2017 (12) TMI 1515 - AT - Customs

Valuation - discount - includibility - related party transaction - goods imported from their principals for purposes of stock and sale - Held that - the quantum of imports made by the respondent justify the same to be categorized as a separate class of buyers - the order passed by the learned Commissioner(Appeals) is reasonable. He has given detailed reasons justifying the grant of discounts - appeal dismissed - decided against Revenue.

Summary

Issues: Valuation of imported goods for stock and sale, Allowance of discounts to importer from foreign principal, Justification of discounts based on business risks

Valuation of Imported Goods:
The appeal was filed by the Revenue against the Order-in-Appeal regarding the valuation of goods imported from a foreign principal for stock and sale purposes. The Special Valuation Branch had earlier determined that the invoice values for imports should be loaded by 12% to 30% due to discounts provided by the foreign suppliers to the importer. The Order-in-Original and subsequent Order-in-Appeal addressed the issue of allowing these discounts to the importer. The Revenue contended that discounts should not be allowed as the importer undertakes business risks that do not justify such discounts, while the importer argued that the discounts were necessary due to the risks involved in importing, stocking, and selling the goods.

Allowance of Discounts:
The main contention revolved around whether the importer was entitled to discounts ranging from 12% to 30% provided by the foreign principal. The Revenue argued that the discounts were not justified as the importer could minimize business risks associated with importing goods. On the other hand, the importer justified the discounts by highlighting their role as a sole distributor undertaking various activities such as after-sales services, administration, and marketing. They claimed that the discounts were based on a structured discount system and were not solely due to the relationship between the parties.

Justification of Discounts Based on Business Risks:
The importer justified the discounts by emphasizing the risks involved in their business activities, including holding inventory, foreign exchange risks, maintenance costs, and warranty coverage. They argued that these risks warranted the discounts provided by the foreign principal. The lower authority supported the importer's claim by categorizing them as a separate class of buyers due to the nature and volume of their imports, which involved additional services not provided by other importers at a smaller scale.

In the final judgment, the Appellate Tribunal upheld the Order-in-Appeal, ruling that the importer was entitled to the discounts provided by the foreign principal. The Tribunal found that the discounts were justified based on the importer's role as a sole distributor and the risks involved in their business activities. The decision was supported by detailed reasoning provided by the Commissioner(Appeals), and the Tribunal saw no reason to interfere with the impugned order. As a result, the appeal filed by the Revenue was dismissed, and the stay application was also disposed of.