Customs valuation under Rule 7 cannot apply to related-party sales; recovery stayed on a strong prima facie case.

Rule 7 of the Customs Valuation Rules was found inapplicable where the department itself treated the buyers as related persons, because that rule governs sales to unrelated persons. The Tribunal also accepted that the FOB value of the exported goods and the DTA sale price appeared broadly comparable, and that the Board's circular supported acceptance of invoice value in such circumstances. As the Revenue did not rebut the comparative pricing and FOB-based submissions, the applicants established a strong prima facie case. Recovery of the entire duty and penalties was stayed during pendency of the appeals.

---

---

Issues: Whether the applicants had made out a prima facie case for stay of recovery of duty and penalties by showing that the valuation adopted by the department under Rule 7 was not applicable where the goods were treated as sold to related persons, and whether recovery should be stayed during pendency of the appeals.

Analysis: The Tribunal noted that Rule 7 of the Customs Valuation (Determination of Price of Imported Goods) Rules applies to sales to persons who are not related to the seller, whereas the department itself proceeded on the basis of relationship between the parties. It also noticed that the applicants had a prima facie case on the footing that the FOB value of exported goods and the DTA sale price were broadly comparable and that the Board's circular supported acceptance of invoice value in such circumstances. The Tribunal further observed that the Revenue had not rebutted the submissions on FOB value and comparative pricing, and therefore the applicants had shown a strong prima facie case.

Conclusion: Recovery of the entire duty and penalties was stayed during the pendency of the appeals.

---