"IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH, COURT NO. IV Customs Appeal No. 53091 of 2014 [Arising out of Order-in-Appeal No. CC(A) Cus/I & G/310/2014 dated 17.02.2014 passed by the Commissioner of Customs (Appeals), New Delhi] Commissioner of Customs Appellants New Delhi Vs. M/s. SICPA India Ltd. Respondent Appearance: Dr. S.K. Sheoram, AR for the Appellants Shri S Vasudevan, Advocate for the Respondent CORAM: Hon'ble Shri Ashok Jindal, Member (Judicial) Hon'ble Mr. V Padmanabhan, Member (Technical) Date of Hearing / decision: 15. 12.2016 FINAL ORDER NO. 56373 /2016 Per Ashok Jindal : Revenue is in appeal against the impugned order. The facts of the case are as under:- “1. Special Valuation Branch, New Customs House, New Delhi took up the case of valuations of goods imported by M/s. SICPA India Pvt. Ltd., 308-312, Mercantile House 15, KG Marg, New Delhi -110001- (IEC No. 0292005407 and PAN 2 AADCS6121L) (hereinafter referred to as “the Importer”) from different group companied of SCPA Holding SA, Switzerland and vide order in original No. 14/UG/98 dated 13.5.1998, the then Assistant Commissioner, SVB, New Delhi held that the Importer and the overseas suppliers were related persons in terms of Rule 2(2) of the Customs (Determination of Price of Imported Goods ) Rules, 1988, however, the prices declared by the Importer for assessment of the imported goods to duty were not influenced by the relationship. He ordered that the price declared by the importer in the import invoice in respect of imports made from these suppliers be accepted as transaction value in terms of Rule 4(3)(a) of the said Rules. This branch in periodical review of Order dated 13.5.1998 vide Order No. SVB /Cus/Review/ RMY/15/2010 ordered for continuation of operation of order dated 13.5.1998 for a further period of three years. 2. As the order dated 21.10.2010 neared completion of its three years’ run, this branch started the process of renewal of the said order and directed the Importer to submit their reply to SVB questionnaire and other documents to show fairness of their declared invoice values in respect of goods imported by their company from their related foreign suppliers. This branch also asked the importer to state whether there was any change in the pricing policy of their related foreign suppliers / equity structure of their company. ” 2. The respondent submitted various documents in reply to the questionnaire and thereafter it was held that the transaction value is to be enhanced by 5% on account of royalty being paid by the respondent to the related party for the goods manufactured in India. The said order 3 was challenged by the respondent before the learned Commissioner (Appeals) who set aside the order of enhancement of providing technical know-how and for the said technical know-how, the appellant has paid lump sum of SFr.525,000.00 (five hundred and twentyfive thousand swiss francs) to the foreign party and they were given the rights to use the license and to pay the royalty at the rate of 5% on the end sale of all the products and parts thereof manufactured and sold in India. Therefore, it is submitted that the respondent is paying royalty to their foreign supplier for manufacturing the goods in India and for the imported goods in India. In that circumstances, the amount paid on account of royalty is not liable to be included in the value of imported goods. He also submitted that initially the respondents entered into an agreement in January, 1991 and after examining their agreement the transaction value was accepted by Special Valuation Branch till 2010 and there is no change in the terms of the agreement and same has been disputed in the year 2010. Leaned Commissioner (Appeals) has examined the issue in detail and arrived at a decision that the value is not required to be added. In that circumstances, impugned order is to be upheld. He also relied on the decision of Brembo Brake India P Ltd. vs. CC (Imports) Mumbai [ 2014 (302) ELT 551 (Tri-Mum)]. 3. Heard the parties. Considered the submissions. 4. The sole case of the Revenue is that as respondent is paying the royalty of 5% on the goods manufactured in India to their foreign 4 supplier, the same is required to be added in the assessable value of imported goods as per Rule10(1)(c) of the Customs Valuation (Determination of value) of imported goods Rules, 2007. 5. We have gone through the observations made by the learned Commissioner in the impugned order which are reproduced herein as under: “7. Regarding pricing policy of the Foreign Suppliers, the importer has submitted a copy of price list. The Importer has also submitted self-certificate signed by the Vice President (Technical) and informed that the prices are finalized after detailed negotiation from time to time considering various factors like market condition etc. The sale and purchase of goods were made on principal to principal basis at arm’s length and independent of any interest. No extra consideration except the price of goods has been charged. The goods supplied are purely based on international trade usage and the price offered is the sole consideration for the sale of goods. 8. In order to examine values of imported goods and compare the values with the value of Identical/ Similar goods, this branch asked the Importer to submit as to whether the Foreign Suppliers are supplying any identical/similar goods to any other buyer in India and if yes, to submit a comparison of import prices. The importer has submitted that the Foreign Suppliers have not supplied any identical/similar goods to any other importer in India. 9. The importer has also submitted that product imported/manufactured by them is Hightech security inks mostly 5 used for printing banknote by Govt. authorized presses namely; Bhartiya Reserve Bank Note Mudran Private Limited ( a wholly owned subsidiary of the Reserve Bank of India) and Security Printing & Mining Corporation India Limited ( a wholly owned by Ministry of Finance, Govt. of India). Being Hitech Product and to keep the secrecy, raw material sourced from associate companies.” 6. We have also gone through the provisions of said Rule which are reproduced hereinas under: Rule 10(1)(c). - Royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; The following explanation has been added to Rule 10(l)(c). “Where the royalty, licence fee or any other payment for a process, whether patented or otherwise, is includible referred to in clauses (c) and (e) such charges shall be added to the price actually paid or payable for the imported good, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods”. From the said provisions, it is very much clear that royalty under the said Rule can be included in the assessable value if in case of imported goods, it is the condition of sale. And as per the explanation, royalty would be includable in the case even after the imported goods have undergone the process after importation of said 6 goods. In this case from the facts of this case, it is clear that the respondent is paying royalty to their foreign supplier for the manufacturing of goods under their license in India. The same cannot be termed as royalty paid for the imported goods. Same view was taken by this Tribunal in the case of Brembo Brake India P Ltd (supra) wherein this Tribunal has observed as under: “And the explanation only added that such royalty would be includable in the case even if the imported goods have underegone the said process after importation of such goods. The department could not show that the royalty and other charges were for the imported goods and they were as a condition of sale of such imported goods. Undisputedly the royalty on technical know how was paid only for the manufacture sub-assembly of Dis Brake Systems. Therefore, the royalty and other charges are not includible and the impugned orders is not sustainable and is set aside. The appeal is allowed.” 7. In that circumstances, we do not find any infirmity in the impugned order, same is upheld. The appeal filed by the Revenue is dismissed. (pronounced in the open court ) ( Ashok Jindal ) Member(Judicial) ( V. Padmanabhan ) Member(Technical) ss 7 "