Judgment:
1. In all these Five Revenue appeals, common question of law is involved, hence they are taken up together for disposal, as per law.
2. All the importers had filed Bills of entries. In the case of TRW Rane Occupant Restrainsts Ltd., they had imported electrical components parts from M/s. TRW Inc. USA.3. The Special Valuation Branch (SVB) carried out probe into the relationship between the supplier and the importer and registered a case against the said importer by raising several queries. The respondent importer filed copies of the joint venture and Technological agreements dated 11.1.96. The statement of Chartered Accountant was also recorded. The importer also furnished several documents. On a detailed examination of the reply and the documents, the SVB noticed that there was foreign equity participation of 50% each and therefore it concluded that the importers are related to the suppliers in terms of Rule 2 (2) IV of Custom Valuation Rules (CVR). The importer waived the show cause notice. Hence the Deputy Commissioner held a personal hearing. It was put to the importer as to why the amount of Rs. 7,50,000/- US$ which is shown as fee in Article I4 para 4.1 of the Licence Agreement should not be loaded to the import items besides asking them as to why the royalty and other fees should not be levied.
4. The importer during the personal hearing contested the case and contended that the imported components were independently imported and had no relation with the agreement which granted the imported rights to manufacture, test and for transfer of technology and as there was no relationship with the import item, therefore they contended that it cannot be loaded. They relied on large number of judgments in their favour. The Deputy Commissioner noted that in terms of the conference of Additional/Dy./Asstt. Collectors of Customs held on 21.22.June 90, it was decided to follow uniform practice by adding cost of engineering, design work, etc. to the assessable value. He also noted about the decision ratified by Conference of Collector of Customs held on 23-25 July 90 to load the technical know-how fees into the transaction value. Therefore, he ordered the group to finalise the provisional assessment by loading this lump-sum amount of US $ 7,50,000/- in the Bills of entries from April 97 to March 99. He also held that as per Rule 9(1) (SIC) of CVR'88 royalty related to the imported goods can be added to the transaction value. But taking into consideration the interpretative notes 2 of CVR 88 under Rule 9(1) (SIC) which clarifies that if the royalty is calculated excluding the cost of the imported materials, then it will not be added to the assessable value. Therefore, taking into consideration the OBC letter F, No. 467/36/89-Cus. v. (ICD) dated 29.8.89 addressed to the Collector of Customs Chennai which categorically states that the royalty and licence fees are to be added to the Invoice only if related to imported goods, and in view of this findings, he proposed to keep uniformity of assessment and not to add royalty to the transaction value in view of the judgment cited by the assessee.
5. The importer was aggrieved with this order and appealed before the Commissioner (Appeals). The Commissioner (Appeals) allowed the assessee's claim by a very brief order. In the order he has noted the submission of the assessee that the lower authority had committed an error in holding that the technical know-how fee and lump sum payment are includible whereas what is contemplated under Rule 9(1)(b)(iv) towards payment of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in India and necessary for the production of imported goods; that as such, only those payments which have been made towards production and sale for export of imported goods should be includible in the assessable value and in the instant case, the contract entered into by them would clearly show that these payments are in respect of goods which are going to be manufactured out of the imported goods. Commissioner noting only the headings of Article IV and Sections 2.1, 2.2, 3.1, 3.5, 3.6 and without detailed discussion and the various facts involved in the matter on the premise that all these, in terms of agreement, supports their plea, passed one line order holding that "therefore it is clear these payments are not relatable to the goods under import nor are they concerned with the manufacture or sale for export of imported goods; As such, they are not includable in the assessable value in terms of Rule 9(1)(b) as held by the lower authority". The Commissioner has mis-applied the rule and the correct rule is 9(1)(c) of The CVR Rules 1988. Therefore the Revenue have filed the appeal submitting that the entire facts were examined by the Special Valuation Branch and the Dy. Commissioner in so far as the transaction and relationship between the importer and the collaborator has not been examined and the terms of rules have not been examined and the terms of rules have not been properly looked into. The judgments have not been properly analysed and cases not been decided in proper perspective and the order is not a speaking order but a cursory order accepting the mere plea of the assessee without due analyses and giving rationale finding. Therefore, the Revenue seek for setting aside the order and for restoring the Deputy Commissioner's Order-in-Original.
