Valeo Friction Materials India Ltd. Vs Commissioner of Customs (CESTAT Chennai)
The appeal before CESTAT Chennai challenged Order-in-Original No.47467/2016 dated 31.05.2016, whereby the Commissioner of Customs, Chennai-II confirmed differential customs duty, interest and penalty by adding royalty payments to the value of imported raw materials.
The appellant imported textured yarn, technical yarn and semi-finished clutch facings from M/s. Valeo Materriaux De Friction, France and its associate companies. The relationship between the appellant and the foreign suppliers and its impact on transaction value had earlier been examined by the Special Valuation Branch in 2000. By Order-in-Original No.1153/2000-SVB dated 14.12.2000, the authorities held that the parties were related under Rule 2(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, but accepted the declared invoice value as the transaction value under Rule 4. The order also held that royalty payable at 3.75% of the net sale value of finished goods was not includible in the transaction value of imported goods. This position was subsequently sustained through Orders-in-Original dated 28.09.2004, 23.11.2007 and 10.12.2010.
Later, the Deputy Commissioner of Customs (SVB), by Order-in-Original dated 17.01.2014, held that royalty should have been calculated on the net sale value without excluding the value of imported raw materials and, therefore, the royalty amount should be included in the transaction value. Differential customs duty for the period 2001 to 2013 was demanded under Section 28(4) of the Customs Act, 1962 along with applicable interest. The Commissioner (Appeals) upheld that demand.
