Transaction value of imports from associate enterprise cannot be rejected without proving that price was influenced due to relation.

PJ/Case law/2014-15/2242

Case:- SEMPERTRANS NIRLON PVT. LTD. Versus COMMR. OF CUS. (IMPORT), MUMBAI

Citation:- 2014 (299) E.L.T. 363 (Tri. - Mumbai)

Brief facts:- The appeal is directed against Order-in-Appeal No. 430/MCIVAC/SVB/2012, dated 29-5-2012 passed by Commissioner of Customs (Appeals), Mumbai-I. The appellant, M/s. Sempertrans Nirlon Pvt. Ltd., Roha, was registered with Special Valuation Branch at Mumbai Customs House. They imported conveyor belts of various specifications along with accessories from M/s. Semperit France Belting Technology, France and Poland under six Bills of Entry during the period March, 2008 to June, 2009. The importer and the foreign suppliers are related parties inasmuch as the importer is a joint venture company of Semperit Aktiengesellschaft Holding a Public Limited Company incorporated and existing under the laws of Austria and the foreign supplier is an associated company of the company in Austria and they are part of the same group of companies. The import made by the appellant was examined by the Valuation Cell, Mumbai and it was noticed that the prices declared in respect of impugned imports were comparable with the price declared for such supplies made to buyers located in other countries, such as Pakistan, Chile and Argentina. It was noticed that the price declared in the impugned imports by the appellants are much higher than the price for similar goods supplied to buyers in other countries. Accordingly, the assessing authority came to the conclusion that the relationship between the suppliers and the Indian importer has not influenced transaction price; therefore, the transaction value can be accepted. The Revenue filed an appeal against the said order before the Commissioner (Appeals) on the ground that there is a technical assistance, trade mark and royalty agreement between the appellants and their principal in Austria as per which the appellant is required to pay royalty to their foreign principal and, therefore, the payment of royalty has influenced the supply price in the instant case. The said appeal was considered by the lower appellate authority, who held that the appellant had also imported capital goods from their parent company and are utilizing the technology/know-how by paying royalty for the same and therefore, the adjudicating authority has wrongly concluded that the relationship has not influenced the price. Accordingly, the lower appellate authority set aside the order of the assessing authority and allowed the department's appeal. Hence, the appellant is before Tribunal.

Appellant’s contention:- The appellant submits that the technical assistance, trade mark and royalty agreement entered into by the appellant with their foreign principal is for the manufacture of textile reinforced conveyer belts to be manufactured in India by the appellants and the royalty payments are made for the said technical know-how as a percentage of the domestic sales/export of the product. This has nothing to do with the import of conveyer belts by the appellant from their associate company in France, as these are two entirely different transactions. Further, the price at which the goods have been supplied to the appellant company compared favourably with similar goods supplied by the same supplier in France to other importers in other countries, such as, Pakistan, Argentina and Chile. Therefore, it cannot be said that their relationship has influenced the price. He also relies on the decision of the Hon'ble Apex Court in the case of CC, New Delhi v. Prodelin India (P) Ltd., reported in 2006 (202) E.L.T. 13 (S.C.) in support of his above contention.

Respondent’s contention:- The ld. Addl. Commissioner (AR) appearing for the revenue reiterates the findings of the lower appellate authority.

Reasoning of judgment:- Having carefully considered the submissions made by the both sides, it is concluded that the technical assistance, trade mark and royalty agreement entered into between the appellants and their foreign principal is for the manufacture of conveyor belts in India by the appellants and also for using the trade mark of the foreign principal at the time of marketing such manufactured goods. In consideration for the provision of know-how and grant of licence, the appellants are required to pay royalty @ 3% for net domestic sales and for export. In other words, the royalty payments are made for the transfer of technical know-how for the conveyor belts manufactured in India by the appellants. This is an independent transaction and has nothing to do vis-a-vis the import made in this case which is from an associate company in France. Further, the assessing authority has compared the price of imports with the supply price in respect of similar goods made by the same supplier to other importers in nearby countries such as Pakistan, Argentina, Chile and after finding that the price declared is on the higher side when compared to supply prices elsewhere, he has accepted the transaction value. Further as per the decision of the Hon'ble Apex Court in the Prodelin case (supra), merely because the importer and the foreign supplier are related persons, the transaction value cannot be rejected and the onus to prove that the declared price did not reflect true transaction value is always on the department and in the absence of any evidence that identical or similar goods imported by other importers are at higher price, the department is bound to accept the transaction value. The ratio of the above decision applies squarely to the facts of the case. There is no evidence led by the department to show that the transaction value declared by the appellant has been influenced by the relationship between the foreign supplier and the appellant importer. Further, evidences available on record show that the prices declared are comparable with prices of similar supplies made to importers in other countries. Thus, they do not find any reason to reject the transaction value declared by the appellants. Accordingly, the impugned order is set aside and the order of the lower assessing authority is restored.

Decision:- Appeal allowed.

Comment:- The essence of this case is that the onus to prove that the price was influenced when the goods were imported from an associated enterprise lies on the department. In the absence of any evidence that identical or similar goods imported by other importers are at higher price, the department is bound to accept the transaction value.

Prepared by: Kushal Shah

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PJ/Case law/2014-15/2242

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