K.L. Rekhi, Member (T)

1. The respondents (hereinafter referred to as 'Maruti') are manufacturers of motor cars in India in collaboration with Suzuki Motor Company Limited, Japan (hereinafter referred to as 'Suzuki')- The two parties have entered into three agreements :

(1) Joint Venture Agreement :- Under this Agreement Suzuki acquired 26% equity shares in Maruti as also proportional representation on the Board of Directors of Maruti.

(2) Licence Agreement :- Under this Agreement, Maruti acquired the right and technical knowhow to manufacture cars and their components in India to the patents, designs and specifications of Suzuki on payment of lump sum royalty of $ 24/- lakhs plus 3% running royalty.

(3) Purchase and Supply Agreement :- This Agreement related to import of SKD/CKD packs and complete vehicles from Suzuki, Japan.

In the background of royalty payments, the Assistant Collector loaded the invoice prices of SKD/CKD packs and complete vehicles imported by Maruti from Suzuki by 1%, for the purpose of assessment of customs duty. In appeal, the Collector (Appeals) held that the loading was not called for and that the invoice price was acceptable as the basis for assessment under Section 14(1)(a) of the Customs Act, 1962. The department is now in appeal before us with the prayer to set aside the impugned order passed by the Collector (Appeals) and to restore the Assistant Collector's order of 1% loading.

2. At the outset, we took up for consideration the two miscellaneous applications filed by Maruti for bringing on record certain additional evidence (invoice, Bills of Entry etc.). After hearing both sides, we allowed the applications and admitted these documents into evidence.

3. The merits of the appeal were heard thereafter. The department's case, in brief, is that since Maruti had a complex and inter-woven relationship with Suzuki, value under Section 14(1)(a) of the Act was not ascertain-able and, therefore, best judgment assessment under Rule 8 of the Valuation Rules was the only alternative. It was a common ground between- the department and Maruti that Rule 6 of the Valuation Rules was not applicable. Maruti countered the department's pleas stating that there was no mutuality of interest between Maruti and Suzuki, that the royalty payments were only for local manufacture of vehicles and parts under the indigenisation programme and had nothing to do with the price of the imported SKD/CKD packs and complete vehicles, that the invoice price paid by Maruti was a fully commercial price and that there was no other consideration for the sale of imported goods. We will examine the rival contentions in the succeeding paragraphs.

4. It is, no doubt, correct that Suzuki held 26% shares in Maruti and, for that reason, had a proportional representation on the Board of Directors of Maruti also. But Maruti had no share holding in Suzuki nor any representation on the Board of Directors of Suzuki. To rule out valuation under Section 14(1)(a), the seller and the buyer should have "interest in the business of each other". One-sided interest is therefore, not enough; there has to be a mutuality of interest and Maruti is right in pleading that such mutuality of interest did not exist [MANU/SC/0175/1984 : 1984 (17) ELT 323 (SC) -Union of India and Ors. v. Atic Industries Ltd.]. Confronted with this situation, the learned representative of the department argued that Maruti had an indirect interest in the business of Suzuki since Maruti was interested in technical knowhow from Suzuki not only for the current models and their components but also for future models and their components. We do not agree with the department's plea. The transfer of technical knowhow from Suzuki to Maruti is a separate commercial transaction governed by the Licence Agreement and Suzuki charges a price for it. That does not create an interest of Maruti in the business of Suzuki, Japan.

5. The department next contended that the invoice price of the imported goods was