VALUATION & DUTY LIABILITY FOR CUSTOMS
1. Define 'Related Persons' as per Customs Valuation Rules,1988Answer: For the purpose of these rules, persons shall be deemed to be "related" only if –(i) they are officers or directors of one another's businesses;(ii) they are legally recognised partners in business;(iii) they are employer and employee;(iv) any person directly or indirectly owns, controls or holds 5 per cent or more of theoutstanding voting stock or shares of both of them;(v) one of them directly or indirectly controls the other;(vi) both of them are directly or indirectly controlled by a third person;(vii) together they directly or indirectly control a third person; or(viii) they are members of the same family.
2. When are the custom authorities precluded from enhancing the value on the basis ofcontemporaneous import at higher price invoking Rule 4 of the Customs (Determination ofPrice of Imported Goods) Rules, 1988 read with section 14 of the Customs Act, 1962.Answer: If methodology given under Rule 3 is not followed then custom authorities areprecluded from enhancing the value of goods imported on the basis of contemporaneousimports. According to Rule 3, the value shall be transaction value determined in accordance withRule 4 and where conditions of Rule 4 are not satisfied then valuation has to be done inaccordance with Rule 5 to 8. The value can be enhanced on the basis of identical or similargoods imported at or about the same time as the goods are being valued. If thecontemporaneous imports does not satisfy the criteria of the identical goods or similar goodsthen custom authorities cannot enhance the value.
3. In a particular case of import of goods, the seller in USA and the Indian buyer were found to betogether controlling a third company in India. What are the conditions subject to which thentransaction value of such goods would be accepted for customs purpose?Answer:(A) Rule 2(2) of Customs Valuation Rules, 1988 specifies the situations in which persons shallbe related. One of the specified situations is that the persons together directly or indirectlycontrol a third person. It has been further clarified in the explanation to this sub-rule that theterm' person' also includes legal persons. In view of the above, the seller and buyer are deemedto be related in the given case.(B) Rule 4(3) of Customs Valuation Rules deals with acceptance of transaction value where buyerand seller are related. Refer Rule 4(3) above.
4. Discuss the concept of 'Price actually paid or payable' with reference to 'Transaction Value' asgiven in Interpretative notes of Customs Valuation Rules, 1988.Answer:(a) The price actually paid or payable is the total payment made or to be made by the buyer to orfor the benefit of the seller for the imported goods.(b) The payment need not necessarily take the form of a transfer of money. Payment may be madedirectly or indirectly.(c) Activities undertaken by the buyer on his own account, other than those for which anadjustment is provided in Rule 9, are not considered to be an indirect payment to the seller,even though they might be regarded as of benefit to the seller. The costs of such activitiesshall not be added in determining the value of imported goods.(d) The value of imported goods shall not include the following charges or costs, provided that theyhttp://success-gurus.blogspot.com
• Charges for construction, erection, assembly, maintenance or technical assistance,are distinguished from the price actually paid or payable for the imported goods:undertaken after importation on imported goods such as industrial plant, machinery orequipment;• The cost of transport after importation;• Duties and taxes in India.(e) The price actually paid or payable refers to the price for the imported goods. Thus the flow ofdividends or other payments from the buyer to the seller that do not relate to the importedgoods are not part of the customs value.
5. Explain whether the costs and services as given in Rule 9 of the Customs ValuationRules, 1988 are to be added to the value of the identical goods or similar imported goodsunder Rule 5 & 6 respectively.Answer:(a) Rule 5(1)(c) of the Customs Valuation Rules, 1988 provides that where imported goods arebeing valued as per Rule 5, the value of identical goods is adjusted to take into account thedifference attributable to the commercial level or to the quantity or both.(b) Rule 5{2) provides that where costs and charges referred to in Rule 9 are included in the valueof identical goods, adjustment has to be made for the difference in such costs and chargesbetween the imported goods and identical goods.(c)Therefore, if the value of the identical goods does not include certain specific costs andcharges relating to the imported goods, these are to be included as per Rule 9.
6. Determine Assessable Value from the following:Sale quantity Unit Price Number of Sales Total quantity sold ateach price1-10 units 100 10 sales of 5 units5 sales of 3 units6511-25 units 95 5 sales of 11 units 55Over 25 units 90 1 sale of 30 units1 sale of 50 units80Answer: The greatest number of units sold at a price is 80, therefore, the unit price in the greatestaggregate quantity is 90.
