2020 (6) TMI 67 - AT - Customs

Valuation of imported goods - percentage of enhancement to the transaction value - order of loading in the transaction value - Comparable goods or not - HELD THAT - As the ASD do not import RF products as well as the made to order products , but some products are imported both by the appellant and the ASD, but are not comparable. Such imports constitute a significant part of the total imports made by the appellant. Such imports are in the range of 16 to 51% during the period 2013-14 to 2017-18 or an average of 36% of the total imports made by the appellant. Further, the quantity imported by the appellant is more than 200 times than the quantity imported by the ASD - the ASD placed order for import usually when they have sales order in hand and do not undertake stocking of the products. Whereas the appellant irrespective of the sales orders in hand, the appellant imports in bulk and stocks, and maintains an inventory. Thus they incur much higher selling and distribution cost. Thus, there is no reasonable basis for enhancement of 77% in the transaction value as per the impugned order. The proposition of Revenue that the import price of ASD are comparable to that of the appellant is a vague, in view of the heavy difference in the quantity imported of identical goods. Thus, the appellant and the ASD cannot be treated as a comparable at commercial level. Sub-rule (3) of Rule 3 in clause (b) provides that, in case of sale between the related person the transaction value shall be accepted whenever the importer demonstrates that the declared value of the goods being valued, closely approximate to one of the following values imported at or about same time. Sub-clause (ii) in clause (b) provides for the deductive value of the identical goods or similar goods. In applying the value use for comparison, due account shall be taken of demonstrated difference in commercial level, quantity levels, adjustment in accordance with the provision of Rule 10 and cost incurred by the seller in sales, in which he and the buyer are not related. Sub-rule (4) of Rule 3 further provides, if the value cannot be determined under the provisions of sub-rule (1) of Rule 3, the value shall be determined by proceedings sequentially through Rule 4 to 9. Admittedly, it is evident on the face of the record that deductive value was available before the Court below which have not been rejected by a speaking order, thus, violating the provisions of Rule 3 (3) of the Valuation Rules - as the deductive value for calculation have not been rebutted by the Revenue, the same has to be followed for calculation of any adjustment in the transaction value in terms of Rule 3(3) of the Valuation Rules. This appeal is allowed by way of remand to the Court below to the Deputy Commissioner, SVB to re-determine the adjustment, if any, in the transaction value on the basis of deductive value and computed value - appeal is allowed by way of remand.

Summary

Issues involved:
1. Admissibility of additional evidence.
2. Determination of the transaction value between related parties.
3. Justification for the enhancement of transaction value by 77%.
4. Applicability of the Customs Valuation Rules, 2007.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Evidence:
The appellant filed a Miscellaneous Application No. 50977 of 2019, requesting the inclusion of additional evidence, specifically a Chartered Accountant’s certificate confirming the deductive value derived from the resale price of imported goods and computed value certificates from M/s Lutron Electronics Co. Inc., USA. The Tribunal allowed the application, noting that these documents are based on the record and go to the root of the matter.

2. Determination of the Transaction Value Between Related Parties:
The primary issue was whether the transaction value between the appellant and its parent company, M/s Lutron Electronics Co., Inc., USA, was influenced by their relationship. The appellant provided extensive documentation and responses to the Special Valuation Branch (SVB), asserting that the declared transaction value was at arm’s length and supported by deductive value calculations. The Tribunal found that the appellant had submitted sufficient evidence to demonstrate that the relationship did not influence the price, including certificates for deductive value and audited Profit and Loss statements.

3. Justification for the Enhancement of Transaction Value by 77%:
The Deputy Commissioner had ordered an enhancement of the transaction value by 77%, based on the comparison with prices offered to Authorised Stocking Distributors (ASD). The Tribunal found this enhancement unjustified, noting significant differences in the commercial levels and quantities imported by the appellant and ASDs. The Tribunal observed that the appellant’s imports were significantly higher than those of the ASDs, justifying a higher discount. The Tribunal modified the enhancement to 20% for the period 2013-14 to 2016-17 and found no enhancement necessary for 2017-18.

4. Applicability of the Customs Valuation Rules, 2007:
The Tribunal emphasized the importance of following the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Rule 3(3) allows the acceptance of transaction value if the importer demonstrates that the declared value closely approximates deductive or computed values. The Tribunal found that the lower authorities had incorrectly applied Rule 4 without exhausting the provisions of Rule 3. The Tribunal held that the deductive value calculations provided by the appellant were not rebutted by the Department and should be accepted.

Conclusion:
The Tribunal allowed the appeal, remanding the case to the Deputy Commissioner, SVB, to re-determine any adjustment in the transaction value based on deductive and computed values. An interim arrangement was made, restricting the loading to 15% of the invoice value until the Deputy Commissioner’s order. The appeal was allowed in these terms, and the Miscellaneous Application for additional evidence was also granted.