2024 (4) TMI 640 - AT - Customs

Valuation of imported goods - inclusion of royalty in the invoice value - Rule 10(1)(c) of the Customs Valuation Rules, 2007 - HELD THAT - Impliedly, the direction of the first appellate authority is not relatable to goods under import or under proceedings for recovery of duty short-paid on import. A proceedings which does not pertain to goods under import or already imported and cleared is not a proceedings acknowledgeable under Customs Act, 1962. Neither Learned Counsel nor Learned Authorised Representative were able to evince notice under section 28 of Customs Act, 1962 for recovery of duty arising from proposed addition to declared value by recourse to rule 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 or for finalization of assessment under section 18 of Customs Ac, 1962 which, other than section 124 of Customs Act, 1962, should be the requisite framework for adjudication and appellate disposal. The order impugned before the first appellate authority has its origins in a peculiar institution of customs administration, viz., Special Valuation Branch (SVB) or GATT Valuation Cell (GVC), found in some of the older customs houses with specific remit to investigate acceptability of price declared for assessment of goods transacted between related persons. This arises from provisioning in section 14 of Customs Act, 1962 for assessable value to factor in relationship affecting price arrangement in transactions which frailty of human expression could but, in the nascent stage of harmonized approach to valuation, inadequately articulate as the norm or the deviation, and as remedies appurtenant thereto, to justify institutionalized support to assessment hierarchy. Furthermore, from the absence of show cause notice, as well as response by or on behalf of appellant about fiscal detriment in proceedings, we may not be wrong in speculating that such imports as may be subject to oversight of Special Valuation Branch (SVB) are, invariably, assessed provisionally for finalization to be undertaken upon completion of ascertainment by Special Valuation Branch (SVB) - As appeal has not been directed before first appellate authority against order of such proper officer , it transgresses the remand jurisdiction of such appellate authority to issue directions to a proper officer who has yet to undertake finalization. Direction to the ostensible original authority is nothing but an exercise in futility and direction to the proper officer , and the statutorily empowered potential original authority , is beyond appellate jurisdiction of Commissioner of Customs (Appeals) before whom assessment was not under challenge. There was no cause for grievance to initiate appellate remedies. Such opportunity would have presented itself after finalization. Implicit in acknowledgement of appellate remedy against advisory of Special Valuation Branch (SVB) is another round of appeal through the first appellate authority on the same goods and on the same facts which does not sit well with the principle of comity of courts. The appeal before the first appellate authority was, thus, premature. This aspect of disposal of the appeal within the scheme of Customs Act, 1962, and the role of Deputy Commissioner, Special Valuation Branch (SVB) within it, had not been evaluated by the Commissioner of Customs (Appeals). The impugned order set aside - appeal restored to first appellate authority to dispose off the pleas of the appellant-Assistant Commissioner in accordance with the scheme of Customs Act, 1962 - appeal allowed by way of remand.

Summary

Issues involved:
The issues involved in the judgment are the valuation of goods imported by the appellant, specifically regarding the inclusion of royalty paid under Rule 10(1)(c) of the Customs Valuation Rules, 2007.

Details of the Judgment:

Valuation of Goods and Inclusion of Royalty:
The appellant, M/s Endress Hauser Flowtec (India) Private Limited, challenged the direction of the Commissioner of Customs (Appeals) to add royalty paid by the appellant in the invoice value of the imported goods. The appellant contended that their relationship with the supplier did not influence the price, and the royalty payable under the agreement should not impact the value for assessment. The impugned order directed the addition of royalty based on the agreement for the use of trademark and logo, payable on the turnover of goods manufactured in India. However, the appellate authority's direction lacked details of imported consignments affected, and the proceedings did not pertain to goods under import or already imported and cleared. The Tribunal found that the Special Valuation Branch (SVB) had overstepped its mandate by including the royalty in the assessable value without proper notice under the Customs Act, 1962. The Tribunal set aside the impugned order and remanded the appeal to the first appellate authority for proper disposal in accordance with the Customs Act, 1962.

Jurisdiction of Special Valuation Branch (SVB):
The judgment delved into the jurisdiction of the Special Valuation Branch (SVB) or GATT Valuation Cell (GVC) in investigating the acceptability of prices declared for goods transacted between related persons. The SVB's role was scrutinized, and it was found that the SVB was not empowered to assess duty or enhance the value in the assessment of goods under the Customs Act, 1962. The Tribunal highlighted the lack of competence of the SVB to finalize assessments or recover short-paid duties, emphasizing that the SVB's role was advisory and not quasi-judicial. The Tribunal concluded that the SVB's quantification order was relevant for finalization of assessment under the Customs Act, 1962, which falls under the purview of the proper officer, not the SVB.

Appellate Remedies and Premature Appeal:
The Tribunal also examined the appellate remedies available and found that the appeal before the first appellate authority was premature. The opinion of the Deputy Commissioner, Special Valuation Branch (SVB), was not binding on the proper officer responsible for assessment. The Tribunal emphasized that the appeal should have been initiated after finalization, and premature appeals disrupt the scheme of the Customs Act, 1962. Therefore, the Tribunal set aside the impugned order and allowed the appeal by way of remand for proper disposal by the first appellate authority.