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M/s. Richemont India Pvt. Limited Versus CC, New Delhi

2015 (12) TMI 1043 - CESTAT NEW DELHI

Valuation - Rule 4 - includibility/ non includibility of the expenses on advertising and sales promotion etc. - Related person - transaction value of identical goods - Held that:- It is pertinent to note that the appellant has conceded that the appellant and the supplier being related persons and Revenue was justified in having reason to doubt the truth or accuracy of the value declared. In terms of Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rule, 2007, this is s .....

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appellant also would get the benefit thereof and therefore to treat this entire amount as additional consideration for import of goods in order to arrive at the loading factor is not sustainable. - But as stated earlier, we are only concerned with Rule 4 of CVR, 2007 (which the adjudicating authority has used for loading the value) and not with Rule 10 thereof while the contention of ld. DR falls within the ambit of Rule 10 (which has not been used by the adjudicating authority to arrive at .....

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f assessee. - Customs Appeal No. 50868 of 2015 - Final Order No. 53695 / 2015 - Dated:- 4-11-2015 - Mr. G. Raghuram, President And Mr. R. K. Singh, Member (Technical) For the Petitioner : Sh. N. Venkatraman, Sr. Advocate with Sh. R. Murlidharan and Sh. Dheeraj Srivastava, Advocates For the Respondent : Sh. Amresh Jain, DR ORDER Per: R. K. Singh: Appeal has been filed against Order-in-original No. SVB/CUS/45/DRPK/2013 dated 30.10.2013 in terms of which the transaction value declared by the import .....

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r was related person and therefore Revenue was justified in having a reasonable doubt about the declared value. (iii) The loading has been ordered on the ground that the price charged by the supplier from the independent parties was12.5% higher than the price charged from the appellant. However, in the table given in para 6 and 14 of the impugned order, it is nowhere indicated whether the price charged from the retail importers was in relation to the imports around the same time and at the same .....

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xpected to arrange marketing, distribution & domestic logistics, advertising & promotion and keep stock of goods. It cited the judgments in the cases of Komet Precision Tolls India Pvt. Limited vs. CC - 2009 (245) ELT 737 (Tri. Bang.), CC vs. Hewlett Packard Limited 1999 (108) ELT 221 (Tri. Mad.) to support the proposition that to compare the value with the value of contemporaneous imports adjustment has to be made on account of difference is commercial level and quantity imported which .....

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ses, ₹ 3.28 crores were accounted for by amount reimbursed by the appellant to the foreign supplier as these expenses were incurred by the foreign supplier on the appellant s behalf to promote sale of its products in India. As these expenses were reimbursed by the appellant they cannot be considered as consideration towards the imported goods. (viii) The appellant was not obliged to incur these expenses in terms of distribution agreement with overseas supplier and therefore these were not .....

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uch commercial methods as shall enhance the prestige, integrity and market situation of the products and it was also required to submit to the supplier for approval its marketing and communication budget for the following year which shall include detailed promotion public relations and media plan which showed that the expense on marketing and sales promotion etc. was a condition of sale and therefore, such expenses are includible in the assessable value in terms of Rule 10(1)(c) of the Customs V .....

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conceded that the appellant and the supplier being related persons and Revenue was justified in having reason to doubt the truth or accuracy of the value declared. In terms of Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rule, 2007, this is sufficient to allow determination of value as per Rules 4 (onwards) of the said Valuation Rules. 5. Both sides argued at length about includibility/ non includibility of the expenses on advertising and sales promotion etc. made .....

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Indeed, it is seen that in the discussion and finding portion of the impugned order the Commissioner formulated the issue to be decided in this case as under: (i) Whether the Importer and the Foreign Supplier are related persons in terms of Rule 2(2) of the Valuation Rules, 2007 (ii) Whether the transactions between the Importer and the Foreign Supplier are influenced by such relationship and (iii) Whether any addition on account of payment of royalty, technical know-how fee, interest etc. made .....

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efore, we do not think it necessary or relevant to dwell on the aspect whether the expenses on advertisement and sales promotion etc. incurred by the appellant are includible in the assessable value in terms of Rule 10 because the adjudicating authority has not invoked the Rule 10 for loading the declared value. 6. As the loading has been determined by the adjudicating authority (only) in terms of Rule 4 of the CVR, 2007 it is useful to reproduce the said rule below: Rule 4. Transaction value of .....

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he same quantity as the goods being valued shall be used to determine the value of imported goods. (c) Where no sale referred to in clause (b) of sub-rule (1), is found, the transaction value of identical goods sold at a different commercial level or in different quantities or both, adjusted to take account of the difference attributable to commercial level or to the quantity or both, shall be used, provided that such adjustments shall be made on the basis of demonstrated evidence which clearly .....

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(3) In applying this rule, if more than one transaction value of identical goods is found, the lowest such value shall be used to determine the value of imported goods. We find that in para 23 of the impugned order, the Commissioner has categorically noted that NIDB data in respect of contemporaneous imports of identical/ similar goods was scrutinized; however, no data for similar/ identical goods of any other brand or company were available on the DOV website . Rule 4 requires that in applying .....

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ntity or both and such adjustments is required to be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustments. The appellant has been able to demonstrate that as a distributor its imports were at a different commercial level and in much larger quantity compared to the imports made by the individual retailers. From the tables given in paras 7 and 14 of the adjudication order used to arrive at the finding that the price declared by the .....

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as 12.5% lower due to relationship is obviously invalid and not in accordance with the requirements of Rule 4 of the CVR, 2007. Further, the prices were compared only for two models of watches and simple extrapolation thereof to all other models of watches for the purpose of revising their values upwards does not have any legal basis for sustainability. The appellant has argued, and reasonably so, that the margin of 12.5% vis-a-vis the price for direct sales to independent retailers is not an un .....

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in commercial levels as well as in the quantity of goods imported and therefore, we do not find the loading of 12.5% to be in conformity with the requirements of Rule 4 of the CVR. This conclusion is supported by CESTAT decision in the case of Hewlett Packard Ltd. (supra) wherein it was inter-alia held as under: ....In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximate .....

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e 9 of these rules and cost incurred by the seller in sales in which he and the buyer are not related; A plain reading of the above provisions shows that when the value of contemporaneous imports are to be considered vis-a-vis imports by related persons, then in view of the proviso to sub-rule 3(b), due account has to be taken of demonstrated difference in commercial levels, quantity levels and adjustments in accordance with the provisions of Rule 9. Now the facts of this case are undisputed reg .....

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