Commissioner Of Customs New Delhi vs M/S Prodelin India (P) Ltd

The brief facts leading to the filing of the present appeal are as under:

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. Vide order dated 17.3.2004, the Commissioner of Customs (Appeal) 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 relationship between the respondents and its foreign collaborator, it is manifestly clear that they had a complex and interwoven relation in which the latter did not only have 75% of the equity shares but also had their own three of the four Directors in the Board of Directors of the respondent, therefore, it is correctly held by the Adjudicating Authority that their foreign collaborator are related persons covered by Rules 2(2)(i) and 2(2)(iv) of the Rules. It also held that the foreign company had a controlling interest in the activities of the company. It was further held that it is not a case which is covered by Rules 4(3)(b) and 4(3)(a) of the Rules and it is clear that the relations between the two companies would have a bearing on the value of the goods imported. The respondent preferred an appeal against the said order of the Commissioner of customs (Appeals), Delhi-II before the Customs, Excise and Service Tax Appellate Tribunal, R.K. Puram, New Delhi (for short 'CESTAT'). The CESTAT vide its impugned judgment and final order dated 20.12.2004 had allowed the appeal and set aside the impugned order on the ground that though the authorities were right in holding that the transaction was between related person inasmuch as the importer was a joint venture in which the foreign supplier was the partner, however, that by itself, was no ground to make addition to sale price. The CESTAT has held that the reference to raw material is for assistance in sourcing of supply. A sourcing assistance can 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.

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. Therefore, the respondent and their foreign collaborators are related persons in terms of Rule 2(2)(i) and Rule 2(2)(iv) of the Rules. The Tribunal completely failed to appreciate that this relationship had influenced the price of the goods imported and the adjudicating authority was justified in loading 10% in the invoice value of the goods imported.

(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.

The above submission, in our view, is factually as well as legally untenable.

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 nothing on record to show that any technical fee was being charged in respect of the imported goods or pre-import function. Therefore, various contentions raised by the Department, in the present appeal, are wholly devoid of any merit.

In the instant case, we have elaborately considered the entire facts and circumstances of the case with reference to the agreement entered into between the parties and also decided the case on the provisions of the Rules. In our opinion, the various contentions raised by the Department, in the present case, are wholly devoid of any merit. In the result, the appeal stands dismissed. However, there shall be no order as to costs.