India: Special Valuation Branch Customs - Role, Operational Challenges And Reforms


The Special Valuation Branch ("SVB") is a unit of the Indian custom authorities that investigates valuation of goods during imports between related parties. A special relationship between an Indian importer and a foreign supplier may impact the transaction price of the import and thereby affect the customs duty imposed on such transaction. SVB's function is precisely to examine the impact of such relationship on the invoice value of the imported goods.

This newsletter discusses the framework of SVBs, the erstwhile procedure for investigation previously followed by SVBs, the related practical issues faced by Indian importers and the new framework introduced by the government along with its proposed impact.

1. Purpose and constitution of SVB

Under Section 14 of the Customs Act, 1962, customs duty is imposed on the value of the imported goods. If the Indian buyer and foreign supplier are related say as holding and subsidiary the goods may be imported at a discounted price that could be lower than the normal market price. Accordingly, the customs duty imposed will be lower leading to a potential loss in revenue accruing to the authorities. The SVBs have been constituted to monitor the valuation of goods in such cases in accordance with circulars issued by the Central Board of Excise and Customs ("CBEC") from time to time. At present, only four (4) SVB offices are in operation at Chennai, Calcutta, New Delhi and Mumbai respectively. Each SVB is headed by a Deputy Commissioner of Customs and assisted by one appraising officer and the necessary ministerial staff. Before February 9, 2016, the working of SVBs was governed by CBEC Circular No. 11/2001 dated February 23, 2001 ("2001 Circular"). However, two weeks ago CBEC has revamped the assessment procedure to be followed by SVBs through issuance of Circular No.4/2016 ("Circular 4") and Circular No. 5/2016 ("Circular 5") effective February 9, 2016. Consequently, the 2001 Circular stands repealed from this date.

2. Related party criteria and erstwhile procedure followed by SVB

The Customs Valuation (Determination of Value of Imported Goods), Rules, 2007 ("Rules") require every importer to furnish information to the custom authorities in a bill of entry on the basis of which the customs duty is assessed. The importer and exporter are considered as related if they satisfy any of the criteria laid down in Rule 2(2). This rule considers parties to be related in 8 different situations. These are (i) officers or directors of one another's business, (ii) business partners, (iii) employer-employee, (iv) if one person owns, directly or indirectly, 5% or more stock or shares of both parties in aggregate, (v) either party directly or indirectly controls the other1, (vi) both parties are, directly or indirectly, controlled by a third person, (vii) both parties together control a third person; and (viii) they are members of same family. All related importers must provide details of their relationship in a declaration form along with the bill of entry. Rule 3(3)(a) provides that for assessing the applicable customs duty in case of related parties, the transaction value shall be taken to be the value of the imported goods only if the circumstances of the sale indicate that the special relationship between the importer and exporter did not influence the transaction value. The importer is required to give documentary evidence to this effect and if it is unable to do so, the concerned authorities refer the case to SVB for investigation.2

Under the 2001 Circular, the concerned SVB office, upon receiving a reference, registered a case to initiate investigation into the valuation of the concerned import through issuance of a PD circular for provisional assessment.3 At this point, the importer had to execute a PD bond containing a 1% extra duty deposit ("EDD") on the assessable value of the goods.4 Simultaneously, a questionnaire was issued to the importer requiring submission of relevant information and documents within thirty (30) days of its receipt failing which the EDD increased from 1% to 5% of the assessable value. Upon receiving the reply, the SVB could seek further information and give a personal hearing to the importer to explain its case regarding the valuation adopted in context of the imported goods. Thereafter, the SVB passed an order finalizing the importer's case and the EDD was adjusted accordingly. The maximum time limit to pass the order was four (4) months after receiving the reply to the questionnaire beyond which the EDD must be discontinued. In practice, the time period is not really respected. Each SVB order was applicable for 3 years and for imports continuing beyond this period, the importer had to apply for renewal at least 3 months before the order's expiry. All orders were appealable to the concerned Commissioner of Customs (Appeals).