7. XYZ Co., the assessee, has claimed before the Customs Authority that since the exports of goods inits case attracted no duty, the value, for purposes of the Customs Act, 1962, to be declared shall be thevalue of goods, which he expects to receive on sale of goods in the overseas market.Briefly discuss giving reasons whether the stand taken by the XYZ Co. is correct.Answer: The Supreme Court has addressed this issue in M/s Om Prakash Bhatia V. Commissionerof Customs, Delhi 2003 (155) ELT 423. The Apex Court observed that for finding the value section 14of the Customs Act has £o be read with section 2(41) which defines the term Value'. According to itvalue means the value as determined in accordance with section 14(1).According to section 14(1) the value of such goods shall be deemed to be the price at which such orlike goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation orexportation, as the case may be, in the course of international trade, where the seller and the buyerhave no interest in the business of each other and the price is the sole consideration for the sale oroffer for sale. Therefore, irrespective of the fact whether duty is to be levied or not. the value has to bedetermined in accordance with the provisions of section 14 only. Hence, contention of XYZ Co. is tobe rejected.http://success-gurus.blogspot.com
gaskets, elements etc., from 00 Asia Private Limited, Singapore. The Special Valuation Branch8. DD India Private Limited Imported components and spares of diesel engines such as impellers,(SVB) Customs House Chennai Initiated Investigation into the question of admissibility of invoicevalue for the purpose of valuation of goods Imported and assessment of custom duty.The SVB found that DD India was re-selling the imported components at a margin of 65% (whichincludes expenses and profits) in the domestic market. The SVB felt that the said margin shouldnot be more than 45%.The SVB came to the following conclusions:1. DD India is related to DD Asia as per rule 2(2) of the Customs Valuation Rules, 1986 as DDIndia are the sole distributors in India of DD Asia.2. The "transaction value" shall be determined as per rule 8 of the Customs Valuation Rules, 1988.Consequently the invoice value of all imports by DD India was ordered t be loaded by 20% forthe purpose of assessment of the custom duty.DD India taken over the distribution from M/s Elandtee, who were the erstwhile distributors In India forDD Asia. During the enquiry proceedings DD India had placed evidence before the SVB that themargins enjoyed by M/s Elandtee was also 65%. However, this was ignored by SVB as not relevant.The SVB also rejected the price list of foreign suppliers produced by DD India without assigning anreasons. Write a brief note on the two conclusions arrived at by SVB and state, how as the Excise andCustoms consultant of DD India you would assail the same in the aforesaid facts and circumstances ofthe case.
Answer: According to explanation to rule 2(2) of the Custom Valuation Rules, 1988, a sole distributorcan be treated as a related person only if he is related in any of the manner specified under rules 2(r)to rule 2(viii). Therefore, in the given case, on the basis of given facts, DD India cannot be treatedas a related person. First conclusion of SVB is not sustainable.Second conclusion of SVB is also not sustainable. Assessment of duty has to be based on the priceactually paid or payable and not on any fictitious or notional price. Rule 5 to 8 are adopted only whentransaction value is not available. In Eicher Tractors Ltd. V. CC2000(122) ELT321, 325 the SupremeCourt has held that the reason should fall within the scope of rule 4{2). Before adopting rule 8 i.e. bestjudgment, all preceding rules shall be applied and it has to be determined why value cannot be decidedaccording to any of those rules. The adjudicating authority cannot directly adopt rule 8 without examiningthe applicability of preceding rules.It is to be noted that the facts given do not indicate that SVB has applied any of the preceding rules.Therefore, adoption of rule 8 is not correct.
9. Due to congestion in the ports or non-availability of deep draught all ports are not navigable untothe jetty. Goods have to be discharges or transshipped at the outer anchorage with the help of barges.The charges associated with the delivery of cargo at outer anchorage are called 'barging/lighteragecharges'. State giving the reasons whether such charges have to be included for purpose ofdetermination of assessable value under the Customs Valuation (Determination of price of importedgoods) Rules, 1988.Answer: AS per MF (DR) Circular No. 29/2004 - Cus dated 13.04.2000, the barging /lighteragecharges borne by the importer in bringing the goods from outer anchorage to the landmass should beincluded in the assessable value as 'extended cost of transportation' under rule 9{2)(a) of theCustoms Valuation Rules, 1988. The value of goods is deemed to be the price at which such goodsare ordinarily sold or offered for sale for delivery at the time and place of importation in the course ofinternational trade. The importation gets completed when the goods reach the landmass of thecountry and not at the outer anchorage point. Therefore, all the expenses incurred by the importer inbringing the goods to the landmass of the country will be includible in the assessable value.http://success-gurus.blogspot.com
10. A consignment of 800 metric tones of skimmed milk powder of US origin was imported by a non-profitmaking organization for free distribution of milk to the children In a tribal area under a World HealthProgramme. This being a special transaction a nominal price of US $ 10 per metric ton was charged forthe consignment to cover freight and insurance charges. The customs department found out at or aboutthe importation of this gift consignment there were the following imports of the skimmed milk powder of USorigin:Sl. No. Quantity importedIn metric tonnesUnit price in US $ CIF1 20 2602 100 2203 500 2004 900 1755 400 1806 780 160The rate of exchange as on the relevant date was 1 US$ = Rs. 40.Briefly explain how the assessable value for the purposes of the customs duty will be arrived at in thiscase under the Customs Act, 1962 and the Customs Valuation Rules, 1988.Answer: In the given case only a nominal value of US$ 10 has been charged for covering up the costof transportation and insurance of the goods. Not being the actual price of the goods, value cannotbe determined in accordance with Rule 4 and hence, valuation has to be done on the basis of Rule 5i.e. identical goods.As per Rule 5, the contemporaneous imports at the same commercial level and in substantially samequantity will be considered. Therefore, consignments of 20 tonnes and 100 tonnes cannot be consideredwhile the remaining four consignments can be considered to be of substantially the same quantity.According to Rule 5(3) if more than one transaction is found for identical goods then lowest of them shall beconsidered for determination of import value of the goods. Therefore, unit price in the given case will betaken at US $ 160 per metric tonne.Particulars Value1.CIF value of 800 metric tones @ US $ 160 per MT 1,28,0002.Rate of Exchange 1US $= Rs.403. CIF in Indian Rupees= (1) x (2) Rs.51,20,0004. Add: Landing Charges @ 1% of CIF value (3) Rs.51,2005. Assessable Value = (3) + (4) Rs.51,71,200
