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TMI Blog2004 (11) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... ies M/s. Stahl GB, UK. The lower authority found a difference of about 25% in the prices of goods sold to the appellant when compared to other unrelated buyers and, therefore, the prices declared in the invoices of the imported goods were not accepted. There was no contemporaneous imports or raw material by unrelated parties and, therefore, that matter was remanded for de novo consideration. 2. On de novo consideration, the original authority dropped the loading of price of 25% of raw material in so far as import of the final product is concerned. The Commissioner confirmed the lower authority s order to load 25% on the invoice value. The Commissioner has noted that importer are 100% subsidiary of M/s. Zeneca of Netherlands which in turn, is a subsidiary of M/s. Zeneca, U.K. The supplier, M/s. Stahl GB, UK is a 100% subsidiary of M/s. Zeneca, UK. In view of the fact that both the supplier and the importer are directly owned 100% subsidies of M/s. Zeneca, UK hence they were held to be related persons as per the definition under Customs Valuation Rules, 1988. He has noted that as the appellants are doing certain activities (a) marketing efforts (b) laboratory facilities (c) sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the finished goods. However, conditions or considerations relating to the production or marketing of the imported goods shall not result in rejection of the transaction value. For example, the fact that the buyer furnishes the seller with engineering and plans undertaken in India shall not result in rejection of the transaction value for the purposes of Rule 4. Likewise, if the buyer undertakes on his own account, even though by agreement with the seller, activities relating to the marketing of the imported goods, the value of these activities is not part of the value of imported goods nor shall such activities result in rejection of the transaction value The said rule has been incorporated in the GATT Rules and, therefore, the fact that appellant has undertaken the activity of marketing does not by itself is a reason to load the value by 25% of another importer. He submitted that the import was at arm s length and there was no mutuality of interest. Further more, the import of the appellant was at bulk quantity of more than 80 tonnes wherein that of M/s. Manjunath Corporation was only 15 tonnes. He submitted that the ground taken up for enhancing the value with regard to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) it has been held that the transaction value should be comparable. In the present case, the invoices are not comparable and, therefore, the ground taken for enhancing the value on the basis that appellant were carrying on marketing activity is of no cause to enhance the value as laid down in the Interpretative Notes to Rule 4(2)(f) of Customs Valuation Rules, 1988 which has been extracted above. The lower authority had remanded the matter on the same ground. Therefore, the enhancement was done with regard to raw material and he dropped the proceedings. Therefore, same ratio would apply in the present case also. It is now well settled that in the case of CC Chennai v. Hewlett Packard Ltd. (supra) it has been held that merely because appellants are related persons by itself is no ground to enhance the value. Further more, we notice that supplier has been supplying to their other distributors in other parts of the world at the same rate at which it has been sold to appellant and the price has been constant. Copies of said invoices have been produced to show that the price has been constant and not varied. It is clear that the appellant has not received any benefit being a distributor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-a-vis imports by related persons, then in view of the proviso to sub-rule (3)(b), due account has to be taken of demonstrated difference in commercial levels, quantity levels and adjustments in accordance with the provisions of Rule 9. It is thus clear that this decision relates to sale of goods to related persons importing goods in bulk for stock and sale vis-a-vis individual consumer importing a small quantity for actual use. The said decision also relates to activities for stock and sale undertaken by the subsidiary company holding that the cost of such activities are not to be added to the price actually paid, whereas in the instant case, the activities done by the appellants are not confined to merely stock and sale but also activities such as laboratory facilities and conducting sales etc. No doubt, there are number of decisions that an importer importing large quantity of goods get higher quantum of discount compared to the smaller quantity imported by another importer and in such circumstances the two imports cannot be considered as comparable and when the imports are not comparable, the transaction value has to be accepted. But in the instant case, it is an admitted fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether it is a sale of 15 tons as in the case of M/s. Manjunath Corporation or 80 tons as in the case of the appellants herein. As regards the question of mutuality of interest, as noted above, the appellants herein are obliged to carry out certain functions and a discount in the prices is offered only to them and not to other distributors and thus it clearly proves that they have interest in the business of each other inasmuch as the appellants were not functioning merely as a distributor. In view of the above I am of the considered opinion that the order of the lower appellate authority for loading of 25% on the invoice value cannot be found fault with. I, therefore, uphold the impugned order and dismiss the appeal. Sd/- Jeet Ram Kait Member (T) Dated 13-2-2004 POINTS OF DIFFERENCE In view of the difference of opinion between the Members, the following points are referred to the third Member for determination as per law. Whether the impugned order is required to be set aside by allowing the appeal for the reasons given by Member (Judicial) in the impugned order? Or Whether the appeal is required to be rejected by upholding the order of the low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods supplied by the later and also that the appellants had demonstrated that the declared value of the goods closely approximated to the transaction value [as adjusted in terms of the proviso to clause (b) of sub-rule (3) of Rule 4 ibid] of identical/similar goods imported by the unrelated buyer. This approximation was sought to be made in the following manner : Statement of Import prices from Stahl GB to unrelated distributor and to Stahl India Description % Adjustment Price Remarks Prices of goods imported by unrelated distributor from Stahl GB Rs. 100 Deductions Volume discount 10% - 15% 15 84 tons by Stahl India, 15 tons Import by unrelated distributor Marketing expenses other overhead costs 10% 10 Expenses only incurred by Stahl India Interest for shorter credit period 4.5% 4.5 Credit period for Stahl India - 60 days, Credit period for unrelated distributor - 150 days (Interest rate of 18%) Inventory holding cost 5.5% 5.5 Inventory holding period for Stahl India 4.8 mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other subsidiaries that the pricing was uniform worldwide. Such evidence was available in that case and the Revenue could not show that the transaction between the importer and the supplier was not at arms length. Hence the transaction value was accepted in the above case. In similar circumstances, it can be safely held in the present case that the transaction value of the finished goods imported by the appellants is not liable to be rejected on the ground of relationship . Ld. Consultant has also heavily relied on the Tribunal s decision in C.C., Chennai v. Hewlett Packard Ltd. [1999 (108) E.L.T. 221]. M/s. Hewlett Packard India Ltd. (HPI) were a 100% subsidiary of M/s. Hewlett Packard USA (HPU). They imported goods in large quantity from HPU at a lower unit price than the one at which unrelated consumers directly imported similar goods in smaller quantities. Their imports were for stock and sale, whereas the unrelated parties imported the goods for their actual use. It was found that, in the process of trading of the goods imported by HPI, the importer incurred expenses for maintaining sales team, advertising, rendering free warranty services etc. The unrelated importers did not ..... 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