2026 (1) TMI 1533 - AT - Customs

Transaction value vs contemporaneous price in related-party imports: third-party prices insufficient to overturn declared assessable value, appeal allowed

Transaction value declared for related-party imports was examined against contemporaneous third-party prices; the article concludes that rejection of ... Transaction value - contemporaneous price - related persons - payment under protest - imports from a related foreign principal - contemporaneous prices of third-party imports - Whether the department was correct rejecting the transaction value and in re-determining the assessable value by relying on certain contemporaneous prices or otherwise. - HELD THAT:- We find that the Original Assessing Authority has taken into consideration the order of the SVB dt.13.04.2011, as also, the order dt.30.01.2015. The authority felt that the SVB order was valid up to 20.01.2013 only, which is not factually correct as it was valid for three years. Insofar as the observation that it was due for review on 20.01.2013 is factually wrong as the order dt.13.04.2011 was valid for three years and there was no such observation made in the SVB order as was made later in the order dt.30.01.2015. Therefore, 10 BoEs were clearly covered under the earlier order as imports have been made prior to 12.04.2014. It was also considered that the declared value in respect of 21 consignments was in huge variation with the contemporaneous price and therefore, cannot be said to represent true transaction value in terms of Rule 3(1) of the Customs Valuation (Determination of the Price of Import Goods) Rules, 2007 (hereinafter referred to as the Rules) read with section 14 of the Customs Act, 1962 (hereinafter referred to as the Act) and therefore, rejected the said transaction value. After rejecting the transaction value, he proceeded sequentially through Rule 4 to 9 of the Rules to determine the value of goods and after rejecting Rule 4 & 5 as well as Rule 7 & 8 and adopted Rule 9 for determining the assessable value. Since the SVB has already taken into consideration the declared assessable value being correct i.e., the transaction value has been rightly adopted for discharge of customs duty, the Assessing Officer’s reliance on certain observations in the SVB order dt.30.01.2015 is not correct for rejecting the transaction value as it is clearly held that the value declared has not been influenced by the relationship between the appellant and the principal. The SVB has taken into account various factors in the case of related transaction including variations in price and non-inclusion of certain elements, etc., and thereafter came to the conclusion whether the transaction value is acceptable or not. Once having decided that transaction value is correct, its rejection by the Appraising Officer, per se, is not sustainable despite having made certain observation in this regard by the SVB in the order dt.30.01.2015. Moreover, even for the sake of argument it is accepted that the Appraising Officer was free to re-determine the assessable value by rejecting the transaction value, having regard to the fact that certain so called ‘contemporaneous price’ was in existence and by applying the said contemporaneous price, this adoption itself is also not correct and tenable on two grounds. Firstly, while the goods are identical/similar, the appellants and the third party are not in the same class of buyers. Secondly, there is demonstrable difference between the quantity of import made by the appellants as well as the third party. Further, the difference in the value declared is not substantial considering that the importer/appellant is required to undertake resale of the said consignment, which involves various overheads and costs and therefore, it falls within the reasonable margin and permissible discount. This aspect has been examined by the SVB itself and they have made an observation that the relationship has not influenced the import price. Therefore, in the factual matrix, the Appraising Officer could not have adopted the value of third party as contemporaneous price for the purpose of loading/redetermining the assessable value of the appellant. We also note that the appellants had contested the loading and adoption of contemporaneous price and paid the duty under protest. Thus, we do not find the Order of the Commissioner (Appeals) sustainable and is accordingly, set aside. Appeal is allowed with consequential relief, if any, as per law. Issues: Whether the transaction value declared by the importer, in respect of imports from a related foreign principal, could be rejected by the Assessing Officer and the assessable value re-determined by adopting contemporaneous prices of third-party imports.Analysis: The question arises in the context of the Customs Valuation Rules, 2007 read with Section 14 of the Customs Act, 1962, where Rule 3(1) and its proviso require that in sales between related persons the transaction value shall be accepted when the importer demonstrates close approximation to contemporaneous values taking due account of differences in commercial level and quantity and adjustments under Rule 10. The Special Valuation Branch (SVB) had earlier examined the relationship and concluded that the relationship did not influence the invoice price and accepted the transaction value for the relevant period. The Assessing Officer relied on a later SVB observation and on a single contemporaneous BoE of a third party (an actual user importing a much smaller quantity) to reject the transaction value and apply loading under Rule 9. Under Rule 4 and the proviso to Rule 3, use of contemporaneous/imports for comparison requires comparability of commercial level and quantity and any adjustments must be supported by demonstrated evidence establishing reasonableness and accuracy. The contemporaneous price relied upon was from a different class of buyer (actual user versus reseller/distributor) and related to significantly different quantities; the record did not contain demonstrated adjustments to account for these differences. The SVB had analysed discounts and distribution overheads and concluded the declared value was not influenced by relationship, and several consignments fell within the period covered by the earlier SVB acceptance.Conclusion: The Assessing Officer's rejection of the transaction value and adoption of the third party contemporaneous price for loading is not sustainable; the transaction value must be accepted for the consignments covered by the SVB findings. The appeal is allowed and the impugned order is set aside in favour of the importer.Ratio Decidendi: Where the SVB has accepted that a transaction value between related persons is not influenced by the relationship, an Assessing Officer may not reject that transaction value based on a single contemporaneous import unless the comparator belongs to the same class of buyer and differences in commercial level and quantity are adjusted on the basis of demonstrated evidence as required by the Customs Valuation Rules, 2007.