Case: HABASIT LAKOKA PVT. LTD Vs. COMMISSIONER OF CUSTOMS (IMPORTS)

1. The appellant herein had imported jumbo rolls from M/s. Habasit Holding A.G. Switzerland for the manufacture of endless belts. Bill of Entry was filed declaring the value as per the invoices raised by the seller company. It was discarded by the customs authorities on the ground that the M/s. Habasit Holding A.G. Switzerland and the appellant are related persons. This finding was arrived at by giving reasons that the Swiss company holds 51 per cent shares of the appellant and it also appoints three directors in the Board in the Indian company with additional right to nominate a Director of its choice to be the Chairman of the Board with a casting vote. These facts are not disputed and therefore, the aforesaid conclusion of the customs authorities, which is accepted by the Customs, Excise and Service Tax Appellate Tribunal [2005 (183) E.L.T. 321 (Tri.-Chennai)], is also not challenged in the present appeal. 2. On the aforesaid facts, the only dispute is about the valuation which was arrived at by the customs authorities. The contention of the appellant was that even if the appellant company and Swiss company were related persons, the transaction in question was on principal to principal basis and was at arms length and the price at which the goods in question were bought by the appellant was the market price of such goods at which these goods were sold and therefore, the appellant had not sought any advantage because of the relationship between the parties. This contention has been rejected by the CESTAT by giving following reasons :- 3. While examining whether the relationship between the Swiss Exporter and the respondents has influenced the price of the impugned imported goods, the original authority found that the impugned goods imported by the respondents are not being sold to any other unrelated importer in India. However, he found that the goods imported by others is of same grade and identification code namely, S-251 and A-2 grade. The difference was that other independent importers bought belts, which were cut and joined whereas the respondents imported belts in running length, which were to be cut and joined. The original authority also found that the exporting Swiss Company charged the independent importers 20% extra on the basic list price of S-251, A-2 grade materials towards cutting and joining. This extra 20% has been into account and adjusted by the original authorities to compare the prices charged to the respondents and other independent importers. This method adopted by the original authority is perfectly in order to arrive at a valid comparison between goods of the same grade and identification code in the absence of any sale of belts in running length to other independent importers. 4. On comparison, the original authority found that the Swiss Company is allowing a 20% discount to independent buyers, whereas the respondents have been charged a lower price after allowing 33.3% discount. In other words, the respondents are not being charged 20% towards the cutting and joining charges and in addition, they are being given a discount of 33.3% as against 20% to others. Under the circumstances, the original authority cannot be faulted for having come to the conclusion that the price charged to the respondents is influenced by their relationship with the supplier Swiss Company. 5. Once it is held that the supplier and the importer are related and the relationship has influenced the price, valuation cannot obviously be done under the Transaction value method accepting the declared value. The original authority has therefore, rightly, in our view, rejected the declared value. He has ordered assessment after disallowing the extra 13.3% discounts by which an arms-length price, so to say, has been established which has inter alia taken into account the 20% extra cost involved in cutting and joining the belt in running length imported by the respondents. The secondary methods of valuation in the Customs Valuation Rules, based on value of identical/similar goods, deductive and computed value methods and the residual method all seek to establish an arms-length price when the declared value cannot to be accepted in cases such as this, where the price is influenced by the relationship. The value established by the original authority adequately represents cost plus freight to the suppliers based on independent sales once the cutting and joining charges are adjusted. 3. These are the findings of fact arrived at on the basis of material on record and there is no reason to interfere with the same.

Decision reasoning: 0[ds]These facts are not disputed and therefore, the aforesaid conclusion of the customs authorities, which is accepted by the Customs, Excise and Service Tax Appellate Tribunal [2005 (183) E.L.T. 321 (Tri.-Chennai)], is also not challenged in the present appeal.This contention has been rejected by the CESTAT by giving following reasons :-3. While examining whether the relationship between the Swiss Exporter and the respondents has influenced the price of the impugned imported goods, the original authority found that the impugned goods imported by the respondents are not being sold to any other unrelated importer in India. However, he found that the goods imported by others is of same grade and identification code namely, S-251 and A-2 grade. The difference was that other independent importers bought belts, which were cut and joined whereas the respondents imported belts in running length, which were to be cut and joined. The original authority also found that the exporting Swiss Company charged the independent importers 20% extra on the basic list price of S-251, A-2 grade materials towards cutting and joining. This extra 20% has been into account and adjusted by the original authorities to compare the prices charged to the respondents and other independent importers. This method adopted by the original authority is perfectly in order to arrive at a valid comparison between goods of the same grade and identification code in the absence of any sale of belts in running length to other independent importers.4. On comparison, the original authority found that the Swiss Company is allowing a 20% discount to independent buyers, whereas the respondents have been charged a lower price after allowing 33.3% discount. In other words, the respondents are not being charged 20% towards the cutting and joining charges and in addition, they are being given a discount of 33.3% as against 20% to others. Under the circumstances, the original authority cannot be faulted for having come to the conclusion that the price charged to the respondents is influenced by their relationship with the supplier Swiss Company.5. Once it is held that the supplier and the importer are related and the relationship has influenced the price, valuation cannot obviously be done under the Transaction value method accepting the declared value. The original authority has therefore, rightly, in our view, rejected the declared value. He has ordered assessment after disallowing the extra 13.3% discounts by which an arms-length price, so to say, has been established which has inter alia taken into account the 20% extra cost involved in cutting and joining the belt in running length imported by the respondents. The secondary methods of valuation in the Customs Valuation Rules, based on value of identical/similar goods, deductive and computed value methods and the residual method all seek to establish an arms-length price when the declared value cannot to be accepted in cases such as this, where the price is influenced by the relationship. The value established by the original authority adequately represents cost plus freight to the suppliers based on independent sales once the cutting and joining charges are adjusted.3. These are the findings of fact arrived at on the basis of material on record and there is no reason to interfere with the same.