Estee Lauder P/l v Comprtroller-General of Customs
[1991] FCA 359
•28 JUNE 1991
Re: ESTEE LAUDER PTY. LIMITED
And: COMPTROLLER-GENERAL OF CUSTOMS AND ANOR
No. G611 of 1990
FED No. 359
Customs Duties
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)
CATCHWORDS
Customs Duties - applicant imports cosmetics from associated companies in other countries - applicant exclusive licensee of related company's trade mark - cosmetics bear trade mark on importation - applicant pays licence fees to licensor on sales of cosmetics in Australia whether imported or made locally - whether licence fees should be taken into account in determining price and thus "transaction value" of goods for purposes of assessing customs duty - whether licence fees "price related costs" - whether such fees payable directly or indirectly by the applicant to the licensor under the import sales transactions - whether only relationship of licence fees to imported goods insubstantial or incidental.
Customs Tariff Act 1987, s.13
Customs Act 1901, ss. 154, 157, 159, 161
HEARING
SYDNEY
#DATE 28:6:1991
Counsel for the Applicant: A. Robertson
Instructed by: Baker and McKenzie
Counsel for the Respondents: D.K. Catterns
Instructed by: Australian Government Solicitor
ORDER
The amount of customs duty payable upon the importation into Australia of a quantity of lipstick as shown on entry for home consumption No. IM.0047.0872E prepared on 19 February 1990 is to be assessed without reference to the terms of a licence agreement dated 1 February 1969 made between Estee Lauder Cosmetics Limited of Ontario, Canada and the applicant or the royalties payable thereunder.
The amount of customs duty payable upon the importation into Australia of a quantity of body lotion as shown on entry for home consumption No. 1M.0268.0533M prepared on 26 September 1990 is to be assessed without reference to the terms of a licence agreement dated 1 February 1969 made between Estee Lauder Cosmetics Limited of Ontario, Canada and the applicant or the royalties payable thereunder.
THE COURT ORDERS THAT:-
The respondents pay to the applicant its costs of the application.
There be liberty to apply.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.
JUDGE1
This re-amended application, brought under the Administrative Decisions (Judicial Review) Act 1977 and s.39B of the Judiciary Act 1903, raises questions concerning the construction of provisions of Division 2 of Part VIII of the Customs Act 1901. The Division is headed "Valuation of Imported Goods". The Division is made applicable to goods which have been imported into this country by the Customs Tariff Act 1987 s. 13 of which provides that the value of any goods for the purposes of the Tariff is the customs value of the goods ascertained or determined in accordance with Division 2 of Part VIII of the Customs Act ("the Act"). There is a dispute between the Comptroller and the applicant (formerly known as Estee Lauder Australia Pty. Limited) concerning the question whether certain royalties which are paid by the applicant to a related company in Canada should be taken into account in arriving at the value of goods imported by it. Two importations have been selected as examples of the transactions which regularly occur.
The entries for home consumption for each importation are in evidence. Entry number 1M.0047.0872E was prepared on 19 February 1990 in respect of an importation by the applicant of a quantity of lipstick (described as "lip-makeup"). The lipstick was imported from Hong Kong and the supplier was another related company. The other entry for home consumption was number 1M.0268.0533M and was in respect of a quantity of body lotion. The entry was prepared on 26 September 1990. It showed that the importation was from Canada and that the supplier was another Estee Lauder company. The lipstick and the body lotion were packed in containers which bore the words "Estee Lauder" which is a registered trade mark owned by Estee Lauder Cosmetics Limited which is a company incorporated in Canada.
