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TMI Blog2025 (2) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 712 - CESTAT MUMBAI], has held that royalty charges for technical-how paid are not to be added to the assessable value of imported goods as there is no restriction for procuring the raw-materials from any source of choice of the importer. In the case of Brembo Brake India Pvt. Ltd. Vs. Commissioner of Customs (Imports), Mumbai [2014 (11) TMI 22 - CESTAT MUMBAI], the Tribunal has held that royalty is not includable in assessable value when royalty or technical know-how was paid only for manufacture of sub-assembly of Disc Brake Systems and payment of royalty and other charges are not related for imported goods and not a condition of sale of goods. Even in this case, the entire Agreement is only for technical assistance and a detailed analysis made by the Ld. Adjudicating Authority indicated that only 9% of the value of the final products are from the import. The entire Agreement is only for sending technical personnel whose main function is to get the approval of the products manufactured by the Appellant from M/s. Hyundai Motor India Limited. There is no relation or connection between the technical assistance taken by the Appellant to the imported goods and how the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the transaction value as per Rule 10(1)(c) of CVR. Being, aggrieved, the Appellant has sought relief from this forum by filing this appeal. 3.1 The Ld. Advocate Shri M. Karthikeyan representing the Appellant, first reiterated the Grounds of Appeal and then submitted that the Order of the Lower Adjudicating Authority to the extent it accepted the value adopted by the Appellant in terms of Rule 3 r/w Rule 9 has attained finality and cannot be reopened by the first appellate authority as the order was not appealed against by relying on the decision of this Tribunal in the case of M/s. Hyundai Engineering Plastics India Pvt. Ltd. [2018 (6) TMI 654 - CESTAT CHENNAI]. 3.2 He has contended that the technical assistance fee could not be added to the value of imported goods under Rule 10(1)(c) as it is neither related nor conditional to the sale of imported goods. It was submitted that the Appellant, engaged in the business of manufacture of body panels and sheet metal components for M/s. Hyundai Motor India Ltd. (HMIL) procures various raw materials/capital goods from their foreign related supplier and also procured technical assistance in consonance with the agreement dated 01.04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; ... ... Explanation.--- Where the royalty, licence fee or any other payment for a process, whether patented or otherwise, is includible referred to in clause (c) and (e), such charges shall be added to the price actually paid or payable for the imported goods, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods." Rule 10(1)(c) of the Valuation Rules provides for addition to the price actually paid or payable for imported goods if royalties and license fees related to the imported goods. However, the Rule 10(1)(c) also requires that such amounts are those that the buyer is required to pay, directly or indirectly as a condition of the sale of the goods. There has to be a nexus between the goods imported with the royalties or license fees. The payment of royalty and licence fees should be a condition of sale with respect to the goods imported. 8. We find that as per Rule 10(1)(c) of Customs Valuation (Determination of Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is providing only services under Rule 10(1)(c) of CVR which talks only of the royalty and licence fee. It was also observed that "US$ 260/- per person per day would work out to Indian Equivalent to Rs.13,000/- (taking the average of Rs.50 = 1 US$ in the span 6 years). The Agreement shows that the Appellant company has to bear the additional expenditure towards the costs incurred by the M/s. Sungwoo with respect to the dispatch of its technical experts, travel and accommodation expenses, expenses towards medical treatment, case. It is very unlikely that such a huge sum is spent towards the remuneration for technical experts. The Appellant has not disclosed the details of such Technical Experts, their qualification, experience. The details of their income tax payments are also not disclosed. What is the remuneration given by the foreign company viz., M/s. Sungwoo to these Technical Experts when they were in Korea were also not disclosed. In the absence of such details, it cannot be said that the amount stated to be consideration for technical experts is true and actually paid to them." 13. We find that the Ld. Adjudicating Authority observed that the technical assistance rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were to pay MEI a royalty @ 3% on net ex-factory sale price of the colour TV receivers manufactured by the appellants for the technical assistance 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 prerequisite 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 imported components. 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 determining whether one value "closely approximates" to another value. These factors include the nature of the imported goods, the nature of the industry itself, the difference in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. The Tribunal Mumbai in the case of BASF India Pvt. Ltd. Vs. Commissioner of Customs (Imports), Mumbai [2014 (314) ELT 462 (Tri.-Mum.)], has held that royalty charges for technical-how paid are not to be added to the assessable value of imported goods as there is no restriction for procuring the raw-materials from any source of choice of the importer which reads as follows: - "5.1 We have also perused the technical know-how agreement entered into by the appellant with their foreign counterpart. From this agreement, it is seen that the supply of technical know-how is for manufacture of various products in India by the appellant and for the technical know-how so provided, the appellant is required to pay royalty as a percentage of sale price of the goods manufactured in India including the cost of goods imported from abroad. However, there is no condition in any of agreements that the appellant is required to purchase the raw materials only from the technical know-how provider. They are at liberty to procure the raw materials from any person including the technical know-how supplier. In fact, the appellant procures the raw materials from various parties, both in India and abro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department could not show that the royalty and other charges were for the to the imported goods and they were as a condition of sale of such imported goods. Undisputedly the royalty on technical know-how was paid only for the manufacture sub-assembly of Dis Brake Systems. Therefore the royalty and other charges are not includible and the impugned order is not sustainable and is set aside. The appeal is allowed." 17. Even in this case, the entire Agreement is only for technical assistance and a detailed analysis made by the Ld. Adjudicating Authority indicated that only 9% of the value of the final products are from the import. The entire Agreement is only for sending technical personnel whose main function is to get the approval of the products manufactured by the Appellant from M/s. Hyundai Motor India Limited. There is no relation or connection between the technical assistance taken by the Appellant to the imported goods and how the condition of sale of goods is satisfied, no evidence is forthcoming. 18. Hence, in view of the above discussions and by appreciating the ratio of the above decisions, we are of the considered view that payments for technical assistance is not inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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