2023 (6) TMI 18 - AT - Customs

Valuation of imported goods - various types of Pigments - foreign entity as well as the importer/appellant were related in terms of Rule 2(2)(i), (iv) and (v) of the Customs Valuation Rules, 1988 or not - inter-se relation having any influence on the transaction value of imports, or not - whether the declared transaction price was acceptable, or did it require loading, as proposed, for the reasons discussed in the orders of lower authorities? HELD THAT - The appellant nowhere denied, and rightly so, that its imports were sourced from its relative entity and accordingly hit by Rule 2(2)(i), (iv) and (v) ibid. wherein related is defined. It is most relevant here to ascertain if the value so declared is at arm s length. Burden is therefore on the appellant to establish that the transaction value declared by it was not influenced by the relationship with its supplier. Though the Learned Advocate contended that the declared value was at arm s length, we find from the orders of the lower authorities that they have disputed the same. Even before us, other than arguing that their value declared was at arm s length, no supporting material is placed to dislodge the findings of the lower authorities. If the price declared was at arm s length, then perhaps there would not be any such long drawn dispute at all - Moreover, from the claim of the appellant that the deductive method of valuation is appropriate, itself suggests that the prices declared were certainly not at arm s length - the declared value was not at arm s length. Whether the value was influenced by the relative party transaction, in terms of Rule 4(3)(a) ibid? - HELD THAT - When such a doubt is expressed by the authority, then the burden is on the appellant to discharge the same, to establish that the transaction value was at arm s length - there is no dispute as regards the relationship between the appellant and the foreign supplier and hence, we have to read second proviso to sub-section (1) carefully. This is because, it is only provided here, under the second proviso, as to the determination of import value in respect of related party transaction. It also provides, inter alia, power to the Adjudicating Authority to reject the declared value where the proper officer has reasons to doubt the truth or accuracy of the declared value. Rule 4(3)(b) could be invoked only when the importer demonstrates as to meeting three requirements thereunder. But it is to be noted here that Rule 4(3)(b) does not talk anything when the value is held to be at arm s length. The Adjudicating Authority has adopted Rule 5 as against which, the appellant urges for the adaptation of Rule 7. It is thus urged by the appellant to violate the sequential Rule and choose the one which perhaps suits it, for which no justifiable reason is advanced. It is not only for jumping the sequence, but also for choosing Rule 7 that proper case has to be made out otherwise, the Adjudicating Authority has to follow the mandate of the Rule 3(ii) ibid, which according to us is perfectly in order. Thus, necessary opportunities were given to the appellant for producing all the evidence based on which the Adjudicating Authority passed a detailed speaking order and consequently, the appellant cannot be heard to say it was not given sufficient opportunities and nor is there any such ground to that effect urged before us. Hence, the impugned order does not call for any interference. Appeal dismissed.

Summary

Issues Involved:
1. Whether the declared transaction price was acceptable or required loading.
2. Whether the relationship between the appellant and the foreign supplier influenced the transaction value.
3. Whether the method adopted for determining the transaction value was appropriate.

Summary:

Issue 1: Acceptability of Declared Transaction Price
The appellant imported various types of pigments from its parent company and subsidiaries. The Revenue doubted the transaction value due to the relationship between the parties and provisionally assessed the imports with 1% Extra Duty Deposit (EDD). The Adjudicating Authority, after considering the details and documents provided by the appellant, proposed to load the transaction value by 23% due to noticeable differences in unit prices compared to third-party imports. The First Appellate Authority remanded the matter back for fresh consideration, highlighting that the inter-company pricing pattern was not considered.

Issue 2: Influence of Relationship on Transaction Value
The case was reconsidered de-novo, and the Adjudicating Authority found several discrepancies in the documents provided by the appellant, such as different price lists for the same item and lack of reconciliation for certain items. The declared transaction value was proposed to be loaded by 24.40%. The appellant contended that the proposed loading was not in accordance with the Valuation Rules and that the prices charged for export to India should be relevant for comparison. However, the Adjudicating Authority rejected the declared invoice price and directed loading by 24.40%.

Issue 3: Method of Determining Transaction Value
The appellant argued that the deductive method under Rule 7 should be adopted instead of the weighted average method used by the Adjudicating Authority. The appellant also contended that the prices declared were at arm's length and that the relationship did not influence the price. However, the Adjudicating Authority found that the declared value was not at arm's length and that the relationship influenced the transaction value. The appellant's appeal to the First Appellate Authority was also rejected.

Conclusion:
The Tribunal found that the appellant failed to establish that the declared transaction value was not influenced by the relationship with its supplier. The Adjudicating Authority followed the sequential method for determining the value as mandated by Rule 3(ii) and adopted Rule 5. The Tribunal concluded that the declared value was not at arm's length and upheld the loading of the transaction value by 24.40%. The appeal was rejected.