Regarding Customs Valuation (Determination of Price of Imported Goods)
Rules, 1988 - Cases handled by Special Valuation Branch of the Custom Houses
Circular No. 1 dated 1st
instructions and the procedure 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 in the context of several representations received from
the trade and industry about inordinate delays in the finalisation of cases
involving related personal transactions, payment of royalty and licence fees,
technical collaboration agreements between the seller and buyer and also the
financial burden on account of the requirement of the extra duty deposit etc.
2. On the basis of
this review, the Board has taken the 'following decisions:
'Special Valuation Branch' (SVB, for short) as an institution specialising in
investigating transactions involving special relationships and certain special
features should be continued. However, these SVBs would be located only at four
Custom Houses i.e. at Chennai, Calcutta, Delhi and Mumbai. Any decision taken in
respect of a particular case in any of the four major Custom Houses shall be
followed by all other Custom Houses/ formations.
SVB of any one of the four Custom Houses, located proximate to the Head or
Corporate Office of the importer or as requested by the importer would handle
the investigation of such a case. Where 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 enquiry, the concerned case of import may be
referred to the SVB of the concerned Custom House, where a separate case file
would be opened and a registration number assigned to the case.
examining whether a prima facie case exists for investigation by the SVB, the
following criteria should be applied: -
(a) Where the
importer provides evidence to the effect that the goods under assessment have
been obtained at the same price by unrelated buyers or where the importer is
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 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.
Assessment Group will proceed to determine the value for the goods under
assessment as declared by the importer without any reference to SVB. In coming
to a conclusion in this regard, the provisions of Rules 4(3)(b) and 4(3)(c) of
the Valuation Rules, 1988 and the interpretative Notes relating to Rule 4(3)(b)
should be kept in view.
however, any particular case is not covered by (a) above and an examination of
the circumstances surrounding the relevant sale is clearly required to be
undertaken, the case should be referred to the SVB. In such a case, there should
be prima facie evidence of the relationship having influenced the price declared
by the importer.
regard to transactions where the sale or price is subject to certain
restrictions, or conditions or considerations [c.f. Rules 4(2)(a) and 4(2)(b)]
the Assessment Group will examine the restrictions or conditions or
considerations as they appear in the Agreement or any other document concerning
the sale, determine the value and complete the assessment without referring the
case to the SVB.
the Assessment Group or the importer is of the opinion that the correct method
to be adopted is the 'deductive value' method, the case should be referred to
the SVB after initial assessment on provisional basis since the process of
arriving at the Customs Value under this method would require examination of the
sale transactions over a period of time. Similarly, where the 'computed value'
method is sought to be applied the case may be referred to the SVB.
regard to additions to the transaction value made under Rule 9 of the Valuation
Rules, 1988, the criteria for reference to SVB would be as follows:
any additions are sought to be made under Clauses (a) and (b) of Rule 9(1) the
determination of value in each case should be completed by the Assessment Group
without any reference to the SVB.
the additions sought to be made are in the nature of 'royalty and licence fee',
if on a prima facie consideration the payment of such "royalty or licence
fee" satisfies the conditions laid down in the relevant rule [i.e. Rule
9(1)(c)] read with the interpretative note relating thereto the case may be
referred to the SVB after following the usual provisional assessment procedure.
where the value of any proceeds of any subsequent sale, disposal or use of
imported goods [i.e. Rule (9)(1)(d)] or other payments made as a condition of
sale of imported goods [i.e. Rule 9(1)(e)] prima facie merits addition to the
transaction (invoice) price the case may be referred to the SVB after following
the provisional assessment procedure.
cases to be registered in the SVB for a special 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 noticed in a Custom House or Customs
formation other than Chennai, Calcutta, Delhi and Mumbai Custom Houses, all the
relevant records should be forwarded to the SVB of one of the Custom Houses
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 terms of paragraph 2(2) above. There
should be greater co-ordination between the SVBs of 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 3(2) and 3(3) above. The
information available, showing special relationship in respect of a supplier,
importer, needs to be shared amongst the four Custom Houses on a regular basis
for which a specially designed format could be worked out and prescribed.
SVBs, while investigating transactions involving 'related persons' or cases
entailing additions on account of the special relationships or special features
of the sale transactions, will keep in view all the relevant judgments of the
Courts and decisions of the CEGAT in the matter. In particular, the ratio of the
judgments/ decisions in the following cases should be borne in mind:-
of Customs v. Maruti Udyog Ltd. [1987 (28) E.L.T. 390 (Tribunal)]
of India v. Mahindra and Mahindra Ltd. [1995 (76) E.L.T. 481 (S.C.)]
of Customs v. Essar Gujarat Ltd. [1996 (88) E.L.T. 609 (S.C.)]
The procedure so
far being adopted for registration and subsequent investigation of the cases may
continue to be followed. Thus, the requirement of furnishing information and the
formats of the sample questionnaire, Annexure 'X' (i.e. list of the documents
required to be submitted in case of Sole Agencies/ Sole distributors/ Sole
concessionaires). Annexure Y (i.e. list of documents required to be submitted in
case of collaboration Agreement). statement 'A' (i.e. information to be filed by
Agents, distributors etc.) and Statement 'B' (i.e. information to be furnished
by subsidiaries/ collaboration Agreements), may be continued as in the past. It
is however, emphasised that the required information should not be sought
piece-meal. Any importer to whom the Questionnaire is issued should be directed
to furnish the reply within 30 days of receipt of the Questionnaire.
the minutes of the Conference of Collectors of Customs held (i) at Calcutta on
8th and 9th December, 1988, (ii) at Madras from 23rd to 26thJuly, 199Qread with
the minutes of the meeting of Addl./ Deputy Collector of Customs held in June,
1990 circulated under Boards' letter F. No. 467/ 18/ 89-Cus., V, dated 27-6-1990
and .the contents of Boards' letter F. No. 467/ 36/ 89-Cus., V (ICD) should also
be kept in view. A copy each of these minutes/ letters is enclosed for ready
cases where the provisional assessment procedure is resorted to on account of
determination of value it would be imperative for the concerned Commissioner of
Customs to critically examine the issues leading to the adoption of the
provisional assessment procedure. In each and every case, the decision should be
taken at his level before provisional assessment is ordered.
amount of extra duty deposit presently kept at 5% of the value of the goods
should henceforth be reduced to 1% of the value.
where provisional assessment is being resorted to, the investigation and
finalisation of the assessment should be completed within three months of the
registration of the case in the SVB of the designated Custom House. If no
decision is given within 4 months of the registration of the case, the obtaining
of the extra duty deposit should be discontinued. The time- frame for
finalisation of investigation should be strictly adhered to irrespective of
whether the importer has furnished all the required information or not.
10. As regards
the cases pending with the SVB of various Custom Houses pending as on 30-4-1997,
steps should be taken to complete the investigation and have the issues finally
settled by 28th February, 1998. All the concerned Chief Commissioners and
Commissioners are requested to put in extra efforts by way of re-deploying
officers to achieve this target. As for cases registered from 1-6-1991 to
31-12-1997, all the pending cases should be completed by 30-4-1998.
11. In view of
the tight time-frame laid down for finalisation of SVB cases in para 9 above,
the Commissioners of Customs should institute special monitoring arrangements
and review periodically each pending cases and taken suitable steps to arrive at
a decision. The Commissioners are wholly responsible for adhering to the
12. The receipt of this letter
may please be acknowledged.