TMI Blog2021 (5) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... er - HELD THAT:- Legally speaking nothing stops the officer from examining each import made by an importer from a related person to see if the relationship affected the price. As it will be rather cumbersome to do so, the investigation done once and an SVB order issued is normally applied for imports for a period of three years assuming that in all these years, the price is not affected by the relationship. Both the SVB orders issued in this case clearly indicate that they are subject to occasional review and also a final review after three years - there are no no force in the argument of the appellant that since the first SVB order had found that their relationship with the foreign supplier had not affected the prices at that time, the department cannot examine if such is the case in all subsequent imports. True Up payments - HELD THAT:- True Up is an arrangement between the appellant and the parent company. No law requires such a payment nor can it influence the transaction prices. Let us say, the appellant has suffered a loss of $ 10,000. The shareholders suffer this loss in proportion to the shares held by them. Since the parent company owns 99.99% of the shares of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order that the Commissioner (Appeals) has come to prima facie conclusion based on some data that the additional features and the difference in quantities do not account for the price difference. It is not also indicated how the original authority is expected to achieve this quantification. We, therefore, find no substance in such a direction in the impugned order for re-examination. Another finding in the impugned order is that the adjudicating authority has not verified the balance sheets to conclude that no amount is paid or payable directly or indirectly to or on behalf of the supplier of the imported goods for engineering, development, art work, design work and plans and sketches undertaken elsewhere than in India - there are nothing in the order to show that some payments were noticed by the Commissioner (Appeals) towards engineering, development, art work, etc. If the Commissioner (Appeals) could not, after considering the department s appeal for one year after concluding the hearing, find that some payments were made towards these, it is not justifiable to brush aside the order of the original authority on some suspicion without any basis. The last of the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are related persons, how the valuation should be done. It is undisputed that the appellant (importer) and the parent company who exports the goods to them are related persons as per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 Rules . 3.If the buyer and seller are related persons, it needs to be seen if the invoice value is affected by their relationship. If it is not, the invoice value should be accepted in terms of Rule 3(3)(a). This determination of whether the relationship affected the invoice value, and if so, to what extent, is an exercise which requires detailed investigation after calling for information from the importer. The assessing officer who has to deal with the current imports everyday does not have the required time and resources. Therefore, the mechanism set up to deal with such cases, is to refer the matter to a Special Valuation Branch - SVB for investigation and pending investigation, the Bills of Entry are assessed provisionally. As per the practice prevalent during the relevant period, the SVB would conduct a detailed investigation and the Assistant Commissioner or Deputy Commissioner in-charge of SVB would p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this order, Revenue filed an appeal before the Commissioner (Appeals), who passed the impugned order setting aside the order in original and allowing the appeal filed by the department. It needs to be pointed out that the impugned order neither remanded the matter to the original authority with directions to pass a de novo order nor has it modified the order in original indicating how the valuation should be done. Consequently, there is a stalemate and no further order appears to have been passed by the original authority. However, the impugned order found that the order-in-original was not legally correct for the following reasons: a)The OIO was not a speaking order inasmuch as it accepts that the transaction was on principal to principal basis but on the other hand, notes that the foreign supplier is covering the losses incurred by the importer by paying TRUE UP amounts. These are accumulated losses which must be examined with reference to all the expenditures and outstanding incomes which was not done in the impugned order. b)There is a contradiction in the order as in para 4 it has been mentioned that no expenses are incurred by the importer on behalf of or by under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs Handicrafts and Handlooms export corporation of India Ltd. [2014- 49 taxmann.com 488 (Delhi) e)There is no contradiction in the OIO. In para 4, it was recorded that no expenses are incurred by them on behalf of or by understanding or agreement with or under instructions from the suppliers of the goods e.g, advertising, propaganda expenses or any other expense for the sale of the imported goods. In para 11, it is recorded that the importer is operating as a distributor in India and is incurring expenses on activities like marketing, advertising, after sale services, etc. and is also required to maintain a minimum stock. In the light of the submissions made and judgments cited by the importer, I hold that the importer operating at higher commercial level, i.e., distributor and purchasing in bulk quantity . The appellant argued that as a bulk buyer and distributor, they need to take responsibility for their own stocks