TaxTMI 
TaxTMI 
2008 (2) TMI 231
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....oreign collaborator. In consideration for the transfer of technical know-how, the appellant was to pay a lumpsum amount of US $ 1 lakh and a royalty of 5% for a period of 8 years to the collaborator. The royalty was to be calculated on net ex-works selling price. They procured the raw material i.e. base oils and concentrate from their foreign collaborator and since they were 100% subsidiary of the foreign collaborator, they were considered as a related buyer and accordingly various information was sought from them to ascertain whether the price at which the raw material was procured was influenced by the relationship between the two or not. After seeking the necessary information the lower adjudicating authority held that the company ....
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....price of the imported goods and therefore the same cannot be added to the price of the imported goods for the purpose of determining the value under Section 14. It is against this order that the appellant is before us in appeal. 2. The learned advocate for the appellant took us to the clause of the agreement entered into by the appellant with its collaborator particularly clause 4 regarding procurement of products and components. Clause 4.1, 4.2 and 4.3 are reproduced as under:- "4. Procurement of PRODUCTS RAW MATERIALS and components 4.1 Licensee shall purchase CONCENTRATES from ELF or from a source recommended by ELF shall be at the best possible prices and terms of sale in force at the date of delivery. ....
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.... US $ 1 lakh and a royalty of the 5% of the net sales made by the appellant from the date of agreement for a period of 8 years with a condition that the total payment for lumpsum and royalty should be equal to but shall not exceed 8% of the net sales for a period ending 8 years from the effective date. The lumpsum was required to be paid in two instalments, the first instalment of 50% was to be paid within 30 days from the end of 3rd year and the other 50% within 30 days of the end of 4th year. The entire payment was related to the supply of technical know-how for the manufacture of finished goods and has nothing to do with the supply of raw materials and once the Commissioner (Appeals) has himself held that the royalty of 5% relate t....
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.... same from source other than their collaborator provided it meets the specifications laid down by them for the manufacture of the final products. There is no condition in the sale agreement that the raw materials will not be sold unless and until the technical know-how is procured from them and royalty on the finished product is also paid. The lower authority has given a finding that the appellant were procuring similar items from other sources at same price. This has not been contradicted by the Commissioner (Appeals) in his order. These facts clearly establish that the supply of raw material was not linked with the supply of technical know how and further the price at which the raw material i.e. concentrates and base oil were suppli....