2015 (12) TMI 1345 - AT - Customs

Valuation - Loading of transaction value of spares ordered by the DC (SVB) and whether the commission received from the foreign supplier is to be loaded to the transaction value or otherwise - Held that - DC (SVB) while determining the relationship and while finalizing the transaction value held that 17% commission received from the foreign supplier be added to the transaction value of the imported goods, on the ground that this is on account of the goods imported by the third parties, which is indirectly flowed back to the Indian firm. The adjudicating authority in his findings also admitted that the agency commission received by the appellant is on account of the service rendered by the Indian firm, on behalf of the suppliers and the discounts they enjoyed. This admittedly confirms that the commission amount received from their foreign supplier is towards the service rendered by the appellant in India on third party imports. We also find that the appellate authority has not brought out any clear findings on the relationship between the appellant and the foreign supplier. In fact, the Commissioner (Appeals) has admitted that there is no detail available on the relationship between the supplier and the Indian firm but assumed that the parties are related on the presumption that M/s. Instron Holding Limited, UK controls the appellant firm and the supplier firm without any evidence. In this regard, we find that the Tribunal in the case of Mittal International Vs. CC, New Delhi (2002 (3) TMI 132 - CEGAT, COURT NO. I, NEW DELHI) has clearly held that 15% commission received by the importer is not related to the imports made by the appellant but in respect of imports made by third party. Where the appellants have received 17% commission from the supplier which is not related to the imported goods but for the goods supplied to the third party and the services rendered by the appellant in India on such goods, the application of the provisions contained under Rule 9(1)(a) is totally misplaced. However, we also find that even assuming that the parties are related, in order to invoke Section 14 and also Customs Valuation Rules for rejecting the value and the mutuality of interest between the supplier and the appellant has to be established. Whereas, in the present case, we do not find any justification or any evidence for mutuality of interest between the supplier and the appellant firm. - impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Relationship between the importer and the supplier.
2. Loading of transaction value of spares.
3. Inclusion of commission received from the foreign supplier in the transaction value.

Analysis:
1. The appellant appealed against the OIA dated 27.02.2004, which held the appellant and the supplier related under Rule 2 (2) (i) of the Customs Valuation Rules, 1988 (CVR). The DC (SVB) ordered a 22.66% loading of the transaction value of spares. The Commissioner (Appeals) upheld this order. The appellant contended they were related only to M/s. Instron Holdings Limited, UK, not M/s. Instron Limited, UK, the supplier. The Tribunal found the relationship issue crucial, as the DC (SVB) added a 17% commission received from the supplier to the transaction value based on services rendered by the appellant on third party imports.

2. The Tribunal noted the lack of clear findings on the relationship between the appellant and the foreign supplier. It referenced a case law where a similar commission was deemed unrelated to the imports made by the appellant. The Tribunal emphasized the need for establishing mutuality of interest to invoke Section 14 and Customs Valuation Rules. In the absence of evidence for mutuality of interest, the Tribunal held that the loading of 22.66% on the transaction value due to commissions received from the supplier was not justified. Therefore, the impugned order was set aside, and the appeal was allowed.

3. The Tribunal's decision highlighted the importance of establishing mutuality of interest between the supplier and the appellant for invoking Section 14 and Customs Valuation Rules. The case law cited supported the argument that commissions received from the supplier for services rendered on third party imports should not be included in the transaction value. The Tribunal's analysis focused on the lack of evidence for mutuality of interest in the present case, leading to the setting aside of the loading of 22.66% on the transaction value. The decision emphasized the need for clear findings on the relationship between the parties to determine the inclusion of such commissions in the transaction value.