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TMI Blog2006 (8) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... d components provided by M/s. PC USA and will service, test and install these products. Technical service fee was also to be paid by M/s. PIPL to M/s. PC USA for the period 1-10-1997 to 30-9-1998 @ US $ 25,000 per month in terms of technical service agreement between the two companies. A copy of the joint venture agreement dated 1-9-1997 has been filed and marked as annexure P-1. 4. On the basis of the documents and information provided by the respondent, the Dy. Commissioner of Customs, ICD, passed an order on 11-1-2001 for loading of 10% in the invoice value of the goods imported from M/s. PC, USA. As per the Department, M/s. PIPL, India and M/s. PC, USA are related persons in terms of Rules 2(2)(i) and 2(2)(iv) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (for short "the Rules") and this relationship had influenced the price of the imported goods. 5. Vide order dated 17-3-2004, the Commissioner of Customs (Appeals) Delhi-II passed in Appeal No. CCA/CST/74/D-II/2004 dismissed the appeal preferred by the respondents upholding the order dated 11-1-2001 passed by the Dy. Commissioner, ICD, TKD. The Commissioner held that as regards the relationsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have heard Mr. Harish Chandra, learned senior counsel, appearing for the appellant and Mr. Shyam Divan, learned senior counsel, appearing for the respondent. 8. Mr. Harish Chandra, learned senior counsel appearing for the appellant invited our attention to the orders passed by the Dy. Commissioner of Customs, Commissioner of Appeals and by the CESTAT. He also invited our attention to the 1988 Rules and submitted as under : (a) The impugned final order is not sustainable since the CESTAT has only interpreted half of the clause of control of foreign partner regarding the source of raw material from where the raw material was to be procured. The other half of the clause related to the pricing details i.e. the price of procurement has not been discussed much less adjudicated upon. (b) The Tribunal failed to appreciate that in this case the foreign company i.e. M/s. PC USA has the controlling interest in the respondent-Company since 75% of the equity shares are controlled by the foreign company and that it has its three of the four Directors in the Board of Directors of the respondent. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular, the purpose of agreement between the parties, financial participation, Management, Obligations of the first party and of the second party, Marketing, Competition, voting and arbitration etc. 10. Per contra, Mr. Shyam Divan, learned senior counsel appearing for the respondent drew our attention to the various clauses in the technical service agreement and submitted that the Customs Department was of the view that the respondent appeared to be a related person of the first party that is PC USA in terms of Rules 2(2)(i) and 2(2)(iv) of the Rules and that as per Rule 4(3)(a) of the Rules where the buyer and seller were related, the transaction value shall be accepted provided that the circumstances of the sale of imported goods indicate that the relationship did not influence the price. Hence, according to them the declared price could not be accepted as transaction value. Therefore, the appellant started enquiries in respect of the amount of US $ 2,58,000 paid in two instalments by the respondent PC USA. It was submitted that as per Article 11 para 2.1 of the Technical Service Agreement, the respondent had to pay a sum of US $ 25000 per month to M/s. PC USA. The appellant sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , being the consideration for technical know-how and was includible in the value of the imported goods in terms of Rule 9(l)(c) of the Rules. Since according to the adjudicating authority no separate break-up for consultation or training had been given by the respondent, the appellant was loaded to the import value worked out to 10% of the invoice value of the goods imported by the respondent from M/s. PC USA. 12. Aggrieved by the said order, the respondent filed appeal before the Commissioner of Customs (Appeals), New Delhi and canvassed many submissions. However, it was held that the respondent was under obligation to procure components only from the foreign collaborator or from TAML with whom the foreign collaborator had an agreement. Therefore, according to the appellate authority, the relation between the two would had definitely influenced the price of the imported goods. 13. Learned senior counsel appearing for the respondent invited our attention to the concluding portion of the order passed by the CESTAT which has held in clear terms as under : "We have perused the records and considered the submissions made by both sides. True, the authorities are right in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned senior counsel appearing for the respondent has also invited our attention to the various findings rendered by the Tribunal and of the CESTAT with reference to the agreement and other documents. 16. We have given our careful consideration to the arguments advanced by the learned senior counsel appearing for the appellant and countered by the learned senior counsel appearing for the respondent. 