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TMI Blog2017 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Member (Technical) Shri B. Balamurugan, AC (AR) for the Appellant Shri S. Murugappan, Advocate for the Respondent ORDER Per: Madhu Mohan Damodhar The respondent importer had imported auto parts from M/s. Telco America, USA. Issue in dispute relates to addition to assessable value of technical know-how fees of ₹ 99,99,999/-and running royalty. The original authority, in denovo adjudication, while accepting the invoice value of the imports for assessment purpose in terms of Rule 4(3)(a) of Customs Valuation Rules, 1988, however, ordered that technical know-how fees and royalty shall be added to invoice value in terms of Rule 9(1)(c) of the said Rules. The importers preferred an appeal before learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of royalty, they are directly related to the sale of the goods manufactured and hence cannot form part of the assessable value at the time of import. He places reliance on the ratio of the judgment of the Hon ble Supreme Court in the case of Commissioner of Customs Vs. Ferodo India Pvt. Ltd. - 2008 (224) ELT 23 (SC). 5. Heard both sides and have gone through the facts. 6. The license agreement available in the appeal folder has been perused by us. Para 2 of the license agreement concerns technical know-how granted to appellants to exclusively manufacture, market, sale and distribute the licensed products within the territory agreed upon. Para 4 of the agreement specifies that for grant of such technical know-how license of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of these imported goods. Thus, in our opinion, is the correct interpretation of the facts of the case. 9. In the judgment of the Hon ble Supreme Court in the case of Ferodo India Pvt. Ltd. (supra) , identical issue was under consideration before the Apex Court and it was held that royalty / license fee shall not be a condition prerequisite to the sale of the imported goods and hence not includible in the assessable value thereof. The following paragraphs of the said judgment make for illuminating reading:- 18. Royalties and licence fees related to the imported goods is the cost which is incurred by the buyer in addition to the price which the buyer has to pay as consideration for the purchase of the imported goods. In other wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed royalty/licence fees then the adjudicating authority would be right in including the cost of royalty/licence fees payment in the price of the imported goods. In such cases the principle of attribution of royalty/licence fees to the price of imported goods would apply. This is because every importer/buyer is obliged to pay not only the price for the imported goods but he also incurs the cost of technical know-how which is paid to the foreign supplier. Therefore, such adjustments would certainly attract Rule 9(l))(c). Application of Rule 9(l)(c) to the facts of the present case xxxxxx xxxxx xxxxx xxxxx xxxxx 22. In the case of Essar Gujarat Ltd. (supra) , the buyer had entered into a contract with TIL for purchase of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce rendered by MEI. The appellants were to pay a lump-sum amount of U.S. $ 2 lakhs to MEI for transfer of technical know-how. It was the case of the appellant that payment of royalty was not related to imported goods as the said payment was made for supply of technical assistance and not as a condition pre-requisite for the sale of the components. 24. One of the questions which arises for determination in this civil appeal is whether reliance could be placed by the Department only on the Consideration Clause in the TAA for arriving at the conclusion that payment for royalty was includible in the price of the important components. 25. Rule 4(3)(b) of the CVR, 1988 provides for an opportunity for the importer to demonstrate that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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