In a licence agreement dated 1 February 1969 made between Estee Lauder Cosmetics Limited and the applicant, it was recited that the Canadian company, which was the licensor, had for many years been engaged in the business of manufacturing, developing, promoting, marketing and selling cosmetics and other like articles under the trade name and style "Estee Lauder" and under trade marks used exclusively in conjunction with that mark. It was next recited that the Canadian company was the owner in Australia of the rights to the trade mark "Estee Lauder" and other trade marks used solely in conjunction with that mark. It was then recited that the applicant had been permitted to use these various trade marks in conjunction with the manufacture, development, promotion, marketing and sale of "Estee Lauder" products in Australia without royalty or compensation. The recitals continued:-
"WHEREAS, LICENSEE (the applicant) is fully aware of the need to have continued use of the trade name and trademark "ESTEE LAUDER" to insure the continued success of its business in Australia and therefore desires to obtain rights to use the Australian trademark "ESTEE LAUDER" and such other dependent trademarks in connection with its business for the manufacture, development, promotion, marketing and sale of the PRODUCTS in Australia and to compensate LIMITED (the Canadian company) for such rights; and WHEREAS, LIMITED is willing to grant LICENSEE rights to the Australian trademark "ESTEE LAUDER" and the dependent trademarks upon the terms and conditions hereinafter specified;
By Article I(A) of the Agreement the Canadian company granted to the applicant for the term of the Agreement, which was of indefinite duration subject to termination as provided for in Article VII, the exclusive right and licence to manufacture, use and sell Estee Lauder products in Australia under the Australian trade mark "Estee Lauder" and all other Australian trade marks owned by the Canadian company. By Article II(A) it was provided that, in consideration of the rights "conveyed" to it, the applicant agreed to pay the Canadian company a royalty equal to three per cent of net sales (as later defined) of the products in Australia except that for the first two years of the Agreement, the royalty was to be two per cent of net sales.
Article II(B) defined net sales as follows:-
"'Net Sales'. For purposes of this Agreement and in particular for purposes of computing the payments to be made by LICENSEE hereunder, NET SALES shall mean the gross volume of sales of PRODUCTS by LICENSEE or its sublicensees under the TRADEMARK and the DEPENDENT TRADEMARKS, less commissions, returns and allowances, expressed in United States of America currency, converted at the official rate of exchange on the last day of the month in which the sale is made. Sales of PRODUCTS between persons related to or controlled, directly or indirectly, by LICENSEE are not to be included."
Article II(C) provided for payment which was to be made at convenient intervals. A minimum of $US500 was to be paid each quarter and the balance, if any, of any royalty due for each annual period of the agreement was to be paid on or before the fifteenth day of the second month following the end of the applicant's accounting period.
There were some other provisions which should be referred to but not in detail. Article III made provision for reports, the keeping of records and quality control. Article IV provided for promotion activities and required the Canadian company to co-operate in all advertising, promotion, and publicity in Australia.
Mr K.C. Mortlock is the Finance Director of the applicant. He said that the applicant carried on the business in Australia of manufacturing and selling, under the Estee Lauder trade mark and other associated marks, cosmetics, perfumes and similar goods made from raw materials some of which were imported.
Obviously raw materials do not bear the Estee Lauder trade mark at the time of acquisition. However, the applicant, as the two selected transactions in this case show, imports finished products which do bear the Estee Lauder trade mark. Of the goods so imported, the majority are sold by the applicant in Australia. But a small proportion of them is used by the applicant in promotional activities or given away by it as gifts, for example, to hospitals or other charitable institutions.
Mr Mortlock said that the applicant remits the royalty of 3 per cent which is payable to the Canadian Company each quarter. The remissions of royalty are based on the net sales of all goods sold bearing the Estee Lauder trade mark. No distinction is drawn between goods which have been manufactured in Australia and those which have been imported as finished products and bear the trade mark at the time of their importation. No payment is made in respect of goods which are not sold but which are used in promotional activities or given away. Mr Mortlock said that the lipstick and body lotion which are the subject of the entries for home consumption in question here bore the Estee Lauder trade mark at the time of their importation. The supplier of the body lotion imported from Canada and the supplier of the lipstick imported from Hong Kong were companies related both to the Canadian company and the applicant.
Mr R.J. Aquilina is a vice president of the Canadian Company. He said that the payments of royalty made by the applicants to the Canadian Company pursuant to Article II of the Licence Agreement were received and treated by it as royalty payments for the use of the trade mark. The payments were not received or treated by the Canadian company as payments or part of the payments for any goods bearing the Estee Lauder trade mark.
I can now come to Division 2 of Part VIII of the Act. Section 159 of the Act provides that, unless a contrary intention appears, the value of imported goods for the purposes of an Act imposing duty is their customs value and the Collector shall determine that customs value in accordance with s. 159. Where a collector can determine the transaction value of imported goods, their customs value is their transaction value.
Section 154 of the Act defines a number of expressions. "Customs Value" has the meaning given to it by s. 159. "Transaction Value" has the meaning given it by s. 161. That section provides that the transaction value of imported goods is an amount equal to the sum of their adjusted price in their import sales transaction and of their price related costs to the extent that those costs have not been taken into account in determining the price of the goods. The expression "adjusted price" is defined in subs. 161(2). It is not material to refer to the detail of the definition.
