DIRECTORATE GENERAL OF VALUATION

(Central Board of Excise & Customs)

New Customs House Annex, Ballard Estate, Mumbai

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1.        Functions

The Directorate of Valuation (DOV) was established in the year 1997. It  was upgraded to a Directorate General in December 2002. 

The main functions of the Directorate General are:   

v     Assisting the Board (Central Board of Excise & Customs) in Policy matters concerning Customs Valuation;

v     Developing valuation tools (including databases) and best practices for the effective and uniform application of valuation law; 

v     Monitoring valuation trends of sensitive commodities and taking corrective action; 

v     Providing guidance to field formations for checking undervaluation / over valuation of imported or export goods so as to prevent leakage of Customs revenue; 

v     Carrying out valuation inspections at Customs stations to ensure that the valuation guidelines and procedures are being effectively applied;  

v     Coordinating Customs valuation matters with relevant international organizations and other sources abroad.  

v     Developing a Central Excise Valuation Database  

v     Providing data for valuation corridor under RMS  

v     Monitoring and examining quality of orders passed by Special Valuation Branches of the Commissionerates 

v     Conducting study and providing necessary inputs for issues pertaining to transfer pricing. 

 

2.         Organization

 

2.1       The Headquarter of the Directorate General is established at Mumbai (New Custom House Annex) and it is headed by a Director General. He is assisted by a team consisting of a Commissioner/ADG, three Addl./ Joint Commissioners and four Assistant Commissioners. There are three Zonal Units, one each at Delhi (Northern Zone), Chennai (Southern Zone), and Kolkata (Eastern Zone).    

2.2       The supporting staff at Group B, C and D levels and are presently on deputation/loan basis from the Central Excise/Customs formations.

 

3.         Performance 

3.1    National Import Data Base (NIDB):  A comprehensive electronic data base of imported goods namely National Import Data Base (NIDB) has been developed.  This involves compilation of import data on a daily basis from all Customs stations in the country and its analysis by specially developed software to determine unit values, weighted average values of identical goods, percentage deviations and outliers, supplemented with international price information.  The combined, analyzed data is transmitted to all Customs stations every week for use as an assessment tool and decision support system for checking under valuation. The NIDB data is also made available on the Directorate of Valuation website (www.dov.gov.in) for direct access by departmental officers on a password protected basis.  

3.2   Export commodity database (ECDB) project: The Export Commodity Database (ECDB) Project is a comprehensive export valuation data base, developed with a view to check overvaluation and misuse of export incentive schemes. This involves capturing  of export data in a pre-determined format from the Customs Stations, consolidation and analysis of this data with the help of a specially designed software for providing certain results (such as weighted averages, standard deviations, outliers), leading to detection of potential  cases of valuation fraud. Presently, on the basis of the said analysis, a list of sensitive export commodities is being generated by the software itself on the basis of top hundred counts under two schemes i.e. Drawback and DEPB. The data is being

disseminated thrice in a month to field formations for on-line use to check export value declarations and to take considered decisions on valuation. The entire ECDB (Phase II) is also made available on the DOV Website (www.dov.gov.in) for access by officers on a Password protected basis.  

3.3 Central Registry Database (CRD):   This is a database maintained by DGOV on its website which contains details of Special Valuation (SVB) cases pertaining to related party imports, payment of royalties, license fees, supply of materials and services by the importer, etc. registered in the five major Custom Houses at Mumbai, Chennai, Delhi, Kolkata and Bangalore. Each case registered under SVB has to be uploaded in the CRD by the respective Custom House. The Central Registry (CRD) is available on the Directorate’s web site for reference by departmental officers. DGOV has been vested with functional control over the SVBs with effect from 1st January 2013 by the CBEC vide Circular No.29/2012-Customs dt.07.12.12. 

3.4 Central Excise Valuation Database (CEDB): On the lines of Customs Valuation database, this Directorate General has started developing a Central Excise Valuation database. The data in respect of sensitive commodities is being received from the central excise zones with effect from July 2008 and is being analyzed. A report is generated containing the average, maximum and minimum assessable values for different commodities. The report is then circulated back to the Zones for use by assessing officers. In future, it is proposed to develop software to analyze the data captured for Central Excise data valuation base on the lines developed for Customs. The data can then be analyzed methodically, timely and can serve as an assessment tool for the assessing officers on central excise side. DGOV is already capturing data on import and export side; along with this the Central Excise Valuation data will provide assessable values for domestic consumption. With these three set of values, DGOV is providing inputs to all field formations in case it notices substantial variation in values for a particular commodity for further investigation.  The monthly CEDB is also available online on password protected basis. 

3.5 Website: The Directorate General has its own website (www.dov.gov.in).  The website hosts the National Import Database (NIDB), Export Commodity Database(ECDB), Central Excise Valuation Database (CEDB), Central Registry of Special Valuation cases (SVB) and Valuation Bulletin as well as Alerts under password protection.  The website is updated every week (Mondays) with the latest information and data. Important valuation news incorporating international price movements of commodities is also hosted, along with other valuation related developments. The weekly dispatches of NIDB are also posted on the web site in a downloadable format so that even remote customs stations can update their local NIDB data.  Compilations of Supreme Court decisions and CESTAT decisions on Customs Valuation have been placed on the website.  The users can also find answers to a number of frequently asked questions on Customs valuation under the tab ‘FAQ’ of the website.  The website is regularly visited by staff and trade for various kind of information (about 1000 hits per week).

 

3.6 Valuation Alerts: In cases, where the studies reveal potential undervaluation, Alert Notices are issued to field formations. These alerts give details of the study conducted by the Directorate along with guidelines for further action to safeguard revenue. The follow up action taken by field formations on these Alert Notices issued by the Directorate General is also monitored on a regular basis.  

