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Procedure for investigation of related party import cases and other cases by the Special Valuation Branches

Customs - 05/2016 - Dated:- 9-2-2016 - CIRCULAR NO 5 /2016-Customs F. No. 465/12/2010-Cus V GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF EXCISE AND CUSTOMS New Delhi, dated 9th February, 2016 To, All Principal Chief Commissioners Customs All Principal Chief Commissioner of Customs & Central Excise All Chief Commissioners of Customs, All Chief Commissioners of Customs & Central Excise, All Directorate-Generals, Chief Departmental Representative, All Princ .....

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ich have a bearing on the assessable value. Detailed instructions were issued vide Circular Nos. 1/98 - Customs dated 1.1.98 and 11/2001-Customs dated 23.2.2001, prescribing the procedure to be observed by the Custom Houses for referring cases to Special Valuation Branches and time lines to be followed for finalising such cases. 2. However, trade and industry has been repeatedly representing regarding delays in finalisation of SVB investigations, continued uncertainty due to provisional assessme .....

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onsidering the above and the large number of SVB investigations pending in various Customs Houses, a need has been felt to streamline the procedures relating to investigations by SVBs. 3. Vide Circular No. 29/2012 dated 7th of December, 2012, it had been decided to vest functional control over SVBs with the Director General of Valuation (DGOV), with effect from 1st January, 2013. However, upon assessing the impact of the revised administrative arrangements and taking into consideration the sugge .....

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itatively monitor investigation orders issued by SVBs. 3.1 The SVBs are presently functioning at the Customs Houses at Bengaluru, Chennai, Kolkata, Delhi and Mumbai. Para 1 (b) of circular no. 11/2001 dated 23rd Feb 2001 laid down the jurisdiction of the SVBs, based upon the principle of location of the corporate office of the importer. After reviewing this arrangement from the point of view of convenience of the trade, it has been decided to continue with the same administrative arrangements. A .....

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e corporate office, as convenient to him. The jurisdiction of the five SVBs is attached as Annexure F. 3.2 The Board has reviewed the practice relating to levy of 'Extra Duty Deposits' (EDD) in cases where SVB investigations are undertaken. It has been taken into consideration that 'Extra Duty Deposit' @ 1% of declared assessable value is being obtained from the importer for a period of 4 months during which time he is required to submit required documents and information to the .....

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een noted that many importers have represented on delays in dispensing of EDD, even though they have provided the required information and a period of 4 months has passed without the case having been decided. Therefore, the Board has decided that while reference to SVB requires the assessments to be provisional, for the sake of reducing transaction cost and bringing uniformity across Customs Houses, no security in the form of EDD shall be obtained from the importers. However, if the importer fai .....

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may consider the use of other provisions of the Customs Act for obtaining documents / information from an importer for conducting investigations. In no case shall the imposition of Security Deposit exceed the period of three months specified above. Furthermore, the Board has also decided that the importer would be free to choose whether the Security Deposit to be provided for the purposes of provisional assessment shall be by way of cash deposit or a Bank Guarantee. The form of Bond to be initia .....

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order. Instead, the SVB shall convey its investigative findings by way of an Investigation Report to the referring customs formation for finalizing the provisional assessments. This would obviate multiple streams of appeals for the trade. 3.4 During consultations with field formations, it has been reported that while circular 11/2001- Cus dated 23.2.2001 cast the responsibility upon the Commissioner to carefully examine whether a case merits SVB investigations, lack of adequate information at th .....

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are taken up for SVB investigations, the following cases shall not be taken up for inquiries by SVBs: (i) Import of samples and prototypes from related sellers (ii) Imports from related sellers where duty chargeable (including additional duty of Customs etc.) is unconditionally fully exempted or nil. (iii) Any transaction where the value of imported goods is less than ₹ 1 lac but cumulatively these transactions do not exceed ₹ 25 lacs in any financial year Cases, which may be consid .....

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stances surrounding the sale of the imported goods indicate that the relationship has influenced the price. Accordingly, such transactions will require to be examined as to whether SVB inquiries are necessary. 4.1 Apart from investigation of transactions involving related parties, cases involving possible additions to declared transaction value also need to be examined to determine whether SVB investigations are necessary. Accordingly, transactions where any payments are sought to be made which .....