The expression "import sales transaction" is defined in s. 154 and means in this case the contract of sale for the importation of the goods into Australia.
The word "price" is defined in s. 154. The relevant parts of the definition are as follows:-
"'price', in relation to goods the subject of a contract of sale, means an amount determined by a Collector, after disregarding value unrelated matters in relation to those goods, to be the sum of:
(a) all payments that have been made, or are to be made, directly or indirectly, in relation to such goods, by or on behalf of the purchaser:
(i) to the vendor;
(ii) to any person related to the vendor unless a Collector is satisfied that the vendor has not derived and will not derive any direct or indirect benefit from the payment; or
(iii) to any other person for the direct or indirect benefit of the vendor;
in accordance with the contract of sale; and
(b) all payments that have been made, or are to be made, directly or indirectly, in relation to such goods, by or on behalf of the purchaser:
(i) to the vendor;
(ii) to any person related to the vendor unless a Collector is satisfied that the vendor has not derived and will not derive any direct benefit from the payment; or
(iii) to any other person for the direct or indirect benefit of the vendor;
under any other contract, agreement or arrangement, whether formal or informal, being a contract, agreement or arrangement for the doing of anything to increase the value of the goods or that a Collector is satisfied is so closely connected with the contract of sale referred to in paragraph (a) and to the goods the subject of that contract that together they form a single transaction;
whether the payment is made in money or by letter of credit, negotiable instrument or otherwise, and includes:
The expression "value unrelated matter" is defined in s.154 but the definition is not relevant to the matters here in question.
The other expression referred to in s. 161 which defines the transaction value of imported goods is "price related costs". That expression is defined in s. 154. The relevant part of the definition is as follows:
"'price related costs', means:
(e) all royalties or licence fees paid or payable, directly or indirectly, by or on behalf of the purchaser to the vendor or to another person under the import sales transaction, not being royalties or licence fees:
(i) that do not relate to the imported goods in the condition, or
substantially in the condition, in which they are imported into Australia;
(ii) whose only relationship to the imported goods in the condition in which they are imported into
Australia is insubstantial or
incidental;
(iii) that are merely for the right to reproduce the imported goods within Australia; or
(iv) that are payable for the assembly, erection, construction or
maintenance of imported goods after their importation into Australia or for any technical assistance in respect of the goods after their importation;"
It remains to refer to two further definitions. "Purchaser", in relation to imported goods, means the purchaser under the import sales transaction for the goods. "Royalty" has the meaning given it by s.157 which provides in subpara. (1)(b)(i), that a reference in Division 2 to a royalty includes a reference, inter alia, to an amount paid or credited to the extent to which the amount is paid or credited as consideration for the use of, or the right to use, a design or trade mark.
The submissions made on behalf of the Comptroller were that the amount of royalty payments to the Canadian company were to be taken into account in arriving at the transaction value of the goods either because they were part of their price or were "price related costs". It was said that they were part of the price because they fell within para. (b) of the definition of "price" in s. 154. It was said that they were part of the "price related costs" because they fell within para. (e) of the definition of that expression in s. 154 and were not excluded by subpara. (ii) of that paragraph. In the submission of counsel for the applicant the payments of royalty were not part of the price of the goods because the licence agreement was not an agreement for the selling of anything which increased the value of the goods or which a Collector could be satisfied was so closely connected with the contract of sale and to the goods that together they formed a single transaction. In relation to price related costs, counsel for the applicant submitted that, although the payments were of royalties, such royalties were not payable directly or indirectly by or on behalf of the purchaser, i.e. the applicant, to the vendor, i.e. the relevant Estee Lauder company, under the import sales transactions which are in question. Counsel further submitted that, if he were wrong about that submission, the case nevertheless fell within subpara. (e)(ii) of the definition because the royalties had only an insubstantial or incidental relationship to the imported goods in the condition in which they were imported.
