MINUTES
OF THE MEETING OF CHIEF COMMISSIONERS AND COMMISSIONERS OF MUMBAI ZONES
HELD IN THE DIRECTORATE GENERAL OF VALUATION ON 12TH JANUARY
2005.
A meeting was held in the
Directorate General of Valuation on 12th January 2005 to discuss the issues
concerning customs valuation as per the agenda circulated vide
F.No.Val/Tech/90/2004 dated 23rd December 2004. The following officers attended the meeting:-
1. Shri Joseph Dominic, Chief Commissioner
of Customs, Nhava Sheva,
Mumbai Zone II.
2. Shri K.M. Tiwari, Chief Commissioner of
Customs, Mummbai Zone I
3. Shri S.S. Renjhen, Director General
(Valuation), Mumbai.
4. Shri D.S.Sra, Commissioner of Customs
(General), Mumbai Zone I
5. Shri Dutt Majumder, Commissioner of
Customs, Mumbai Zone III, Pune.
6. Shri K.P. Mishra, Commissioner of
Customs (Export), Mumbai Zone I.
7. Shri Y.G. Parande, Commissioner of
Customs, Mumbai Zone II.
8. Shri N. Sasidharan, Commissioer
(Valuation), Mumbai.
9. Shri Najib Shah, Commissioner of Customs (Import), Nhava
Sheva, Mumbai Zone II.
10. Shri A.K. Prasad, Commissioner of
Customs (Import), Mumbai Zone I.
11. Smt. Seema Arora, Addl. Commr.
(Valuation), Mumbai.
12. Shri P.K. Sinha, Addl. Commr., Nhava
Sheva, Mumbai Zone II.
13. Ms. Reshma Lakhani, Addl. Commr., NCH,
Mumbai Zone I.
14. Shri Rajendra Singh, Joint Commissioner
(CCO), NCH, Mumbai Zone I.
15. Shri S.K. Rahman, Joint Commissioner
(Valuation), Mumbai.
16. Shri K.K. Katheria, Dy. Commissioner
(Valuation), Mumbai.
17. Shri R.R. Bangar, Asst. Commissioner
(Valuation), Mumbai.
2.
Shri S.S. Renjhen,
Director General of Valuation, welcomed the participants and explained the
objective of the meeting. He said that
the Directorate (DOV) had made several initiatives for providing valuation
tools and guidance to field formations and that it was felt necessary to
evaluate the efficacy of these measures. The Directorate had also noticed wide
variation in valuation practices among Customs houses in several areas
indicating the need for better coordination of Customs valuation work and its monitoring
at senior levels. The Directorate was
also looking for feedback from the Commissionerates regarding the effectiveness
of valuation tools, information and guidance provided by it in improving the
quality of assessment work. It was thus
felt appropriate to have a regular mechanism for interaction at senior levels
for examining the valuation related issues and achieving uniformity in
approach. The experience gained in
Mumbai Zone will be replicated in other in other Zones in due course.
3. The meeting started with a presentation
by the Directorate highlighting the initiatives taken by the DOV in the area of
Customs valuation. The presentation
also focussed on the issues requiring urgent attention and provided the brief
for discussion on the Agenda points. A Brochure
containing the relevant information and documents for discussion in the meeting
was also distributed to the participants. The various issues discussed during
the meeting and the conclusions arrived at are summarized below.
(i) Identification
of sensitive commodities:
4. It was noted that the Directorate
General of Valuation (DOV) had requested the Customs houses / commissionerates
to send a monthly report, vide letter F. No. VAL/TECH/82/2004 dated 28.08.2004,
concerning the sensitive commodities in a proforoma designed the purpose. It
was pointed out during the DOV presentation that the Directorate had been
reviewing the list of sensitive commodities used for NIDB analysis
periodically, taking into account the monthly reports received from Custom
houses, and also on the basis of commodity studies carried out by the officers
of the Directorate. The latest list
currently in use has been reproduced in the Brochure (List I) and it contained
257 commodities. The Custom houses were requested to review this list based on
the experience in commodities handled by them and recommend additions /
deletions of sensitive commodities, in the monthly reports so as to enable the
Directorate to up to date the list.
5. Further, it was brought to the notice
of the participants that the Directorate had worked out a shorter list of
highly sensitive commodities on the basis of valuation trend analysis with the
help of NIDB and worked out the acceptable value bands. This short list (31
commodities given in List II of the Brochure) was prepared on the basis of
studies for the period September to November 2004 and will be utilized for
valuation risk assessment in the Risk Management System under development. This
list would also be periodically reviewed on the basis of assessment practices
reported by Custom houses and studies conducted by DOV for the necessary
additions / deletions as well as modification of value bands so as to keep it
updated.
