IMPORT SUPPLY NO: 4/2001
EXPORT SUPPLY NO: 4/2001
DATE: 16.04.2001

PUBLIC NOTICE NO.52/2001 Date:12.04.2001

Sub: Valuation (Customs) cases handled by Special Valuation Branch of the Customs Houses Review of instructions.
The existing instructions and he 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 01.01.98-

a. The Special Valuation Branch’ (SVB for short) as an institution specializing 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.

b. The Special Valuation Branch of the major Custom House, (out of the 4 mentioned earlier) which is located proximate to be Head or Corporate Office of the importer (having special relationships etc, with the suppliers) would handle the investigation 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, 188") 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 of further enquiry, the concerned case of import may be referred to the SVB of the concerned Custom House where a separate case file shall be opened and registration number assigned to the case. Similar reference to SVB to took into valuation an 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 transaction of any importer which a particular supplier.

(c) It will be deemed that a prima facie, case for investigation by the SVB where the importer is not able to provide evidence to the effect that the price has between influence by the relationship or where the importer is not able to demonstrate that the price for the said good closely approximates to one of the following values ascertained at or about the same time.

i. The transaction value of identical goods, or 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.

2. Apart from investigation of special relationship case, SVB will also handle more complicated cases of additions to declared transaction value as stipulated under Rule 9 of the Valuation Rule. No reference to SVB would be necessary where any additions are sought to be made under clause (a) and (b) of rule 9(i). 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.

3. All cases to be register in the SVB for special investigation shall be with the specific approval of the concerned Commissioner of Customs

4. Where the imports requiring investigation by SVB are 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 Custom 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 terms of paragraph 1(b) above.

5. There should be greater co-ordination amongst the SVBs of the four Custom Houses which undertake investigations in case where special relations between the import and supplier exist or in case 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 House on a regular basis. Once a case is registered by the SVB of one of the 4 Custom House, 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 thought the monthly Valuation Bulletins to all Custom Houses, so that imports effected at any Custom House in such cases under investigation by SVB are undertake provisionally and interests of revenue are safeguarded.

6. The procedure so far being adopted for registration and subsequent investigation of the case may continue to be followed. The requirement of furnishing information and the formats of the sample questionnaire, as 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 be import soon after it is decided (with Commissioner’s concurrence as mentioned earlier) to refer the case to a SVB. Any import 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.

7. Upon receipt of reply to the questionnaire within the prescribed time limit, the SVB will decide within 7 days whether the import has replied to the questionnaire substantively. Otherwise, immediate further information not furnished will be sought before taking steps for finalization of investigation

8. Board is very keen that decision to make reference to SVB and advising all assessments of particular for goods from particular suppliers to be undertake on provisional basis, should be made after very careful consideration and good deal of circumspection. It would be imperative for the concerned Commissioner of Custom to critically examine the issues 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 bill of entry, in a particular case, once the case has been registered with the SVB.

9. The amount of extra duty deposit presently kept at 1% will 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 import, the extra duty deposit will be increased to 5% till the date of receipt of reply by the Department, It is therefore impressed upon the concerned importers to ensure timely replies being sent tot the Questionnaire to avoid any higher deposit being insisted.

Further, where provisional assessment is being resorted to, the investigation and finalization of the assessment must be completed within four months form 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 responsible for inexplicable delay in finalization.

10. It has been reported that the Declaration forms prescribed for valuation purposes are being filled up in a very casual manner by the importer leaving many columns blank. All the assessing officers are directed to ensure correct filling up of these forms including reference to the relevant B/E before they allow individual clearance after provisional assessment. (The declaration form is being revised to include details of the ports/ICDs through which the imports will be affected).


Sd/-
(M.C.THAKUR)
COMMISSONEROF CUSTOMS
NEW CUSTOM HOUSE,
MUMBAI

Issued from F.NO. S/26-88/2001 9(G)

Based on the Board’s circular No. 11/2001-Cus dated 23.02.2001

Issued from the F. No. 467/32/2000- Customs V


A T T E S T E D

(P. BALAKRISHNAN)
DY.COMMISSIONER OF CUSTOMS, APPRAISING (GENEAL)

Annex-A

Questionnaire to be filled by importers who are related to the foreign suppliers

1. Name of the importer with fill address of the Head or Corporate Office registered office, administrative office/ factory and PAN No

2. Whether the import is a proprietorship/partnership/private limited company/public limited company/branch office of company incorporated outside India.

3. (a) Name of the 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 import, 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 import 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 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, directed or indirectly towns 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 import.

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 import 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 import and the supplier of the imported goods are members 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/distributors/Indentor?

15. Whether the import is a branch or subsidiary of the supplier of the import goods? (The words subsidiary) has the same meaning here as in section 4 of the Companies Act.)

16. (a)Whether the import is engaged in the local manufacture of any products of the suppliers of the importer 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 import using the imported goods is sold under a trademark, 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 component 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 case of (160 and (170 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 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 agreement 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 form the same supplier during the last three years

26. Amount of royalty / technical know how fees/ license fee / any other fee paid or payable by the importer to the supplier of the imported goods.

27. Furnish the full details of amount, if any, received by the importer in the form of agency commission, overriding commission or any other remuneration received either form 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 sale 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 bill 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. Commissioner 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 agreement 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 form 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 bill 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 shareholdings 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 invoice of procurement of goods procured form some other person by the 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 bill 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.

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