2004 (10) TMI 218 - AT - Customs

Import of goods from VTC and VPC - Valuation (Customs) - related persons - price of spare part can be enhance upto the original equipment price? - Whether the Commissioner (Appeals) is correct in remanding the matter to the original authority with a direction to fix the assessable value in terms of Rule 8 - HELD THAT - The Board's instruction of 1957 has been mentioned in the Circular of 2002. Therefore, just because the spare parts cost much more than the cost of the OE, one cannot enhance the value of the OE for assessment purposes. The appellants have stated that the commercial level at which the OE is imported is much higher than that of those of the spare parts. Moreover, the spare parts have to be kept for fairly a longer time. All these factors influenced the price of the spare parts. lt is also seen that simply for the reason that the appellant and the exporters are related persons, we cannot enhance the price of OE to the level of the Spare parts unless it has been shown that the relationship has influenced the price. It is for the department to do thorough investigation and come out with evidence to show that the relationship has influenced the price. The department has not done that. Thus, we do not have any reason to uphold the decision to enhance the price of the OE Parts to that of the spare parts. In any case, the OIA has already set aside the determination of the transaction value under Rule 5 of the Valuation Rules, 1998. The Commissioner (Appeals) is clearly in the wrong, in traversing beyond the scope of the original show cause notice. Thus, the JCDR's request for remanding the case to the original authority is not at all justified. Hence, we allow the appeal by setting aside the OIA.

Summary

Issues involved: Assessment of imported goods under Customs Valuation Rules, 1988 based on relationship between importer and exporters, applicability of Rule 5 and Rule 8, influence of relationship on pricing, remand order by Commissioner (Appeals).

Summary:
The case involved Volvo India Private Limited importing parts for truck manufacture from Volvo Truck Corporation (VTC) and Volvo Parts Corporation (VPC), both subsidiaries of AB Volvo. Customs assessments were done provisionally due to the relationship between the parties. A Show Cause Notice alleged importing identical goods from VTC and VPC, proposing to enhance VTC prices to match VPC prices. Deputy Commissioner ordered price enhancement under Rule 5, later appealed by appellants. Commissioner (Appeals) found goods not identical, directed assessment under Rule 8 due to price variation. Appellants challenged this decision.

The appellants argued that the Commissioner (Appeals) exceeded the Show Cause Notice scope by not setting aside the original order. Citing case laws, they contended against introducing new points in appeals. They highlighted a Board Circular recognizing dual prices for OE and spare parts. They emphasized differences in prices internationally and domestically, urging that relationship influenced prices. They referred to a Transfer Pricing Policy by Volvo Group aiming for arm's length pricing.

The JCDR defended the remand order, stating goods were not identical as some invoices showed parts from the same country. She suggested relationship influenced pricing, requiring detailed examination per the Board's Circular. The Tribunal agreed with the appellants, stating the Commissioner (Appeals) cannot introduce new cases beyond the Show Cause Notice. They noted historical Circulars on dual pricing and emphasized the need for evidence showing relationship impact on prices. As the department failed to provide such evidence, the decision to enhance prices was overturned, and the remand order was deemed unjustified. The appeal was allowed, setting aside the Order-in-Appeal.