TMI Blog2008 (2) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Agarwal, Member (T) Shri G.B. Yadav, Advocate, for the appellant. Shri S.G. Dewalwar, SDR, for the respondent. [Order Per: K. K. Agarwal, Member (Technical)] - The appellant is a joint venture company set up with 51% equity shares by their collaborator and was engaged in the manufacture of high quality industrial and automotive lubricants with technical know-how and licence imparted by the foreign collaborator. In consideration for the transfer of technical know-how, the appellant was to pay a lumpsum amount of US $ 1 lakh and a royalty of 5% for a period of 8 years to the collaborator. The royalty was to be calculated on net ex-works selling price. They procured the raw material i.e. base oils and concentrate from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. He therefore held that US $ 1 lakh paid in consideration for transfer of technical know-how would be addable to the price of imported goods in terms of Rule 9(1)(c) of the Customs Valuation Rules, 1988 on a pro-rata basis. However, as regards payment of royalty he held that since royalty is to be paid on sale of finished goods, which is a post importation activity the same cannot have any bearing on the price of the imported goods and therefore the same cannot be added to the price of the imported goods for the purpose of determining the value under Section 14. It is against this order that the appellant is before us in appeal. 2. The learned advocate for the appellant took us to the clause of the agreement entered into by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other source provided it met the specifications laid down by them. In view of this the supply of technical know-how and the payment of royalty cannot be considered as a condition of sale and was related to the manufacture of finished products only. As per clause 9.1 of the agreement the appellants were required to pay in consideration of the licence granted to them a lumpsum of US $ 1 lakh and a royalty of the 5% of the net sales made by the appellant from the date of agreement for a period of 8 years with a condition that the total payment for lumpsum and royalty should be equal to but shall not exceed 8% of the net sales for a period ending 8 years from the effective date. The lumpsum was required to be paid in two instalments, the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the submissions. After perusing the agreement we find that the agreement relates to supply of technical know-how and licence to manufacture finished goods only and has nothing to do with the sale of raw materials. The two raw materials mentioned in the agreement are concentrates and base oils and the agreement clearly shows that the appellant are free to purchase the same from source other than their collaborator provided it meets the specifications laid down by them for the manufacture of the final products. There is no condition in the sale agreement that the raw materials will not be sold unless and until the technical know-how is procured from them and royalty on the finished product is also paid. The lower authority ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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