1995 (3) TMI 88 - SC - Customs

Court affirms invoices as sole consideration for sale, rejects revenue's argument.

UNION OF INDIA Versus MAHINDRA & MAHINDRA LTD.

The Supreme Court affirmed the High Court's decision that the price mentioned in the invoices for CKD packs was the sole consideration for the sale. It ... Whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price and so section 14(1)(b) of the Customs Act was properly invoked? Held that:- On an evaluation of the relevant clauses in the collaboration agreements and the attendant circumstances, we are of the view that the concurrent Judgments of the High Court at Bombay do not merit interference in this appeal as there existed no nexus between the lumpsum payment under the agreement for the technical know-how and the determination of the price for supply of CKD packs or spares. The learned Single Judge and the Division Bench concluded that 'the contention that the price quoted in the invoices tendered by Mahindra & Mahindra (respondents) does not reflect the correct price because a part of the value of imported packs and components was already received by foreign collaborator while determining the consideration of 15 million French Francs cannot be accepted', and 'the collaboration agreement does not support the claim nor was there any material available to the Assistant Collector to warrant such a conclusion', and, therefore, resort to section 14(1)(b) of the Act and Rule 8 of the Customs Valuation Rules is clearly incorrect and unsustainable and the 'Assistant Collector was bound to accept the price mentioned in the invoices for the purpose of assessing the customs duty'. Appeal dismissed. Issues Involved:1. Whether the price mentioned in the invoices for CKD packs was the sole consideration for the sale.2. Whether the lumpsum payment under the technical know-how agreement influenced the price of CKD packs.3. Applicability of Section 14(1)(a) or Section 14(1)(b) of the Customs Act, 1962.Detailed Analysis:Issue 1: Whether the price mentioned in the invoices for CKD packs was the sole consideration for the sale.The respondents, a public limited company, entered into a technical know-how agreement with a French company for the manufacture of diesel engines. They imported CKD packs and service parts from the foreign collaborator. The Assistant Collector of Customs held that the invoice value of CKD packs was not the sole consideration for the sale of goods, invoking Section 14(1)(b) of the Customs Act and increasing the value by 1.5%. The High Court quashed this decision, stating that the price mentioned in the invoices should be accepted for customs duty assessment.Issue 2: Whether the lumpsum payment under the technical know-how agreement influenced the price of CKD packs.The Assistant Collector argued that the lumpsum payment of 15 million French Francs for the technical know-how included an element of the price for CKD packs. However, the High Court found no evidence to support this claim. The agreements were deemed to be at arm's length, and the price for CKD packs was the same as that charged to other buyers. The High Court concluded that the collaboration agreement and the supply of CKD packs were independent transactions with no nexus between the lumpsum payment and the CKD pack prices.Issue 3: Applicability of Section 14(1)(a) or Section 14(1)(b) of the Customs Act, 1962.The core of the dispute was whether the price in the invoices was the true price or if it was influenced by the lumpsum payment, thus justifying the application of Section 14(1)(b) instead of Section 14(1)(a). The High Court found that the parties had no interest in each other's business, and the price was the sole consideration for the sale, making Section 14(1)(a) applicable. The Supreme Court upheld this view, stating that the revenue failed to prove that the apparent price was not the real price.Conclusion:The Supreme Court affirmed the High Court's decision, holding that the price mentioned in the invoices for CKD packs was the sole consideration for the sale, and there was no evidence that the lumpsum payment influenced this price. The application of Section 14(1)(b) was deemed incorrect, and the appeal was dismissed with costs quantified at Rs. 10,000/-.