6. Another list of sensitive commodities
prepared by the Directorate was also added as List III to the Brochure. This
List consisted of goods with description of general nature for which the
Directorate was not able to carry out NIDB analysis for want of further details
like brand, model, specifications, etc. However, these items continue to be
sensitive and efforts would have to be made by Custom houses to capture more
specific information during the data entry and assessment. The valuation trend
of the commodities also require regular monitoring.
7. During the discussion it was pointed
out that compiling the requisite report
of sensitive commodities in the proforma prescribed by the Directorate was
quite time consuming and it would be desirable to have these reports prepared on
a quarterly basis. This suggestion was accepted and it was agreed that
henceforth the report on sensitive commodities could be sent to DOV on a
quarterly basis. The Custom houses should however should ensure that the
requisite information is prepared after objective study and valuation trend analysis
in respect of important commodities noticed during the relevant period. It was
noted that only one sensitive commodity report was so far received by DOV from
Mumbai I Zone (for the month of August 2004) and that no reports were yet
received from the Mumbai – II and III Zones.
All the pending reports will be consolidated into one report for the
quarter ending 31st December 2004 and thereafter quarterly reports will be
submitted for January-March 2005 and other subsequent periods.
(ii)
Utilisation of NIDB and other instruments provided by DOV
8. It was noted that the DOV has been is
providing a lot of valuation related information (NIDB, CRD, Valuation News,
Valuation Bulletin, Alerts, etc.) to the field formations, and that it was
necessary for the Custom houses to take appropriate steps to ensure that these
databases and information are made available to the assessing officers so as to
enable them take well informed decisions. The Directorate, during its
inspections of certain Custom stations, had observed that there was some
information gap in this area and that the details were not being percolated
down to the cutting edge level. For
example, it was found that the NIDB data being dispatched every week by the Directorate
was not being downloaded by Customs stations.
Similarly, the Valuation Bulletin, Alerts and other information
documents were not in the knowledge of the assessing officers. In certain cases
where the information was accessible, the officers were not making use of them
in their daily assessment work, indicating lack of seriousness and poor
monitoring.
9. The DOV had issued a number Valuation
alerts during the current year (22 alerts) based on its studies indicating the
trend on undervaluation. However, further studies on the post alert scenerio
had indicated that prompt action was not being taken by several Customs
stations. In this context, a view was expressed that alerts, which are outdated
and irrelevant, should be withdrawn to avoid confusion in the field. In this
regard, DOV clarified that the situation after issue of Alerts was periodically
reviewed. It was agreed that the alerts should be suitably modified or
withdrawn, if necessary based on the results of the review. Another suggestion
made in the meeting was that the Alerts should be serially numbered each year
for the ease of reference and this was agreed to. A further suggestion was to build up an automatic alert system in
the ICES for the Alert notices on the basis of description of goods or
CTH. It was noted that this matter
required examination by the Directorate General of Systems for appropriate
modification of EDI software and implementation at the national level.
10. It was noted that quality of assessment
work could substantially improve if the information and details provided by the
DOV were made available to the assessing officers and ensuring their use
regularly by closer monitoring of the valuation work at senior levels. In this
context, the Board’s instructions concerning setting up a Special Valuation
Cell in each Customhouse for monitoring the valuation work was also referred
to. There was a consensus that the Special Valuation Cell should be
strengthened in the customhouses for co-ordinating the valuation work among the
various assessing groups and to enhance the interaction with DOV for a unified
approach. The SVC could also monitor the utilization of NIDB and other
information provided by the DOV. Each Custom house should designate a senior
officer (Joint / Addl. Commissioner) as DOV Nodal Officer, who could also
function as the head of SVC. He should be provided with necessary supporting
staff to perform the function of the Special Valuation Cell effectively. The
Special Valuation Cell (SVC) could attend to the following work: -
q Updating the CH database and monitoring access;
q Ensuring follow up action on NIDB outliers;
q Identifying sensitive goods and monitoring valuation trends;
q Weekly downloading all Valuation related information
(Valuation Bulletin, Weekly Valuation News, Valuation alerts, Guidelines, etc.)
from DOV website and providing to assessing officers;
q Coordinating with Service Center and appraising staff for
improving quality of data;
q Liaising with System Manager (EDI) to ensure smooth flow of
raw data to Directorate of Valuation and receipt weekly analyzed data from
Directorate of Valuation;
q Monthly Reports to DOV.
