Related person under customs valuation rules requires control or mutual interest; shareholding alone will not displace transaction value.

Under the Customs (Valuation) Rules, 1988, a buyer and an assessee are not "related persons" merely because the buyer holds a substantial shareholding in the assessee. In the absence of reciprocal shareholding, direct or indirect control, or other evidence of mutuality of interest, Rule 2(2) is not satisfied and the declared transaction value cannot be rejected. The department's attempt to invoke a different clause not covered by the show-cause notice also failed. On those facts, the transaction value was correctly accepted and the valuation challenge could not succeed.

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Issues: Whether the buyer and the assessee were "related persons" under Rule 2(2) of the Customs (Valuation) Rules, 1988 so as to reject the declared transaction value and assess the goods on the basis of the price charged to independent buyers.

Analysis: The assessee had no shareholding in the buyer-company, and the buyer held only 29% of the assessee's shares. On those facts, the buyer could not be said to directly or indirectly control the assessee within Rule 2(2)(v). The department's reliance on Rule 2(2)(iv) also failed, and the attempt to raise a new case based on clause (v) was not supported by the show-cause notice. In the absence of legally established "relation" and mutuality of interest, the declared transaction value could not be displaced merely because the buyer was a substantial shareholder.

Conclusion: The buyer and the assessee were not related persons under Rule 2(2) of the Customs (Valuation) Rules, 1988, and the transaction value was correctly accepted.

Final Conclusion: The departmental challenge to the valuation and demand failed, and the appellate order in favour of the assessee was sustained.

Ratio Decidendi: Substantial shareholding by one company in another, without reciprocal shareholding or evidence of direct or indirect control, does not by itself establish "related person" status or justify rejection of the declared transaction value.

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