The assessee was engaged in manufacture of goods in respect of which they had entered into a ‘Technology Transfer Agreement’ with ‘C’ & INC overseas entities. The assessee was clearing semi-finished goods, i.e., Billets/Bars from their ‘M’ Unit to ‘R’ Unit where they were further processed and cleared to the market.
For the technology transfer, assessee had paid a fixed technology transfer fee and they were also paying running royalty at rate of 3.4 to 3.9 per cent of the net sale value of licensed products.
The assessee’s case was that running royalty was not includible in the value for the purpose of assessment under rule 8 of the Central Excise Valuation Rules because it was a case of payment of royalty on sales and not in respect of manufacturing activity.
The revenue authorities rejected assessee’s claim.
On appeal: Whether in view of fact running royalty was not in nature of brand or IPR but in nature of technology transfer fee for purpose of costing specialty Alloy, same was includible in assessable value of goods, i.e., blooms/bars cleared by assessee – Held, yes
Citation: [2018] 93 taxmann.com 345 (Mumbai)