Full Judgment
2. The relevant facts that arise for consideration are the respondents herein entered into a Technical Collaboration and Licence Agreement with their foreign Collaborator to manufacture and sell "Hydraulic Filters", "Filter Housings" & "Filter Elements" without any technical know-how fees. The compensation for rights and services rendered by the foreign Collaborator was in form of royalty @ 5% on all the national sales and 8% on goods exported out of India.
3. The respondents imported components, value of which was sought to be loaded by including the payment on account of royalty on the ground that it is being charged for having given them the right to produce hydraulic filter elements and accessories in India with know-how from the foreign, Collaborator. The adjudicating authority did not load the value on the ground that the royalty is calculated on the selling price on the products, hence royalty payment has no relationship with the imported components.
4. Aggrieved by such order, the revenue preferred an appeal to the Commissioner (Appeals) also upheld the order of the adjudicating authority.
5. Ld. SDR contended that both the lower authorities have erred in not loading the value of the imported components by the amount of royalty paid or payable by the respondents. He submits that there is no clause in the agreement providing exclusion of cost of imported components on the payment of royalty. It is also his submission that unit selling price had not been defined in the agreement and as such, the cost of imported goods is not expressly deducted from the sale price, on which royalty is payable. Hence, there is a clear nexus between the imported goods and royalty payable. It was the submission that the respondents have also not submitted any contrary evidence to this fact. He submitted that the order-in-appeal be set aside on this ground.
6. Ld. Counsel appearing on behalf of the appellants submits that the issue involved in this case is squarely settled by the various decisions of the Tribunal. It is his submission that royalty, which is paid by the respondent is on the sale value of the goods manufactured out of the components imported by the appellants. The Ld. Counsel, submits that the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of UOI v. Mahindra & Mahindra Ltd. as reported at , in the case of Tata Yazaki Auto Corporation Ltd. v. Commissioner of Customs (Imports), Mumbai, as reported at and in the case of Sony Music Entertainment Pvt. Ltd. v. Commissioner of Customs (Imports) Mumbai as reported at .
7. We considered the submissions made at length by both sides and perused the records.
8. The issue in this case is whether the royalty payable by the respondent to the foreign collaborator needs to be included in the value of the goods imported by the respondents. It is not disputed that the respondents imported components for the manufacturing of the final products as per the agreement with the foreign buyers. It is noticed that there is no stipulation or condition in respect of the payment of royalty relating to the goods imported by the respondent. It is also seen that the agreement do not preclude the respondents from sourcing these components from out side. We find that the findings of the Ld.
Commissioner (Appeals), in this regard are well reasoned one and the conclusion arrived at by him is correct and does not require any interference. As long as the payment of royalty, is not a condition of sale of the goods being valued, the provisions of Rule 9(1)(c) will not apply. Revenue has not produced any contrary evidence.
9. Accordingly, the concurrent findings arrived at by the lower authorities are correct. The impugned order is upheld and the appeal filed by the revenue is rejected.