TaxTMI 
TaxTMI 
2026 (7) TMI 175
X X X X Extracts X X X X
X X X X Extracts X X X X
....port and resale of Information Technology products like computers, laptops, printers, servers etc. in India during the relevant period 01.11.2004 to 19.03.2009. In carrying out the said business, the appellant also imports spare / replacement parts of the said products. The appellant was appointed as a non-exclusive distributor of HP products and spare parts in India in terms of Distributor Agreement dated 01.11.2005. The parts imported during the relevant period are classified based on its intended purpose as (i) PL91 (FT 9A) parts imported for sale in Indian Market - these parts were imported for sale in the open market 'as such' and (ii) Parts imported for after sales support services-these parts were not intended for commercial sale by the appellant but were imported solely for providing warranty and annual maintenance contract (AMC) support services. Out of the total imports, around 95% of the spare parts were used for providing warranty/ maintenance services (support services) whereas only 5% of the spare parts were sold in Indian market 'as such'. The parts imported were also categorised as 'Red parts' and 'Blue parts'. The Red parts are primarily comprise of computer pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re parts are which in line with transaction value defined under Rule 3(3)(a) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007) and the value declared was not influenced with the relationship. He has submitted that their HP-Return on Value Added Cost" (ROVAC, for short) pricing policy ensures that each HP entity recovers all the post importation costs (Value Added Costs and Non-VAC) along with a reasonable profit margin (ROVAC). He has submitted that for the parts intended for resale in India, the import value was determined using the methodology of CLCP less IC discount so as to enable the appellant to recover all post-importation expenses and earn a reasonable profit. The CLCP less method is consistent with the deductive value method enshrined under Rule 7 of the CVR. For the parts imported for internal use (for e.g. warranty or support services), the import value is determined through the Reference Price (RP less IC discount Plus DCCA) method. 5. It is submitted that the reference price is basis for worldwide internal transfer pricing used to value products/ services that are sold from one entity to another entity and includes administrati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on to the valuation of products, he has submitted that the issue has already been addressed by the CEGAT in their own case reported as CC, Chennai Vs. Hewlett Packard Ltd. [1999(108) ELT 221 (Tri.)]. 7. Further he has submitted that pursuant to the merger with Compaq, they intimated Special Valuation Branch (SVB), Chennai that the merged entity would follow HP's pre-merger Inter-Company (IC) pricing policy (ROVAC) for the imported products, except for certain items (some of the spare parts) where Compaq's pricing policy would apply, which was accepted by the SVB authorities and orders were passed. Further, he has submitted that the impugned order has failed to demonstrate as how the declared transaction value is liable to be rejected in terms of Rule 7 of CVR. Therefore, there is no justification to reject the transaction value declared by the appellant. 8. Assailing the methodology adopted by the learned Commissioner in the impugned order adopting Rule 9 for determination of the assessable value, he has submitted that Interpretative Notes to Rule 9 allow a degree of flexibility in the determination of value, which is in line with the framework prescribed under Rules 3 to 8 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot been proposed in the notice. In support, he referred to the following judgments:- i. Saci Allied Products Ltd. Vs. CCE, Meerut [2005(183) ELT 255 (SC)] ii. Hindustan Polymers Co. Ltd. Vs. CCE, Guntur [1999(106) ELT 12 (SC)] iii. Reckitt & Colman of India Ltd. Vs. CCE [1996(88) ELT 641 (SC)] iv. CCE Vs. Gas Authority of India Ltd. [2008(232) ELT 7 (SC)] 10. Advancing an alternate argument, learned advocate has submitted that deductions towards trade discount should be allowed @ 50% from the list price. He has submitted that the appellant was selling only 5% of the imported parts as such in the market, whereas remaining 95% of spare parts were used by the appellant for providing support services. For the parts sold (PL91), the list price/CLCP was available, which is the starting point for computation of the import price. From this price, trade discounts offered to the buyers (channel partners / end-customers) are deducted to arrive at the net resale price of the products. The learned Commissioner accepting the contention of the appellant has allowed a discount of only to the extent of 30% of the List Price even though he has observed that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that while determining the revised assessable value for parts, deductive methodology has been adopted for all the parts whether sold or not; that a fiction has been created that all the parts are sold and has proceeded to determine the value of the parts on the said basis. Therefore, it is mandatory to