Sale in india by non-resident after import of goods

Dear All

I would appreciate your valuable feedback on the following query for one of our clients:-

NOTE ON MACHINERY IMPORT AND SALE BY ABC LTD. GROUP

Facts of the Case

Some time in the year 2010 ABC Ltd. Brazil had imported in its own name, a machinery of the declared value of Rs. 51 lakhs to India for the purposes of an exhibition in Ahmedabad. At the time of import of machinery a declaration was filed with the customs authorities that the said machine would be re-exported after completion of the fair and accordingly no import duties were paid.

However, the said re-export did not happen for various reasons and owing to the efflux of time the said machinery was then moved from Ahmedabad to ABC Ltd. Brazils Customer in Haryana through an invoice showing the consignee as a customer in Haryana. The value of the machinery was shown as INR 51 lacs. Thereafter, import duties including interest and storage charges have also been paid by a clearing and forwarding agent on behalf of ABC Ltd. Brazil to the custom authorities sometime in the month of July, 2011.

ABC Ltd. Brazil now desires to sell these goods (which are physically lying with its customer in Haryana), to a prospective customer in Maharashtra for an approximate value of Rs. 31 lakhs i.e. at a loss.

ABC Ltd. Brazil has no place of business or operations in India and is a foreign company registered under local laws of Brazil. They have no registrations whatsoever under the customs or VAT authorities in any state of India.

ABC Ltd. Brazil also has a subsidiary namely ‘ABC Ltd. India’ which is a private limited company recently established in India and also having registered office in New Delhi.

Queries:

ABC Ltd. Brazil desires to sell this imported machinery to its customer in Maharashtra at a price of approx. of Rs. 31 lakhs. Since ABC Ltd. Brazil does not have any VAT or Customs registrations, how would the sale and physical movement of goods be effected from Haryana to Maharashtra?

Assuming that the sale is effected what is the mechanism through which payment will be made by Maharashtra to Brazil/ ABC Ltd. India (can foreign remittance be made against this sale or otherwise how will the funds ultimately be remitted to Brazil)?

Can ABC Ltd. India show ownership of these goods on account of purchase from ABC Ltd. Brazil or any other mechanism so as to sell this machinery to Maharashtra and therefore seek VAT/CST registrations under the respective state laws.

Any other FEMA or Custom Duty implications on the above transactions need to be examined.

For any further questions/clarfications, please feel free to revert.

With Regards

Suhel Goel, ACA, CPA

Mr Suhel Goel,

Now ,M/s ABC have already paid the customs duty through a clearing agent,and therefore, it is an imported goods.The machinery has been moved to a customer in Haryana,through an invoice,but not actually sold to them. If this Haryana party is registered under HVAT Act he can sell it to the Maharashtra customer by issing an invoice.If not,their franchisee ABC India, has to receive the goods from Haryana through ABC Brazil's documents,stating the whole history in a letter(for enabling smooth checkpost movement) and then sell it to the Maharashtra man. If this Delhi subsidiary is not registered under DVAT Act,then the Brazil firm can sell directly to the Maharashtra party as an export from Brazil to India,creating documents to show the exhibition at Ahmedabad(a letter from Ahmedabad exhibition authorities),any correspondence with them,payment of customs duty and the final disposal through an invoice. Along with this the documents like,bill of lading through which the machine was brought into India,documents showing participation in exhibition etc, would give a clear picture of the transaction.With all these documents the Maharashtra party can treat it as import from Brazil and make payment in dollars. The invoice of Brazil Co can also be in dollars.

I have given this opinion out of my knowledge and experience. Pl check up with other experts also.