COMMISSIONER OF CUSTOMS, NEW DELHI versus M/S PRODELIN INDIA (P) LTD.

Citation: [2006] SUPP. 5 S.C.R. 678 · Decided: 31-08-2006 · Supreme Court of India · Bench: AR. LAKSHMANAN · Disposal: Dismissed

Judgment (excerpt)

A 
B 
COMMISSIONER OF CUSTOMS, NEW DELHI 
v. 
M/S PROD ELIN INDIA (P) LTD. 
AUGUST 31, 2006 
[DR. AR. LAKSHMANAN AND TARUN CHATTERJEE, JJ.] 
Customs Valuation (Determination of Price of Imported Goods) Rules, 
1988: Rules 2(2)(i), 2(2)(iv) and 9(/)(c)-Technica/ services fee-Impact of 
C on valuation of imported goods-Foreign Company having 75% equity shares 
in a joint venture Indian Company-Indian company assembling VSAT 
antennas, accessories and other communication equipments, supplied by 
foreign company, testing, installing and servicing them-Revenue adding 
I 0% in invoice value of goods-Held, there is nothing on record to indicate 
that foreign company has charged any technical fee for any imported goods 
D or for pre-import function-II was paid for post-import operations-Revenue 
not justified in loading of I 0% in invoice value 
Precedent: 
Decision of CESTAT-Based on its earlier decisions-Held, it is not 
E open to Revenue lo seek reversal of order of CESTAT which is based on its 
earlier decisions wherein correct view has been taken by it. 
The respondent-Company was set up under an agreement between a 
foreign company and an individual residing in Delhi for facilitating promotion 
a1:d selling VSAT Antennas, accessories and other communication 
F equipments. The foreign company owned 75% equity shares of this joint 
venture in the respondent-company which would assemble and test feed the 
components provided by the foreign company and would service, test and install 
these products. A certain amount as technical service fee was to be paid by 
the foreign company to the respondent company per month. The Deputy 
G Commissioner of Customs passed an order for loading of 10% in the invoice 
value of goods imported from the said foreign company. The Revenue was of 
the opinion that the respondent-company and the foreign company were 
related persons in terms of Rules 2(2)(i) and 2(2)(iv) of the Customs Valuation 
(DeterJDination of Price of Imported Goods) Rules, 1988 and this relationship 
influenced the price of the imported goods. The Commissioner of Customs 
H 
678 
...
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COMMISSIONER OF CUSTOMS, NEW DELHI 1·. PRODELIN INDIA (P) LTD. 
679 
• 
4. 
(Appeal) dismissed the appeal of the respondent. However, the Customs, Excise A 
and Service Tax Appellate Tribunal allowed respondent's appeal holding that 
though the transaction was with related persons, but that by itself would be 
no ground to make addition to sale price. The CEST AT held that the reference 
to raw material was for assistance in servicing of supply and a sourcing 
assistance could be required only when the servicing was from a third party B 
and not when it was from one of the partners. Aggrieved, the Revenue filed 
the appeal. 
It was contended for the appellant that the CEST AT only half interpreted 
the clause of control of foreign partners regarding source of raw material. 
The other half of the clause, i.e., price in detail was not discussed at all and C 
the CEST AT failed to appreciate that in the instant case the foreign company 
had the controlling interest in the Indian company and that the respondent 
was under obligation to procure components only from the foreign 
collaborator or from the company with whom the foreign collaborator had an 
agreement. 1t was submitted that in the circumstances; the technical fees paid· 
definitely influenced the price of the goods imported. 
D 
Dismissing the appeal, the Court 
HELD: 1. The plea of the appellant that the CEST AT had only interpreted 
half of the clause relate[!· to pricing detail is neither factually nor legally 
.... correct. The CEST AT has in clear terms taken into consideration the various E 
clauses of the joint venture agreement and came to the correct conclusion 
that the service agreement was mainly manufacturing, design, know-how 
specifications, drawings and all types of tooling equipment etc. The reference 
to raw materials is for assistance in sourcing of supply. A sourcing assistance 
can be required only when the sourcing is from a third party and not when it 
is from one of the partners. It further held that it would be placing an artificial F 
meaning to assistance for sourcing i.e. locating the best source or supply. 
Therefore, the CEST AT held in clear terms that such an artificial meaning 
was not justified. [688-B-E] 
2. There is nothing on record, including the joint venture agreement 
which may reveal that the foreign company has charged any technical fee for 

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