give deduction on account of post-importation expenses and reasonable profit that would be incurred, if the imported products are resold in India as such to arrive at the deduced assessable value from the fictional resale price or list price in India. The GPSC (Global Parts Supply Chain) expenses represent only the expenses incurred by the appellant in connection with physically importing, transporting, storing, warehousing, distribution etc. of the parts. Such expenses merely include the costs incurred in performing the supply chain function for the parts and do not include expenses like selling, marketing, administration and other general expenses which also qualify as post-importation expenses. Even though there is no sale is involved with respect to parts imported and internally consumed in providing support services, once deductive methodology has been adopted in arriving at ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with Handbook of Procedures and for that, the appellant was required to obtain licence from the DGFT, the learned advocate has submitted that the learned Commissioner on the basis of new allegation of non-furnishing of a Chartered Engineer certificate; such an allegation has never been alleged in the show-cause notice proposing confiscation and penalty. Thus, the learned Commissioner has travelled beyond the scope of show-cause notice; hence, directing confiscation and imposition of penalty for non-production of Chartered Engineer certificate cannot be sustained. In support, he has relied upon the following judgments:- i. Dristy Communication Pvt. Ltd. Vs. CCE&ST [2018(10) TMI 1326] ii. Precision Rubber Industries (P) Ltd. Vs. CCE, Mumbai [2016(334) ELT 577 (SC)] iii. Principal Commissioner of C,CE&ST, Nagpur Vs. Fabrimax Engg. Pvt. Ltd. [2018(359) ELT 43 (Bom.)] Further, he has submitted that the learned Commissioner's finding based on the valuation methodology that whether part is new or refurbished does not alter the condition of the goods is unsustainable in law. 16. Further, on the issue of limitation, he has submitted that entire demand is bar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing policy followed by pre-merger Compaq for spare parts was duly disclosed to and approved by the SVB. Hence, the is no basis for the DRI in the SCN or for the Ld. Commissioner in the impugned order to allege suppression or misstatement on the part of the Appellant. 17. Further the appellant has submitted that specific provisions relating to levy of interest, penalties, confiscation and redemption fine, since not borrowed for CVD and SAD demand, submissions relating to Section 138B penalties on individuals as submitted in their argument /written submissions relating to demand on products be mutatis mutandis applied to the present appeals also. 18. Per contra, the learned Special Counsel for the Revenue, reiterating the findings of the adjudicating authority, has submitted that as a result of the investigation by the DRI, the facts revealed indicated that the appellant has grossly undervalued the imports parts sold as well as used by them for internal purposes. He has submitted that the following facts not been brought to the notice of the Customs including SVB are:- (i) the Distributor Agreement effective from 1-11-2002 & 1-11-2005 entered between HPISPL (merged ent....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bills of entry filed by HPISPL for the import of subject goods, in the columns meant for 'discount amount' and 'discount rate' the declaration is '0' i.e. zero' even though the price indicated on the Customs Invoice accompanying the consignment was actually derived from the 'list price' after applying the relevant funding discounts; (vii) the above information is available in the corresponding EIFFEL invoice for every blue part coming from C- 200 (HP-USA); given the existence of such an EIFFEL invoice for each of the consignments, the declaration as above does constitute gross misdeclaration; (viii) further, the existence of pricelists was suppressed before the Customs /SVB so that effective and corrective mechanism would have been effected to value the spares in accordance with the Customs valuation rules. (ix) the defence of Appellant is that there is no requirement to indicate the list price and the discount since the price paid or payable is not the list price but the net price; section 46 of the Customs Act, 1962, requires an importer of goods to file an Entry i.e. the B/E in the prescribed form providing full information about the goods under impor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here existed a Distributor agreement dated 01.11.1994, the same was not placed before the CEGAT or any other authorities. As per the copy of the Agreement produced just before the conclusion of the hearings, the quantum of total funding discount in favour of HPI was indicated therein. HPI did not share the said information with the CEGAT, obviously because it could have adversely affected their case. All the same, because of non-disclosure, CEGAT did not have an opportunity to examine the actual facts flowing from the said Agreement. (c) CEGAT primarily examined the question whether on the basis of commission earned by HPI on a few direct sales, the value declared by HPI in respect of their own imports could be enhanced to the level of the prices charged in respect of such direct sales. (d) After, 2002, another company, viz. 