TaxTMI 
TaxTMI 
TaxTMI 
2021 (5) TMI 867
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....t. 15. Appeal is disposed of accordingly." 2.The appellant is a subsidiary of M/s. Volvo, Sweden who own 99.99% of the appellant's shares. The parent company manufactures Completely Built Units (CBU) of motor vehicles which are imported and sold by the appellant. Customs duty is chargeable on most goods including motor vehicles on ad valorem basis. The value of the goods for the purpose of calculation of Customs duty is the transaction value as per Section 14 of the Customs Act provided the buyer and seller are not related persons. As per this section, Rules can be framed to determine when they are deemed to be related persons and if they are related persons, how the valuation should be done. It is undisputed that the appellant (importer) and the parent company who exports the goods to them are related persons as per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 Rules. 3.If the buyer and seller are related persons, it needs to be seen if the invoice value is affected by their relationship. If it is not, the invoice value should be accepted in terms of Rule 3(3)(a). This determination of whether the relationship affected the invoice va....
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.... their relationship." It further held that the transaction value may be accepted as per Rule 3(3)(a). This order states that it is valid for period of three years from the date of issue (para 21) and that the decision is subject to occasional review/ a final review after a period of three years. This order has not been appealed against by either the Revenue or the appellant. 5.After three years, a second Order in Original No. SVB/CUS/Review/YP/58/2014 dated 22.12.2014 was passed again holding that the relationship has not affected the invoice value of the goods imported and it may be accepted as per Rule3(3)(a). 6.Aggrieved by this order, Revenue filed an appeal before the Commissioner (Appeals), who passed the impugned order "setting aside the order in original and allowing the appeal filed by the department.' It needs to be pointed out that the impugned order neither remanded the matter to the original authority with directions to pass a de novo order nor has it modified the order in original indicating how the valuation should be done. Consequently, there is a stalemate and no further order appears to have been passed by the original authority. However, the impugned order foun....
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.... nor discussed in the order. c)The impugned order is pre-meditated and unilateral. d)The TRUE UP payments were payments received by the appellant from the foreign supplier who is also their principal not for sale or purchase of the imported cars but as subvention payments to recoup the losses and other expenses incurred by the appellant. Subvention payments by a parent company to its loss making subsidiary are in the nature of "capital receipts' and NOT "revenue receipts' They rely on the following income tax case laws: i.Seimens Public Communication Network (P) Ltd. vs CIT [2017] 77 taxmann.com 22 (SC) ii.CIT vs Handicrafts and Handlooms export corporation of India Ltd. [2014- 49 taxmann.com 488 (Delhi) e)There is no contradiction in the OIO. In para 4, it was recorded that "no expenses are incurred by them on behalf of or by understanding or agreement with or under instructions from the suppliers of the goods e.g, advertising, propaganda expenses or any other expense for the sale of the imported goods." In para 11, it is recorded that "the importer is operating as a distributor in India and is incurring expenses on activities like marketing, advertising, after sale serv....
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....d if the difference in price between the sale to the appellant and the sale of same models of cars but with additional features to unrelated parties. g)Therefore, the matter may be remanded to the original authority with directions to pass a speaking order. 9.We have considered the arguments on both sides and examined the records of the case. 10.We find that the impugned order is inconclusive inasmuch as it found several mistakes with the order in original but has neither decided those issues so as to modify the order in original nor has it remanded the matter to the original authority for re adjudication. It allows the departmental appeal and sets aside the order in original. In cases where there is a demand for additional duty, or imposition of penalty, if the order of the lower authority is set aside, it ceases to exist or at least have any effect. Thus, there will not be any confirmed duty, penalty, etc. This is not such a case. The Order in original says that the relationship between the importer and their foreign supplier has not affected the transaction price and therefore, the same needs to be accepted (and assessments finalized). If it is set aside, the impugned order ....
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.... respect to any future imports. If, for instance, excess duty was paid due to wrong classification of goods, erroneous computation of value or by not claiming an eligible exemption notification, etc. it does not mean that the assessee has to continue to pay excess duty in all his future imports. Conversely, if duty is short paid and the department failed to issue a notice within time, it does not mean that the department is estopped from making correct assessments of future Bills of Entry and collecting the correct amount of duty. Otherwise, it would lead to anomalous situation where the duty leviable will be based not on the correct legal position but on the past practices including erroneous ones. If the appellant's argument is accepted, for instance, if there are three Custom Houses and identical goods were correctly classified, valued and charged to duty at Custom House A, excess duty is erroneously charged in Custom House B and short duty is charged erroneously in Custom House C and appeals and demands were not raised within time to correct the mistakes, the errors in Custom House B and Custom House C would prevail over the law. Further, in the same custom house, for the same ....
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....nder capital receipts or revenue receipts. It should have been seen by the original authority as to how much loss was incurred by the appellant and how much was paid by the foreign supplier as True up payments and if these payments affected the invoice price of the imported goods. 19.We note that the appellant importer pays and the foreign supplier send the goods to them. What is relevant is the invoice price and if there is any additional consideration flowing from the importer to the foreign supplier so that the correct transaction value can be determined. For instance, if the importer is being invoiced for and is paying Rs. 100 to the foreign supplier and the importer is separately transferring Rs. 10 to the foreign supplier, it needs to be seen if this Rs. 10 is meant to be consideration for the sale of the goods. If so, the value is to be taken as Rs. 110 and not Rs. 100. In this case, the True Up payments are flowing not from the appellant to the foreign supplier but the other way round. Therefore, if these are reckoned to arrive at the transaction value, the invoice value will have to lowered which does not advance the case of the Revenue at all. 20.The argument of the le....
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....in the price actually paid or payable for the imported goods, namely:- (i)commissions and brokerage, except buying commissions; (ii)the cost of containers which are treated as being one for customs purposes with the goods in question; (iii)the cost of packing whether for labour or materials; (b)The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has not been included in the price actually paid or payable, namely:- (i)materials, components, parts and similar items incorporated in the imported goods; (ii)tools, dies, moulds and similar items used in the production of the Imported goods; (iii)materials consumed in the production of the imported goods; (iv)engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods; (c)royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of th....
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....alf of the foreign supplier although the foreign supplier would also indirectly benefit if the appellant's business improves. The foreign supplier is also independently selling the goods (cars) to embassies, etc. and there is nothing on record to show that the appellant has incurred any expenses to promote such sales. Comparison with prices of sales to independent buyers 24.The next allegation of the department accepted in the impugned order is that adjudicating authority has compared the prices of cars sold to the importer (i.e., the appellant herein) and the prices at which similar cars but with extra features were sold to unrelated buyers, viz., embassies in India. The prices at which the cars were sold the embassies were approximately 33% higher. An in-depth analysis of the amount charged for the extra features needed to have been done. We find that it is not in dispute that the cars which were sold by the foreign supplier to independent buyers (embassies) were different and had additional security features such as bullet proofing customized as per their requirements. It is also not in dispute that those cars were sold in retail while the appellant bought the cars in bulk, be....