GUEST COLUMN

 

SVBs; recent changes; is it beginning of a new era?

 

By Manish Jain

Principal Associate, Lakshmikumaran & Sridharan, Ahmedabad

 

The ‘Special Valuation Branch’ (hereinafter referred to as “SVB”) is specialized institution to investigate related party transactions under customs laws. SVB determines the true assessable value of imported goods for purpose of customs duty payment. Vide the new circular No. 5/2016-Cus dated 09.02.2016, CBEC has made significant changes and simplified the procedure governing the determination of the transaction value. The earlier instructions have been rescinded. Following are some of the important changes: 

 

The SVBs shall be under the supervisory control of the jurisdictional customs Commissioners. 

 

No extra duty deposit (EDD) payable pending SVB investigation

 

No EDD shall be payable pending SVB investigations. Only if the importer fails to provide documents/ information required for SVB inquiries, within 60 days of such requisition, EDD at a rate of 5% of the declared assessable value shall be imposed. In any case, EDD shall not be payable for a period exceeding three months.

 

If the importer does not corporate with the investigations then, the Commissioner may consider the use of other provisions of the Customs Act for obtaining documents / information.

 

The importer has option to offer Security Deposit either by way of cash deposit or a Bank Guarantee for the purposes of provisional assessment. 

 

No adjudication by SVBs, its only investigating authority 

 

Earlier system of SVB passing an appealable order followed by the assessing officer passing another corresponding order finalizing provisional assessments has been replaced. Now onwards, the SVB shall convey its investigative findings by way of an Investigation Report to the referring customs formation for finalizing the provisional assessments.

 

New format of questionnaire to be submitted before jurisdictional customs

 

New format of questionnaire is introduced, which is to be filed before the jurisdictional Commissioner to enable him to decide whether a case needs to be referred to SVB. The following cases shall not be taken up for inquiries by SVBs in any case:

 

• Import of samples and prototypes,
• duty chargeable is unconditionally fully exempted or nil.
• value of imported goods is less than Rs 1 lac but cumulatively these transactions do not exceed Rs 25 lacs in any financial year Cases

 

Other matters may also be referred to SVB

 

In addition to transactions involving related parties, following cases may also be referred to SVB investigations:

 

• ‘royalty and licence fee’ under Rule 10 (1)(c) of CVR, 2007

 

• where the value of any part of proceeds of any subsequent resale, disposal or use of imported goods accrues to the seller [i.e. Rule (10)(1)(d)]of CVR, 2007

 

• where any other payments are made or are contemplated to be made in future by buyer to seller as a condition of sale of imported goods etc., [i.e.Rule 10(1)(e)] of CVR, 2007

 

Procedure for considering reference to SVB

 

For speedy clearance of imported goods, importers are permitted to file advance bill of entry (15 days prior) along with the information as per Annexure-A. This would offer sufficient time to customs for decision on reference to SVB.

 

On receipt of the above information, customs officer shall examine transaction on various parameters and submit preliminary finding before commissioner within three days. 

 

On receipt of above information, commissioner would decide on following alternative actions:

 

• the matter be referred to the SVB for further investigations and the goods be provisionally assessed to duty in terms of section 18 of the Customs Act, or
• the transaction does not merit investigations by SVB and that assessment be finalised

on the basis of enquiries to be conducted by the proper officer in terms of Rules 4 to

9 of the CVR 2007 or

• the transaction be assessed in terms of Rule 3 of CVR 2007

 

Procedure for reference to SVB:

 

Once the matter is referred to SVB, the officer would be immediately assess the goods provisionally and require further information from the importer as per Annexure B.  On receipt of information from importer, all related records shall be transferred to the jurisdictional SVB within three days.

 

Procedure in Special Valuation Branch

 

Upon receipt of information from customs, SVB shall commence inquiries and if required Deputy Commissioner / Asst. Commissioner (SVB) may call for further documents or information as required. The importer shall also be given suitable opportunity to submit evidence in support of the declared value.

 

The SVBs has been given two months timeline to complete investigation and issue report, further extension of two months have also been granted with the approval of jurisdictional commissioner. In case of delay of more than 4 months, the matter shall be submitted before the Chief Commissioner for extension.

 

Submission of IR before jurisdictional customs

 

Once the investigation is complete, the SVB shall submit the IR before the Principal Commissioner/Commissioner. The IR would quantify the extent of influence on the transaction value due to the relationship or payments towards royalty or licence fee or other payments actually made or to be made as a condition of sale of the imported goods.

 

Once the IR is approved by Principal Commissioner / Commissioner, it shall be communicated to the referring customs station/appraising group and such other stations where imports have been provisionally assessed. A copy of the IR shall also be sent to the DGoV.

 

Finalization of assessments

 

If IR is in conformity with the declared value then the provisional assessment has to be finalized immediately.

 

In IR is not in conformity with the declared value then customs would issue SCN to importer. Thereafter, the adjudicating authority shall, after following the principles of natural justice, pass an appealable order quantifying the extent of influence on the declared transaction value. The Order shall be endorsed to the Risk Management Division and the DGoV, for updating the Central RegistryDatabase.

 

Change in circumstances surrounding the sale

 

The system of renewal of SVB orders has been discontinued with immediate effect. However, in any case where, the circumstances of sale or terms and conditions of the agreement between the buyer and related seller change, the importers shall be required to declare the same at the place of import in the prescribed format at Annexure C. thereafter, the proper officer shall examine the transactions and shall refer the matter to the jurisdictional SVB, where required.

 

Pending cases before SVB

 

With regard to disposal of pending cases before SVB, CBEC has issued separate circular No. 4 / 2016 dated 9.02. 2016. In cases involving no changes of circumstances and on same being declared by importer the requirement of renewal of SVB is dispensed with.

 

In cases involving change of circumstances, the above procedure would be followed as new case. However, EDD would be discontinued.

 

Disclaimer: Views expressed are strictly personal. The content of this document are solely for informational purpose, it doesn’t constitute professional advice or recommendation.