6. In the Revenue appeal pertaining to M/s. Netzsch India Pvt. Ltd., the importer imported spare parts of filter Press from M/s. NETZCH Filtrationstechnique, Germany. In this case also, the SVB, Customs, Chennai carried out investigation to find out the relationship between the supplier and the importer and after due investigation, registered the case on 26.8.99. The questionnaire was supplied to the importer and details of all the documents of collaboration, agreement and other documents were scrutinised. After due scrutiny, the assessee was given an opportunity of hearing. The waived the show cause notice but appeared before the Deputy Commissioner. The Dy. Commissioner after due analysis like in the above case noted from the agreement that the supplier was a related person in terms of Rule 2(2)(iv) of Custom Valuation Rules 1988 and that their relationship had influenced the transaction value. He further noted that the amount paid as Licence Fee DM. 3,00,000/- as technical know-how fee was required to be loaded as it had influenced transaction value in terms of the agreement. He has also relied on several judgments in this regard. The importer challenged the order and the Commissioner (Appeals) merely noting the Articles of the agreement, without going into the aspect of relationship and as to whether the payment of technical know-how fees which influenced the transaction and the transaction value, had upheld the assessee's contention and hence this appeal. The Commissioner (Appeals) has also not analysed the ratio of the judgments nor given a rationale finding. Therefore, the Revenue, like in the earlier case, seek for setting aside the order on the ground that the lump sum payment of DM. 3,00,000/- is directly related to the imported goods in terms of the know-how agreement dated 18.3.95 which specifically defines what know-how is. The same has been extracted in the grounds of appeal. Revenue has also relied on large number of judgments.
7. In the Revenue appeal against Buhler India Ltd., the Order-in-Original refers to the importer entering into collaboration and joint venture agreement with M/s. Buhler International Ltd., Switzerland/Germany for the manufacture of machines for Food Processing industry. The SVB registered a case. They examined the technical, Licence Agreement and other documents. The Dy. Commissioner gave a hearing to the importer and ordered for loading the lump sum Swiss Frank of 2,000,000/- (Two million Swiss frank) on the basis of the relationship they have and the influence it has made on the price and the parties being related with supplier in terms of Rule 2(2) of CVR Rules 1988 and Rule 4(3)(b) of Custom Valuation Rules. He had also taken into consideration several judgments which are favourable to Revenue. The party filed the appeal before the Commissioner (Appeals) who, on identical findings as in the above two cases, briefly noting the agreements and without due discussion and without giving rationale finding, and notwithstanding the judgments and the relationship between the supplier and the importer and as to whether the lump sum payment had any nexus to the price or not and by merely noting the judgments, allowed the assessee's appeal, hence the Revenue is aggrieved on the same grounds.
8. In the Revenue appeal pertaining to Tyrecord Fabric Ltd., the Order-in-Original refers to the import of Nylon 66 Industrial Yarn imported from Du Pont, USA and DU Pont, Singapore. In this case also, SVB Chennai registered a case. The Deputy Commissioner gave total hearing and after examining the agreement, held that the supplier and the importer were related persons. He also noted that the importer company was formed in 1987 and a joint venture between Du Pont India and Ballarpur Industries Ltd. and Mitsuit Ltd., a Japanese company. The share-holding pattern was Ballarpur Industries - 50%. The objective of the Joint venture was to manufacture Tyrecord fabric for the supply of the tyre manufacturers in India and the technology for the same was to be provided by Du Pont, USA under a Technology Fee and Royalty payment.
The Assistant Commissioner, after due noting of the provisions of the agreement and noting the relationship and the provisions of law, directed for loading the know-how and basic engineering fee of US $ 5 Million in the transaction value as per Rule 9(1)(c) of Custom Valuation Rules 1988. As stated in the above three cases, this importer also challenged the order before the Commissioner (Appeals) and the Commissioner (Appeals) in an identically worded order without due examination of the matter on the relationship between the supplier and the importer and as to whether the payment of the engineering fee had influenced the price of the import of yarn, has passed the order allowing the assessee's contention. As the order is not a detailed and speaking order, therefore the Revenue is aggrieved and had filed this appeal.
