Valuation (Customs) — Cases handled by Special Valuation
Branch of the Custom Houses — Review of instructions
Circular No. 11/2001-Cus., dated 23-2-2001
F. No. 467/32/2000-Customs.V
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject : Valuation (Customs) - Cases handled by Special
Valuation Branch of the Customs Houses - Review of instructions.
The existing instructions and the procedures observed in
the various Custom Houses in regard to cases taken up by the Special Valuation
Branch of the Custom Houses have been reviewed by the Board and the following
instructions are issued in modification of the earlier Circular No. 1/98-Cus.,
dated 1-1-1998 :-
The ‘Special Valuation Branch’ (SVB, for short) as an (a)
institution specialising in investigation of transactions involving special
relationships and certain special features having bearing on value of import
goods should be continued. SVBs would continue to be located only at four major
Custom Houses, i.e. Chennai, Calcutta, Delhi and Mumbai and any decision taken
in respect of a particular case in any of these major Custom Houses shall be
followed by all other Custom Houses/formations.
The Special Valuation Branch of that major Custom House,
(out (b) of the 4 mentioned earlier) which is located proximate to the Head or
Corporate Office of the importer (having special relationships etc. with the
suppliers), would handle the investigations into valuation of such importer.
Wherever in the declaration prescribed under the Customs Valuation
(Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to
as “Valuation Rules, 1988”), the importer has himself made an averment that the
transactions are between related persons in accordance with Rule 2(2) of the
Valuation Rules, 1988, and there is a prima facie, justification for further inquiry, the
concerned case of import may be referred to the SVB of the concerned Custom
House, where a separate case file should be opened and a registration number
assigned to the case. Similar reference to SVB to look into valuation on account
of special relationship could be ordered by Commissioner concerned where though
not disclosed by the importer, such relationship comes to light on any
intelligence or while enquiring into transactions of any importer with a
particular supplier.
It will be deemed that, a (c) prima facie, case
exists, for investigation by the SVB where the importer is not able to provide
evidence to the effect that the price has not been influenced by the
relationship or where the importer is not able to demonstrate that the price for
the said goods 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 respect of sales to unrelated buyers in
India;
(ii) the deductive value for identical
goods or similar goods; and
(iii) the computed value for identical or
similar goods.
Apart from investigation of special relationship case,
SVB 2. will also handle more complicated cases of additions to declared
transaction value as stipulated under Rule 9 of the Valuation Rules. No
reference to SVB would be necessary where any additions are sought to be made
under Clauses (a) and (b) of Rule 9(1). Where, however, the additions sought to
be made are considered to be in the nature of ‘royalty and licence fee’ under
Rule 9(1)(c), or where the value of any part of proceeds of any subsequent
resale, disposal or use of imported goods accrues to the seller [i.e. Rule
9(1)(d)] or where any other payments are made or are contemplated to be made in
future by buyer to seller as a condition of sale of imported goods etc. [i.e.
Rule 9(1)(e)], the case may be referred to the SVB after following the
provisional assessment procedure.
All cases to be registered in the SVB for special 3.
investigation shall be with the specific approval of the concerned Commissioner
of Customs. Without the approval of the Commissioner, no case should be referred
to the SVB.
Where the imports requiring investigation by SVB are 4.
noticed in a Custom House or Customs formation other than Chennai, Calcutta,
Delhi, or Mumbai Custom House, all the relevant records should be forwarded to
the SVB of the concerned Customs House which would take up the investigation of
the case, after following the provisional assessment procedure. The Custom House
which would be undertaking the investigation will be determined in the terms of
paragraph 1(b) above.
There should be greater co-ordination amongst the SVBs
of 5. the four Custom Houses which undertake investigations in case where
special relations between the importer and supplier exist or in cases referred
to in paragraph 2 above. The information available, showing special relationship
in respect of a supplier and importer, under investigation in any SVB needs to
be shared amongst the four Custom Houses on a regular basis. Once a case is
registered by the SVB of one of the 4 Custom Houses, detailed information
regarding the same along with PAN No. of the importer should be furnished to the
Directorate of Valuation for maintaining a Central Registry. The Directorate of
Valuation will also circulate such details through the monthly Valuation
Bulletins to all Custom Houses, so that imports effected at any Custom House in
such cases, under investigation by SVB are undertaken provisionally and
interests of revenue are safeguarded.
The procedures so far being adopted for registration and 6.
subsequent investigation of the cases may continue to be followed. The
requirement of furnishing information and the formats of the sample
questionnaire, as also the list of the documents required to be submitted have
since been reviewed and a consolidated questionnaire along with list of
documents has been prepared (Annex-A). This should be issued by the assessing group, dealing with
particular imports, to the importer soon after it is decided (with
Commissioner’s concurrence as mentioned earlier) to refer the case to a SVB. Any
importer to whom the questionnaire is issued should be instructed to furnish the
reply to the referring Custom House as well as to the SVB of the concerned major
Custom House, within 30 days of receipt of the questionnaire. The questionnaire
should be issued by the Custom House referring the case to the SVB.
