Custom, Excise & Service Tax Tribunal
Cisco Systems Pvt Ltd vs Bangalore-Cus on 18 May, 2023
C/21106/2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 21106 of 2016
(Arising out of Order-in-Appeal No.260/2016 dated
31.3.2016 passed by the Commissioner of Customs
(Appeals), Bangalore.)
M/s. Cisco Systems Pvt Ltd
Brigade South Parade, Appellant
No.10, M. G. Road,
Bangalore - 560 001.
Versus
Commissioner of Customs
Airport & Air Cargo
Air Cargo Terminal Respondent
Devanahalli Bangalore.
Appearance:
Ms. Neetu James, For the Appellant Advocate Mrs. D. S. Sangeetha, For the Respondent Addl. Commissioner (AR) CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 20870 /2023 Date of Hearing: 18.05.2023 Date of Decision: 18.05.2023 Per : R. BHAGYA DEVI M/s. Cisco Systems Pvt Ltd., the appellant, is a subsidiary of M/s. Cisco Systems Management B.V. (Netherlands). The appellant imported networking systems from its related entities and these imports were provisionally assessed during the period from 2000-2007. The Special Valuation Branch (SVB), New Delhi Page 1 of 9 C/21106/2016 vide SVB order dated 25.08.2004 while deciding the issue of valuation of the above inputs held that the appellant and M/s.
Cisco Systems Management B. V. (Netherlands) are related persons in terms of Rule 2(2) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1998 and loaded with 65.75% to 70%. This order was revised vide SVB order dated 23.04.2009 once again holding that the importer and the supplier as referred above are related persons and it was ordered to load the declared invoice values of all the imports by the appellants in the following manner.
Year Goods for Spare part Capital goods Equipment for
internal use STP unit demonstration
purposes
2000 46% of GPL 46% of GPL 46% of GPL 46% of GPL
2001 50% of GPL 50% of GPL 50% of GPL 50% of GPL
2002 48% of GPL 48% of GPL 48% of GPL 48% of GPL
2003 46% of GPL 46% of GPL 46% of GPL 46% of GPL
2004 46% of GPL 46% of GPL 46% of GPL 46% of GPL
2005 46% of GPL 46% of GPL 46% of GPL 46% of GPL
2006 46% of GPL 46% of GPL 46% of GPL 46% of GPL
2007 46% of GPL 46% of GPL 46% of GPL 46% of GPL
The above SVB order dated 23.04.2009 was accepted by the appellant and the department. Based on the above SVB order dated 23.04.2009, the appellant requested for finalisation of the provisional assessments. The original authority vide Order-in-
Original No.694/2014 dated 31.12.2014 finalised the provisional assessments in the case of 224 Bills of Entry which were provisionally assessed during the year 2002-2003. He found that in respect of these 224 Bills of Entry, there was excess payment of duty of Rs.4,18,60,248/- due to enhancement / loading of the value under Rule 8 of Customs Valuation Rules, 1998 to 46% and 48% of Global Price List (GPL) in terms of the SVB order Page 2 of 9 C/21106/2016 dated 23.04.2009 as against the loading 65.75% to 70%.
Department filed an appeal before the Commissioner (A) wherein the Commissioner (A) at para 10 of the impugned order held that:
"10. A plain reading of Rule 8 of Valuation Rules read with Section 114 (1) of Customs Act, 1962 reveals that wherever, value paid for import of goods is not determinable under provisions of any of the preceding rules i.e., from 4 to 7 of Valuation Rules, then Rule 8 lays down that provisions of Section 14(1) are attracted for determination of value. In the instant case, as the value of the imports has been determined under Rule 8, provisions of Section 14(1) of the Customs Act, 1962 shall come into play. Therefore, the price paid by the importer for the goods imported shall form the value of the goods imported. Accordingly, the SVB order of new Delhi vide Para 17 has correctly held "where the declared invoice values of the importer are more than the average annual selling price of the unrelated buyers in India, the same shall be accepted." Thus, I find merit in the Departmental Appeal and consequently, I hold that part of the impugned order granting refund of Rs.26,57,893/- as incorrect as it is not in consonance with the intent of the SVB order. It is also pertinent to note that when the SVB order New Delhi finalised the valuation applying the Valuation Rules, there is no scope to interpret the language of Para 17 of the Adjudication Authority who himself is a creature of the Customs Act, 1962.
