2016 (12) TMI 1029 - AT - Customs

Valuation of imported goods - rejection of declared value on the ground that the parties were related - related party transaction - Held that - we find that there is no evidence brought on record that contemporaneous imports were at a higher price and there being one common director of the importers was also a director and supplier in Walltracts, Dubai, had influenced the price. In the absence of any such evidence, we find that the transaction value as declared by the appellant should not have been rejected. Compliance of provisions of rule 4(3)(a) - Held that - we do agree with the submission of the Id. counsel that provisions of rule 4(3)(a) needs to be complied, assuming that there is a relationship between the supplier and the appellant herein, the circumstances warrant the same should be examined and the transaction value shall be accepted as the value of the imported goods provided that relationship did not influence the price. In the case in hand, there is nothing on record to show that due to commonality of one director the prices were influenced. Burden of proof of under invoicing is on the revenue, which has not been done. The loading of the price by 100% is incorrect and the impugned order is unsustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to loading of 100% on declared price due to alleged relationship between importer and supplier.

Analysis:
The appeal in this case challenges the loading of 100% on the declared price of imported goods due to an alleged relationship between the importer and the supplier. The appellant, engaged in import and sale of various goods, imported items from a supplier in Dubai, where one of the directors of the appellant company also held a directorship. The revenue authorities asserted a relationship between the supplier and the importer, leading to the rejection of the declared price and the imposition of 100% loading. The appellant contended that the transaction was at arm's length and the declared price reflected the true value as per Customs Act, 1962. The appellant argued that there was no evidence of shareholding or control between the entities and that the loading was unjustified without proper reasoning or notice. The appellant cited precedents to support their case, emphasizing the revenue's burden of proof in cases of under-invoicing.

Upon review, the Tribunal found the impugned orders unsustainable for multiple reasons. Firstly, there was no evidence of contemporaneous imports at a higher price or that the common directorship influenced pricing. Citing a Supreme Court precedent, the Tribunal emphasized that the burden to establish the actual value of imported goods rests with the revenue and cannot be shifted to the importer. The Tribunal also referred to a previous case where a common directorship was not sufficient grounds for rejecting transaction value without evidence of influence on pricing. Secondly, the Tribunal agreed that if a relationship existed between the supplier and the importer, the circumstances should be examined to ensure the transaction value was not influenced. In this case, there was no evidence that the common directorship affected pricing. The Tribunal upheld the appellant's argument regarding the revenue's burden of proof in cases of under-invoicing and concluded that the loading of 100% was incorrect. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.