Transaction Value- CESTAT rejects Customs claim


Dated: 02.08.23

Transaction Value- CESTAT rejects Customs claim

In the matter of Commissioner of Customs (Preventive), Jaipur Vs M/s V. K. Metcast Pvt. Ltd, Alwar CESTAT New Delhi has issued its final order where CESTAT New Delhi has rejected the plea of the customs department challenging the Order-in-appeal No. 120(SM)/CUS/JPR/2022 Dated 29.07.2022 whereby the appeal filed by the respondent/importer was allowed and the Order-in-original was set aside.

CESTAT New Delhi Order: In the light of the statutory provisions under Section 14 of the Customs Act, 1962, Rule 3 and 4 of CVR, 2007 and the observations made in the various case law, it can be safely concluded that the revenue erred in rejecting the invoice price. I agree with the arguments made by the learned Counsel for the respondent that revenue is unable to provide any clinching evidence to prove undervaluation by the importer so as to reject the transaction value given in the invoice. The impugned order is therefore affirmed and the present appeal filed by the Department is dismissed and the consequential relief, if any in favour of the respondent is allowed.


Customs regulations serve as the backbone of international trade, facilitating the movement of goods across borders while safeguarding a nation’s economic interests. A crucial aspect of these regulations is the determination of transaction values for imported goods. Transaction value, representing the declared price of goods sold for export to the importing country, is a cornerstone in customs valuation. Yet, instances arise where Indian Customs rejects declared transaction values, often leading to disputes. This article delves into the intricacies of transaction value rejection by Indian Customs and the role of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in resolving these disputes.


Understanding Transaction Value and its Significance

Triggers for Transaction Value Rejection

CESTAT: A Vital Adjudicatory Authority

Challenges and Resolutions in the CESTAT Process

Harmonizing International Trade through CESTAT


  1. Understanding Transaction Value and its Significance

Transaction value stands as a pivotal concept in determining the customs value of imported goods. This value reflects the actual price paid or payable for goods when sold for export to the importing country. It plays a foundational role in computing customs duties, taxes, and other levies. The World Trade Organization’s (WTO) Agreement on Customs Valuation establishes guidelines for ascertaining transaction values, fostering transparency and uniformity in customs valuation procedures worldwide.

  1. Triggers for Transaction Value Rejection

Indian Customs may refute declared transaction values for several reasons, primarily to curb under-invoicing—a practice where the value of imported goods is intentionally understated to minimize customs duties. Some common factors that can lead to transaction value rejection encompass:

  1. Perceived Inaccuracy: Customs authorities may question the accuracy of declared transaction values if they significantly diverge from those of identical or akin goods.
  2. Intra-Group Transactions: Transactions among related parties (e.g., subsidiaries and parent companies) may raise suspicions of price manipulation to reduce duties.
  3. Price Add-ons: Customs may dismiss the transaction value if additional payments, such as royalties or commissions, agreed upon by the buyer and seller are omitted.
  4. Resale Restrictions: If imported goods are subject to resale restrictions in India, the transaction value may be rejected if it does not align with the genuine value.
  5. Misrepresentation or Fraud: Deliberate misrepresentation of goods’ attributes, quality, or quantity can lead to transaction value rejection.


  1. CESTAT: A Vital Adjudicatory Authority

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) holds a pivotal role in addressing disputes stemming from transaction value rejection. It serves as an appellate authority, providing an impartial forum for aggrieved parties to contest Customs decisions. CESTAT is entrusted with the authority to hear and adjudicate appeals against Customs orders, ensuring fair and equitable resolution of disputes.

  1. Challenges and Resolutions in the CESTAT Process

Rejection of transaction values can trigger a range of challenges and disputes, implicating importers, exporters, and Customs authorities:

  1. Protracted Delays and Escalated Costs: Transaction value rejection can culminate in customs clearance delays, resulting in augmented costs like storage and demurrage charges.
  2. Amplified Administrative Load: Both importers and Customs authorities may grapple with heightened administrative burdens in substantiating the accurate customs value.
  3. Disputes and Judicial Proceedings: Disagreements between importers and Customs over-assessed values can snowball into legal proceedings, potentially impacting supply chains.
  4. Trade Relations Ripples: Frequent clashes concerning transaction values may strain trade relations between countries, impeding the smooth flow of goods.
  5. Operational Uncertainty: Importers may find it onerous to chart their business operations confidently in the face of customs duty uncertainty and variable clearance timelines.


  1. Harmonizing International Trade through CESTAT

To mitigate challenges and disputes emerging from transaction value rejection, several mitigation strategies can be employed:

  1. Transparent Documentation: Lucid and transparent documentation, including contracts, invoices, and pricing agreements, can bolster the credibility of declared transaction values.
  2. Comparable Valuation Data: Furnishing evidence of comparable transactions for analogous goods can substantiate declared transaction values.
  3. Advance Customs Rulings: Importers can seek advance customs rulings to elucidate valuation methodologies, preempting potential disputes.
  4. Engagement with Customs Authorities: Regular interaction and collaboration with Customs officials can help address concerns and forestall misunderstandings.
  5. Alternate Valuation Methods: If transaction values face rejection, alternative valuation methods prescribed in the WTO Agreement on Customs Valuation can be explored.


  1. Conclusion

Transaction value rejection by Indian Customs underscores the need for accuracy and integrity in customs valuation. While it can breed challenges, a transparent and cooperative approach between Customs authorities and traders, facilitated by institutions like CESTAT, can mitigate these issues. Adhering to the principles of equitable trade and compliance with customs regulations empowers businesses to navigate the complexities of international trade while fostering harmonious trade relations across nations.

CESTAT Order download:

  1. CESTAT Order Copy

Source: CESTAT New Delhi


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The views expressed in the update are strictly personal, based on our understanding of the underlying law. We are not responsible for any injury, loss, or cost arising to any person who refers to this update and acts or refrains from any act accordingly. We would suggest that detailed legal advice must be sought before relying on this update.

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