2019 (8) TMI 693 - AT - Customs

Valuation of imported goods - related party transaction or not - rejection of transaction value - enhancement of value by 7% - Rule 8 of Customs Valuation Rules, 2007 - HELD THAT - The foreign suppliers and the Appellants are partners of the Joint Venture; as per the agreement the importers and suppliers are partners in business; two employees of the suppliers, that is Metal One Corporation, are nominated as directors of MSSCL. Therefore, we find that as found by the original authority the foreign suppliers and the Appellants are related. The adjudicating authority and the Appellant authority have sought to load the value of imported goods at a flat 8% of profit margin. The original authority has stated to rely on Arcelor Mittal. However, no details have been furnished - the reasons given by the Original Authority for not accepting the same are not satisfactory, as it was not established to the supplier company and had posted higher profit percentage, if any. Without providing any such data simple rejection of the declared profit margin is not acceptable. Moreover department has not adduced any evidence of any contemporaneous imports so as to indicate under valuation by Appellants. Loading of value by 1% in respect of imported capital goods i.e. slitting line, which is already included in the value declared is sufficient - Appeal allowed in part.

Summary

Issues:
Valuation of imported goods based on relationship between buyer and seller, application of Customs Valuation Rules 2007, determination of profit margin for assessable value.

Analysis:
The judgment revolves around the valuation of imported goods by M/s. Mahindra Steel Service Centre Ltd from M/s. Metal One Corporation, Japan. The Original Authority concluded that the buyer and seller are related, necessitating a 7% increase in assessable value as per Rule 8 of Customs Valuation Rules 2007. The Commissioner Appeals upheld this decision, leading to an appeal by the Appellant.

The Appellant argued that they are not related to the foreign exporter as the majority stake is held by Mahindra & Mahindra, not the foreign supplier. They contended that the supplier procured capital goods from another company and added a 1% margin, which aligns with Rule 11 of Customs Valuation Rules 2007. The Appellant cited a tribunal decision to support the acceptance of a 1% profit margin, contrasting the Original Authority's 8% assumption based on a different case. They highlighted the department's acceptance of the value of steel coils imported from the same exporter to demonstrate the transaction value's validity.

The department supported the findings of the Original Investigation Officer and Original Adjudicating Authority, emphasizing the related nature of the buyer and seller.

Upon reviewing the case, the Tribunal found that the buyer and seller were indeed related due to their partnership in a joint venture. However, the Tribunal disagreed with the flat 8% profit margin imposed by the lower authorities, deeming it arbitrary. They noted that the goods dealt by the supplier were different from those in the Arcelor Mittal case used as a reference. The Tribunal highlighted the lack of evidence supporting the rejection of the declared profit margin and the absence of data on contemporaneous imports for valuation comparison.

Referencing a previous case involving Google India Pvt. Ltd., the Tribunal emphasized the need for a nominal profit element rather than a substantial margin addition. They concluded that a 1% loading on the declared value of the imported capital goods was sufficient, considering the circumstances and purpose of the imports. Consequently, the appeal was allowed, and the impugned order was modified to reflect the 1% adjustment in the assessable value of the goods.

In essence, the judgment delves into the intricacies of customs valuation rules, the determination of related parties, and the appropriate profit margin adjustments for imported goods, providing a detailed analysis of each aspect to arrive at a fair and justified decision.