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2014 (5) TMI 753 - AT - CustomsValuation of goods - Under valuation of goods - related parties - supply of spares - Penalty - Held that:- there is sufficient evidence to show that during the period of dispute, refurbishable spares were not paid for by Sun US/SGP and apparently appellants have made efforts subsequently to make suitable adjustments. We have already taken note of the fact that even to PWC for conducting study of transfer pricing issue, appellants have not disclosed these facts and even the fact that defective parts were paid for and such payment was equal to the cost of new parts supplied by Sun US/SGP was also not brought to the notice of PWC. Therefore we really do not know the implications on this account on the PWC report. The analysis, evidences, annexures, documents and statements of officers of the company and information collected from bankers, courier services would clearly show that appellants have not been able to prove their claim of receiving payments in respect of refurbishable spares. Therefore, the claim of the Revenue that the price charged to SI by Sun SGP cannot be accepted since there were other circumstances besides the relationship between the entities has considerable force. Appellant cannot be considered as different from other buyers of equipments since the parts are supplied against replacement and old parts are sent back and appellant is reimbursed on the basis of cost plus 10% for the services they render. In such a situation, the discount given to appellant has no meaning since appellant in any case, do not incur any extra cost and AMC / warranty charges do take into account the cost of spare parts that they may have to be replaced during the course of rendering such services. Therefore even if the refurbishable spare parts were being paid for to Sun US at the price of new parts, such a transaction would definitely affect the transaction value between the two entities. whatever angle we look at the transactions we find that the value adopted cannot be considered transaction value in terms of section 14 of Customs Act, 1962. Therefore US list price minus discount cannot be a basis for charging customs duty. - Decided against the assessee. Regarding flow-back is underbilled amount of spares used for warranty - Held that:- The mail is an evidence that the cost plus 10% billing for the services provided by SI to SunUS and SunSGP has a bearing on the supply of spares by SunSGP and SunUS to SI at list price less discount (68% or 70%). Hence, under billing in respect of services provided by SI to SunSGP and SunUS was to compensate the underbilling of spares systematically. - submissions on behalf of Revenue that Asia Logistic Centre (ALC) charges charges related to the spares transaction has not been shown to be wrong. - Decided against the assessee. As regards provisional charges and marketing & R&D charges, SI admitted the underbilling but claimed it had nothing to do with the import of spares. This becomes evident from the submissions made by the appellants in the paper books wherein they have given rebuttals point by point to the allegations in the show-cause notice. As regards underbilled professional charges, the appellants stated in any event the amounts have already been charged by SI on 26/05/2009 and paid for by SunUS. It has to be noted that this is much after the issue of show-cause notice and conducting of investigation. Therefore this allegation has to be held as proved. Other than stating that this had nothing to do with the import of spares, there is no other explanation. There is no explanation how this conclusion has been reached by them. - Decided against the assessee. Under these circumstances, there is absolutely no alternative but to levy customs duty on the US list price as arrived at by the Revenue. There are several instances where no discount has been allowed or price has been in excess from 1% to 128% of the US list price (as arrived at). Even probably the biggest customer viz. Infosys also was charged 128% over the list price in respect of one item. The list price is the only price which has some relationship and some value as a reflection of independent transactions. - US list price as worked out by the Revenue should be the basis and duty demand confirmed on that basis and assessments should be finalized on that basis. - Decided against the assessee. Regarding penalty on DHL Express India ltd - Held that:- Appellant was not at all involved in undervaluation. M/s. DHL was providing all logistic support including clearances of imported goods from Customs to SI. There were raising freight invoices. They were aware that the consignments were received on freight to collect basis. They have a unique system of identifying ‘freight to collect’ consignments imported based on account number. Non-declaration of freight element and terms of import resulted in non-payment of duty on freight charges. DHL did not inform CHA to include the freight charges in the assessable value. Even though the learned counsel argued vehemently, and submitted that they had not filed any documents and therefore no penalty can be imposed on them, we find that facts go against DHL totally. DHL is in the business of logistics and for a professional organization which is engaged in the same business, it cannot be said that they were not aware of the legal position. However, Penalty reduced from 20 lacs to 10 lacs.
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