2017 (3) TMI 1115 - AT - Customs

Valuation - enhancement of value - related party transaction - Held that - first appellate authority has made a finding that there is no payment on account of royalty/technical knowhow fees. The appellants are involved in manufacture of final products using the imported items. The pricing of the same is taken on the basis of cost of production/purchase plus 10% markup. The same appears to be reasonable - Revenue is not contesting the factual findings recorded by the first appellate authority. In the absence of any serious contest to the factual findings as recorded by the first appellate authority, we do not find any merits in the appeal filed by the Revenue - appeal rejected - decided against Revenue.

Summary

Issues:
Enhancement of value of imported goods due to relationship between importer and supplier.

Analysis:
The appeal was filed by the Revenue against the order-in-appeal dated 8.1.2007, which ordered the enhancement of the invoice value of imported goods by 50% due to a perceived relationship between the importer and the supplier. The first appellate authority set aside the order, stating that the importer and supplier were related, but the lower authority should have explored valuations under subsequent rules instead of insisting on test values. The lower authority's enhancement of value by 50% was deemed arbitrary and contrary to the provisions of CVR, 1988. The appellants provided evidence of pricing based on cost production/purchase plus a 10% mark-up, including details of imports from an unrelated company to show that the relationship did not influence pricing. Additional documents submitted by the appellants were taken on record, and it was noted that there were no royalty/technical knowhow fees involved in the transactions. The first appellate authority set aside the lower authority's order and allowed the appeal.

The Revenue filed an appeal before the Tribunal, challenging the first appellate authority's order on the grounds that the importer did not produce a transfer pricing policy of the supplier or procurement invoices to verify the cost plus 10% mark-up claim. The Commissioner (Appeal) did not comment on the adjudicating authority's findings or discuss the Trade Mark Agreement between the importer and supplier. The Tribunal observed that the Revenue did not contest the factual findings of the first appellate authority. As there was no serious challenge to the factual findings, the appeal filed by the Revenue was found to lack merit. Consequently, the impugned order was upheld, and the appeal was rejected.