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TMI Blog2020 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... per the impugned order. The proposition of Revenue that the import price of ASD are comparable to that of the appellant is a vague, in view of the heavy difference in the quantity imported of identical goods. Thus, the appellant and the ASD cannot be treated as a comparable at commercial level. Sub-rule (3) of Rule 3 in clause (b) provides that, in case of sale between the related person the transaction value shall be accepted whenever the importer demonstrates that the declared value of the goods being valued, closely approximate to one of the following values imported at or about same time. Sub-clause (ii) in clause (b) provides for the deductive value of the identical goods or similar goods. In applying the value use for comparison, due account shall be taken of demonstrated difference in commercial level, quantity levels, adjustment in accordance with the provision of Rule 10 and cost incurred by the seller in sales, in which he and the buyer are not related. Sub-rule (4) of Rule 3 further provides, if the value cannot be determined under the provisions of sub-rule (1) of Rule 3, the value shall be determined by proceedings sequentially through Rule 4 to 9. Admittedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utron GL Sales Services Pvt. Limited imports lighting control systems (products) from their parent company, related party , M/s Lutron Electronics Co., Inc. USA (Lutron US for short). These products include sensors and dimmers, processors, controllers, radio frequency (RF) transmitters, interfaces, shades, etc. which are used for convenience and energy saving solutions to customers. The appellant is registered with SVB. Revenue started investigation into the matter of influence of their relationship on the invoice value of imported goods and thus SVB had registered the case vide DOV No. DOV0007307 and sent questionnaire and other documents concerning imports to which the appellant replied as follows:- a. That they are a private limited company; b. That they import from M/s Lutron Electronics Co. Inc., USA and M/s VIMCO, USA; c. That they are a subsidiary company and fellow subsidiary company to the foreign suppliers respectively; d. That the nature of their transaction with the exporter is sale; e. That John Woodman is Assistant Secretary at Lutron Electronics and Vimco; f. That they are not the partners in the business of each other s; g. That there is no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gning, manufacturing, marketing and selling variety of total lighting management solutions lighting control and shades through a variety of channels including electrical contractors, lighting showrooms, window treatment dealers, retailers, custom electronics dealers and few other channels. 3. Considering the documents produced and reply to the questionnaire the SVB framed the issue for determination as follows:- (i) Whether the importer and the foreign supplier are related person? (ii) Whether the transaction value between importer and the parent supplier is influenced by such relationship; and (iii) Whether there is any requirement of any addition of any value/cost/payment to the transaction value in terms of Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007? 4. Learned Counsel for the appellant urges that the imported products, broadly fall in two categories (i) those that require an import licence from the WPC, Department of Telecommunications, as they may receive or transmit radio frequency signals (RF Products), (ii) and others (Non-RF Products), for which no such licence is required. The RF products are being imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olume of purchases. Assuming the Lutron US list price to be same, the comparative average import price of ASDs vs. The appellant, would have been as under (rounded): Year Appellant price ASD price Difference 2013-14 21 42 21 2014-15 27 44 17 2015-16 28 43 15 2016-17 34 41 7 2017-18 35 34* 1 Difference Average 15 (leaving 2017-18) *Starting FY 2017-18 through the present, the appellant believes that there were no imports by the ASDs. The end customers purchased the goods from the ASDs on high sea sale basis. 8. The quantities imported by the appellant were significantly higher than those by the ASDs, and consequently the appellant enjoyed higher discounts. The appellant s imports were about 20 to 280 times greater than those o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by ASDs in comparison to those incurred by the appellant was also furnished. (iii) That the imports by the ASDs are not comparable to the imports by the appellant, on account of the huge difference in volumes. Further adjustment of 5% on account of the differences in quantity, is wholly unreasonable. (iv) That the appellant incurs significant expenses in obtaining Radio Frequency Licences (WPC DGFT), for import of RF products, whereas the ASDs do not import RF products,, and do not incur such expenses. (v) The arm s length transaction was justified by the deductive methodology, indicating a nominal profit. Further, that with 77% loading, the appellant would incur losses on their imports. (vi) That there is no published price list of Lutron US, for made to order (custom) products and import value of such products cannot be enhanced. 