Value Loading on Solar Imports Unjustified Without Proof of Related-Party Dealings: CESTAT Dismisses Revenue Appeal in Customs Valuation Case [Read Order]
The Tribunal held that there was no justification for value loading on the imported goods in the absence of proof of related-party influence or under-valuation.
Solar Imports - Unjustified - CESTAT - Revenue Appeal - Customs Valuation Case - taxscan
Solar Imports - Unjustified - CESTAT - Revenue Appeal - Customs Valuation Case - taxscan
The bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, held that in the absence of evidence showing an international transaction between related parties, there is no justification for value loading on solar imports under the Customs Act, 1962.
The case arose from imports made by M/s Enfinity Solar Solutions Pvt. Ltd., Chennai, which had imported solar panels, photovoltaic cables, solar power inverters, and related accessories from M/s Enfinity N.V., Belgium and M/s Enfinity Asia Pacific (Trading) Ltd., Hong Kong.
The Department suspected that these entities were related parties, and in accordance with the Board’s Circular No. 11/2001 dated 23.02.2001, the transactions were referred to the Special Valuation Branch (SVB) at the Custom House, Chennai, for scrutiny.
During the enquiry, the assessing authority enhanced the Extra Duty Deposit (EDD) between 1% and 5% of the assessable value. Upon completion of the investigation, the Adjudicating Authority passed Order-in-Original No. 23952/2014 dated 17.02.2014, which directed value loading of 20% on photovoltaic cables, 15% on Power-One inverters, and 15% on accessories and parts, while accepting the transaction value of solar panels.
The assessee denied importing from any related suppliers and maintained that the actual manufacturers in China exported the goods directly to India, though the invoices were routed through Enfinity Asia Pacific (Trading) Ltd., Hong Kong. The Commissioner (Appeals) set aside the additions, leading to the Revenue’s appeal before the Tribunal.
Represented by Sanjay Kakkar, the Revenue argued that since the Belgium and Hong Kong companies were related to the Indian importer, the absence of a margin between invoices raised by the manufacturer and those issued by the Hong Kong trading firm indicated that the transactions were not at arm’s length. The Adjudicating Authority, therefore, rightly resorted to loading the value under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
Represented by Shobana Krishnan and Manasa Srinivasan, the Respondent contended that there was no direct import from any related supplier and that the goods were procured from independent suppliers in China, with the Hong Kong company merely routing the invoices. The Respondent argued that the Adjudicating Authority erred in treating the Hong Kong entity as a supplier without any supporting agreement or evidence.
It was also submitted that the loading of value based on perceived relationship or absence of profit margins was contrary to the Customs Act, 1962, and that the Transfer Pricing principles applicable to income tax proceedings could not be imported into customs valuation assessments.
The bench comprising P. Dinesha, Judicial Member and M. Ajit Kumar, Technical Member found that the Adjudicating Authority’s assumption that the Indian importer had made imports from related suppliers was unsupported by evidence. The Tribunal observed that the findings in the Order-in-Original were inconsistent with the record, as it was clearly established that the actual suppliers were independent manufacturers in China, and only the invoices were raised by the Hong Kong entity.
The Tribunal emphasized that under the Customs Act, 1962, value additions or disallowances can only be made when statutory conditions are not fulfilled, and not merely based on assumptions. Since there was no material to prove that the Hong Kong entity added any mark-up or that the transaction value was manipulated, the Revenue failed to discharge its burden of proof.
The Tribunal further held that the Adjudicating Authority’s approach akin to a transfer pricing analysis used in income tax assessments was misplaced in customs proceedings. Consequently, the Commissioner (Appeals)’s decision to set aside the value loading was upheld.
Accordingly, Revenue’s appeal was dismissed.
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