2016 (9) TMI 318

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....en ("H&M GBC") holding 99% of equity shares of the applicant and M/s H&M Hennes & Mauritz International AB, Sweden ("H&M AB") holding the remaining 1% shares of the applicant. Applicant is in the process of setting up its business of single brand retail trading of various products viz. Clothes and Apparel, Footwear, Cosmetics and Accessories, Handbags, Home furnishing products, Children Products, Outdoor utility products etc. under the brand "H&M". H&M AB, resident in Stockholm, Sweden, is the parent company of the H&M group of related entities. H&M AB currently operates as the centralized administrative entity of the global H&M operation and is the owner of all H&M intellectual property related to the H&M brand and trademarks. H&M AB&#8223....

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.... market and sell the said goods in India on the basis of commercial arrangements with H&M GBC. In this regard, for the sale of goods in India and using the H&M concept and brand, the applicant has entered into three separate Agreements with H&M GBC, which are explained hereunder:- a. Foreign Collaboration and Sub-License Agreement: Applicant has entered into a Foreign Collaboration and Sub-License Agreement with H&M GBC dated 01.04.2014 for obtaining rights to exploit "H&M‟ brand for sale of goods in India. The consideration for this agreement will form part of the Trademark License Agreement and a consolidated consideration will be paid by the applicant to H&M GBC for both the Agreements. b. Trademark License Agreem....

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....nd apart from the payment in terms of the said invoices, no other payment will be made by the applicant or by anybody else on behalf of the applicant to the said third party manufacturers for the said goods. 5. Applicant has raised following questions for rulings by this Authority; A. Whether the value on the invoice raised by the overseas third party manufacturer on the applicant is the Transaction Value and on which Customs Duty is required to be paid in terms of Section 14 of the Act read with the Customs Valuation (Determination of Values of Imported Goods) Rules, 2007? B. Whether the Trade Mark/ License Fee and the payment made in terms of the foreign collaboration agreement by the applicant to H&M GBC does not qua....

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....lers to the applicant; that Rule 10 (i) ( c) of the Valuation Rules prescribe that royalties and license fee paid by the buyer of the goods, directly or indirectly, as a condition of sale, is includible in the Transaction Value; that therefore, for inclusion of royalties and license fee, it must clearly be established to be a "condition of sale‟ of the goods; that in the present case, import of the said goods from overseas third party manufacturers and payments of Trademark License fee by the applicant to H&M GBC are independent transactions; that in view of the aforesaid, since payment of Trademark Licenses fee by the appellant to H&M GBC is not a condition of sale of said goods by the overseas third party manufacturers to the applic....

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....is mutandis applicable to the payment of sale and business support fee. 9. Revenue submits that as a matter of abundant precaution, the possibility of any Agreement between the third party manufacturers and H&M GBC needs to be enquired into whereby the third party manufacturers might have agreed to supply the goods to only such party who enters into an Agreement with the H&M GBC under the Foreign Collaboration Agreement and the Trademark License Agreement. However, during hearing of this case, it was made clear on behalf of the applicant that there is no Agreement between third party manufacturers and H & M GBC. The role of H &M GBC is only restricted to indentifying independent third party manufacturers. 10. In view of the above, the....