'Compaq' merged with HPI. Two Agreements were entered into by HPI (HPISPL) with other HP entities, one in 2002 and another in 2005. Both these Agreements were not produced before any of the authorities. The terms of these Agreements were vastly different from the terms of the Agreement placed before the CEGAT. (e) The pricing policy a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isdeclaration in the B/Es, non-disclosure of Distributor and other agreements. Notably, the practice of valuation of spare parts imported from Singapore, based on Refurbished Value Standard (RVS) plus 15% plus DCCA for blue parts and RVS plus 10% for red parts and the practice of valuation of spare parts imported from USA, based on RP less I/C discount of 61% plus DCCA for blue parts and RVS plus 10% for red parts for warranty and AMC purposes and CLCP less IC discount of 61% was never disclosed to SVB or Customs. Voluntary statements given by various employees about disclosures made and not made to SVB /Customs, when shown the documents obtained from HPISPL indicate that HPISPL deliberately suppressed material particulars. They also did not disclose the applying of a different pricing methodology for the imports of pre-merger HP parts and pre-merger Compaq parts, the existence of price lists in respect of spares imported being generated in Singapore, and the list of goods for which the computed cost method would be followed. iv. In view of the facts and circumstances of the case, the Master Parts Reseller (MPRs) price list was rightly taken as the basis and various abatem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Red parts. For Blue parts imported from USA, the practice of arriving at the assessable value was: Base price (RP or CLCP) less 61% discount; no breakup of 61% discount was provided. Further, he has submitted that since local market prices charged by the appellant for identical goods was available in MPRs list prices, which were also available with HP Singapore, the said prices were taken as the Base Price and abatements in respect of average / standard discounts not linked with the quantity purchased was allowed. Department is not in acceptance of the said discount allowed by the Commissioner. 25. Further, Revenue has objected to the abatements allowed by the adjudicating authority in respect of the items of expenses viz., (i) DCCA- Distribution Centre Cost Allocation expenses incurred by HP Singapore. Obviously, such expenses are incurred before import, (ii) Freight-includes transportation charges for international and domestic movement of goods, (iii) Actual Duties and taxes paid, (iv) other trading expenses, (v) warehousing charges, (vi) logistic overheads, (vii) total material cost of spares imported by HPISPL and (ix) stock and write-off, scrap-good as well as defective in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the CVR. 28. Before analysing the rival claims on merits of the case, it is essential to address the preliminary objections raised by the appellant during the hearing viz. (i) the methods of valuation now questioned by the DRI has already been considered and settled by this Tribunal by order dated 10.07.1998 in their own case, and subsequently followed in SVB orders passed from time to time, hence raising the same issue again is bad in law; and (ii) the statements of various persons recorded under Section 108 of CA,1962 cannot be relied upon as the provisions of Section 138B have not been complied with. 29. We find that initially the matter was adjudicated by the Special Valuation Branch (SVB). The appellant aggrieved by the said order challenged it before the learned Commissioner(Appeals), who allowed their appeal. On Revenue's Appeal, the Tribunal, inter-alia, analysing the issues raised upheld the Order of the Ld. Commissioner(Appeals). The learned advocate heavily relied on the following observation of the Tribunal: "23. We also note that it is clearly provided in the notes to Rule 4(2)(b) that the activities relating to the marketing of the imported goods by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Order is illegal and without justification. 31. The contention of the Department, on the other hand is that the appellant, while declaring the assessable value for their imports had never made true and full disclosure about the discounts & deductions on account of other factors in their declarations to the department; different methodologies adopted for determination of value of Blue parts & Red parts, hence the admissibility of said Discounts/deductions, methodologies for valuation could never be the subject matter of scrutiny/adjudication by SVB or Appellate authorities i.e. Ld. Commissioner(appeals) or CEGAT. In the earlier proceeding the question before the authorities/CEGAT was whether the Commission earned by the appellant on Indent sales to third party buyers/purchasers be loaded to the their(Distributor's) net price for stock and sale traded goods Imported by them. Besides, the merger with Compaq, subsequent agreements entered in 2002 and 2005, the complex nature of fixation of CLCP, devolution of funding discount based