In the course of the argument reference was made to what is described as a "Replacement Explanatory Memorandum" which was circulated to members of Parliament when the Customs and Excise Legislation Amendment Bill (No. 2) 1987 was being debated. In relation to para. (e) of the definition of import sales transaction, it was said (p 12) that the mischief to which paras. (d) and (e) were directed was known as "transaction split" whereby special or separate payments were made to the vendor, or a person related to the vendor for the benefit of the vendor, in respect of some specialist service which in reality formed part of the goods or added something of value to the goods. A number of examples were given none of which referred to a trade mark or any other mark or characterisation by which the goods might be identified. It was also said that the provisions were not intended to apply to services which had a merely incidental connection with the goods. In relation to royalties it was said (p 26):-
"... the definition of 'royalties' is wide. However, the definition in the Bill does not of itself operate to include a 'royalty' in the value of the imported goods. . royalties are included in the definition of 'price related costs' only insofar as they are '...in relation to the goods..' and only if they meet the stringent tests appearing in paragraph (e) of the definition. That provision has, as an essential pre-condition, the requirement that the royalty is paid or payable by or on behalf of the purchaser to the vendor or another person under the 'import sales transaction' and it expressly excludes from the customs value of the goods:
'...all royalties...
(i) that do not relate to the imported goods in the condition, or substantially in the condition, in which they are imported into Australia;
(ii) whose only relationship to the imported goods in the condition in which they are imported into Australia is insubstantial or incidental;
(iii) that are merely for the right to reproduce the imported goods into Australia'; or
(iv) are payable for post importation assembly, erection, construction, maintenance or technical assistance of the goods."
In the Explanatory Memorandum itself, which was circulated prior to the Replacement Explanatory Memorandum, reference was made to the amendment to s. 154 of the principal Act. Amongst other things it was said:-
"The mischief to which these amendments are directed concern certain practices known as 'transaction splitting' or 'payment separation'. The practices take various forms. Their common aim is to exclude certain payments or other consideration from the 'price' upon which the value for customs purposes is determined. Thus, in certain circumstances, payments are made or consideration supplied, pursuant to a transaction which is entered into separately from the contract of sale in which a service is performed for the purchaser in relation to the goods: the object of the transaction being to add value to the goods. Examples of such specialised services include: engineering; modifying the goods to comply with a standard in Australia; design modification; finishing; refurbishing and marketing services."
The Customs and Excise Legislation Amendment Bill (No. 2) 1987 became the Customs and Excise Legislation Amendment Act 1989. The Act was assented to on 5 May 1989 and, by s. 2, commenced on 1 July 1989. By s. 7 it replaced the existing Division 2 of Part VIII of the Act with a new Division 2 which is the Division to which I have referred and which applied to the importations here in question. In the submissions of both parties reference was made to the decision of the Full Court of this Court in LNC (Wholesale) Pty. Limited v Collector of Customs (1988) 17 FC.R. 154. The decision was based upon the provisions of Division 2 as it was prior to its being replaced by the 1989 amendments. Accordingly, the decision is of limited assistance in the resolution of the present case, but, with respect, I have found it helpful in the references made to the 1950 Convention on the Valuation of Goods for Customs Purposes and a number of United Kingdom and United States authorities; see pp 160-1. I would also adopt with respect the statement in the joint judgment of Davies and Einfeld JJ. to the effect that in calculating the value of goods for customs purposes, one should "take a practical commercial view of transactions" having regard to their substance rather than to their form; see p 164. Nevertheless, I think that the replacement of the entirety of the Division means that one should approach a problem of this kind with the language which Parliament has now adopted to the forefront of one's mind and regard as determinative only those authorities which may be said to have been decided on the same or similar language.
In his submissions, counsel for the Comptroller relied heavily upon the fact that the licence agreement conferred an exclusive licence on the applicant to sell the products in question in Australia under the Australian trade mark "Estee Lauder" and/or other Australian trade marks owned by the Canadian company. The fact that the licence also conferred the exclusive right to manufacture, use and sell the products in Australia did not detract from the fact that the licence agreement conferred the exclusive right to sell under those trade marks.
Counsel submitted that the very importation of goods for sale in Australia, the goods bearing a trade mark, constituted a use of the trade mark. Reference was made to a number of authorities but particularly to Re Registered Trade Mark "Yanx"; Ex parte Amalgamated Tobacco Corporation Limited (1951) 82 CLR 199 where Williams J. said (pp 204-5):-
"On principle and as a matter of common sense, however, it would seem that a mark is used as a trade mark in Australia if it is used here to designate the goods of a particular trader which are offered for sale in Australia under that mark whether the goods themselves are actually in Australia or not. The goods are put upon the Australian market whether they are in Australia awaiting delivery upon sale or they may have to be imported for delivery after sale. They are in either case actually a vendible article in the Australian market within the definition of Lord Westbury in M'Andrew v Bassett (1864) 10 LT (N.S.) 442, cited by Sir H.M. Cairns L.J. (as Lord Cairns then was) in Hogg v Maxwell (1867) 10 LT (NS) 442."
