You are aware that the ‘Special Valuation Branch (hereinafter referred to as “SVB”) was created as institution specialising in investing transactions involving relationship between foreign supplier and importer or those involving other special circumstances surrounding the sale of imported goods, both of which a bearing on the assessable value. In this regard, detailed instructions were issued vide Circular No. 01/98-Customs dated January 01, 1998 and 11/2001- Customs dated February 23, 2001, prescribing the procedures to be observed by the Customs Houses for referring cases to SVBs and the time lines to be followed for finalising such cases.
However, there is a tremendous delay in finalization of SVB investigations by the Departmental officials, resulting continued uncertainty due to provisional assessments, increase in transactions costs due to extra deposits and burdensome procedure of renewal of SVB orders.
In view of the above background, the Central Board of Excise and Customs has issued two Circulars namely-
(i) Circular No. 4/2016- Customs ‘Procedure for renewal of SVB Orders and ongoing SVB inquiries under Circular No. 11/2001-Cus dated February 2001-reg.;
(ii) Procedure for investigation of related party import cases and other cases by the Special Valuation Branches-reg.
In this note, we have only discussed Circular No. 04/2016 which provides procedure for renewal of SVB orders.
PROCEDURE FOR RENEWAL OF SVB ORDERS AND ONGOING SVB INQUIRIES UNDER CIRCULAR NO. 11/2001 – CUS DATED FEBRUARY 23, 2001 – reg.
The Board has comprehensively revised instructions for the examination of related party transactions and those involving royalty, licence fee etc. vide Circular No. 5/2016 dated February 09, 2016. In view thereof, the Board has decided that the following procedure shall be followed with respect to pending SVB cases initiated in terms of circular 1/98 – Cus dated January 01, 1998 & 11/2001-Cus dated February 23, 2001 and those involving renewal of SVB orders.
In order to facilitate quick disposal of cases currently pending with SVBs for renewal, a system of one-time declaration has been provided. Importers, in respect of whom SVB orders are pending renewal, shall submit to the jurisdictional SVB, a declaration in the prescribed formats (these formats have been enclosed with the Circular No. 04/2016-Customs) by May 31, 2016.
The salient features of the said circular are as under:
♠ Each SVB shall maintain a consolidated record of such declarations and allot a reference no. to each declaration received;
♠ The SVB shall provide a duly acknowledged receipt of the declaration to be filed by the respective importers in the prescribed format;
♠ The SVBs shall promptly scrutinize the declarations and in cases where the importer files declaration in the prescribed format and confirms that-
- there are no changes in the circumstances surrounding of the goods between the importer and the related party,
- there is no change to the terms and conditions contained in the agreement(s) with the related foreign supplier;
- the importer has not entered into an agreement with any new related supplier or their associates since the issuance of earlier SVB Order;
- there is no change in rate of Royalty payment or License Fee/or any other payment made to the supplier of the imported goods;
- there are no post-import price adjustments with the supplier
then the process of renewal would be treated as dispensed with.
♠ The SVB shall immediately inform the Custom stations where provisional assessments have re-started due to the process of renewal to immediately discontinue obtaining Extra Duty Deposit and finalize the related provisional assessments, without any further reference to the importer;
♠ In all such cases, the communication from the SVBs to the Customs formations / Appraising groups must be sent by June 2016, under intimation to Chief Commissioner, DGoV, RMD and the importer.
♠ In cases where a change in circumstances surrounding the sale has been stated in the declaration in the prescribed form, the SVB inquiries shall be initiated in terms of the procedure stated in Circular No. 05/2016 dated February 09, 2016 by serving upon the importer questionnaire. If EDD is being obtained in such cases, the same shall be reviewed and the sequence provided in para 3.2 of the Circular No. 5/2016 dated February 09, 2016 shall be followed;
♠ All pending SVB investigations (other than renewal cases), where Extra Duty Deposit is being obtained are required to be reviewed in terms of para 3.2 of the Circular No. 5/2016 dated February 09, 2016. In cases, where the importer has provided information & documents, requisitioned by the SVB, EDD shall be discontinued forthwith. This exercise shall be completed by May 31, 2016.
