2015 (2) TMI 691 - AT - Customs

Valuation of goods - Determination of transactional value - Influence on transactional value - Held that - Lower appellate authority has not given any reasoning as to why the transaction value cannot be accepted. The only reason given is that Rule 12 provides for rejection of transaction value involving special discounts limited to exclusive agents. The learned lower appellate authority has ignored the fact that Rule 12 does not provide for a method of valuation as explicitly stated therein. It only mentions the circumstances under which transaction value can be rejected. Once the transaction value is rejected, then the value has to be determined sequentially following Rules 4 to 8 of CVR, 2007 which the appellate authority has failed to do. Since there are no contemporaneous imports of similar or identical goods, the assessing authority has determined the value adopting the deductive method under Rule 7 and found the transaction value to be acceptable. There is no rebuttal by the appellate authority as to why this conclusion drawn by the assessing authority is wrong and therefore, the reasoning adopted by the lower appellate authority is completely mis-placed. In the facts of the present case, there is no allegation of any flow back or payment of any additional consideration by the appellant to the foreign supplier. In the absence of any positive evidence, the argument that transaction value cannot be accepted has to be rejected. The ratio of the decisions of this Tribunal in the case of Rehau Polymers Pvt. Ltd., (2014 (6) TMI 265 - CESTAT MUMBAI) would also apply. In view of the above, we set aside the impugned order and allow the appeal by restoring the previous order of the assessing officer wherein it has been held that the transaction value has not been influenced by the relationship between the foreign supplier and the Indian importer. - Decided in favour of assessee.

Summary

Issues:
1. Valuation of imports from a related foreign entity.
2. Acceptance of transaction value declared by the importer.
3. Rejection of transaction value based on special discounts.
4. Application of Customs Valuation Rules, 2007.
5. Comparison with prices of identical goods supplied to related parties in other countries.
6. Rebuttal of findings by the assessing officer.
7. Compliance with Rule 12 of Customs Valuation Rules, 2007.

Issue 1: Valuation of imports from a related foreign entity
The appeal challenged an Order-in-Appeal that set aside the Assessing Officer's decision on the transaction value declared by the importer concerning imports from a related foreign entity. The assessing authority accepted the transfer price based on the cost plus method and found it acceptable, considering raw material costs, manufacturing costs, and a profit margin of 25%.

Issue 2: Acceptance of transaction value declared by the importer
The appellant argued that the assessing officer's decision was well-reasoned and should be upheld. They cited previous Tribunal decisions to support their claim that in the absence of specific findings rebutting the importer's claims, the value should not be enhanced. The Tribunal agreed, finding the assessing officer's reasoning impeccable and the lower appellate authority's lack of reasoning for rejecting the transaction value as misplaced.

Issue 3: Rejection of transaction value based on special discounts
The lower appellate authority rejected the transaction value, citing special discounts received by the appellant from related suppliers as discriminatory. However, the Tribunal pointed out that Rule 12 of the Customs Valuation Rules, 2007 does not provide a valuation method but only circumstances for rejection. The Tribunal found no reason to reject the transaction value based on the discounts.

Issue 4: Application of Customs Valuation Rules, 2007
The assessing authority applied Rule 7 of the Customs Valuation Rules, 2007 to determine the value, considering deductive methods and comparing prices of goods sold in India. The Tribunal found the assessing officer's determination acceptable and criticized the lower appellate authority for failing to follow the sequential valuation rules after rejecting the transaction value.

Issue 5: Comparison with prices of identical goods supplied to related parties in other countries
The assessing officer compared prices declared by the appellant with prices of identical goods supplied to related parties in other countries and found them comparable. This comparison supported the conclusion that the transaction value was acceptable.

Issue 6: Rebuttal of findings by the assessing officer
The appellant argued that there was no reason to rebut the assessing officer's findings, which were based on a thorough examination of the transaction value. The Tribunal agreed, stating that the lower appellate authority failed to provide a valid reason for rejecting the transaction value.

Issue 7: Compliance with Rule 12 of Customs Valuation Rules, 2007
The Tribunal clarified that Rule 12 does not dictate a valuation method but outlines circumstances for rejecting transaction value. Since there was no evidence of additional consideration or flow back from the appellant to the foreign supplier, the rejection of transaction value based on special discounts was deemed unwarranted.

In conclusion, the Tribunal set aside the lower appellate authority's decision and allowed the appeal, restoring the assessing officer's order that the transaction value was not influenced by the relationship between the foreign supplier and the Indian importer.