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. Rule 10(1)(e)] of CVR, 2007 4.2 However, no reference to SVB would be necessary where any additions are sought to be made under Clauses (a) and (b) of Rule 10(1), as it is expected that such matters would be decided routinely by Appraising Groups. Procedure for considering reference to SVB 5. Scrutiny of a transaction between related persons or involving additions to value on account of royalty, licence fee etc. can pose complex issues and may lead to delay in clearance. Therefore, importers a .....

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e Bill of Entry is expected to provide sufficient time for taking a decision on whether the transaction needs to be referred to SVB or not and therefore ensuring timely clearance of the goods. This would be necessary only in the first instance of import and once a decision has been taken regarding referring the matter to SVB or not, there would be no need for such advance filing of the Bill of Entry for each subsequent import. 5.1 Upon filing of the Bill of Entry, and receipt of information in A .....

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f the goods imported is a "transfer price"? ii. What is the basis on which the price has been settled between the buyer & seller? iii. Has the price been settled in a manner consistent with the way the seller settles prices for sales to buyer who are not related to the seller? iv. Does the nature of relationship between the buyer and seller appear to influence the price? v. Is the information provided by the importer in terms of rule 3 (3) (b) able to demonstrate that the transacti .....

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ure of other payments, if any, made or to be made by the buyer as a condition of sale of the imported goods? ix. Has the importer entered into an Advance Pricing Agreement with the Income Tax Authorities or obtained an Advance Ruling? x. Will the prices paid or payable by the importer be settled with the seller at the end of a defined period by means of a debit note / credit note? 5.2 While examining the information provided by the importer in terms of Rule 3(3) (b), if any, the proper officer s .....

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standard such as a fixed percentage, in each case. For example, a small difference in value in a case involving one type of goods could be unacceptable while a large difference in a case involving another type of goods might be acceptable in determining whether the transaction value closely approximates to the "test" values set forth in rule 3(3)(b)." 5.3 After examining the transaction on the above lines, the proper officer at the customs station of import shall submit the findi .....

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es to be conducted by the proper officer in terms of Rules 4 to 9 of the CVR 2007 or (c) the transaction be assessed in terms of Rule 3 of CVR 2007 Procedure for reference to SVB: 6. In the event of the Commissioner directing investigations by SVB, the proper officer shall promptly carry out provisional assessment in terms of section 18 of the Customs Act, 1962 and ensure that no delays occur in the release of the goods. 6.1 In order to facilitate expeditious inquiries by the SVB, the proper off .....

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o case later than 3 working days of the release of the goods. 6.3 The documents received from the importer with respect to the checklist shall be duly acknowledged by the SVB. An intimation shall be forwarded to RMD and the referring appraising group regarding submission of the documents within time so that provisional assessments, without security deposit or bank guarantee, continue till the finalisation of the investigation. Procedure for cases where reference to SVB is not required: 7. In cas .....

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ion, the SVB shall forthwith assign a case number and update the Central Registry Database (CRD) maintained by DGoV. The SVB shall also inform the RMD of the details of the importer, his IEC code, and details of seller for inserting suitable instructions for assessing officers at all Customs Houses so as to ensure provisional assessments during the currency of SVB inquiries. 8.1 Upon receipt of information from the importer as per Annexure B, SVB shall commence inquiries, during the course of wh .....

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onal Commissioner for such extended time period as is deemed necessary to complete investigations. However, where investigations are not completed within 4 months from the date of receipt of information in Annexure B, the matter shall be submitted before the Chief Commissioner for extension of period as is deemed fit. 8.3 Upon completing investigations, the SVB shall submit the findings before the Principal Commissioner/Commissioner, quantifying the extent of influence on the transaction value d .....

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shall include all relied upon documents and shall be communicated to the referring customs station/appraising group and such other stations where imports have been provisionally assessed. A copy of the IR shall also be sent to the DGoV. Finalisation of assessments 9. Upon receipt of the IR from the SVB, where investigative findings are that the declared value is found conforming to Rule 3 of the CVR, 2007, the customs stations where provisional assessments have been undertaken shall immediately .....

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jurisdictional commissioner of the SVB shall, after issue of notices by the proper officers in the said locations, make a proposal addressed to the Commissioner (Customs), CBEC recommending appointment of a common adjudicating authority by the Board for the purpose of passing order for finalization of the provisional assessments. 9.3 The adjudicating authority shall, after following the principles of natural justice, pass an order quantifying the extent of influence on the declared transaction .....

