TaxTMI 
TaxTMI 
Procedure for investigation of related party import cases and other cases by the Special Valuation Branches
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....39; (hereinafter referred to as "SVB") was created as an institution specializing in investigation of transactions involving special relationships between buyer - seller or those involving other special circumstances surrounding the sale of imported goods, both of which have a bearing on the assessable value. Detailed instructions were issued vide Circular Nos. 1/98 - Customs dated 1.1.98 and 11/2001-Customs dated 23.2.2001, prescribing the procedure to be observed by the Custom Houses for referring cases to Special Valuation Branches and time lines to be followed for finalising such cases. 2. However, trade and industry has been repeatedly representing regarding delays in finalisation of SVB investigations, continued uncertainty due to provisional assessments, increase in transaction costs due to extra duty deposits and burdensome procedure of renewal of SVB orders. Board has also taken cognizance of the WCO's Guide to Customs Valuation and Transfer Pricing (June 2015) and the fact that the circulars 1/98 and 11/2001 were based upon the Customs Valuation (Determination of Price of imported goods), Rules, 1988, which have since been superseded by the Customs Valuation (Deter....
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....eclared assessable value is being obtained from the importer for a period of 4 months during which time he is required to submit required documents and information to the SVB. In the event of his failing to do so, the EDD can be increased to 5% till such time the importer complies. Upon the importer complying with the requisition for documents and information, Circular 11/2001 - Cus dated 23.2.2001 provides that EDD shall be discontinued, while imports will continue to be assessed provisionally till the completion of investigations. In other words, the imports were continued to be assessed provisionally on the basis of a PD Bond but without any EDD. It has also been noted that many importers have represented on delays in dispensing of EDD, even though they have provided the required information and a period of 4 months has passed without the case having been decided. Therefore, the Board has decided that while reference to SVB requires the assessments to be provisional, for the sake of reducing transaction cost and bringing uniformity across Customs Houses, no security in the form of EDD shall be obtained from the importers. However, if the importer fails to provide documents and i....
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....hat in order to ensure that only cases with significant revenue implications are taken up for SVB investigations, the following cases shall not be taken up for inquiries by SVBs: (i) Import of samples and prototypes from related sellers (ii) Imports from related sellers where duty chargeable (including additional duty of Customs etc.) is unconditionally fully exempted or nil. (iii) Any transaction where the value of imported goods is less than Rs. 1 lac but cumulatively these transactions do not exceed Rs. 25 lacs in any financial year Cases, which may be considered for SVB Investigations 4.0 While filing a bill of entry, every importer makes a declaration about whether the seller of imported goods is a related party or not, as defined under Rule 2(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 (CVR, 2007). In other words, where any importer makes a declaration that the transaction is between 'related persons', as defined under Rule 2 (2) of CVR 2007, it would be necessary to examine whether or not the circumstances surrounding the sale of the imported goods indicate ....
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....re would be no need for such advance filing of the Bill of Entry for each subsequent import. 5.1 Upon filing of the Bill of Entry, and receipt of information in Annexure A, the proper officer shall proceed to determine whether, prima facie, there is a need for investigation by the SVB. He shall complete such examination within 3 days of the filing of Bill of Entry and the matter submitted before the Commissioner. While examining the information submitted by the importer, the proper officer shall carefully examine the "circumstances surrounding the sale" and evaluate the case on the following parameters:- i. Has the importer declared the price of the goods imported is a "transfer price"? ii. What is the basis on which the price has been settled between the buyer & seller? iii. Has the price been settled in a manner consistent with the way the seller settles prices for sales to buyer who are not related to the seller? iv. Does the nature of relationship between the buyer and seller appear to influence the price? v. Is the information provided by the importer in terms of ru....
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.... referred to the SVB for further investigations and the goods be provisionally assessed to duty in terms of section 18 of the Customs Act, or (b) the transaction does not merit investigations by SVB and that assessment be finalised on the basis of enquiries to be conducted by the proper officer in terms of Rules 4 to 9 of the CVR 2007 or (c) the transaction be assessed in terms of Rule 3 of CVR 2007 Procedure for reference to SVB: 6. In the event of the Commissioner directing investigations by SVB, the proper officer shall promptly carry out provisional assessment in terms of section 18 of the Customs Act, 1962 and ensure that no delays occur in the release of the goods. 6.1 In order to facilitate expeditious inquiries by the SVB, the proper officer shall alongside of provisionally assessing the bill of entry, requisition further information from the importer as per Annexure B to this circular. The importer should be advised to furnish the documents and a duly indexed reply to the questionnaire to the jurisdictional SVB (as per para 3.1) within 60 days. 6.2 Upon completion of the procedure for provisional assessment and issue of the questionnaire (Anne....
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.... period as is deemed fit. 8.3 Upon completing investigations, the SVB shall submit the findings before the Principal Commissioner/Commissioner, quantifying the extent of influence on the transaction value due to the relationship or payments towards royalty or licence fee or other payments actually made or to be made as a condition of sale of the imported goods. Upon approval by the Principal Commissioner / Commissioner, an Investigation Report (IR, for short) shall be prepared incorporating all relevant facts, submissions made by the importer, investigative findings, grounds for acceptance or rejection of transaction value, and the extent of influence on declared transaction value, if any. The IR shall include all relied upon documents and shall be communicated to the referring customs station/appraising group and such other stations where imports have been provisionally assessed. A copy of the IR shall also be sent to the DGoV. Finalisation of assessments 9. Upon receipt of the IR from the SVB, where investigative findings are that the declared value is found conforming to Rule 3 of the CVR, 2007, the customs stations where provisional assessments have been undertaken sha....
