Case Law Details
Schunk Metal and Carbon (India) Private Limited Vs Commissioner of Customs (CESTAT Bangalore)
Introduction: In a significant decision, CESTAT Bangalore addressed the inclusion of royalty in transaction value under Customs Valuation Rules 2007. The case, Schunk Metal and Carbon (India) Private Limited vs. Commissioner of Customs, focused on arm’s length pricing and the validity of adding 5% royalty under Rule 10(1)(c) of the Customs Valuation Rules.
Detailed Analysis:
M/s. Schunk Metal and Carbon India Pvt. Ltd. imported materials from associated companies, with accepted transaction values under Rule 3(3)(a) of Customs Valuation Rules 2007. Despite recognizing related-party status, authorities allowed the declared prices, except for adding 5% royalty on carbon brushes.
The Commissioner (Appeals) upheld the royalty addition, assuming an implicit condition to buy only from related suppliers. The appellant contended that, once arm’s length pricing was accepted, adding royalty was legally unsustainable.
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