This dictum is applicable to the goods in question here as the selling of Estee Lauder products in Australia by the applicant was an ongoing affair and the importation of the goods that are the subject of this case were but instances of a business practice that had gone on since the licence agreement was entered into in 1969 and before.
Counsel's next step was to say that the goods in question would have been worth very little if they had not borne the Estee Lauder trade mark. It was the mark, so it was said, which gave them their value and made them marketable. In reality the mark was an integral part of what was imported. It was for the exclusive use of the mark that the royalty was paid. It followed, so the submission ran, that the royalty payments were part of the "price" of the goods (as defined in s.154) because the payments of royalty were made indirectly in relation to the goods by the purchaser to a person related to the vendor or to another person for the direct or indirect benefit of the vendor under another contract (the licence agreement) which was a contract, agreement or arrangement for the doing of something to increase the value of the goods or that a Collector could be satisfied was so closely connected with the contract of sale (the contract whereby the goods were imported) and to the goods the subject of that contract that together they formed a single transaction (see para. (b) of the definition of price in s.154).
The payments of royalty were said to be part of the "price related costs" (as defined in s.154) which were to be taken into account in order to ascertain "the transaction value" of the goods (see ss.159 and 161 of the Act) because the payments were amounts paid or payable for royalties, directly or indirectly, by the applicant "to another person", (i.e. a person other than the vendor or supplier of the goods) namely, the licensor, under the import sales transaction within the meaning of para. (e) of the definition of "price related goods".
Counsel for the applicant stressed the need, in relation to any of the relevant definitions, for there to be a substantial connection between the royalties payable under the licence agreement and the import sales transaction or the imported goods. Counsel put forward five factors as providing a reason why the necessary degree of connection was lacking. These were:-
1. The licence agreement was removed in time from the import transactions
2. The licence agreement did not relate specifically to the goods which were imported or any specific goods.
3. The royalties were calculated on sales in Australia by the importer, i.e. the applicant, not on sales by the exporter to the importer.
4. The licence agreement did not require the payment of royalties on all goods imported - only on goods which were sold.
5. The agreement applied to all goods sold by the applicant whether imported by it into Australia or manufactured by it here.
In addition to referring to the L.N.C. case, both counsel referred to some other authorities. None of these was decided in relation to the legislation in its present form. In Re Burroughs Limited and Collector of Customs (N.S.W.) (1985) 4 AAR 197 the Administrative Appeals Tribunal, when presided over by Davies J. of this Court, was concerned with the importation of computer equipment purchased from a related company. The applicant paid a licence fee to its United States holding company on its net sales of Burroughs' products. The Collector sought to include in "the transaction value" of the goods the licence fees paid by the applicant. This was rejected by the Tribunal. It held that the licence fees were payable, not for goods, but for information and services, were not collected on the sale price, but on the net selling price, and were not payable to the exporter.
A not dissimilar case was Ninette Trading Pty. Limited v Bates (1987) VR 431, a decision of Beach J. of the Supreme Court of Victoria. It was there held that the licence fees in question were not payable "in respect of goods to be valued" for customs purposes within the meaning of the then subs. 159(3) of the Act but were payable for the right to distribute or market the goods.
In Re The Ink Group Pty. Limited and Collector of Customs (1988) 9 AAR 350, another decision of the Administration Appeals Tribunal, the applicant imported transparencies used for the printing of greeting cards. The Comptroller contended that the price of the transparencies included a non-revocable advance royalty which was payable by the importer for the right to use the transparencies. It was held that the royalty payments were not made with respect to the acquisition of goods or the right to use them but for an entirely different reason, namely, the right to reproduce in a material form copyright material depicted upon the transparencies.
On no basis were the licence fees in the Burroughs and Ninette Trading cases paid in respect of the goods. That is sufficient to distinguish them from the present case quite apart from any point arising from the change in the applicable legislation. The Ink Group case is closer but the legislation was not the same. I think, as counsel for the Comptroller submitted, that what I must do is to go to the words which the statute presently uses and determine whether, upon their true construction and the proper construction of the licence agreement, the licence fees are properly to be regarded as part of the price or as "price related costs".
