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2023 (6) TMI 856 - AUTHORITY FOR ADVANCE RULINGS, CUSTOMS, MUMBAISeeking Advance Ruling on the basis of incomplete details - Valuation of imported goods for trading activity - applicant can be considered as Trader or Commission Agent? - trading margin of 3% earned by the applicant upon import of the subject goods is required to be added in the assessable for customs purposes? - Section 14 of the Customs Act, 1962 read with Customs Valuation (Determination of value of imported goods) Rules, 2007 (CVR, 2007), interpretative notes to the CVR, 2007 and the Special Valuation Branch related CBIC circular of February 2016. HELD THAT:- The assessable value for payment of customs duties has been determined by the applicant as the sum of price at which the goods are sold by Ingrasys Singapore to the applicant and freight charges. It is noted that freight is directly met by ADSPL, a third party. In the value chain the price offered to the third party subsequent to import should have been higher than the assessable value declared but for direct freight payment by the third party to the supplier- exporter even if there is no value addition on account of manufacturing or processing - there are no role of the department or a legal framework under the Customs Act, 1962 in it. As stated earlier this accumulation is entirely attributable to the way the transaction is organized among the three transacting entities. Hence accumulation of IGST credit (ITC) is not a correct legal ground for seeking an advance ruling. Addition or otherwise of 3% amount earned by the applicant to the declared import transaction value - HELD THAT:- It is on record that the applicant company is a subsidiary of Ingrasys (Singapore) PTE Ltd. which holds 99% of the share capital of the applicant company. They are related parties in terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. In such a situation the import transactions will be subjected to the rigor of procedure laid down under the CBIC circular no. 5/2016-Customs dated 9.2.2016 related to the procedure to be followed in related party import cases and other cases by the Special Valuation Branch. It is found that here the questions remain as to: (1) why the price agreement is entered into between the exporter supplier M/s Ingrasys, Singapore & a third party buyer M/s ADSPL leaving aside the importer-applicant (claimed to be principal to the transaction), who claims to be an independent business entity. The copy of price agreement is necessary to examine the role of the applicant in the transaction, (2) why the principal (importer) in this transaction has not borne the burden of the freight that would have resolved the issue of accumulation of ITC, (3) whether 3% amount earned by the applicant is a "profit margin" or "a business revenue' of the applicant. It is important to note that the business profit and business income are not same and interchangeable terms, (4) why there is no statement/submission on the grounds for payment of Customs duty and interest subsequent to DRI investigation when the applicant is of firm belief that the 3% margin earned by them is not a commission and hence not includible in transaction value of imported goods under section 14 of the Customs Act, 1962. Investigation closure report of the DRI, if any, is also not submitted by the applicant, (5) why the data sought from the applicant including the profit and loss account of the applicant, referred in para 5.1 earlier, was not submitted by the applicant. This data was essential to understand exact role of the applicant in the transaction, (6) Rule 10(1)(e) provides for inclusion of all other payments which are a condition of sale. In the absence of sufficient data this factor also cannot be conclusively verified. On the background of foregoing discussion, the applicant has not submitted requisite information sought by the advance ruling authority. This is a clear case of data insufficiency.
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