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TMI Blog2025 (2) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... lty' is paid, which is not even the case of the Revenue.
The imported goods in this case are not procured from the Group Company and nor there are any condition to the effect that these goods shall be sold only upon payment of Royalty. In fact, the Agreement also provides a leverage to the appellant in case of any damage or the non--selling of goods, charging back, etc. and hence, the payment of Royalty is fixed at 4% of the Net sales.
Conclusion - There was no requirement to add Royalty to the price of imported goods as done by the Commissioner in this case and hence, the impugned orders cannot sustain.
Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... d Composite Products. 6.1 Upon analysis of the terms of the Agreement between the importer and its principal located in the US, it was held by the Department/SVB that the transaction value was acceptable and that 4% Royalty was held to be payable on the net sales value of the final products manufactured, negating the contentions of the appellant that the goods imported did not attract Royalty; it was only the final product manufactured using the goods imported that attracted Royalty and hence, there was no question of paying Royalty on Bushings, Glass fiber and other materials imported by them. In this regard para 2.1, 5.1 and para II of Schedule IIA of the Agreement has been referred to. 6.2 It is the case of the Revenue, in the impugned order, that in terms of Rule 10(1)(c) ibid as pointed out by the importer, the Royalty could be included in the transaction value provided it related to the imported goods and it forms a condition for sale of the goods. In the instant case and from the copy of the Agreement made available, it was understood that the Royalty mentioned therein related to the sale of goods manufactured in India; the net sales value included cost of the license fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , para 6.2 of the above Agreement was referred to. It is also their case that the appellant had not imported any capital goods from the licensor or from any other company; they had imported spares in negligible quantities for the capital goods; they would "regularly import Bushings made of platinum, rhodium 'under exchange' programme in terms of Notification No.12/2012- CUS (Sl.No.393), on the cost of repair and to & fro freight". It was submitted that the bushing imported was made from the worn-out bushing exported by the Appellant as has been the practice in the Glass Fiber Industry. 6.7 It is their further case that they would regularly import processing aids/chemicals used in the manufacture of glass fiber, reinforcement and composite products from unrelated persons and in support of this claim, they would refer to the Table reproduced at paragraph C.8 of Grounds wherein, they have captured various imports made from the year 2010 to 2012. Further, major input materials like Quartz, Dynamite, Clay, Limestone, Soda Ash, Sodium Sulphate are obtained locally by them. From paragraph 6.2 of the Licensing Agreement, it was contended that they were not required to purchase raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively and simultaneously. This was the position prior to October 2007, which remains unaltered even after the introduction of the Explanation supra to Rule 10 ibid which was added with effect from 10.10.2007 to Rule 10(1) ibid. 7. It is also a fact borne on record that no where it is denied by the appellant that all the above inputs procured from their Group Company were in fact used in the manufacture using the 'technology'; and it is this 'technology' for the use of which, the appellant had obtained license by paying Royalty. 7.1 It was further contended that in para 17 of the OIO, it is observed that the Royalty was paid by the appellant on the net sales value and is not excluding the imported goods, but the non-exclusion of the value of machinery, materials, etc. cannot be a basis for including the Royalty in the transaction value of the imported goods. Hence, the Royalty paid was not related to the goods being imported into India, but the same was solely related to the goods manufactured and sold in India. Just because the value of imported goods was taken into account in the net sales price for the purposes of payment of Royalty, would not mean that the payment of Royalty w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of such goods." 11. We have carefully read the judicial precedents relied upon during the hearing before us, we have also gone through the documents placed on record including the Agreement in question. Upon going through the various decisions, we have no doubts in our mind that as long as the Royalty is not paid or payable on the imported goods and as long as there is no condition as to 'sale of goods' being valued, the same is not includable in the price. But we only have to check the impact of Explanation in this context. Explanation [supra] refers, clearly, to 'a process' for which Royalty is paid, shall be added to the price actually paid or payable for the imported goods. The emphasis again, is on the 'imported goods' which would suffer Royalty when brought into India. Therefore, our understanding is that the imported goods should undergo the 'process' for which 'Royalty' is paid, which is not even the case of the Revenue. We say so because, it is clear that the imported goods in this case are not procured from the Group Company and nor do we find any condition to the effect that these goods shall be sold only upon payment of Royalty. In fact, the Agreement also provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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