UNION OF INDIA Vs. MAHINDRA AND MAHINDRA LTD

JUDGEMENT

(1.) THIS is an appeal preferred against the judgment dated July 27, 1988 delivered by Mrs. Justice manohar and the question for determination is whether the Assistant Collector of Customs, special Valuation Branch, was justified in loading amount by 1. 5% on the invoice value of CKD components of the engines imported by Mahindra and Mahindra Limited (hereinafter referred to as the "mahindra") by exercising powers under Section 14 (1) (b) of the Customs Act, 1962 read with Rule 8 of the Customs Valuation Rules, 1963. The facts which gave rise to the passing on the order are as follows :

(2.) MAHINDRA Limited are a public Company carrying on business amongst others of manufacture of different types of automobile vehicles. The vehicles the manufactured at their factories situated at Kandivali and Ghatkoper in Bombay and at Igatpuri and Nasik. On November 6, 1979, Mahindra entered into a technical know-how agreement with M/s. Automobile Peugeot, a french Company. The technical know-how agreement was in respect of a diesel engine manufactured by Peugeot and known as XDP 4. 90. The agreement recites that as a result of long experience and extensive and continuous research and the development in the business of manufacture of motor vehicles, the foreign collaborators had developed or acquired and possesses designs and technical knowledge in the manufacture of an engine designated XDP 4. 90. The foreign collaborators had industrial property rights consisting of designs, engineering technological and all other information with respect to the engine. Mahindra desired for the purpose of carrying on business as a manufacturer of motor vehicles to obtain the right to manufacture, assemble and use the engine and use the technical knowledge and also to have continuing technical assistance from the foreign collaborators. The period of agreement was for a duration of 10 years from the date of securing the consent of Government of India to the agreement.

(3.) ARTICLE 'a' of the agreement refers to supply of Peugeot engine technology and, inter alia, provides that foreign collaborators shall furnish to Mahindra the complete technical know-now which shall include specifications, drawings, designs, design data and calculations, techniques, facilities, trade secrets and processes and manufacturing control procedures and methods, used in the manufacture of the engine. The Article further provides that the engine technology to be furnished by the foreign collaborators shall be such as will enable Mahindra to manufacture progressively the engine with upto hundred per cent. indigenous content in India. The Peugeot agreed not to furnish or make available directly or indirectly the engine technology necessary to manufacture, assemble and sell the engine in India to any other person. Article '3' of the agreement deals with right to manufacture, assemble and sell and confers exclusive right on mahindra to use the engine technology. The Article prescribes that during the period of five years from the effective date of this agreement, the production of the engines shall be limited to maximum of 25,000 units per year. Mahindra were prohibited from assigning or otherwise transferring the rights under the agreement to any party. Article C (2) (a) of the agreement, inter alia, provides that during the subsistence of the agreement either the foreign collaborator or mahindra receives any information relating to any improvement or improved manufacturing techniques relating to the engine, then the same shall be communicated to the other party. Article c (4) (a) provides that the foreign collaborator retains ownership and exclusive possession of all the industrial property rights relating to the engine and to the engine technology such as processes and manufacturing secrets as well as licenses, patents, trade marks and brand names. By clause 4 (b), Peugeot expressly granted to Mahindra the exclusive rights to use in India of the industrial property rights including applicable patents, trade marks, registered designs and design copy rights relating to the engine or any parts, components or other elements thereof. Clause 5 (a)provides that during the period of five years from the effective date of the agreement, Mahindra shall apply to all engines and parts thereof manufactured, assembled and sold the trade mark "indenor" in the same dimensions and with the same characters and symbols as carried by the original engines and parts in France. It also provides that each engine shall bear an apparent insignia with the marking "peugeot Diesel Engine, type INDENOR, made by Mahindra and mahindra. " it is required to be stated at this juncture that the parties entered into a supplemental agreement on March 6, 1980 and Clause 5 (a) of the main agreement was substituted by providing that unless otherwise agreed, during the period of five years from the effective date of the agreement mahindra shall apply to all engines and parts thereof manufactured, assembled and sold under the agreement the marketing "manufactured by Mahindra and Mahindra with Peugeot technology. " Clause 5 (c) provided that at the expiry of period of five years Mahindra shall cease use of the words PEUGEOT" and shall apply to all engines and parts thereof manufactured, assembled and sold a trade mark belonging to Mahindra in such a way that there can never be any confusion with 'peugeot' trade marks.