Lutron GL Sales & Services Pvt. Ltd. Vs Commissioner of Customs (CESTAT Delhi)
The issue under consideration is whether the percentage of enhancement to the transaction value ordered by the Deputy Commissioner of Customs is justified in law?
In the present case, 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. The Deputy Commissioner directed enhancement of value by 77%, to make it at par with the price offered to the ASD. It was further held that substantial incontrovertible documentary evidence could not be provided by the appellant, for acceptance of the transaction value.
CESTAT 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. Further they states that 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.
Accordingly, CESTAT 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.
FULL TEXT OF THE CESTAT JUDGEMENT
The appellant has filed Miscellaneous Application No. 50977 of 2019 praying that the additional evidence may be taken on record in terms of Rule 23 of the CESTAT (Procedure) Rules, 1982, in the interests of justice, which is „certified by Chartered Accountant‟ confirming the „deductive value‟, derived from the re-sale price of the imported goods for the period under question, „computed value certificates‟, issued by M/s Lutron Electronics Co. Inc. USA for the financial year 2016-17 and 2017-18, in support of export by Lutron US, at arm‟s length price. The appellant further submitted that the certificate indicates that transaction value declared was at arm‟s length. Further, appellant relied on the ruling of Hon‟ble Supreme Court in North Eastern Railway Administration, Gorakhpur vs. Bhagwan Das -2012 (281) ELT 161 (SC) in support of their prayer for additional evidence, praying that such evidence is basically calculation based on the record, and in the interest of justice to be considered in this appeal.
2. The issue involved in this appeal is regarding „order of loading‟ in the transaction value, the impugned order confirming the percentage of enhancement to the transaction value, as ordered by the Deputy Commissioner of Customs vide order-in-original dated 11.2018.
3. The brief facts of the case are that the appellant M/s Lutron GL Sales & Services Pvt. Limited imports lighting control systems (products) from their parent company, “related party”, M/s Lutron Electronics Co., Inc. USA (Lutron US for short). These products include sensors and dimmers, processors, controllers, radio frequency (RF) transmitters, interfaces, shades, etc. which are used for convenience and energy saving solutions to customers. The appellant is registered with SVB. Revenue started investigation into the matter of influence of their relationship on the invoice value of imported goods and thus SVB had registered the case vide DOV No. DOV0007307 and sent questionnaire and other documents concerning imports to which the appellant replied as follows:-
a. That they are a private limited company;
b. That they import from M/s Lutron Electronics Co. Inc., USA and M/s VIMCO, USA;
c. That they are a subsidiary company and fellow subsidiary company to the foreign suppliers respectively;
d. That the nature of their transaction with the exporter is sale;
e. That John Woodman is Assistant Secretary at Lutron Electronics and Vimco;
f. That they are not the partners in the business of each other‟s;
g. That there is no employer employee relationship;
h. That M/s Lutron Electronics Co. Inc., USA, holds over 97% of their shares;
i. That Lutron Electronics Co. Inc., has control over the use of all intellectual property;
j. That no obligation of the supplier are transferable to the importer;
k. That they are not the members of the same family;
l. That they are not engaged in the local manufacture of the products of the Foreign Suppliers;
m. That the imported goods are not the components parts of CKD/SKD sets for local assembly into finished goods, as the imported goods are finished goods;
n. That they have not imported any capital goods, plant and machinery equipment‟s etc. from the Foreign Suppliers;
o. That no amount is paid or payable, directly or indirectly, to or on behalf of the Foreign Supplier for engineering development, artwork, design work, plans or sketches undertaken elsewhere than in India and connected with the production of the imported goods;
p. That the import of the goods are covered under distribution and other agreement, are marketing & communication agreement;
q. That the basis of arriving at the price in the invoice is ‘Transfer Price’;
r. That the foreign suppliers supply the identical goods to any other person also in India;
s. That the form of payment to the Foreign Suppliers of the imported goods is „Bank Transfer‟ and no other payments are made to the Foreign Suppliers;
t. That no amount on account of royalty/ technical know-how fee/ licence fee/ any other fee is paid or payable by their company to the foreign suppliers;
u. That their company does not receive any amount in the form of agency commission, over riding commission or any other remuneration;
v. That their company does not incur any expenses on behalf of, by understanding or agreement with, or under instructions from the supplier of the imported goods on advertising, propaganda expenses or any other expenses for the promotion of sale of the imported goods;
w. That the foreign suppliers supplies identical, similar or connected items to its subsidiaries in several countries.
From the submissions made by the appellant, it surfaced that the appellant is a subsidiary of M/s Lutron Electronics Co., Inc. Headquartered in Coopersburg, Pennsylvania, USA, which along with its subsidiaries and associated companies is engaged in the business of designing, manufacturing, marketing and selling variety of „total lighting management solutions – lighting control and shades‟ through a variety of channels including electrical contractors, lighting showrooms, window treatment dealers, retailers, custom electronics dealers and few other channels.
3. Considering the documents produced and reply to the questionnaire the SVB framed the issue for determination as follows:-
(i) Whether the importer and the foreign supplier are related person?
(ii) Whether the transaction value between importer and the parent supplier is influenced by such relationship; and
(iii) Whether there is any requirement of any addition of any value/cost/payment to the transaction value in terms of Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007?
4. Learned Counsel for the appellant urges that the imported products, broadly fall in two categories –(i) those that require an import licence from the WPC, Department of Telecommunications, as they may receive or transmit radio frequency signals (RF Products), (ii) and others (Non-RF Products), for which no such licence is required. The RF products are being imported exclusively by the appellant under CTH 85269200 and 85437099. In certain exceptional cases however, where the customer is operating under the EPCG, EOU or SEZ or other duty exemption schemes, the RF products are also being imported by the customers, for their own use. The Non-RF products are imported both by the appellant and its network of „In Country Resellers‟ (ICR), including the „Authorised Stocking Distributors‟ (ASD), for sale in the Indian market. The non RF products fall in various headings including 8537, 3926, 8302 and 8479.
5. The ASDs do not import the RF products or certain Non-RF products. There are also „Made To Order‟ products that are imported both by the appellant and the ASD, but are not comparable. These imports constitute by quantity, a significant part of the total imports made by the appellant. The share of such imports out of the total imports made by the appellant in details are as under:
