Imports in Bulk for Resale and Stocks the Goods Results in Additional Cost, So Higher Discount on the Price list justified: CESTAT [Read Order]

The Customs, Excises and Service Taxes Appellate Tribunal (CESTAT) while allowing the application of the appellant held that the appellant imports in bulk for resale and also stocks the goods in sufficient quantity to meet the demand for the goods which results to additional cost to them in warehousing and reselling of the goods. Further, the appellant also undertakes sales promotion activity which is not done by the Authorised Stocking Distributors  (ASD) and other importers. Accordingly, the higher discount enjoyed by the appellant on the list price as compared to the ASD has got reasonable justification.

The appellant M/s Lutron GL Sales & Services Pvt. Limited imports lighting control systems from their parent company, “related party”, M/s Lutron Electronics Co., Inc. USA. These products include sensors and dimmers, processors, controllers, radiofrequency, transmitters, interfaces, shades, etc. which are used for convenience and energy-saving solutions to customers. The appellant is registered with SVB. Revenue started an investigation into the matter of the influence of their relationship on the invoice value of imported goods and thus SVB had registered the case and sent questionnaires and other documents concerning imports.

The tribunal consists of Judicial Member, Anil Choudhary, and Technical Member C. L. Mahar held while allowing the application of the appellant held that the appellant imports in bulk for resale and also stock the goods in sufficient quantity to meet the demand for the goods which results in an additional cost to them in warehousing and reselling of the goods. Further, the appellant also undertakes sales promotion activity which is not done by the Authorised Stocking Distributors  (ASD) and other importers. Accordingly, the higher discount enjoyed by the appellant on the list price as compared to the ASD has got reasonable justification.

“In view of the transaction value of some of the identical goods imported by the appellant and other importers, there appears to be a requirement of some adjustment. Accordingly, we modify the direction of enhancement of transaction value by 77% to 20% for the period 2013-14 to 2016-17. For the year 2017-18, there is apparently no such difference in the import value by other importers and the appellant and as such, no enhancement in the transaction value is required. We also noticed that the part collection of deductive value submitted by the appellant, they are only making a nominal profit,” the tribunal said.

“We find that as the ASD does not import “RF products” as well as the made to order products, but some products are imported both by the appellant and the ASD, but are not comparable. Such imports constitute a significant part of the total imports made by the appellant,” the tribunal observed.

“It is evident on the face of the record that deductive value was available before the Court below which have not been rejected by a speaking order, thus, violating the provisions of Rule 3 (3) of the Valuation Rules. Accordingly, we hold that as the deductive value for calculation has not been rebutted by the Revenue, the same has to be followed for calculation of any adjustment in the transaction value in terms of Rule 3(3) of the Valuation Rules. We further hold that application of Rule 4 by the Court below is not justified in the facts and circumstances. Accordingly, we allow this appeal by way of remand to the Court below to the Deputy Commissioner, SVB to re-determine the adjustment, if any, in the transaction value on the basis of deductive value and computed value,” the tribunal said.

Therefore, the tribunal passed the interim order that there is an average price difference of 15% in the import made by the appellant and the ASD. Accordingly, until the order is passed by the Deputy Commissioner, SVB pursuant to the remand, the loading shall be restricted to 15% of the invoice value.