TMI Blog2008 (10) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and K.K. Agarwal, Member (T) Shri Mayur Shroff, Advocate, for the Appellant. Shri S.S. Katiyar, SDR, for the Respondent. [Order per : K.K. Agarwal, Member (T)]. - The appellants in this case are engaged in the business of marketing of audio cassettes and CD imported inter alia from M/s. Universal Manufacturing and Logistics, Germany and associated companies. Their company is a 100% subsidiary of Universal Music Holding, Netherlands. As per the agreement entered into with the foreign collaborator the Indian company was required to pay royalty at the rate of 15% at the retail sale price of the goods to the foreign supplier. Since the importer was a 100% subsidiary company, it was considered as a related person and the royalty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not due or payable at the time of imports. It is payable in their capacity as seller and not as importers. Further, it is not a condition of sale for import of the goods as liability arises only if the imported goods are sold as the contingency of sale of compact discs in India and not occurred at the time of imports. Payment of royalty cannot be considered as a condition of sale and is accordingly not addable. Further, the royalty was payable on the basis of the quantity of CD sold in India and not on the basis of quantity imported. Thus, royalty payment forms a component of value when the subject CDs are sold in India and not a component of assessable value at the time of import of aforesaid goods. He then took us to the relevant Para 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x as may be included in the retail price or applicable in connection with the purchase of Records. Licensee shall notify Licensor in writing of any changes in the method of establishing the Retail Price in the Territory. D. The royalty shall be payable to Licensor in respect of one hundred percent (100%) of net sales. For the purpose of this Agreement, the term "net sales" shall mean in respect of each Record of identical catalogue number all Record(s) shipped for distribution (including Record(s) reshipped after return less Record(s) returned PROVIDE THAT the number of total Record(s) returned shall not in any event exceed ten percent (10%) of each specific record item shipped.) E. ......... "Clause 7 - COPYRIGHT OF COMPOSITIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of each specific record. This makes it clear that royalty was required to be paid only in respect of sale and not otherwise. 4. He further submitted that Rule 9(1)(c) provides that in determining the transaction value, there shall be added to the price actually paid or payable for the imported goods "royalties and licence fees related to 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 royalty and fees are not included in the price actually paid or payable." He then invited attention to interpretation note to Rule 9(1)(c) which reads as under :- 9(1)(c)-1)................... (c) Payment made by the buyer for the right to distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras High Court has in this case noted the interpretative rule to Rule 9(1)(c) referred to by the Ld. Advocate. Thus the Tribunal's decisions cited by the appellant are not applicable even though in one of the case the decision of Madras High Court has been noted. In the case of Sony BMG, it appears that the agreement did not restrict the appellant to produce CD from other source and therefore they related to CD as such and not pre-recorded CDs. Attenlion was also invited to the Supreme Court decision in the case of Matsushita Television and Audio (I) Ltd. - 2007 (211) E.L.T. 200 (S.C.) wherein a royalty at the rate of 3% was payable on the sales turnover of the final product which included the cost of the imported component and it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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