BARBOUR VARDHMAN THREAD LTD. Vs. CC

JUDGEMENT

(1.) THE issues, involved in this appeal filed by M/s. Barbour Vardhman Thread Ltd., are whether the appellants and M/s. Barbour Campbell Group Limited, who have supplied the imported goods, are related persons and whether Rs. 30 lakh, paid by them for technical know -how, has to be included in the assessable value of the goods imported by them.

(2.) SHRI Balbir Singh, learned Advocate, submitted that the appellant Company is outcome of joint venture between M/s. Mahavir Spinning Mills Ltd. and M/s. Barbour Campbell Group Ltd.; that in appellant Company, both M/s. Mahavir Spinning Mills Ltd. and M/s. Barbour Campbell Group Ltd. have equal holding of 50% each; that the appellant Company has been formed for carrying out manufacture of sewing thread, twines and braids; that the appellants have imported some dyeing machines from M/s. Barbour; that the Revenue has treated the appellants and M/s. Barbour Campbell Group Ltd. as related persons in terms of Rule 2(2)(iv) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988; that the Revenue has loaded the declared assessable value by 10% on this count; that the Revenue has also added the technical know -how fee paid by the appellants to M/s. Barbour Campbell Group Ltd. on the ground that they had imported all the goods required for the commencement of production including capital goods, raw -material and technology from Barbour and it was not possible for them to manufacture the goods without technical knowledge. The learned Advocate, further, submitted that Rule 2(2)(iv) of the Customs Valuation Rules, is not applicable as, according to this sub -rule, the person shall be deemed to be related only if any person, directly or indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares of both of them; that, therefore, the impugned order is contrary to basic premise of law, so as to treat them related persons. He also relied upon the decision in the case of C.C., Mumbai v. Modi GBC Ltd., 1999(114) ELT 931(Tri), wherein it has been held that for invoking the clause (iv) of Rule 2(2) of Customs Valuation Rules, the presence of third person owning stock in each of them, is required. He also mentioned that the Civil Appeal, filed by the Revenue against the said decision, has been dismissed by the Supreme Court reported in 2000 (120) ELT A70 (S.C.).

(3.) REGARDING inclusion of technical know -how fee in the assessable value, the learned Advocate, submitted that as per the technical collaboration agreement, the knowledge/information refers to manufacturing process of thread in India. The technical know -how has no relation with the import of dyeing machine in question; that further supply of technical know -how was not linked; that import of capital goods, technical know -how was not a pre -condition for sale of capital goods and vice versa. He emphasised that technical collaboration agreement is an independent agreement which has no bearing on import of capital goods; that this aspect can be seen from the factual position as they had imported only four machines, namely, dyeing machine, printer, dye spring which is less than 4 -5 per cent of total capital goods import made by them; that in other words, plant and machinery for manufacturing thread was primarily procured from independent sources other than M/s. Barbour.