Accordingly, I do not concur with the ground of appeal of M/s. Cisco interpreting the language of the SVB Order of New Delhi in the way they have pleaded before this forum, so as to render a contrary opinion than what is intended in the law." Accordingly, he set aside the Order-in-Original allowing the refund of excess amount paid.
2. Ms. Neetu James, learned counsel on behalf of the appellant submits that the Commissioner (A) rejected the refund of excess duty paid by them on the ground that para 17 of the SVB order holds that where the declared invoice price is more than the annual selling price to unrelated buyers, the declared invoice price must be adopted. It is claimed by them that the above finding was factually and legally incorrect as the findings in para 17 of the above SVB are irrelevant for the finalisation of Bills of Entry provisionally assessed for the relevant period. It is Page 3 of 9 C/21106/2016 submitted by them that the present dispute is only regrading import of spares which have been imported at 35% of GPL for the period 2002 since all unrelated buyers were allowed a discount of 52%, the SVB order had enhanced the declared value to 48% of the GPL for the said period. Similarly for the year 2003, the discount allowed to unrelated buyers was 54% and the SVB order enhanced the declared value to 46% of GPL. Therefore, they claim that only for the years other than 2001, 2002 and 2003, the declared value is to be accepted. It is also submitted that the Revenue has not found any instance where the declared value of spare parts is more than the average annual selling price to unrelated buyers. Therefore, they submit that the Commissioner (A) was incorrect in rejecting the findings of the original authority. It is also submitted by them that this Tribunal vide Final Order No.20005 - 20010 / 2022 dated 7.1.2022 had allowed their appeals in similar set of facts where finalisation of assessment was involved vide Order-in-Original No.693/2014 and where similar observations were made by Commissioner (A) vide Order-in-Appeal No.256-257/2016 dated 31.03.2016. She also submits that the learned Commissioner in para 10 of the impugned order has held that the refund of Rs.26,57,803/- is rejected which is incorrect, and the refund granted under the impugned Order-in-Original dated 20.12.2014 is Rs.4,18,60,248/-.
3. The Department reiterating the findings of the Commissioner (A) at para 10 of the impugned order submitted that the original authority should not have finalised the Page 4 of 9 C/21106/2016 provisional assessments accepting 46% to 48% of the Global Price List. As per para 17 of the SVB order dated 23.04.2009, he should have finalised the provisional assessment accepting the declared value in the Bills of Entry. Accordingly, requested for dismissing the appeal filed by the appellant.
