2005 (98) ECC 423 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Shri S.S. Kang, Vice President and Shri C.N.B. Nair, Member (T)

Prodelin India (P) Ltd.

Versus

CCE, New Delhi

Appeal No. C/396/04-NB(A)

[Arising out of Order-in-Appeal in Appeal No. CC(A) CSP/74/DII/2004 dated 17.3.2004 passed by the Commissioner of Customs (Appeals), New Delhi.]

Final Order No. 1425/04-NB-A, dated 20.12.04, Certified on 27.12.2004

Assessable Value (Customs)

Transaction value -- Related parties -- Authorities right in holding that transaction is between related persons inasmuch as the importer is a joint venture in which the foreign supplier is a partner. However, that by itself is no ground to make addition to sale price. A perusal of the service agreement makes it clear that its area of coverage is mainly manufacturing, design, know-how specifications, drawings and all types of tooling equipment etc. The reference to raw materials 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. Transaction value between the parties cannot be treated as anything other than a commercial price. Such a price commends itself as assessable value.

[Para 5]

Appeal allowed

PRESENT :

Shri K.K. Anand, Adv. for the appellant.

Shri S.M. Tata, SDR for the respondent.

Cases Cited :

1. Daewoo Motors v. CC, New Delhi, 2000 (115) ELT 489 (T)................................. [Para 3]

2. NEG Micon (India) Pvt. Ltd. v. CC, Chennai, 2004 (170) ELT 29 (T).................... [Para 3]

Per : C.N.B. Nair

M/s Prodelin India (P) Ltd., is a Joint Venture between M/s Prodelin Corporation, USA and Mr. Ashok Mago of New Delhi. The joint venture was set for purpose of assembly and installation of antennae. For the said purpose the appellant joint venture imported antennae parts from their foreign partner. Customs authorities took the view that, since the transaction was between related parties, the purchase price of the joint venture cannot be accepted for the purpose of assessment of the imported antennae parts to duty. The appellant resisted the proposal by pointing out that the price is the full and sole consideration for the imported goods and such a transaction value rightly constitute the assessable value for the purpose of customs assessment. Under the impugned order, Commissioner held that apart from the fact that the import is from joint venture partner, the transaction is also affected by a technical agreement between the parties where under an amount of US $ 2,58,000 was payable as technical services fees for services. The Commissioner also held that the fees paid is not only for post import assistance as contended by the appellant, but it is also for pre-import functions such as supply of design, drawing, fabrication drawing, etc. He, therefore, held that the relation between the two companies would have a bearing on the value of imported goods. The Commissioner, therefore, upheld the order of the Deputy Commissioner ordering addition of 10% to the invoice value of the goods imported from M/s Prodelini (sic) Corporation, USA for the purpose of assessment.

2. We have heard both sides and perused the records. The addition to the import price is ordered in view of the following clause in the services agreement dated 1.10.97 between the parties:

"1.1 Scope of Services

PC shall provide technical services to enable PIPL to develop capabilities in the area of manufacturing, design, know-how, specifications, drawings, and all types of tooling equipment.

Design of antenna systems including all the sub-assemblies.

All high tech equipment tooling for the manufacture of VSAT antenna systems.

The sources of supply of raw material with pricing details for procurement.

Supply of necessary instrumentation and documentation for Quality Control during production and before shipping.

Necessary supports for PIPL and, if required, to its clients on a day-to-day basis.

After sales services to customers in case of major problems faced by them.

Assistance in achieving ISO-9002 Certification".

3. The submission of the appellant is that the above clause, in no way, relates to the price of goods purchased from the foreign partners. It only provides for assistance of the foreign partner in design and manufacture of goods in India. This position was emphasized by the learned Counsel for the appellant. The Counsel also pointed out that the appellant's case is covered by the decision of the Tribunal in the case of Daewoo Motors India Ltd. v. CC, New Delhi, 2000 (115) ELT 489 (T) and NEG Micon (India) Pvt. Ltd. v. CC, Chennai, 2004 (170) ELT 29.

4. As against the above contention on behalf of the appellant, the learned SDR has submitted that the services related not merely to design and assembly of antenna system in India, but also to raw materials. Reliance in this regard is placed on the specific clause which relates to assistance for "the sources of supply of raw material with pricing details for procurement' (the third item in clause 1.1 reproduced in para 2).

5. We have perused the records and considered the submission made by both sides. True, the authorities are right in holding that transaction is between related persons inasmuch as the importer is a joint venture in which the foreign supplier is a partner. However, that by itself is no ground to make addition to sale price. A perusal of the service agreement makes it clear that its area of coverage is mainly manufacturing, design, know-how specifications, drawings and all types of tooling equipment etc. The reference to raw materials 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 would be placing an artificial meaning to assistance for sourcing, if sale to each other is also treated as requiring assistance in sourcing i.e. locating the best source of supply. We are of the view that such an artificial meaning is not justified. There is no other material on record to indicate that the sale price in the present case is not a full commercial price. In these circumstances, we are of the opinion that the transaction value between the parties cannot be treated as anything other than a commercial price. Such a price commends itself as assessable value. The impugned order is not sustainable. Accordingly, it is set aside and the appeal is allowed with consequential relief, if any, to the appellant.

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