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TMI Blog2018 (6) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... s, ergo, these amounts cannot be then made part of the assessable value of such imported goods. The royalty and lump sum fees paid in relation to manufacture of goods in India cannot be padded on to the declared import value of the impugned goods. The portion of the order of the original authority accepting the declared value in terms of rule 3 (3) (b) of the Customs Valuation Rules restored - the upholding of addition of lump sum amount and royalty fees to the assessable value of the impugned imports set aside. Appeal allowed - decided in favor of appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... of the invoice value of the goods imported from "related suppliers" to be collected towards EDD till the issue of fresh order. Aggrieved, the appellants are before this forum. 2. Today when the matter came up for hearing, on behalf of the appellants, Ld. Consultant Shri Joseph Dominic made a number of submissions which can be broadly summarized as under : i) The impugned order has gone beyond the scope of appeal made by them. ii) Ld. Consultant drew our attention to pages 26 to 31 wherein copies of the appeal made to the Commissioner (Appeals) have been filed. Ld. Consultant pointed out that the reliefs claimed in the appeal by them were only for holding as unsustainable, the order of the original authority for inclusion of royalty amount and subsequent inclusion of 4% to be loaded in the invoice value of future imports. iii) Ld. Consultant took us to copy of the License and Technical Assistance Agreement dt.18.04.2008 between them and Hyundai Engineering Plastics Pvt. Ltd., Korea. He points out that Article 2.1 clearly indicates that the license agreement is only to manufacture, use and sell the products in the territory; that as per Article 1.5, products shall mean PPF of var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of respondent, Ld. A.R supports the impugned order. He submits that Commissioner (Appeals) is fully within his powers to modify the order appealed against as per Section 128 of the Customs Act, 1962. There is no dispute even from the appellants that they have not paid lump sum amount as well as 4% / 2% royalty to their related person abroad. Since this royalty is being paid in relation to manufacture of the goods in India, the raw materials imported for it will also have to be necessarily loaded to arrive at the correct assessable value. Since the appellants are importing only from provider of technical information and license rights in principal there has to be addition in terms of Rule 10 (1) (c) of the Valuation Rules. 4. Heard both sides and have gone through the facts. 5.0 We first take up the objection of Ld. Consultant with regard to their contention that the impugned has gone beyond the scope of their appeal made to that authority. 5.1 We find from a copy of the Form C.A-1 of appeal to the Commissioner (Appeals), Column No.7, that the reliefs claimed in appeal are as follows : "Hold that the Order of the Respondent in ordering for the inclusion of the Royalty amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he related Agreement also clearly lays down that for the purpose of Article "products" shall include products manufactured wholly or in part using technical information furnished by the licensor. It is also indicated that the royalties relate to the number of products that were sold by the licensee / appellants and the royalty amount due during the actual period would be calculable accordingly. 5.4 The take away from these conditions of the agreement is obviously that royalty and lump sum payments are only in relation to the goods that would be manufactured by the appellants in India and not in respect of raw materials imported by the appellants. 5.5 We also find merit in the assertion of Ld. Consultant that the agreement does not bar purchase of such raw material from sources other than the related person. On the other hand, as averred by the appellant, their parent company is only one of their suppliers and that they are also importing the same goods from other suppliers who are not related to them. There is also an assertion that even the parent company also is not the manufacturer of the goods but are procuring the same from other manufacturers and supplying it to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the components. The question for consideration was whether the lump sum 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 the demand. The said order was also affirmed by the Hon'ble Apex Court in the same case. In Mahindra & Mahindra Ltd. case the Hon'ble Apex Court considered a more or less identical issue. There was a technical know-how transfer agreement between the Indian manufacturer and the foreign collaborators for the progressive manufacture of automobiles in India on payment of lump-sum royalty. In the meanwhile, the Indian manufacturer imported CKD packs of engines from the foreign collaborator. The Revenue was of the view that lump-sum payment of royalty made for supply of technical know-how should be included in the value of the CKD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at were to be provided post-import of the goods, hence value thereof should not be loaded on to the value of imported goods. 5.7.5 Similar view has been reiterated time and again by the Hon'ble Apex Court in CC (Port) Kolkata Vs J.K.Corporation Ltd. - 2007 (208) ELT 485 (SC), CC (Port) Chennai Vs Toyota Kirloskar Motor P. Ltd. - 2007 (213) ELT 4 (SC), Gujarat Mineral Development Corpn. Ltd. Vs CCE & C Ahmedabad - 2005 (190) ELT 5 (SC). 5.7.6. There could be an argument that some of these Supreme Court decisions relate to disputes which arose during the pendency of the earlier Valuation Rules. Nonetheless, even though the Customs Valuation Rules have a work in progress and been evolving over the years to its present shape, certain basic tenets of valuation, inter alia, the when and how of includability of royalty etc. payments to assessssable value, have certainly remained constant. 6. In view of the discussions herein above, and also following the ratio already laid down by various higher appellate forums, including High Courts and Apex Court, we hold that the royalty and lump sum fees paid in relation to manufacture of goods in India cannot be padded on to the declared import v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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