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TMI Blog2012 (11) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... pays royalty to the foreign collaborators towards transfer of Technical Know-How. The matter was examined by the Special Valuation Branch of the Mumbai Custom House and in respect of 13 agreements, the Assistant Commissioner held that the royalty is not includable in the value of the goods imported by the appellant from the foreign collaborators inasmuch as the value on which royalty is paid does not include the price of the imported components. However, in respect of 10 agreements, the said Assistant Commissioner held that the royalty paid is relatable to the goods imported by the appellant from the collaborator or related/un-related supplier inasmuch as the royalty payment is the condition for sale of the imported goods. Therefore, he o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the judgment of this Tribunal in the case of BASF Strenics Pvt. Ltd. reported in 2006 (195) ELT 206 (Tri-Mum), wherein it was held that Rule 9(1)(c) and Rule 9(1)(d) cannot have any application where the goods are used by the importer for further manufacture and such manufactured goods are sold subsequently. He also relied on the judgment of the Apex Court in the case of Ferodo India Pvt. Ltd. 2008 (224) ELT 23 (SC), wherein it was held that if the licence fee and royalty payment is not related to the imported goods or the material in addition to the declared value for the purpose of assessment of the goods is not required to include under Rule 9(1) of the Customs Valuation Rules, 1988. He also relied on the judgment of this Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (211) ELT 200 (SC), wherein it was held that when royalty payment was made not only on the domestic element of net sale price of colour T.V. but also on the cost of imported components then it become a condition of sale of its goods and such royalty payment is includable in the assessable value under Rule 9(1)(c) of the Customs Valuation Rules, 1988. In the light of these submissions, he argues that the orders of the lower authorities are correct in law and has to be sustained. 5. We are of the view that appeal itself can be disposed of at this stage, as the issue lies in a narrow compass. Therefore, after dispensing with the requirement of pre-deposit of dues adjudged, we take up the appeal itself for consideration. 6. We have car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty payment and the import of components. 6.1 In respect of only 3 agreements, we find that there is a clause relating to purchases which has been reproduced above. As per the said clause, there is no condition that the appellant should purchase the components from the collaborator. The said agreement merely says that the licensee should give preference when purchasing any parts or components of the Contract Products not manufactured by the licensee, if the same meets all the specification required by the licensee and at competitive price and conditions. In other words, the clause does not specifically say that licensee should necessarily purchase the components from the licensor at all. In the absence of such a clause in these agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. He also incurs the cost of technical know-how. Therefore, the Department in every case is not only required to look at TAA, it is also required to look at the pricing arrangement/agreement between the buyer and his foreign collaborator. For example if on examination of the pricing arrangement in juxtaposition with the TAA, the Department finds that the importer/buyer has misled the Department by adjusting the price of the imported item in guise of increased royalty/licence fees then the adjudicating authority would be right in including the cost of royalty/licence fees payment in the price of the imported goods. In such cases the principle of attribution of royalty/licence fees to the price of imported goods would apply. This is becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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