2020 (6) TMI 95 - AT - Customs

Valuation of imported goods - industrial valves of various types - international transaction of the appellant with their principals and affiliates - rejection of transaction value - HELD THAT - The OIA is very cryptic and does not give any cogent reasons for rejecting the declared assessable value. Moreover, the Appellate Authority does not discuss the submissions of the appellants as to why the price at which M/s Sergi have imported are at variance from that of the importer. There is a pre-notified inter-company price list and the prices were as declared in the same. It is not correct to reject the transaction value just because there are imports at a higher price by third parties. Also, as submitted by the appellants, the Appellate Authority did not discuss on the methodology to arrive at the import price having rejected the declared value. No directions are given to the lower authorities about the manner in which the valuation is to be arrived at and the rules thereunder to be applied. Such an order cannot be implemented. The grounds held to be acceptable to reject the declared prices are not strong - the OIA is not legally acceptable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Valuation of imported industrial valves based on relationship influence.
2. Comparison of import prices with inter-company price list.
3. Application of Customs Valuation Rules for determining the value.
4. Allegations of flow back and additional considerations in the transaction.

Issue 1: Valuation based on relationship influence
The case involved the import of industrial valves by the appellant from their principal in Switzerland and other foreign affiliates. The Special Valuation Branch (SVB) held that the international transactions were at arm's length. However, the Revenue appealed against this decision, claiming that the relationship influenced the transaction value. The Commissioner (A) rejected the transaction value, citing the influence of relationships on pricing.

Issue 2: Comparison with inter-company price list
The appellant argued that the Adjudicating Authority (AA) compared import prices with the inter-company price list but failed to consider if the price list was influenced by the relationship. The appellant contended that the price difference with third-party imports was due to commissions paid for marketing support. The Commissioner Appeals believed that the lower prices charged to the Indian subsidiary indicated the influence of the relationship on pricing.

Issue 3: Application of Customs Valuation Rules
The appellant challenged the order's validity, claiming it did not specify which price to adopt and did not follow the Customs Valuation Rules. The appellant relied on Rule 7 of the Customs Valuation Rules, arguing that the order should have considered deductions for profit, transport costs, and customs duties.

Issue 4: Allegations of flow back and additional considerations
The appellant argued that there was no evidence of flow back or additional considerations to the foreign supplier, making the transaction value valid. The appellant emphasized the need for a sequential determination of value following the Customs Valuation Rules. The Appellate Tribunal found the objections raised by the appellant justified, citing the lack of cogent reasons for rejecting the declared value and the absence of evidence of flow back in the transaction.

In the final judgment, the Appellate Tribunal allowed the appeal, stating that the objections raised by the appellant were valid, and the Revenue failed to provide sufficient legal support for their contentions. The Tribunal found the order rejecting the declared value legally unacceptable and ruled in favor of the appellant.