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under Rule 10 (1) (c), (d) & (e) of the CVR, 2007 become payable, the importers shall be required to declare the same at the place of import in the prescribed format at Annexure C. In all such cases, the proper officer shall examine the transactions as per procedures laid out above in this circular and the jurisdictional Commissioner shall refer the matter to the jurisdictional SVB, where required. 10.1 In view of the above, it may be noted that the system of renewal of SVB orders has been d .....

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of the investigations and report to the Board cases involving any inordinate delays. 12. This circular is issued in supersession of Circular No. 1/98 - Cus dated 1.1.98 and 11/2001-Cus dated 23rd February 2001 and comes into immediate effect. 13. Difficulties, if any, faced in the implementation of this Circular may be brought to the notice of the Board. 14. Hindi version follows. (S.Kumar) Commissioner (Customs) BE No: Customs Station: Annex-A Questionnaire to be filled by the importer at the t .....

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please provide address of unit (s); and jurisdictional central excise / service tax commissionerate, division & range. 3.2 If the importer is a manufacturer, please briefly describe the manufacturing activity undertaken (principal inputs and description of goods manufactured) 3.3 If the importer is a manufacturer cum trader, please list the goods which are imported and traded. 3.4 If the importer is only a distribution & marketing company or maintenance & services co. etc., please b .....

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nd the seller and/or with their associates Goods 5 Have goods identical to the goods imported under the present BE, been imported earlier? If yes, please provide details. 5.1 Whether the importer has imported any capital goods, plant, machinery, equipment, etc., from the seller of the imported goods or its related or associated concerns? 5.2 Does the seller of the imported goods supply the same directly to any other unrelated person in India? If so, please furnish details of other importers in I .....

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Price'? 5.7 What is the basis on which the price has been settled between the buyer and seller? Other Payments (Costs & Services under Rule 10 of CVR, 2007) 6. Whether the goods imported by the importer are sold under a trade mark, design, licencing/royalty agreement or patent owned or controlled by the seller of the goods or any other person? 6.1 Whether the product manufactured by the importer using the imported goods is sold under a trade mark, design, licencing/royalty agreement or p .....

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indirectly, to or on behalf of the seller of the imported goods in connection with the production of the imported goods? (for example, materials, parts, components, tools, dies, moulds, engineering, development, art work, design work, plans or sketches undertaken elsewhere than in India) 6.5 Are any services rendered by or on behalf of the importer relatable to the goods imported or undertaken on behalf of the seller of foreign goods? 6.6 Will the price paid or payable by the importer be settled .....

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n. 2. In cases where the import takes place through CHs of Mumbai / Delhi / Chennai / Kolkata / Bangalore, the importer will be free to select the SVB of Customs House of Import or the Customs House most proximate to the Corporate Office, as convenient to him. Company Seal (Signature of Authorised Representative)/ Director (Finance)/CFO Name: Designation: Tel no. / email: Annex-B Questionnaire and documents to be filed by the importer to SVB within 60 days Details of Importer 1. Name of the impo .....

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eports, if any, for a period of upto three preceding years. 1.5 Please provide Balance Sheets, if any, for a period of upto three preceding years. 1.6 Please provide, copy of Transfer Pricing report filed before Income Tax Dept, if any, or a Transfer Pricing Report prepared for Customs Purposes / Tax Purposes, if any 1.7 Please provide copy of Advance Pricing Agreement, if any 1.8 Whether the importer has imported any capital goods, plant, machinery, equipment, etc., from the seller of the impor .....

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ernationally quoted in any data bases, commodity exchanges, industry publications (e.g. PLATT, Public Ledger etc)? If yes, please provide details of price listings and copies of relevant printed material 3.1 If the imported goods are for stock & sale, please provide a pricelist for sale in India of the imported goods. 3.2 If the imported goods are for captive consumption by the importer please provide the pricelist of the goods manufactured and sold in India. Terms & Conditions of Sale 4 .....

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mounts are paid by the importer in the form of agency commission, overriding commission or any other remuneration, including that for services rendered by or on behalf of the seller, to other importers in India or to the seller of the imported goods, or their related or associated concerns or persons. If yes, please provide copies of the agreements and details of such expenses 4.4 Is the price paid or payable by the importer to be settled with the seller at a future date by means of debit note / .....

