2007 (3) TMI 139 - AT - Customs

Valuation(Custom) - Department contended the price charges by exporter to appellant for raw material is considered for valuation but appellants contended that the price paid for raw material is higher side so the invoice price of sale is considered - Appellant contention allowed with consequential relief

Summary

Issues involved: Valuation of raw materials and finished products imported, application of Customs (Valuation) Rules, 1988, determination of transaction value, relationship between supplier and importer affecting value, Rule 7(3) applicability, treatment of imported goods losing identity in production process.

In this case, the issue involved is the valuation of raw materials and finished products imported by a joint venture company from its partner in the joint venture. The company challenged the valuation of raw materials based on the application of Rule 7(3) of the Customs (Valuation) Rules, 1988. The company argued that Rule 7(3) was not applicable to the valuation of raw materials as it only applied when goods were sold in the condition as imported or after further processing in arms length transactions. The company contended that since the imported goods lost their identity in the production process of final products, Rule 7(3) was not applicable. The company provided evidence that the invoice price from the supplier was higher compared to the manufacturer's price for one raw material. The lower appellate authority refused to accept the company's plea to treat the invoice price for all raw materials as the related transaction value, citing lack of evidence for all 26 raw materials imported. The company sought valuation based on similar instances where the original authority had accepted the invoice price of related suppliers for other items. The company prayed for acceptance of invoice values for all raw materials as transaction value under Rule 4 of the Customs (Valuation) Rules, 1988.

Regarding the finished goods, the company argued that the impugned order had an unintended error as it did not extend the benefit of accepted transaction value to goods other than adhesives. The company provided evidence of import prices for finished products, including a comparative chart, to support their claim. The company's consultant presented documentary evidence of import prices of similar raw materials by other importers in India, demonstrating price differentials. The company sought acceptance of the invoice value for all raw materials as transaction value based on the evidence presented. The departmental representative argued that the impugned order was passed in accordance with the law and that the original order operated until modified.

The Tribunal carefully considered the submissions from both sides. In the case of two specific raw materials, the Tribunal found that the company had been paying higher prices compared to alternative sources, and thus accepted the invoice value as transaction value under Rule 4 of the Customs (Valuation) Rules, 1988. For other raw materials, the Tribunal ruled out the application of Rule 7 of the Valuation Rules, as the imported materials lost their identity in the production process. The Tribunal directed the determination of transaction value for other raw materials in terms of Rule 8 of the Valuation Rules, allowing the company to provide evidence of contemporaneous imports for valuation purposes. The Tribunal allowed the company's appeal in respect of finished products other than adhesives, based on evidence of lower import prices for coating solutions/primers compared to the supplier's prices. The appeal was remanded for the valuation of the remaining items for assessment.