2021 (1) TMI 1060 - AT - Customs

Valuation of imported goods - related party transaction - Jurisdiction - power of Commissioner to interfere with the order and pass an order in review - HELD THAT - In respect of valuation of imported goods, the price at which the foreign supplier sells the goods to the importers in other countries is not at all relevant. It is not open for the reviewing authority or Commissioner (Appeals) to conduct a fishing expedition and to raise questions without giving sufficient and enough reasons for entertaining such a reasonable belief. Neither the reviewing authority nor the Commissioner (Appeals) has cited proof whatsoever to indicate either that the prices declared by the appellants were influenced by their relation or that there was a certain amount of flow back to the foreign supplier in the one form or the other. In the absence of the above, no amount of questioning, though seemingly logical, would be of any help to the Revenue. It is a settled principle of law that the authority making the allegations has to prove with sufficient evidence. In the instant case, leaving alone the evidence, even reasons to entertain such a belief have not been properly brought forth or established. It is found that neither the reviewing authority nor the Commissioner (Appeals) has made out a case for striking down the order of the original authority. Therefore, the impugned order does not stand the scrutiny of law. The declared prices cannot be reviewed without any evidence to the effect that the relation between the appellant and the foreign supplier has influenced the declared price or to the effect that there was a flow back of money from the importer to the related foreign supplier. There are nothing to sustain the impugned order. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Valuation of imported goods in related party transactions under Customs Valuation Rules, 2007.

Detailed Analysis:
The case involved M/s. Hanil Automotive India Pvt. Ltd., engaged in manufacturing automotive parts for Hyundai cars, importing parts from related foreign suppliers. Initially, the department accepted the transaction value declared by the appellant. However, after the appellant became a subsidiary of the foreign supplier, the department initiated Special Valuation Branch (SVB) orders to assess the relationship's impact on pricing. The SVB orders in 2007 and 2011 found no change in the pattern of sale or flow back. In 2015, the appellant approached SVB for supplies from another related foreign company, which was also accepted. The Commissioner (Appeals) reviewed the order in 2016.

The appellant argued that the Commissioner failed to consider settled facts and laws, including the application of Customs Valuation Rules, 2007. They contended that the examination of prices in related party transactions is required only when doubts exist about declared prices. The appellant emphasized that the assessing officer had scrutinized all aspects, including earlier SVB orders, and found no reason to doubt the transactions. They criticized the Commissioner for unsettling an issue settled for eight years without proper consideration.

The reviewing authority raised concerns about the influence of the relationship on prices and the applicability of price lists to unrelated buyers. However, the reviewing authority and Commissioner (Appeals) were unable to provide evidence or reasons to support these doubts. The Tribunal emphasized that valuation of imported goods should focus on the actual transaction value, unaffected by the relationship between parties. They cited a previous case to support the appellant's argument that the accepted transaction value should not be questioned without evidence of price influence due to the relationship.

Ultimately, the Tribunal allowed the appeal, stating that the impugned order did not stand legal scrutiny. They emphasized that declared prices in related party transactions should not be reviewed without evidence of price influence or flow back. The Tribunal highlighted the importance of following Customs Valuation Rules and ensuring that doubts about declared prices are supported by sufficient evidence.