2023 (5) TMI 1399 - AT - Customs

Valuation and enhancement of declared invoice values under Rule 8 of Customs Valuation Rules 1998 - appellant and M/s. Cisco Systems Management B. V. (Netherlands) are related persons in terms of Rule 2(2) of Customs Valuation (Determination of Price of Imported Goods) Rules 1998 or not - loading of declared invoice values of all the imports by the appellants - HELD THAT - With regard to import of spare parts it is held that in the case of spare parts also the value of goods will be as same as in the case of goods imported by the importer for their internal use as discussed in para 16 of the Order. At Para 17 the order categorically mentions In the Years 2001 and 2002 unrelated buyers have been allowed discounts of 50% and 52% respectively. Keeping in view the data provided by the importer. The order also mentioned that in the year 2003 the average discount given to unrelated buyers in India and the importers is fixed at 54% of GPL. Following the same the original authority has finalised 224 Bills of Entry loading the value of 46% to 48%. Since the earlier order of 2004 the loading was 65.75% to 75% which had been revised by the order dated 23.4.2009 to 46% and 48% the original assessing authority while finalising the assessment found that there was an excess payment of duty of Rs. 4, 18, 60, 248/- which is refundable to the appellant. The Commissioner (A) ignoring these facts only harps on last two lines of para 17 which refers to In rest of the cases where the declared invoice values of the importer are more than the average annual selling price of unrelated buyers in India the same shall be accepted. There is no evidence or data to show that the declared invoice value of the spares imported by the appellant was more than the average annual selling price of unrelated buyers in India. The original authority has rightly finalised the provisional assessment based on the final SVB order dated 23.04.2009 where the loading for the relevant years for the spare parts was 46% to 48% respectively. Appeal allowed.

Summary

Issues Involved:

1. Determination of the relationship between the importer and supplier under Rule 2(2) of Customs Valuation Rules, 1998.
2. Valuation and enhancement of declared invoice values under Rule 8 of Customs Valuation Rules, 1998.
3. Finalization of provisional assessments and the refund of excess duty paid.
4. Interpretation and application of SVB orders and their impact on valuation and assessment.
5. Compliance with Section 14(1) of the Customs Act, 1962 in determining the value of imported goods.

Issue-wise Detailed Analysis:

1. Relationship Between Importer and Supplier:

The appellant, a subsidiary of a foreign entity, imported networking systems from related entities. The Special Valuation Branch (SVB), New Delhi, in its order dated 25.08.2004, determined that the appellant and the foreign supplier were related persons under Rule 2(2) of the Customs Valuation Rules, 1998. This relationship influenced the valuation of imports, necessitating the loading of invoice values.

2. Valuation and Enhancement of Declared Invoice Values:

The SVB order dated 23.04.2009 revised the earlier valuation, continuing to hold the importer and supplier as related persons. It mandated the loading of declared invoice values for imports from 46% to 48% of the Global Price List (GPL) for various years, instead of the previous loading of 65.75% to 70%. This adjustment was based on the average discounts given to unrelated buyers in India, as per the data provided by the importer.

3. Finalization of Provisional Assessments and Refund of Excess Duty:

The original authority, through Order-in-Original No. 694/2014 dated 31.12.2014, finalized the provisional assessments for 224 Bills of Entry, finding an excess duty payment of Rs. 4,18,60,248/-. This excess arose due to the revised loading percentages under the SVB order dated 23.04.2009. The department's appeal against this refund was based on the interpretation of the SVB order, particularly para 17, which was contested by the appellant.

4. Interpretation and Application of SVB Orders:

The Commissioner (A) in the impugned order emphasized para 17 of the SVB order, which stated that the declared invoice values should be accepted if they exceeded the average annual selling price to unrelated buyers. The appellant argued that this interpretation was incorrect, as the SVB order's findings were irrelevant to the finalization of the Bills of Entry for the relevant period. The Tribunal noted that there was no evidence showing the declared invoice value of spares exceeded the average annual selling price to unrelated buyers.

5. Compliance with Section 14(1) of the Customs Act, 1962:

The Commissioner (A) held that the provisions of Section 14(1) of the Customs Act, 1962, were applicable as the value of imports was determined under Rule 8. This meant that the price paid by the importer should form the value of the imported goods. The Tribunal found that the original authority correctly finalized the provisional assessments based on the SVB order, which aligned with Section 14(1).

Conclusion:

The Tribunal allowed the appeal, finding that the original authority had rightly finalized the provisional assessments and granted the refund based on the final SVB order dated 23.04.2009. The Tribunal emphasized that the SVB order's loading percentages for the relevant years were correctly applied, and there was no evidence to support the department's claim that the declared invoice values exceeded the average annual selling price to unrelated buyers.