The foregoing process is plagued with several practical difficulties for the importers. Right from the point of reference to SVB, liaising with the department is not an easy task. Importers often seek assistance from intermediaries who may have varied interests. In many cases, the questionnaire does not reach the importers within time resulting in an unjustified increase of EDD. Further, the SVB generally does not accept the transaction value and pricing methodology applied by the importer. To this end, importers are often quizzed with various superfluous questions which sometimes may have no legal basis. For instance, the department may ask for the pricing adopted by the foreign supplier while exporting goods to other countries. Importers are also sometimes asked to provide costing details of all products imported in India which is difficult, time-consuming and gives rise to confidentiality issues.

Some other issues identified by stakeholders in context of SVBs are as follows. In practice, the EDD is not discontinued even after expiry of the stipulated four (4) months period. Consequently, the importers often have to resort to litigation and even when a case gets decided in their favour, the department is reluctant to refund the EDD.5 Then, there is a huge pendency of cases before the SVB extending up to 3-4 years due to which the importers' money remains locked for a long period as EDD.6 A common problem is that orders issued by SVB offices are often arbitrary and do not adequately deal with the critical issues associated with the case. They have an extremely low success rate when tested in appeal.7 Another challenge is that the SVB offices lack adequate personnel with the required level of training necessary to handle complicated custom valuation issues. Finally, since the transaction occurs between related parties, the importer has to justify the import price to the transfer pricing authorities to prove that the transaction was undertaken on an arm's length basis. Due to a difference in approaches followed by the SVB and transfer pricing authorities, the importer struggles in arriving at an import price acceptable to both.8

3. Assessment under the new circulars

The plight of the importers associated with the prevalent practices led to passing of Circular 4 and Circular 5. Briefly, the process for investigation by SVBs prescribed under Circular 5 is as follows:

  1. At the time of filing the bill of entry the importer shall provide information outlined in Annexure A of the circular to the concerned customs officer who shall thereafter proceed to determine the need for investigation by SVBs. Within 3 days of receiving the information, he shall submit preliminary findings to the concerned Commissioner of Customs ("Commissioner").
  1. After assessment of the preliminary findings, the Commissioner can direct either reference of the case for investigation by SVB along with a provisional assessment of goods, in parallel, or finalization of the customs duty assessment or assessment in terms of Rule 3 of the Rules by the concerned officer without any SVB investigation;
  2. Reference to SVB shall not be made for import of samples and prototypes, exempted goods (where no duty is charged or charged at nil rates) and goods whose value does not exceed INR 100,000 (USD 1,471)9. Additionally, SVB investigation is mandatory for transactions involving payments towards royalty and license fee or where proceeds of a subsequent resale, disposal or use of the imported goods accrue to the seller or if the condition of sale involves future payments to the buyer.
  3. For cases where SVB investigation has been directed, the concerned customs officer shall seek relevant information and documents from the importer in a questionnaire (Annexure B of the circular) while continuing with the provisional assessment of the imported goods;
  4. The importer must furnish its reply to the concerned SVB within sixty (60) days from the receipt of questionnaire. Upon failure to do so, the importer is granted a further period of sixty (60) days to reply and while no EDD is levied, a security deposit at the rate of 5% of the assessable value is imposed. The security deposit, which can be given through cash deposit or a bank guarantee, is applicable for three (3) months and must necessarily be discontinued thereafter. After expiry of this period, the SVB can only resort to the Customs Act to obtain necessary replies from the importer.
  5. After receiving the importer's reply, the SVB shall commence inquiry and may seek further information as needed. The investigation must be completed within 2 months of receiving the importer's reply or, after obtaining an extension from the Commissioner, within 4 months thereof;
  6. Upon completion of its investigation, the SVB shall submit its findings to the Commissioner for approval. After the approval has been granted, the SVB shall send an investigation report to the concerned customs officer for finalizing the provisional assessment. The report must contain relevant facts, importer's submissions, investigative findings, grounds for acceptance/rejection of the transaction value declared by the importer and extent of the influence of the importer's relationship with the foreign supplier on the value;
  7. If the findings of the report indicate that the transaction value conforms to Rule 3 of the Rules, the provisional assessment must be finalized accordingly. However, if the value is found to have been influenced by circumstances surrounding the sale, a show cause notice is sent to the importer and an adjudicating authority is appointed; and
  8. The adjudicating authority shall pass an order quantifying the extent of influence of the declared transaction value and the provisional assessment shall be finalized accordingly. The said order, unlike previously, shall remain applicable till change, as maybe declared by the importer, in the terms and conditions of the import in case of which a fresh reference shall be made to the SVB for investigation. Thus, no renewal is necessary under the new law.

