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TMI Blog2023 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that their value declared was at arm s length, no supporting material is placed to dislodge the findings of the lower authorities. If the price declared was at arm s length, then perhaps there would not be any such long drawn dispute at all - Moreover, from the claim of the appellant that the deductive method of valuation is appropriate, itself suggests that the prices declared were certainly not at arm s length - the declared value was not at arm s length. Whether the value was influenced by the relative party transaction, in terms of Rule 4(3)(a) ibid? - HELD THAT:- When such a doubt is expressed by the authority, then the burden is on the appellant to discharge the same, to establish that the transaction value was at arm s length - there is no dispute as regards the relationship between the appellant and the foreign supplier and hence, we have to read second proviso to sub-section (1) carefully. This is because, it is only provided here, under the second proviso, as to the determination of import value in respect of related party transaction. It also provides, inter alia, power to the Adjudicating Authority to reject the declared value where the proper officer has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant is the subsidiary of M/s. Nubiola Pigmentos SL, Spain which was holding 98% of share in the appellant/importer company and that there was a common director. It thus appeared to be clear from the above that both the foreign entity as well as the importer/appellant were related in terms of Rule 2(2)(i), (iv) and (v) of the Customs Valuation Rules, 1988. 2.3 In the backdrop of the above, it appeared as regards the transaction value declared by the appellant, that the comparison of price of import vis- -vis third party imports were noticeably different; that unit price between the third party imports and the import of the appellant with reference to the imported products appeared to be varying between 0.44% and 44.59%, which prompted the Revenue to believe that the admitted transaction value between the appellant and its foreign supplier was not at arm s length as envisaged under Rule 4 ibid. 2.4 It appears that from the above, the obvious conclusion was drawn by the Revenue that the relationship had influenced the transaction value, which was therefore liable to be rejected in terms of Rule 4(3)(a) ibid. 2.5 It is seen from the record that the appellant tried its best t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e certificate of a Chartered accountant, which showed that ICP among subsidiaries were uniform. Documents submitted in support also revealed that there was uniformity in unit prices in respect of subsidiaries; no third party invoices from overseas suppliers filed. Pricing of group companies was governed by inter-company prefixed prices and the transfer pricing would consider manufacturing/industrial cost plus a mark-up of 8%. The above was the standard practice among group companies, but the prices to third parties was fixed after considering expenses relating to sales, administration logistics, post-sale services and future technical support. Quantity of purchase by a group company was relatively higher than that from other company. 5.2 De-novo Order-in-Original No. 12899/2010 dated 14.09.2010 was thereafter passed by the Adjudicating Authority wherein the transaction value was proposed to be loaded by 24.40%, for the following reasons: - a) Several discrepancies, deficiencies and incorrect instance of two different price list with different prices for a same item was noticed. b) The Chartered Accountant has certified as to the uniformity in Rupees only in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third party supplies. 5.3 For the above reasons and discussion, the Adjudicating Authority vide de-novo Order-in-Original rejected the declared invoice price of goods imported by the appellant and inter alia directed for loading the same by 24.40% under Rule 5 ibid. It is also clear from the above that though the appellant participated in the proceedings, apparently for want of evidence / documents in support, the Adjudicating Authority had to propose loading of transaction value by 24.40%. 6. The appellant appears to have preferred first appeal before the First Appellate Authority, but however, even the First Appellate Authority having rejected their appeal vide Order-in-Appeal C.Cus. No. 1539/2012 dated 21.12.2012, the present appeal has been filed before this forum. 7. Heard Shri. S. Murugappan, Learned Advocate appearing for the appellant and Smt. Sridevi Taritla, Learned Additional Commissioner representing the respondent. 8.1 The Learned Advocate submitted at the outset that the appellant could not furnish certain documentary evidences before the Adjudicating Authority due to various reasons which were beyond the control of the appellant. For the above reasons, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich resulted in percentage variation as well, as tabulated in the Order-in-Original. This, according to the Learned Advocate, would clearly establish that the supplies were not comparable at commercial levels due to the quantum of the order and the period of supply. 8.8 He would also contend that the appellant had relied on and referred to imports made by them from China to point out that the prices of the imported goods were comparable, which fact was not at all accepted by the Adjudicating Authority without giving any reason. 8.9 Without prejudice to the above, it is his case that the appellant had arrived at net profit margin after taking out the sales details of these very goods which were imported during the relevant period and the overhead expenses incurred, in support of which a certificate issued by a Chartered was also filed. 8.10 He would further contend that the overall profit margin on the basis of selling price for the year 2004-05 was 5.52% and for the year 2005-06 was 4.43%, which makes it clear that the profit margin earned by the appellant was comparatively low; hence by the appellant s own data as well as sales by applying deductive method, it becomes ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, or did it require loading, as proposed, for the reasons discussed in the orders of lower authorities? 12.1 We find after hearing both sides and after going through the appeal papers that the appellant nowhere denied, and rightly so, that its imports were sourced from its relative entity and accordingly hit by Rule 2(2)(i), (iv) and (v) ibid. wherein related is defined. In view of the above, it is most relevant here to ascertain if the value so declared is at arm s length. Burden is therefore on the appellant to establish that the transaction value declared by it was not influenced by the relationship with its supplier. Though the Learned Advocate contended that the declared value was at arm s length, we find from the orders of the lower authorities that they have disputed the same. Even before us, other than arguing that their value declared was at arm s length, no supporting material is placed to dislodge the findings of the lower authorities. 12.2 If the price declared was at arm s length, then perhaps there would not be any such long drawn dispute at all. 12.3 Moreover, from the claim of the appellant that the deductive method of valuation is appropriate, itself s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of any class of imported goods and the checks to be exercised, including the circumstances and manner of exercising thereof, as the Board may specify, where, the Board has reason to believe that the value of such goods may not be declared truthfully or accurately, having regard to the trend of declared value of such goods or any other relevant criteria :] Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Explanation. For the purposes of this section (a) rate of exchange means the rate of exchange (i) determined by the Board, or (ii) asce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules. 17.4 Further, Rule 4(2)(d) reads as under: - 2. The transaction value of imported goods under sub-rule (1) above shall be accepted: (d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below. 17.5 Rule 4(3)(a) and 4(3)(b) are also extracted below:- 3. (a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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