on global/regional averages and the Country Specific adjustments(CSAs), etc. were never disclosed to SVB and CEGAT, hence no deliberation could be made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re completed on 31.03.2012. He has further submitted that during the course of hearing before the adjudicating authority, the appellant has never raised any objection alleging non-compliance with the procedure of accepting evidences of witnesses to be followed by subjecting them first to examination in-chief, thereafter cross-examination, if requested, and hence raising such objections at this stage should not be accepted. He has further submitted that besides, the statements recorded under Section 108 of the Customs Act, 1962 had never been retracted by any of the witnesses, hence admissible in evidence. In support, he referred to the judgment in the case of Commissioner of CGST and CE, Howrah Vs. Ashirwad Foundries Pvt. Ltd. [(2023) 4 Centax 265 (Cal.)]. Further, he has submitted that the jurisdictional High Court in the case of Commissioner of Customs, Bangalore Vs. Jyothi Jain & Ors. 2025(9)TMI-1225-Karnataka High court observed that Section 138B of the Customs Act, 1962 is not applicable to the Departmental adjudications. The said judgment is binding on this Tribunal being an Order of the jurisdictional High Court as opined by the Larger Bench of this Tribunal in the case of C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where - (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill or bill of export, as the case may be, is presented under section 50 (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of his behalf.] imported goods shall be determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), if the Board is satisfied that it is necessary or expedient so to do it may, by notification in the Official Gazette,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section: Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Explanation. --For the purposes of this section-- (a) "rate of exchange" means the rate of exchange- (i) determined by the Board, or (ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign curr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mined in accordance with Rule 4 of these rules. (2) ... ... ... 3. Determination of the method of valuation. For the purpose of these rules,- (i) subject to rules 9 and 10A, the value of imported goods shall be the transaction value; (ii) if the value cannot be determined under the provisions of clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these rules.] 4. Transaction value. (1) The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules. (2) The transaction value of imported goods under sub-rule (1) above shall be accepted: Provided that- (a) the sale is in the ordinary course of trade under fully competitive conditions; (b) the sale does not involve any abnormal discount or reduction from the ordinary competitive price; (c) the sale does not involve special discounts limited to exclusive agents; (d) objective and quantifiable data exist with regard to the adjustments re- quired....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsaction value is not available. ... ... 7. Deductive value. (1) Subject to the provisions of Rule 3 of these rules, if the goods being valued or identical or similar imported goods are sold in India, in the condition as imported at or about the time at which the declaration for determination of value is presented, the value of imported goods shall be based on the unit price at which the imported goods or identical or similar imported goods are sold in the greatest aggregate quantity to persons who are not related to the sellers in India, subject to the following deductions: (i) either the commission usually paid or agreed to be paid or the additions usually made for profits and general expenses in connection with sales in India of imported goods of the same class or kind; (ii) the usual costs of transport and insurance and associated costs incurred within India; (iii) the customs duties and other taxes payable in India by reason of importation or sale of the goods. (2) If neither the imported goods nor identical nor similar imported goods are sold at or about the same time of importation of the goods being valued, the value of imported ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 4. (2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1). 11. ... ...... 12. .... .... Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 Rule 1. Short title, commencement and application.- ... ... ... Rule 2. Definitions.- (1) In these rules, unless the context otherwise requires, - (a) "computed value" means the value of imported goods determined in accordance with rule 8. (b) "deductive value" means the value determined in accordance with rule 7. (c) to (f) ... ... .... (g) "transaction value" means the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s acceptable for customs purposes under the provisions of sub-rule (3) below. (3) (a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price. (b) In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time. (i) the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India; (ii) the deductive value for identical goods or similar goods; (iii) the computed value for identical goods or similar goods: Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related; (c) substitute values shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3. (2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1). Explanation.