4. Heard both sides. The appellant had been importing networking systems and spares from their related entities and the SVB vide its order dated 25.8.2004 upholding the fact that they are related persons in terms of Rule 2(2) of Customs Valuation Rules, 1988. The appellant had filed an appeal against this SVB order and on an appeal, the Commissioner (A) had remanded the matter to the adjudicating authority by making the following observations:
"2. Being aggrieved by the Order-in-Original, the importer filed an appeal before the Commissioner of Customs (Appeals), New Delhi who vide Order-in-Appeal No.CC(A)/CUS/14/07 dated 20.08.2007 has held that "Keeping in view the provisions of Section 14 of the Customs Act, 1962 read with Rule 3 of the Customs Valuation (Determination of Prices of the Imported Goods) Rules, 1988, it appears that the goods under reference have not been ordinarily sold as commercially understood. Transaction value of imports, which have been made on loan or returnable basis, cannot be accepted and these are not normal transaction involving sale in the international trade. So their values cannot be accepted under the provisions of assessment. The supplies are special by their nature. As regards the supply of spare parts under warranty replacement to the specified customers of the foreign supplier, it is seen that these are only symbolic delivery routed through the Indian subsidiary where bills have been raised to the foreign supplier. In other situations, these symbolic deliveries have been resold to the said supplier. Thus, there appears to be restrictions upon 'Sales' of spares to be supplied to the foreign supplier's customers in India." It was also held that "In view of the above, it is clear that the transaction values cannot be accepted after examining the circumstances of the sale of imported goods, which indicate that the relationship has influenced the prices. But in order to arrive at the correct and fair value that data provided by the appellant in 4 volumes as mentioned above, has to be analysed and verified and adjusted has to be made in the price of the imported goods for the STP unit as the price has to be revised at 46% with the effect from 12.06.2004. Therefore, the impugned order is liable to be remanded to the Adjudicating Authority to assess the impugned goods keeping the above facts in mind and verifying the data submitted by the appellant after following the Principles of Natural Justice."Page 5 of 9
C/21106/2016
5. Accordingly, the Original Authority vide SVB order dated 23.04.2009 held as follows:
"21. The declared transaction value of the importer is rejected and invoice/declared value of the imported goods of the importer may be enhanced under Rule 8 of the Customs Valuation (Determination of Prices of the Imported Goods) Rules, 1988 as given below:
Year Goods for Spare part Capital Equipment for internal goods STP demonstration use unit purposes 2000 46% of GPL 46% of GPL 46% of GPL 46% of GPL 2001 50% of GPL 50% of GPL 50% of GPL 50% of GPL 2002 48% of GPL 48% of GPL 48% of GPL 48% of GPL 2003 46% of GPL 46% of GPL 46% of GPL 46% of GPL 2004 46% of GPL 46% of GPL 46% of GPL 46% of GPL 2005 46% of GPL 46% of GPL 46% of GPL 46% of GPL 2006 46% of GPL 46% of GPL 46% of GPL 46% of GPL 2007 46% of GPL 46% of GPL 46% of GPL 46% of GPL
22. All pending assessment be finalised accordingly. The importer is directed to submit the provisionally assessed Bills of Entry to the respective Assessing Groups for early finalisation."
6. Based on this, vide Order-in-Original No.694/2014 dated 31.12.22014, the original authority issued the final assessment order finalising the provisional assessment for 224 Bills of Entry and held as follows:
"In respect of 224 Bills of Entry there is an excess payment of duty Rs.4,18,60,248/- (Rs. Four Crore Eighteen Lakhs Sixty Thousand Two Hundred Forty Eight Only) which is refundable, due to enhancement/loading of the value under Rule 8 of CVR 1988 to 46% and 48% of Global Price List in terms of O-in-O No. SVB/CUS/JPK/02/2009 dated 23.04.2004 as against the loading if 65.75% to 70% adopted as detailed in Annexure."
7. The department filed an appeal against the above order and the Commissioner (A) in the impugned order dated 31.3.2016 held that:
"10. A plain reading of Rule 8 of Valuation Rules read with Section 114 (1) of Customs Act, 1962 reveals that wherever, Page 6 of 9 C/21106/2016 value paid for import of goods is not determinable under provisions of any of the preceding rules i.e., from 4 to 7 of Valuation Rules, then Rule 8 lays down that provisions of Section 14(1) are attracted for determination of value. In the instant case, as the value of the imports has been determined under Rule 8, provisions of Section 14(1) of the Customs Act, 1962 shall come into play. Therefore, the price paid by the importer for the goods imported shall form the value of the goods imported. Accordingly, the SVB order of new Delhi vide Para 17 has correctly held "where the declared invoice values of the importer are more than the average annual selling price of the unrelated buyers in India, the same shall be accepted." Thus, I find merit in the Departmental Appeal and consequently, I hold that part of the impugned order granting refund of Rs.26,57,893/- as incorrect as it is not in consonance with the intent of the SVB order. It is also pertinent to note that when the SVB order New Delhi finalised the valuation applying the Valuation Rules, there is no scope to interpret the language of Para 17 of the Adjudication Authority who himself is a creature of the Customs Act, 1962. Accordingly, I do not concur with the ground of appeal of M/s. Cisco interpreting the language of the SVB Order of New Delhi in the way they have pleaded before this forum, so as to render a contrary opinion than what is intended in the law."
