Case Note & Summary
The petitioner, M/s. Fairfield Atlas Limited, was engaged in the manufacture of transmission gears and imported cutting tools from related persons. The Deputy Commissioner of Customs, by order dated 24 December 2003, enhanced the declared invoice value by 25% due to lack of documents. The appeal was dismissed as time-barred, but CESTAT remanded the matter for fresh adjudication on 28 June 2004. Upon remand, the Deputy Commissioner passed an order on 24 April 2006 adding US$ 20 lakhs as technical know-how fee under Rule 9(1)(c) of the Customs Valuation Rules, 1988, without first determining whether the relationship had influenced the price. The Commissioner (Appeals) set aside this order and remanded again, but the petitioner appealed to CESTAT, which allowed the appeal on 28 February 2007, holding that the Deputy Commissioner had not followed the remand directions. The petitioner then filed a writ petition before the Bombay High Court challenging the order of the Deputy Commissioner. The High Court found that the Deputy Commissioner had failed to decide the preliminary issue of whether the relationship affected the price, as directed by CESTAT, and instead added the technical know-how fee. The court set aside the order and remanded the matter to the Deputy Commissioner for fresh adjudication, directing him to first decide the relationship issue and then consider the applicability of Rule 9(1)(c). The court also directed that the petitioner be given a reasonable opportunity of hearing.
Headnote
A) Customs Law - Valuation of Imported Goods - Related Party Transactions - Rule 9(1)(c) of Customs Valuation Rules, 1988 - The issue was whether the Deputy Commissioner could add a lumpsum technical know-how fee to the invoice value without first determining whether the relationship between the importer and the foreign supplier had influenced the price. The court held that the adjudicating authority must first decide the preliminary issue of whether the relationship affected the price before making any addition under Rule 9(1)(c). The order was set aside and the matter remanded for fresh adjudication. (Paras 1-6)
B) Customs Law - Remand by Tribunal - Scope of Adjudication - The CESTAT had remanded the matter for a fresh adjudication on the specific issue of whether the relationship had influenced the price. The Deputy Commissioner, however, departed from the remand direction and added the technical know-how fee. The court held that the adjudicating authority must comply with the remand directions and cannot decide issues not remanded. (Paras 2-5)
Issue of Consideration
Whether the Deputy Commissioner of Customs was justified in adding US$ 20 lakhs as technical know-how fee to the invoice value under Rule 9(1)(c) of the Customs Valuation Rules, 1988 without first determining whether the relationship between the petitioner and the foreign supplier had influenced the price.
Final Decision
The High Court allowed the writ petition, set aside the order of the Deputy Commissioner of Customs dated 24 April 2006, and remanded the matter to the Deputy Commissioner for fresh adjudication. The Deputy Commissioner was directed to first decide the issue of whether the relationship between the petitioner and the foreign supplier had influenced the price, and then consider the applicability of Rule 9(1)(c) of the Customs Valuation Rules, 1988. The petitioner was to be given a reasonable opportunity of hearing.
Law Points
- Customs Valuation Rules
- 1988
- Rule 9(1)(c)
- Related party transactions
- Burden of proof on revenue
- Natural justice
- Remand by Tribunal
Case Details
2013 LawText (BOM) (06) 39
WRIT PETITION NO.3897 OF 2013
DR. D.Y. CHANDRACHUD, A.A. SAYED
Mr. V. Sridharan, Sr. Counsel with Mr. Jas Sanghavi i/by PDS Legal for Petitioner, Mr. R. Ashokan for Respondents
M/s. Fairfield Atlas Limited
The Union of India and others
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Nature of Litigation
Writ petition challenging the order of Deputy Commissioner of Customs adding US$ 20 lakhs as technical know-how fee to the invoice value of imported goods under Rule 9(1)(c) of Customs Valuation Rules, 1988.
Remedy Sought
The petitioner sought quashing of the Deputy Commissioner's order dated 24 April 2006 and a direction for fresh adjudication.
Filing Reason
The Deputy Commissioner failed to decide the preliminary issue of whether the relationship between the petitioner and the foreign supplier had influenced the price, as directed by CESTAT, and instead added the technical know-how fee.
Previous Decisions
Deputy Commissioner's order dated 24 December 2003 enhancing value by 25% was set aside by CESTAT on 28 June 2004 and remanded. Upon remand, Deputy Commissioner passed order dated 24 April 2006 adding US$ 20 lakhs. Commissioner (Appeals) set aside that order on 31 August 2006 and remanded. CESTAT on 28 February 2007 allowed petitioner's appeal and set aside Commissioner's order, restoring the Deputy Commissioner's order of 24 April 2006.
Issues
Whether the Deputy Commissioner of Customs was justified in adding US$ 20 lakhs as technical know-how fee to the invoice value under Rule 9(1)(c) of the Customs Valuation Rules, 1988 without first determining whether the relationship between the petitioner and the foreign supplier had influenced the price.
Submissions/Arguments
The petitioner argued that the Deputy Commissioner failed to follow the remand directions of CESTAT, which required him to first decide whether the relationship had influenced the price. Instead, he added the technical know-how fee without any finding on that issue.
The respondents supported the Deputy Commissioner's order.
Ratio Decidendi
In a related party transaction, before making any addition to the invoice value under Rule 9(1)(c) of the Customs Valuation Rules, 1988, the adjudicating authority must first determine whether the relationship between the importer and the foreign supplier has influenced the price. Failure to do so vitiates the order.
Judgment Excerpts
We find force in the submission of the appellants that while the issue to be considered by the Deputy Commissioner was whether the relationship between the appellants and the foreign company had influenced the price of the cutting tools imported by the appellants herein, the adjudicating authority has not recorded any finding on the issue which he was required to decide but has added the amount of US $ 20 Lakhs paid/payable as technical know-how fee by the appellants in India to its supplier, under the provision of Rule 9(1)(c) of the Customs Valuation Rules, 1988.
Procedural History
The Deputy Commissioner of Customs passed an order on 24 December 2003 enhancing the declared invoice value by 25%. The appeal to Commissioner (Appeals) was dismissed as time-barred on 12 May 2004. CESTAT on 28 June 2004 remanded the matter for fresh adjudication. Upon remand, the Deputy Commissioner passed an order on 24 April 2006 adding US$ 20 lakhs as technical know-how fee. The Commissioner (Appeals) set aside this order on 31 August 2006 and remanded. The petitioner appealed to CESTAT, which on 28 February 2007 allowed the appeal and set aside the Commissioner's order, restoring the Deputy Commissioner's order of 24 April 2006. The petitioner then filed the present writ petition.
Acts & Sections
- Customs Valuation Rules, 1988: Rule 9(1)(c)
