M/S Beckhoff Automation Pvt. Ltd vs Commissioner Of Customs (Import), ...

(Arising out of Order-in-Appeal No. 290/2008/MCH/AC/Gr.IIA/07-08 dated 21.11.2008 passed by the Commissioner of Customs (Appeals), Mumbai).

For approval and signature:

Honble Shri Anil Choudhary, Member (Judicial) Honble Shri P.S. Pruthi, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy : Seen of the order?

4. Whether order is to be circulated to the Departmental : Yes authorities? ======================================================

M/s Beckhoff Automation Pvt. Ltd. Appellant

Vs.

Commissioner of Customs (Import), Mumbai Respondent

Appearance: Shri Bharat B. Raichandani, Advocate with Shri Mihir Deshmukh, Advocate, Shri Abhijit Singh, Advocate and Shri Omkar Sharma, Advocate for Appellant

Shri Ahibaran, Addl. Commissioner (AR) for Respondent

CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) SHRI P.S. PRUTHI, MEMBER (TECHNICAL)

Date of Hearing: 20.03.2015

Date of Decision: 20.03.2015

ORDER NO.

Per: P.S. Pruthi

The appellants are in appeal against the impugned order passed by the Commissioner (Appeals) in which he upheld the adjudicating authoritys decision holding that duty is payable on the price of the imported goods as per the List price. It was also ordered by the adjudicating authority that on the expiry of three years period of the order of Assistant Commissioner of Customs (SVB), the appellant will continue to pay EDD equal to 1% of the assessment value.

2. The facts are that the appellant being a 100% subsidiary, imported electronic automation parts from their Principal. The appellant are related person in terms of the definition of related person under Rule 2(2) of the Valuation Rules. The appellants were receiving the imported goods at a discount of 35% to 45% on the List price of the Principal. The appellant submitted evidence to the effect that an independent dealer by the name of M/s Inteltek Automation Pvt. Ltd. was receiving the same goods from the same supplier at a discount of 30% to 35%. The difference of 5% to 10% in the discount received by the appellant and M/s Inteltek Automation Pvt. Ltd. was explained by the learned Counsel as being their commission on account of the after sales support service given by them to their customers. M/s Inteltek Automation Pvt. Ltd., an independent dealer, was not required to provide such after sales service. As per the agreement with the Principal, the appellant is to receive 15% on the Inteltek price. The learned Counsel also showed us comparison between their price and price at which their competitor was selling similar goods in India, which were manufactured by another manufacturer. However, the description of the goods in the two cases appears to vary.

2.1 The adjudicating authority did not accept the contention of the appellant and ordered that the suppliers List price be accepted as a transaction value under Rule 3 of the Valuation Rules and also ordered for extra duty deposit of 1% on the expiry of three years period of the SVB order, if no review order is passed after three years. The Commissioner (Appeals) while upholding the order of adjudicating authority stated that the appellant had failed to provide price data for identical/similar goods imported by an unrelated or independent buyer from the said supplier. Further, the appellant could not produce evidence to justify that their import price should be accepted. The Commissioner (Appeals) also referred to the reply to the questionnaire filed by the appellant with the Department in connection with the SVB valuation, in which the appellant had mentioned that the Principal had control over the corporate policies of the appellant. Further, it is also recorded by him that the invoice produced by the appellant of M/s Inteltek Automation Pvt. Ltd. actually pertains to the import made by their groups/companies/distributors. He further mentioned that the appellant used to get monthly fee of 5000 Euros for the services rendered on account of trade show and seminar participation and other tasks.

3. Heard both sides and considered the submissions.

4. At the outset, we may mention that both the adjudicating authority and the Commissioner (Appeals) have not passed a well reasoned order. There is no dispute on the fact that the appellant is related to the supplier (Principal) being a 100% subsidiary of the supplier. Rule 3 of the Valuation Rules provides for discarding the invoice price if there is evidence that the relationship between the supplier and the importer has influenced the price. The facts in this case are that the appellant is receiving goods at a value which is discounted by 35 to 45% on the value in the List price. There is no evidence whatsoever forthcoming from the record that the relationship has influenced the price. Mere passing of discount by the supplier to the importer does not necessarily lead to a conclusion that the discount has been passed on account of the relationship. The appellant have explained that the discount was also given to an independent dealer. Further, it was also explained that the difference between the discount to the appellant and to the independent dealer is due to the fact that the appellants were providing after sales service to customers in India. The commission received by the appellant to the extent of 15% over the price at which Inteltek was importing the goods is also explained by them. This is a normal commercial practice. Unfortunately, neither the adjudicating authority nor the Commissioner (Appeals) have followed the legal provisions and judicial pronouncements in rejecting the transaction value declared by the appellant. They have not proceeded sequentially through the Valuation Rules in determining the value. The whole case has been dealt by the lower authorities in a very casual manner without examining the evidence and circumstances provided by the appellant in the form of import by another independent dealer and the provisions of law, particularly the Valuation Rules. Therefore, it would be most appropriate to remand this case back to the adjudicating authority for taking a proper legal view in the matter.

5. The adjudicating authority also ordered the appellant to pay the EDD of 1% on their imports after the expiry of his order in 2011. Board Circular No. 11/2011-Cus dated 23.2.2011 requires that if finalization is not completed within 4 months from the date of reply to the questionnaire provided by the Customs, the extra duty deposit should discontinued. That there is no reason to charge 1% EDD is also supported by the decision of Honble Mumbai High Court in the case of E I Dupont India Pvt. Ltd. vs. Union of India  2014-TIOL-1315-HC-MUM-CUS.

6. In the end, we order 

(a) The case is remanded back to the adjudicating authority, who will decide the matter within three months of the receipt of this order as the issue pertains to the period 2008 onwards. He will afford an opportunity of personal hearing to the party before taking a decision.

(b) Extra Duty Deposit (EDD) of 1% is not payable by the appellant on clearance from 2011 onwards.

(Dictated and pronounced in Court)

(Anil Choudhary) (P.S. Pruthi) Member (Judicial) Member (Technical)

Sinha

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