TaxTMI 
TaxTMI 
2014 (6) TMI 300
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso profit margin and arrives at the transaction price which is the transfer price. The department came to the conclusion that the transfer price is not influenced by the relationship and accordingly the same was accepted as transaction value for the purposes of levy of Customs duty vide SVB order dated 20-4-2006. In the said order it was also observed that the importer has not paid any Royalty/Technical Know-how fees/licence fee/any other fee to the supplier and accordingly there is no addition required to be made to the invoice price under Rule 9(1)(c) of the Customs Valuation Rules, 1988. The said decision was subject to review once in every three years. 3. The matter came up for review and the appellant vide letter dated 5-6-2009 submitted an affidavit stating that there is no change affecting the invoice value and requested for renewal of the assessment practice accepting the transfer price. The appellant also submitted copies of agreement dated 1-4-2006 and supplemental agreement dated 1-4-2008 with the supplier as per which the appellant had appointed the supplier as a technical consultant. As per the said agreement the appellant was required to pay technical consultan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portioned the technical fees over the goods imported and produced in India. Accordingly he prays for setting aside the impugned order and allow the appeal. 5. The ld. Addl. Commissioner (AR) reiterates the findings of the lower assessing and appellate authorities. 6. We have carefully considered the rival submissions. Since there is no quantification of duty or interest or penalty in the impugned order, the stay application is not relevant. Accordingly we take up the appeal itself for consideration. 6.1. The argument of the appellant that there is no material change in the circumstances and therefore, the previous decision of accepting the transaction value vide order dated 20-4-2006 lacks merit. There is a product development and purchase agreement entered into by the appellant with the foreign supplier effective from 1-1-2007 and therefore, it is necessary to examine the scope of the agreement to determine whether in terms of the said agreement whether the declared transaction value needs to be modified or not. Even if there is no material change in the pricing pattern, if any error has been committed in the previous assessments, the same can be rectified when ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....seller; (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments 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 clauses (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.". * (2) .................... (not relevant for the present case) * (3) Additions to the price actually paid or payable shall be made under this rule on the basis of objective and quantifiable data. * (4) No addition shall be made to the price actually paid or payable in determining the value of the imported goods except as provided for in this rule. From the above provisions, especially 10(1)(b)(iv), any payment made for "engineering, development, art work, design work, and plans and sketc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng studies, planning activities, manufacturing process details in respect of the above; 1.10.5 all modifications made to the above, from time to time, and all other improvements developed and incorporated within the above; 1.10.6 Intellectual Property and Intellectual Property Rights relating thereto in so far it belongs to the German Invention Law." 8.2 Clause 6 of the agreement relating to Pricing and Payments reads as follows :- "6.1 Parties shall mutually discuss the consideration for the Product(s) to be sold by SEG to SEL keeping in view the arm's length price as per transfer pricing requirements of respective countries. As per both parties' transfer pricing policy, the consideration shall be arrived by adding 5%-10% profit to the cost price of Products. Cost price will include all direct and indirect costs incurred by SEG in producing the Products, including but not limited to direct costs such as salaries, travel and external consultants costs as well as indirect allocated costs such as Managing Director, administration, office and workshop rental, costs of financing work in progress, etc., such allocations to be made to each Product produced using a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mere averment to that effect, no documentary evidence has been furnished by the appellant either before the lower authorities or before us. However, in the balance sheets of the appellant during the relevant years, the amounts paid to SEG are shown under the head "Research & Development Fees" and not under "technical consultation fee". Therefore, the department has presumed that the payments made have nexus with and attributable to the imported goods. It is also on record that the appellant had procured drawings and designs for which payments were made to the foreign supplier. However, no bills of entry appears to have been filed for such imports. The appellant's claim is that designs and drawings are exempt. 8.6 There are two issues that arise for consideration in this case. The first one is whether the payments made under the head "R&D fees" pertains to design and development of imported components as claimed by the Revenue or it has nothing to do with the imported goods as claimed by the appellant. The second issue is whether the payments made for drawings and designs has nexus with the imported products or not. In case there is a nexus in respect of both these payments to....