-(1) For the removal of doubts, it is hereby declared that:- (i) This rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with rules 4 to 9. (ii) The declared value shall be accepted w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e applying comparative method, due account should be given to difference in commercial levels, quantity levels, adjustments and in accordance with provisions of Rule 9 of CVR and cost incurred by the seller in sales in which he and the buyer are not related. 39. The new Customs Valuation Rules, 2007 made effective from 10.10.2007 defines transaction value at Rule 2(g) as referred to in Section 14 of the Customs Act, 1962. Rule 3 of the said Rules prescribes that value of imported goods shall be the transaction value adjusted in accordance with sub-section (1) with provisions of Rule 10; however, it is made subject to Rule 12 of the said Rules. Sub-rule (2) prescribes the circumstances where a transaction value shall be accepted. Under Clause (iii) of the said sub-rule says that the transaction value shall be accepted where the buyer and seller are not related, for Customs purposes under provisions of sub-rule (3) of the said Rules Clause (a) of sub-rule (3) prescribes that where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....competitive prices, sales involving the special prices, misdeclaration on parameters such as description, quality, quantity, country of origin, year of manufacture or production, non-declaration of parameters such as brand and grade etc. and fraudulent or manipulated documents. Grounds mentioned in (a) to (f) however are not exhaustive of 'certain reasons' to raise doubt about the truth or accuracy of the declared value. Clause (ii) to Explanation states that the declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after enquiry in consultation with the importers. Clause (i) to the Explanation states that Rule 12 does not provide a method of determination of value but provides the procedure or mechanism in cases where declared value can be rejected when there is a reasonable doubt that the declared transaction value does not represent the actual transaction value. In such cases the transaction value is to be sequentially determined in accordance with Rules 4 to 9 of the 2007 Rules. Sub-rule (2) of Rule 12 stipulates that on request of an importer, the proper officer shall intimate to the importer in writi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the conditions when the 'reason to doubt' exists. The instances mentioned in clauses (a) to (f) are not exhaustive but are inclusive for there could be other instances when the proper officer could reasonably doubt the accuracy or truth of the value declared.(emphasis supplied) 17. The choice of words deployed in Rule 12 of the 2007 Rules are significant and of much consequence. The Legislature, we must agree, has not used the expression "reason to believe" or "satisfaction" or such other positive terms as a pre-condition on the part of the proper officer. The expression "reason to believe" which would have required the proper officer to refer to facts and figures to show existence of positive belief on the undervaluation or lower declaration of the transaction value. The expression "reason to doubt" as a sequitur would require a different threshold and examination. It cannot be equated with the requirements of positive reasons to believe, for the word 'doubt' refers to un-certainty and irresolution reflecting suspicion and apprehension. However, this doubt must be reasonable i.e. have a degree of objectivity and basis/foundation for the suspicion must be based on 'certain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....discount mechanism, there is no such policy as far as spares imports are concerned". 46.2. Further, I also rely on the decision of CEGAT Special Bench decision in the case of Joy Foam Private Ltd. Vs. Collector of Customs, Madras reported in 1984(18) E.L.T 73(Tri) where in at para 5 it has been held as under: "5. We have given our very careful consideration to the submissions made by both sides. In the normal course, a price list for goods is adopted as basis for valuation of the goods, more so, when the said price list is produced by the importers themselves. Having produced the price list, the appellants cannot take the plea that they had produced the literature to the Customs authorities only with regard to specifications of the machine and its spares and not for the purposes of valuation of the goods with to the prices shown in the same literature. It appears to us that the appellants are trying to wriggle out of the situation created by themselves in producing the literature which goes against their stand". In the instant case also, I find that during the course of investigation by DRI, HPISPL produced the pricelist generated at their Singapore offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not prohibit adoption of different pricing policies for different categories of imported parts and parts imported from different sources, if each of the methodology resulted in arm's length price. 