Valuation of imported goods in case of related party transaction - CBEC's Customs Manual 2023 - Customs

9. Valuation of imported goods in case of related party transaction: 9.1 Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 enumerates the persons who shall be deemed to be related . It has been made clear by Explanation II thereto that the sole agent, sole distributor or sole concessionaire shall be deemed to be related only if they fall within the criteria of this sub-rule. Further, Rule 3(3) provides that where buyer and seller are related, the transaction value can be accepted if the examination of circumstances of the sale of the imported goods indicate that the relationship did not influence the price or if the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the test values namely transaction value of identical/similar goods, in sales to unrelated buyers in India, deductive value for identical/similar goods or computed value for identical/similar goods ascertained at or about the same time can be used. 9.2 In related party transactions, the importer is required to fill a questionnaire and furnish a list of documents so that it can be ascertained whether the said case requires investigation by SVB or not. The proper officer shall examine the information provided by the importer in terms of Rule 3(3)(b) of the CVR, 2007 and shall submit the findings to the Commissioner for a decision as to whether the case is fit for being referred to the SVB for investigation. The Commissioner shall after due consideration of the preliminary findings, take a considered view whether: (a) the matter be referred to the SVB for further investigations and the goods be provisionally assessed to duty in terms of section 18 of the Customs Act, 1962 , or (b) the transaction does not merit investigation by the SVB, and that assessment be finalized on the basis of enquiries to be conducted by the proper officer in terms of Rules 4 to 9 of the CVR 2007 , or (c) the transaction be assessed in terms of Rule 3 of the CVR 2007 . 9.3 In cases, where the Commissioner concerned finds it fit that the transaction requires investigation to be conducted by SVB, the Investigations are carried out by Special Valuation Branches (SVB) located presently in the major Custom Houses at Bengaluru, Mumbai, Kolkata, Chennai and Delhi. As and when imports requiring investigation by SVBs are noticed at any customs formation, the concerned Commissionerate shall after following the laid down procedure, transfer all records to the jurisdictional SVBs for investigations. 9.4 With effect from 09.02.2016, the functional and supervisory control over the SVBs has been divested from DGOV and the same has been vested with the jurisdictional Chief Commissioner/ Principal Commissioner/ Commissioner. DGOV will continue to support the SVBs by issuing advisories on legal issues guidance notes. DGOV shall also qualitatively monitor investigation orders issued by SVBs. 9.5 The provision of taking Extra Duty Deposit @ 1% of declared assessable value for four months, during which he is supposed to submit requisite documents and information to SVBs, has been withdrawn and in order to reduce the transaction cost it has been mandated that no security in the form of EDD shall be obtained from the importer. However, if the importer fails to provide the documents and information required for SVB inquiries, within 60 days of such requisition, security deposit at a rate of 5% of the declared assessable value shall be imposed by the Commissioner for a period not exceeding the next three months. 9.6 Only cases with significant revenue implications are taken up for SVB investigations. The following cases are not to be taken up for SVB investigations: (a) Import of samples and prototype from related sellers (b) Imports from related sellers where duty chargeable (including additional duty of customs etc.) is unconditionally fully exempt or NIL. (c) Any transaction where the value of imported goods is less than Rs.1 Lac but cumulatively these transactions do not exceed Rs 25 lac in any financial year. 9.7 Apart from investigation of transactions involving related parties, cases involving possible additions to declared transaction value also need to be examined to determine whether SVB investigations are necessary. Accordingly, transactions where any payments are sought to be made which are in the nature of instances given below shall also be examined with respect to the need for SVB investigations: (i) royalty and licence fee under Rule 10(1)(c) of CVR,2007 , or (ii) where the value of any part of proceeds of any subsequent resale, disposal or use of imported goods accrues to the seller i.e. Rule 10 (1)(d) of CVR, 2007 or (iii) Where any other payments are made or are contemplated to be made in future by buyer to seller as a condition of sale of imported goods etc. Rule 10 (1)(e) of CVR, 2007 . [Refer Circulars No.11/2001-Cus, dated 23.2.2001 and Circular No. 5/2016 dated 09.02.2016 ]