CBEC issues Circulars laying down procedure for investigation of related party import cases by Special Valuation Branch of Customs

We are pleased to release a Tax Alert on recent Circular No. 4/2016 and 5/2016 both dated 9 February 2016 issued by Central Board of Excise & Customs (‘CBEC’) prescribing procedure for investigation of related party import cases and other cases by the Special Valuation Branch (‘SVB’) of Customs. It also prescribes procedure for renewal of SVB orders and ongoing SVB inquiries.

Key aspects of the prescribed procedure is laid down below:
► No security in the form of Extra Duty Deposit (‘EDD’) shall be collected from the importers. However, if the importer fails to provide requisite documents / information within 60 days, security deposit (either in cash or bank guarantee) at a rate of 5% of the declared assessable value shall be collected for a period not exceeding three months.
► SVB shall not issue an appealable order. Instead, it shall convey its investigative findings by way of an Investigation Report to the referring customs formation for finalizing the provisional assessments.
► In cases involving additions to value on account of royalty, licence fee etc, importers are advised to file a prior bill of entry, preferably 15 days prior to the import.
► SVBs shall complete the investigations and issue its findings within two months from the date of receipt of information wherever possible. In cases where investigations are not completed within 2 months, SVB shall seek the approval of appropriate authority for extension of time period.
► Circular No 5/ 2016 dated 9 February 2016 is issued in supersession of Circular No. 1/98 – Cus dated 1 January 1998 and 11/2001-Cus dated 23 February 2001.
Comments:
► The new procedure prescribed by CBEC will not only provide much needed relief to the importers in case of transactions involving special relationships and circumstances but will also facilitate ease of doing business through radical shift in the approach and functioning of SVB.
► The success in bringing down the time taken in disposal of cases and making the process less burdensome, will however depend on its efficient implementation by the revenue department. On the other hand timely adherence to the simplified compliance requirements will help importers overcome their grievances.