TaxTMI 
TaxTMI 
TaxTMI 
2008 (10) TMI 140
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....ent entered into with the foreign collaborator the Indian company was required to pay royalty at the rate of 15% at the retail sale price of the goods to the foreign supplier. Since the importer was a 100% subsidiary company, it was considered as a related person and the royalty payable by it to the supplier was considered to be as a condition of sale and therefore required to be included in the declared invoice value to the extent of royalty amount for which a show cause notice was issued to the appellants and adjudicated by the Dy. Commissioner, who held that the value of the goods imported by the appellant is to be loaded by 15% as per Rule 9(1)(c) of Customs Valuation Rules and this order was upheld in appeal by the Commissioner (Appeal....
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....antity of CD sold in India and not on the basis of quantity imported. Thus, royalty payment forms a component of value when the subject CDs are sold in India and not a component of assessable value at the time of import of aforesaid goods. He then took us to the relevant Para 6 and 7 of the agreement of foreign supplier which reads as under :- "Clause 6-ROYALTIES A. In consideration of the rights granted to Licensee and the services rendered by Licensor hereunder. Licensee shall pay to Licensor royalties at the rates set forth in the Schedule to this Agreement, which rates may be amended from time to time by written notice from Licensor to Licensee. Licensor shall additionally have the right to require payment of a higher royalty rate for....
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....luding Record(s) reshipped after return less Record(s) returned PROVIDE THAT the number of total Record(s) returned shall not in any event exceed ten percent (10%) of each specific record item shipped.) E. ......... "Clause 7 - COPYRIGHT OF COMPOSITIONS AND TEXTS A. Licensee undertakes that it will pay all applicable copyright fees and/or royalties to copyright proprietors of the relevant collecting agencies with respect of all Record(s) manufactured by or for Licensee and distributed pursuant to this Agreement, and Licensee agrees to indemnify and hold Licensor free and harmless with respect to any claims, damages, costs or expenses (including reasonable attorney's fees) incurred by reason of Licensee's failure to do so. It is Licensee'....
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.... and fees are not included in the price actually paid or payable." He then invited attention to interpretation note to Rule 9(1)(c) which reads as under :- 9(1)(c)-1)................... (c) Payment made by the buyer for the right to distribute or resale the imported goods shall not be added to the price actually paid or payable for the imported goods if such payments are not a condition of sale for export to the country of importation of the imported goods." 5. It was accordingly submitted that in their case they are paying royalty only for acquiring the right of distribution and resale and therefore the royalty is not liable to be included in the transaction value as per Rule 9(1)(c). Reference in this regard was invited to Tribunal's d....
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....hita Television and Audio (I) Ltd. - 2007 (211) E.L.T. 200 (S.C.) wherein a royalty at the rate of 3% was payable on the sales turnover of the final product which included the cost of the imported component and it was inferred that since royalty was on the cost of imported components also it became a condition of sale of finished goods. 7. We have considered the submissions. We find that in this case there is no dispute that the cassette under question is a pre-recorded cassette and not unrecorded cassette. Such cassettes carry the music, song of artist who have a right over the song/music. Clause (6) makes it clear that royalty payment is towards the money to be paid to artist and producer who have produced such cassette. We further note ....