid down similar ratio, i.e., that the transaction value must be relatable to import of goods meaning thereof that the amounts must be payable as a condition of sale and that there clearly exists a distinction between amount payable as a condition of import and payable in respect of the matters governing the manufacturing activities . In the case of Tata Yutaka Autocomp Ltd. (supra) the licence fee was to be paid on all products manufactured. In the present case, as has been stated in para 19 (quoted earlier) of primary adjudication order, the royalty payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered to be condition of sale. As per Rule 9(1)(c) of the said Rules - Royalty and Licence Fee related to the imported goods that the buyer is required to pay, directly or indirectly as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable is to be added to the assessable value. Thus as per the analysis above, the royalty paid by the appellant is includible in the assessable value. Once it is held that royalty payment is a condition of sale, it is immaterial how the royalty payable is computed. In the case of Living Media (I) Ltd. (supra), the Apex Court observed as under : 32. . duty will necessarily have to be charged on the value of the final product. As per Rule 9, in determining the transaction value there has to be added to the price actually paid or payable for the imported goods, royalties and the license fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of sale of goods. Therefore, when pre-recorded music cassette is imported as against the blank cassette, definitely its value goes up in the market which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1988, are satisfied. The ratios of the judgments of the Supreme Court in the case of Living Media (I) Ltd. and Matsushita Television Audio (I) Ltd. v. C.C. (supra) are thus also supportive of the above analysis. 9. The Civil Appeal against this order of the Tribunal filed by the assessee was dismissed by the Supreme Court in AGC Networks Ltd. Vs. Commissioner [ 2017 (349) ELT A 158(SC) ]. 10. He also relied on Atul Kaushik Vs. Commissioner of Customs (Export), New Delhi [ 2015 (330) ELT 417 (Tri.-Del.) ] which was affirmed by the Supreme Court [ 2016 (339) ELT A136 (SC) ]. 11. He also placed reliance on Giorgio Armani India (P) Ltd. Vs. Commissioner of Customs, New Delhi [ 2018 (362) ELT 333 (Tri.-Del.) ] affirmed by Supreme Court [ 2019 (365) ELT A110 (SC) ]. 12. Learned Departmental Representative submits that merely because the license agreement was not with the overseas supplier but with the parent holding company of both the appellant and the supplier should make no difference because the license fee paid either directly or indirectly is liable to be included in terms of Rule 9 (1)(c) of the Valuation Rules. On the question whether license fee can be at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e figure 0 was indicated against the column Miscellaneous Charges . The net effect of the valuation insofar as these charges is concerned is that the miscellaneous charges were included by the appellant in the Bill of Entry. Therefore, we find no reason or justification to add them again to the assessable value. 17. The next question is includibility of royalty/license fee paid by the appellant to its holding company as a percentage of its total sales turnover in the assessable value. Learned Departmental Representative relies on the judgment of the Supreme Court in Matsushita Television Audio (I) Ltd. in which it was held that the royalty paid by the appellant as a percentage of the net ex-factory sale price of the colour television is includible in the assessable value of the components which were imported and used in the manufacture of the television. Paragraphs 6, 7 and 8 of this judgment are reproduced below: 6 . On reading the above agreement, the following features emerge. Under Clause 1.03 the term Net-factory sale price has been defined to mean the sale price billed by the appellants for its products to its customers in normal arm s length transaction exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable at the rate of 3% of the net ex-factory sale price of the colour T.V. exclusive of taxes, freight and insurance but including the cost of imported components. In other words, the royalty payment was to be computed not only on the domestic element of the net sale price of the colour T.V. but also on the cost of imported components. A bare reading of the agreement shows that payment under the said agreement related not only to the production of the goods in India but also to imports. In some of the decisions cited on behalf of the assessee, we find that the net ex-factory sale price of the finished products expressly excluded the cost of imported components. On the other hand, in the present case, the cost of imported components was expressly included in the net ex-factory sale price of the colour T.V. Further, when payment to MEI was at the rate of 3% of the sales turn over of the final product, including cost of imported component, 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. 8. For the above reasons, we find no merit in this civil appeal and the same accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licensee in the methods of working the processes relating to or in respect of or for the manufacture of the goods and to provide total management. The restrictions in the agreement are with respect to import or export of final products by the appellant but not with respect to imports. It is also mandated that the goods were to be manufactured strictly in accordance with the specifications provided by technology provider. A license fee @ 5% had to be paid on the total net turnover of the goods. We have gone through the agreement and do not find anything in it that it also provides import of the components. Therefore, the goods were not imported under the agreement and any royalty under the agreement cannot be related to it. Further, there is no condition that the importer has to obtain the approval of the technology provider either for import or for procuring components domestically. Therefore, the royalty paid by the appellant @ 5% on the final products under the technical aid agreement cannot be said to be a condition for sale and added to the assessable value of the imported goods. It is true that the royalty is paid is as percentage of the net turnover of goods manufactured, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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