and they also need to promote sales for their own business. It does not mean that they are incurring these expenses on behalf of the foreign supplier. Neither are any extra payments made by them to their foreign supplier. f)In tax proceedings, there needs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dication. It allows the departmental appeal and sets aside the order in original. In cases where there is a demand for additional duty, or imposition of penalty, if the order of the lower authority is set aside, it ceases to exist or at least have any effect. Thus, there will not be any confirmed duty, penalty, etc. This is not such a case. The Order in original says that the relationship between the importer and their foreign supplier has not affected the transaction price and therefore, the same needs to be accepted (and assessments finalized). If it is set aside, the impugned order should have either held that the relationship affected the price and should also have than decided how the valuation should be done or it should have remanded the matter for a re-decision. However, the impugned order did neither and is therefore inconclusive. 11.The impugned order needs to be set aside on this ground alone. Nevertheless, since arguments have been made by both sides, we proceed to decide on the other issues so raised. Delay in passing the impugned order and allegations of pre- meditated order 12.The appellant argues that the impugned order is vitiated because it was passed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the duty leviable will be based not on the correct legal position but on the past practices including erroneous ones. If the appellant s argument is accepted, for instance, if there are three Custom Houses and identical goods were correctly classified, valued and charged to duty at Custom House A, excess duty is erroneously charged in Custom House B and short duty is charged erroneously in Custom House C and appeals and demands were not raised within time to correct the mistakes, the errors in Custom House B and Custom House C would prevail over the law. Further, in the same custom house, for the same goods, if one importer is charged erroneously less and another is charged properly, there will be two different laws for them. Taxes and duties can never be assessed so. The principle of Res Judicata applies only to the extent of the assessment of the particular Bill of Entry at the particular level attaining finality. Thus, we find no force in the argument of the appellant that once a decision has been taken in the first SVB order, it binds the department in the subsequent SVB order. 17.Legally speaking nothing stops the officer from examining each import made by an importer fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the importer is being invoiced for and is paying ₹ 100 to the foreign supplier and the importer is separately transferring ₹ 10 to the foreign supplier, it needs to be seen if this Rs. 10 is meant to be consideration for the sale of the goods. If so, the value is to be taken as ₹ 110 and not ₹ 100. In this case, the True Up payments are flowing not from the appellant to the foreign supplier but the other way round. Therefore, if these are reckoned to arrive at the transaction value, the invoice value will have to lowered which does not advance the case of the Revenue at all. 20.The argument of the learned Authorized Representative is that it needs to be seen how much loss was suffered by the appellant and how much was paid as a True up payment and if the difference affected the invoice price. 21.We find no force in this argument. True Up is an arrangement between the appellant and the parent company. No law requires such a payment nor can it influence the transaction prices. Let us say, the appellant has suffered a loss of $ 10,000. The shareholders suffer this loss in proportion to the shares held by them. Since the parent company owns 99.99% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported goods, to the extent that such value has not been included in the price actually paid or payable, namely:- (i)materials, components, parts and similar items incorporated in the imported goods; (ii)tools, dies, moulds and similar items used in the production of the Imported goods; (iii)materials consumed in the production of the imported goods; (iv)engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods; (c)royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; (d)The value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly, to the seller; (e)all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices of cars sold to the importer (i.e., the appellant herein) and the prices at which similar cars but with extra features were sold to unrelated buyers, viz., embassies in India. The prices at which the cars were sold the embassies were approximately 33% higher. An in-depth analysis of the amount charged for the extra features needed to have been done. We find that it is not in dispute that the cars which were sold by the foreign supplier to independent buyers (embassies) were different and had additional security features such as bullet proofing customized as per their requirements. It is also not in dispute that those cars were sold in retail while the appellant bought the cars in bulk, being a distributor. It is common knowledge that the retail prices to individual buyers are higher than the bulk prices to distributors. The Commissioner (Appeals), in the impugned order, observed that the original authority should have determined whether the additional features were worth so much as to account for the higher prices. It is not clear as to how it is expected of the adjudicating authority to achieve this considering that there are no cars with these additional features sold to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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