The burden of proof lies on the importer to show that transaction values between related parties are not influenced by their relationship, as per Customs Valuation Rules.

Per M. Ajit Kumar,

This appeal is filed by the appellant against Order in Appeal C. Cus. II No. 701/2015 dated 30.6.2015 passed by the Commissioner of Customs (Appeals – II), Chennai (impugned order).

2. Brief facts of the case are that the appellant is engaged in the manufacture of moulds and machinery for the toothbrush industry. It was established as a joint venture between ZAHORANSKY AG, Germany, and the Sarin Group of Mumbai. Following the termination of the joint venture in 2008, the company became a wholly owned subsidiary of ZAHORANSKY AG, Germany. Subsequently, the company's name was changed to Zahoransky Moulds and Machines Pvt Ltd., and its registered office was relocated from Mumbai to Coimbatore. Initially, the appellant was registered with the Special Valuation Branch (SVB) in Mumbai; upon the relocation of the registered office, registration was transferred to the Chennai SVB. The valuation of imports from Zahoransky, Germany, and other global affiliates was investigated by the Special Valuation Branch of Mumbai Customs. The adjudication order determined that the appellant was related to Zahoransky, Germany, however it accepted the invoice value as the transaction value. With the transformation from a joint venture to a wholly owned subsidiary and the shift in jurisdiction to Chennai SVB, further renewal proceedings followed. The Order in Original dated 31 January 2012 affirmed the findings of the previous order. In renewal proceedings, Order in Original No. 35205 dated 19 February 2015 noted that the appellant’s related supplier purchased goods, added 65% markup and supplied them to the appellant with a 20% discount. The invoice price, post-discount, was accepted under Rule 3(3)(a) of the Customs Valuation Rules, 2007, and no addition under Rule 10(1)(c) was deemed necessary. Subsequently, the department reviewed the said order and appealed before the Commissioner (Appeals), arguing that the discount reduced the sale value below the actual cost of the goods, indicating an inadequate recovery of costs and profits by the supplier. The learned Commissioner (Appeals) set aside the lower authority’s order and upheld the department’s appeal. Accordingly, the appellant has filed the present appeal before the Tribunal.

3. The learned Counsel Smt. Radhika Chandrasekar appeared for the appellant and Ld. Authorized Representative Smt. O.M. Reena, appeared for the respondent.

3.1 The Ld. Counsel submitted that the appellant imports raw materials, spares and components from its parent company for manufacture of machinery and moulds for toothbrush industry. The Appellant after manufacturing the goods exports as well as sells it to customers in India. It is submitted that the parent company does not sell the products to any other party in India. She stated that the Original Authority had accepted the invoice value as transaction value after examining the details of procurement prices and sale prices of the suppliers. However, on departments appeal, the First Appellate Authority has set aside the Order in Original and has loaded 20% discount to the transaction value. The Ld. Counsel stated that the Original Authority had passed the Renewal Order after examination of purchase invoices of the suppliers and supplier's letter dt.03.12.2014 wherein they have specifically stated that they offer 20% discount after mark-up of 65% on their purchases and their prices are still 32% higher than the market price.

b) The