The Central Board of Excise and Customs (CBEC) has
comprehensively revised the procedure for examination of related
party transactions by the Special Valuation Branch (SVB).
Presently, SVB investigates transactions involving relationship and
certain other special features like technical collaboration etc.
between suppliers and importers, to determine influence of such
relationship on the invoice value of imported goods. SVBs are
currently housed in Mumbai, Delhi, Chennai, Kolkata and Bangalore
which take cases for adjudication of importers most proximate to
their location. Usually SVB mandates provisional assessment with 1%
Extra Duty Deposit (EDD) till finalization of the case, and case is
finalized by issuing an appealable order subject to periodical
review after every 3 years.
Circular no 4/2016 and 5/2016 dated 09 February 2016 lay down a
new procedure for referral and investigation of related party
transactions by SVBs.
Circular 4/2016 dated 09 February 2016
Automatic renewal of existing SVB
orders pending renewal by filing one-time declaration by 31 May
2016, if there is no change in the circumstances surrounding sale
of goods between the parties. EDD to be discontinued and
provisional assessments would be finalised based on the SVB order
If any change in the circumstances
surrounding the sale of goods is reported by the importer,
enquiries would be initiated as per Circular 5/2016.
In case of pending SVB investigation
where importer has provided requisite information and documents,
EDD to be discontinued immediately.
Circular 5/2016 dated 09 February 2016
Importer to furnish requisite
information at the time of first import to enable the
jurisdictional Commissioner to judiciously decide on the reference
of cases to SVB for further investigation
Investigation by SVB in the following
cases dispensed with:
Import of samples and prototypes from
Imported goods which are
unconditionally fully exempt from customs duty
Imported goods where nil rate is
prescribed for customs duty
Value of imported goods is less than
INR 1,00,000 per transaction provided the cumulative value of
imported goods does not exceed INR 25,00,000
Appraising officers are allowed to
decide cases involving royalty, license fee and flow back without
referring to SVB. Importers are advised to file advance bill of
entry to allow appraising officer's sufficient time to
determine if reference to SVB is required.
SVB to investigate and quantify the
extent of influence on the transaction value, if any, and submit an
investigation report to the jurisdictional commissioner for
issuance of a show cause notice to the importer by the proper
officer. If no influence found on the transaction value,
provisional assessment shall be finalised forthwith without any
notice or speaking order.
SVB shall complete the investigation
within 2 months of receipt of requisite information and documents
from the importer, which can be extended by the Commissioner for a
period of another 2 months and by the Chief Commissioner for an
appropriate period where the investigation is not completed within
4 months. All pending investigation (commenced on or before 31
December 2015) shall be completed by 31 October 2016.
In case of pending SVB
investigations, where requisite information and documents are not
submitted by the importer within 60 days of requisition, 5%
security deposit shall be collected for a period not exceeding 3
months. At the option of the importer, the security deposit can be
paid either by cash or bank guarantee.
While the procedure for investigation by SVB has now been
simplified to an extent, by removing uncertainty in the
assessments, reducing transaction cost on account of EDD and
eliminating multiple appeals by issuance of speaking orders, the
measures appear to be halfhearted. Determination of influence for
reasons of payment of royalty, license fee and flow back by
appraising officers would continue to lead into multiple orders and
The content of this document do not necessarily reflect the
views/position of Khaitan & Co but remain solely those of the
author(s). For any further queries or follow up please contact
Khaitan & Co at firstname.lastname@example.org
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