TaxTMI 
TaxTMI 
2016 (9) TMI 569
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....s enhanced by royalty equal to 3% of the importer's selling price of the licensed products defined in the license agreement dated 01/04/2007 under Rule 4 read with Rule 9 (1) (c) of the Customs Valuation Rules, 2007 for the period from 10/10/2007 till expiry of three years from the date of issue of orders. 1.1 Subsequently, M/s.HHPL approached for the periodical review of the said order-in-original dated 30/06/2008 and submitted the necessary documents and affidavit to the effect that there was no change in the invoicing pattern, etc. After examination of the facts, the Assistant Commissioner, GATT Valuation Cell, New Customs House observed as follows: 15. "I find that the importer has also submitted letter from the related supplier Husco International Ltd. UK wherein the Husco International Ltd. UK certified that the price charged in the invoices raised by Husco International Ltd. UK on M/s.Husco Hydraulics India Pvt. Ltd. For the supply of the goods are at international prices which are computed on the basis of all costs and representative profit. Hence, I find that the transaction value of the goods is acceptable under Rule 3 (3....
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.... before the Commissioner (Appeals). The Commissioner (Appeals) modified the order-in-original dated 07/08/2014 and held that there was no case for addition of royalty payment in assessable value of the goods under Rule 10 (1) (c) of the Customs Valuation Rules, 2007. Aggrieved by the said order, the Revenue has filed two appeals before the Tribunal. M/s.HHPL have also filed two cross objections. 2. The grounds of appeal in the Revenue's appeal are that the Commissioner (Appeals) has not stated as to how the decision of Hon'ble Apex Court in the case of Matushita Television & Audio Ltd. Vs. CC - 2007 (211) ELT 200 (SC) is not applicable. In the appeal it has been argued that the royalty is paid on the ex-factory sale price of goods and that includes the cost of imported components. It has been argued in the grounds of appeal that since the cost of imported components was included in the ex-factory sale of products it becomes condition of sale of finished goods. Thus in terms of decision of Hon'ble Apex Court in the case of Matushita Television & Audio Ltd.(supra) the royalty should be added to the transactin value. 2.1 The learned AR took us thr....
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.... case, no such direct evidence has been produced and thus, this case does not further the arguments of the learned AR. 2.4 The learned AR also relied on the decision of the Tribunal in the case of General Motors India Ltd. - 2009 (235) ELT 364 (T). In the said case also license fee was found not related to the imported goods and therefore, held to be not includable in the assessable value. Thus, this case also does not further the argument of the Revenue. 2.5 The learned AR also tried to distinguish the decisions relied upon by the Commissioner (Appeals) in the case of Ferodo India - 2008 (224) ELT 23 (SC). He argued that in the said case, the imported goods were not a licensed product and it is not clear if the running royalty was calculated on the value including the value of imported goods or not. 2.6 The learned AR also relied on the decision of the Tribunal in the case of MTR Foods Ltd. - 2010 (252) ELT 580 (Tri-Bang) and on the decision of the Hon'ble High Court of Delhi in the case of AGV Alfab Ltd. - 2011 (270) ELT 331 (Del). Relying on these decisions he argued that the principles of res judicata are applicable to th....
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....tion value under Rule 3 (3) (a) of the Customs Valuation Rules, 2007. Further, it includes the royalty payments solely for the reason that there are no change in condition of license agreement on the basis of which the earlier order dated 30/06/2008 was passed. He argued that it is improper to add any value to a transaction value accepted under Rule 3 (3) (a) of the Customs Valuation Rules, 2007. 3.2 The learned Counsel also argued that the Commissioner (Appeals) has rightly relied on the decision of the Apex Court in the case of Feroda India (supra) and in the case of Essar Steel (supra) to hold that the transaction value of the goods is acceptable under Rule 3 (3) (a) of the Customs Valuation Rules, 2007 and there is no case for addition of royalty value in assessable value. 4. We have gone through the rival submissions. We find that in the order-in-original dated 30/01/2014, the Assistant Commissioner, GATT Valuation Cell has specifically observed as follows: 15. "I find that the importer has also submitted letter from the related supplier Husco International Ltd. UK wherein the Husco International Ltd. UK certified that the price ch....
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....e appealed against by the party. Further, the importer has vide affidavit confirmed that they are following consistent invoicing pattern for the Husco group products being imported by them. Hence, in the light of the above facts and circumstances, I find that the issue of addition of the payment of royalty as per the said license agreement has attained finality and hence, I don't find any reason to interfere with the said order at this stage". 4.2 The purpose of entire exercise is to find the correct assessable value of the goods for the purpose of valuation under Customs Act. The order-in-original finds the transaction value of goods acceptable under Rule 3 (3) (a) of the Customs Valuation Rules, 2007 only implies that the transaction value is not influenced by relationship, if any. Rule 3 of the Customs Valuation Rules, 2007 reads as follows: 3. Determination of the method of valuation. - (1) Subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10; (2) Value of imported goods under sub-rule (1) shall be accepted : Provided that - (a) there are no restrictions as ....
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.... related parties. The order-in-original clearly holds that the transaction value is acceptable under Rule 3 (3) (a). Having held that the value of the goods can be determined under Rule 3 (1) read with Rule 12. 4.4 We find that the orders of assessment dated 30/06/2008 was accepted by the HHPL. The Revenue has argued that the principle of res judicata applies to the instant case as HHPL have accepted the said order. M/s.HHPL have relied on the decision of Tribunal on exact same issue in the case of Hewlett Packard reported in MANU/CC/0178/1998. Para 25 thereof has been reproduced in para 3 above. It is clear that in such cases the principle of res judicata does not apply. In both the cases relied by the Revenue the decision was accepted by Revenue and principle of res judicata was applied against Revenue. In this case it is other way round. Since the decision of Tribunal in the case of Hewlett Packard is in identical circumstances. Thus, we hold principle of res judicata does not apply in the instant case. 4.5 Now we examine the various case laws citied by both the sides. Revenue has heavily relied on t....
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.... case the one time know-how fee was paid for the installation of plant and machinery. The facts were substantially different from the facts in the case of Matushita Television & Audio Ltd. (supra). 4.8 In the instant case it is undisputed that the royalty is paid on a value inclusive of the value of the imported goods. Clause 5 of the Article of definition section of the license agreement defines net sale as follows: "This agreement is made and entered into as of this first day of April, 2007, by and between Husco International, Inc. a Delaware Corporation having offices in Waukesha, Wisconsin, USA (hereafter called "HUSCO") and HUSCO Hydraulics Private Ltd. Having its registered office at MIDC, Talegaon, Pune, Maharashtra, India (hereinafter called "the Licensee"). 1. Licensed Products shall be defined as all control valves, components and accessories manufactured or designed by HUSCO. 2. Patents shall be defined as any and all patents owned by HUSCO covering the Licensed Products in any of the countries of the Territory as hereinafter defined. 3. Trademarks shall be "HUSCO" 4. Territory shall be worldwide (non-exclusive) except for No....