By TIOL News Service

CHENNAI, MAR 21, 2016: THE M/s. Instron India Pvt. Ltd., imported components and spare parts for testing equipments from M/s. Instron Limited, UK. The appellant also declared that they are subsidiary of M/s. Instron Holdings Limited, UK and not related to M/s. Instron Limited, UK. The issue was referred to SVB. The DC (SVB) in his order dated 29.05.2003, held that the supplier and the appellants are related to each other under Rule 2 (2) (i) of the Customs Valuation Rules, 1988 (CVR) and ordered to load the transaction value of spares by 22.66% under Rule 8 of CVR, 1988. The Commissioner (Appeals) upheld the demand. Hence the present appeal.

The appellant contended that they have imported components and spare parts from M/s. Instron Limited, UK and the supplier is not related to the appellant M/s. Instron India Pvt. Ltd. The department considered the commission of 17% received by the appellant from the supplier, which is towards the sale of equipment to third party in India. The commission is related to the service rendered by the appellant on behalf of the suppliers on the third party imports.

After hearing both sides, the Tribunal held:

++ The appellant contended before the Commissioner (Appeals) itself that they are related only to M/s. Instron Holdings Limited, U.K and they are nowhere connected to M/s. Instron Limited, U.K. directly or indirectly. The fact was accepted by the Commissioner (Appeals) in his OIA. However, the DC (SVB) while determining the relationship and while finalizing the transaction value held that 17% commission received from the foreign supplier be added to the transaction value of the imported goods, on the ground that this is on account of the goods imported by the third parties, which is indirectly flowed back to the Indian firm. The adjudicating authority in his findings also admitted that the agency commission received by the appellant is on account of the service rendered by the Indian firm, on behalf of the suppliers and the discounts they enjoyed. This admittedly confirms that the commission amount received from their foreign supplier is towards the service rendered by the appellant in India on third party imports. It is also clear that the appellate authority has not brought out any clear findings on the relationship between the appellant and the foreign supplier. In fact, the Commissioner (Appeals) has admitted that there is no detail available on the relationship between the supplier and the Indian firm but assumed that the parties are related on the presumption that M/s. Instron Holding Limited, UK controls the appellant firm and the supplier firm without any evidence.

++ Perusal of facts in question reveal that the appellants have received 17% commission from the supplier which is not related to the imported goods but for the goods supplied to the third party and the services rendered by the appellant in India on such goods. Thus the commission received by the importer is not related to the imports made by the appellant but in respect of imports made by third party.

Thus, it was held that 22.66% loading of the value ordered by the DC (SVB) on account of the commissions received from the supplier is not liable to be loaded on the transaction value.

(See 2016-TIOL-663-CESTAT-MAD)