11. The appellant attended hearings on four dates, before different adjudicating authorities, and provided all the information and evidence requested for by the officers. The appellants were surprised and shocked to note that none of the evidence furnished or the arguments made, were considered by the Adjudicating authority, while de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relationship did not influence the price. (b) In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time. (i) The transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India; (ii) The deductive value for identical goods or similar goods; (iii) The computed value for identical goods or similar goods; Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of Rule 10 and cost incurred by the seller in sales in which he and the buyer are not related; (c) Substitute values shall not be established under the provisions of clause (b) of this sub-rule. (4) if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentially through Rule 4 to 9 . (emphasis supplied). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds.- (1) (a) Subject to the provisions of rule 3, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued; Provided that such transaction value shall not be that value of the goods provisionally assessed under section 18 of the Customs Act, 1962. (b) In applying this rule, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods. (c) Where no sale referred to in clause (b) of sub-rule (1), is found, the transaction value of identical goods sold at a different commercial level or in different quantities or both, adjusted to take account of the difference attributable to commercial level or to the quantity or both, shall be used, provided that such adjustments shall be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value . Rule 4 can be invoked only where there is an import of ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied). 22. The appellant submits that the average import quantity by an ASD is in the range of 0.5% to 5% of the imports made by the appellant. The imports by ASD s being negligible, as compared to that of the appellant, the imports are neither at the same commercial level nor in substantially the same quantity. The appellant had furnished evidence of the expenses incurred by ASDs as compared to those incurred by the appellant, to demonstrate that they were different class of buyers. A difference in quantity of this magnitude would occasion a higher discount, based on commercial considerations, and hence there is no reason to doubt the transaction value. 23. Without prejudice to the above, the absurdity of the loading is evident from the fact, that no cognizance has been taken of the change in the import price of the appellant vis-a-vis that of the ASD, over the period. From 2016 onward the differential between pricing of the appellant and the ASD has declined significantly. In 2017-18 the prices for the appellant and the ASD are nearly at par. The loading, for most of the period results in a value, which is even higher than the import price of the ASD s. The order suffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, that bearing in mind the object behind the provision for adjustment in terms of Rule 5(1)(c), the fine distinction between the words adjustment and discount sought to be brought out by the appellant is of no relevance to the controversy at hand. The provision is clear and unambiguous meant to provide some adjustment in the price of identical goods, imported by two or more persons but in different quantities. It is plain that such adjustment may not necessarily lead to a decrease in the value. It may result in an increase as well. Reference to the word discount in the interpretative note is by way of an illustration to indicate that a seller s price list is one of the relevant pieces of evidence to establish the factum of quantity discount by the seller. It is manifest that adjustment in terms of Rule 5(1)(c) of 1988 Rules, for the purpose of determination of value of an import, can be granted only on production of evidence which establishes the reasonableness and accuracy of adjustment and higher volumes of imports per se, would not be sufficient to justify an adjustment, though it may be one of the relevant considerations. Accordingly, learned Authorised Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. We also noticed that part collection of deductive value submitted by the appellant, they are only making a nominal profit. The appellant has to occur significant reduce licences from the Telecom Department and DGFT for import of RF products which are not incurred by other resellers. Accordingly, the impugned order is modified to the extent as indicated hereinabove. 28. Having considered the rival contentions, we find that as the ASD do not import RF products as well as the made to order products , but some products are imported both by the appellant and the ASD, but are not comparable. Such imports constitute a significant part of the total imports made by the appellant. Such imports are in the range of 16 to 51% during the period 2013-14 to 2017-18 or an average of 36% of the total imports made by the appellant. Further, we find that the quantity imported by the appellant is more than 200 times than the quantity imported by the ASD. Further, we find that the ASD placed order for import usually when they have sales order in hand and do not undertake stocking of the products. Whereas the appellant irrespective of the sales orders in hand, the appellant imports in bulk and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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