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TMI Blog2023 (11) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... w influenced the price of the imported goods. The appellant s submission that once the transaction value of the goods imported from the associated companies are at arm s length price under Rule 3(3)(a) of the Customs Valuation Rules, 2007 is accepted, the Department cannot load 5% royalty to the transaction value under Rule 10(1)(c) of the Customs Valuation Rules, 2007 is absolutely valid and sustainable in law as has been held by the Hon ble Supreme Court in the case of COMMISSIONER OF CUSTOMS VERSUS M/S FERODO INDIA PVT. LTD [ 2008 (2) TMI 12 - SUPREME COURT ] wherein it had held that 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. In the present appeal, the facts have clearly proved that the pricing was at arm s length and the relationship had not influenced the price, which has been accepted by the department hence there is no question of adding the roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s imported from them was not influenced from their relationship and the transaction value was accepted in terms of Rule 3(3)(a) of the Customs Valuation Rules, 2007. It is stated that once the transaction value has been accepted, the question of adding 5% royalty to the transaction value is not sustainable in law. In support of their claim, the learned counsel relied on the decision of the Hon ble Supreme Court in the case of Commissioner of Customs vs. Ferodo India Private Limited: 2008 (224) ELT (23) (SC). With regard to carbon strips, the learned counsel submitted that they had not admitted their liability as claimed by the Commissioner (A) in the impugned order instead their claim was that the payment of 5% royalty is not a prerequisite condition to import carbon strips and other goods from the associated companies to use in the manufacture of pantographs. The royalty for technical know-how for the manufacture of pantographs is a post import activity and therefore, it cannot be the part of the transaction value for the imported goods. In this regard, reliance is placed on decision of the Hon ble Supreme Court in the case of Commissioner of Customs Port, Chennai vs. Toyota Kirlo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification has been done for various grades of carbon blanks/brushes based on other detailed verification of the transaction value of these products was accepted stating that the relationship had not influenced the price. 5. As per the license agreement, Article 10(4) a royalty of 5% shall be paid based on the net sales volume of licensed products and licensed products at Article 1(2) is defined as current transmission systems (Pantographs) and its spare parts not including carbon strips. The Commissioner (A) in the impugned order has confirmed addition of royalty on carbon brushes only on the ground that the appellant has admitted the same but the appellant before us has denied that no such admission was made before the Commissioner (Appeals) hence this inference is baseless. So, the question to be decided is that once the authorities accept that the relationship of the importer and supplier has not influenced the price, whether addition of royalty on the imported goods that were used in the manufacture of Pantographs needs to be revised with the addition of 5% royalty or not? 6. Once the fact that the pricing pattern has been examined from various angles as discussed supra and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know-how. Therefore, the Department in every case is not only required to look at TAA, it is also required to look at the pricing arrangement/agreement between the buyer and his foreign collaborator. For example if on examination of the pricing arrangement in juxtaposition with the TAA, the Department finds that the importer/buyer has misled the Department by adjusting the price of the imported item in guise of increased 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). Emphasis supplied 25. Rule 4(3)(b) of the CVR, 1988 provides for an opportunity for the importer to demonstrate that the transaction value closely approximates to a test value. A number of factors, therefore, have to be taken into consideration in dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It is by highlighting the above aspects that the learned Single Judge and the Division Bench concluded that the contention that the price quoted in the invoices tendered by Mahindra Mahindra (respondents) does not reflect the correct price because a part of the value of imported packs and components was already received by foreign collaborator while determining the consideration of 15 million French Francs cannot be accepted, and the collaboration agreement does not support the claim nor was there any material available to the Assistant Collector to warrant such a conclusion, and, therefore, resort to Section 14(1)(b) of the Act and Rule 8 of the Customs Valuation Rules is clearly incorrect and unsustainable and the Assistant Collector was bound to accept the price mentioned in the invoices for the purpose of assessing the customs duty. 9. In the present appeal, the facts have clearly proved that the pricing was at arm s length and the relationship had not influenced the price, which has been accepted by the department hence there is no question of adding the royalty to the transaction value as held by the apex court in the judgement referred above. 10. In view of the above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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