2015 (11) TMI 445 - AT - Customs

Valuation of goods - Related person - whether the appellants are related persons to the suppliers of imported goods within the scope of Rule 2 (2) (vi) of CVR - Held that - the appellant and all the 7 subsidiaries group companies are fully owned and controlled by M/s.Ansoldo Signals NV and all the imports are made only from the said group companies and there is no outside translation. Therefore, the transaction between supplier and appellants cannot be at arms length or normal transaction. - their principal holding company decides the corporate policy, design, specification, quality control, marketing, sub-licensing of patent, franchise etc. In view of the above undisputed facts, the appellants and suppliers are related persons - Decided against the assessee. Whether the denial of special discount offered to the supplier and loading of value of the imported goods as per the list price for each of import items in terms of Rule 4(2) of CVR is correct or otherwise - Held that - it is established beyond doubt that the discounts offered are exclusive discounts only to the appellant who is 100% subsidiary of the principal company. Therefore, the appellant s contention that they are eligible for discount of upto 30% for the transfer price is not acceptable. - the rejection of discount and loading of invoice price to different % for each imports made from their related suppliers is liable to be upheld. - Decided against the assessee. Whether the addition of lump sum fee and royalty paid to value of goods in terms of Rule 9 (1) (c) of CVR is correct or otherwise - Held that - Supreme Court in the case of CC (Prev.) Ahmedabad Vs ESSAR Gujarat Ltd. 1996 (11) TMI 426 - SUPREME COURT OF INDIA clearly held that Technical Knowhow and lump sum shall be includible in the value of imported goods - The ratio of the Apex Court decision is squarely applicable to the present case as the technical knowhow, lump sum payment, royalty are part of condition of executing the contract with Railways and certainly it is a condition of sale of imported Microlock-II components to the appellant falls within Rule 9 (1) (c) of CVR and includible in the invoice price of imported goods. - the lump sum fee, royalty paid to U.S.S.CSEE are includible in the invoice value. - Decided against the assessee. Whether the loading ordered for previous imports of 1999 to 2002 based on price list of 2002 is valid or otherwise. - Held that - We are surprised to know that the appellant being a multinational company knowing the legal requirements failed to disclose the facts before importation nor filed any declaration on the related party transactions and imported goods from 1999 to 2001 which are mandatory requirement for assessment and clearance of goods but chose to suppress the above facts and paid customs duty on the declared value. It is abundantly clear that but for the department s efforts, this could not have been brought to light. Therefore, we have no hesitation in holding that since the appellants had suppressed the facts of their related party transaction the adjudicating authority had rightly ordered for determination of value of all the imports made in 1999 to 2001 based on the Transfer price list of 2002. - Decided against the assessee.

Summary

Issues Involved:
1. Whether the appellants are related persons to the suppliers of imported goods within the scope of Rule 2(2)(vi) of Customs Valuation Rules, 1988 (CVR).
2. Whether the denial of special discount offered to the supplier and loading of value of the imported goods as per the list price for each import item in terms of Rule 4(2) of CVR is correct or otherwise.
3. Whether the addition of lump sum fee and royalty paid to the value of goods in terms of Rule 9(1)(c) of CVR is correct or otherwise.
4. Whether the loading ordered for previous imports of 1999 to 2002 based on the price list of 2002 is valid or otherwise.

Issue-wise Detailed Analysis:

1. Related Persons under Rule 2(2)(vi) of CVR:
The Tribunal upheld that the appellants, M/s. Ansaldo STS Transportation Systems India Pvt. Ltd., and the suppliers, M/s. Ansaldo Signal NV, Netherlands, and its subsidiaries are related persons under Rule 2(2)(vi) of CVR. The appellants are a 100% subsidiary of M/s. Ansaldo Signal NV, Netherlands, which controls various subsidiaries globally. The Tribunal found that the transactions between the appellant and the suppliers could not be at arm's length due to the relationship and control by the principal company, M/s. Ansaldo Signal NV.

2. Denial of Special Discount and Loading of Value:
The Tribunal agreed with the adjudicating authority's decision to reject the special discount offered to the appellant by the related suppliers and to load the invoice value based on the 2002 price list. The Tribunal found that the discounts were exclusive to the appellant and not available to any unrelated buyers, making them special discounts under Rule 4(2)(c) of CVR. The adjudicating authority's detailed analysis of price variations and the application of Rule 8 for determining the transaction value was upheld.

3. Addition of Lump Sum Fee and Royalty under Rule 9(1)(c) of CVR:
The Tribunal upheld the addition of lump sum fees and royalty payments to the value of imported goods under Rule 9(1)(c) of CVR. The payments were directly related to the imported goods, specifically the Microlock-II Railway Signal Interlocking Control System, and were a condition of sale. The adjudicating authority's proportionate allocation of these payments to the imported goods was found to be justified. The Tribunal distinguished this case from other case laws cited by the appellants, noting that the payments were essential for the execution of the contract with Indian Railways.

4. Loading of Previous Imports Based on 2002 Price List:
The Tribunal upheld the adjudicating authority's decision to load the value of imports made from 1999 to 2001 based on the 2002 price list. The appellants failed to disclose their related party transactions at the time of importation, and the department only discovered the relationship in 2002. The Tribunal found that the appellants' suppression of facts justified the retrospective application of the 2002 price list for determining the value of past imports.

Conclusion:
The Tribunal upheld the impugned order, confirming that:
- The appellants and the suppliers are related persons under Rule 2(2)(vi) of CVR.
- The rejection of discounts and loading of invoice prices based on the 2002 price list is upheld.
- The lump sum fees and royalty payments are includible in the value of imported goods under Rule 9(1)(c) of CVR.
- The re-determination of the value of past imports based on the 2002 price list is valid.

The appeal was rejected, and the impugned order was upheld. The Tribunal appreciated the detailed and systematic analysis provided by both the original adjudicating authority and the lower appellate authority.