17. It was argued by the learned senior counsel appearing for the appellant that the CESTAT has interpreted only half of the clause of control of foreign partner regarding the source of raw material from where the raw material was to be produced. According to him, the other half of the clause related to the pricing details i.e. the price of procurement has not been discussed much less adjudicated upon. 18. The above submission, in our view, is factually as well as legally untenable. 19. The CESTAT has in clear terms taken into consideration the various clauses of the joint venture agreement and came to the correct conclusion that the service agreement was mainly manufacturing, design, know-how specifications, drawings and all types of tooling equipment etc. The reference to raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at rest inasmuch as there is nothing in this break up or the various consideration which could lead to prove the department that the said technical fee related to the price of the imported goods. In our view, the Department has wrongly interpreted these clauses and wrongly attributed design, drawing, fabrication etc. to the imported goods whereas a perusal of this break up clearly reveals that the technical fee is in respect of the various jobs/consideration which M/s. PC USA was to perform in respect of the manufacture of the antennas system in India. It would also be evident by the findings given by the lower authorities and various grounds raised by the appellant before this Court that they are drawing unwarranted inferences and trying to relate to the various activities which M/s. PC USA was to perform in terms of the joint venture agreement and trying to relate the same to the imported good. Such a course on the part of the appellant cannot be countenanced. 22. Further the appellant in their appeal itself have admitted at Para 2(c) about the scope of the services which M/s. PC USA was to provide to the respondent. A perusal of their own appeal would reveal that there is noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent have proved beyond doubt that what they had paid to M/s. PC USA was not in respect of the value of the imported goods but the technical fee for post-importation operation. 27. The Department, in their grounds of appeal, before this Court relied upon the provisions of Rules 2(2)(i) and 2(2)(iv) and also Rules 4(3)(a) and 4(3)(b) of the Rules. For the sake of convenience, the Rules on which the Department is relying upon are reproduced hereinbelow : "Rule 2(2)(i) : they are officers or directors of one another's businesses; Rule 2(2)(ii) : …………………………….. Rule 2(2)(iii) : …………………………….. Rule 2(2)(iv) : any person directly or indirectly owns, controls or holds 5 per cent or more of the outstanding voting stock or shares of both of them;" "Rule 4(3)(a) : Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price. Rule 4(3)(b) : In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the first appellate authority could not have given unsubstantiated findings and could not upheld the order of the original authority on the ground different from the findings of the adjudicating authority. Therefore, viewed from any angle, the appeal filed by the Department is wholly misconceived. 30. In the instant case, the appellant had reproduced the contents of their letter dated 18-10-2000 wherein they had brought on record the considerations for which they had paid fee to M/s. PC USA and had nothing to do with the imported goods and M/s. PC USA was only supplying the parts of antenna systems and not a complete antenna. This letter has been reproduced in the order of the Deputy Commissioner. However, he did not controvert the contentions raised by the respondent before him but went on to load the assessable value by 10% in terms of Rule 9(l)(c). When the respondent had taken a categorical stand about the nature of technical fee to be paid to M/s. PC USA and it was clearly contended that it was for post-importation activity, it was obligatory on the part of the original authority to have controverted the contents of the said letter. He simply ignored the same and went o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and service thereof and not in respect of parts/components imported by them - license fee not payable as a condition of sale of imported goods - License fee not satisfy the required conditions under Rule 9(1)(c) of the Rules for being added to the assessable value of the imported goods. 34. This apart, the Department has not advanced any argument as to how the Tribunal erred in following their earlier judgments on the identical issue. When the law has been laid down by the CESTAT itself in a number of earlier judgments, it only followed the same in the facts and circumstances of the present case. Therefore, now it is not open for the Department to persuade this Court to reverse the order which is based on the earlier judgments of the CESTAT wherein correct view has been taken by it. 35. He also cited, some judgments on Rule 9(1)(c) of 1988 Rules and on Section 14 of the Customs Act, 1962. 36. In Eicher Tractors Ltd., Haryana v. Commissioner of Customs, Mumbai, (2001) 1 SCC 315, this Court, in paragraph 6, held as under : "6. Under the Act customs duty is chargeable on goods. According to Section 14(1) of the Act, the assessment of duty is to be made on the value of the goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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