1. Which department of Indian customs authorities inspects/investigatesrelated party transactions. what are a customs special valuation branch?
The SVB is a unique element within the Indian Customs Authorities thatsupervise the valuation of the transactions between ‘related persons’, asmentioned under Rule 2 (2) of Customs Valuation Rules. This department has customs officials for carrying out the inspection and evaluate reports stating if the intercompany prices of goods are affected due to the relationship between the parties, with the intention or objective to lessen or lower the Customs Duty accountability.
2. Which location would be selected for the Special branch investigationof the imports?
At Present, five Customs port cities, namely, Bengaluru, Chennai, Delhi,Kolkata, and Mumbai have the Customs department with special valuation branch functioning. As perthe mentioned guidelines, the importer is free to choose any Customs branch for undergoing the SVB investigation based on his convenience. However, it is preferable to commute to the SVB department, which is based near the registered office of the related importer in India.
3. Does all import from related party needs to allude/referred to a special valuation branch? is there any indemnity?
As per the Mentioned procedures, the following cases are not to be takenunnecessarily for inquiries by SVBs:
- Imports from Related Sellers of samples and prototypes
- Imports where duty chargeable is unconditionally fully exempted or nil from related sellers.
- Transactions where the worth of imported goods is less than INR 100 thousand (approximately 1.250 Euro) but cumulatively do not exceed INR 2.5 million (approx. 30.000 Euro) in any financial year.
4. What is the activation for SVB investigation to be initiated?
SVB investigation is generally activated immediately when, for thepurpose of filing of Bill of Entry for customs clearance, the importer declaresthat the supplier is ‘related’ to the importer at the time of first import of goods by the importer from its related party imports. In case of any intricated party transaction, the SVB can also be activated in case the importer confirms that it is making additional payments to the supplier as denoted in Rule 10 of the Customs Valuation Rules.
As the special valuation branch (SVB) gets activated during the first consignment from the relatedparty comes in action at the customs port for space/clearance, given thedocumentary filing requirements and the subsequent registration process, it is preferable to prepare the said documents well in advance to avoid dispensable delays in the spacing of goods and consequent levy of delayed clearance charges.
5. Who can fall term “related” under the customs regulation?
The term “related” has been mentioned in Rule 2 (2) of the CustomsValuations Rules to provide that buyer and seller shall be deemed to be"related" if Officers or directors of each other business.
- Recognized partners in business legally.
- Relationship of employer and employee.
- Any person directly or indirectly owns, controls, or holds five or more percent of the outstanding voting stock or shares of each other.
- Either of them directly or indirectly has control over the other.
- Both are directly or indirectly controlled/managed by a third person.
- Together they directly or indirectly control/manage a third person; or
- They are members of the same/identical family.
6. Could we use the documentation prepared for income tax transferpricing purposes be used for SVB investigation?
the documentation prepared for Income Tax transfer pricing objectives can be valued in determining the certitudes to the Customsauthorities, they cannot be the sole foundation for the Customs authorities toaccept the intercompany pricing of imports. This is since SVBs are carried outunder a different set of mentioned rules and the criteria of inspection(undervaluation of goods) are exactly opposite to the purpose of inspection bythe Income Tax departments (Overvaluation of goods). It should be noted that ina recent case, Customs authorities in India have started to request theimporter to also submit the documents prepared for Income Tax transfer pricing purposes.
