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Special Value Branch Rules

March 31, 2023 | Taxation, Direct and Indirect

The import of goods from related parties is referred to the Special Valuation Branch (SVB) of Indian customs authorities to investigate transaction value is at arm’s length.

The import of goods from related parties is referred to the Special Valuation Branch (SVB) of Indian customs authorities to investigate transaction value is at arm’s length. A relationship between an Indian importer and a foreign supplier may impact the transaction price of the import and thereby affect the customs duty imposed on such transaction.

Applicability of Special Value Branch Rules:

Rule 2 of the Customs Valuation (Determination of Value of Imported Goods), Rules, 2007 covers  people who shall be deemed to be "related" only if –

  1. they are officers or directors of one another’s businesses;
  2. they are legally recognized partners in business;
  3. they are employer and employee;
  4. any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them;
  5. one of them directly or indirectly controls the other;
  6. both of them are directly or indirectly controlled by a third person;
  7. together they directly or indirectly control a third person; or
  8. they are members of the same family

The import of goods from the above-mentioned related parties is referred to Special Value Branch to examine the influence of the relationship on the invoice value of the imported goods in respect of transactions between related parties. 

T of Special Value Branch Rules:

All importers who are ‘related’ to suppliers are required to follow the procedure for registration with the SVB:

  1. The import shall provide the information under Annexure A of the Circular to the customs officer at the time of filling the bill of entry. The customs officer, within three days of receiving the information, shall submit their findings to the concerned commissioner of customs (Commissioner).
  2. After the preliminary assessment, the Commissioner directs the custom officer to refer the case for the investigation by SVB along with a provisional assessment of goods or finalization of the customs duty assessment by the customs officer without any SVB investigation.
  3. The import of samples and prototypes, exempted goods and goods whose value does not exceed INR 100,000 are not referred to Special Value Branch. The investigation is mandatory for import involving royalty, license fee, where proceeds of a subsequent resale,
    disposal or use of the imported goods accrues to the seller or if the condition of sale involves future payments to the buyer.
  4. The cases which were director for SVB investigation, the customs officer shall seek information and documents from the importer in Annexure B of the circular while continuing with the provisional assessment of the imported goods.
  5. The importer is required to reply within sixty (60) days from the date of receipt of the questionnaire. In case of delay, the customs officer shall grant a further extension of sixty (60) days to reply and imposed a security deposit (for 3 months) at the rate of 5% of the assessable value.
  6. On the receipt of the importer's reply, the SVB shall commence inquiry and may seek further information as needed. The investigation must be completed within 2 months of receiving the importer's reply or, after obtaining an extension from the Commissioner, within 4 months thereof.
  7. Upon completion of its investigation, the SVB shall submit its findings to the Commissioner for approval. After the approval has been granted, the SVB shall send an investigation report to the customs office for finalizing the provisional assessment.
  8. The adjudicating authority shall pass an order quantifying the extent of influence of the declared transaction value and the provisional assessment shall be finalized accordingly. An Order-In-Original is issued and intimated to the importer by registered post and copies.
  9. In all further cases of loading, it then becomes mandatory for the importer to quote the Order-In-Original number of SVB and indicate the percentage of loading at the time of filing of each bill of entry by the importer.
  10. The Order-In-Original issued by the SVB remain effective for three years and can be renewed for a further period of three years in case there is no change in agreement with the related parties.
  11. In all cases where the importer is aggrieved by the order passed by SVB, he may file an appeal to the Commissioner of Customs (Appeals) of the respective jurisdiction.

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