TMI Blog2005 (7) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated in the grounds of appeal that in effect the royalties are being paid on manufacturing cost plus profit plus the value of raw materials. Just because a particular formula has been designed to calculate the royalty amount which also includes the raw material cost, it cannot be said that the royalty payment is related to the imported goods. In fact, the royalty is payable on the Net Selling Price of all Agreement Products under the agreement and such products have been defined to mean polystyrene polymers manufactured in whole or in part according to existing technology or improvement. Such payment of royalty is not therefore restricted to polystyrene polymers manufactured using impugned goods imported from the related suppliers only. We find that the impugned agreement provides for payment of running royalty under the know-how agreement and relates to goods manufactured and sold indigenously. Such payment of royalty to BASF, Germany is for using BASF technology and has also been approved by the R.B.I. Thus, we are of the view that the amount of royalty in question cannot be added to the declared value under the said sub-rule (c) either. Revenue's contention seeking addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d percentages in different year. I find the license agreements and supplies of raw materials from related supplier at Singapore or Sabic Marketing or the Licensor are not related or conditions of sale. As per the agreements royalty of varied percentages shall be paid for all Agreement products sold or used captivity by appellants. Agreement products used by appellant shall bear royalties on an assumed net sales value. From provisions of agreement it is seen that the royalty payment is not related to manufacture of imported raw materials, but concerned with technology for production of finished goods in India. So royalty paid is not includible in value of raw materials. In the second case relating to import of Ethyl Benzene, the appellants have demonstrated that their invoice price is higher compared to ruling prices per ICIS Price Report , which has not been disputed by adjudicating authority. In fact price has been ordered to be accepted under Rule 4(3). Regarding payment of royalty, for the reasons given in earlier paras in view of provisions of the agreement, the same is not includible in the invoice price. 4. The grounds of appeal advanced by Revenue are as follows :- (1) Altho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the royalty paid indirectly on the cost of the raw materials has to be added to the invoice value. The Commissioner's (Appeal) observation that there is no condition of sale is untenable. The question to be asked is whether the Importer has a right to refuse payment of royalty on the cost of raw materials imported from the Supplier. Whether the Importer can insist on the deduction of the cost of raw materials from the net selling price on the grounds that all other input costs have been paid from the royalty payable. The answer is obviously no. The technology has been granted to the Importer on the condition that they pay royalty of 1% on the profits/manufacturing expenses made from the sale of goods and also on the value of the raw materials used. There definitely exists a condition of sale as the importer is bound to pay royalty of 1% on the value of imported raw materials used. (3) The Hon'ble Tribunal had examined and passed judgment in the case of Matsushita Television and Audio India Ltd. - 2001 (136) E.L.T. 1093 (Tri.-Del.). The facts and circumstances pertaining to that case is squarely applicable to this case. In the above mentioned case too, Royalty was paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority has determined the respondents and suppliers to be related to each other. But the price has not been rejected on the ground of relationship. It is also not the department's case that the relationship has influenced the price. On the contrary, as noted by the lower authorities, the prices are comparable between imports from related and unrelated suppliers. As such, this is not a case of discarding the transaction value method and applying another method of valuation. The issue before us is whether any adjustments are required to be made to the declared price in terms of Rule 9(1)(c) and Rule 9(1)(d) of the Customs Valuation Rules, 1988 by making additions for the royalty being paid by the respondents to their related suppliers. 7. The provision of the said Rule 9(1)(c) (d) are as follows :- '9. Cost and services. - (1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, - (a) x x x (b) x x x (c) royalties and licence fees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculate the royalty amount which also includes the raw material cost, it cannot be said that the royalty payment is related to the imported goods. In fact, the royalty is payable on the Net Selling Price of all Agreement Products under the agreement and such products have been defined to mean polystyrene polymers manufactured in whole or in part according to existing technology or improvement. Such payment of royalty is not therefore restricted to polystyrene polymers manufactured using impugned goods imported from the related suppliers only. We find that the impugned agreement provides for payment of running royalty under the know-how agreement and relates to goods manufactured and sold indigenously. Such payment of royalty to BASF, Germany is for using BASF technology and has also been approved by the R.B.I. In view of the foregoing, we are of the view that the amount of royalty in question cannot be added to the declared value under the said sub-rule (c) either. 10. Revenue's contention seeking addition of royalty under Rule 9(1)(c) and Rule 9(1)(d) fails in view of our findings above. As such, we dismiss the appeals filed by the department. The cross objection filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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