2013 (6) TMI 535 - AT - Customs

Valuation - Extra discount received - appellant are related person to their foreign supplier - Held that - As per the discount policy of their foreign supplier, as the product being new in India, they offered extra 10% discount to the appellants to introduce the product in India and it is an accepted practice that the goods are sold in different places and at different prices and to attract customers, additional discounts may be given in an area where the product is new and in a well-established market there is no need for any discount. In the instant case, the discount of 20% is uniformly offered in those areas of market where the product is new and new technology is to be introduced which is to be accepted by the buyers. To attract the buyers in new market, the additional discount has been given and in the case of Eicher Tractors Ltd (2000 (11) TMI 139 - SUPREME COURT OF INDIA) it is held that a discount is a commercially acceptable measure which may be resorted to by a vendor for a variety of reasons including stock clearance. A price list is really no more than a general quotation. It does not preclude discounts on the listed price. When a discount is permissible commercially, and there is nothing to show that the same would not have been offered to anyone else wishing to buy the old stock, there is no reason why the declared value in question was not accepted under Rule 4(1). As revenue has not produced any extra evidence which can be proved that being a related person the price is influenced and more discount has been given to the appellants as a related person the transaction value produced by the appellants is acceptable. In favour of assessee.

Summary

Issues:
1. Valuation of imported goods based on related party transactions and extra discounts received.
2. Proper application of Customs Valuation Rules, 2007.
3. Acceptance of transaction value in the case of related party transactions.

Issue 1: Valuation of imported goods based on related party transactions and extra discounts received:
The case involved the import of goods by the appellants from their foreign supplier, who offered extra discounts to specific countries, including a 20% discount to the appellants due to the new market and technology introduction risks. The department contested the valuation, claiming the extra discount received by the appellants was unjustified. The Commissioner (Appeals) remanded the matter for reassessment, leading to an appeal before the Tribunal. The appellants argued that the extra discount was a legitimate practice to develop new markets and attract buyers, citing the decision in Eicher Tractors Ltd. vs. CC, Mumbai. The Tribunal acknowledged the related party status but upheld the extra discount as a valid commercial practice to introduce products in new markets, emphasizing that the transaction value was acceptable, leading to the appeal being allowed.

Issue 2: Proper application of Customs Valuation Rules, 2007:
The Tribunal noted the initial adjudication that the transaction value was the proper value, which the department disputed based on the extra discount received by the appellants. The Commissioner (Appeals) remanded the case for reassessment, leading to a rejection of the transaction value. However, the Tribunal, after considering arguments from both sides, found that the discount offered by the foreign supplier was a legitimate commercial practice to attract buyers in new markets and introduce new technology. The Tribunal emphasized that the transaction value presented by the appellants was acceptable under the circumstances, thereby setting aside the impugned order and allowing the appeal with consequential relief.

Issue 3: Acceptance of transaction value in the case of related party transactions:
The Tribunal recognized the related party status between the appellants and the foreign supplier, emphasizing that the extra discount offered was a valid commercial strategy to introduce products in new markets like India. Despite the related party relationship, the Tribunal found no evidence to suggest that the price was unduly influenced, highlighting that the discount was a standard practice for new market penetration. Citing the decision in Eicher Tractors Ltd., the Tribunal concluded that the transaction value provided by the appellants was acceptable, leading to the impugned order being set aside and the appeal being allowed with consequential relief.

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