Upon receipt of reply to the questionnaire within the 7.
prescribed time limit, the SVB will decide within 7 days whether the importer
has replied to the questionnaire substantively. Otherwise, immediate further
information not furnished will be sought before taking step for finalisation of
investigation.
Board is very keen that decision to make reference to
SVB 8. and advancing all assessments of particular importer for goods from
particular suppliers to be undertaken on provisional basis, should be made after
very careful consideration and good deal of circumspection. It would be
imperative for the concerned Commissioner of Customs to critically examine the
issue involved and decide whether it merits detailed enquiries by SVB and
adoption of the provisional assessment procedure. In each and every case, the
decision would be taken at his level before provisional assessment is ordered
and matter referred to SVB. There would be however no need to obtain
Commissioner’s approval for imports made under different bills of entry, in a
particular case, once the case has been registered with the SVB.
The amount of extra duty deposit presently kept at 1%
will 9. be continued. Board has however decided that if the importer does not
furnish complete reply to the questionnaire within 30 days, of receipt of the
‘Questionnaire’ by the importer, the extra duty deposit will be increased to 5%
till the date of receipt of reply by the Department. It should therefore be
impressed upon the concerned importers (in the public notice that is issued) to
ensure timely replies being sent to the Questionnaire to avoid any higher
deposit being insisted.
Furthermore, where provisional assessment is being resorted
to, the investigation and finalisation of the assessment must be completed within four months from
the date of reply. If no decision is taken within 4 months, the extra duty
deposit should be discontinued and the concerned Deputy Commissioner/Assistant
Commissioner will be held responsible for inexplicable delay in
finalisation.
It has been reported that the Declaration forms
prescribed 10. for valuation purposes are being filled up in a very casual
manner by the importers leaving many columns blank. All the assessing officers
must be directed to ensure correct filling up of these forms including reference
to the relevant B/E before they allow individual clearances after provisional
assessment. (The declaration form is being revised to include details of the
ports/ICDs through which the imports will be effected).
Annex - A
Questionnaire to be filled by importers who are related to
the foreign suppliers:
1. Name of the importer with
full address of the Head or Corporate office, registered office, administrative
office/factory and PAN No.
2. Whether the importer is a
proprietorship/partnership/private limited company/public limited company/branch
office of company incorporated outside India.
3. Name of the (a) foreign
supplier from whom the goods are imported (b) nature of the business
relationship of the importer with the supplier (e.g. subsidiary company/branch
office/distributor/agent/indentor or any other) (c) nature of the transaction -
e.g., sale to the importer, consignment sales, branch transfer or any other.
4. Whether any officer or
director in the company/firm of the importer holds any office in any company
incorporated outside India; if so, whether such a company is related
to/associated in any way with the supplier of the imported goods. Also give
details of converse situation, if applicable?
5. Whether the importer and
the supplier of the goods are partners in business?
6. Whether there is an
employer-employee relationship between the importer and the supplier of the
imported goods and vice versa?
7. Whether the foreign
supplier or any of their associated companies jointly or severally, directly or
indirectly own, control or hold equity shares worth 5% or more of the total
paid-up capital of your company or any of your associated companies?
8. Whether any other third
person jointly or severally, directly or indirectly owns, controls or holds the
equity shares worth 5% or more of the paid-up capital of the foreign supplier
and of your company including associated companies?
9 (a) Whether the
supplier of the goods is in a position, directly or indirectly, to exercise
restraint over you, legally or operationally, in any manner? (b) Specify the
role if any, of the supplier or any of its associate business entities, in your
corporate policy, design specification, quality control, marketing,
sub-licensing of patent, franchise, etc.? (c) Whether any legal liabilities
created by contracts or agreements entered into by the supplier devolve on the
importer?
10. Whether the importer is in a position,
directly or indirectly, to exercise restraint over the supplier, legally or
operationally, in any manner? Details as per (b) and (c) above for this converse
position?
11. Whether a third party is in a position,
directly or indirectly, to exercise restraint over both the importer and the
supplier of imported goods, legally or operationally, in any manner? Details, as
per (b) and (c) of (9) above?
12. Whether the importer and the supplier
of the imported goods, together, are in a position, directly or indirectly, to
exercise restraint over a third person, legally or operationally, in any manner?
Details as per (b) and (c) of (9) above.
13. Whether the importer and the supplier
of the imported goods are member of the same family?
14. (a) Whether the importer is a sole
agent, distributor or indentor appointed by the foreign suppliers. (b) Give full
particulars of all the suppliers of goods from outside India for whom the
importer acts as agent/distributor/indentor?
15. Whether the importer is a branch or
subsidiary of the supplier of the importer goods? (The word subsidiary has the
same meaning here as in Section 4 of the Companies Act).
16. (a) Whether the importer is engaged in
the local manufacture of any products of the suppliers of the imported goods?
