2015 (10) TMI 205 - AT - Customs

Valuation - Related person - Determination of transactional value - Held that - Both the adjudicating authority and the Commissioner (Appeals) have not passed a well reasoned order. There is no dispute on the fact that the appellant is related to the supplier (Principal) being a 100% subsidiary of the supplier. Rule 3 of the Valuation Rules provides for discarding the invoice price if there is evidence that the relationship between the supplier and the importer has influenced the price. The facts in this case are that the appellant is receiving goods at a value which is discounted by 35 to 45% on the value in the List price. There is no evidence whatsoever forthcoming from the record that the relationship has influenced the price. Mere passing of discount by the supplier to the importer does not necessarily lead to a conclusion that the discount has been passed on account of the relationship. The appellant have explained that the discount was also given to an independent dealer. The commission received by the appellant to the extent of 15% over the price at which Inteltek was importing the goods is also explained by them. This is a normal commercial practice. Unfortunately, neither the adjudicating authority nor the Commissioner (Appeals) have followed the legal provisions and judicial pronouncements in rejecting the transaction value declared by the appellant. They have not proceeded sequentially through the Valuation Rules in determining the value. The whole case has been dealt by the lower authorities in a very casual manner without examining the evidence and circumstances provided by the appellant in the form of import by another independent dealer and the provisions of law, particularly the Valuation Rules. Therefore, it would be most appropriate to remand this case back to the adjudicating authority for taking a proper legal view in the matter. - Decided in favour of assessee.

Summary

Issues Involved:
1. Valuation of imported goods based on List price and related party transactions
2. Application of Valuation Rules and legal provisions
3. Extra Duty Deposit (EDD) imposition and compliance with Customs Circular

Valuation of Imported Goods Based on List Price and Related Party Transactions:
The appellant, a 100% subsidiary of the supplier, imported electronic automation parts at a discount from the List price of the Principal. The dispute arose regarding the acceptance of the List price as the transaction value under Rule 3 of the Valuation Rules. The lower authorities upheld the duty payment on the List price and ordered EDD equal to 1% of the assessment value. However, the Tribunal found that the relationship between the supplier and importer did not influence the price, as the discount was also given to an independent dealer. The appellant justified the difference in discounts by providing after-sales services, a commercial practice. The Tribunal criticized the lower authorities for not following legal provisions and remanded the case for a proper valuation analysis.

Application of Valuation Rules and Legal Provisions:
The Tribunal highlighted that Rule 3 of the Valuation Rules allows discarding the invoice price if the relationship between the supplier and importer affects the price. In this case, the appellant received discounts without evidence of price influence due to the relationship. The Tribunal emphasized that the lower authorities did not adhere to the Valuation Rules and failed to consider evidence, such as imports by an independent dealer, in determining the value. The Tribunal concluded that a sequential analysis of the Valuation Rules was necessary, criticizing the casual approach of the lower authorities in handling the case.

Extra Duty Deposit (EDD) Imposition and Compliance with Customs Circular:
The adjudicating authority imposed EDD of 1% on the appellant's imports post-2011. However, the Tribunal referenced Board Circular No. 11/2011-Cus, which mandates discontinuation of EDD if finalization is not completed within four months of the Customs questionnaire reply. Citing a Mumbai High Court decision, the Tribunal ruled that there was no justification for the 1% EDD. Consequently, the Tribunal ordered the appellant not to pay EDD from 2011 onwards and remanded the case to the adjudicating authority for a timely decision on the valuation matter.

This detailed analysis of the judgment addresses the issues of valuation based on List price and related party transactions, application of Valuation Rules, and the imposition of Extra Duty Deposit, providing a comprehensive overview of the Tribunal's findings and directives.