11: M/s SAS imported 10000 citizen calculators model No. CT 500 of Chinese origin from Singaporeand declared value to be US$0.90 per piece in the Bill of Entry. The customs authorities enhancedthe value to be US$ 1.80 per piece on the basis of price list of citizen calculator and contemporaneousimports at the same value. Is the action of Customs justified.Answer: The customs authorities have enhanced the value of the goods based on price list of thecontemporaneous imports of identical goods. Now, it is for the importer to prove that the price declaredby him in the Bill of Entry is the genuine price and it is not affected by any other consideration. Thefacts of the case are similar to that of SAS Impex V. CC 2002 (144) ELT 215 (T) where the Tribunal heldthat enhancement of value on the basis of contemporaneous imports is sustainable in absence of anyevidence that the price declared in the Bill of Entry is the genuine price.http://success-gurus.blogspot.com
12. Gujrat Dry Fruits Limited imported dry fruits and declared the value as under –Date of imports Quantity Declared value per MT Country of importNovember 2008 250 25,000 EgyptNovember 2008 150 25,000 EgyptIt was found that imports were also made by some other dealers as indicated belowDate of Imports:Date of import andimporterQuantity (MT) Declared Value Rs. perMTCountry of importSeptember 2008Mumbai Intil50 35,000 DubaiOctober 2008Chennai Fruits Ltd20 40,000 PersiaThe Customs Department has sought to assess the imports made by the Gujarat Fruits Ltd. ascontemporaneous imports under section 14 read with Rule 5 of the Customs Valuation Rules, 1988. Brieflyexamine whether the action proposed by the Department is correct.Answer: The goods are said to be identical only if the goods to be valued have been produced in the samecountry. In the given question, the goods in question have been imported from Egypt while other importershave imported goods from other countries. Moreover, there is a substantial difference in the quantity of thegoods imported and contemporaneous imports taken by the customs for enhancing the value. Inaccordance with the provisions of section 14 and the Customs Valuation Rules. 1988 the action taken bythe Department is not correct.
13. C & Co. imported second hand machinery and declared the transaction value in the Bill of Entry filed forthe purpose of assessment of import duty. The Assistant Commissioner ignored the transaction value andbased on the chartered engineer's certificate showing that the machinery was in working condition and had aresidual life of 10 years, he completed the assessment under Rule 8 of the Customs Valuation (Determination ofvalue of Imported Goods) Rules, 1988 after allowing maximum depreciation of 70%.Discuss briefly giving reasons whether the action of the Assistant Commissioner is valid inlaw.Answer: The facts given in the case are similar to the facts in Tolin Rubber Pvt. Ltd. V. COC, Cochin,[2004] 163 ELT 289 (SC). In this case the Supreme Court stated that the value of the goods has to bedetermined as per rule 4(1) of the Customs Valuation Rules, 1988 and only in the circumstances referredunder rule 4(2) the transaction value can be rejected and further determination has to be made as per rule 8.The assessing authority has not given any reason for rejecting the transaction value. It was held by theSupreme Court that the price declared by the company in the Bill of Entry has to be accepted by theDepartment.Applying the same ratio in the given situation, it may be concluded that the decision of the AssistantCommissioner is not valid in law.
14. V Steels imported various items for its captive power plant with technical know-how from Nengineering USA. The relevant drawings of the turbine shaft and lay out of the turbine with other items werealso supplied. One of the items which was turbine shaft was in semi-finished condition. Before fitting theturbine shaft had to be further ground and finished as per the dimensions of the shaft indicated in the lay outdrawings. V Steels paid US$ 2000 for the layout drawings and did not pay any custom duty on this amount.The Customs Department claims that this amount of USS 2000 forms part of the transaction value under Rule9(1) of the Custom Valuation Rules, 1988. The counter of V steels to this claim made by the Department isthat the drawings indicating the dimensions of the turbine shaft was merely a layout drawing of the turbinewith other items of the turbine room.Explain with reference to the provisions of Rule 9 of the Customs Valuation Rules, 1988, whether theclaim made by the Department is tenable.Answer : In accordance with Rule 9(1){e) of the Customs Valuation Rules, 1988, in determining thetransaction value, any payment made by the buyer as a condition of sale of goods will be included inthe value of the goods.http://success-gurus.blogspot.comIn the given case, the turbine shaft was imported in the semi-finished condition and before lilting, ithas to be finished as per the specifications in the drawing. Therefore, drawing becomes essential forfinishing and fitting of the shaft. Therefore, amount of USS 2000 paid towards the drawings, which isessential for working of the turbine, has to be included in the assessable value.
15. Rule 4 of the Customs Valuation Rules, 1988, states that the transaction value of the good shall be theprice actually paid or payable for the goods when sold for export to India adjusted in accordance with provisionsof Rule 9 with regard to costs and services. What is the benefit available to the importer with respect to cost oftransportation for importation by air when FOB value is ascertainable.Answer : The cost of transportation is required to be added with the FOB value for valuation purposes.Where the import is by air, if the cost of import exceeds 20% of FOB value then for the purpose ofvaluation it shall be restricted to 20% of the FOB value.
