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TMI BlogSpecial Valuation Branch Amendment and Its Impact in the Current ScenarioX X X X Extracts X X X X X X X X Extracts X X X X ..... Special Valuation Branch Amendment and Its Impact in the Current Scenario - By: - ajay singh - Customs - Import - Export - SEZ - Dated:- 3-5-2016 - - To curb the loss of revenue and to deal with the transaction between the related parties kind of scenarios i.e. having special relationships etc. with the suppliers, the authorities developed a Specialized Branch of Customs. This branch of customs is called SPECIAL VALUATION BRANCH (SVB) Of Customs. SVB is a Branch of the Custom House specializing in investigating the transactions involving relationship between the supplier and the importer and certain other special features like Technical Collaboration between the parties, Royalties, License Fee or any other payment made etc. SVB examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es whether the relationship between the exporting party and Importing party has influenced the price of the goods Imported in India. In respect of Technical Collaboration Agreements and Joint Venture Agreements, the terms and conditions of these agreements are examined to arrive at the conclusion, whether the existence of such agreement has influenced the invoice value of the imports. SVBs are located only at five Custom Houses, i.e., Chennai, Kolkata, Delhi, Bangalore and Mumbai and any decision taken in respect of a particular case in any of these Custom Houses is followed by all other Custom Houses/formations. The Special Valuation Branch of that Custom House, which is located proximate to the Head or Corporate Office of the importer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (having special relationships etc. with the suppliers), handles the investigation into valuation of such importer. Wherever in the declaration prescribed under the Customs Valuation (Determination of Value of Imported Goods), Rules, 2007 (hereinafter referred to as Valuation Rules, 2007 ), the importer has himself made an averment that the transactions are between related persons in accordance with Rule 2(2) of the Valuation Rules, 2007 , and there is a, prima facie, justification for further enquiry, the concerned case of import is referred to the SVB of the concerned Custom House, where a separate case file is opened and a registration number is assigned to the case. Similar reference to SVB to look into valuation on account of spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial relationship can be ordered by Commissioner concerned where such relationship comes to light on any intelligence or while enquiring into transactions of any importer with a particular supplier. As per Rule 2 (2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (Customs Valuation Rules), persons shall be deemed to be related only if:- (i) they are officers or directors of one another's businesses (ii) they are legally recognized partners in business ; (iii) they are employer and employee; (iv) any person directly or indirectly owns, controls or holds 5 per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other ; (vi) both of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; (viii) they are members of the same family. According to Explanation I to Rule 2 (2) of the Customs Valuation Rules , the term person also includes legal persons. Further according to Explanation II to Rule 2 (2) of the Customs Valuation Rules, Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, however described, of the other shall be deemed to be related for the purpose of these rules, if they fall within the criteria of this sub-rule (2) of Rule 2 . Apart from the above, those who are having Collaboration Agreement, Tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical Assistance Agreement or any other agreement / contract with the foreign supplier are also required to register with SVB. Procedure for reference to SVB In order to ensure that only cases with significant revenue implications are taken up for SVB investigations, the following 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. In case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after examination of the transaction, it is decided by the Commissioner that a reference to SVB is not necessary, the Customs House shall issue a reference number to the importer and the Risk Management Division to indicate that the transaction has been examined from the point of view of need for SVB inquiries and it has been decided not to refer the same for SVB investigations The importer who is related to the supplier is required to furnish a declaration about the relationship at the time of filing of Bill of Entry. In case where after examination of the transaction, it is decided by the Commissioner that a reference to SVB is not necessary, the Customs House shall issue a reference number to the importer and the Risk Management Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to indicate that the transaction has been examined from the point of view of need for SVB inquiries and it has been decided not to refer the same for SVB investigations. 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. 