44. We find that as recorded by the Commissioner in the impugned order, the appellant had been adopting different pricing methodology for the transaction between overseas related entity HP USA, the supplier in the present case to the appellant, for resale of the parts as well as for internal use. It is not that the same parts that were sold to different customers against different transactions but same parts for different use by the appellant. Thus, in absence of any identical or similar goods, the Department proposed to adopt the uniform principles of deductive method prescribed under Rule 7 adjusting to the extent of non-availability of aggregate quantity of goods sold resorting to Rule 8/9 of the CVR 1988/2007. In adopting the said methodology, the Department took recourse to the List Price maintained at the Singapore office for majority of the goods to be sold in India called MPRs List Price retrieved during the course of investigation by the DRI. The said MPRs List Price is consid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lared by HPISPL was found to be distorted as per findings and therefore the adoption of value based on the spares having list price appears plausible. Therefore in the light of Apex Court decisions, I hold that DRI's method of arriving at the Customs value in respect of some spares which do not have list price is consistent with the principles of Customs Act and Customs Valuation Rules. 46. We do not find any justification for adoption of such methodology taking shelter of Rule 8 / 9 of the CVR 1988/2007. It is also not clear as to which are the spare parts not included in the MPRs Price List and not the quantum thereof either in the impugned order or from the submissions of the appellant. Rule 8 /9 of the CVR, 1988/2007 which is a residuary method has to be applied in consistency with the principles laid down under the rules mentioned for determination of the valuation viz. Rule 3 to 7 of the CVR 1988/2007. None of these provisions allowed to extrapolate the data to determine hypothetical selling price in determining the assessable value under deductive method where there is no sale price is available for the imported goods under assessment. In the absence of selling price ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsidered taking the GPSC expenses on annual basis, which in my view is also correct. Therefore, the actual GPSC expenses as provided by HPISPL and also taking these expenses on annualised basis seems appropriate. Accordingly the revised working as per my findings is to be carried out and the same are part of the final order. 49. The Department has challenged the said deduction of the expenses from the net price; which, in our opinion, cannot be sustained in view of the clear provisions under Rule 7 of the CVR 1988/2007 which allows deduction of general expenses and profit from the sale price. Also, the in their Appeal, department has assailed the standard Discount of 30% from the List price allowed by the Commissioner. We find that when such discount was allowed in connection with valuation of products, the department has accepted the same and not raised any objection; besides, we are of the view that the standard quantity discounts allowed by the commissioner from the List price to arrive at the Net price is admissible. 50. On the issue of deduction of expenses towards selling, marketing and other general expenses to the extent of 5% of the List Price, the learned Commission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d insurance, is contrary to the principles of law laid down by the Hon'ble Supreme Court in the case of UOI Vs. Mohit Minerals Pvt. Ltd. [2022(61) GST 251 (SC)]. Further, it is submitted that once the transaction value is rejected and value is determined under deductive method, resorting to Rule 10(2) is bad in law. The said Rule 10(2) of the CVR is reproduced below:- 10. Cost and services. - (1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, - (a) .. .....:- (b) ... ... (2) For the purposes of sub-section (1) of section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall be the value of such goods, and shall include - (a) the cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation; (b) the cost of insurance to the place of importation : Provided that where the cost referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods : Provided further ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e finding of the Commissioner in not including these expenses in the VAC for calculating the ROVAC observing that customs duty constitute an element of cost and cannot be regarded as value added costs in as much as once the customs duty and customs brokerage fees have been considered as a part of general expenses being post-importation charges under Rule 7, then non-inclusion of the said expenses in computing ROVAC would be contrary to the principles of valuation, also such a proposal is not made in the show-cause notice, hence the order of the Commissioner is beyond the scope of the show-cause notice; hence, bad in law. 55. On the issue of applicability of exemption Notification No.89/1982-Cus dated 25.03.1982 to SAD, the appellant's contention is