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TMI Blog2013 (9) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... ny incorporated in India and having registered office at 30, Forjett Street, Mumbai, (J&J India, in short) is engaged in the manufacture and sale of drugs and pharmaceuticals in India. They are a subsidiary of Johnson & Johnson, USA (J&J USA in short). The appellant entered into a technical know-how agreement dated 21-11-1994 with their principal in USA. As per the said agreement, the principal shall make available to the Indian subsidiary technological assistance and service and the benefits of its continuing research and development efforts and in particular, shall advise and assist the Indian subsidiary,- (1) selection and introduction of new products relating to drugs and pharmaceuticals or in any other core industrial sector of the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on identical terms and conditions for the Over The Counter preparations (OTC) of the principal to be manufactured and sold in India by J&J India. As per the quality control clause in the said agreement, J&J India will use only active ingredients and excipients which are produced by them in accordance with Licensor's specifications or which are purchased from vendors approved in advance by the licensor. 2.1 The appellant imported raw materials and capital goods for their manufacturing operations in India from the associates and subsidiaries of the parent company. They also submitted competitive quotations which revealed that the prices are based on commercial considerations and are comparable and the invoice values were not influenced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et sales" of a product shall mean net ex-factory sales price of the products exclusive of excise duties, minus the cost of standard bought out components and the landed cost of imported components irrespective of the source of procurement, including ocean freight, insurance premium, customs duties, etc. It is therefore evident that "Net Sales" and "Net ex-factory sale" price are different prices. Payment towards technical assistance fee and royalties payments are not "Net Sale" and therefore, it is necessary to examine in detail how the value for calculation of above fees has been arrived at by the respondents. There is no mention in the finding of the lower authority that he has examined this aspect. The impugned order is therefore, not le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; He relies on the decisions of the Hon'ble Apex Court in the case of Ferodo India Ltd. [2008 (224) E.L.T. 23 (S.C.)], Toyota Kirloskar Motor P. Ltd. [2007 (213) E.L.T. 4 (S.C.)], Mitsuba Sical India Ltd. [2005 (192) E.L.T. 159 (Tri.-Chennai)] and Bridgestone India Ltd. [2012-TIOL-166-CESTAT (Mum)] in support of his above contentions. Accordingly he pleads for allowing the appeal. 4. The ld. Additional Commissioner (AR) strongly opposed the contentions of the appellant. He submits that the appellants are not free to procure the raw materials from anywhere. The raw materials can be procured only from the licensor of the know-how or from the vendors approved in advance by the licensor. This shows that the payment made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e audit, periodic visits to the plants, innovating and updating quality assurance procedures, sterilization procedures, quality improvement package from the in-house institute of quality management, waste water management, air pollution management, solid and liquid waste management, etc. Further the principal also undertakes to train at its laboratories, plants and R&D centres in USA or elsewhere, employees of J&J India. In other words, the technical know-how is for the post- importation activity to be undertaken by the appellant in India. There is no condition stipulated in the said agreement that the appellant should procure the raw materials/components from the licensor. He is free to produce the same in India in accordance with the lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ferodo India Pvt. Ltd. case is more relevant to the facts on hand. In the said case, the Hon'ble Apex Court held that in the absence of any evidence showing existence of a price adjustment between the cost incurred by the buyer on account of royalty/licensee fees by reducing price of imported items, it can- not be that such royalty payments are includible in the assessable value of the imported goods under Rule 9(1)(c)/10(1)(c) of the Customs Valuations Rules, 1988/2007. In the present case, from the records it is seen that the appellant does not import any goods from the licensor/supplier of technical know-how at all. Further the assessing authority has recorded a clear finding that the appellant had submitted competitive quotations w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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