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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 ..... aid by the 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, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icense to use the technical know-how, information, data etc. furnished by the Licensor under Article 3 hereof. The amount of the royalty shall be fixed in accordance with paragraphs (a) and (b) of Article 17 hereof. (b) The Licensee may deduct from the royally payments hereunder any withholding taxes which the Licensee is required under the law of the Territory to pay for the account of the Licensor, provided that the Licensee 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 Territo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; all costs for such Local Parts as are standard bought out components as used to manufacture those unit Local Parts and as listed in Appendix H attached hereto, which are equivalent to the Licensee's cost of production thereof if those are manufactured by the Licensee itself or the Licensee's purchase prices thereof if those are purchased by the Licensee from third parties; and (iii) sales tax, excise tax, commodity tax or any other lax of similar nature (other than any of such taxes to be refunded to the Licensee) imposed directly on the manufacture, sale or delivery by the Licensee of those unit Local Parts. (b) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic planning and layout of the plant (2) Specifications relating to the building, utilities and attachments. 2. For production preparation (1) Basic planning of production preparation. (2) Detailed planning of various processes and line-layout (3) Planning of specifications of the equipment (4) Planning of the sources of the equipment (5) Planning of the schedule and method concerning the installation, testing and adjustment of the equipment. (6) Planning of the production instruction, the logistics inside the plant and the control of materials and wastes. 3. For pilot production and production model (1) Adjustment of pilot production schedule (2) Inspection and test of initial products (3) Checking prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated under Rule 9. 10. Learned SDR would submit that as the appellant was using the imported goods exclusively for production in terms of the agreement, foreign supplier is his only source of supply and since the foreign supplier's approval was required for use of even the indigenously manufactured parts the Commissioner was right in holding that royalty and licence fee related to the imported goods and their values were required to be added to the price paid. 11. Even though much case law has been cited by both sides, given the nature of dispute, the same is to be determined in terms of the relevant clauses in agreement in question. As regards royalty which goes under "ordinary assistance" relevant article of the agreement stipulates that upon request the foreign supplier shall furnish to the importer such technical know-how, information, data relating to the licenced products. The licenced products are the automobile to be manufactured in India, under the agreement as well as specific parts. It is to be seen that the technical; know-how, information etc. to be furnished are for studying the feasibility of Local Parts manufacturing, for manufacturing of local parts, for producti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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