TMI Blog1993 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... process and engineering designs and drawings, documents, process know-how and secret formula. Besides the appellants pay to their collaborators royalty at the rate of 4 per cent of net and ex-factory sale prices minus excise duty arid the landed cost and the imported components and standard bought out components for 5 years. As per Clause 22 of the Agreement, this Swiss firm holds 24.9% of the paid up equity share capital in the appellant company. The Assistant Collector has held that this is a case of special relationship between the appellants and their overseas suppliers and among the grounds for reaching this conclusion are (a) failure of the appellants to supply important documents like price lists, procurement prices at which most of the items were procured by their collaborators from others, purchase orders, order acceptance and letter of credit etc., which were essential for proving the truth and accuracy of the statements, information and declarations made by the appellants from time to time for the purpose of determining the prices of imported goods in accordance with Customs Valuation Rules, 1963 as well as Customs Valuation (Determination of Price of Imported Goods) Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erox is not correct. It is true that these decisions related to Customs Valuation Rules, 1963, but even the new Valuation Rules (The 1988 Rules) have to be consistent with the provisions of Section 14(1) of the Customs Act, 1962 and these provisions continued to be materially the same before and after change in the Rules. The appellants have also questioned the conclusions of Collector (Appeals) about furnishing 80% of the information. They have also questioned the conclusion of the Collector about the relevance of the procurement prices of M/s. Trafag AG for the purpose of determining the assessable value of the goods. The appellants have also contested the order on the ground that Rule 8 was not applicable and the loading of values determined by the Assistant Collector was arbitrary. 5. Arguing on the appeal, Shri P.A.S. Rao, the learned Counsel for the appellants submitted that the mere holding of 24.9% equity by the Swiss company - the suppliers of the goods - and their representation on the Board of Directors of the appellant-company did not constitute mutuality of interest . This is what has been decided by the Tribunal in the case of Collector of Customs, Bombay v. Maruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reliance on the following decisions in support of his contention that this could not be considered to be a case of related persons and Rule 2(2)(iv) was not applicable at all :- (a) Collector of Customs v. Modi Xerox Ltd. - 1990 (48) E.L.T. 141 (Tribunal) (b) Dynamic Hydraulics Ltd. v. Collector of Customs - 1990 (50) E.L.T. 85 (Tribunal) (c) Sanjaya Chandiram v. Collector of Customs - 1991 (52) E.L.T. 413 (Tribunal) (d) Shyam Antenna Electricals Ltd. v. Collector of Customs - 1991 (53) E.L.T 133 (Tribunal) (e) Union of India v. Mahindra Mahindra Ltd., - 1991 (55) E.L.T. 15 Bombay H.C. (f) Vellore Roller Flour Mills Private Ltd. v. Collector of Customs 1991 (56) E.L.T. 659 (Tribunal) (g) Collector of Customs v. Nippon Bearings (P) Ltd. - 1991 (55) E.L.T. 68 (Tribunal). 8. Replying, Shri Rao submitted that 24.9% equity shareholding of the collaborators in the appellant - Company had entitled them to the appointment of two non-executive Directors, and on the basis of the rights given to them, these two Directors could not exercise any power for passing any special resolution in terms of Section 189 of the Companies Act, 1956, the requirement of which is that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The position becomes quite clear from the following extract of the decision in this case :- 4. It is, no doubt, correct that Suzuki held 26% shares in Maruti and, for that reason, had a proportional representation on the Board of Directors of Maruti also. But Maruti had no shareholding in Suzuki nor any representation on the Board of Directors of Suzuki. To rule out valuation under Section 14(1)(a), the seller and the buyer should have interest in the business of each other". One-sided interest is therefore, not enough; there has to be a mutuality of interest and Maruti is right in pleading that such mutuality of interest did not exist [1984 (17) E.L.T. 323 (S.C.)] - Union of India Others v. Atic Industries Ltd..............." 10. Bombay High Court judgment in the case of Mahindra Mahindra (supra) makes it cleat that as long as the payment of royalty had no nexus with the import of the goods but with the purchase of technical know-how etc., there was no justification for loading of values for the imports from the Collaborators. The relevant portion of this judgment is as under :- 13..........................We, therefore, find considerable merit in the submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to Indian taxes for a period of 5 years from the date of commencement of production, but may be extended to 10 years or more subject the approval of Government of India. The royalty is calculated on the basis of net ex-factory sales price of the products minus excise duty, landed cost of the imported components and standard bought out components and used in the manufacture of the controls sold.... 12. This agreement does not stipulate that it is necessary to import components etc. from the collaborators. The learned Counsel had stated at the hearing that neither the collaborators are bound to sell nor are the appellants bound to buy components etc. from them. There is, therefore, no link between the value of imports from the collaborators and the payment of licence fees and royalty to them. In the absence of any nexus between the two, it would not be correct to reject the invoice value of the goods supplied by the collaborators even if they were obtained by them from third parties for supplying to the appellants. The absence of a Price List also could not be held against them; nor could any adverse presumption be drawn from that fact. 13. The learned JCDR had referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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