♠ In cases, where EDD has been enhanced to 5%, due to the importer not having provided information or documents necessary for SVB inquiries, the Commissioner shall immediately take recourse to appropriate provisions under the Customs Act for obtaining the necessary documents for investigations and subsequently dispense with the EDD.
The said Circular further provides that all pendency should be brought down by 10% in each month so that all existing cases (commenced upto December 31, 2015) are disposed of latest by October 31, 2016.
In so far as the procedure for completing pending SVB investigations, instructions contained in Circular No. 5/2016 dated February 09, 2016 shall be followed.
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ANNEXURE – 1
(One-time Declaration in lieu of pending renewal by SVB)
(on the letterhead of the importer)
To,
Commissioner of Customs (Bengaluru, Chennai, Delhi, Kolkata, Mumbai (as applicable)
I ( Name of the person) , (Designation) , of M/s (Name of Company) do hereby declare & confirm
that, –
(i) This declaration is in relation to the SVB order (s) – in- original No.____ dated__________
(ii) We have made an application for renewal of SVB orders on __________ (date) to_____________ (customs House)
(iii) During the period___________ (date of issue of order) to ______________ (date of declaration),
(a) there are no changes in the circumstances surrounding the sale of the goods between us and our related supplier (s).
(b) there is no change to the terms & conditions contained in the agreement (s) between us and our related supplier (s).
(c) we have not entered into an agreement with any new related supplier or their associates since the issuance of the earlier SVB order
(d) there is no change in rate of Royalty payment or Licence Fee / or any other payment made to the supplier of imported goods.
(e) There are no post-import price adjustments with our supplier.
The above statements are true and correct to the best of my knowledge.
Company Seal
(Signature of Authorised Representative)/ Director (Finance)/CFO
Name:
Designation:
Tel no. / email:
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ANNEXURE – 2
(One time Declaration in lieu of pending renewal by SVB)
(on the letterhead of the importer)
To,
Commissioner of Customs
Bengaluru, Chennai, Delhi, Kolkata, Mumbai (as applicable)
I ( Name of the person) , (Designation) , of M/s (Name of Company) do hereby declare & confirm that, –
(i) This declaration is in relation to the SVB order (s) – in- original No.____ dated__________
(ii) We have made an application for renewal of SVB orders on __________ (date) to_____________ (customs House)
(iii) During the period___________ (date of issue of order) to ______________ (date of declaration*),
(a) there is a change in the circumstances surrounding the sale of the goods between us and our related supplier (s)
(b) there is a change to the terms & conditions contained in the agreement (s) between us and our related supplier (s).
(c) We have entered into a new agreement with our existing related supplier / new related supplier / or their associates
(d) there is a change in the rate of royalty payment / licence fee / or other payment being made to the supplier of the imported goods.
(e) There are post-importation price adjustments with our supplier.
(*Please strike out, which ever are not applicable; please provide supporting documents in respect of (a) to (e), as applicable)
The above statements are true and correct to the best of my knowledge.
Company Seal
(Signature of Authorised Representative)/ Director (Finance)/CFO
Name:
Designation:
Tel no. / email:
About Author : Sumit Wadhva has a Bachelor’s degree in Commerce from the University of Delhi and holds Professional Affiliation to the Bar Council of Delhi. He is also a company secretary from the Institute of Company Secretaries of India and can be reached at Mob: +91- 97187 04960 or via Email: [email protected])
Need clarification.
Fact.
1. M/s ABC and M/s XYZ both are Private Limited company registered in India.
2. M/s ABC acquire major stake in M/s XYZ. ( Now M/s XYZ become subsidiary of M/s ABC ) w.e.f. 09/2019
3. M/s ABC buy the material from foreign supplier who is not related parties of M/s ABC & M/s XYZ.
4. M/s ABC sells material on High sea Sales to M/s XYZ .
Question
Whether M/s XYZ is required to take SVB registration when they are buying material from M/s ABC on HSS in turn is buying from a 3rd party foreign supplier (Not related ) to either M/s ABC or M/s XYZ .