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TMI Blog2015 (2) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... ts do not envisage or stipulate any condition with regard to the procurement of raw-materials for the manufacture to be undertaken in India. The appellant has entered into separate contracts for the procurement of raw-materials. Even in the contract entered into with the related foreign suppliers, it is clearly stipulated that the appellant has the freedom to procure the raw-materials from any persons, so long as the quality/standard is maintained. Thus, the agreement for the purchase of raw materials also does not impose any condition with regard to the source of procurement of raw materials. In these circumstances, it cannot be said that the relationship has influenced the supply price of the raw materials. - Following decision of Escorts Ltd. case [1995 (10) TMI 140 - CEGAT, NEW DELHI] and Mahindra & Mahindra Ltd. [1995 (3) TMI 88 - SUPREME COURT OF INDIA] - impugned orders are not sustainable in law. Accordingly, we set aside the same - Decided in favour of assessee. - Appeal No.C/323/12 - Final Order No. A/1703/2014-WZB/C-I(CSTB) - Dated:- 31-10-2014 - P R Chandrasekharan and Ramesh Nair, JJ. For the Appellant : Shri Prashant Patankar, Adv. For the Respondent : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te purchase agreements with the group entities situated abroad. These group entities supplied the materials as per the consideration agreed upon. The supply agreement also provided for a clause that the present frame contract does not intend to bind the buyer in any manner whatsoever to curtail its ability to procure goods from persons other than the seller in the international market. Although this option, the buyer is still obliged to ensure it does not compromise on the Can Pack group's quality standards vis-a-vis finished product . The Revenue was of the view that inasmuch as the appellant procured bulk of their raw-materials requirements from the related foreign entities, the lump sum payments for trade mark usage and royalty for the technical know-how is a condition of sale for the purchase of raw-materials from the related foreign entities and therefore, it should be added on a proportionate basis to the value of the goods imported. However, the assessing authority held that the said condition would not apply in respect of the running royalty even though both the payments were made under the same agreement and for the same purpose. The learned Counsel submits that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umpsum or running cannot be added to the assessable value of the raw-materials or components imported from the foreign entities. The ratio of these decisions would apply to the facts of the present case also. Accordingly, he submits the impugned orders are not sustainable in law and need to be set aside. 3. The Additional Commissioner (AR) appearing for the Revenue, on the other hand, reiterates the findings of the lower authorities and submits that in the supply agreement there is a condition that the raw materials should be of prescribed quality. Thus, in the guise of ensuring quality, the supplier is indirectly controlling the appellant in India and therefore, since the transaction is between two related parties, the same might have influenced the price. Therefore, addition of lumpsum royalty payments to the value of the goods imported is justifiable and accordingly, he pleads for upholding the impugned order. 4. We have carefully considered the submissions made by both the sides. 4.1 We have also perused the trade mark usage agreement and the technical know-how supply agreement and also the agreements for supply of raw-materials entered into by the appellant with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods inasmuch as the entities were related. This contention was negative by this Tribunal holding that payment of royalty has nothing to do with the supply of components or on the price of the components and inasmuch as the foreign company had no controlling interest in the Indian buyer, the royalty paid cannot form part of the price for the supply of components. Similarly, in the case of Hindustan Motors Ltd. case, there was an agreement for supply of technical know-how and lumpsum payment was made to the foreign collaborator. The appellant has also entered into component purchase agreement whereby the collaborator supplied the components. The question for consideration was whether the lumpsum payment of royalty made for the supply of technical know-how could be included in the assessable value of the components purchased by the appellant from the foreign supplier. It was held that since the imports were made at a price which was normal in the international market for such goods, the technical know-how agreement did not relate to the supply of components and it cannot be inferred that royalty payment made is a condition for the sale of goods. Accordingly, this Tribunal set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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