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TMI Blog2005 (12) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant to M/s. Toyota Motor Corporation should form part of the assessable value of the imported goods. 4. Even though the orders noted that the appellant importer and the foreign supplier are related parties, the order itself has not been passed taking into account the effect of relationship; but in terms of Rule 9(1)(c) of the Customs Valuation Rules, 1988. This rule relates to addition of "royalties and licence fees" to the price paid for the imported goods for the purpose of determining the 'transaction value', because customs duty is to be assessed on the transaction value. We may read the subject Rule for ease of discussion :- "I. Cost and Services. — (1) In determining the transaction value, these shall be added to the price actually paid or payable for the imported goods "- (2) .............. (b) .............. "royalties and licence fees related to the imported goods that the 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" 5. The dispute has arisen in the contest of the agreement dated 1st April, 1998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall pay such taxes on behalf of and in the name of the Licensor and furnish the Licensor with proper certificates for the same from the authorities concerned, to enable the Licensor to obtain credit therefore against its Japanese taxes. Handling fees or any other expenses incurred in remitting the amount of royalty shall be for the account of the Licensee, and shall not be deducted from the royalty payments. Article 17. — Calculation of Royalty (a)(1) With respect to the Licensed Vehicles manufactured by the Licensee during each calenadar quarter, the Licensee shall pay the Licensor royalty at the rate of (i) five percent (5%) of the "Local Value Added" of those Licensed Vehicles for domestic sales in the Territory and (ii) six percent (6%) of the "Local Value Added" of those Licensed Vehicles for export outside the Territory subject to paragraph (a) of Article 2 hereof. For this purpose, the number of the Licensed Vehicles subject to royally shall be determined at the time of their line-off at the factory where they are manufactured, and the "Local Value Added" shall be the Licensee's wholesale price of those Licensed Vehicles, minus the following costs and tax, if include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With respect to the Local Parts (except the unit Local Parts) sold by the Licensee during each calendar quarter, the Licensee shall pay the Licensor royalty at the rate of three percent (3%) of the Licensee's wholesale or selling prices of those sold (i) as spare parts for the Licensed Vehicles and/or (ii) as original equipment parts and/or spare parts for other vehicles than the Licensed Vehicles. However, such Local Parts as listed in Appendix H attached hereto shall not be subject to the royalty under this paragraph (c) The Licensee shall keep accurate records and statement of accounts relating to the Licensed Products manufactured by the Licensee. (d) The Licensor may inspect the records and statement of accounts staled in the preceding paragraph (c), at any time during the term of this Agreement and one (1) year thereafter". 7. The second payment in dispute namely lump-sum payment are in terms of Article 4 relating to additional assistance. That article reads as under : "Article 4. — Additional Assistance : (a) At the Licensee's written request, the Licensor may furnish the Licensee with manufacturing, engineering and other know-how and info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. That Annexure reads as under :- "Annex E-2 Technical Assistance Fee The per month amount of the Technical Assistance Fee which is used for the calculation under Section 3 of Appendix E to this Agreement and which is applied to any employee of the Licensor who works for each project to provide the Licensee with the Technical Assistance shall be 1,110,000. The parties hereto agreed that this per month amount was decided by multiplying the per diem amount thereof 55,500 by twenty (20) days, regardless of actual number of working days in a month. The above amount may be changed from lime to time upon agreement between the parties hereto". A summary of estimated payments under the technical assistance agreement may also be reproduced for understanding the controversy. SCHEDULE 'D' PAYMENTS UNDER TECHNICAL ASSISTANCE AGREEMENT S. No. Particulars Per Month No. of man months estimated Total 1 1. Payment for Engineering Services - Annexure E-2 of the T/A JPY USE Rs. 1110000 8538 341538 800 888000000 6830769 273230769 2. Payment for despatch of the Licensor' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing of local parts, for production preparation of licensed products etc. What is important is that none of assistance is in relation to the goods under import. Further, royalty is to be computed at the agreed percentage of local value addition of vehicle manufactured under licence or unit local parts manufactured and sold or exported. Thus, the computation also has no bearing upon the imported goods or their value. In these circumstances, we are of the view that the royalty in question does not satisfy the requirement of being "related to the imported goods". In the agreement under question or the import of the goods, there is nothing indicating that royalty payment is a condition of the sale of the imported goods. Thus, the requirement of royalty being a condition of sale also is not satisfied. In view of these, we are of the opinion that there is no requirement in the present case for adding royalty payment to the price payable for the purpose of determining the transaction value of the imported parts. 12. In regard to lump-sum payments, it is noticed from the agreement that this assistance is in the area of manufacturing the licenced products. Appendix 'D' to the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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