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TMI BlogProcedure for investigation of related party import cases and other cases by the Special Valuation BranchesX X X X Extracts X X X X X X X X Extracts X X X X ..... etween buyer - seller or those involving other special circumstances surrounding the sale of imported goods, both of which have a bearing on the assessable value. Detailed instructions were issued vide Circular Nos. 1/98 - Customs dated 1.1.98 and 11/2001-Customs dated 23.2.2001 , prescribing the procedure to be observed by the Custom Houses for referring cases to Special Valuation Branches and time lines to be followed for finalising such cases. 2. However, trade and industry has been repeatedly representing regarding delays in finalisation of SVB investigations, continued uncertainty due to provisional assessments, increase in transaction costs due to extra duty deposits and burdensome procedure of renewal of SVB orders. Board has also taken cognizance of the WCO's Guide to Customs Valuation and Transfer Pricing (June 2015) and the fact that the circulars 1/98 and 11/2001 were based upon the Customs Valuation (Determination of Price of imported goods), Rules, 1988 , which have since been superseded by the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 . Accordingly, after considering the above and the large number of SVB investigations pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired documents and information to the SVB. In the event of his failing to do so, the EDD can be increased to 5% till such time the importer complies. Upon the importer complying with the requisition for documents and information, Circular 11/2001 - Cus dated 23.2.2001 provides that EDD shall be discontinued, while imports will continue to be assessed provisionally till the completion of investigations. In other words, the imports were continued to be assessed provisionally on the basis of a PD Bond but without any EDD. It has also been noted that many importers have represented on delays in dispensing of EDD, even though they have provided the required information and a period of 4 months has passed without the case having been decided. Therefore, the Board has decided that while reference to SVB requires the assessments to be provisional, for the sake of reducing transaction cost and bringing uniformity across Customs Houses, no security in the form of EDD shall be obtained from the importers. However, if the importer fails to provide documents and information required for SVB inquiries, within 60 days of such requisition, security deposit at a rate of 5% of the declared assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases shall not be taken up for inquiries by SVBs: (i) Import of samples and prototypes from related sellers (ii) Imports from related sellers where duty chargeable (including additional duty of Customs etc.) is unconditionally fully exempted or nil. (iii) Any transaction where the value of imported goods is less than ₹ 1 lac but cumulatively these transactions do not exceed ₹ 25 lacs in any financial year Cases, which may be considered for SVB Investigations 4.0 While filing a bill of entry, every importer makes a declaration about whether the seller of imported goods is a related party or not, as defined under Rule 2(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 (CVR, 2007) . In other words, where any importer makes a declaration that the transaction is between 'related persons', as defined under Rule 2 (2) of CVR 2007 , it would be necessary to examine whether or not the circumstances surrounding the sale of the imported goods indicate that the relationship has influenced the price. Accordingly, such transactions will require to be examined as to whether SVB inquiries are necessary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll proceed to determine whether, prima facie, there is a need for investigation by the SVB. He shall complete such examination within 3 days of the filing of Bill of Entry and the matter submitted before the Commissioner. While examining the information submitted by the importer, the proper officer shall carefully examine the circumstances surrounding the sale and evaluate the case on the following parameters:- i. Has the importer declared the price of the goods imported is a transfer price ? ii. What is the basis on which the price has been settled between the buyer seller? iii. Has the price been settled in a manner consistent with the way the seller settles prices for sales to buyer who are not related to the seller? iv. Does the nature of relationship between the buyer and seller appear to influence the price? v. Is the information provided by the importer in terms of rule 3 (3) (b) able to demonstrate that the transaction is at arms length? vi. Are there any payments, such as royalty, licence fee etc., actually made or to be made, as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) the transaction be assessed in terms of Rule 3 of CVR 2007 Procedure for reference to SVB: 6. In the event of the Commissioner directing investigations by SVB, the proper officer shall promptly carry out provisional assessment in terms of section 18 of the Customs Act, 1962 and ensure that no delays occur in the release of the goods. 6.1 In order to facilitate expeditious inquiries by the SVB, the proper officer shall alongside of provisionally assessing the bill of entry, requisition further information from the importer as per Annexure B to this circular. The importer should be advised to furnish the documents and a duly indexed reply to the questionnaire to the jurisdictional SVB (as per para 3.1) within 60 days. 6.2 Upon completion of the procedure for provisional assessment and issue of the questionnaire (Annexure B), all related records shall be transferred to the jurisdictional SVB, and in no case later than 3 working days of the release of the goods. 6.3 The documents received from the importer with respect to the checklist shall be duly acknowledged by the SVB. An intimation shall be forwarded to RMD and the referring appraising group regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of sale of the imported goods. Upon approval by the Principal Commissioner / Commissioner, an Investigation Report (IR, for short) shall be prepared incorporating all relevant facts, submissions made by the importer, investigative findings, grounds for acceptance or rejection of transaction value, and the extent of influence on declared transaction value, if any. The IR shall include all relied upon documents and shall be communicated to the referring customs station/appraising group and such other stations where imports have been provisionally assessed. A copy of the IR shall also be sent to the DGoV. Finalisation of assessments 9. Upon receipt of the IR from the SVB, where investigative findings are that the declared value is found conforming to Rule 3 of the CVR, 2007, the customs stations where provisional assessments have been undertaken shall immediately proceed to finalize the same. There would be no need to issue a speaking order for finalising the provisional assessments in such cases. 9.1 However, when investigative findings are that the declared value has been influenced by the circumstances surrounding the sale, the proper officer shall issue a sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 1.1.98 and 11/2001-Cus dated 23rd February 2001 and comes into immediate effect. 