2024 (4) TMI 1019 - AT - Customs

Transaction value - Valuation (Customs) - Related person - loading of import value - Modular panels of different sizes for use in the construction industry - imports raw materials - provisional duty assessment - special or abnormal discount to the related buyers which were in excess of 3% discount - HELD THAT - We find that the Chairman and Managing Director of Paschal Germany has confirmed that their normal trade practice in the course of international trade is to offer discount at the range of 25% to 40% of the normal sale price to all their customers located across the globe including the group companies/ affiliates. The importer has also demonstrated that even at the time that they were not in existence in India their parent company had allowed 25% discounts to buyers like NCC in India. The cash discount of 3% is allowed by the parent company if the subsidiary pays the import bills within the time. No cash discount was ever availed by the Appellant as the import payments could not be made to the suppliers within the time. The cost construction statement duly certified by the CA shows that on average the profit margin was around 16%. None of this was refuted through facts. The OIO also mentions that the learned Adjudicating Authority did not find any cash flow back towards Royalty/ Technical Know-How fees/ Licence fee in respect of the imported goods. We find that the department at the first instance has not shown any concrete reason to discard the transaction value. The OIO states that it appears that the importer is giving 25% discount to their related parties and may be another 3% as per the terms and condition of the price list. He goes on to opine that there can not be mass production of such machinery plant which warrants such huge discount , without any factual substantiation. The whole arguments to discard the transaction value are based on conjectures and surmises. This being so the question of determining a fresh value as per the CVR does not arise. The Commissioner (Appeals) after examining the matter is also unsure about the exclusive nature of the discounts affecting the transaction value on the imported goods and states in conclusion that the discount enjoyed by the importer appears to be a special one made only for related importers . On the other hand he has gone beyond his statutory functions, traversed beyond the scope of the appeal and taken on the role of an investigator directing the lower authority to examine why the loading of value should not be at 25%. Hence the impugned order must fail both for sustaining the OIO which was based on conjectures and surmises and could not give any concrete reasons to discard the declared transaction value and further for exceeding his statutory functions by ordering a fresh enquiry. Thus, we set aside the impugned order. The appeal succeeds and is disposed of accordingly.

Summary

Issues Involved:
The issues involved in this case are related to the Customs Valuation Rules, 2007, specifically the determination of the assessable value of imported goods, influence of discounts on transaction value, and the burden of proof on the department to show that the declared price does not reflect the true transactional value.

Assessable Value and Influence of Discounts:
The case involved Paschal India, a manufacturer of modular panels, importing raw materials from its parent company Paschal Germany. Due to their relationship, the import transactions were investigated by the SVB, Chennai Customs. It was found that Paschal Germany had offered a 25% discount to Paschal India, along with a 3% prompt payment discount. The adjudicating authority disallowed the 22% special discount offered to related buyers, leading to a loading of 22% on the invoice value. The Commissioner (Appeals) upheld the loading but directed further examination at 25%. The Tribunal noted that the relationship between the parties should not influence the price as per Customs Valuation Rules.

Burden of Proof and Conclusive Evidence:
The appellant argued that Paschal Germany's normal trade practice was to offer discounts of 25% to 40% globally, including to group companies. The appellant demonstrated instances of discounts offered even before their incorporation in India. The appellant also highlighted that no cash discount was availed due to payment delays. The cost construction statement showed an average profit margin of 16%, which was not refuted. The Tribunal emphasized that the burden to prove the declared price did not reflect the true value lies with the department. The department failed to provide concrete reasons to discard the transaction value, relying on conjectures and surmises. The Commissioner (Appeals) was criticized for exceeding statutory functions by ordering a fresh inquiry without sufficient evidence.

Conclusion:
The Tribunal set aside the impugned order, stating that it failed to provide concrete reasons to discard the declared transaction value and exceeded statutory functions. The appeal was successful, and the case was disposed of accordingly.