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y or indirectly, to exercise restraint over the importer, legally or operationally, in any manner? If so, details thereof. 5.3 Whether the converse position for serial no. 5.2. or 5.3 applies? If so, details thereof. 5.4 Whether any third party is in a position, directly or indirectly, to exercise restraint over both the importer and the seller of imported goods, legally or operationally, in any manner? If so, details thereof 5.5 Whether the importer and the seller of the imported goods, togethe .....

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Designation: Tel no. / email: ANNEXURE - C (Para 10 of Circular 5 / 2016 dated 9th February 2016 refers) (on the letterhead of the importer) To, Commissioner of Customs Customs House____________ I (Name of the person) , (Designation) , of M/s (Name of Company) do hereby declare & confirm that, - This declaration is in relation to the Bill of Entry No._________ dated__________ (a) there is a change in the circumstances surrounding the sale of the goods between us and our related seller (s) ( .....

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provide supporting documents in respect of (a) to (e), as applicable) The above statements are true and correct to the best of my knowledge. Company Seal (Signature of Authorised Representative/Director (Finance)/CFO Name: Designation: Tel no. / email: Annexure D Continuity Bond (Under Section 18 of the Customs Act, 1962) (To be executed by the Importer of goods subject to Inquiries by Special Valuation Branch under Customs Valuation (Determination of Value of Imported Goods) Rules, 2007) (Circ .....

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"President" (which expression shall include his successors and assigns) in the sum of Rs___________ Rupees__________________(please fill amount in words) to be paid to the President for which payment well and truly to be made, we bind ourselves, our successors, heirs, executors, administrators and legal representatives firmly by these presents. Sealed with our seal(s) this___ day of______20 WHEREAS the Assistant Commissioner of Customs/Deputy Commissioner of Customs at the ____________ .....

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THE CONDITION of the above written bond is such that - (1) If the importer shall within ninety days from the date of importation of this consignment or within such extended period as the Proper Officer may allow, produce such documents and furnish such information as may be called for by the Proper Officer/Special valuation branch, and (2) If the importer pays to the President, the difference between the duty finally assessed and the duty provisionally assessed in respect of the goods imported f .....

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Section 142 of the Customs Act, 1962 without prejudice to any other mode of recovery. 3. This bond shall remain in force from the date hereof and the obligation and liability of the importer shall be a continuing one in respect of all goods imported from time to time by the importer between the period of ______________ (present date) and the payment by the importer of the difference between the duty finally assessed and the duty provisionally assessed in respect of the goods imported from time .....

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oods subject to Inquiries by Special Valuation Branch under Customs Valuation (Determination of Value of Imported Goods) Rules, 2007) (Circular No5 / 2016 dated 9th February 2016 issued from CBEC F.No: 465/12/2010 - Cus V) Bill of Entry Number Date Provisional Assessable Value Balance of bond value Remarks Signature / date / name / designation of officer (1) (2) (3) (4) (5) (6) Annexure E Continuity Bond (With Bank Guarantee or Security Deposit) (under section 18 of the Customs Act, 1962) (To be .....

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ereinafter called the "Importer" (which expression shall include its successors/heirs, executors, administrators and legal representatives) are held and firmly bound unto the President of India hereinafter called the "President" (which expression shall include his successors and assigns) in the sum of Rs___________ Rupees__________________(please fill amount in words) to be paid to the President for which payment well and truly to be made, we bind ourselves, our successors, h .....

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completion of further enquiries and the Proper Officer has agreed to allow provisional clearance of the goods mentioned in the schedule hereto annexed upon the importer agreeing to furnish such bond as is herein contained; and WHEREAS the importer has deposited with the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, at - (location), * a bank guarantee; OR * a security deposit mentioned in the schedule hereunder for the due observance of and performance of the t .....

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ficer/Special valuation branch, and (2) If the importer pays to the President, the difference between the duty finally assessed and the duty provisionally assessed in respect of the goods imported from time to time. Then the above written bond shall be void and of no effect; otherwise the same shall remain in full force and virtue. AND IT IS HEREBY AGREED AND DECLARED by the importer as follows:- 1. This bond and security deposit/bank guarantee are given under the orders of the Central Governmen .....

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t of all goods imported from time to time by the importer between the period of ______________ (present date) and the payment by the importer of the difference between the duty finally assessed and the duty provisionally assessed in respect of the goods imported from time to time. IN WITNESS WHEREOF the importer has herein set and subscribed its hands and seals the day, month and year first above written. SIGNED AND DELIVERED by and on behalf of the importer at___________ (place) in the presence .....

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