3.7 Sensitive Commodities: The Directorate General has developed a list of sensitive commodities prone to undervaluation based on its studies and research in consultation with Customs stations which is periodically updated on the basis of feedback from Customs houses and Directorates’ own studies on valuation trends.  

3.8       Fixation of Tariff Value:- The CBEC fixes tariff values in respect of commodities where ever it is considered necessary. DGOV provides support to the CBEC for fixations of Tariff value on the basis of detailed study conducted. At present the Tariff values are being fixed, in respect of brass scrap, some edible oil (Palm oil, Pamolin oil, Soya bean oil), poppy seeds and Arecanuts. 

3.9   Valuation Bulletin: A monthly “Valuation Bulletin”, which is compilation of all value related information, including international price trends of important commodities and market intelligence reports from various sources, is published and distributed to all field formations.   The Bulletin is widely used by officers in the field as an important source of information on valuation questions in their day to day assessment work. The Valuation Bulletin is also made available on line to field officers on the Directorate’s website (www.dov.gov.in).  

3.10. Valuation Inspection: Valuation Inspection of Customs stations is done by the Directorate General on a regular basis to bring in the uniformity in the valuation practices adopted by different field formations. The endeavor is to inspect once a year Customs formations having revenue of more than 200 crores and other formations at least once in two years. During the Inspection the overall performance of the Customs station in complying with the regulations and instructions on Customs valuation matters is studied with reference to the information gathered and the relevant documents scrutinized. Spot study is conducted to see if the valuation tools, that are made available, are used or not and the effect thereof.  

3.11     Additional Revenue Realised: As a result of inputs given by the DGOV, extra revenue is generated.  Reports to this effect are received from the zones regarding additional revenue realised.  The said reports are compiled and transmitted to the Board on monthly basis.  A comparative chart reflecting additional revenue realised for last three years is as below: 

 

Sr. No.

Financial Year

Amount realized (Rs. in crores)

% increase/decrease over last year

  01

2010-2011

930

+17.70%

  02

2011-2012

1096

+17.86%

  03

2012-2013

1410.90

+28.72%

 

3.12 International Co-operation:  This Directorate General is also the nodal point for international cooperation on valuation matters and coordinates with international organizations (World Trade organization, World Customs Organization) as well as other Customs administrations. This Directorate represents India in various conferences, meetings, concerning valuation matters, held under the aegis of WCO/WTO. Necessary help is also extended to other countries for capacity building for development and implementation of valuation Database on the lines of NIDB. Presently this Directorate is involved in building of Import database for Kenyan Revenue Authority. The Uganda Custom Authorities have also requested in writing to DGOV to help them in providing assistance in development of database similar to NIDB. The Ethiopian revenue authorities have also expressed their interest in the database similar to NIDB. Foreign delegations have been visiting this directorate for study, discussions and hands-on training on building and utilization of Valuation Databases.  

3.13 Valuation Risk Component of RMS: The Directorate General has been working with the Risk Management Division of Directorate General of Systems in development and execution of Valuation Risk Assessment Module (VRAM) which is an important component of Risk Management System (RMS). The DGOV submits the list of (i) Most Sensitive Commodities with acceptable valuation brands (ii) List of valid valuation alerts and (iii) unusual unit quantity codes for improving data quality on quarterly basis, to the RMS division of the Directorate General of System and Data Management.

This Directorate General has developed the list of Sensitive Commodities which as on 31.8.2009 consists of 193 commodities. Due to paucity of staff, out of these 193 commodities only 40 highly sensitive commodities have been selected and value bands of these commodities have been worked out and provided to the RMD. For the preparation of value bands for these commodities, each commodity has to be further sub-divided into different categories on the basis of the brand, model, grade, specification, country of origin, uqc, etc. Accordingly, different clusters of such commodities are being prepared.

 

3.14     Transfer Pricing & Special Valuation Branches: Transfer pricing is the mechanism adopted by multination Enterprises for valuing the goods and services traded with their Subsidiaries or Associate Companies abroad so as to lower taxes and maximize profits. The transfer pricing polices relating to Customs are based on the Article VII of the GATT (General Agreement On Trade & Tariff) WCO and on the Income Tax side are based on the OECD (Organization of Economics Co-operation & Development) Guidelines.

            A study has been conducted by this Directorate General to ensure that there is harmonization between the provisions related to related party transactions (Transfer pricing) between Customs Act and Income Tax Act. As per the initiative taken by this Directorate General a J.W.G has been constituted by CBEC consisting of officers of CBEC and CBDT.(Circular NO.20/2007-Cus.Dated 08/05/2007 refers).  Pursuant to this, periodical meetings between the Customs and Directorate of Transfer Pricing are being held. Regional meetings were held in Mumbai and Chennai and a meetings were held in Mumbai and Chennai and a meeting at the level of Director General of Valuation (CBEC), Director General (International Taxation, CBDT and the Chief Commissioners of Customs, in whose jurisdiction SVBs are located was held. Meanwhile, DGOV is critically scrutinizing the orders issued by the Special Valuation Branches (SVBs) created for examining the ‘related party transactions’ located in Mumbai, Delhi, Chennai & Kolkatta and Bangalore .  

3.15     Seminars and Workshops: Seminars and workshops are organized for the benefit of officers so as to strengthen the Customs valuation expertise. Whenever a valuation inspection is conducted, in the last session a workshop is also organized for that custom house, in which not only general points are covered, issues pertaining to that custom house are specifically discussed. These workshops also help to ascertain the practical problems in the field and to provide feedback for further improving the database.