Whether enhancement in transaction value sustainable merely because the parties are related?

PJ/Case law/2013-14/1892

Case:-COMMISSIONER OF CUSTOMS (I), MUMBAI Vs M/s SYSMEX TRANSASIA BIO MEDICALS PVT LTD

Citation:-2013-TIOL-1087-CESTAT-MUM

Brief facts:-Briefly stated facts of the case are that the respondents imported a consignment of medical equipments form M/s. Sysmex Corporation, Japan in which the importer had shares. The department initiated proceedings against the respondents on the premise that the supplier and the respondents are related person and the relationship has influenced the transaction value. The lower adjudicating authority enhanced the declared value by 50%. Aggrieved by the same, the respondents filed appeal before the Commissioner (Appeals) who, after holding that the lower adjudicating authority could not show any basis for the enhancement of the value, set aside the adjudication order and allowed the appeal of the respondents. Hence, the Revenue is in appeal.

Appellant Contention:-The contention of appellant is that the supplier and the respondents are related person. Therefore, the value declared cannot be accepted and the respondents failed to produce the documents which were asked for by the lower adjudicating authority. Therefore, the enhancement of value by 50% is in order and the ld. Commissioner (Appeals) has not given any ground for not accepting the enhanced value. He has recorded in his order that the royalty is paid on 5% of total net sales of the goods manufactured in India and the lower authority has not given a finding how the same is related to the imported goods and he has not accepted the enhanced value and without any reason he has set aside the order. At the best, the ld. Commissioner (Appeals) should have remanded the case to the lower adjudicating authority by directing the respondents to produce the documents. He, therefore, prayed that the case should be remanded to the lower adjudicating authority.

Respondent contention:-The respondents submitted that mere relationship cannot be a ground for enhancement of the value. The department failed to produce any evidence for enhancement of the value and they have enhanced the value in an arbitrary manner. In support of his contention, he placed reliance on the decision of the Hon'ble Supreme Court in the case of CC vs Prodelin India (P) ltd. 2006 (202) E.L.T. 13 (S.C.) = (2006-TIOL-110-SC-CUS) and the Tribunal's decision in the case of Modi Senator (I) Pvt. Ltd. vs. CC (I&G), New Delhi- 2009(247) E.L.T. 313 (Tri-Del)which was affirmed by the Hon'ble Supreme Court in the case of CC vs. Modi Senator(I) P. Ltd.

Reasoning of judgement:- It was held by the Tribunal thatundisputedly, both the supplier and respondents are related person. However, the department could not produce any evidence that the transaction value has been influenced by the relationship between the supplier and the respondents. We also find that the department could not give any cogent reason for enhancing the value to 50% and the value has been enhanced in an arbitrary manner. The Hon'ble Supreme Court in the case of CC vs Prodeline India (P) Ltd. supra has held as under:

"It is settled law that the onus to prove that the declared price did not reflect the true transaction value is always on the Department. It is also a settled law that the Department is bound to accept the transaction value entered between the two parties. It is not the case of the Department that M/s PC USA were exporting the identical goods to other importers at higher price and that the Department has not made any effort to bring on record any evidence that identical or similar goods were imported by other importers at higher price. Therefore, in view of the clear position of law about the acceptance of the transaction value, the Customs authorities could not add the technical know-how fee in respect of the post importation activities to the assessable value of the imported goods."

This Tribunal in the case of Modi Senator (I) Pvt. Ltd. (supra) held that even before the amendment dated 11-5-2002 of Section 14 of Customs Act, 1962 and for the period thereafter till 10-10-2007 as per the definition of ‘related person' under Section 14 ibid there should be two way interest between the buyer and seller. The Tribunal also observed that mere holding of shares by one party with proportional nominee directors in the other company does not amount to a relationship to disqualify transactional value and in the absence of ownership of shares of 5% or more by the third party in both the companies i.e., the buyer and the seller, Rule 2(2)(iv) of the erstwhile Customs (Valuation) Rules, 1988 could not be applied. This decision was affirmed by Hon'ble Supreme Court.

In view of the above judgement, the appeal filed by the revenue is devoid of any merits and the same is rejected.

Decision:-Revenue appeal rejected.

Comment:-The analogy that is drawn from this case is that the enhancement in the value declared by the importer is not possible merely by contending that the importer and seller are related persons without evidencing that the relationship has influenced the price of the goods. Accordingly, as the revenue department could not discharge the burden of proving the fact that the relation between the parties has influenced the price, the appeal for enhancement in value was rejected.

Comments

PJ/Case law/2013-14/1892

Post a Comment

Query