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. The documents received from the importer with respect to the checklist shall be duly ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledged by the SVB. An intimation shall be forwarded to RMD and the referring appraising group regarding submission of the documents within time so that provisional assessments, without security deposit or bank guarantee, continue till the finalisation of the investigation. Upon receipt of all related records from the referring customs formation, the SVB shall forthwith assign a case number and update the Central Registry Database (CRD) maintained by DGoV. The SVB shall also inform the RMD of the details of the importer, his IEC code, and details of seller for inserting suitable instructions for assessing officers at all Customs Houses so as to ensure provisional assessments during the currency of SVB inquiries. Upon receipt of inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation from the importer as per Annexure B, SVB shall commence inquiries, during the course of which the Deputy Commissioner / Asst. Commissioner (SVB) may call for further documents or information as required. The importer shall also be given suitable opportunity to submit evidence in support of the declared value. The SVBs shall, as far as possible, complete the investigations and issue its findings within two months from the date of receipt of information in Annexure B. In cases where investigations are not completed within 2 months, the SVB shall seek the approval of the jurisdictional Commissioner for such extended time period as is deemed necessary to complete investigations. However, where investigations are not completed within 4 mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ths from the date of receipt of information in Annexure B, the matter shall be submitted before the Chief Commissioner for extension of period as is deemed fit. Upon completing investigations, the SVB shall submit the findings before the Principal Commissioner/Commissioner, quantifying the extent of influence on the transaction value due to the relationship or payments towards royalty or Licence fee or other payments actually made or to be made as a condition 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 transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 Upon receipt of the IR from the SVB, where investigative findings are that the declared value is found conforming to Rule 3 of the Custom Valuation Rule, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, when investigative findings are that the declared value has been influenced by the circumstances surrounding the sale, the proper officer shall issue a show cause notice to the importer within 15 days of the receipt of the IR, under intimation to the concerned SVB. In cases where imports have been cleared through multiple customs locations, the jurisdictional commissioner of the SVB shall, after issue of notices by the proper officers in the said locations, make a proposal addressed to the Commissioner (Customs), CBEC recommending appointment of a common adjudicating authority by the Board for the purpose of passing order for finalization of the provisional assessments. The adjudicating authority shall, after following the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of natural justice, pass an order quantifying the extent of influence on the declared transaction value. The Order shall be endorsed to the Risk Management Division and the DGoV, for updating the Central Registry Database. The appellate provisions under Section XV of the Customs Act would apply for filing appeals against the order passed by the adjudicating authority. Change in circumstances surrounding the sale In any case where, the circumstances of sale or terms and conditions of the agreement between the buyer and related seller change, or any other payments of the kind referred under Rule 10 (1) (c), (d) (e) of the CVR, 2007 become payable, the importers shall be required to declare the same at the place of import in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prescribed format at Annexure C. In all such cases, the proper officer shall examine the transactions as per procedures laid out above in this circular and the jurisdictional Commissioner shall refer the matter to the jurisdictional SVB, where required. Procedure for renewal of SVB orders The system of renewal of SVB orders has been discontinued with immediate effect. All pending SVB investigations (other than renewal cases), where Extra Duty Deposit is being obtained are required to be reviewed in terms of para 3.2 of the circular no. 5/2016 dated 9th February 2016 . In cases, where the importer has provided information documents, requisitioned by the SVB, EDD shall be discontinued forthwith. This exercise shall be complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by 31st May 2016. In cases, where EDD has been enhanced to 5%, due to the importer not having provided information or documents necessary for SVB inquiries, the Commissioner shall immediately take recourse to appropriate provisions under the Customs Act for obtaining the necessary documents for investigations and subsequently dispense with the EDD. Conclusion: On the whole, the reforms introduced by CBEC are laudable efforts towards making the process simpler for importers from a procedural standpoint. They provide much needed clarity on what does or does not require investigation by SVB considering the existing tendency of the department to intervene even when not needed. Exclusion of certain transactions from the ambit of SVBs shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not only provide greater ease to the importers in doing business but also reduce the administrative burden on the department. Measures such as dispensing EDD and doing away with the need for renewal would work towards reducing the pendency of cases and lower compliance costs for the importers. Further, furnishing of deposit through bank guarantee shall allow the importer to avoid blockage of funds with the department. To avoid any risks, most importers would probably want to follow this method as opposed to making a cash deposit. However, effectiveness of the new regime would be contingent on a smooth transition of SVBs to the new norms. The current operational methods of the SVBs are not favourable to importers and hamper the growth o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an environment conducive for business. They act as in-country barriers to trade related activities undertaken by group companies. An over-inquisitive approach tends to adversely impact completely genuine import transactions. Hopefully, the SVBs take speedy measures to implement the new norms which would facilitate trade and thereby act as a further step towards transforming the government s Make in India vision into a reality. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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