Related party transactions are always susceptible to price manipulations. In the case of import transactions, any price manipulation in the import price can greatly affect the collection of import duty. Therefore, to avoid such manipulations, Special Valuation Branches (SVBs) were established to investigate the relationships between the buyers and foreign suppliers and whether the price has been affected due to such a relationship.
Transactions, where goods are imported from related foreign suppliers, are examined by the Special Valuation Branch (SVB). Let’s understand the procedure of SVB investigations in customs and situations where SVB investigation is exempted.
Procedure of Special Valuation Branch
Following are brief insights into the procedure adopted by the Special Valuation Branch of Customs in case of imports from related foreign suppliers:
1) Filing of Annexure -A: While filing the bill of entry, the importer shall file an Annexure-A with the customs department declaring whether the seller of the imported goods is a related person as per Rule 2(2) of the Valuation Rules.
2) Reference to Special Valuation Branch : Based on the information provided under Annexure-A, the customs officer shall examine the conditions under which the goods were imported based on the parameters specified under Annexure-A. Thereafter, the case shall be forwarded for consideration by the Commissioner whether the case is fit for investigation by the SVB or not.
3) Procedure After Reference to SVB : If the case is referred to the SVB, the proper officer will assess and release the goods on a provisional basis and seek further information from the importer in Annexure-B along with submission of necessary documents. All the information and documents shall be forwarded to the SVB by the proper officer.
4) SVB Investigation : The SVB department shall go through all the information and documents received from the proper officer and conduct its investigation. It shall issue its findings within 2 months from the initial receipt of information and documents. The SVB shall quantify the extent of influence of the following factors on the transaction value and submit its findings to the Commissioner or Principal Commissioner:
• Relationship or payment towards licence fees or royalty
• Other payments that are actually made or to be made as a condition of sale for the imported goods
5) Finalisation of Assessment : Once the SVB provides the Investigation Report, the assessment shall be finalised. The customs officer shall issue a show cause notice to the importer in case the investigation report states that the transaction value is found to be influenced. However, in case the investigation report accepts the declared value, then no further investigation shall take place.
Cases Where SVB Investigation Shall Not Take Place
Following are the situations where SVB investigation is exempted:
• Import of samples or prototypes from the related sellers.
• Imports that are undertaken from the related sellers where the customs duty is NIL or unconditionally fully exempt.
• Imports where the imported goods value less than Rs. 1 lakh and the cumulative value of imports in a financial year do not exceed Rs. 25 lakhs.
Following was the procedure for SVB valuation and situations where SVB valuation is exempted. In case you require any assistance regarding the procedure of the special valuation branch of customs, feel free to contact the ASC Group.
