Special Valuation Branch Registrations

The Special Valuation Branch (SVB) is a special cell within Indian Customs which investigates the value declared for the imported goods when there is a relationship between buyer and seller and/or royalty/licence fees/assists impact on the valuation. The process starts with a statutory declaration at the Bill of Entry stage and in certain cases, Indian Customs may refer the matter to SVB for further investigation while clearance is going on provisionally. "SVB Registration" in India, the way it is used in trade, is about undergoing the valuation review process and not about getting a registration from Customs. SKMC Global helps in applicability, disclosures, annexures and coordination with Indian Customs during investigation and assessment. As the repercussions of any adverse decision are much more serious than the efforts needed in proper disclosures, the practical first step for any related party importer is to understand the position of its transactions within the circulars.

SVB Registration in India: Key Questions Answered

What Is the Special Valuation Branch?

The Special Valuation Branch (SVB) is a Customs body that deals specifically with the investigation of sales where there are special relationships between the buyer and the seller or any other special features in the sale which affect the assessable value. It is based on law through Section 14 of the Customs Act, 1962 which lays the foundation for duty being levied on the basis of transaction value and under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and Sections 17 and 18 dealing with re-assessment and provisional assessment. SVBs are set up in the Bengaluru, Chennai, Kolkata, Delhi and Mumbai Customs Houses under the jurisdiction of the Chief, Principal or Commissioner respectively. The SVBs do not decide the matter but the findings emerge in the form of an Investigation Report that goes to the custom station that refers the matter, from where the assessment is done by the appropriate officer.

When Is SVB Investigation Applicable?

In each and every Bill of Entry, the importer reports whether the seller is a "related person" as per Rule 2(2) of Valuation Rules 2007 and whether any payments under Rule 10, i.e. royalties, license fees, resale and condition-of-sale payment including assists like engineering, design and tooling are made. The proper officer considers the circumstances in which the transaction takes place. This includes consideration of how the price was arrived at, compatibility with similar imports, influence of the relationship on the price, if any, and whether the reported value is close to the values set out in Rule 3(3)(b). The matter is referred for consideration where the value fails to meet the acceptance test or there are additions under Rule 10(1)(c), (d) and (e). Additions under Rule 10(1)(a) and (b) commissions and packing costs are decided routinely by appraising groups and are not themselves SVB matters, which is why classifying each payment stream correctly at declaration stage matters before the examination begins.

SVB Applicability and Exclusions

A related-person relationship alone is not decisive under Rule 3(2), transaction value is accepted even between related persons provided the relationship has not influenced the price; otherwise the importer may demonstrate close approximation to a Rule 3(3)(b) test value. Circular No. 5/2016-Customs lays out three cases where no SVB reference shall be made: Samples and prototypes of related sellers, imports in respect of which the duty chargeable is unconditionally fully exempt or zero and transactions of value less than ₹1 Lakh but the cumulative value of such transactions in a financial year does not exceed ₹25 Lakh. If the decision of the Commissioner is not to make any reference, then a reference number will confirm the examination process and valuation will be conducted in accordance with the regular enquiry by the competent officer in accordance with the valuation regulations. These exemptions imply that the low-cost or tax-exempt related party trade does not pile up SVB files, but the disclosure itself is done in the Bill of Entry form.

Documents Required

SVB Investigation Process

1. Declaration: The importer submits the Annexure A form along with the Bill of Entry, mentioning relationship, basis for pricing, and Rule 10 payments; a prior Bill of Entry 15 days before the first import is desirable.

2. Initial Examination: The competent officer scrutinizes the declaration and terms of the invoice within three days, giving his findings to the respective Commissioner.

3. Refer or No Refer Decision: The Commissioner takes decision regarding whether the case should be referred to the SVB, make an assessment under Section 18 or proceed with an assessment under Rule 3.

4. Annexure B: The importer submits the required information to the SVB within 60 days of requisition; entry of records made within three working days after release of goods.

5. Investigation: The SVB investigates and gives opportunity to the importer to justify the declared value within two months, which can be extended with Commissioner/Chief Commissioner’s consent. Findings issue as an Investigation Report to the referring station.

6. Final assessment: If the declared value is accepted under Rule 3, provisional assessments are finalised immediately; if influence is found, the proper officer issues a show cause notice within 15 days, and adjudication follows  through a common adjudicating authority where imports cleared at multiple ports. Appeals lie against that order, not the Investigation Report.

Annexure A, B and C Explained

Customs Valuation and Transfer Pricing

Customs valuation and income-tax transfer pricing consider pricing of related parties, however, under separate legal regimes. Customs value is determined under Section 14 and the Valuation Rules, 2007, on the transaction value of the specific consignment, with additions for royalties, resale proceeds and assists; transfer pricing determines an arm's length range for income tax. A transfer-pricing study or Advance Pricing Agreement does not fix the customs value, though it may serve as evidence under Rule 3(3)(b); equally, a post-import transfer-pricing adjustment can raise customs questions, since the final settlement between related parties may alter the price actually paid or payable for the consignment. The two are distinct compliance streams, and planning the wider import programme including preferential tariff treatment available under a free trade agreement advisory engagement should be kept separate from the customs valuation position taken on each consignment.

Provisional Assessment and Financial Implications

Where a case is referred, assessments continue provisionally under Section 18 against a Continuing Bond (Annexure D), with a bank guarantee or security deposit added (Annexure E) only where required. Circular 5/2016 dispensed with the automatic Extra Duty Deposit. A 5% security deposit on the declared assessable value applies only if Annexure B information is not furnished within 60 days it cannot exceed three months, may be met by cash deposit or bank guarantee, and is security rather than duty. The cap is absolute: even where the information remains outstanding, the deposit cannot be extended beyond three months, though continued inaction may attract other provisions of the Customs Act for obtaining documents. On finalisation, any deficiency is payable with interest under Section 18 where the declared value is accepted, assessments are finalised without a speaking order and excess security is refunded.

Changes and Ongoing Compliance

There is no period of renewal; rather, renewal of SVB valuations ceased from the date of Circular 5/2016, while legacy renewal cases were settled using one-time declarations as per Circular 4/2016. Compliance is based on disclosure if there is any change in the situation of sale, including any change in the pricing criteria, contractual terms, the relationship itself and royalty/license fees, resale proceeds, or any other exceptional circumstances where payments become necessary, then disclosure must be made in the format of Annexure C at the point of importation, thereby necessitating further review and referral where necessary. Importers with an excellent compliance history in the form of programs like the Authorised Economic Operator registrations will find it easier to make such disclosures and produce documentation.

Risks and Common Errors

Some recurring mistakes are: failure to disclose properly or partially the related party relationship on the Bill of Entry missing deadlines for Annexure B that makes the importer liable for the 5% security deposit considering royalty/licence fees to be outside customs valuation and interpreting the results as SVB order instead of investigation report. Importers sometimes also assume that a long trading history at a port, or an earlier examination that ended without referral, forecloses fresh scrutiny it does not, because a change in circumstances of sale reopens examination through the Annexure C route. Where there is any proof of influence upon the transaction value, the consequence is payment of duties on the differential, interest on provisional assessment underpayments and where the adjudicating authority decides, penalties. Delays in responding to requisitions prolong these exposures and a poorly assembled Annexure B reply can convert a defensible declared value into an adverse finding for want of evidence.

How SKMC Global Assists

• Evaluation of suitability and exposure prior to the first shipment.

• Correct preparation of Annexure A declarations and Annexure B consolidated responses

• Assembling valuation documentation including transfer-pricing cross-references

• Reviewing customs valuation positions on royalties, assists and post-import adjustments.

• Coordinating with Customs through provisional assessment, investigation and finalisation.

• Advising on the broader import/regulatory framework see our foreign trade policy advisory for import/export regulatory planning.

Supporting accurate disclosures and a substantiated declared value and coordinating each stage so that requisitions are met within their windows, is how SKMC Global works to keep related-party importers out of avoidable dispute while all determinations rest with Customs, whose role is to finalise the assessment on the Investigation Report and the importer's submissions.