11. It was pointed out during the DOV
presentation that absence of full description, model, specifications, etc. in respect of imported goods, as well as
different units of quantity used for the same goods are major problems in
improving the quality of import data. In this regard, a paper prepared by the
DOV highlighting the problems concerning data quality in the context RMS was
also circulated to the participants. It was pointed out that these deficiencies
in data quality interfere with the data analysis for NIDB and give inaccurate
and even misleading results. Further, such imperfect data brings down the
effectiveness of the Risk Management System. It was therefore necessary to
ensure that adequate checks are introduced to ensure data quality, especially
to capture the full description of goods concerned at the time of accepting the
declarations. These checks could be further strengthened by objective scrutiny
by officers at the assessment and clearance (during examination) stages. In
this regard, it was noted that necessary Public Notices and Standing Orders are
already in existence in Mumbai Zone stipulating the requirement of providing
full and accurate information at the time of filling the declarations and that
these needed to be strictly enforced.
12 After discussion, it was agreed that
the custom houses should take measures to strictly enforce the above
requirements at the service center so as to ensure capturing all relevant
information. This will be further scrutinized at the time of assessment and
examination / clearance of the goods.
It was also agreed that documents found lacking with regard to the
information and other required details would be sent back to the importer for
providing the missing information by way of amending the documents. A strict enforcement of this procedure would
send the signals to the importing community that they need to take due care in
furnishing the declarations and that they would be answerable for the mistakes
/ omissions. It was further agreed that
the issue of data quality would be monitored and enforced at senior levels in
the customhouses.
13. The work of the Special Valuation Branch
was also briefly discussed in the meeting.
It was pointed out by DOV that the Central Registry Database (CRD) has
been developed with a lot of effort and that it is not being fully utilized by
customhouses. The database is presently
on the DOV website and it needs to be downloaded to the local Intranet by the
customhouses for allowing the assessing officers to have access to it. Further, the SVB concerned would have to be
provided the internet connectivity for updating the information concerning the
decision of SVB cases as well as fresh registrations. This could be done online
by making use of the special username and password granted to the SVB
officers. It was also pointed out that
most of the SVB cases figuring in the CRD pertain to Mumbai Customs house (2039
out of 3484 cases) and that a large number of them were incomplete with regard
to essential details, (such as the suppliers name, decision taken) which needed
to be uploaded for making the CRD meaningful. Further, the quality of SVB decisions
needed considerable improvement. In Mumbai Custom house, the SVB orders were
still being passed by the Asst, commissioner, though it was already decided in
the Conference of Chief Commissioners in August 2003 that the SVB decision
making level should be upgraded to that of Joint Commissioner.
14. The Commissioner (Import), Mumbai
Custom house in charge of the SVB said that he had initiated steps to
inventorise the SVB cases and assured that all efforts would be made to supply
the missing information on all SVB cases. It was noted that many of the
decisions were very old and that the validity of SVB decisions being only for
three years, a comprehensive review of all such decisions over three years
should be undertaken by Mumbai Custom house without delay.
15. In the context of SVB decisions, the
problem encountered in deciding whether to include or exclude various
categories of royalties and licence fees in the Customs value was mentioned. It
was noted that this question is independent of the fact whether the importer
and exporter is related, and that such an examination was needed even if
relationship did not exist. The problem areas could be studied for issue of
guidelines. It was agreed to study some typical cases on the basis of
information provided by customs houses.
(v) Valuation
Risk Assessment for RMS
16. It was noted that DOV was actively
involved in the development of Risk Management System for import clearance and
that the necessary input for the assessment of valuation risk is being developed
by the DOV. For that purpose, the DOV
had identified a list of highly sensitive commodities and worked out the
acceptable value bands based on the imports noticed during the period September
– November 2004. Copy of this list
along with the value bands was also included in the Brochure prepared for the
meeting. It was explained that
necessary risk rules in respect of valuation will be worked out by the RMS Team
based on the inputs received from the Valuation Directorate. Further, the list of commodities identified
as highly sensitive would be kept under periodic review by the DOV based on the
study of assessment practices and the international price information gathered
from various sources.
17. It was pointed out that the valuation
risk assessment for the RMS should also take into account the volume of
imports, duty structure and revenue contribution of the commodities in
question. It was agreed that DOV could
take care of these aspects based on the data and information available to
it. It was however noted that the input
from Customs stations particularly in respect of sensitive commodities was very
important to develop and maintain a successful valuation risk assessment
mechanism.
(vi) Export
Commodity Database
18. The progress in the development of the
Export Commodity Database was explained by the DOV. It was recalled that a
primary version of the database (a structured database without analysis) had
already been prepared and made available on the DOV website. This database will have to be downloaded by
Customs houses and provided to the assessing officers on the Intranet for
review. The DOV had already asked for
comments and suggestions from the CustomHouses for improving format and content
of the Export Commodity Database. The entire data fields captured are presently
included. Specifically, it was requested to provide information concerning
essential data fields required by the assessing officers in their day-to-day
work of export valuation. Based on the comments received, DOV will modify the
format and curtail the number of fields so as to reduce the bulk of the data
and make it more user friendly.