that after introduction of SAD in 2005 vide Section 3(5), Notification No.89/1982 was not amended; therefore, the appellant are entitled to the benefit of the said Notification. Once they discharged CVD on the imported goods, then all other duties levied under Section 3 of the Customs Tariff Act would stand exempted. Rebutting the said argument, the learned Special Counsel for the Department has submitted that as laid down by the Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eir pricing policy has been accepted by CEGAT; thus, they have disclosed the full facts to the Department; hence, allegation of misdeclaration or suppression of facts on the part of the appellant cannot be sustained. Therefore, the allegation of suppression or misstatement on the part of the appellant is not sustainable. The learned Special Counsel for the Department responding to the argument of the appellant has submitted that during the course of investigation by the DRI relating to import of products and parts, statements of various employees have been recorded and other documentary evidences were retrieved from the appellant revealed that appellant during the period May 2005 to April 2009 they were following different methods of valuation relating to Blue parts and Red parts revealed as a result of investigation which were never brought to the notice of the SVB and also before CEGAT. Further, he has submitted that the basis for the mark-up of 10% or 15% on RVS methodology in valuing spares imported by the appellant is not established and not visible to employees of the appellant. The appellant have never provided dated relating to Reference Price (RP) for each spare so that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....engineers certificate as required under Handbook of procedures(HBP). The Ld. advocate for the appellant assailing the said finding submitted that no such proposal nor any such allegation has been advanced in the show cause notice, hence direction of confiscation, is bad in law. We find merit in the contention of the learned advocate for the appellant that in absence of such an allegation in the show cause notice, directing confiscation on the ground of non production of chartered engineer certificate is bad in law, hence cannot be sustained. 58. On the issue of applicability of penal provisions, confiscation and levy of interest, to the major portion of demand which relates to CVD/SAD, the appellant had submitted that the CVD/SAD are levied under Section 3(1) and 3(5) of the Customs Tariff Act, 1975. The duty defined under Section 2(5) of the Customs Act 1962 and dutiable goods defined under Section 2(14) is only to levy of customs duty (i.e. BCD) under Section 12 of the Customs Act since the provisions of levy of interest, imposition of penalties and confiscation under Section 28AB, Sections 114A and Section 114AA and Section 111(d) & 111(m) have not been borrowed under the Cus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n sub-section (6) of Section 3 or sub-section (4) of Section 3A of the Customs Tariff Act, 1975. Therefore, the intention of the legislature was very clear that it wanted to include interest and penalties only with regard to anti-dumping duty on dumped articles and not for CVD, i.e., levy of additional duty equal to excise duty and SAD, i.e.,, special additional duty. No such insertion or amendment was made in Section 90 of the Finance Act, 2000 relating to surcharge. Therefore, interest and penalty cannot be levied on the portion of demand pertaining to surcharge under section 90 of the Finance Act, 2000 or additional duty of customs under section 3 or special additional duty of customs under the Customs Tariff Act, 1975. 27. Sub-section (6) of Section 3 and sub-section (4) of Section 3A of the Customs Tariff Act, 1975 makes applicable to the duty chargeable under section 3 and Section 3A the provisions of the Customs Act, 1962 and the rules and regulations made thereunder including those relating to drawbacks, refunds, exemptions from duties so far as it applies to Section 3 and so far as Section 3A is concerned, it is relating to non levy, short levy, refunds and appeal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duty or penalty because as time and again Courts have held that taxing statute have to be incorporated strictly and tax can be imposed only when the language of the statute expressly provided for it. The authority has to be provided specifically, explicitly and expressly. Moreover, CVD, SAD and surcharge are in addition to the basic customs duty. Sub-section (5) of Section 3 and sub-section (3) of Section 3A of Customs Tariff Act, 1975 provide that the duty chargeable under the said sections will be in addition to any other duty imposed under the Customs Tariff Act, 1975 or any other law for the time being in force. Sub-section (3) of Section 90 of the Finance Act, 2000 say the surcharge shall be in addition to any duties of customs under the Customs Act or under any other law for the time being in force. 30 to 36 ... ...... ... 37. In view of the above, imposing interest and penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction. Following the aforesaid judgment, we are of the view that imposition of penalty, confiscation of the goods seized and levy of ....