8. From the above facts, it is seen that the SVB order dated 23.04.2009 has clearly held that:
"16. The importer has submitted data pertaining to imports of Cisco products made by top unrelated importers in India for the year 2000 to 2008 showing total no. of transactions, total value of transactions, total value of GPL, %age of total value of all transactions for Cisco and average Selling Price % of GPL. From the data supplied by the importer, the average discount granted to unrelated parties during the years 2000 to 2007 is tabulated below:
Prices of unrelated buyers in India Year Qty.Global Price List Selling Price SP of Dis-
(GPL GPL counts
2000 39746 $ 69,331,035.00 $ 31,214,049.09 45% 55%
2001 49712 $ 95,125,207.00 $ 47,548,962.94 50% 50%
2002 60340 $ 97,925,253.00 $ 47,307,563.82 48% 52%
2003 83324 $ 127,461,179.00 $ 58,487,690.63 46% 54%
2004 - $ 528,630,802.58 $ 158,682,318.77 30% 70%
2005 - $ 359,790,359.92 $ 150,076,23 .94 42% 58%
2006 - $ 558,712,512.03 $ 251,367,679.73 43% 57%
2007 - $ 920,502,617.00 $ 360,542,277.38 39% 61%
17. From the data supplied by the importer, it is clear that the average annual discount given by the Foreign Supplier to unrelated buyers in India during the year 2000-2007 is different from the discount given to the importer which is fixed at 54% of GPL except in the year 2003 when same average discount is given to unrelated buyers in India and the importer. In the years 2001 and 2002, unrelated buyers have been allowed discounts of 50% and 52% respectively. Keeping in view the data provided by the importer, it would be fair if the same discount is allowed to the importer.
In the rest of the cases where the declared invoice values of the Page 7 of 9 C/21106/2016 importer are more than the average annual Selling Price of the unrelated buyers in India, the same shall be accepted."
9. At Para 18, with regard to import of spare parts, it is held that in the case of spare parts also the value of goods will be as same as in the case of goods imported by the importer for their internal use as discussed in para 16 of the Order. At Para 17, the order categorically mentions "In the Years 2001 and 2002, unrelated buyers have been allowed discounts of 50% and 52% respectively. Keeping in view the data provided by the importer." The order also mentioned that in the year 2003, the average discount given to unrelated buyers in India and the importers is fixed at 54% of GPL. Following the same, the original authority has finalised 224 Bills of Entry loading the value of 46% to 48%. Since the earlier order of 2004, the loading was 65.75% to 75% which had been revised by the order dated 23.4.2009 to 46% and 48%, the original assessing authority while finalising the assessment found that there was an excess payment of duty of Rs.4,18,60,248/- which is refundable to the appellant. The Commissioner (A) ignoring these facts only harps on last two lines of para 17 which refers to "In rest of the cases where the declared invoice values of the importer are more than the average annual selling price of unrelated buyers in India, the same shall be accepted." There is no evidence or data to show that the declared invoice value of the spares imported by the appellant was more than the average annual selling price of unrelated buyers in India. Therefore, we find that the original authority has rightly finalised the provisional assessment based Page 8 of 9 C/21106/2016 on the final SVB order dated 23.04.2009 where the loading for the relevant years for the spare parts was 46% to 48% respectively. From the Final Order No.20005-20010/2022 dated 7.1.2022 passed by this Tribunal in the appellant's own case, it appears that similar Order-in-Original No.693/2014 dated 20.12.2014 where provisional assessments were finalised in respect of 15 Bills of Entry was upheld by the Tribunal.
10. In view of the above, the appeal is allowed.
(Order dictated and pronounced in Open Court.) (D.M. MISRA) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 9 of 9