Custom, Excise & Service Tax Tribunal
Armstrong World Industries (I) Pvt. Ltd vs Commissioner Of Customs (I) on 22 October, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.C/87419/13 (Arising out of Order-in-Appeal No.272/MCH/AC/GVC/2013 dated 10/04/2013 passed by Commissioner of Customs (Appeals), Mumbai) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) 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? ========================================
Armstrong World Industries (I) Pvt. Ltd., Appellant Vs. Commissioner of Customs (I), Respondent Mumbai Appearance:
Shri.T.Vishwanathan, Advocate for appellant Shri.A.K.Singh, Addl. Comm. (AR), for respondent CORAM:
Honble Mr. P.R.Chandrasekharan, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) Date of Hearing : 22/10/2014 Date of Decision : 22/10/2014 ORDER NO Per: P.R.Chandrasekharan
1. The appeal is directed against Order-in-Appeal No.272/MCH/AC/GVC/2013 dated 10/04/2013 passed by Commissioner of Customs (Appeals), Mumbai. Vide the impugned order, the learned lower appellate authority has set aside the order of the Assessing Officer holding that the transaction value declared by the appellant M/s. Armstrong World Industries (I) Pvt. Ltd., in respect of imports undertaken by them from the related foreign entity M/s.Worthington Armstrong Metal Product Co. (Shanghai) Ltd., China, has not been influenced by the relationship. Aggrieved of the same, the appellant is before us.
2. The learned Counsel for the appellant makes the following submissions.
2.1 The transactions of the appellant in respect of supplies received from the related foreign entity was examined at length by the Assistant Commissioner of Customs, GATT Valuation Cell, Mumbai vide order dated 18/11/2011. The Assessing Officer after considering the documents submitted by the appellant came to the conclusion that the prices for the transaction is a transfer price which was arrived at on costs plus method after taking into account the raw materials costs, manufacturing costs plus profit margin of 25%. Since the cost plus method is an acceptable principle of valuation, he held that the transfer price arrived at on that basis can be accepted as transaction value. The assessing authority also observed that the price at which the goods have been imported by the appellant herein were also the same at which such goods have been supplied to other related foreign entities in Hong Kong, Australia, etc. and therefore, the said price is acceptable. The assessing authority has also examined the issue using deductive method under Rule 7 of the Customs Valuation Rules, 2007 and after providing for operating expenses, financing cost, interest on inventories and receivables, the net profit of the appellant worked out to 12.5% which is reasonable. On that basis he has come to the conclusion that the transfer price on cost plus basis declared by the appellant has not been influenced by the relationship and accordingly, he has ordered for acceptance of the same. However, the appellate authority has observed that the appellants have been getting a discount to 25% to 30% from the related suppliers and this discount is discriminatory in nature and therefore, loading of transaction value to the extent of discount should have been considered by the assessing officer. The lower appellate authority has also observed that special discount limited to exclusive agent can be rejected as per Rule 12 (1) (iii) (c) of Customs Valuation Rules, 2007. Accordingly, the transaction value has been rejected.
2.2 The learned Counsel submits that there is no reason given to rebut the findings of the assessing officer who has examined the matter and considered the value from three different angles and therefore, the impugned order is unsustainable in law. The learned Counsel relies on the decision of this Tribunal in the case of Ashland India Pvt. Ltd., vide order No.A/1064/13/CSTB/C-1 dated 15/05/2013 wherein also a more or less identical issue was involved and wherein it was held that in the absence of any specific findings rebutting the claims of the importer, enhancement of value cannot be done. Reliance is placed on the decision of this Tribunal in the case of Rehau Polymers Pvt. Ltd., vide order NoA/25/13/CSTB/C-I dated 18/12/2012, wherein also it was held that in the absence of any contemporaneous imports price by independent buyers and in the absence of any allegation of any flow back of any consideration from the importer to the foreign supplier, rejection of transaction value is not permissible. Accordingly, it is submitted that the impugned order be set aside and the appeal allowed.
3. The learned Additional Commissioner (AR) appearing for the Revenue reiterates the findings of the lower appellate authority and seeks upholding of the impugned order.
4. We have carefully considered the submissions made by both the sides.
4.1 The assessing authority while examining the matter has considered the issue from three different angles and has come to the conclusion that the transaction value declared by the importer appellant is acceptable. He has observed that the transfer pricing method adopted by the appellant is the cost plus method wherein the raw material costs plus manufacturing cost plus profit margin @ 25% has been taken and therefore, he has concluded that the transfer price declared is acceptable. Further, he has compared the prices declared by the appellant with prices of identical goods supplied to other related parties situated in other countries and found them to be comparable. Lastly, he has analysed the issue under Rule 7 using the deductive method from the sale price of the goods sold in India and working backwards after excluding the operating expenses and finance costs. He has observed that the net profit obtained by the appellant on sale in India is only 12.5% and therefore, the prices declared by the appellant, on the basis of deductive method, is acceptable and accordingly he has come to the conclusion that the transaction value can be accepted. The reasoning adopted by the assessing officer in his order dated 18/11/2011 is impeccable and we do not find any reason to take a different view. On the contrary, we find that the lower appellate authority has not given any reasoning as to why the transaction value cannot be accepted. The only reason given is that Rule 12 provides for rejection of transaction value involving special discounts limited to exclusive agents. The learned lower appellate authority has ignored the fact that Rule 12 does not provide for a method of valuation as explicitly stated therein. It only mentions the circumstances under which transaction value can be rejected. Once the transaction value is rejected, then the value has to be determined sequentially following Rules 4 to 8 of CVR, 2007 which the appellate authority has failed to do. Since there are no contemporaneous imports of similar or identical goods, the assessing authority has determined the value adopting the deductive method under Rule 7and found the transaction value to be acceptable. There is no rebuttal by the appellate authority as to why this conclusion drawn by the assessing authority is wrong and therefore, the reasoning adopted by the lower appellate authority is completely mis-placed. In the facts of the present case, there is no allegation of any flow back or payment of any additional consideration by the appellant to the foreign supplier. In the absence of any positive evidence, the argument that transaction value cannot be accepted has to be rejected. The ratio of the decisions of this Tribunal in the case of Ashland India Pvt. Ltd. and Rehau Polymers Pvt. Ltd., (cited supra) would also apply. In view of the above, we set aside the impugned order and allow the appeal by restoring the order dated 18/11/2011 of the assessing officer wherein it has been held that the transaction value has not been influenced by the relationship between the foreign supplier and the Indian importer. Thus, the appeal is allowed, with consequential relief, if any, in accordance with law.
(Dictated in Court) (Ramesh Nair) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 6