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

..... 6 AM (I) Dated: 25.02.2016 FACILITY NOTICE No. 35/2016 Sub: - reg. Attention of all the Importers, Customs Brokers and the Members of the Trade is invited to the Board s Circular No.5/2016 dated 9.2.2016 on the above subject. 2. The Special Valuation Branch (hereinafter referred to as SVB ) was created as an institution specializing in investigation of transactions involving special relationships between buyer - seller or those involving other special circumstances surrounding the sale of imported goods, both of which 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. 3. However, trade and industry has been repeatedly representing regarding delays in finalisation of SVB investigations, continued uncertainty due to provisional assessments, increase in transaction costs due to extra duty deposits and burdensome procedure of renewal of SVB orders. Board has also taken cognizance of the WCO s Guide to Customs Valua .....

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..... attached as Annexure F. 4.2 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 SVB. In the event of his failing to do so, the EDD can be increased to 5% till such time the importer complies. Upon the importer complying with the requisition for documents and information, Circular 11/2001 - Cus dated 23.2.2001 provides that EDD shall be discontinued, while imports will continue to be assessed provisionally till the completion of investigations. In other words, the imports were continued to be assessed provisionally on the basis of a PD Bond but without any EDD. It has also been 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 b .....

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..... y the importer (attached as Annexure A to the circular), which would enable the jurisdictional Commissioner to take a decision on whether a case needs to be referred to SVB for investigations. 4.5 The Board has also decided that in order to ensure that only cases with significant revenue implications 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 considered for SVB Investigations 5.0 While filing a bill of entry, every importer makes a declaration about whether the seller of imported goods is a related party or not, as defined under Rule 2(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 (CVR, 2007). In other words, where any importer makes a declaration that the transaction is between related persons , as def .....

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..... r to SVB or not, there would be no need for such advance filing of the Bill of Entry for each subsequent import. 6.1 Upon filing of the Bill of Entry, and receipt of information in Annexure A, the proper officer shall proceed to determine whether, prima facie, there is a need for investigation by the SVB. He shall complete such examination within 3 days of the filing of Bill of Entry and the matter submitted before the Commissioner. While examining the information submitted by the importer, the proper officer shall carefully examine the circumstances surrounding the sale and evaluate the case on the following parameters:-. i. Has the importer declared the price of 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 transaction is at arms length? vi. Are there any .....

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..... hat assessment be finalized on the basis of enquiries 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: 7. 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. 7.1 In order to facilitate expeditious inquiries by the SVB, the proper officer shall alongside of provisionally assessing the bill of entry, requisition further information from the importer as per Annexure B to this circular. The importer should be advised to furnish the documents and a duly indexed reply to the questionnaire to the jurisdictional SVB (as per para 3.1) within 60 days. 7.2 Upon completion of the procedure for provisional assessment and issue of the questionnaire (Annexure B), all related records shall be transferred to the jurisdictional SVB, and in no case later than 3 working days of the release of the goods. 7.3 The documents received from the importer with respect to the checklist shall be dul .....

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..... or licence fee or other payments actually made or to be made as a condition of sale of the imported goods. Upon approval by the Principal Commissioner / Commissioner, an Investigation Report (IR, for short) shall be prepared incorporating all relevant facts, submissions made by the importer, investigative findings, grounds for acceptance or rejection of transaction value, and the extent of influence on declared transaction value, if any. The IR 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 10. 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 proceed to finalize the same. There would be no need to issue a speaking order for finalising the provisional assessments in such cases. 10.1 However, when investigative findings are that the declared value has been influenced by the circumstances s .....

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