16. M/s H.R.C. imported a consignment of computer software and manual valued at USS 42 lacs andcontended that the actual value was only US S 10 lakhs and the balance amount represented licence feefor using the software at multiple locations and as such custom duty Is payable only on the actual value ofUS $ 10 lakhs. Is the contention raised by M/s HRC correct? Discuss.Answer : The facts of the case are similar to that of the case of Slate Bank of India v. C.C, Bombay2000 (115) ELT 597 (SC). The Supreme Court held that the license for country wide use cannot beconsidered as the charges for the right to reproduce the imported goods as envisaged in theinterpretative Note to Rule 9(1)(c) of the Valuation Rules. Therefore, total cost incurred in transactionvalue on which custom duty has to be paid and total cost for the purpose of assessment of customduty would include single site licence fee as well as country wide licence fee.Since software cannot be used at multiple location unless licence fee is paid for such use, it becomes apart of the software and therefore contention of M/s HRC is not correct.
17. Rl is an indenting agent of an Italian Company. The agreement provides for payment of 20%commission on the Imported equipments supplied by Rl to users in India. However, in respect of Rl's ownrequirement of equipments supplied by the Italian company no commission was payable as there was to beno value addition by the indenting agent. The department wants to enhance the value of import by 20% asaccording to them the indenting agent is a 'Related Person'. Examine briefly whether the stand taken by thedepartment is correct with reference to Section 14 of the Customs Act, 1962 and Rule 9 of the CustomsValuation Rules, 1988 regarding "cost and services" and Rule 2(2) regarding "Related Persons".Answer: Valuation of imported goods has to be done in accordance with the provisions of section 14of the Customs Act, 1962 read with the Customs Valuation Rules, 1988 for the purpose of chargingcustom duty.Rule of 9 of the aforesaid Rules provide that the value of the services paid by importer but not includedin the value of goods shall be added. 'Related person' has been defined under Rule 2(2). Rule 4provides that when sale is to a related person, the transaction value may be accepted if therelationship has not affected the price in any way.Going by the definition of Rule 2(2) the indenting agent cannot be treated as a related. As per rule 9 onlythe cost of services paid by the importer is to be included in the value of goods. In the instant case thecommission of 20% cannot be added. Therefore, contention of the department is not correct.
18: Discuss briefly with reference to decided case laws as to how the 'value' shall be determined undersection 14 of the Customs Act, 1962 read with the Customs Valuation Rules, 1988 in the following cases -(i) Goods are offered at specially reduced price to buyer and buyer is asked not to disclose speciallyreduced price to any other party In India.(ii) There has been a price rise between the date of contract and the date of importation. Thecontract was over 6 months before the date of shipment.(iii) The sale involves special discounts limited to exclusive agents.(Iv)The goods are purchased on high seas.http://success-gurus.blogspot.com
Answer:(i) Where sale is made at a specially reduced price then such price cannot be said to be the ordinaryprice. In the case of Padia Sales Corporation V. Collector of Customs [1993] 66 ELT 35 (SC) theSupreme Court has stated that where goods are offered to the buyers at specially reduced price and thebuyer has been asked not to disclose this to any other party, then the discounted price will not beacceptable.(ii) The value of imported goods is to be determined at the time of importation thereof. Therefore, wherethere has been a price rise between the date of contract and the date of actual importation then value atthe time of actual importation i.e. after price hike, is to be considered for the purpose of levy of customduty. Rajkumar Knitting Mills Pvt. Ltd. V. Collector of Customs [1998] 98 ELT (SC).(iii) In the case of Eicher Tractors Ltd. V. Commissioner of Customs, Mumbai [2000] 122 ELT 321 (SC), theSupreme Court observed that the price paid by the importer to the vendor in the ordinary course of commerceshall be taken to be the value of imported goods. Therefore, where seller and buyer are not related personand sale price is the genuine price, it shall be accepted for the purpose of custom duty. But according torevised rules, where special discounts are offered to the exclusive agents such discounted price shall not beaccepted as the assessable value.(iv) In the case of Godavari Fertilizers V. C.C.Ex [1996] 81 ELT 535(T) the Tribunal observed that in case ofhigh seas sales the price charged from the assessee will be value of the imported goods.19. M/s Agrawal Industries imported by Air from USA certain goods on CIF value $ 6,500. Air freightUS$ 1,400 and insurance charges US$ 100 were also paid. Bill of entry was presented on 28.02.08 butthe Entry Inward was granted on 10.3.08. Other relevant information is as follows -As on 28.02.08 As on 10.03.08Rate of exchangeAs announced by CBEC US$ 1 Rs. 46.80 Rs. 46.70As announced by RBI US$ 1 Rs. 46.60 Rs. 46.50Rates of custom dutyBasic Custom Duty 25% 16%Additional Custom Duty 20% 16%The same goods are exempt from Excise duty in India, if manufactured without the aid of power.Compute the assessable value and give the rates of basic and additional custom .duty to be adopted inthis case, as also the basis for arriving at the Basic and Additional custom duty (actual dutycalculation need not be given.
