2016 (1) TMI 425 - AT - Customs

ATA Carnet value not conclusive for duty assessment in related party transactions

The Tribunal held that the value declared in the ATA Carnet for imported cars cannot be automatically accepted for duty assessment, especially in related ... Valuation - request for provisional clearance of imported cars against an ATA Carnet for the purpose of exhibition at Auto Expo - The adjudicating authority ordered the assessable value to be taken as Carnet price + Insurance + Freight + Landing Charges. Before the Commissioner (Appeals) the appellant also pleaded that since their case is under investigation by SVB Mumbai in respect of other cars imported, the lower authority ought to have permitted provisional clearance after acceptance of 1% Revenue deposit. Held that:- In this particular case when import of identical cars have been made at lower values which are comparable to the value declared at the time of filing Bill of Entry for sale of the cars imported under Carnet, there is no justification to take the higher value mentioned in the Carnet. The appellant gave specific Bills of Entry Nos. 543752, 541155, 510318 under which contemporaneous imports were made assessed to duty on provisional basis as the valuation of the cars was being examined by Special Valuation Branch (SVB), Mumbai, the lower authorities ignored this aspect and did not allow the provisional assessment on similar basis in the case of the cars imported under Carnet. In any case it is shown by the Ld. Advocate that the SVB Order did not establish that the value between appellant and their Principal had influenced the price and had consequently accepted the declared prices. Therefore, we find no reason to differentiate between the cars imported under Carnet and the cars imported otherwise. In the present case even though buyer and seller are related it is established by the SVB order that the price has not influenced the relationship. Therefore, the transaction value cannot be rejected. Revenue rejected the transaction value on the basis that the value declared in the Carnet is much higher. We find that Rule 8(2)(iii) of the Valuation Rules which provides for residual method of determining the value clearly states that no value shall be determined on the basis of the price of the goods on the domestic market of the country of exportation. Carnet value does not constitute assessable value under Section 14 of the Customs Act. - Appeal allowed - Decided in favor of appellants. Issues: Valuation of imported cars under ATA Carnet for assessment of duty, rejection of provisional clearance plea, application of Valuation Law in related party transactions.Valuation of imported cars under ATA Carnet for assessment of duty:The appeal challenged the Order-in-Appeal passed by the Commissioner (Appeals) regarding the valuation of cars imported under ATA Carnet for exhibition at Auto Expo. The appellant's parent company imported three cars from Germany under ATA Carnet, and after obtaining permission to sell them, the Bills of Entry declared a lower value than the Carnet. The adjudicating authority determined the assessable value as Carnet price + Insurance + Freight + Landing Charges. The appellant argued that the value declared in the Carnet represents the commercial value in the country of issue, Germany, and pointed out similar imports of the same models at lower prices. The Tribunal noted that the Carnet value does not constitute the assessable value under Section 14 of the Customs Act, especially when identical cars were imported at lower values. The Tribunal emphasized that the declared value in the Carnet should not be automatically accepted for duty assessment, especially when the transaction value between related parties is not influenced by the relationship.Rejection of provisional clearance plea:The appellant requested provisional clearance of the imported cars under investigation by the Special Valuation Branch (SVB) Mumbai, by paying a 1% Revenue deposit. However, both the adjudicating authority and the Commissioner rejected this plea. The Tribunal observed that the lower authorities failed to consider the provisional assessment granted for contemporaneous imports of identical cars under specific Bills of Entry, which were assessed on a provisional basis due to SVB examination. The Tribunal highlighted that the SVB order did not establish any influence of the relationship between the appellant and their Principal on the price, and hence, provisional clearance should have been allowed in this case as well.Application of Valuation Law in related party transactions:The Tribunal analyzed the application of Valuation Law in related party transactions concerning the imported cars. Despite the buyer and seller being related, the SVB order confirmed that the price was not influenced by the relationship. Therefore, the Tribunal concluded that the transaction value could not be rejected solely based on the higher value declared in the Carnet. The Tribunal referred to Rule 8(2)(iii) of the Valuation Rules, which prohibits determining the value based on the domestic market price of the country of exportation. As the Carnet value represented the commercial value in Germany, it was deemed inappropriate to consider it as the assessable value under Section 14 of the Customs Act. Consequently, the Tribunal set aside the impugned order, emphasizing the importance of considering the actual transaction value in related party transactions for duty assessment purposes.