Imports from related party will be scrutinised by Customs: Expert

Rule 3(3)(a) of the Customs Valuation Rules, 2007 provides that where the buyer and the seller are related, the circumstances surrounding the sale will be examined

In a related party transaction between a wholly-owned subsidiary located abroad and the Indian parent company, if there is a regular trade and certain customised items do not have any comparable independent price, what procedure is to be followed under the Customs Act?

Rule 3(3)(a) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 provides that where the buyer and the seller are related, the circumstances surrounding the sale will be examined. Rule 3(3)(b) provides an opportunity for the importer to demonstrate that the transaction value closely approximates to a “test” value previously accepted by the proper officer of customs and is therefore acceptable. For Customs procedures on investigations by Special Valuation Branch, please refer to CBEC Circular no.5/2016-Cus dated February 9, 2016.

As manufacturers of electronic products, we import all inputs through Advance authorisation. During the manufacturing process, we get certain plastic wastage. We convert these into plastic product and sell in the domestic market on payment of GST. We fulfill our export obligation and achieve the prescribed value addition. Will Customs duty be applicable on plastics sold in the domestic market, even though we fulfill our export obligation?

No, as the input output norms take into account the wastage that may be generated during manufacturing process.

We are a SEZ unit and now want to exit the SEZ. We were advised to pay Basic customs duty of 5 per cent on all the capital goods being moved to Domestic Tariff Area (DTA). Is it correct, when all our capital goods were sourced locally? Also, our laptops are five years old and the book value is zero. We are still being asked to pay Basic Customs Duty @5 per cent and GST @18 per cent on them at 10 per cent of the original purchase price. Is this a valid imposition?

As per Rule 49 (3) of the SEZ Rules, 2006, goods on which any export entitlements were availed at the time of procurement of goods may be supplied back to the DTA on payment of duty equivalent to the export entitlements availed, subject to the condition that the identity of goods being supplied back to the DTA is established to the satisfaction of the Specified Officer. Provided that where no export entitlements are availed, such goods may be supplied back to the DTA without payment of duty. Secondly, as per Rule 74 (5) of the said Rules, for exit of the unit, depreciation norms for capital goods shall be as given in sub-rule (1) of Rule 49. As per Rule 49(1)(c) of the said Rules, depreciation shall be allowed in straight line method for computer and computer peripherals: for every quarter in the first year at the rate of 10 per cent, for every quarter in the second year at the rate of 8 per cent, for every quarter in the third year at the rate of 5 per cent and for every quarter in the fourth and fifth year at the rate of 1 per cent.