9. The Revenue in the case of Shin Ho Petro-Chemical (India) Ltd. are aggrieved with the Commissioner (Appeals)'s order on the same grounds for allowing the assessee's appeal in the like manner as in the above four cases. In this case, the importer had imported Anti-Foaming Agent, Coating Agent, Polythylene Wax, Polyvinyl Alcohol (additives) etc. from Shin Ho Petro Chemical Co. Ltd., Korea (supplier). The SVB Chennai investigated the case and examined all the documents including joint venture agreement and other documents and noted that the importer had made a technical know-how fee payment of US $ 700000/- in terms of the technical assistance agreement dated 27.6.99. The Deputy Commissioner after due examination of the entire transaction and documents, noted that the relationship was related in terms of the Rules and therefore the transaction value had been influenced and hence ordered the same was required to be loaded. On appeal before the Commissioner (Appeals), the Commissioner (A) allowed the assessee's contention without proper analysis and the relationship which influenced the price. Revenue is aggrieved with the cursory and non speaking order and hence this appeal.
10. We have heard Shri G. Sreekumar Menon, Ld. SDR for the Revenue, Shri S. Murugappan, Ld. Advocate for TRW Rane Occupant Restraint Ltd., Netzsch India Pvt. Ltd. and Shin Ho Petro Chemical India Ltd., Shri B.V. Kumar, Ld. Advocate for Buhler India Ltd. and R. Muralidharan, Cost Accountant for Tyrecord Fabric Ltd. 11. Ld.SDR tooks through the various terms of the agreements. He pointed out that the supplier and the importer were related persons and in terms of Rule 9(1)(c), the price had influenced and there was a connection between the imported goods and the transaction value and the same had been influenced on account of this agreement and payment made towards the know-how fee, etc. He pointed out that the Deputy Commissioner had given a clear finding after due examination of the facts and the case law while the Commissioner (Appeals) has not examined the facts and the relationship between the parties and how it has affected and influenced and transaction. Therefore, he sought for setting aside the order and for confirming the Order-in-Original.
12. The respondent importers have filed Cross-Objections along with documents and the counsels and the Cost-Accountant strenuously argued the case and pointed out Rule 9(1)(c) could be applicable only when the agreement and payment influenced the transaction value. In the present matter they pointed out that the import of components/spares and yarn respectively by them were independent of the transaction and the agreements entered into for setting up plant and for manufacture of the entire goods including components. They pointed out that there was no nexus and connection with the imported components and the agreements entered into for setting up the plant for manufacture of the final product. They were paying the know-how on technical fees and for transfer of technology, it had no influence at all on the price of the imported items. The transaction value was not influenced by the said agreement directly on indirectly, as a condition of sale of the goods which was valued independent of the fees paid. On a specific query from the bench to all the counsels to point out from the impugned order of Commissioner as to whether he has given a categorical and clear finding on this aspect of the matter, after great deal of argument, the counsels admitted that although the Commissioner might have given a cursory order, but his final order allowing their contentions is justified and correct. They sought for detailed examination of their documents and for dismissal of the Revenue appeals. R. Muralidharan, Cost Accountant pointed out that in their case, the agreement entered into for setting up plant was not adhered to and there was only a part payment for transfer of technology and as the plant was not set up due to various reasons, the factory was closed, the part payment by them was waived. The yarn imported was independent of the transaction. He pointed out that Commissioner has partly allowed their claim and partly remanded the case. He contends that the Commissioner ought to have allowed their claim fully and there was no question of remanded for examining any point. He contended that in his case, there was no question of adding technical know-how fee to the value of transaction in view of the fact that the agreement did not come through and the entire payment were not done. Therefore, he prayed for dismissal of their case.
