TaxTMI 
TaxTMI 
2016 (3) TMI 338
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....STE's) i.e. canalizing agencies. Further, DGFT may grant License/authorization to any other person to import. Thus DGFT may authorize any person to import through a canalizing agency like State Trade Corporation as per the procedure prescribed in para 2.59 of the policy. DGFT, on receipt of applications of importers through the STE's, allot import authorization and Tariff Rate Quota (TRQ) to the respective STE's for import on behalf of the importer. Sr. No. 21 of Notification No. 21/2002 provides concessional rate of duty if maize is imported under TRQ scheme subject to condition No. 1 specified in the notification. Condition reads as follows : Condition No. 1: The rate of duty specified in column (4) shall apply to such quantity of imports for which an importer holds a Tariff Rate Quota Allocation Certificate issued by the EXIM Facilitation Committee in the Directorate General of Foreign Trade in accordance with the procedure as may be specified by the EXIM Facilitation Committee in the Directorate General of Foreign Trade from time-to-time through a public notice. 2.1 The maize corn imported into India, undergoes the following processing to make instant pop....
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.... DGFT that they are an Actual User. 2.3 The second issue in the show cause notice is that under an Agreement between M/s. ConAgra Foods Inc., USA and the appellant, royalty was paid by the appellant on the net proceeds of sales for each product manufactured and sold by the appellant. The Commissioner held that royalty paid is directly related to imported popcorn maize as a condition of sale of the imported goods and hence is liable to be added to the declared invoice value of the imported goods in term of Rule 10(i)(c) and 10(i)(d) of the Customs Valuation Rules, 2007. The Commissioner relied on the Supreme Court judgment in the case of Living Media - 2011 (271) E.L.T. 3 (S.C.). The Commissioner also held that the appellant violated Section 46(4) of the Customs Act by making false entries in the Bills of entry in respect of value of goods and therefore held the goods liable to confiscation under Section 111(m), 111(d) and 111(o) of the Customs Act. Commissioner ordered inclusion of royalty amount in the assessable value and confirmed demand of duty amounting to Rs. 1,49,70,000/- on this count along with interest. He also imposed penalty under Section 114A equivalent to the ....
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....d to the licensor is not a condition of the sale of the imported goods. Further the appellant were free to procure goods from any source. He relied on the case of CC v. Ferodo India Pvt. Ltd. [2008 (224) E.L.T. 23 (S.C.)] and the decision of the Tribunal in the case of CC v. Bridgestone India Pvt. Ltd. v. [2013 (292) E.L.T. 403 (Tri.)] and ABB Ltd. v. Commissioner [2013 (288) E.L.T. 296] to contend that the royalty has nothing to do with the imported goods nor was it a condition of sale of imported goods. Therefore application of Rule 10 (i)(c) is ruled out. He added that Rule 10(i)(d) is also not applicable because the seller of imported goods does not receive any part of the proceeds of subsequent resale of the imported goods. On confiscation he stated that Section 111(d) is not applicable because goods are not imported contrary to any prohibition. Section 111(m) is not applicable because no value was mis-declared in the Bill of Entry. And Section 111(o) is not applicable because no post import condition has been violated. On the issue of time bar he stated that no facts were suppressed in the Bill of Entry and the issue involves interpretation of complex FTP provisions and there....
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....t to the condition mentioned in the notification. This condition is reproduced in para 2 above and requires a TRQ Allocation Certificate issued by DGFT. We find that appellant had four Allocation Certificates (referred as Licences) under which goods were imported during the period of dispute. The question of applicability of these licences arises because the applications submitted by the appellant have a column which reads as "Address where items imported shall be used". The appellant have mentioned the address against this column. The Licenses also indicate under column "name of item" that they are allocated to Actual User. Revenue's contention is that in case of vending corn, the appellant are not an Actual User. We will analyze this issue later. 7.1 We first take up the contention of the appellant that the Actual User condition was deleted by Public Notice 47, dated 18-5-2011 as confirmed by the affidavit submitted by DGFT before the Hon'ble High Court of Andhra Pradesh (supra). We find that the Andhra Pradesh Division Bench interim Order in Writ Appeal No. 228/2012 held that the Central Government has not amended the FTP or done away with the Actual User condition for t....