Considering the wait for transition to the new regime, Circular 4 provides for treatment of pending cases till such time. It provides that in all pending SVB investigations, EDD is to be discontinued after receipt of the necessary information and documents from the importer or with immediate effect if they have already been provided. Further, for all matters pending renewal, importers are required to provide further information indicating whether or not there is a change in the terms and conditions of the imports. In case there are changes, SVB shall initiate fresh inquiries in terms of Circular 5 and if not, then EDD is to be discontinued immediately and concerned authorities must finalize the ongoing provisional assessment.

4. Proposed impact

On the whole, the reforms introduced by CBEC are laudable efforts towards making the process simpler for importers from a procedural standpoint. They provide much needed clarity on what does or does not require investigation by SVB considering the existing tendency of the department to intervene even when not needed. Exclusion of certain transactions from the ambit of SVBs shall not only provide greater ease to the importers in doing business but also reduce the administrative burden on the department. Measures such as dispensing EDD and doing away with the need for renewal would work towards reducing the pendency of cases and lower compliance costs for the importers. Further, furnishing of deposit through bank guarantee shall allow the importer to avoid blockage of funds with the department. To avoid any risks, most importers would probably want to follow this method as opposed to making a cash deposit. However, effectiveness of the new regime would be contingent on a smooth transition of SVBs to the new norms.


The current operational methods of the SVBs are not favourable to importers and hamper the growth of an environment conducive for business. They act as in-country barriers to trade related activities undertaken by group companies. An over-inquisitive approach tends to adversely impact completely genuine import transactions. Hopefully, the SVBs take speedy measures to implement the new norms which would facilitate trade and thereby act as a further step towards transforming the government's "Make in India" vision into a reality.


1 The interpretative notes forming part of the Rules define "control" as a position, in a legal or operational capacity, that enables a party to exercise restraint or direction over another.

2 Rule 3(3)(b) provides that the importer must be permitted to demonstrate that value of goods declared in the bill of entry closely approximates to transaction value of similar or identical goods sold to unrelated buyers in India or the deductive or computed value for identical or similar goods ascertained at or about the same time.

3 Under Section 18 of the Customs Act, the concerned customs officer can make a provisional assessment of customs duty if (a) the importer is unable to furnish complete information required to make a final assessment or (b) the officer needs to subject the import goods to chemical or any other kind of test or (c) the importer has furnished all necessary information but the officer deems it necessary to make an enquiry before making a final assessment.

4 The customs officer gets a bond executed of such amount that he feels will cover the difference between customs duty provisionally assessed and the duty arrived at post final assessment. If the bond amount exceeds the difference, a refund is given to the importer but if it falls short, the importer is required to make further payment of the shortage amount.

5 Chapter VI.11 of the First Report of the Tax Administration Reforms Committee dated May 30, 2014 available at /First_report_TARC.pdf, last accessed on February 12, 2016.

6 Ibid.

7 Ibid.

8 Santosh Dalvi, Special Valuation Branch Cell – Operational Issues and Challenges, The Chamber's Journal – September 2013, available at:, last accessed on February 12, 2016.

9 1 USD = INR 68.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.