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TMI Blog2014 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... d into Licence and Technology agreement dated 28.05.1999 as amended on 01.06.2000 with SGV, France. d. The appellant imported certain capital equipments (i.e. capital goods) from their related group company. The matter was taken up by the Special Valuation Branch attached to the Customs House. e. The adjudicating authority by adjudication order dated 14.10.2003, held that royalty of 3% on internal sales and exports, net of taxes and technical knowhow fees of US$ 2 million paid to M/s. SGV, France, would be added to the value of capital goods imported only from M/s. SGV France, in terms of Rule 9(1)(C) of Customs Valuation Rules, 1988, f. Aggrieved by the adjudication order, the appellant preferred an appeal. By the impugned order, the Commissioner (Appeals) rejected the appeal and upheld the adjudication order g. The Commissioner (Appeals) observed that the appellant M/s. SGGIL is required to pay the Technical know-how fee and royalty to M/s. SGV, France for supply of 'Basic Float Process Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of Licence and Technology Agreement entered by the appellant with Saint Gobain Vitrage (SGV), France, dated 28.05.1999, and amendment to the said agreement dated 01.06.2000. The preamble of the agreement reads as under:- Whereas SGV has built, owns and operates plants throughout the world which manufactures float glass through the float process (the 'Basic Float Process Technology') and has also developed and possesses certain new confidential technology and knowledge relating to the Float Process which are of the highest value as they increase productivity and reduce costs (the 'Additional Technology') Whereas SGGI is desirous of obtaining access to, and the right to use, the Basic Float Process Technology as well as the Additional Technology in its plant in India and SGV is prepared to grant such access to SGGI, subject to the following terms and conditions. ARTICLE 1 of the agreement defines Additional Technology and Basic Float Process Technology, which reads as under:- Additional Technology shall mean any and all know-how, techniques and process, relating to : &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wings. In consideration for the grant of the above Basic Float Process Technology and on the Additional Technology, the appellant shall pay to their collaborator a lump sum of two million US $ (the 'License Amount') and Royalty at the rate of 3% (Three percent) both on internal sales and export sales, net of taxes for a period of 7 (Seven) years. On a plain reading of the said agreement, we are of the considered view that SGV developed technology and knowledge relating to Float Process, which they will transfer to the appellant on a consideration of payment of license fee and royalty on the goods manufactured and cleared for domestic sales as well as for export by the appellants. Nowhere in the said agreement, it is indicated that the said licence fee and royalty is also on the importation of capital goods from SGV. 7. Customs Valuation Rules, 1988 provides methods for arriving valuation on the imported goods. Since, the appellant has imported the impugned capital goods from their related group company; the lower authorities have taken the recourse to Rule 9 (1) (C) of the said rules. The relevant extracts of Rule 9 (1) (c) of CVR, 88 is as under:- & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards royalty which goes under 'ordinary assistance' relevant article of the agreement stipulates that upon request the foreign supplier shall furnish to the importer such technical know-how, information, data relating to the licensed products. The licensed products are the automobile to be manufactured in India under the agreement as well as specific parts. It is to be seen that the technical know-how, information etc. to be furnished are for studying the feasibility of Local Parts manufacturing, for manufacturing of local parts, for production preparation of licensed products etc. What is important that none of assistance is in relation to the goods under import. 10. For the purpose of the proper appreciation of the case, the relevant portion, in the case of Toyota Kirloskar Motors Pvt. Ltd. (supra) are reproduced below:- 31. The transactional value must be relatable to import of goods which a fortiori would mean that the amounts must be payable as a condition of import. A distinction, therefore, clearly exists between an amount payable as a condition of import and an amount payable in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery or equipment; (b) The cost of transport after importation; (c) Duties and taxes in India. The price actually paid or payable refers to the price for the imported goods. Thus the flow of dividends or other payments from the buyer to the seller that do not relate to the imported goods are not part of the customs value. 35. The said rule clearly states that the charges or costs envisaged there under were not to be included in the value of the imported goods subject to satisfying the requirement of the proviso that charges were distinguishable from the price actually paid or payable for the imported goods. 36. Interpretation of the said rule came up for consideration before a Bench of this Court in Tata Iron & Steel Co. Ltd. v. Commissioner of Central Excise & Customs, Bhubaneswar, Orissa [(2000) 3 SCC 472], wherein it was held : ...This part of the Interpretative Note cannot be so read as to mean that those charges which are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, that, ordinarily, the technical know-how of the machine can take in the assembly thereof, that the CKD packs and spares were supplied to the respondents by the collaborator not at a concessional price but at the price at which they were sold to others, 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 long before the supply of the CKD packs and spares, the royalty due to the collaborators was paid, 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; in other words, there existed no nexus between the lump sum payment under the agreement for the technical know-how and the determination of the price for supply of CKD packs or spares. It is by highlighting the above aspects that the learned Single Judge and the Division Bench concluded that the contention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 9(1) (C) is not applicable in the appellant's case as the said licence fee and royalty is nothing to do with the imported capital goods nor it is a condition for sale of imported capital goods. 12. Now, we discuss the decision of the Hon'ble Supreme Court relied upon by the Ld. AR, in the case of Matsushita Television & Audio (I) Ltd. Vs. CC (supra). In that case, the issue involved is whether the royalty payment was connected with the imported components of colour TV and if no such royalty payment would be includible in the assessable value of such components. The Hon'ble Supreme Court dismissed the appeal and upheld the order of the Tribunal. On perusal of the agreement, the Tribunal observed that the Clause 7.02 was stipulated that not only the supplier would assist the appellant in selling the components but the supplier would also assist the appellants in approving the components which were brought-out items. Under the Agreement, samples of brought-out items were to be sent by the appellants to the supplier for inspection and quality certification. Under the agreement, the brought-out items (components) could be used in the T.V. only if it was approved by the supplier. Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find no merit in this civil appeal and the same accordingly stands dismissed with no order as to costs. It is seen from the above that the Apex Court has held that royalty is includible in the assessable value of the imported capital goods, as the said agreement clearly includes the cost of imported goods. In the present case, there is no such clause mentioned in the agreement. Further, there is no indication in the agreement that SGV, France, will assist the appellant in respect of the imported capital goods or otherwise in any manner. In other words, SGV, France would assist the appellant in respect of manufacturing process of Float Glass. Therefore, the decision relied upon by the Ld. AR is distinguishable and not applicable to the facts of the present case. 14. In view of the above discussions and respectfully following the decision of the Apex Court in the case of Toyota Kirloskar Motor Pvt. Ltd. (supra), we hold that the licence fee and royalty paid by the appellants to their collaborator M/s. SGV, France, would not be added to the value of the imported capital goods. Accordingly, we set aside the impugned orders and allow the appeal filed by the appellant with consequenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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