9911796707
TMI Blog1995 (3) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 million French Francs cannot be accepted", and "the collaboration agreement does not support the claim nor was there any material available to the Assistant Collector to warrant such a conclusion", and, therefore, resort to section 14(1)(b) of the Act and Rule 8 of the Customs Valuation Rules is clearly incorrect and unsustainable and the "Assistant Collector was bound to accept the price mentioned in the invoices for the purpose of assessing the customs duty". Appeal dismissed. - 1886 (NM) of 1993 - - - Dated:- 8-3-1995 - J.S. Verma, S.P. Bharucha and K.S. Paripoornan, JJ. [Judgment per : Paripoornan, J.]. - The Union of India, the Collector of Customs, Bombay and the Assistant Collector of Customs, Special Valuation Branch, Bombay are the appellants in this appeal. M/s. Mahindra and Mahindra Limited, Bombay are the respondents. The matter herein arises under the Customs Act, 1962. The respondents filed Writ Petition No. 3167 of 1986 in the High Court of Bombay and assailed the order dated 20-9-1985, passed by the Assistant Collector of Customs, evidenced by Ext. K and the appellate order dated 2-9-1986 passed by the Collector of Customs (Appeals) affirming the said o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement dealt with the subject of supply of CKD packs and service parts. The respondents imported CKD packs and service components from Peugeot from the year 1982 onwards. In June, 1984, the Customs Appraising Group referred the question as to the valuation of a consignment of crankshafts imported, to the Special Valuation Branch of the Custom Department. The Assistant Collector, after hearing the company, issued an order dated 20-9-1985, holding that out of the lumpsum payment made to the respondents - M/s. Peugeot 15% is attributed towards designs, patents and trade marks, and the circumstances under which CKD packs are imported warrant valuation under Rule 8 of the Customs Valuation Rules, 1963 read with Section 14(1)(b) of the Customs Act and excludes Section 14(a) of the Act before assessment. He took the view that the composite agreement envisaged supply of CKD packs of components for 5 years, and it is obvious that the price of CKD packs set out in the invoice value is determined after bearing in mind the lumpsum payment made under the agreement. In other words, the lumpsum paid by the respondents under the agreement included an element of price to be settled in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also to have continuing technical assistance from PEUGEOT during the period of the Agreement; and WHEREAS PEUGEOT is willing to grant the use of its technical knowledge and to assist M M in the manufacture and assembly of the Engine in the manner hereinafter provided; Therefore, it is hereby agreed between PEUGEOT and M M as follows : A - SUPPLY OF PEUGEOT ENGINE TECHNOLOGY 1. As soon as practicable after the effective date of this Agreement PEUGEOT shall furnish to M M complete technical know-how which shall include specifications, drawings, designs, design data and calculations, techniques, facilities, trade secrets and processes and manufacturing control procedures and methods used by PEUGEOT in the manufacture of the Engine (hereinafter referred to as the PEUGEOT Engine Technology) so as to enable the manufacture of the Engine by M M in India and to this intent, will furnish to M M two copies, one of which will be in the form of tracings and/or films, of all of the documentation of the PEUGEOT Engine technology as follows. *** *** *** *** *** *** *** *** *** *** *** *** *** *** 4. The PEUGEOT Engine Technology referred to herein shall be such as will enable M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contemplated by this Agreement; 5. (a) Unless otherwise agreed, during the period of five (5) years from the effective date of this Agreement, M M shall apply to all Engines and parts thereof manufactured, assembled and sold under this Agreement the trade mark INDENOR, in the same dimensions and with the same characters and symbols as those carried by original Engines and parts in France. Each Engine shall bear an apparent insignia with the marking "PEUGEOT Diesel ENGINE, type INDENOR, made by M M. *** *** *** *** *** *** *** D - TRAINING, TECHNICAL ASSISTANCE *** *** *** *** *** *** *** E - PAYMENTS 1. As consideration for providing the use of PEUGEOT Engine technology pursuant to this Agreement, M M shall pay PEUGEOT in PARIS a sum of fifteen million (15,000,000) French Francs as follows : (a) Five million (5,000,000) French Francs on the effective date of this Agreement; (b) Five million (5,000,000) French Francs at the date of supply of the PEUGEOT Engine Technology or within a period of nine (9) months from the effective date of this Agreement, whichever occurs first; (c) Five million (5,000,000), French Francs on commencement of commercial production. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LIMITED, Gateway Building, Apollo Bunder, Bombay 400 039, INDIA (hereinafter referred to as M M), on the other. WHEREAS PEUGEOT and M M have entered into an Agreement dated the 6th day of November 1979 (hereinafter referred to as the Main Agreement) for the manufacture in India of the PEUGEOT XDP 4.90 Diesel Engine; and WHEREAS the Government of India have suggested certain modifications to the Main Agreement; Therefore, it is hereby agreed between PEUGEOT and M M as follows : *** *** *** *** *** *** *** 4. Clause C. 5(a) of the Main Agreement shall be substituted by the following : Unless otherwise agreed, during the period of five (5) years from the effective date of this Agreement M M shall apply to all Engines and parts thereof manufactured and assembled and sold under the Agreement the marking `Manufactured by M M with PEUGEOT technology'." *** *** *** *** *** *** *** We shall now set out the relevant statutory provisions. Section 14(1)(a) (b) of the Customs Act, 1962, are to the following effect : "14. (1) For the purpose of the Customs Tariff Act, 1975, or any other law for the time being in force whereunder a duty of customs is chargeable on any goods b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CKD packs is not the true price, and the price was determined by reckoning or taking into consideration the lumpsum payment made under the collaboration agreement in the sum of 15 million French Francs. The short question is whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price and so section 14(1)(b) of the Act was properly invoked. 6. Certain aspects highlighted by the learned Solicitor General to prove that the price of CKD packs mentioned in the invoices is not the true price are as follows : The collaboration agreement dated 6-11-1979 is an indivisible and composite one. The agreement should be read as a whole. The technology for the assembly of the engine is necessary and is included in the agreement. The price of technology `to assemble' is really a part of the bargain and is included in the composite agreement. The foreign collaborator who retained the industrial property rights relating to the engine exclusively permitted the respondents to use the same in India and the consideration therefor is also included; but for this, the respondents cannot use the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents by Peugeot for the production of the engine. No material has been adduced by the Revenue to demonstrate that the price fixed in the invoices is not the true or the real price, or in other words, the apparent is not the real. In no sense, it can be stated that the price of the goods obtained later was reckoned or reflected in the lumpsum payments made, long before. The parties never had in mind the nature and extent of the spare parts that may be required later, when the collaboration agreement was entered into. The inference so suggested to be drawn is arbitrary, and ad hoc and has no foundation. 8. On an evaluation of the relevant clauses in the collaboration agreements and the attendant circumstances, we are of the view that the concurrent Judgments of the High Court at Bombay do not merit interference in this appeal. The crucial aspects appearing in the case are that the parties were dealing at arm's length, that the seller and the buyer have no interest in the business of each other, that, ordinarily, the technical know-how of the machine can take in `the assembly' thereof, that the CKD packs and spares were supplied to the respondents by the collaborator not at a conce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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