2013 (5) TMI 351 - AT - Customs

Rejection of declared value - loading of 10% on the declared transaction value - Held that - On perusal of the records, we find that in Order-in-Original a clear cut finding was given that there is no case of loading the transaction value on account of factors such as Royalty, Technical Know-how and Lumpsum payment to the related supplier. No evidence has been brought on record by the adjudicating authority that there is some flow of funds other than the transaction value. The transaction value has been enhanced under Rule 10(1)(c) of the Custom Valuation Rules, 2007 which clearly deals with lumpsum payment of royalty. There is no justification for addition of 10% of the value of the declared value. Thus, order is set aside.

Summary

Issues:
1. Rejection of declared value and enhancement of transaction value by loading 10%.
2. Applicability of Customs Valuation Rules 2007 on related parties.
3. Invocation of Rule 10(1)(c) for enhancing transaction value.

Analysis:

Issue 1: Rejection of declared value and enhancement of transaction value by loading 10%
The appellants filed an appeal against the impugned order where the adjudicating authority rejected the declared value and increased the transaction value by loading 10% of the declared value. The appellant contended that the enhancement was solely due to the relationship between the supplier and importer, invoking a non-existent Rule 3(3)(d) of Customs Valuation Rules 2007. The Commissioner relied on the audited balance sheet of the appellants to justify the enhancement, citing administrative expenses. However, the adjudicating authority found no payments for Royalty, Technical Know-how, or lumpsum payment to the related supplier, contradicting the basis for the enhancement. The impugned order was set aside, and the appeal was allowed.

Issue 2: Applicability of Customs Valuation Rules 2007 on related parties
The case involved related parties, where the supplier and importer had a relationship affecting the declared value of imported goods. As per Rule 2(2) of Customs Valuation Rules 2007, the declared value is influenced by such relationships. The impugned order was passed considering this relationship, leading to the rejection of the declared value. However, the appellate tribunal found no evidence of additional funds beyond the transaction value, leading to the rejection of the enhancement based on Rule 10(1)(c) of the Customs Valuation Rules 2007.

Issue 3: Invocation of Rule 10(1)(c) for enhancing transaction value
The Ld.A.R. argued in favor of upholding the loading of 10% on the declared transaction value, citing the high administrative expenses shown in the balance sheet. However, the appellate tribunal noted that Rule 10(1)(c) of the Custom Valuation Rules 2007, dealing with lumpsum payment of royalty, was incorrectly applied for the enhancement. The tribunal found no justification for the addition of 10% of the declared value and set aside the impugned order, allowing the appeal with consequential relief.

In conclusion, the appellate tribunal set aside the impugned order, highlighting the incorrect application of Rule 10(1)(c) for enhancing the transaction value based on the relationship between related parties. The decision emphasized the need for evidence and justification when rejecting declared values and enhancing transaction values under the Customs Valuation Rules 2007.