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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 ..... 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 - 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 - Following decision of Toyota Kirloskar Motor Pvt. Ltd. [2007 (5) TMI 20 - SUPREME COURT OF INDIA] - Decided in favour assessee. - C/147/2005 - FINAL ORDER No. 40426 / 2014 - Dated:- 28-7-2014 - SHRI P.K. DAS AND SHRI R. PERIASAMI, JJ. For the Appellant : Shri S. Murugappan, Adv., For the Respondent Ms. Indira Sisupal, AC (AR), JUDGMENT Per: R. Periasami; This is an appeal filed by the appellants against the Order-in-Appeal No. C.Cus.438/2004 dated 30.06.2004, passed by the Commissioner (Appeals), wherein the order of the Deputy Commissioner of Customs (Special Valuation Branch) was upheld. 2. The brief facts of the case for consideration are as under:- a. The appellant is a manufacturer of Float Glass and Mirror at their factory situated at Sriperumpudur, Kanchipuram. b. Saint Gobain Glass, Deustchland GmbH, is a ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. CC, Mumbai Vs. Max Atotech Ltd. 2014 (301) ELT 531 (Tri.-Mum.) 4. Tata Yutaka Autocomp Ltd. Vs. CC (imp.), Mumbai 2013 (294) ELT 467 (Tri.- Mum.) He submits that the Hon ble Supreme Court in the case of Toyota Kirloskar Motor Pvt. Ltd. (supra), dealt the identical issue and held that the royalty and the technical know-how fee are not includible in assessable value of imported goods, as the same are not related to the sale of imported capital goods. 4. On the other hand, the Ld. AR for Revenue reiterated the findings of the Commissioner (Appeals). She relied on the decision of the Hon ble Supreme Court in the case of Matsushita Television Audio (I) Ltd. Vs. CC - 2007 (211) ELT 200 (S.C), wherein the Apex Court held that royalty payment is includible in the assessable value of the imported capital goods. The Commissioner (Appeals) has rightly upheld the adjudication order. 5. We have carefully gone through the case records and considered the submissions of both the sides. We have perused the copies of Licence and Technology Agreement entered by the appellant with Saint Gobain Vitrage (SGV), France, dated 28.05.1999, and amendment to the said agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy, SGGI will pay to SGV a lump sum of two million US $ (the License Amount ) The relevant extract of the amendment to the said agreement dated 01.06.2000, reads as under:- ARTICLE 1 - CONSIDERATION In consideration for the grant of the Basic Float Process Technology and the Additional Technology, SGGI will pay 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. The tax liability if any shall be borne by SGGI. 6. After reading the above clause of the agreements, it is clear that the collaborator will provide and transfer technical know-how on Basic Float Process Technology and on the Additional Technology, all experience, methods and know-how, that it uses itself as on the date of transfer, including trade secrets, documents, plans and drawings. 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 plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Toyota Kirloskar Motors Pvt. Ltd., (supra) held that the transaction value must be relatable to import of goods which a fortiori would mean that the amounts must be payable as a condition of import and the Hon ble Court dismissed the appeal filed by the Revenue and upheld the order of the Tribunal. In that case, Revenue contended royalty and know-how fees were to be added in the invoice value of the capital goods in terms of Rule 9(1) (c) of the Customs Valuation Rules, 1988 as it had a direct nexus to the imported goods as the same go into the manufacture of licensed vehicles and spare parts. The Tribunal held that in the agreement to the import of goods, there is nothing indicating that royalty payment is a condition of the sale of imported goods. It is observed that as 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 kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adjustment is provided in Rule 9, are not considered to be an indirect payment to the seller, even though they might be regarded as of benefit to the seller. The costs of such activities shall not, therefore, be added to the price actually paid or payable in determining the value of imported goods. The value of imported goods shall not include the following charges or costs, provided that they are distinguished from the price actually paid or payable for the imported goods : (a) Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery 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 requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held : 9. On an evaluation of the relevant clauses in the collaboration agreements and the attendant circumstances, we are of the view that the concurrent judgments of the High Court at Bombay do not merit interference in this appeal. The crucial aspects appearing in the case are that the parties were dealing at arms length, that the seller and the buyer have no interest in the business of each other, 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to pay directly or indirectly as addition of importation of goods. In the absence of any such condition in the agreement and also considering the fact that the royalty and the licence fee are related to the manufacture of Float Glass by the appellants for which the technology know-how is supplied by M/s. SGV, France, inclusion of royalty on the assessable value of the imported capital goods does not arise. Rule 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 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as expressly included in the net ex-factory sale price of the colour T.V. Further, when payment to MEI was at the rate of 3% of the sales turn over of the final product, including cost of imported component, it became a condition of sale of the finished goods. Hence, in this case both the conditions of Rule 9(1)(c) of the Valuation Rules, 1988, are satisfied. 8. For the above reasons, we 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 dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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