Answer: When import is by air, the cost of air freight should not exceed 20% of FOB value, hence theFOB value is as under -CIF Value US$ 6,500Less: Air freight US$ 1,400Insurance US$ 100FOB Value of imports US$ 5,000Add: Air freight 20% ofAssessable value US$1,000Insurance US$ 100TOTAL US$ 6,100CIF Value in Indian Rupees US$ 1 = Rs. 46.80US$ 6,100 X 46.80 Rs.2,85,480.00Add : 1% of GIF value towards handling charges Rs. 2.854.80Assessable Value Rs. 2,88,334.80http://success-gurus.blogspot.com
20. Infotech Limited has imported a machine from Japan at FOB cost of 50,000 Yen (Japanese). Theother expenses incurred are as follows -(i) Freight from Japan to Indian port 5000 yen.(ii) Insurance paid to insurer in India Rs. 2500(iii) Designing charges paid to consultancy firm in Japan 7500 yen(iv) M/s Infotech spent Rs. 25,000 in India for development work connected with the machine.(v) Transportation cost from Indian port to factory Rs. 7500.(vi) Central Government has announced exchange rate of 1 yen = Rs. 0.40 by notification under section14(3) of the Customs Act, 1962. The exchange rate prevailing on that day in the market was 1 yen = Rs.0.4052.(vii) M/s Infotech made payment to the bank based on the exchange rate of 1 yen = Rs. 0.4150.(viii)The commission payable to the agent in India was at 5% of the FOB price in Indian rupees.The rate of custom duty is 35%. Similar goods are subject to 15% excise duty in India.Clearly show your working to arrive at the total assessable value in rupees for purposes of Ivey of custom duty.Ans. Computation of Assessable ValueFOB Value 50,000Freight 5,000Designing charges paid in Japan 7,500Total 62,500 yenFOB value in Indian rupees = 62,50 x 0.40 Rs. 25,000Add:Insurance Rs. 2,500Agents Commission @ 5% of 50,000 yen x 0.40 Rs. 1,000Total CIF value Rs. 28,500Add: 1% of CIF value as handling charges Rs. 285Assessable value Rs. 28,785Notes :• Designing charges paid in India have not been included in assessable value.• Transportation charges paid in India for transportation from port to factory have not beenincluded in the assessable value as this is post importation expenditure.
21. Discuss briefly with reference to the decided case law whether the landing charges imposed afterthe landing of the goods, but prior to their clearance for custom purposes are to be included fordetermining the value under section 14 of the Customs Act, 1962 and arriving on the custom dutypayable.Answer. In Garden Silk Mills Ltd. V. UOI [1999] 113 ELT 358 (SC) the Supreme Court held that indetermining the deemed price in international trade the element of port charges, which are borne by theimporter, have to be added in the assessable value.As per the Customs Valuation Rules, 1988, handling charges are added in the CIF value @ 1% of GIFvalue irrespective of the actual amount of landing charges.
22. Discuss the Includibility or otherwise to the assessable value under the Customs Ac 1962 of thefollowing payments made by the importer to the overseas supplier of second hand plant in India:(i) Dismantling charges for removing the second hand plant at the supplier's place an shipping to Indianimporter.(ii) Fees for supervision of erection and commissioning of plant in India. For this purpose theforeign supplier deputed their technician in India.(iii) Payments for tools, dies and moulds (imported along with plant) for use in connection with themanufacture of excisable goods on successful commissioning of the plant.(iv) Lump sum payment and annual royalty for transfer of technical know-how for manufacturing goods.http://success-gurus.blogspot.com
Answer:(i) Dismantling charges - According to Rule 9 of the Custom Valuation Rules, 1988. a paymentsactually made or payable by the importer in connection with the import c goods, to the extent notincluded in the price of the goods are to be included. In the give case payment of dismantling chargesis certainly incidental and essential for import c machine. Therefore, it is to be included in theassessable value.(ii)Fees for supervision of erection and commissioning - The activity of erection ancommissioning is post import activity and thus, any amount of supervision for the same are notincludible in the assessable value. It is also to be noted that such cost is not included in price of theplant at the time of importation into India, as required under section 14 of the Customs Act, 1962.iii) Payments for tools, dies and moulds (imported along with plant) - If the tools, die andmoulds etc imported along with the plant are to be used with the same plant the value thereof is to beincluded in the assessable value of the plant otherwise not.(iv) Lump sum payment and annual royalty for transfer of technical know-how - As per rule 9 ofthe Customs Valuation Rules. 1988, the transaction value is inflated by cost c services and expenses asspecified. Under rule 9(1)(c) royalties and licence fee related t the imported goods that the buyer isrequired to pay as a condition of sale of goods being valued, is added to the transaction price. It is to benoted that only such amount c royalties and licence fee which relate to the imported goods is to be addedback. In this case the lump sum payment and annual royalty are related to the manufacture of goodand do not relate to the imported goods. Hence, this amount is not includible in this assessable value.
