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Issues: Valuation of imported goods for original equipment manufacturing and spare parts.
Analysis: 1. The appeal concerns the valuation of goods imported by the assessee for original equipment manufacturing and spare parts. The appellant, a subsidiary of a larger group, imports components for manufacturing tractors and spare parts. The issue arose when the assessing authority added 40% to the declared value of goods imported by the appellant from foreign suppliers and their associates. The appellate authority, however, reduced this loading to 9.09% for components for assembly but accepted the invoice value for spare parts. The appellant challenges the rejection of the invoice value for components in this appeal. 2. The appellant argues that the transaction value is not influenced by the relationship between the parties, citing Rule 4(3)(a) of the Customs Valuation Rules. They claim that the declared value closely approximates the computed value of identical goods, as required by Rule 4(3)(b). The appellant emphasizes that the pricing methodology adopted by the exporters is reasonable and that the relationship between the parties did not influence the pricing. 3. The appellant asserts that supplies for original equipment manufacturing and spare parts represent different levels of trade and class of buyers. They argue that once the relationship's influence on pricing is ruled out and the pricing methodology is deemed reasonable, it is incorrect to suggest that prices for components for assembly and spare parts should be the same. The appellant relies on legal precedents and customs valuation commentary to support the distinction between commercial levels in trade. 4. The Departmental Representative contends that the appellate authority did not accept the method used by the supplier to determine the deductive value of the imported goods. They argue against adopting the transaction value for supply for assembly, claiming that the relationship between the parties did influence the pricing. 5. The Commissioner (Appeals) acknowledged the relationship between the parties but questioned the lack of mechanisms to distinguish between components for assembly and spare parts. However, the Tribunal found that the import for components for assembly and spare parts are at different commercial levels. The appellant provided evidence to differentiate between spare sales and manufacturing orders, indicating separate profit centers for each. 6. The Tribunal concluded that the Commissioner (Appeals) erred in rejecting the transaction value for the supply of components for assembly. They found no basis for the Commissioner's assertion that the cost of components should be the same regardless of end-use. Therefore, the order was set aside, and the appeal was allowed in favor of the appellant.
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