Legal principle

A one-way equity holding by a foreign supplier in the importer does not make them 'related persons' absent mutuality of interest, and the burden of proving undervaluation — requiring contemporaneous imports of identical goods at a higher price — lies on the Revenue.

Court decision

The Supreme Court agreed with the view taken by the Tribunal and dismissed the Revenue's appeal under Section 130A, leaving the parties to bear their own costs; the enhancement of assessable value was not sustained.

Facts

M/s. Initiating Explosives Systems India Ltd. imported 'Orange Shock Tube' from M/s. The Ensign Bickform Co., USA, declaring US$ 0.01/ft (US$ 10/1000 ft) in June 2001, down from US$ 15/1000 ft till November 2000 and US$ 0.0141/ft thereafter. The reduction was attributed to an agreement dated 16th/23rd April 2001 under which the respondent would purchase 100% of its annual requirement from the supplier, against a backdrop of substantially rising import volumes. The Dy. Commissioner rejected the declared value under Section 14(1A) of the Customs Act, 1962 and Rule 4 of the Customs Valuation Rules, 1988, holding buyer and seller were related because the exporter held 30% of the respondent's paid-up share capital, and reassessed duty under Rule 5 (transaction value of identical goods) at US$ 14.10/1000 ft FOB. The Commissioner (Appeals) confirmed, but the Tribunal allowed the importer's appeal following Daewoo Motors and Maruti Udyog, and the Revenue appealed to the Supreme Court under Section 130A of the Act.

Key provisions

• Section 130A, Customs Act, 1962 — Application to High Court