ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 03.02.2026
CESTAT Hyderabad Overturns Customs Valuation Order
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idย intelconsul@gmail.comor on his Mobile +91-9999005379.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Regional Bench at Hyderabad recently delivered a significant judgment in the case of M/s Elkem South Asia Pvt Ltd vs. Commissioner of Customs Visakhapatnam. This case revolved around the rejection of transaction value and the re-determination of assessable value based on alleged contemporaneous prices. โ The final order, pronounced on January 30, 2026, provides valuable insights into the application of Customs Valuation Rules and the treatment of related parties in import transactions. โ
Background of the Case
M/s Elkem South Asia Pvt Ltd, a 100% subsidiary of Elkem AS Norway, acts as the exclusive dealer and reseller of Elkem Micro Silica (EMS) in South Asia, including India, Sri Lanka, and Nepal. โ The company imports EMS from its principal through various ports, including Visakhapatnam. โ Since the appellant is a wholly-owned subsidiary of the principal, it is considered a “related person” under customs regulations. โ This relationship was disclosed to the Special Valuation Branch (SVB) in Mumbai, which allowed the imports based on the transaction value (invoice value) since 2000. โ
However, for certain imports made through Visakhapatnam Port, the Appraising Officers assessed customs duty based on higher values derived from third-party imports by M/s Vesuvius India Pvt Ltd, an actual consumer of EMS. โ The appellant paid the duty under protest, and the assessments were finalized for 21 Bills of Entry (BoE) on May 2, 2016. โ While some amounts were refunded, the appellant challenged the assessment order before the Commissioner (Appeals), who upheld the decision. โ This led to the present appeal before the CESTAT.
Key Arguments Presented โ
Appellant’s Arguments:
- Transaction Value Validity: The appellant argued that their transaction value should not be rejected merely because they are a related party. โ The SVB had previously accepted their transaction value as the basis for customs duty, and the relationship between the appellant and the principal was deemed not to influence the price. โ
- Contemporaneous Price: The appellant contended that the contemporaneous price adopted by the department was based on a single Bill of Entry from M/s Vesuvius India Pvt Ltd, which imported a significantly smaller quantity of EMS and was an actual user, not a reseller. โ This comparison was not valid under the Customs Valuation Rules. โ
- Protest Payment: The appellant clarified that the duty was paid under protest, supported by submitted letters, and they did not agree to the enhancement of the unit price. โ
Respondent’s Arguments:
The department reiterated the findings of the Commissioner (Appeals), emphasizing the validity of the contemporaneous price and the rejection of the transaction value. โ
Tribunal’s Observations and Decision
After hearing both sides and reviewing the records, the Tribunal made the following observations:
- Validity of SVB Orders: The SVB orders dated April 13, 2011, and January 30, 2015, were crucial in determining the transaction value. โ The Tribunal noted that the SVB had already examined the relationship between the appellant and the principal and concluded that it did not influence the price. โ The SVB order from 2011 was valid for three years, contrary to the department’s claim that it expired in 2013. โ
- Contemporaneous Price: The Tribunal found that the adoption of the contemporaneous price from M/s Vesuvius India Pvt Ltd was flawed. โ The third party was an actual user, not a reseller, and imported a significantly smaller quantity of EMS. โ The Customs Valuation Rules require adjustments for differences in commercial levels, quantity, and other factors, which were not adequately demonstrated by the department. โ
- Rejection of Transaction Value: The Tribunal held that the rejection of the transaction value by the Appraising Officer was not sustainable. โ The SVB had already determined that the declared value was not influenced by the relationship between the appellant and the principal. โ The discounts provided by the principal were deemed normal, considering the appellant’s role as a reseller. โ
- Protest Payment: The Tribunal acknowledged that the appellant paid the duty under protest, further supporting their claim that the transaction value was valid. โ
Final Order
The Tribunal concluded that the Commissioner (Appeals) erred in upholding the rejection of the transaction value and the adoption of the contemporaneous price. The Tribunal set aside the impugned order and allowed the appeal with consequential relief as per the law. โ
Key Takeaways
- Importance of SVB Orders: The case highlights the significance of SVB orders in determining the transaction value for related parties. โ Once the SVB has validated the transaction value, it cannot be arbitrarily rejected without substantial evidence. โ
- Contemporaneous Price: The judgment underscores the importance of adhering to the Customs Valuation Rules when adopting contemporaneous prices. โ Comparisons must be made between identical goods, similar quantities, and buyers of the same commercial class. โ
- Protest Payments: Importers should ensure proper documentation when paying duties under protest, as it can strengthen their case during appeals. โ
- Role of Resellers vs. Actual Users: The Tribunal emphasized the distinction between resellers and actual users in determining assessable value, as their commercial levels and cost structures differ significantly. โ
Conclusion
The judgment in the case of M/s Elkem South Asia Pvt Ltd vs. Commissioner of Customs Visakhapatnam serves as a precedent for importers dealing with related parties and facing challenges in the determination of transaction value. It reinforces the principle that transaction value should be accepted unless there is concrete evidence to prove that the relationship has influenced the price. โ Additionally, it highlights the need for proper application of Customs Valuation Rules when considering contemporaneous prices. โ This case is a reminder of the importance of transparency, documentation, and adherence to statutory provisions in customs assessments.
Source: CESTAT Hyderabad
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