TaxTMI 
TaxTMI 
2008 (10) TMI 77
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....proprietary concern of Shri Ram Niwas Aggarwal who has filed this application as Proprietor. The applicant states that it entered into a Memorandum of Understanding (hereinafter referred to as MOU) on 24/9/2007 with an overseas company by name Dynamic Exports (P) Ltd. incorporated under the laws of HongKong and having its registered office in HongKong. The purpose of MOU is stated to be to collaborate together for manufacturing and marketing of Metal Torches / Flash Lights in India. Dynamic Exports (P) Ltd., is a company formed by the applicant's brother Shri Aggarwal Rajesh Kumar on 14.8.2007, who at the time of application held all the shares of the company and was the sole Director. Subsequent to the filing of the application, the applicant brought to the notice of this Authority that 100 shares each were transferred to two Chinese residents after receiving consideration equivalent to original share value. The share capital of the company is 10,000 HK$ divided into 10,000 shares of one dollar each. Though the residential address of Shri Aggarwal Rajesh Kumar is shown as Phase-I, Ashok Vihar, Delhi -52, it is the case of the applicant that Shri Rajesh Kumar is not a resident of I....
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...., it is no longer a proposed activity which is a pre-requisite for making an application for advance ruling. It is then contended by the Departmental representative that the present application does not conform to the definition of 'applicant' in clause (c) of section 28-E of the Customs Act. It is the contention of the Department that the ingredients of joint venture as defined in the Explanation to section 28-E (c) are not satisfied for two reasons : (i) the MOU in the instant case cannot be construed as a contractual arrangement and (ii) the control and substantial interest of Dynamic exports (P) Ltd. is not established. Further, it is submitted that the non-resident status of Dynamic Exports (P) Ltd. has not been satisfactorily established and therefore the requirement of sub-clause (b) of clause (c) of section 28 E is not satisfied for that reason also. 8. The relevant provisions of the Customs Act are extracted below : 28 E. (a) "activity" means import or export; (b) "advance ruling" means the determination, by the Authority, of a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity which is proposed t....
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....importers including the applicant is the mis-declaration of goods imported in order to get out of the clutches of the notification No.125/2003 for the purpose of evading the duty. That question has a different dimension and it has little bearing on the question formulated in the application. The question raised in the application is a straightforward question i.e., whether anti-dumping Duty will be attracted or not in terms of the notification no.125/2003-Cus., if 4 specified parts of the flash light are imported and the finished product is manufactured in the proposed unit with the aid of the parts imported, the parts purchased from the domestic market and the parts manufactured within the proposed manufacturing unit. 10. The second contention of Revenue is that the activity of import by the applicant has already started and therefore it is no longer a 'proposed activity' within the meaning of clause (b) of section 28-E. It is the contention of the applicant that the activity of import so far made by the applicant cannot be mixed up with the import of few parts to be made in the future by the Joint Venture enterprise for manufacturing the finished product in its proposed unit i....
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.... expressly declared to be void". If the agreement is not enforceable by law, it is said to be void. It is trite that mutual promises gives rise to an agreement. A promise or a set of promises resulting in an agreement and an agreement culminating into a contract enforceable by law - these are the facets integral to the concept of contract. Then, what does 'contractual arrangement' mean Certainly, it is not the same thing as contract. It can fall short of a contract. It may be a step in aid to a contract. It may be a broad framework within which a contract will be concluded. Though not enforceable in law, a contractual arrangement should clearly reflect the understanding of the parties on the material terms that form the basis of a formal agreement to be entered into later. 14. The adjective 'contractual' means "pertaining to or of the nature of contract" (see The New Shorter Oxford Dictionary). The expression 'arrangement' which is preceded by the adjective 'contractual' should thus be understood as an arrangement relatable to a contract already concluded or to be concluded. It need not necessarily be a fall out of the concluded contract. In other words, an arrangement giving ri....
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....ould be liberally construed in favour of the subject. 18. Next, we turn our attention to the crucial point, i.e., whether on a reasonable construction, the MOU spells out a "joint venture in India" within the meaning of the Explanation to Section 28-E(c) of the Act. Of course, we approach this question keeping in view the wider meaning attributable to the phrase 'contractual arrangement' as discussed supra. 19. On a close perusal of the MOU, we are inclined to reject the contention of the applicant's counsel that the MOU brings into existence a joint venture as defined in the Explanation The MOU has ostensibly been entered into to set up a manufacturing facility for Metal Torches / Flash Lights. Clauses (2) and (3) purport to set out the terms of investment. The two clauses are so vague and ambiguous that it is difficult to infer therefrom a contractual arrangement. Whereas clause (2) says that Paradise International will invest to the extent of 50% in the form of "arranging land, building, indigenous machinery, working capital and indigenous capital", clause (3) states that Dynamic Exports (P) Ltd. will arrange 50% of the investment in the form of technical know-how, s....
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....nty. 20. When it was pointed out to the applicant in the course of hearing that the terms of MOU are too vague and nebulous to give rise to a contractual arrangement containing material terms, the counsel for the applicant pointed out at the next date of hearing that the terms of MOU have since been translated into action by forming a new company by name Tulsi Electronics (P) Ltd with both entities having equal stake therein and therefore the relevance of MOU has paled into insignificance. In the affidavit signed on 24^th June, 2008 it is stated by Ram Niwas Aggarwal (applicant) that Tulsi Electronics (P) Ltd. has been duly incorporated on 11/6/2008. A true copy of Company's details downloaded from the official website of Registrar of Companies, Delhi was annexed to the affidavit. It is interesting to note that as per the Memorandum of Association of Tulsi Electronics (P) Ltd., the authorised share capital of the company is a measly amount of Rs.1 lakh divided into 10,000 equity shares of Rs.10 each out of which 5,000 shares were subscribed by the applicant and Dynamic Exports (P) Ltd. Be that as it may, if a new joint venture company has been formed for the purpose ....