13. Difficulties, if any, faced in the implementation of this Circular may be brought to the notice of the Board. 14. Hindi version follows. (S.Kumar) Commissioner (Customs) BE No: Customs Station: Annex-A Questionnaire to be filled by the importer at the time of filing bill of entry Importer 1 Name Address of the importer 1.1 IEC Code 1.2 Central Excise Registration number, if any 1.3 Service Tax Registration number, if any 1.4 PAN number 2. Whether the importer is a proprietorship/partnership/private limited company/public limited company/branch office of company incorporated outside India/wholly owned subsidiary etc.? 3 Whether the importer is manufacturer or manufacturer cum trader or only a trader? 3.1 If the importer is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease provide copy of the price list and the basis of arriving at the invoice value. 5.6 If the price is not based upon a price list, then is the price declared a 'Transfer Price'? 5.7 What is the basis on which the price has been settled between the buyer and seller? Other Payments (Costs Services under Rule 10 of CVR, 2007) 6. Whether the goods imported by the importer are sold under a trade mark, design, licencing/royalty agreement or patent owned or controlled by the seller of the goods or any other person? 6.1 Whether the product manufactured by the importer using the imported goods is sold under a trade mark, design, licencing/royalty agreement or patent owned or controlled by the seller of the goods or any other person? 6.2 Whether any amount or any part of the proceeds of any subsequent resale, disposal or use of the imported goods accrues, directly or indirectly, to the seller? 6.3 Whether there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of which Annex A was filed. 1.3 Please provide copies of all provisionally assessed bills of entry and accompanying, invoice, bill of lading, packing list and LC since filing of Annex A at all ports. 1.4 Please provide Annual reports, if any, for a period of upto three preceding years. 1.5 Please provide Balance Sheets, if any, for a period of upto three preceding years. 1.6 Please provide, copy of Transfer Pricing report filed before Income Tax Dept, if any, or a Transfer Pricing Report prepared for Customs Purposes / Tax Purposes, if any 1.7 Please provide copy of Advance Pricing Agreement, if any 1.8 Whether the importer has imported any capital goods, plant, machinery, equipment, etc., from the seller of the imported goods or its related or associated persons? Please furnish copies of Bills of Entry, invoice, packing list, bill of lading LC (or remittance details), as applicable. Details of goods imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entities, in your corporate policy, design specification, quality control, marketing, sub-licensing of patent, franchise, etc? 5.1 Whether any legal liabilities created by contracts or agreements entered into by the seller devolve on the importer? If so, details thereof. 5.2 Whether the seller is in a position, directly or indirectly, to exercise restraint over the importer, legally or operationally, in any manner? If so, details thereof. 5.3 Whether the converse position for serial no. 5.2. or 5.3 applies? If so, details thereof. 5.4 Whether any third party is in a position, directly or indirectly, to exercise restraint over both the importer and the seller of imported goods, legally or operationally, in any manner? If so, details thereof 5.5 Whether the importer and the seller of the imported goods, together, are in a position, directly or indirectly, to exercise restraint over a third person, legally or operationally, in any manner? If so, details thereof. Please note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after called the President (which expression shall include his successors and assigns) in the sum of Rs___________ Rupees__________________(please fill amount in words) to be paid to the President for which payment well and truly to be made, we bind ourselves, our successors, heirs, executors, administrators and legal representatives firmly by these presents. Sealed with our seal(s) this___ day of______20 WHEREAS the Assistant Commissioner of Customs/Deputy Commissioner of Customs at the ________________ (fill in name of customs station of import) (hereinafter called the Proper Officer ) has agreed to make provisional assessment of the goods imported from time to time by the importer pending submission of further documents and furnishing information and/or completion of further enquiries and the Proper Officer has agreed to allow provisional clearance of the goods mentioned in the schedule hereto annexed upon the importer agreeing to furnish such bond as is herein contained. NOW THE CONDITION of the above written bond is such that - (1) If the importer shall within ninety days from the date of importation of this consignment or within such extended period as the Prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) (3) (4) (5) (6) Annexure E Continuity Bond (With Bank Guarantee or Security Deposit) (under section 18 of the Customs Act, 1962) (To be executed by the Importer of goods with provision for security deposit/bank guarantee subject to Inquiries by Special Valuation Branch under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007) (Circular No. 05 / 2016 dated 9th February 2016 issued from CBEC F.No: 465/12/2010 - Cus V) KNOW ALL MEN BY THESE PRESENTS THAT We M/s_______________________________ having our corporate office located at______________________________ and holding Import-Export Code No.__________ hereinafter called the Importer (which expression shall include its successors/heirs, executors, administrators and legal representatives) are held and firmly bound unto the President of India hereinafter called the President (which expression shall include his successors and assigns) in the sum of Rs___________ Rupees__________________(please fill amount in words) to be paid to the President for which payment well and truly to be made, we bind our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond and security deposit / bank guarantee shall remain in force from the date hereof and the obligation and liability of the importer shall be a continuing one in respect of all goods imported from time to time by the importer between the period of ______________ (present date) and the payment by the importer of the difference between the duty finally assessed and the duty provisionally assessed in respect of the goods imported from time to time. IN WITNESS WHEREOF the importer has herein set and subscribed its hands and seals the day, month and year first above written. SIGNED AND DELIVERED by and on behalf of the importer at___________ (place) in the presence of:- (Signature of Authorised Signatory and Corporate Seal) Witnesses: 1. 2. Accepted for and on behalf of the President of India (Signature of the Proper Officer) Schedule to Continuity Bond (under section 18 of the Customs Act, 1962) (To be executed by the Importer of goods with provision for security deposit/bank guarantee subject to Inquiries by Special Valuation Branch under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007) (Circular No. 5 / 2016 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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