2019 (9) TMI 1165 - AT - Customs

Valuation of imported goods - related party - allowability of discount - quantum of discount - Whether the ICIN list followed by the Foreign supplier in respect of import by the appellant can be allowed for the purpose of assessment of value of imported goods? - whether the relation between the Foreign supplier and importer/appellant has influenced the pricing mechanism? HELD THAT - Effectively the difference between the list price and ICIN price works out to a average discount of 32%, which is lesser than the previously accepted discount of 45%; commercial consideration appear to have laid role in determination of sale price of the supplier with no regard to relationship and from the annual Financial Statement, it could be seen that they appellants have not made any other payment other than the purchase consideration and the royalties to the associated companies towards the supply of goods. The original authority all along to the discussion and findings as accepted the contentions of the appellants and has given categorical findings as above. However, in the order portion he comes to the conclusion that the declared invoice values wherever they are less than 55% of global price list. We find that, no reasoning what so ever as been given as to how he has arrived at such a conclusion. The original authority has not given any findings as to why the declare value should be rejected and the value should be re-determined following the valuation Rules. The learned appellant authority also has not gone into the details of the fact of the case and has given cursory findings without delving into the crux of the issue. The appellant authority simply affirms the findings of the lower authority. No reasons what so ever have been given as to why the declared prices have to be rejected and as to how the relationship has influenced, if any, the prices declared in the ICIN. Both, the lower authority and the appellant authority appear to have proceeded with a preconceived notion that the discounts over and above that have been allowed in previous SVB orders should not be allowed - Thus, neither the lower authority nor the appellant authority have rendered justice to the issue. Under these circumstances, we find that, the only way left for us is to set aside the impugned order and to remand the matter for reconsideration to the original authority. Appeal allowed by way of remand.

Summary

Issues Involved:

1. Whether the ICIN price list followed by the foreign supplier for imports by the appellant can be accepted for valuation purposes.
2. Whether the relationship between the foreign supplier and the appellant influenced the pricing mechanism.

Issue-wise Detailed Analysis:

1. Acceptance of ICIN Price List for Valuation:

The appellant argued that the ICIN prices, determined by the foreign supplier, were based on commercial considerations and not influenced by their relationship. The ICIN price list provided fixed discounts for the appellant, unlike the Global Price List, which allowed for negotiable discounts for unrelated buyers. The original authority found that the ICIN prices, on average, resulted in a 32% discount, which was lower than the previously accepted 45% discount. However, it concluded without clear reasoning that discounts over 45% were not acceptable.

The tribunal noted that the original authority had accepted the appellant's contentions during discussions but failed to provide a rationale for rejecting declared values exceeding a 45% discount. The tribunal emphasized the need for a speaking order with clear reasoning, which was absent in the original authority's decision.

2. Influence of Relationship on Pricing Mechanism:

The appellant contended that the relationship with the foreign supplier did not influence the pricing mechanism, as the discounts were commercially justified. They cited various case laws supporting the notion that discounts are a commercially acceptable measure and that a distributor's commercial level differs from that of an independent buyer.

The original authority, however, did not provide evidence or reasoning to show that the relationship affected the pricing. Both the lower and appellate authorities appeared to have a preconceived notion against allowing discounts over 45%, without thoroughly examining the facts or the appellant's arguments.

Conclusion and Remand:

The tribunal found that neither the lower authority nor the appellate authority rendered justice to the issue. The decisions lacked detailed reasoning and did not address the appellant's submissions adequately. Consequently, the tribunal set aside the impugned orders and remanded the matter for fresh reconsideration by the original authority. The original authority was directed to consider all submissions and relevant case laws and to issue a speaking and reasoned order within a specified timeframe.