13. On a careful consideration of the entire submission and on perusal of all the orders, we are of the considered opinion that the matter has to be set aside and remanded to Commissioner (Appeals) for de novo consideration for the reason that the grievance of Revenue that the Commissioner has not gone into in great detail of any of the cases is justified and correct. The Deputy Commissioner had examined the agreement and had noted that the transaction had been influenced by the amounts of Licence Fees/Technical know-how fees paid by the parties to the suppliers. He had noted that the supplier and the importers were related persons and as they were related, the amounts had influenced the transaction value. The importers had filed the appeal before the Commissioner (Appeals) and had attempted to show that he collaboration/agreement was independent of the import of components parts and the yarn respectively and that the prices were equivalent to the price of any other import s made by them or by other parties of the same components. However, we find that the Commissioner (Appeals) has not examined this issue on contemporaneous import. He has also not given the finding that the price of the imported items under the respective bills of entries was not influenced by the lump sum payment made by the importers in the respective agreement. The importers contend that the components purchased by them was at international price and the price had not influenced and no concession had been shown by the supplier. The Commissioner ought to have examined this issue and seen as to whether the transaction entered into by the seller and importer for supply of the components/spares and yarn was independent and had no direct or indirect connection with the agreement or the payment of Licence Fee and technical know-how fee. The examination of the fact was very crucial. Commissioner ought to have given detailed findings and ought to have analysed all the judgments which had been cited before him. We notice that in the case of DAEWOO MOTORS INDIA LTD. v. CC, NEW DELHI [2000 (115) ELT 489 - Trib.] the bench comprising of Hon'ble President have noted that the foreign collaborator holding major equity of the Appellant (importer) and having right to nominate its Directors and in the absence of any evidence produced by the Revenue that the importer had any interest in the business of foreign collaborator, then in such cases, one sided interest of foreign collaborator is not enough to show mutuality of interest. In these cases, the Dy. Commissioner categorically gave a finding that the payment made as Licence Fee and Know-how fee had influenced the transaction value and they were related persons. This judgment has been applied by the Commissioner but without analysing the facts. Likewise, the Apex Court in the case of UOI v. MAHINDRA & MAHINDRA LTD. [1995 (76) ELT 481-SC] has noted that the agreement between the buyer and seller should be properly interpreted and seen as to whether any influence of these terms of the price. The terms had been analysed in great detail by the Apex Court and found that there is no material to indicate any nexus between lump sum payment and supply of CKD packs at the same price at which they were sold to others. The transaction was found to be two independent commercial transactions and the dealings between the parties were at arms length and the buyer and seller had no interest in the business of each other. The Apex Court noted that Revenue had adduced any material to demonstrate that the price fixed in the invoices is not true or the real price, or in other words, the apparent is not the real. Nor had it been shown that the price of the goods obtained later was reckoned or reflected in the lumpsum payments made, long before. Commissioner ought to have examined this judgment and applied its ratio after due application and examination of facts.
Merely to hold that this judgment applies to the facts of the case without analysis and discussion on the aspect of relationship is not the correct way of application of the case law. When the Dy.
Commissioner has noted that nexus and the relationship and the influence on the price and transaction value, the Commissioner (Appeals) ought to have the party's documents examined and after due analysis, if a different view was emerged, then he ought to have given reasons thereof. When two opinions are expressed on same documents, then the facts have to be clearly brought out and evidence analysed.
Non examination of evidence and non application of mind calls for setting aside the impugned orders and for remand of the case for de novo consideration. We also notice that the Commissioner (Appeals) also ought to have taken into consideration the Apex Court judgment rendered in the case of CC, AHMEDABAD v. ESSAR GUJART LTD. [1996 (88) ELT 609-SC] wherein also the Apex Court has gone in detail on all aspects of the agreement to find out as to whether there was any influence on the transaction value. Such analyses in required to be made in each case and clear findings to be recorded. Furthermore, we notice that the Tribunal has done such as exercise in the case of CC BOMBAY v. MARUTI UDYOG LTD. [1987 (28) ELT 390-Trib.] The analyses made by the Tribunal and the law laid down has been confirmed by the Apex Court. Therefore, it is necessary that the Commissioner to examine these cases in detail to enlighten himself as to how the evidence is analysed and applied.
14. We also note that in the case of Tyrecord Fabric Ltd., a specific plea was raised that the agreement was not fully complied as the factory was closed and the technology was not received and all the documents were returned. They also submitted that the transaction value had not been influenced and that the reliance on a document was not contemporaneous to the price on which they had imported the yarn. This matter is required to be re-examined. We hold that the entire orders of the Commissioner (Appeals) is required to be set aside as the Commissioner has not analysed and discussed on all the points raised.
15. We notice that as the Commissioner (Appeals) in all the five cases has not examined the facts at length in the light of the ratios of this Tribunal and Apex Court judgments, it is but proper that the matter is required to be remanded to the Commissioner (Appeals) with a clear direction that he shall examine all the facts and analyse the same in the light of the Valuation rules and categorically record his findings as to whether payment of licence fee and technical know-how fee have influenced the price directly or indirectly and thereafter pass a detailed speaking order, after granting an opportunity of hearing to the importers.