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.... 9.37 of FTP as under : 9.37 "Manufacturer Exporter" means a person who exports goods manufactured by him or intends to export such goods. 9.36 "Manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, Reconditioning repair, remaking, refurbishing, testing, caliberation, re-engineering. Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining". Ld. A.R. contended that the appellant have not satisfied the definition, of manufacture because no new product having a distinctive name, character or use emerges in the case of processing of vending popcorn. The processes undertaken by the appellant are shown as refrigeration, gradation, packing, fumigation, etc. A plain reading of the definition of manufacture in the FTP above shows that processes such as refrigeration, re-packing, polishing will be covered in its ambit. If the ld. A.R....
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....perties in the jurisdictions described on Exhibit "C" attached hereto (the "Territory") in connection solely with the manufacture, marketing, sale and distribution of the products. Agreement 1. License. Subject to the provisions of this Agreement, Licensor hereby grants to Licensee an exclusive, non-transferable, recoverable, royalty-bearing right and license to use the Licensed Properties solely in connection with the manufacture, marketing, sale and distribution of the products in the territory. It is agreed that only the products listed on Exhibit "B" shall be manufactured, marketed sold or distributed thereunder........... 2. Development and marketing............ Licensee shall develop with Licensor a mutually acceptable business plan for the marketing, promotion and sale of the products during each year this agreement is in effect (each an "Annual Plan"). During the term of this Agreement License agrees it will not distribute any other third party's products which are similar to the products. 3. Technical Assistance. Licensee may, from....
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....approve al items and materials used in connection with the products or the Licensed Properties in the Territory including, without limitation, labels and packaging materials............ 9. Acknowledgment of Rights 9.1 Licensee acknowledges and agrees that Licensor is the exclusive owner of all right, title and interest in and to (i) the Licensed Properties. 14. Ingredient Purchases. 14.1 Licenses may purchase bulk popcorn and other ingredients used to manufacture the Products from any source, provided that the products and all ingredients used to manufacture the Products comply with the Specification and other provisions of this Agreement........... Exhibit D 1. The royalty paid by licensee shall be in the amounts specified below on the net proceeds of sale (defined below) for each product manufactured and sold by licensee that utilizes the licensed properties. Licensee shall be responsible to remit to the appropriate Government authority any VAT and/or Service Tax, If any, that is due and payable as a result of the royalty payment. "Net proceeds of Sale" is defined as the ....
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....id specification shall constitute material breach of the Agreement and be ground for immediate termination. Licensor shall have the right to change, alter, amend the specification. Licencee shall permit the licensor to enter and inspect the Licensee's relevant plant and business premises for the purpose of determining if the products conform to the quality standards. 8.1 From the salient features, it is clear that licensor has complete, total and comprehensive control on the technical know-how, production facilities, auditing of plant and business premises, manufacturing process and specification of the products, to name some of the aspects of the agreement. Now the question which arises is whether the royalty payment is a condition of sale of the imported goods. Rule 10(i)(c) states that royally will be includible in the value if payments are made directly or indirectly, as a condition of the sale of the imported goods. The argument of the Counsel is that royalty is linked to the sale of the finished goods. We find that although the in the Agreement the appellant is free to procure the material i.e. maize from any other source, the fact is that during the period of dispute....
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....tice states that the supplier and appellant are subsidiaries of Con Agra Foods Inc. USA. The three entities i.e. licensor, supplier and the appellant are related in terms of Rule 4 of the Customs Valuation Rules. In any case as we have elaborated above, the licensor is having effective control on the quality of the goods being sent by the supplier and the value of the imported maize is definitely included in the sale proceeds of the products made by the appellant i.e. popcorn. Thus royalty is paid as a condition of sale of the imported goods. 8.4 On the invocation of extended time period in respect of demand of duty on royalty, ld. Counsel relied on decision of the CESTAT in Star Entertainment final order No. A/158-159/14/CSTB/C-I, dated 22-1-2014 which was affirmed by the Hon'ble Bombay High Court [2015-TIOL-493-HC-MUM]. We have seen this order and find that the demand for extended time period was set aside on the ground that there was confusion in the matter prior to the decision of the Hon'ble High Court in the case of Living Media India Ltd. [2011 (271) E.L.T. 3 (S.C.).] In the case of the Living Media the issue was regarding royalties paid as licence fees for acquiring....