2004 (11) TMI 444 - AT - Customs

Summary

Issues Involved:
1. Enhancement of assessable value by 25% due to the relationship between importer and supplier.
2. Rejection of transaction value based on marketing activities undertaken by the importer.
3. Comparison of transaction value with unrelated buyers.
4. Applicability of Interpretative Notes to Rule 4(2)(f) of Customs Valuation Rules, 1988.
5. Mutuality of interest between importer and supplier.
6. Differences in quantity levels and commercial levels of transactions.
7. Applicability of precedents from previous judgments.

Detailed Analysis:

1. Enhancement of Assessable Value by 25%:
The Commissioner (Appeals) ordered an enhancement of the assessable value by 25% on the invoice value declared by the importer, citing the relationship between the importer and the supplier as per Rule 2(2)(v) of the Customs Valuation Rules, 1988. The importer and supplier were part of the Zeneca Group of Companies, and the lower authority found a 25% price difference compared to unrelated buyers, leading to the rejection of the declared invoice value.

2. Rejection of Transaction Value Based on Marketing Activities:
The Commissioner noted that the importer undertook several activities such as marketing, laboratory facilities, sales team management, and conducting fairs on behalf of the supplier. This influenced the price, and as related persons, the transaction value was not accepted. The Commissioner ignored the plea that the activities undertaken by the importer should not result in the rejection of the transaction value as per the Interpretative Notes to Rule 4(2)(f) of the Customs Valuation Rules, 1988.

3. Comparison of Transaction Value with Unrelated Buyers:
The appellant argued that their transaction was at arm's length and there was no mutuality of interest. They highlighted that their imports were in bulk (80 tonnes) compared to M/s. Manjunath Corporation (15 tonnes), making the transactions incomparable. The lower authority had previously remanded the matter for de novo consideration, and upon review, the original authority dropped the 25% loading for raw materials, suggesting the same should apply to the final product.

4. Applicability of Interpretative Notes to Rule 4(2)(f):
The appellant referred to the Interpretative Notes to Rule 4(2)(f), which state that activities related to production or marketing should not result in the rejection of the transaction value. The appellant's marketing activities on behalf of the supplier should not justify the 25% value enhancement.

5. Mutuality of Interest Between Importer and Supplier:
The authorities did not prove mutuality of interest between the appellant and the supplier. The appellant's purchase volume was significantly higher than that of M/s. Manjunath Corporation, making the sales non-comparable. The Tribunal has held in previous judgments that mutuality of interest requires both parties to have a vested interest in each other's business, which was not demonstrated in this case.

6. Differences in Quantity Levels and Commercial Levels of Transactions:
The Tribunal in the case of Basant Industries v. CC held that transaction values should be comparable, and in this case, the quantities and commercial levels of the transactions were different. The supplier's pricing was consistent globally, and the appellant did not receive any special benefits as a distributor.

7. Applicability of Precedents from Previous Judgments:
The appellant relied on several judgments, including Mirah Exports Pvt. Ltd v. Collector and Basant Industries v. CC, which supported the argument that bulk imports should not be compared with smaller quantities. The Tribunal also referred to the case of CC, Chennai v. Hewlett Packard Ltd., which held that transaction value should not be rejected merely because the parties are related.

Majority Judgment:
The third member, after considering both sides, concurred with Member (Judicial) that the transaction value should be accepted. The relationship between the importer and supplier did not influence the price, and the declared value closely approximated the transaction value of identical/similar goods imported by unrelated buyers. The appeal was allowed, and the impugned order was set aside.

Conclusion:
The Tribunal allowed the appeal, setting aside the enhancement of the assessable value by 25%. The transaction value was accepted based on the evidence that the relationship between the importer and supplier did not influence the price, and the pricing was consistent globally. The activities undertaken by the importer did not justify the rejection of the transaction value.