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TMI Blog2011 (2) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-01-2007 and by making a revenue deposit of 5% of such assessable value thereafter. 2. The contention of the Appellant before the adjudicating officer and before the first appellate authority has been that the prices to the Appellant company were at arm s length and require no further loading though Appellant is related to the foreign supplier. 3. Prior to 31-03-2007, the foreign company was supplying the same goods directly to unrelated importers in India. It was seen that prices to these unrelated buyers were higher than the prices at which goods were sold to Appellant, who was related to the foreign supplier. The contention of the Appellant is that for such sales to unrelated buyers in India a commission of 25% was being paid to the Appellant as per their agency agreement. It is argued that when goods are sold directly to the Appellant at a whole sale level and the Appellant is marketing the goods thereafter, it is only natural that the goods are sold to it at a lower price corresponding to the 25% Commission that the Appellant was getting earlier. So it is argued that for making a comparison between prices at which goods were sold when the Appellant was acting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per price list where imports made before 10th October, 2007 under rule 9 of CVR 988 and where imports made on or after 10th October, 2007 under Rule 10 of CVR, 2007. Since priced list for the imports prior to 30.5.06 is not supplied/available and date regarding contemporary imports of third unrelated parties are available assessment of the goods will be done on the basis of contemporary imports only. No concession/discount will be allowed as importers and other unrelated Indian buyers are at same commercial level as most of products were imported by both in same/similarly quantity. All future imports of goods shall be assessed on merits subject to verification of the price list taking list price as FOB price and after disallowing any discount etc. keeping in view provisions of the Valuation Rules 2007. All pending assessment may be finalized accordingly. 5. Aggrieved by the order, the Appellant filed appeal with the Commissioner of Customs (Appeals) explaining that the suppliers were giving discount from the list price to other un-related buyers also and that the Corporate Service Charges are for services rendered by the parent company in matters like acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion showing that the parent company was giving discount on the listed price even when the foreign company was selling to other importers. Appellant submitted the following information in respect of their main product:- S.No Name of third party Month Qty Supplied Value in US$ per unit Qty Supplied to Appellant Value in US$ per unit to Appellant 1. ONGC May 2006 2 2341.5 25 2586.8 2. NRSA May 2006 2 2341.5 25 2586.8 7. Appellant argues that from the table above, it can be seen that the prices at which the goods were sold to the Appellant were comparable and higher than with the prices at which the goods were being sold to other independent buyers. Appellant also pointed out that before 1.3.2006 when the above company was supplying directly to the distributors, Appellant was getting commission of 25% of the invoice value and this amount has to be deducted for making a proper comparison when goods are sold to the Appellant. After the above date, the parent company stopped supply to other importers in India and all supplies in India are being made through the Appellant company. 8. App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent company irrespective of the imports made by the company and payments are to be made irrespective of quantum of imports. Appellant quoted the statistics as reproduced in the table in para 4 above to prove that the payment under the head CSC was not relatable to the product. 11. From the table it can be seen that in 2004-05, CSC sales was 61.71% and for other two years, it was only 17.46% and 18.46%. Appellant also pointed out that during the year 2004-05, there was no customs duty payable on import of software and the appellant or the foreign supplier was not gaining anything by showing a higher percentage of amounts as CSC. The CSC were decided purely on the basis of the quantum of service availed by the company from their parent company. 12. He argued that charging customs duty on the basis of list price is totally illegal because the goods are never sold at that price to any distributor whether related or not. Since the transfer price has been worked out by taking into account all the aspects of the costing involved and such prices are also accepted for Income tax purposes, it should also be accepted for assessment of customs duties. 13. The learned D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale does not involve any abnormal discount or reduction from the ordinary competitive price; -- (g) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these Rules; 18. Further, I take note of the Interpretation Notes to Rule 3(3) of Customs Valuation Rules, 2007 which reads as under:- Rule 3(3) Rule 3(3)(a) and rule 3(3)(b) provide different means of establishing the acceptability of a transaction value. 2. Rule 3(3)(a) provides that where the buyer and the seller are related, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted as the value of imported goods provided that the relationship did not influence the price. It is not intended that there should be an examination of the circumstances in all cases where the buyer and the seller are related. Such examination will only be required where there are doubts about the acceptability of the price. Where the proper officer of customs has no doubts about the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that one of the tests provided in rule 3(3)(b) has been met, there is no reason for him to require the importer to demonstrate that the test can be met. In rule 3(3)(b) the term unrelated buyers means buyers who are not related to the seller in any particular case. 19. The transfer prices are normally scrutinized by the Income Tax Department considering the whole gamut of issues relevant and with better focus on the overall accounts of the company unlike the customs department which compares prices for the product billed to other importers. The matter of transfer prices is to be determined by in-depth analysis of the books of accounts and not to be simply rejected on the basis of list price of the commodity for retail sale. No evidence of price for sale at the same commercial level and same quantity level is produced by the department. No case is made out that the Income Tax department found the prices to be vitiated. Once the Transfer Prices Agreement for the products or services is not objected to by the Income-tax Department a case that the value of goods has been transferred to service has to be proved with more meaningful evidence rather than a comparison with list p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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