TMI Blog2001 (8) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... al assistance rendered by MEI; that they were also to pay a lumpsum amount of U.S. $ 2 lakhs to MEI for transfer of technical know-how; that under the agreement MEI would assist them by selling the production equipment at commercial prices; that the Appellants had also entered into a Trade Mark Agreement with MEI for use of the 'Panasonic' Trade mark for a period of 5 years from the date of commercial production. The learned Advocate, further, mentioned that they imported components of colour receivers from M/s. B.M. Nagano Co. who had procured them from different manufacturers including from M/s. Asia Matsushita Electric Pvt. Ltd., Singapore (AME) which is a 100% owned subsidiary of MEI; that the Assistant Commissioner, under Adjudication Order No. 6/99, dated 20-5-1999 ordered loading of the value of the components of colour T.V. receivers imported in 1996-97 and 1997-98 by 2% and 1.58% respectively in terms of Rule 4(2) read with Rule 9(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and Section 14(1) of the Customs Act; that the Commissioner (Appeals), under the impugned Order No. 683/2000 dated 15-11-2000 confirmed the Adjudication Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real state of affairs." The Court held that "as agreed to by the Respondents, the option was entirely with the respondents to order the parts as per their requirements; that there was no obligation on the respondents to purchase CKD Packs at all ......that there is no material to show that the supply of the CKD Packs or spares weighed with the parties in fixing the payments under the collaboration agreement but, on the other hand, the Collaboration agreement for the technical know how and the supply of CKD Packs and spares are independent commercial transactions." He mentioned that in present matter also the Appellants had also the option to purchase production equipments and components from sources other than MEI. 4. The learned Advocate, further, mentioned that the Adjudicating Authority has observed that as lump-sum payment towards know-how is not related to the sale of components, Rule 9(1)(c) of the Valuation Rules would not be applicable; that however, as regards the payment of royalty on account of the technical assistance, the Assistant Commissioner has held that since the value of the imported components has a direct bearing on the total amount of royalty to be paid, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to perform the patented process, since its payment is not a condition of the sale of the machine. In another case where importer makes cosmetics under Trademark of foreign Co., the W.T.O. has expressed the view that the royalty is payable irrespective of whether importer uses ingredients supplied by the Trademark owner or not; it is, therefore, not a condition of sale of the goods. 6. Countering the arguments, Shri P.K. Jain, learned SDR, submitted that Clause 7.02 of the Agreement provides that MEI will assist SIL by selling the components to SIL; that even in respect of the components purchased from other sources SIL, has to send reasonable quantities of samples of such components to MEI for inspection and approval; that Clause 7.03 of the Agreement makes it clear that the Appellants have to purchase the Components from MEI; that the Appellants are paying a running royalty @ 3% on the Net ex-factory sale price of the colour receivers manufactured and sold by the Appellants; that the 'Net Ex-factory Sale Price' includes, as per Clause 1.03, the coat of imported consignment which goes to show that royalty is also payable on the value of the components; that it is evident from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale of the components. According to the Appellants whether the components are imported from MEI or from any other manufacturer, royalty would have to be paid on the finished products. In support of their contention they have relied upon a number of decisions in which it was held that the amount of royalty is not to be includible in the assessable value if it does not have to do anything with the supply of components. On the other hand Revenue has emphasised that the payment of royalty towards Technical Assistance is related to components which is evident from Clause 7.02 of the Agreement which reads as under : - "7.02 Components: A. In addition to the technical assistance herein contained, MEI will assist SIL as much as practically possible in manufacturing the products by selling, at the reasonable request of SIL, the components to SIL. B. SIL may, if it so desires, use in manufacturing the products certain components available from sources other than MEI, if SIL first sends reasonable quantities of such components to MEI for inspection and if then MEI approves in writing the quality and the specifications of such Components." 9. We find substantial force in the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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