TaxTMI 
TaxTMI 
2017 (4) TMI 423
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....ating 8419 of the first schedule to Central Excise Tariff Act, 1985. During scrutiny of records of the Appellant it was found that in terms of licensing agreement dated 03.07.2000 between M/s Euro Apex BV and M/s Bharat Apex Industries ltd. M/s Bharat Apex Industries had paid an amount of US$ 54719 equivalent to Rs. 25,84,817/- in consideration of the technical assistance and know-how for manufacture of heat exchangers. M/s Bharat Apex Industries also paid a royalty of Rs. 11,31,638/- to M/s Euro Apex BV, their foreign collaborator, in terms of licensing agreement dated 03.07.2000 between M/s Euro Apex BV and M/s Bharat Apex Industries. M/s Bharat Apex Industries with the help of technical know-how of foreign collaborator gets the orders fr....
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....s for the royalty amount, he stated that royalty has been paid by the customers i.e. M/s Bharat Apex Industries to their foreign collaborators as share of profit in return for using their goodwill in marketing their products. This payment has no bearing on the product manufactured by them for M/s Bharat Apex. This cannot therefore be treated as extra consideration for the manufacture of final product sold to M/s Bharat Apex Industries. 5. The Ld. AR submitted that the cost of design and drawings form additional consideration in relation to the manufacture of the goods. He added that the issue was no longer res integra and had been settled by the Hon'ble Supreme Court in the case of Commissioner Central Excise, Belgaum Vs. Mysore Kirloska....
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....l of the agreement for supply of machine. It is well to remember that each clearance is an assessment based on a separate contract and a contract price would normally be the value assessable goods. The order passed by the Commissioner does not indicate that no machines were subsequently manufactured by the respondent after using drawings, designs, jigs, fixtures, tooling etc. supplied by the ITC. Therefore, loading of the entire amount of Rs. 43 lakhs without such a finding and recovery of duty thereon was not permissible at all." 8. In the licensing agreement dt. 03.07.2000 between the appellants (as licensee) and M/s Euro Apex B.V. (as licensor), we find that the following clauses establish the nexus between the technical know-how incl....
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.... 3.1 In consideration of the technical assistance and know-how for manufacture of the product, the Licensee agrees to make payment of Euro equivalent to USD 54,719 subject to taxes to the Licensor in the following manner." In fact, the agreement is not merely for design and drawings but a complete contract for technical know-how, royalty, training, sales assistance, supplies and even accounting audit of M/s Bharat Apex Industries Ltd. by public accountant selected by the licensor. Sh. A.P. Malhotra, CGM (Finance) of M/s Bharat Apex Industries Ltd. and also Manager (Finance & Accounts) in M/s Bachmaan Industries ltd. in his statement Dt. 21.03.2005, had, inter alia, admitted that with the help of technical know-how fee of Rs. 25,....
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....elied upon the case law of Pepsi Foods Ltd. Vs. Collector of Central Excise, Chandigarh. In that case, the royalty amount was collected by the assessee M/s Pepsi Food Ltd. from buyers (stock bottlers) for the use of trademark Lehar on soft drink beverages manufactured out of concentrate sold by the assessee. Realization of royalty was as important as the realization of the sale price of concentrate from the assessee s point of view. Bottlers were obliged to purchase the concentrate from assessee alone, use the trademark of assessee on bottled beverage in addition to trademark of Pepsico and comply with the instructions of assessee in regard to manufacture, sale and distribution of beverages. There thus existed an inextricable bond between t....
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....x Industries Ltd. on the ex-factory sales price of the product and the same is granted to the M/s Bharat Apex Industries Ltd. for an exclusive but non-transferable license and same is being paid by M/s Bharat Apex Industries Ltd. in connection with the marketing and sale of the product as per Para 10.2 of the agreement. There is no evidence that the burden of royalty is to be borne by the appellants. Same is therefore not includible in the assessable value of the goods. The facts of the Pepsi case are entirely different as there was integral link between the obligation of the bottlers to purchase the concentrate exclusively from the assessee and use of trademark of assessee subject to payment of royalty. 12. The case law of McDowell and ....