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2023 (9) TMI 580 - AT - CustomsValuation of goods (spare parts) imported by the appellant from their related company - Rejection of transaction value - related party transaction or not - Rejection of deduction of employee cost, rent, repairs and maintenance and office and miscellaneous expenses claimed by the appellant while computing the deductive value - loading the declared value of spares @62.5% under Rule of the CVR, 2007 - Rule 7 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007) - HELD THAT - Valuation of the goods are to be done in terms of Rule 7 of CVR, 2007. The worksheet showing the deductive value of the impugned spare parts as prepared by the appellant has been accepted as correct and only the heads for which deduction has to be allowed from the unit sale price before arriving at the transaction value is disputed. The heads of expenses disputed are employee cost, rent, repairs and maintenance and office miscellaneous expenses are deductible as per Rule 7 of CVR, 2007. The reason that the said heads are found to be not eligible for deduction in the impugned order is that these are post importation expenses which are internal expenses of the importer and hence cannot be deducted while arriving at the transaction value using the deductive method. Since the disputed expenses viz employee cost, rent, repairs and maintenance and office miscellaneous expenses are part of general expenses relating to the direct and indirect cost of marketing the goods in question the appeal must succeed. The department is found not to have substantiated their case - It is found from 2001 to 2013 the Department accepted the transaction value of the imports as declared by the appellant. It was only in 2013 that for the first time the Department took a view that the declared value needed to be enhanced. Since the Department were dealing with legal issues which involved costing of the goods among other issues, it may have helped to have done a cost audit so that the matter could have been examined with reference to the Cost Accounting Standards applicable to the case. Thus, the impugned order has failed to legally substantiate and sustain the rejection on deduction of expenses incurred towards employee cost, rent, repair maintenance and office expenses and miscellaneous expenses from the unit sale price, by holding them as post importation expenses - impugned order set aside - appeal allowed.
Issues: Valuation of imported goods, Deduction of expenses under Rule 7 of CVR, 2007.
Valuation of Imported Goods: The appellant, a subsidiary of a foreign company, imported goods from their related company. The dispute centered around the valuation of spare parts imported by the appellant under Rule 7 of CVR, 2007. The deductive value of the spare parts was accepted, but the deduction of employee cost, rent, repairs, maintenance, and office expenses was disputed as per Rule 7. Deduction of Expenses under Rule 7 of CVR, 2007: The appellant argued that general expenses related to sales in India should be deducted from the sale price of imported goods as per Rule 7. They emphasized that employee cost, rent, repairs, maintenance, and office expenses are part of general expenses and should be considered. The appellant cited relevant legal provisions and cases to support their stance. Judgment: The Tribunal found that Rule 7 of CVR, 2007 allows deductions for general expenses in connection with sales in India. The Interpretative Note to Rule 7 confirms that general expenses include marketing costs. Therefore, the disputed expenses of the appellant, such as employee cost and office expenses, fall under general expenses and should be deductible. The Tribunal noted that the Department failed to substantiate their case and highlighted the historical acceptance of the declared value by the Department until 2013. The Tribunal set aside the impugned order, ruling in favor of the appellant and granting them consequential relief as per the law. Separate Judgment: No separate judgment was delivered by the judges in this case.
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