Minutes of
the Conference of Chief Commissioners meeting
held at
Mumbai Custom House on 01.10.2005
Agenda Point
D :
Reorganization
of Special Valuation Branch
Points for discussion:-
1) Pendency of more than one year of SVB cases
at all SVB branches and more than three years in SVB Mumbai and Kolkata.
2) Lack of updation of Central Registry
Database (CRD) by various SVB units rendering the utility of CRD doubtful in
absence of complete and accurate data.
3) Need to create a separate division with DGOV
on the pattern of International Taxation in Income Tax, for monitoring the
quality of SVB orders of various zones to ensure uniformity in application of
Valuation Rules and to prevent revenue loss due to poor quality of orders, both
appealable or otherwise.
Summary of
discussion :-
The Member (Customs) expressed concern over large pendency of SVB cases
and basic working arrangements available in the various SVBs. It was noted that the staff posted in SVBs
are for a short period and that the quality of the work suffers due to lack of
expertise. It was also noted that
intricacies of the various aspects of relationship, the influence on the price
on account of relationship, royalty and licence fees, etc. are matters which
need very careful and objective examination for determining the influence on
the invoice prices. A suggestion was
made that the possibility of hiring the service of experts like Chartered
Accountants, Cost Accountants, etc. should be explored for improving the
effectiveness of the SVB work. While welcoming the suggestion, it was also
pointed out that the work of SVB is of specialized nature and the basic
responsibility has to remain with the officers of Customs, because of their
experience and in-depth knowledge of Customs rules and regulations. In the context of the proposal for a central
authority for handling SVB work, it was suggested that the SVB functions should
be shifted to the Post Clearance Audit stage, which enable sufficient time for
examination of such relationships and their influence on the prices. However, it was noted that the Post
Clearance Audit which is being introduced in the context of the Risk Management
System was only transactional audit for individual consignment and that any
meaningful SVB work should involve comprehensive audit covering many
transactions of a particular assessee.
After discussion, it was concluded that shifting SVB work to Post
Clearance Audit stage was not a desirable approach, and that the SVBs should
continue but they should be made more effective. In this context it was suggested that the minimum period of
posting of officers in the SVB should be two years, and that the officers
should be hand-picked based on their knowledge and experience, so that there is
enough stability in the SVB work. The
monitoring of the SVB work by DGOV should also be strengthened by way of
scrutinizing the orders and giving constructive comments. The Central Registry Data (CRD) monitored by
the Directorate should also be updated regularly for making it an effective
valuation tool for assessing officers.
On the question of level of decision-making in SVB, the consensus was
that the matter should be left to the respective Chief Commissioners or
Commissioners to decide as to which case should be decided by the Joint / Addl.
Commissioner and which category of cases should be handled by the Deputy /
Assistant Commissioners.
Decision : -
(a) The Chief Commissioners will ensure that
the SVBs are made more effective, by deploying competent officers for a minimum
tenure of two years.
(b) The Chief Commissioners will also ensure
that the CRD of the DGOV are updated on regular basis.
(c) The SVBs should dispose of all pending
cases as on date by 31.12.2005. For
this purpose the Chief Commissioners would ensure that the SVBs are adequately
staffed with experienced officers and that the disposal is monitored
regularly. A monthly disposal report
should be submitted to the Board through the DGOV. The DGOV would play a more
pro-active role in assisting the SVBs of different Commissionerates.
Agenda Point E :
Transfer Pricing
Points for
Discussion:
·
Legal and procedural changes needed for effective handling of
transfer pricing on the Customs side.
·
Mechanism for coordination of transfer pricing work with Income Tax
department.
·
Integration of SVBs and Transfer Pricing work
Summary of
discussion :-
It was
generally agreed by the Conference that urgent action was required to be taken
to handle the transfer pricing matters.
It was also noted that the work handled by SVBs were directly related to
the transfer pricing matter and, therefore, any mechanism to handle the subject
should take into account the related party matters handled by the SVBs.
It was pointed out that a committee
set up by the Department of Company Affairs in the year 2001 had gone into the
question of transfer pricing issue and the action to be taken by all
Departments. The committee has also
analysed the existing legislations having a bearing on transfer pricing and
suggested changes in the various departments.
Though Director (Cus.) was a member of the Committee, there is no
information readily available on the follow up action taken on this
report. It was noted that the present
position of the report should be ascertained.
It was also noted that the basis
followed by Income Tax department in drafting the Income Tax legislation on
transfer pricing should be studied.
Further, administrative and institutional arrangements in handling
transfer pricing work in the income Tax Department also should be studied.
The conference agreed that there is
a need to have close coordination with Income Tax Department on transfer
Pricing matters, and to ensure that the prices adopted for both purposes of the
imported goods are uniform. Suitable
legislative measures and administrative arrangements would be needed for the
purpose. Consultation with the Income
Tax department (CBDT) would also be needed.
It was suggested that a small
committee of officers be constituted in CBEC to study the whole range of
questions concerning Transfer Pricing and its implications on the Customs side
including the harmonization and coordination of work with the Income Tax
department.
The
conference recommended that a committee of officers should be set up by the
Board urgently for studying the Transfer Pricing matters, and especially the
legal and administrative measure (including coordination with the Income Tax
department) to be adopted.