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TMI Blog2015 (11) TMI 1504X X X X Extracts X X X X X X X X Extracts X X X X ..... orted goods. - The Agreements with Sandvik Materials Technology and Sandvik Mining and Construction to whom the royalty is paid do not require the import of material from them only. The material may be procured other foreign suppliers or even locally. There is no condition that the Trademark can be used only if the appellant imports the raw materials from Sandvik. The appellants have made a statement that they have imported the goods from other suppliers and sourced locally too. This establishes that even the second condition under Rule 10 (1) (c), that royalty is paid as a condition of the sale of imported goods, is not met. In any case it is not as if the imported raw materials were sold by the appellant under the brand name Sandvik. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials Technology and Sandvik Mining and Construction who are related to them in terms of the definition of related persons under Rule 2(2) of the Customs Valuation Rules, 1988 and 2007. For many years starting from 1992, it was held by the Customs that the relationship between exporter and appellant has not influenced the price of the imported goods. Special Valuation Branch (SVB) orders of 1992, 2006, 2009 continued to hold this view. However, at the time of review of the preceding SVB order of 2009 which was expiring in April 2012, the Customs Authorities took the view that the royalty paid by them to their Associate Companies in terms of the Trade Mark License Agreement between the two is includible in the value of the imported goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is not correct. (iii) Inclusion of royalty in the value of imported goods is subject to conditions in Rule 10(1) (c ) which reads as under: Rule 10 (1)- In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, - (a).. (b).. (c) Royalties and licence fees related to the imported goods, that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being values, to the extent that such royalties and fees are not included in the price actually paid or payable; According to the Ld. Counsel, the conditions required to be satisfied simultaneously are - (a) Royalty is relatable to the imported goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lays down that Royalty is expressed as a percentage of the invoice price to external customer net of any discount. Hence, according to him, the determination of royalty takes into account the cost of imported raw material and is therefore includible in value for assessment of duty. He placed reliance on the Supreme Court judgement in the case of Matsushita (Supra). 6. We have carefully considered the contentions of both sides. We are constrained to point out that the order of Commissioner (Appeals) does not analyse the facts viz-a-viz the provisions of law. It does not refer to the Agreements at all. It also fails to consider all the relevant judicial pronouncements in the matter especially those of the Honble Supreme Court. The order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emark i.e. Sandvik on the products manufactured and sold in India. Therefore, we are of the view that the first condition of Rule 10 (1) (c) is not satisfied because the royalty is not related to the imported goods. 8.1. The Agreements with Sandvik Materials Technology and Sandvik Mining and Construction to whom the royalty is paid do not require the import of material from them only. The material may be procured other foreign suppliers or even locally. There is no condition that the Trademark can be used only if the appellant imports the raw materials from Sandvik. The appellants have made a statement that they have imported the goods from other suppliers and sourced locally too. This establishes that even the second condition under Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd TAA are both to be seen by the Department. As stated above, in a given case, if the Consideration Clause indicates that the importer/buyer had adjusted the price of the imported goods in guise of enhanced royalty or if the Department finds that the buyer had misled the Department by such pricing adjustments then the adjudicating authority would be justified in adding the royalty/licence fees payment to the price of the imported goods. Therefore, it cannot be said that the Consideration Clause in TAA is not relevant. Ultimately, the test of close approximation of values require all circumstances to be taken into account. It is keeping in mind the Consideration Clause along with other surrounding circumstances that the Tribunal in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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