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2024 (10) TMI 638 - AT - CustomsValuation of imported goods - loading 10% on the transaction value under Customs Valuation Rules - related parties - mutuality of interest - applicability of new Customs Valuation Rules, 2007 - HELD THAT - The period of dispute in the present appeal is from 2013 to 2016. The Order-in-Original No. 6664/2007 dated 11.09.2007, the first SVB order acknowledged the fact that the appellant is 100% fully owned subsidiary of the Italian Company M/s. Biesse SPA Italy (supplier), hence, as per clause (iv) and (v) of Rule 2(2) of the Customs Valuation Rules, 1988, the buyer and the seller were related for the purpose of valuation under the Customs Act, 1962 read with Customs Valuation Rules, 1988. It was also noted that the appellant is engaged in manufacturing and selling of art wood working machines and only 20% of the components were procured by way of import from both related and unrelated parties and 80% of the components were locally procured. From the order, it is also seen that there was no technology transfer and hence, no payment of technical know-how fee or Royalty between the buyer and the seller. The products imported by the appellant were not manufactured by the supplier but procured from third party suppliers. Since, no evidence was placed on record that the overhead costs remained constant and the supplier was playing only a role of facilitator, 10% loading to the transaction value was ordered under the Customs Valuation Rules, 1988 read with Section 14(1) of the Customs Act, 1962. This order was valid for 3 years up to 10.09.2010. In view of the major changes in terms of Rule 3 and 12 brought about in the new Customs Valuation Rules, 2007, the Authorities have to give necessary reasons for rejection of value during the relevant period - Almost after 6 years, the Authorities below have without considering these factors loaded the transaction value based on the SVB order dated 11.09.2007 which expired on 10.09.2010, hence lost its validity and therefore, the present impugned order which relies on the earlier SVB order cannot be sustained. Moreover, during the relevant period, the Customs Valuation Rules, 2007 dated 10th October 2007 are the relevant Rules and these Rules are a major deviation from the earlier Valuation Rules, 1988 in view of the fact that Rule 3 and 12 specifically lays down the procedure for rejection of transaction value. Thus, in the facts and circumstances of the present case, it has to be held that the impugned orders are flawed in following an order which has lost its validity. The order is also contrary to law as it does not give cogent reasons in terms of Section 14(1) of the Customs Act 1962 read with Rules 3 and 12 of the Customs Valuation Rules, 2007 for rejection of the transaction value as declared in the Bill of Entry. In the aforesaid circumstances, the impugned orders cannot be sustained and we set aside the order and remand the matter to the original authority to redetermine the transaction value in the changed circumstances. The Tribunal in BIESSE MANUFACTURING CO. (P) LTD. 2018 (2) TMI 88 - CESTAT CHENNAI had observed that Appellants have also not been able to establish that M/s. Biesse SPA, Italy sold identical or similar goods to other importers in India at the same price. They have themselves not able to satisfy the requirements of Rules 43A 43B of the CVR, 1988 . Now, the appellant has also placed on record the third-party purchases of similar goods which have been sold at the same price that they have imported, hence, mutuality of interest does not arise. The matter is to be remanded for appropriate adjudication for considering the relevant Customs Valuation Rules - Appeal allowed by way of remand.
Issues Involved:
1. Legitimacy of loading 10% on the transaction value under Customs Valuation Rules. 2. Influence of related-party transactions on the declared transaction value. 3. Applicability of the Customs Valuation Rules, 2007 versus the 1988 Rules. 4. Compliance with the principles of natural justice and procedural requirements under Rule 12 of the Customs Valuation Rules, 2007. Detailed Analysis: 1. Legitimacy of Loading 10% on the Transaction Value: The primary issue in this case revolves around the legitimacy of the 10% loading on the transaction value by the Special Valuation Branch (SVB) under Section 14(1) of the Customs Act, 1962, read with the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The appellant contested the decision, arguing that the loading was done mechanically based on previous orders without considering the current circumstances. The Tribunal noted that the earlier SVB order, which was valid until 10.09.2010, was based on the Customs Valuation Rules, 1988, and was not applicable for the period of dispute (2013-2016). The Tribunal emphasized the necessity for the authorities to reassess the transaction value in light of the Customs Valuation Rules, 2007, which were in effect during the relevant period. 2. Influence of Related-Party Transactions: The appellant, a wholly-owned subsidiary of M/s. Biesse SPA Italy, was found to be in a related-party transaction with its supplier. The authorities initially determined that this relationship influenced the transaction value, justifying the 10% loading. However, the appellant argued that the relationship did not affect the price, citing the Customs Valuation Rules, 2007, which allow acceptance of the transaction value if the relationship does not influence the price. The Tribunal noted that the appellant provided evidence of third-party purchases at the same price, suggesting that mutuality of interest did not influence the transaction value. This evidence was deemed significant for reassessment. 3. Applicability of the Customs Valuation Rules, 2007 versus the 1988 Rules: The Tribunal highlighted a critical procedural error in applying the outdated Customs Valuation Rules, 1988, instead of the relevant 2007 Rules. The 2007 Rules introduced significant changes, particularly in Rules 3 and 12, regarding the determination and rejection of transaction values. The Tribunal underscored that the authorities failed to provide cogent reasons under the updated rules for rejecting the declared transaction value, rendering the impugned orders unsustainable. 4. Compliance with the Principles of Natural Justice and Procedural Requirements: The appellant argued that the authorities violated principles of natural justice by not considering the new Customs Valuation Rules, 2007, and by failing to provide adequate reasoning for the rejection of the transaction value. The Tribunal agreed, referencing the Supreme Court's ruling in Century Metal Recycling Pvt. Ltd. vs. Union of India, which mandates that authorities must communicate reasons for doubting the declared value and provide the importer an opportunity to respond. The Tribunal found that the authorities did not comply with these procedural requirements, necessitating a remand for proper adjudication. Conclusion: The Tribunal set aside the impugned orders and remanded the matter to the original authority for redetermination of the transaction value, taking into account the Customs Valuation Rules, 2007, and the changed circumstances of the appellant's business structure. The Tribunal instructed that the appellant be given an opportunity to present evidence and arguments in support of their case. The decision underscores the importance of adhering to the correct legal framework and procedural fairness in customs valuation disputes.
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