2018 (7) TMI 548 - AT - Customs

Valuation of imported goods - inclusion of discount in assessable value - related party transaction - Held that - The appellant has been appointed as the exclusive commercial agent - the original authority i.e., AC, SVB has considered the agreements in its entirety and has observed that the appellant is a distributor, who is handing imports at a different commercial level when compared to other Indian buyers - the appellant is also required to carry out various sales promotion activities as well as minimum order quantity and inventory levels. In the light of the status of the appellant as exclusive commercial agent , the 25% discount enjoyed by them is reasonable and the same cannot be termed as abnormal discount - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to Order-in-Appeal No. 29/2011 dated 25.01.2011 regarding the denial of a 25% discount on imported spares by group companies for re-selling and warranty replacements.

Analysis:

The appeal contested the Order-in-Appeal No. 29/2011, which dismissed the Revenue's grounds but disallowed a 25% discount on spares imported by the appellant for re-selling and warranty replacements. The appellant, a subsidiary of foreign group companies, was appointed as an exclusive commercial agent to promote loom sales in India, justifying the discount as compensation for incurred overheads. The department challenged the discount, arguing that other importers could import at similar prices. The agreement excluded such importers, as they were manufacturers for further production, not agents like the appellant.

During the hearing, the appellant's advocate emphasized the exclusive agency status and the necessity of the discount to cover various operational costs. The department's representative questioned the appellant's exclusivity and pointed out discrepancies in the records. The Tribunal noted the core issue was the 25% discount granted by the related foreign supplier to the appellant for spares intended for re-sale or warranty replacements. The appellant's status as an exclusive commercial agent was crucial, as evidenced by the agreement terms.

The Tribunal reviewed the agreement and the original authority's assessment, recognizing the appellant as an exclusive commercial agent with distinct commercial responsibilities compared to other Indian buyers. Considering the appellant's promotional activities, minimum order quantity, and inventory requirements, the 25% discount was deemed reasonable. Consequently, the Tribunal overturned the Commissioner (Appeals) decision and reinstated the original authority's order, acknowledging the discount's validity for the appellant as an exclusive commercial agent.

In conclusion, the appeal was allowed, and the appellant was granted relief based on their status as an exclusive commercial agent, justifying the 25% discount on imported spares for re-selling and warranty replacements.