23. Discuss the Includibility of the following payments made by an importer to the overseas supplier of animported machine/equipment, to the assessable value of imported machine:(a) Process licence fee and technology transfer fee(b) Dismantling charges for removing the machine before shipment to India at theforeign supplier's site(c) Training charges paid to supplier, for imparting training to Indian company'spersonnel, on how to use the equipment.Your answer shall be with reference to section 14 of the Customs Act, 1962. You may draw supportfrom decided cases.Answer: According to section 14, the value shall be the price at which goods are ordinarily sold in thecourse of international trade.(a) Process licence fee and technology transfer fee - In Collector V. Essar Gujarat Ltd. [1996] 88ELT 609, the Supreme Court held that process licence fees, cost of technical services paid are inciudiblein the assessable value vide section 14 of the Customs Act, 1962 read with rule 9 of the CustomsValuation Rules, 1988.(b) Dismantling charges - According to Rule 9 of the Custom Valuation Rules, 1988, all paymentsactually made or payable by the importer in connection with the import of goods, to the extent notincluded in the price of the goods are to be included. In the given case payment of dismantling chargesis certainly incidental and essential for import of machine. Therefore, it is to be included in theassessable value.(c)Training charges - Training charges are not includible in the assessable value because it is a costto be incurred after the arrival of goods in India and not at the time of importation. Collector V.Essar Gujarat Ltd. [1996] 88 ELT 609 (SC)http://success-gurus.blogspot.com
24. Explain briefly, how the following would be treated for purposes of valuation under section 14 ofthe Customs Act, 1962 and the Customs Valuation Rules, 1988 -• Dismantling charges paid by the importer of a machine to the foreign supplier forremoval of the machine before shipment at the foreign supplier's place• Demurrage charges actually incurred by the importer of goods.Answer: According to Rule 9 of the Custom Valuation Rules, 1988, all payments actually made orpayable by the importer in connection with the import of goods, to the extent not included in the price ofthe goods are to be included. In the given case payment of dismantling charges is certainly incidental andessential for import of machine. Therefore, it is to be included in the assessable value.Demurrage charges are the charges which are payable by the importer for failure to remove the goodsfrom the port within the permitted time limit. Rule 9(4) provides that any cost incurred in connectionwith the import but not provided in the rule shall not be included in the assessable value.Therefore, demurrage charges are not to be included therein. Moreover, according to section 14, thevalue shall be the price at which goods are ordinarily sold in the course of international trade. Payment ofdemurrage is not an ordinary situation. Therefore, it is not inciudible in the assessable value.
25. ABC Ltd. a manufacturer of fertilizers, imported large quantity of rock phosphate and sulphur.Goods were purchased by ABC Ltd. on high seas and the responsibility of unloading in India was theirsand they maintained their own wharf at port unloading equipment and staff for the same. Customauthorities assessed the landing charges at 1.4% on CIF value thereof (then assessed rate) and theimporter had paid the same as demanded. Later on, custom authorities claimed that the said 1.4% didnot include stevedoring charges or unloading charges and therefore they added them separatelycalculating them upon the basis of inter-alia unloading labour charges, custom staff over time, post-hirecharges for dining hall, fuel, electricity, depreciation, maintenance cost, administrative over-heads andnotional interest on capital.State what your advise to the company would be, bearing in mind the provisions of the' Customs Act,1962 and decided cases.Answer: The main issue in the question is 'landing charges'. Custom authorities are within the powersto charge landing charges at a percentage basis or on actual basis. In the given case though the entirework of unloading is done by the assessee himself, the department added 1.4% of the CIF value aslanding charges which are paid by the assessee. Later on department has claimed additional amount.The facts of the case are similar to that of Coromondal Fertilizers Ltd.V. Collector of Customs in whichthe Supreme Court observed that:(a) 'Landing charges' means the expenditure incurred by the importer for bringing goods on board theship to land. Landing charges, if any, in law, must be assessed on actuals, but as a matter ofpractice, particularly to facilitate expeditious clearance, landing charges are issued at a percentage ofthe value of goods and such assessment is accepted. When so assessed, landing charges coverthe totality of all that an importer spends to bring the imported goods to land.(b) Stevedoring charges or unloading charges are not to be added when landing charges are assessedon percentage basis.Thus, assessee is not required to pay any additional duty as demanded by the customauthorities.
26. M/s XYZ, a 100% Export Oriented Undertaking imported DG sets and furnace oil duty free forsetting up captive power plant for Its power requirements for export production. They used the power sogenerated for export production but sold surplus power In domestic tariff area. Is custom departmentjustified In demanding duty on DG sets and furnace oil as surplus power has been sold in domestictariff area.Answer: No. the department cannot demand duty on DG set and furnace oil because the 100% EOUhas already used power for production of export goods and it is only the surplus that has been sold in thedomestic tariff area. CCE&CV. Hanil Era Textiles Ltd. [2005] 180 ELT A 44 (SC)http://success-gurus.blogspot.com
27. An importer has imported certain goods and while determining the assessable value, landing charges@ 1% of CIF value were added. The importer has claimed that actual landing charges are much lower than1% of the CIF value in his case. You have been asked to advise whether the importer can file a bill of entryby adding actual landing charges instead of notional 1% of CIF value or not.Answer: The importer cannot file Bill of Entry by adding actual landing charges. Rule 3(2)(b) ofCustoms Valuation Rules, 1988 has statutorily laid down a fixed 1% charge on free on board value(F.O.B Value) of the goods plus the cost of transport plus the cost of insurance.In Wipro Ltd. Vs ACC, it was held that handling charges of 1% of CIF Value, which isvery nominal, are not arbitrary. It has been fixed under the power conferred by theParliament on the rule making authority and such an act cannot be considered beyond thepower conferred by Section 14(1) or Section 156 of the Customs Act. 1962.Accordingly, the importer should have filed Bill of Entry by adding the statutorily fixed 1%charges in the CIF value regardless of the actual handling charges being much lower inthe present case.
