2020 (6) TMI 285 - AT - Customs

Valuation of imported goods - Diammonium Phosphate (DAP) - related party transaction - whether the relationship has influenced the value of goods imported, or not? - HELD THAT - Sub rule 3(3) (a) mandates that even if the buyer and seller are related, the transaction will be accepted if the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price. In the instant case, the appellant have claimed that their transactions with the foreign supplier have been subjected to detailed examination by SVB and SVB has come to the conclusion that the transaction between them are not influence by relationship and, therefore, the same can be accepted. SVB order no. SVB/CUS/11/PV/2006 dated 22/06/2006 allows acceptance of the declared price only in the circumstance when no contemporaneous imports at higher price are noticed - In the instant case, it is seen that the goods imported by M/s Tata Chemicals Ltd. which were identical in nature, from the same supplier and the same country of origin imported at the same bottom cargo from the same port have been assessed at a much higher price. Thus, the Revenue is relying on conditional acceptance of the declared price as per para 11 of the SVB order dated 22/06/2006. The data given by the appellants confirms and the duty has always been paid on the price contracted with supplier and such price always corresponded to the prevailing price in the international journals. The evidence produced suggests that even when the prices published in international journals at the time of import were much lower the appellants paid duty on the contract prices which were much higher than the prevailing international prices - The dispute is if at the time of contract is not seen as relevant or the price at the time of contract. In the section 14 of the Customs Act, 1962, the price at the time of contract is more relevant. The interpretative Rule to the rule 3(3)(a) clearly lays down that Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price - if the price fluctuation is reasonably explained the same can be accepted. In the instant case cogent reasons have been given along with evidence and post practice details. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the relationship between the appellant and the supplier influenced the transaction value of imported goods.
2. The applicability of Rule 3(3) of the Customs Valuation Rules in determining the transaction value.
3. The relevance of contemporaneous imports and international price journals in assessing the transaction value.

Detailed Analysis:

1. Influence of Relationship on Transaction Value:
The appellants, engaged in importing Diammonium Phosphate (DAP), are related to their supplier, M/s Mosaic Crop Nutrition LLC, USA. The Special Valuation Branch (SVB) had previously determined that the relationship did not influence the price, as transactions were based on international price bulletins. The appellants argued that this relationship continued to have no influence on the transaction value, which was determined based on prevailing international prices.

2. Applicability of Rule 3(3) of the Customs Valuation Rules:
The appellants entered into two contracts on 17.12.2007 for importing DAP. The dispute arose regarding the value declared for customs duty. The appellants contended that the transaction value should be accepted under Rule 3(3)(a) of the Customs Valuation Rules, as the price was based on international market rates. They provided evidence from various reports and previous instances where the declared value corresponded to international prices at the time of the contract, even when the prices at the time of import were lower. The appellants also referenced interpretative notes to Rule 3(3) and cited precedents where the transaction value was accepted based on international publications.

3. Relevance of Contemporaneous Imports and International Price Journals:
The Revenue argued that the value declared by the appellants should be rejected, citing contemporaneous imports at higher prices, specifically a consignment imported by Tata Chemicals Ltd. from the same supplier and same bottom cargo but declared at a higher price. The Revenue relied on Rule 3(3)(b)(i) of the Customs Valuation Rules, which allows for the transaction value to be adjusted based on the value of identical goods sold to unrelated buyers. The Revenue also referenced the SVB order, which allowed acceptance of the declared price unless higher contemporaneous imports were noticed.

Judgment:
The Tribunal considered the arguments and evidence presented by both parties. It noted that the appellants had consistently paid duties based on the contract price, which corresponded to the international prices at the time of the contract. The Tribunal found that the appellants provided cogent reasons and evidence for the price difference, including historical data showing that the declared value always matched the international prices at the time of the contract. The Tribunal also emphasized that the SVB had previously ruled that the relationship did not influence the transaction value.

The Tribunal concluded that the Revenue's reliance on contemporaneous imports was not justified in this case, as the appellants had demonstrated that the transaction value was based on genuine commercial considerations and international market rates. The Tribunal set aside the impugned order, allowing the appeal and accepting the declared transaction value.

Conclusion:
The Tribunal ruled in favor of the appellants, determining that the relationship between the parties did not influence the transaction value, which was based on prevailing international prices. The Tribunal emphasized the importance of examining the circumstances of the sale and accepted the appellants' evidence and arguments, setting aside the Revenue's adjustments based on contemporaneous imports.

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