2014 (12) TMI 1074 - AT - Customs

Valuation of goods - Discount received by assessee - Finalization of provisional assessment - whether the appellant is eligible for 40% discount as shown in the invoices - Held that - Rule 4(3)(a) of Valuation Rules, 1988 provides that where seller and buyer are related, the transaction value shall be accepted provided the examination of the circumstances of the sale of the imported goods indicate that relationship did not influence the price. In the present case, on perusal of the adjudication order, it is seen that on verification of import invoices and bills of entry and local invoices that the importer gets 34% profit and this profit margin is abnormal for aluminium industry. We find that sub-clause (b) of sub-rule (3) of Rule 4 of Valuation Rules provide that in a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to values ascertained at or about the same time. We find that the appellant had not placed any material to establish that the relationship had not influenced the price. Such as, international price list to show that discount is to all the buyers. They have only produced a price list generated in their own system. Discount is a general practice in the trade. On a perusal of the impugned order, it is seen that Commissioner (Appeals) observed that it is very clear that the importer is getting additional discount of 25% which is not available to anybody. In our considered view, the appellant is not eligible for additional discount as referred by the Commissioner (Appeals). After considering the facts and circumstances of the case, we direct that the invoice value would be loaded to 25% instead of 40% for the purpose of amendment of Bill of Entry. - Decided partly in favour of assessee.

Summary

Issues:
1. Determination of related party status and its impact on valuation.
2. Applicability of discounts in related party transactions.
3. Examination of profit margins in the aluminum industry.
4. Consideration of evidence and material to establish pricing influence in related party transactions.
5. Assessment of additional discounts in trade practices.

Analysis:
1. The case involved the import of Plastic & Rubber Articles and other parts from a supplier in Italy. The issue was whether the appellant was related to the supplier and the impact of this relationship on valuation. The adjudicating authority considered the shareholding pattern of the appellant company and found a connection with the supplier, leading to a 40% loading on the invoice value as per Customs Valuation Rules.

2. The appellant contested the loading of invoice value, arguing that the discount was a general trade practice and should not be denied solely based on the relationship between buyer and seller. The Tribunal examined Rule 4 of Valuation Rules, emphasizing that even in related party transactions, the transaction value can be accepted if the relationship did not influence the price. However, the appellant failed to provide material to prove that the discount was not influenced by the relationship.

3. The Revenue side highlighted the abnormal profit margin of 34% in the aluminum industry, suggesting that the discount given was unusual. The appellant's failure to disclose the relationship before the Special Valuation Branch and the alleged suppression of marketing and manufacturing agreements were also raised as points against them.

4. The Tribunal analyzed the provisions of Rule 4(3)(a) and (b) of Valuation Rules to determine the eligibility of the appellant for the discount. It was noted that the appellant did not present sufficient evidence to show that the relationship did not impact the pricing. The lack of an international price list and reliance on an internal price list weakened the appellant's argument.

5. Ultimately, the Tribunal acknowledged the general practice of discounts in trade but found that the appellant was not entitled to the additional discount observed by the Commissioner (Appeals). The invoice value was modified to be loaded by 25% instead of 40%, considering the facts and circumstances of the case. The appeal was disposed of with this modification in the order.