28. A consignment of 20 tonnes of chemicals produced by Company A in Berlin, West Germany is imported byCompany B at $ 20 per kg., C.I.F. Mumbai. At about the same time a consignment of 16 tonnes of samechemical manufactured by same company viz., Company A in Berlin, is imported by Company C at Mumbai; fortheir principals at $ 16 per kg., C.I.F., Mumbai. What value should be taken for assessment of consignments of boththe importers i.e. Company B and C? Give reasons in support of your determination of value. Quoterelevant sections of Customs Act, 1962.Answer: The value is determined as per Section 14(1) of the Customs Act.• It is clear from the given problem that the same exporter has supplied the goods, almostat the same time but quoting two different rates based on the quantity.• A show cause notice has to be issued to importer for the lower price of goods.• If the explanation provided by the importer is not satisfactory, then the customs officercan finalise the assessment on the basis of $20 per kg.
29. What would be the value for the purpose of customs, If a consignment imported by air has a GIF priceof US $ 2,500 including freight US $700 and insurance US $ 90? The exchange rate notified by theGovernment of India under section 14(3)(a)(i) of the Customs Act, 1962 is Rs.42.50.Computation of Assessable ValueParticulars Amount Amount( in US $) (in Rs.)CIF Value $2,500Less : Freight $700Less : Insurance Cost $90FOB Value $1,710Computation of Assessable Value:FOB Value as computed above $1,710Add : Freight (restricted to 20% of FOB Value) $342Add : Insurance Cost $90CIF Value $2,142Exchange rate 1$ = Rs.42.50Total CIF in Rs. ($12,000 X Rs.42.50) A 91,035Add : Landing Charges @ 1% of 'CIF value' B 910Assessable Value (A+B) 91,945http://success-gurus.blogspot.com
30. A consignment is imported by air. CIF price is US$ 12,500. Freight is US$ 2,450 andinsurance cost is US$ 300. On the date of presentation of bill of entry, RBI floor rate wasUS$ = Rs.42.80 and rate notified by Government of India was Rs.41.75. Find the value ofthe consignment for customs purposes.Computation of Assessable ValueParticulars Amount Amount( in USD) (in Rs.)CIF Value $12,500Less : Freight $2,450Less : Insurance Cost $300FOB Value $9,750Computation of Assessable Value :FOB Value as computed above $9,750Add : Freight (restricted to 20% of FOB Value) $1,950Add : Insurance Cost $300CIF Value $12,000Exchange rate 1$ = Rs.41.75Total CIF in Rs. ($12,000 X Rs.41.75) A 5,01,000Add : Landing Charges @ 1% of 'CIF value' B 5,010Assessable Value (A+B) 5,06,010
31. An importer in India imported raw materials @ US $ 25,000 FOB. The goods were packed for which US $600 were charged extra. The goods were stuffed in Container, the price of which was US $ 2,000. Insurancecharges and ocean freight of US $ 250 and 800 respectively were paid. A commission of US $ 500 had to be paidto a broker for arranging the deal:1 US $ = Rs.41.38 ; Customs Duty is 30%; Excise duty on similar goods in India is 14%.Determine the duty payable.Computation of Assessable Value and Customs Duty PayableParticulars Amount Amount(in USD) (in Rs.)FOB Value $25,000Add: Packing Charges at USA $600Add: Freight charges (20% of FOB valueor actual whichever is less) $800Add: Commission to broker who madenecessary arrangement at USA $500Add: Insurance Charge $250CIF Value $27,150Exchange rate $1=Rs.41.38Total CIF Value in Rs. A 11,23,467Add: Landing Charges @ 1 % of 'CIF value' B 11,235Assessable Value (A+B) 11,34,702http://success-gurus.blogspot.comBasic Customs Duty (BCD) @ 30% of AV 3,40,411Duty on Assessable Value:(11,34,702 x 30/100)Countervailing Duty (CVD) @ 14% is payableon (AV + BCD) [11,34,702 + 3,40,411]= (14,75,113 x 14/100) 2,06,516Total (BCD+CVD) 5,46,927Education Cess @ 2% on (BCD + CVD) 10,939SHEC@1%on (BCD+CVD) 5,469Total Duty Payable (BCD + CVD + Education Cess + SHEC) 5,63,335Notes :1. Container is durable and returnable, so no Customs Duty is charged on the cost of containers.2. Any expenses incurred outside India and any expenses committed outside India but paidin India shall be included to consider or calculate GIF Value, duty.32. A consignment is imported by air.• CIF price is 2,000 Euro.• Air freight is 550 Euro.• Insurance cost is Euro 50.• Exchange rate announced by CBE&C as per customs notification is 1 Euro = Rs.67.10.• Basic Customs duty payable is 30%.