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TMI Blog2001 (2) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... n company is entitled to the royalty of 5% of sale and 9% of net profit of sales of Telebrands. Ambervision, Nightvision and Eagle Eyes are brands, whose registered owner is Telebrand Corporation, USA. The sunglasses were supplied by M/s. Azad International, Hong Kong, who procured them from their manufacturer Xiamen Dynasty Optical Manufacturing Company, Xiamen in the People Republic of China. This company also manufactured these sunglasses for Telebrands Corporation, USA. 2.The investigating officers recorded the statement of Hitesh I Israni, in which he narrated the facts that we have referred to above. He also said, in addition, that the CIF price of US$ 3.52 per piece was too low. He has no role to play in fixing the price, this having been negotiated by the American company. He further said that Telebrands advertised to sell Ambervision, Eagle Eyes for sale at US$ 8.30 and US$ 27.75 respectively to buyers in Bangladesh and Pakistan. On this basis notice was issued proposing to enhance the value of the consignment of the glass pending clearance and an earlier consignment already cleared confiscation of the present consignment, and penalty on Telebrands and Hitesh I Israni. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsey, USA. having the same zip code as Telebrand of USA. This shows a relationship between the two. Hitesh Israni, the director held the entire stock of Telebrand India. His sister, Poonam Khubani and her husband MJ Khubani, between them hold the entire stock of Telebrand USA. It is Telebrand India and Telebrand USA are related persons within the meaning of Rule 4 of the Customs Valuation Rules. The invoice produced by Telebrand of the Chinese manufacturer is not acceptable as evidence of true value. It is clearly manipulated, as can be seen from the different type of fonts in it. Therefore, the goods were supplied to the appellant by Telebrand USA, it as a transaction between the related persons of Azad's invoice is therefore not acceptable. 7.The department's case that the goods were directly supplied by Telebrand USA to Indian company, with Azad International at Hong Kong, only a conduit rests to a great extent on the stand taken in the proceedings before the MRTP Commissionerate. Earlier, Telebrand India was importing lenses in the form of glass sheet directly from USA, the supply being routed through Azad International. It passed on this material to a local manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this situation, it is therefore not possible to say that there has been a transaction between related persons. The Chinese manufacturer was not a part of earlier scenario where the goods came from USA to India through Azad International. The position would be significantly different if it could be shown either that the Chinese manufacturer was related, to one of the Telebrand companies, or that there was in reality no manufacture in China. In the first case, it could be argued that Azad International, being merely a conduit or a cargo agent, the transaction is between the two related persons. In the second scenario too, it can be argued that the so called manufacture was only a sham and that the Chinese entity was only a conduit between American and Indian related persons. 10.The Commissioner does not find any relationship between the Chinese manufacturer and the Telebrand companies. He however seems to suggest that there is in reality no value addition in the activities undertaken by the Chinese company. He emphasises that the American company sells in retail its sunglasses and the clip ons at the same price. (Clip ons are a pair of lenses, joint together by the nosepiece, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the area covered by the pin code 200026 are related by virtue of that location. A clear evidence of relationship was required. 12.The Commissioner, in his order, has relied upon, to a great extent, the statement of Hitesh I Israni before the investigating officers, which he finds to be voluntary. It was the contention of the counsel that this statement was not voluntary. He however contends that he denies that Hitesh I Israni has confession to under valuation. Israni has said The principal company in USA negotiated the price of Ambervision sunglasses and Nightvision and since they want their branded glasses to be established in India, they kept the prices of these products on the lower side. The price of ₹ 29 per piece (declared CIF) of the consignment imported under IGM No. 1852/75 and for which we had filed a bill of entry No. 7649, dated 21-9-1997 is on the lower side for the reasons aforesaid. Since this price was decided by the principal company. I had no role to play. However, I state that the CIF price of ₹ 29 per piece is not reflecting the real price. He was then asked, the normal price of the goods under import would be, if the procured price were no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement is that the American company had negotiated the price at which the Chinese manufacturer would supply the goods to Azad International and in turn to the Indian company. In the absence of relationship between the American company and either Azad International or the Chinese company, these two companies cannot be related to the Indian importer. The transaction therefore is not between related persons. What Israni's statement suggest to us is that prices at which the goods imported and sold were kept low that does not amount to underinvoicing. It is permissible for an importer, and often common practice, to sell goods at a low price initially in order to capture a segment of the market. The Commissioner records that Israni's statement was voluntary and freely given. It would then be expected that Israni would have voluntarily indicated payment over and above the invoice value either by him or his US principal to the Chinese company. He does not say any such thing. Nor is there any evidence whatsoever of any payment beyond the invoice price to the Chinese manufacturer. 14.We must refer in this context of the judgment of the Supreme Court in Eicher Tractors Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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