In reaching a conclusion, it is necessary to have in mind the provisions of subpara. (1)(b)(i) of s.157 which provides that a reference to a royalty includes a reference to an amount paid or credited to the extent to which it is paid or credited as consideration for the use of, or the right to use, a trade mark. The royalties here will be part of the price of the goods if they constitute payments made directly or indirectly "in relation to the goods" by or on behalf of the purchaser to the vendor under another contract or agreement which is either a contract or an agreement for the doing of something to increase the value of the goods or which a Collector is satisfied is so closely connected with the contract of sale and to the goods the subject of that contract that together they form a single transaction.
I have reached the conclusion that the Comptroller's case based on "price" cannot succeed. I do not think that the licence agreement is an agreement for the doing of something to increase the value of the goods. The basis for saying that it is derives from the fact that the Canadian company's trade mark was affixed to the goods when they were imported into Australia. The mark was not part of the goods but it identified them and characterised them as Estee Lauder products. I agree with counsel for the Comptroller that, if the goods had not borne the mark, they would have been of very much less value. But there is no evidence to establish that the invoiced prices of the goods did not take into account the fact that the goods were Estee Lauder products and thus constituted a true reflection of their value. Certainly this is not a case where the evidence discloses that any part of the return to the vendors of the goods was, directly or indirectly, in what the licensor received by way of royalty under the licence agreement.
The royalties will also be part of the price of the goods if it were open to a Collector to conclude that the licence agreement was so closely connected with the contracts of sale pursuant to which the goods were imported and to the goods that together they formed a single transaction. I do not think there is any basis for the taking of such a view. The licence agreement was made in 1969 and appointed the applicant exclusive licensee of the relevant trade marks in Australia. The agreement entitled the applicant to use the trade marks on goods manufactured in Australia as well as upon finished goods imported here. The applicant's manufacturing operations in Australia were and are extensive so that its sales comprise substantial quantities of cosmetics manufactured here in addition to those which are imported. Then there is the fact that the licence fees are calculated on sales. For this purpose locally manufactured cosmetics and imported cosmetics are treated indistinguishably. There is also the circumstance that not all goods imported or manufactured by the applicant are sold. Some are given away either in the course of promotions or for reasons not so directly connected with the applicant's advertising and marketing activities. All these factors lead, in my opinion, to the conclusion that it could not be correct to say that either of the contracts pursuant to which the goods were imported and the licence agreement together formed a single transaction.
The question, in relation to "price related costs", is, firstly, whether the royalties paid under the agreement are paid directly or indirectly by or on behalf of the purchaser to the vendor or to another person "under the import sales transaction". If they are, the further question arises whether the only relationship which the royalties have to the imported goods is insubstantial or incidental.
In order for the Comptroller to succeed, the royalties must be paid "under" each of the import sales transactions. "Under" in this context is synonymous with "pursuant to". In my opinion the royalties were not paid pursuant to either of the import sales transactions. The transactions stood separately and apart from the licence agreement which entitled the Canadian company to a royalty in respect of all sales - not imports or purchases - of Estee Lauder products. If I be wrong in this conclusion, then I do not think that the relationship of the royalties to the imported goods is otherwise than insubstantial or incidental. I do not think it possible to take any other view of the matter when one considers what is involved in the licence agreement and considers it in relation to the import transactions and the surrounding facts and circumstances.
The explanatory memoranda earlier referred to show that a principal purpose of the amendments which were made to the legislation in 1989 was to overcome what was referred to as "transaction split". To the extent that the new sections were designed to overcome the mischief of transaction splitting, it has to be said that no such considerations affected the transactions which are in question here. The evidence shows a long standing licence agreement and a continuing business relationship in which goods bearing the Estee Lauder trade marks were imported by the applicant and, independently of those importations, royalties being paid to the Canadian company. I mention this matter only because of the emphasis placed upon it in argument. I do not think it has any ultimate bearing on the outcome of the case because it would not be right to limit the operation of the provisions of the new Division 2 to transactions which, although not properly characterised as transaction splitting, nevertheless fell within the words of the relevant sections.
In the result neither the Comptroller nor the Collector was, in my opinion, entitled to take into account the royalties paid by the applicant to the Canadian company when the transaction values of the goods were assessed. The applicant is thus entitled to succeed. In its application it claimed injunctive as well as declaratory relief. I do not think this is a case where it is appropriate to grant injunctive relief. The applicant will be sufficiently protected by the making of appropriate declarations. The respondents are to pay the applicant its costs of the application.
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