1998 (7) TMI 282 - AT - Customs

Summary

Issues Involved:
1. Valuation of components for the manufacture of test and measurement equipment.
2. Valuation of components for the manufacture of computers.
3. Valuation of finished goods imported for stock and sale (mainly Computer Peripherals).

Summary:

Issue 1 & 2: Valuation of Components for Manufacture of Test and Measurement Equipment and Computers
The Special Valuation Branch (SVB) of the Chennai Custom House reviewed the valuation of imports by HPI, a 100% subsidiary of HP USA, and accepted the invoice price of components imported for the manufacture of test and measurement equipment and computers under Rule 8 of the Customs Valuation Rules. This decision was not contested by HPI.

Issue 3: Valuation of Finished Goods Imported for Stock and Sale (Mainly Computer Peripherals)
The Assistant Commissioner, SVB, prescribed a loading factor for finished goods imported for stock and sale, asserting that HPI was sold these goods at a lower price, exclusive of selling commission. Aggrieved by this, the respondents appealed to the Commissioner (Appeals), who set aside the Order-in-Original based on several grounds:

(a) The Supreme Court judgment in Basant Industries (1996 (81) E.L.T. 195) allowed different sets of prices for different classes of buyers.
(b) The agreement between HPI and HP USA did not affect the transaction value in the absence of evidence of mutuality of interest.
(c) Interpretative note to Rule 4 of the Valuation Rules supported that activities undertaken by the buyer on his own account are not indirect payments.
(d) No evidence was provided to prove mutuality of interest.
(e) The decision in Maruti Udhyog (1989 (28) E.L.T. 390) was applicable to the case.

Revenue's Appeal:
The revenue contended that:
(a) The Maruti Udhyog case was distinguishable as Suzuki Motor Corporation held only 26% shares in Maruti Udhyog, whereas HPI is a wholly-owned subsidiary of HP USA.
(b) HP USA's deductions on grounds of selling commission were not correct in law and should be added to the invoice price.
(c) Rule 9(1)(a)(i) was not considered by the Commissioner (Appeals).
(d) Mutuality of interest existed as HPI and HP USA were related persons.
(e) Previous acceptance of SVB Circular by HPI barred them from appealing against it now.

Tribunal's Findings:
(i) It was conceded that HPI and HP USA were related persons.
(ii) The relationship did not automatically introduce mutuality of interest; no evidence showed flow-back of profits from HP USA to HPI.
(iii) The decision in Maruti Udhyog applied, as mere shareholding did not preclude acceptance of transaction value.
(iv) The pricing policy of HP USA was transparent and at arm's length, considering the commercial and quantity levels.
(v) Rule 4(3)(a) applied, and the price declared ensured recovery of all costs plus a representative profit.
(vi) Interpretative notes to Rule 4 supported that activities undertaken by the buyer on his own account should not be added to the transaction value.

Conclusion:
The Tribunal upheld the Order-in-Appeal of the Commissioner of Customs (Appeals), finding no infirmity and dismissed the revenue's appeal.