TMI Blog2009 (3) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and highlighter. Mr. Umesh K. Modi of India and M/s. MERZ KRELL GmbH Co. started a joint venture company by name M/s. Modi Senator India Pvt. Ltd. (the present appellant) each of them holding 50% equity in the said venture company. The object of the joint venture was to undertake marketing, distribution, assembling, decoration, printing, packaging, promotion and retail sales in India, Sri Lanka, Bangladesh, Nepal, and Bhutan of the writing materials produced with the current/future know-how of M/s. Merz Krell. (b) It has been agreed that there shall be six Directors in the joint venture company and three of them will be nominated by the German Company and three nominated by Shri Modi. (c) The German Company is required to supply goods at the lowest of prices as applicable to their customers at different parts of the world. (d) They are also required to transfer technical know-how in terms of technical know-how agreement . In turn, the joint venture company was required to pay 1 million US $ in eight installments. After payment of a few installments, the balance installments have been waived by the German company. (e) The appellants imported a consignment and filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they should be officers or Directors of one another s business. This is not satisfied since there are no Directors of the appellants in the German Company. (b) The appellants and the German Company have no interest in the business of each other. The appellants and the German Company are not legally recognised partners in business. (c) There is no one person who controls or holds 5% of the outstanding voting stock of both of them. There is no direct or indirect control by one over the other; German Company is not legally or operationally in a position to exercise restraint or direction over the appellant as required in the interpretative Notes. (d) In any event, relationship did not influence the price. (e) Rule 7(3)(a) further lays down that the value can also be based on the unit price of imported goods sold after processing in accordance with the greatest aggregate quantity in India sold to unrelated persons. This point was canvassed before the Commissioner but he has declined to entertain the ground holding that prior to remand this argument was not taken. (f) Rule 8 of the Customs Valuation Rules, 1988 lays down that no value can be based on the price of goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant company. All this would imply that the German company and the appellant have interest in the business of each other. The German company is entitled to dividends for the shares invested by them. The Indian company wants German company to grow so that the costing will be reduced. The interest of each on the other should not be restricted to merely pecuniary interest but also other interest. 6.2 Mutuality of interest exists as mentioned above. However, from 11-5-02 one sided interest is also enough to treat them as related in view of amendment of Section 14 of the Customs Act. 6.3 No import of identical goods or similar goods noticed. Further since the appellants held exclusive rights for import, there are no imports by the third parties and no third party price is available. The appellant has not produced cost construction from the parent company of Germany so as to enable invocation of Rule 7(a) of the Valuation Rules. The imported components are assembled and sold. They are not sold as such. Under these circumstances, invocation of Rule 7 may not be feasible. 6.4 The sales made by German supplier were only to their other related concerns referred to as subsidiaries. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of [international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. The Section 14 of the Customs Act period with effect from 11-5-2002 to 10-10-2007 Section 14. Valuation of goods for purposes of assessment. - (1) For the purpose of [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of [international trade, where - (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale]. 8.2 Section 14, as it stood prior to 11-5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the buyer and the seller to disregard the transaction value. 9.1 In the present case, the German based company is no doubt a shareholder of the Indian company; they also have their nominees as Directors on the appellant company who is the importer. In other words, the importer is controlled by the nominee directors of German company and those of the Indian partner who are in equal numbers in the Board of Directors of the appellant company. On perusal of the records, we do not find any evidence of interest of the Indian company in the business of German supplier as they do not hold any share in the German company and there are no Directors of the appellants in the German Company. The appellants and the German Company are not legally recognised partners in business. As the German Company and the Indian joint venture partner has equal number of directors in the Board of the Indian company, we hold that the German company is not legally or operationally in a position to exercise restraint or direction over the appellant as required in the interpretative Notes. 9.2 As per the definition of related person under Section 14, there should be two-way interest to disregard the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission that Rule 2(2)(iv) of the Valuation Rules are not applicable in the absence of any ownership of shares of 5% or more by third party in both the buyer and the supplier as upheld by the Tribunal in the cases of Barbour Vardhaman Thread Ltd. v. Commissioner of Customs, Delhi - 2004 (177) E.L.T. 966 (Tri - Del.) and Commissioner of Customs, Mumbai v. Modi GBC Ltd. - 1999 (114) E.L.T. 931 (Tri.) 10. From the above, the following emerges : (a) The two way interest between the buyer and the seller is a must to disregard the transaction value both before 11-5-2002 and from 11-5-2002 to 10-10-2007. (b) The interest of the German company in the business of appellant company is established in view of its shareholding, presence of Directors and supply of technical know-how for manufacture of products by the appellant company. There is no evidence of interest of the appellant company in the business of the German company. (c) There is no third party controlling both the buyer and the seller. The buyer and the seller do not together control any third party. (d) As the relationship is not established there is no need to go into other issues. 11. As there are no grounds for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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