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TMI Blog2013 (10) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... course of investigations. 2. The facts of the case, briefly stated, are as follows: Sun(India) and Sun(Singapore) are wholly owned subsidiaries of Sun Microsystems Inc., US, hereinafter referred to as 'Sun(US)'. Sun(US) manufactures spares and also formulates the pricing policy including discount rates. The spares manufactured by Sun(US) are supplied from Singapore by Sun(Sing.) to different group companies in Asia Pacific Region, including Sun(India). The activity of software development for Sun(US) is also undertaken by the STPI unit of Sun(India), for which there is an agreement viz. 'Research and Development Services Agreement' between Sun(India) and Sun(US). As per this agreement, Sun(India) exports software to Sun(US) and bills the holding company at cost plus 10% basis. Sun(India) has also entered into the following agreements with Sun(Sing.):- (a) Logistics Services Agreement, where under Asia Logistic Centre (ALC) of Sun(Sing.) is required to provide replacement of spare parts ordered by Sun(India) at the unit price paid by them, and Sun(India) is required to pay logistic charges (not including freight for import of spares) to Sun(Sing.). These payments by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther proposals were contested by the noticees. It was in adjudication of this dispute that the learned Commissioner passed the impugned order. The present stay application seeks waiver of pre-deposit and stay of recovery in respect of the dues adjudged against Sun(India). 4. Heard both sides. The learned counsel for the appellant contested the demand of duty on numerous grounds including merits and time-bar. His arguments were vehemently contested by the special consultant for the respondent. From the rival submissions, the following issues arose for consideration (as they appear to have been framed in the impugned order), which appear to have arisen before, and elaborately considered by, the Commissioner of Customs:- (a) Whether there are any direct or indirect flow-backs to the supplier as attributable to supply of spares. (b) Whether the declared values represent true transaction values in ordinary course of sale wherein the buyer and supplier are not related. (c) Whether there were any misrepresentations and suppressions in obtaining the Special Valuation Branch(SVB) orders based on which the bills of entry were being assessed at declared value. (d) Whether US list price c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of Value of the Imported Goods) Rules, 2007 to show that the relationship between the appellant and the supplier did not, in any manner, influence the price of the spares imported from the latter. Per contra, it was submitted by the learned special consultant for the respondent that there was irrefutable evidence of direct and indirect flow-backs to indicate that the declared price of the goods was not the sole consideration for the sale. He submitted that the price was undervalued by the appellant and that the suppressed value was compensated to the suppliers by the appellant by making additional payments in the form of freight, ALC charges, AEC charges etc. These additional payments were said to have been effected by way of reduction in the amounts required to be received by the appellant from the suppliers. The learned consultant particularly submitted that substantial benefit accrued to Sun (Sing.) in the form of refurbishable parts sent to them from India. The learned consultant also made elaborate statements on free-of-cost of export of refurbishable spares by the appellant to Sun (Sing.) and submitted that, during the period upto March 2008, the total value of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The refurbishable spares were found to have been exported through courier from January to May 2006. The courier who handled the export shipments confirmed that there was no foreign exchange involved in the shipments. The appellant's bankers also confirmed this. The officials of the appellant, who were incharge of bank-related works also stated that they had not received any remittance towards export of re-furbishable spares. Though some FIRCs were produced by the appellant during the course of DRI investigations, no connection was found between the FIRCs and the export of refurbishable spares. The values shown in the invoices produced by the appellant at the time of export were found to be very minimal. As against these invoices, the appellant claimed before the adjudicating authority that these were not correct invoices and that there were other invoices available which carried the actual values of the exported spares. However, such other invoices were not submitted to the Customs authorities at the time of exports. They were not even produced before the DRI. The learned Commissioner also found that the set of invoices filed with Bills of Entry in Singapore for clearance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This argument has not been substantiated before us and, therefore, we have no reason to alter the prima facie view already taken with regard to the declared value of the imported spares. 10. We find that the adjudicating authority considered the circumstances of sale and, after rejecting the declared value, proceeded sequentially from rule to rule under the Valuation Rules to determine the assessable value of the goods. It adopted the residual method of valuation and called upon the appellant to provide the rationale for the heavy discounts (61 to 70%) from the US List Price allowed by the supplier. The appellant stated the following reasons: a. Sun's ERP system, as set up, could calculate intercompany transactions based only on US List Price less discount methodology. This includes both intercompany hardware and intercompany spares sales. b. While the methodology of US List Price less discount was consistently applied around the world, the discounts varied country by country based upon a periodic review of the transfer pricing principles. c. This US List Price less discount methodology was borrowed and consistent with pricing methodology used by the Sun Group for third part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. In this connection, the learned counsel relied on certain decisions viz. Commissioner Vs. Flock (India) Pvt. Ltd. [2000(120) ELT 285 (SC)], Priya Blue Industries Ltd. Vs. CC (Preventive) [2004(172) ELT 145 (SC)] etc. The learned special consultant for the respondent pointed out that the appellant had not produced the Logistic Service Agreement, Spare Parts Agreement and the Escalated Technical Support Agreement before the SVB. The export of re-furbishable spares free-of-cost to Sun(Sing.) was not disclosed to the SVB. On the other hand, the appellant declared to the SVB that there was no formal agreement between them and Sun (Sing.). The grant of discount to the extent of 61-70% on US Price List was also not disclosed to SVB. The learned special consultant submitted that the appellant had obtained SVB order fraudulently by suppressing material facts having a bearing on valuation of the goods. In the circumstances, it was argued, the Department could lawfully invoke Section 28 of the Customs Act as had been done in this case. Prima facie, these arguments of the learned special consultant for the respondent are acceptable on the facts and circumstances of this case and in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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