Transaction value between related persons requires importer proof that relationship did not influence price; declared value rejected

Transaction valuation between related persons requires examination of whether the relationship influenced price; the importer bears the burden to demonstrate the declared value closely approximates ordinary selling price using contemporaneous import comparisons, and must satisfy the authority on the basis of material on record. A declared invoice showing discounts that eliminate profit suggests relationship influence and may be rejected. The legal requirement that the importer prove value allocation is emphasised, distinguishing precedents placing burden on the department and affirming acceptance only where objective satisfaction of non-influence exists.

---

---

Issues: Whether the declared invoice price (after a 20% discount) from related suppliers should be accepted as the transaction value under the valuation rules, or whether the price must be adjusted (loaded) because the relationship influenced the price and the discount suggests lack of recovery of costs and profit.

Analysis: The matter concerns valuation under Section 14 of the Customs Act, 1962 and the Valuation Rules (Customs Valuation Rules, 1988). The relevant Rule requires that where buyer and seller are related the transaction value is to be accepted only if examination of the circumstances indicates the relationship did not influence price; further, the importer must demonstrate that the declared value closely approximates comparable values (e.g., transaction value of identical or similar goods). The First Appellate Authority found that the supplier applied a 65% markup comprising handling/administration but did not show a profit element and that after a 20% discount the supplier may not have recovered cost plus profit. The Authority noted absence of breakup of costs/profit and absence of evidence that the supplier granted similar discounts to unrelated buyers, creating an inference that the discount arose from the relationship. The Tribunal applied principles on burden of proof and accepted that where facts (profitability, discounts) are especially within the knowledge of the importer/supplier the onus to prove those facts lies on them; if the authority's satisfaction is objective and based on material on record it should not be disturbed. The Tribunal held that the appellate authority's conclusion was supported by material and not perverse, and distinguished authorities cited by the appellant that placed burden on the department because Rule 4(3) imposes on importer the obligation to demonstrate comparability.

Conclusion: The transaction value declared by the appellant (after the 20% discount) is not acceptably shown to be at arm's length; the impugned appellate order upholding the departmental appeal and directing loading of the declared price is upheld. The appellant's appeal is rejected.

---