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....should be entered in the Central Registry Database (CRD) maintained by the Directorate General of Valuation. DGoV shall monitor the progress of the investigations and report to the Board cases involving any inordinate delays. 12. This circular is issued in supersession of Circular No. 1/98 - Cus dated 1.1.98 and 11/2001-Cus dated 23rd February 2001 and comes into immediate effect. 13. Difficulties, if any, faced in the implementation of this Circular may be brought to the notice of the Board. 14. Hindi version follows. (S.Kumar) Commissioner (Customs) BE No: Customs Station: Annex-A Questionnaire to be filled by the importer at the time of filing bill of entry Importer 1 Name & Address of the importer 1.1 IEC Code 1.2 Central Excise Registration number, if any 1.3 Service Tax Registration number, if any 1.4 PAN number 2. Whether the importer is a proprietorship/partnership/private limited company/public limited company/branch office of company incorporated outside India/wholly owned subsidiary etc.? 3 Whether the importer is manufacturer or man....
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.... Other Payments (Costs & Services under Rule 10 of CVR, 2007) 6. Whether the goods imported by the importer are sold under a trade mark, design, licencing/royalty agreement or patent owned or controlled by the seller of the goods or any other person? 6.1 Whether the product manufactured by the importer using the imported goods is sold under a trade mark, design, licencing/royalty agreement or patent owned or controlled by the seller of the goods or any other person? 6.2 Whether any amount or any part of the proceeds of any subsequent resale, disposal or use of the imported goods accrues, directly or indirectly, to the seller? 6.3 Whether there are any other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller? 6.4 Is any amount paid or payable, directly or indirectly, to or on behalf of the seller of the imported goods in connection with the production of the imported goods? (for example, materials, parts, components, tools, dies, moulds, engineering, development, art work, de....
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....nt, etc., from the seller of the imported goods or its related or associated persons? Please furnish copies of Bills of Entry, invoice, packing list, bill of lading & LC (or remittance details), as applicable. Details of goods imported 2. Whether the imported goods are component parts of CKD/SKD sets for local assembly into finished goods? If yes, furnish a complete list of the items imported in CKD/SKD condition. Pricing Pattern 3. Are the imported goods or identical or similar goods (meaning assigned in terms of CVR, 2007) internationally quoted in any data bases, commodity exchanges, industry publications (e.g. PLATT, Public Ledger etc)? If yes, please provide details of price listings and copies of relevant printed material 3.1 If the imported goods are for stock & sale, please provide a pricelist for sale in India of the imported goods. 3.2 If the imported goods are for captive consumption by the importer please provide the pricelist of the goods manufactured and sold in India. Terms & Conditions of Sale 4. Whether the imported items are exclusively supplied by the sellers to the importer in India? 4.1 Whether th....
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....ignature of Authorised Representative/Director (Finance)/CFO Name: Designation: Tel no. / email: ANNEXURE - C (Para 10 of Circular 5 / 2016 dated 9th February 2016 refers) (on the letterhead of the importer) To, Commissioner of Customs Customs House____________ I (Name of the person) , (Designation) , of M/s (Name of Company) do hereby declare & confirm that, - This declaration is in relation to the Bill of Entry No._________ dated__________ (a) there is a change in the circumstances surrounding the sale of the goods between us and our related seller (s) (b) there is a change to the terms & conditions contained in the agreement (s) between us and our related seller (s). (c) We have entered into a new agreement with our existing related seller / new related seller / or their associates (d) there is a change in the rate of royalty payment / licence fee / or other payment being made to the seller of the imported goods. (e) We have undertaken a post-import price adjustment with our seller (*Please strike out, which ever are not applicable; please provide supporting documents in respect of (a) to (....
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....y assessed and the duty provisionally assessed in respect of the goods imported from time to time. Then the above written bond shall be void and of no effect; otherwise the same shall remain in full force and virtue. AND IT IS HEREBY AGREED AND DECLARED by the importer as follows:- 1. This bond is given under the orders of the Central Government for the performance of an act which is in public interest. 2. The President through the [Deputy Commissioner / Assistant Commissioner of Customs] or other officer may recover the said sum of Rs ____________ in the manner laid down in Section 142 of the Customs Act, 1962 without prejudice to any other mode of recovery. 3. This bond shall remain in force from the date hereof and the obligation and liability of the importer shall be a continuing one in respect of all goods imported from time to time by the importer between the period of ______________ (present date) and the payment by the importer of the difference between the duty finally assessed and the duty provisionally assessed in respect of the goods imported from time to time. IN WITNESS WHEREOF the importer has herein set and subscribed its hands and seals the day, m....
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....ke provisional assessment of the goods imported from time to time by the importer pending submission of further documents and furnishing information and/or completion of further enquiries and the Proper Officer has agreed to allow provisional clearance of the goods mentioned in the schedule hereto annexed upon the importer agreeing to furnish such bond as is herein contained; and WHEREAS the importer has deposited with the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, at ----------- (location), * a bank guarantee; OR * a security deposit mentioned in the schedule hereunder for the due observance of and performance of the terms and undertakings on the part of the importer and for being applied in part or full towards the indemnity hereby given or otherwise according to law. * strike out whatever is not applicable NOW THE CONDITION of the above written bond is such that - (1) If the importer shall within ninety days from the date of importation of this consignment or within such extended period as the Proper Officer may allow, produce such documents and furnish such information as may be called for by the Proper Officer/Spec....