(b) If yes, whether the imported items are used in such manufacture? (c) If yes,
whether the imported items are manufactured or exclusively supplied by the
suppliers? (d) Whether the product manufactured by the importer using the
imported goods is sold under a trade mark, design or patent owned or controlled
by the supplier of the goods or any person related to them?
17. (a) Whether the imported goods are
components parts of CKD/SKD sets for local assembly into finished goods? If yes,
furnish a complete list of the items imported in CKD/SKD condition.
18. In the cases of (16) and (17) above;
(b) Are the same components imported by any person into India as spares for
stock and sale? If so, please furnish the prices at which such imports are
made.
19. Whether the importer has imported any
capital goods, plant, machinery, equipment, etc. from the supplier of the
imported goods or its related or associated concerns or persons? Please furnish
details.
20. Is any amount paid or payable, directly
or indirectly, to or on behalf of the supplier of the imported goods for
engineering, development, art work, design work, plans or sketches undertaken
elsewhere than in India and connected with the production of the imported goods?
Are any services rendered by or on behalf of the importer relatable to this?
21. Is the import of the goods covered
under an agreement? Are there other agreements between the importer and the
supplier? If yes, list them.
22. What is the basis of arriving at the
price in the invoice? Is it (a) Price list with discount, (b) Net discounted
price (c) Quotation, (d) Transfer price; or (e) Other (please specify)?
23. Do the suppliers of the imported goods
supply the same directly to any other person in India? If so, please furnish the
prices at which these imports are made with supporting documents.
24. What is the form of payment by the
importer for the imported goods? Furnish the heads of accounts under which other
payments, if any, are made to the supplier of the imported goods, and details of
the payments/transfer of funds in any form.
25. Furnish the total quantity and FOB
value of imports made by the importer from the same supplier during the last
three years.
26. Amount of royalty/technical know-how
fees/licence fee/any other fee paid or payable by the importer to the supplier
of the imported goods.
27. Furnish the full details of amounts, if
any, received by the importer in the form of agency commission, overriding
commission or any other remuneration received either from other importers in
India or from the supplier of the imported goods.
28. Expenses incurred by the importer on
behalf of, by understanding or agreement with, or under instructions from the
supplier of the imported goods, e.g. advertising, propaganda expenses or any
other expenses for the promotion of sales of the imported goods.
29. Whether the supplier of the goods
supplies identical, similar or connected items to buyers/branches/collaborators
in other countries? If yes, prices at which such transaction have taken place,
for the last one year.
List of Documents required to be submitted by the
importer
A. In
case of sole agent/sole distributor/sole concessionaire
1. Agency agreements of the
importer with any person.
2. Specimen copies of the
import invoices and bills of entry.
3. Specimen copies of invoices
for import of identical, similar or connected goods by this party through the
present importer.
4. Specimen copies of invoices
for import of identical, similar or connected goods by a company associated with
the importer.
5. Commission notes and credit
notes in case of amounts received from outside India.
6. Annual reports of the
importer’s business concern for the last three years.
7. Price lists for import and
sale of the imported goods.
8. Statement regarding percentage of shareholding of/in any Indian company
along with number of common director.
9. Statement regarding equity
participation of/in foreign company.
10. Indent/invoice-wise statement of
commission received in the last three years.
11. Details of remittances along with
method, mode and deferred payment details, if any.
12. Statement of expenses as required under
question number 28 of the questionnaire.
B. In case of subsidiaries, holding
companies, and those who have collaboration agreements or similar
agreements
1. Collaboration
agreement/joint venture agreement/other agreement with the supplier of the
imported goods or with any other person acting for the supplier.
2. Approval of Government of
India/R.B.I. to the agreement, if any.
3. Statement for the last
three years till date, duly certified by a Chartered Accountant, containing the
following information :-
(i) CIF value and landed cost
of imports from the suppliers of the imported goods, the collaborator, or
associated companies;
(ii) CIF value and landed cost of
imports from other suppliers;
(iii) Value of standard bought-out components
procured in India;
(iv) Value of other components procured in
India;
(v) Ex-factory value of the
goods;
(vi) Royalty, net and gross, payable or
paid.
4. Representative sample
invoices of own imports for the last three years and photocopies of relevant
bills of entry.
5. Annual reports of importing
company for the last three years.
6. Statement regarding equity
participation in/of foreign company for last three years.
7. Statement regarding
shareholding of/in any Indian company along with particulars of common
director.
8. Current price-list of the
products imported from the supplier of the goods, including spares and warranty
parts imported by any other person.
9. Representative specimens of
invoices of procurement of goods procured from some other person by supplier and
supplied to the importer.
10. Representative specimens of invoices of
imports of identical, similar or connected goods made by companies associated
with importer.
11. Representative specimens of invoices of
imports of identical or similar goods by any other person.
12. Representative specimens of invoices
and bills of entry of imports of identical or similar items as spares and
warranty parts by the importer or any other person.
13. Details of remittances along with
method, mode and deferred payment details, if any.
14. Details regarding any other payment
made to or on behalf or under the instructions of the supplier.