Special Valuation Branch( SVB) in Indian Customs

 Indian Customs Department has its own procedures, laws, rules, and regulations. There is a branch of Indian Customs at every commissionerate level which examine relationships of importers with their suppliers for the purpose of  fair valuation. The name of the branch is Special Valuation Branch in short SVB. 

SVB is a full-length subject itself and is very complex in nature. THIS BLOG IS MEANT TO GUIDE IMPORTERS TO GET INTO INTRICACIES OF SVB. There are thousands of SVB consultants in the market, but most of them making fools of their clients. Getting an SVB order (which is now known as Investigation Report or IR) is not the sole purpose of the whole exercise, but getting a fair valuation for all of the future shipments should be the sole objective.

Guidelines for Special Valuation Branch Enquire is prescribed in Circular 05-2016 read with Customs Valuation (Determination of Value of Imported Goods )  Rules 2007.

As per section 14 of the Customs Act 1962 for acceptance of your declared transaction Value means value paid or payable with regard to your export or imported material. For acceptance of declared Transaction Value  two conditions need to be satisfied i.e. Buyer and Seller should not be related and price should be the sole consideration of sale.

Rule 2(2) of Customs Valuation (Determination of Value of Imported goods Rules 2007) provides for the conditions where buyer and seller shall be deemed to be related parties:

           I. They are officers or directors of one another business

         II. They are legally recognized partners in businesses

       III.   They are employer and employee

       IV. Any person directly or indirectly owns controls or holds five percent or mjore of the outstanding voting stock or shares of both of them.

         V. One of them directly or indirectly control the other

       VI. Both of them directly or indirectly controlled by a third person or

     VII. Together they directly or directly control a third person or

   VIII. They are members of the same family.

While filing bill of entry you need to declare relations ship status whether your supplier is your related party or not. The onus of declaration of relationship falls upon importer because of self assessment by the importer.

 

The Special Valuation Branches all over India function under the supervisory control of the jurisdictional Chief Commissioner/Principal Commissioner/Commissioner of Customs being a specialized formation of Officers of Indian Customs equipped to handle relationship matters between related parties and stock transfer where there is no sell. Director General of Valution (DGoV) is there to  support the SVBs by issuing advisories on legal issues & guidance notes. DGoV shall also continue to qualitatively monitor investigation. The SVBs are presently functioning at the Customs Houses at Bengaluru, Chennai, Kolkata, Delhi and Mumbai.

 

There is no need to deposit any  EDD (Extra Duty Deposit) for first 60 days  , if the importer fails to provide documents and information required for SVB inquiries, within 60 days of such requisition, security deposit at a rate of 5% of the declared assessable value shall be imposed by the Commissioner for a period not exceeding the next three months. Simultaneously, the importer shall be granted a further period of 60 days to comply with the requisition for information & documents. If the importer fails to submit documents within this extended period, the Commissioner in charge of SVB may consider the use of other provisions of the Customs Act for obtaining documents / information from an importer for conducting investigations. In no case shall the imposition of Security Deposit exceed the period of three months specified above. Furthermore, the Board has also decided that the importer would be free to choose whether the Security Deposit to be provided for the purposes of provisional assessment shall be by way of cash deposit or a Bank Guarantee. All the assessment is done on Provisional assessment basis till the finalization of the investigation of the relationship.

 

SVB shall not issue an appealable order. Instead, the SVB shall convey its investigative findings by way of an Investigation Report to the referring customs formation for finalizing the provisional assessments. This would obviate multiple streams of appeals for the trade.

The following cases shall not be taken up for inquiries by SVBs :

(i) Import of samples and prototypes from related sellers

(ii) Imports from related sellers where duty chargeable (including additional duty of

Customs etc.) is unconditionally fully exempted or nil.

(iii) Any transaction where the 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, which may be considered for SVB Investigations

While filing a bill of entry, every importer makes a declaration about whether the seller of imported goods is a related party or not, as defined under Rule 2(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 (CVR, 2007). In other words, where any importer makes a declaration that the transaction is between ‘related persons’, as defined under Rule 2 (2) of CVR 2007, it would be necessary to examine whether or not the circumstances surrounding the sale of the imported goods indicate that the relationship has influenced the price. Accordingly, such transactions will require to be examined as to whether SVB inquiries are necessary.

Apart from investigation of transactions involving related parties, cases involving possible additions to declared transaction value also need to be examined to determine whether SVB investigations are necessary. Accordingly, transactions where any payments are sought to be made which are in the nature of instances given below, shall be examined with respect to the need for SVB investigations:

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

or

(b) 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

or

(c) 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

If a importer and exporter are related parties, very first Bill of Entry of such importer need to file on prior basis in so far as possible before 15 days of the arrival of the shipment sothat proper officer will get sufficient time to investigate the matter and to take the decision whether this case is suitable to be referred to SVB branch , or should be disposed off at primary stage only. prima facie, there is a need for investigation by the SVB. Proper officer shall complete such examination within 3 days of the filing of Bill of Entry and the matter submitted before the Commissioner. After examining the transaction on the above lines, the proper officer at the customs station of import shall submit the findings to the Commissioner for a decision on whether the case is fit for being referred to the SVB for investigations.

In the event of the Commissioner directing investigations by SVB, the proper officer shall promptly carry out provisional assessment in terms of section 18 of the Customs Act, 1962 and  ensure that no delays occur in the release of the goods.

In case where after examination of the transaction, it is decided by the Commissioner that a reference to SVB is not necessary, the Customs House shall issue a reference number to the importer and the Risk Management Division to indicate that the transaction has been examined from the point of view of need for SVB inquiries and it has been decided not to refer the same for SVB investigations.

Where Commissioner decide to refer to the case to SVB branch of Customs it will forwared to the SVB branch for further investigation The SVBs shall, as far as possible, complete the investigations and issue its findings within two months from the date of receipt of information in Annexure B. In cases where investigations are not completed within 2 months, the SVB shall seek the approval of the jurisdictional Commissioner for such extended time period as is deemed necessary to complete investigations.

Upon approval by the Principal Commissioner / Commissioner, an Investigation Report (IR, for short) shall be prepared incorporating all relevant facts, submissions made by the importer, investigative findings, grounds for acceptance or rejection of transaction value, and the extent of influence on declared transaction value, if any. The IR shall include all relied upon documents and 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.

In any case where, the circumstances of sale or terms and conditions of the agreement between the buyer and related seller change, or any other payments of the kind referred under Rule 10 (1) (c), (d) & (e) of the CVR, 2007 become payable, the importers shall be required to declare the same at the place of import in the prescribed format at Annexure C. In all such cases, the proper officer shall examine the transactions as per procedures laid out above in this circular and the jurisdictional Commissioner shall refer the matter to the jurisdictional SVB, where required. In view of the above, it may be noted that the system of renewal of SVB orders has been discontinued with immediate effect. 

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