TMI Blog2006 (8) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... is appeal is filed by the Commissioner of Customs (ICDs), Tughlakabad against the Final Order No. 1425/04-NB-A dated 20-12-2004 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi in Appeal No. C. 396/04-NB/A by which the CESTAT has allowed the appeal filed by the respondent. 2. The brief facts leading to the filing of the present appeal are as under : The respondent-Company i.e., M/s. Prodelin India (P) Ltd. (for short "M/s. PIPL") was set up under an agreement between M/s. Prodelin Corporation U.S.A. (for short "M/s. PC USA") and one Mr. Ashok Mago of New Delhi for marketing facility for promotion and selling VSAT Antennas, accessories and other communication equipments, assembly of equipments, testing, servicing etc. 3. As per the joint venture agreement M/s. PC USA owns 75% of equity shares in M/s. PIPL which shall assemble and test feed 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be required only when the sourcing is from a third party and not when it is from one of the partners. It was submitted that the CESTAT has only half interpreted the clause of control of foreign partner regarding source of raw material from where the raw material was to be procured. The other half of the clause i.e. price in details has not been discussed at all and that the CESTAT has failed to appreciate that in this case, the foreign company has the controlling interest in the Indian Company and that the respondent was under obligation to procure components only from the foreign collaborator or M/s. Tata Advance Material Ltd. with whom the foreign collaborator has an agreement. Therefore, the technical fees paid, have definitely influenced the price of the goods imported. Aggrieved by the order dated 21-12-2004, the Commissioner of Customs has come up before this Court. 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 Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported goods is more than the indigenously procured goods. The impugned final order is silent on this crucial point while accepting the declared value as full commercial value. (f) The Tribunal failed to consider that the respondent was under obligation to procure components from the foreign collaborator or from M/s. Tata Advance Material Ltd. with whom the foreign collaborator M/s. PC USA had an agreement. Therefore, the technical fee, admittedly paid, has definitely influenced the price of the goods imported. 9. Our attention was also drawn to the joint venture agreement entered into between the parties and the salient features contained therein and in particular, 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized fixtures has been stated to be free of cost whereas the technical service fee was paid for these items also. Further M/s. PC USA and Tata Advance Material Ltd., Bangalore were having collaboration agreement and M/s. Tata Advance Material Ltd. which further shows indirect control over M/s. PIPL India by M/s. PC USA. It was held by the original authority that the amount paid as technical service fee, 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 authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the procurement of some parts from TATA Advance Material Ltd. had no bearing on the price of the imported goods; and (f) that the CESTAT has followed their earlier judgments. 15. 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 agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C USA to the respondent. 21. A perusal of the details given in the letter dated 18-10-2000 and referred to in paras supra would clearly set the whole controversy 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 adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a condition of the sale of the goods being valued, to the extent that such royalities and fees are not included in the price actually paid or payable. However, the respondent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the findings rendered by the appellate authority is unwarranted and 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 controve ..... 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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