TaxTMI 
TaxTMI 
2023 (8) TMI 561
X X X X Extracts X X X X
X X X X Extracts X X X X
....sent matters issue is related to the undervaluation of goods imported by the Appellants on the grounds that seller and buyer are related to each other and that their relationship had influenced the price of goods imported. 10. Perusal of the MOU/ agreements and other records reveal that in order to meet out the fertilizer requirement in India and to ensure uninterrupted supply of fertilizer to farmers of India at a subsidized price a Joint Venture company had been formed as per the Memorandum of Understanding (MOU) dated 15.06.1993 entered in to between the GOI and the Sultanate of Oman. In terms of said MOU the companies designated by the GOI for setting up of the joint venture ammonia-urea project were M/s KRIBHCO and IFFCO while Oman Oil Company Ltd. was similarly designated by the Sultanate of Oman in pursuance of the said MOU a further MOU was signed on 30.07.1994 between the GOI, Appellant on one hand and Sultanate of Oman and the Oman Oil Company Ltd. on other. As per the said MOU dated 30.07.1994 the obligations of the GOI were to be performed through Appellants while the Sultanate of Oman would perform its obligations through Oman Oil Company Ltd. As per the said ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the GOI in bulk at FOB the loading terminal one hundred percent (100%) of the actual production of urea from and after the date of commencement of production for the term and on the terms and conditions of agreement. Further, as per clause 5.1 price of urea produced after the date of commercial production the company and GOI agreed for the long term price of urea for rated capacity (initially specified manufacturing capacity) quantity and for excess quantity It had further been provided vide clause 5.1 (a) that the agreement for urea produced up to rated capacity the rates were finalized for the initial 15 years and further that vide clause 5.1 (c) 'excess urea' the price of FOB the loading terminal payable by the GOI to the company for purchase of excess urea was to be an amount equal to ninety five percent of the market price prevailing on the date of applicable bill of lading. Clearly, GOI had agreed to purchase 100% of rated production on the basis of a fixed Long Term Pricing (LTP) for 15 years. These facts would evident that there was a long term agreement as regard production and sale of urea by OMIFCO and purchase of the same by GOI. We also observed that in terms of JV a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e related only if they are legally recognized partner in business and in terms of rule 2(2)(iv) persons can be deemed to be related only if both of them are directly or indirectly controlled by the third person. In the present matter we find that department has failed to prove that as to how the Appellants on one hand and DOF, GOI on the other hand were officers or directors of one another's businesses. Thus, the condition prescribed in sub-rule 2(2)(i) is not satisfied in the instant case. 12. The contention of the revenue also not correct in terms of Rule 2(2)(ii) on the ground that Appellants and OMIFCO are legally recognized partners in business, in as much as IFFCO/ KRIBHCO hold 50% of equity of OMIFCO and that there are two representatives of IFFCO/KRIBHCO on the Board of Directors of OMIFCO while another Director on the Board of OMIFCO represents the GOI. We find that a company and shareholder cannot be termed as partner in the business carried on by the company. In partnership Act, 1932 "partnership' has been defined as relationship between two persons who have agreed to share profit of business carried on by all or any of them acting for all. Partnership is formed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....MOUs and agreements it is also clear that rates were finalized for 15 years. Further it is evident that GOI had agreed to purchase 100% of rated production on the basis of fixed Long Term Pricing (LTP) for 15 years. These facts would evidence that there was a long term agreement as regards production and sale of goods by OMIFCO and purchase of the same by GOI/ Appellants. Further LTP for 15 years has been worked out in such a manner that the LTP was substantially higher than the projected import prices (as per Chem- System) in the initial years of the projects. From the para 7.2 and 7.3 of the records notes of discussion in the meeting of Public Investment Board (PIB) it is clear that contemporaneous international market price trends have been taken into account while negotiating the LTP with OMIFCO. Market price has been defined in the agreement (UOTA) as the average of low and high end of FOB Middle East prices as quoted in the specified international journals. We also find that Government has issued Notification No. 4/2015 dated 16.02.2015 exempting Urea when imported into India from OMIFCO under the UOTA agreement dated 29.05.2002 from the customs duty and additional customs du....