19. It was also noted that data analysis
software for the Export Commodity Database was being developed by the CDAC
(NCST) and that necessary input in this regard from the custom houses,
especially with regard to the details of analyzed information needed, would
also be useful.
20. It was agreed that the Customhouses
should arrange to review the primary version of the Export Commodity database
quickly and forward comments and suggestions to the DOV as early as possible.
(vii) Review of Valuation related Standing Orders:
21. It was explained in the DOV presentation
that there are several Standing Orders in existence Mumbai Zone fixing floor prices
for various commodities and that a review of these Standing Orders was agreed
upon in the conference of Chief Commissioners held in August 2003 for issue of
necessary guidelines. Accordingly, DOV
had also written to the Chief Commissioners for providing information
concerning the Standing Orders in existence along with their suggestions for
issue of guidelines. Such guidelines
have already been developed and issued in respect of stainless steel flat
products. There are several other
product areas ( such as plastics, textile fiber and yarn, metals, etc.) where similar Standing Orders are in
existence and they could be reviewed for issue of guidelines.
22. It was agreed that customhouses will
take stock of the Standing Orders concerning floor prices in existence and a
consolidated proposal would be sent to the DOV for issue of guidelines.
(viii) Valuation
Inspections
23. DOV had been entrusted with the
responsibility of Inspecting Customs stations from the Customs valuation angle.
It was explained by DOV that these inspections were to see whether the
valuation norms evolved were being applied uniformly and that the data,
guidelines and information provided by the DOV are being used effectively.
Information for the purpose of Inspection is gathered in a proforma supplied in
advance and the details are verified and discussion held on the spot with the
Customs house officials by the visiting DOV officers. Inspections were carried
out in six Customs stations successfully and the findings have been useful to
improve upon the working methods and quality of valuation work. More inspections are scheduled during
January and February 2005.
24. It was pointed out that information
requisitioned in the Valuation Proforma was very substantial and it would require
a lot of work to compile the data. DOV
clarified that most of the information related to volume of import and revenue
realization particulars and they should be readily available. However, the
propforma would be reviewed with a view to reducing the data requirement at a
later stage based on experience gathered.
At the request of Commissioner (import), Mumbai, it was decided to
postpone the Inspection of Mumbai Custom house to a convenient time after March
2005. However, It was agreed to carry
out the Inspections of Nhava Sheva (Jawahar) Customs house and Mumbai ACC as
scheduled in January and February, respectively.
25. In the context of uniform and effective
application of valuation norms, the need for training of field officers on
Customs valuation was mentioned. It was pointed out that due to frequent turn
around of apprising staff and new officers coming from the central Excise
formations, there was a need to arrange more training courses and workshops on
Customs Valuation. It was noted that the DOV had conducted some workshops in
the past and they had been quite useful. It was suggested that similar
training-cum-workshops should be organized again.
(ix) Arrangement for regular interaction
26. It was suggested by the DOV in its
presentation that a regular arrangement be established for interaction between
the Mumbai Zone Customhouses and DOV for co-ordinating the Customs valuation
issues. This was unanimously agreed to
and it was decided that quarterly meetings should be held at the level of Chief
Commissioners and Commissioners. This “Customs Valuation Committee of Mumbai
Zone” will discuss the problem areas concerning valuation for a unified
appraoch. The points for discussion will be sponsored by Customhouses and the
DOV. The agenda and date for the
meeting will be set by DOV. The minutes
drawn up pursuant to these meetings to be circulated to all customhouses /
custom stations. As regards issues
concerning policy, the matter along with recommendations of the Committee would
be submitted to the Board (CBEC) for decision.
(x) Specific
issues for discussion at the next meeting
27. The following specific issues raised in
the meeting will be examined at the next meeting of the Customs Valuation
Committee of Mumbai Zone.
(i)
Case studies concerning
royalties and licence fees to be included in the assessable value of imported
goods;
(ii) Legality of registration of long term contracts for import
of goods and acceptance / validity of these contract prices in respect of high
sea sales.
It
was agreed that necessary information and details in respect of Item No. (i)
above would be sent by Commissioner of Customs (Import), Mumbai and
Commissioner of Customs, ACC, Mumbai to DOV for preparing the brief for
discussion. In respect of Item No. (ii)
above, necessary brief will be prepared and sent by the Commissioner of Customs
(Import), Nhava Sheva to the DOV.
28. The meeting adjourned expressing
appreciation for the work accomplished. The next date for meeting of the
Customs Valuation Committee of Mumbai Zone will be notified by the DOV in due
course.
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