1993 (3) TMI 211 - AT - Customs

Summary

Issues Involved:
1. Applicability of Rule 4(3)(a) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.
2. Determination of mutuality of interest under Rule 2(2)(iv) and Rule 2(2)(v) of the Customs Valuation Rules, 1988.
3. Validity of loading the value of imported goods by 5%.
4. Relevance of procurement prices and price lists in determining the assessable value.
5. Applicability of Rule 8 of the Customs Valuation Rules, 1988.
6. Legal and operational control under the License Agreement.

Detailed Analysis:

1. Applicability of Rule 4(3)(a) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988:
The Assistant Collector directed a 5% loading on the value of goods imported by the appellants from their Swiss collaborators, disallowing any commission or special discounts under Rule 4(3)(a). This decision was upheld by the Collector of Customs (Appeals), leading to the present appeal.

2. Determination of Mutuality of Interest under Rule 2(2)(iv) and Rule 2(2)(v):
The Assistant Collector and the Collector (Appeals) concluded that there existed a special relationship between the appellants and their overseas suppliers. This conclusion was based on several grounds, including the failure of the appellants to provide essential documents and the equity participation (24.9%) and board representation by the collaborators. The Tribunal, however, found that mere equity holding and board representation do not constitute mutuality of interest as per the Tribunal's decision in the case of Maruti Udyog Ltd. and the Supreme Court's interpretation in Union of India & Others v. Atic Industries Ltd.

3. Validity of Loading the Value of Imported Goods by 5%:
The Tribunal found no basis for the 5% loading of the value. The learned JCDR suggested remanding the matter for fresh determination of the percentage of loading if the Tribunal was not satisfied. However, the Tribunal concluded that the loading was arbitrary and without basis, thus setting aside the orders for loading.

4. Relevance of Procurement Prices and Price Lists:
The Assistant Collector and the Collector (Appeals) emphasized the non-production of relevant information, including procurement prices and price lists. The Tribunal, however, noted that the absence of a price list could not be held against the appellants, nor could any adverse presumption be drawn from that fact. The Tribunal also referenced several decisions, including Mahindra & Mahindra Ltd., to support the argument that the payment of royalty and technical know-how fees had no nexus with the import of goods.

5. Applicability of Rule 8 of the Customs Valuation Rules, 1988:
The appellants contested that Rule 8 was not applicable and the loading of values determined by the Assistant Collector was arbitrary. The Tribunal agreed with the appellants, finding no justification for the application of Rule 8 in this case.

6. Legal and Operational Control under the License Agreement:
The Tribunal examined the License Agreement and found that it did not stipulate the necessity to import components from the collaborators. The right of the Swiss collaborator to check the appellant company's account books was deemed not to constitute legal or operational control. The Tribunal concluded that provisions related to quality control and sales promotion did not amount to exercising operational or legal control over the appellant company.

Conclusion:
The Tribunal set aside the impugned orders, concluding that there was no mutuality of interest or influence on the price of goods imported by the appellants from their Swiss collaborators due to extra-commercial considerations. The appeal was allowed, and the decision to load the value of imported goods by 5% was overturned.