• Excise duty on similar goods produced in India is 14%.Find Value for customs purposes and total customs duty payable.Computation of Assessable Value and Customs Duty PayableParticulars Amount Amount(In Euro) (In Rs.)FOB Value (Refer Note 1) 1,400Add: Freight (Refer Note 2) 240Add: Insurance 50CIF Value 1,730Value as landing charges (1% of GIF Value) 17Assessable Value 1,747Exchange Rate 1Euro = Rs.67.10Assessable Value in Indian currency 1,17,224Duty on aboveBasic Customs Duty (BCD) @ 30% of AV 35,167Countervailing Duty (CVD) @14% ispayable on (AV + BCD) [1,17,224 + 35,167}] 21,335Total [BCD + CVD] 56,502Add: Education Cess @ 2% on (BCD+CVD) 1,103(56,502 x2/100)Add: SHEC @ 1% on (BCD + CVD) 565Total Customs Duty Payable(BCD + CVD + Education Cess + SHEC ) 58,170Notes :1. FOB Price of consignment is 1,400 Euro [2,000-550-50].2. Air freight is to be restricted to 20% of FOB Value for purpose of customs valuation.Hence, freight will be considered as 20% of 1,400 i.e. 280 Euro for purpose of valuation.http://success-gurus.blogspot.com
33. Determine the total Customs Duty payable from the following data -• Quantity imported : 100 MTs• FOB value : Swiss Franc 10000• AIR Fright: Swiss Franc 2500• Insurance : Data not available• Exchange rate : 1 Swiss Franc = Rs.34• Rate of BCD - 30%• Rate of CENVAT under First Schedule to CETA : 14%• Rate of SED under Second Schedule to CETA : 14%• Rate of AED(GSI) under Additional Duties of Excise (GSI) Act: Rs.10/kg,• Rate of NCCD 1%.Ans.: Computation of Assessable Value and Customs Duty PayableParticulars Computation AmountFOB Value - Swiss Francs 10,000Freight @ 20% of FOB 10,000x20% = 2,000Insurance @ 1.125% of FOB 10,000 x 1.125%= 113CIF Value 12,113Add: Landing Charges @ 1% of CIF 12,112 x 1%= 121Total Assessable Value in Swiss Francs 12,234Total Assessable Value (in Rupees) 12,234 x 34 = 4,15,956Duty on above :Basic Customs Duty (BCD) @ 30% Rs.4,15,956 x 30% = Rs.1, 24,787NCCD (1% of Assessable Value) Rs.4, 15,956 x 1% Rs.4,160CVD @ 28% of (AV + BCD + NCCD) Rs.5,44,885 x 28% Rs.1, 52,568AED (GSI) Rs.10 per Kg.Hence for 100 MT 10,000x10 = Rs.10,00,000Education Cess @ 2% on [BCD + NCCD +CVD + AED (GSI)] =Rs.12,81,515 x 2% = Rs.25,630SHEC@1%on[BCD+NCCD+CVD+AED(GSI)] =Rs.12,81,515 x1% = Rs.12,815Total Customs Duty Payable= (BCD +NCCD + CVD + AED +Education Cess + SHEC) Rs.13,19,960Notes:1. Since air freight is more than 20% of FOB, freight is required to be limited to 20% ofFOB i.e. 2,000 SF (Swiss Francs).2. Since insurance data is not available, insurance cost is to be taken @ 1.125% on FOB,i.e. 113 SF (Approximately).3. Basic Excise Duty (Cenvat) is 14% and Special Excise Duty (SED) is 14%. Hence,CVD, which is equal to excise duty will be 28%.http://success-gurus.blogspot.com
34. 'A' imports by air from USA a Gear cutting machine complete with accessories and spares. Its HSclassification is 84.6140 and Value US $ FOB 20,000.Other relevant date/information:(1) At the request of importer, US $ 1,000 have been incurred for improving the design,etc. of machine, but is not reflected in the invoice, but will be paid by the party.(2) Freight - US $ 6,000.(3) Goods are insured but premium is not shown/available in invoice.(4) Commission to be paid to local agent in India Rs.4,500.(5) Freight and insurance from airport to factory is Rs.4,500.(6) Exchange rate is US $ 1 = Rs.42.(7) Duties of Customs: Basic - 30% CVD - 14%.Compute (i) Assessable value (ii) Customs duty.Computation of Assessable Value and Customs Duty PayableParticulars Amount Amount(in $) (in Rs.)FOB Value of Machine 20,000Add: Expenditure for improving design 1,000Add: Freight limited to 20% of FOB [Rule 9 (2)] 4,000Insurance @ 1.125% of FOB [Rule 9(2)(c)(iii)] 225Sub-Total 25,225Sub-Total In Rs. [@ Rs. 42 per $] 10,59,450Add: Agents Commission [Rule 9(1)(i)] 4,500Total CIF Value 10,63,950Add: Landing charges 1% of CIF 10,640Assessable Value( A.V ) 10,74,590Duty on aboveBasic Customs Duty (BCD) @ 30% of A.V 3,22,377Countervailing Duty (CVD) @14% 1,95,575on (A.V + BCD) [10,74,590+3,22,377)Education Cess @ 2% on (BCD + CVD) 10,359[3,22,377+1,95,575]SHEC @ 1% on (BCD + CVD) 5,180Total Customs Duty Payable(BCD + CVD + Education Cess + SHEC) 5,33,491http://success-gurus.blogspot.com
35. Determine the assessable value and customs duty amount from the following data:1. Name of the raw material: XL-1052. FOB value: Euro 1 million3. Ocean freight: Actual data not available4. Ocean Insurance: Actual data not available5. Freight from sea port to godown paid in India: Rs.10,0006. Transit insurance in India: Rs.2,0007. Selling commission paid to agent in India: 5%8. Royalty on manufacture and sale of finalproduct payable to foreign collaborator: 5%9. Interest payable on raw material imported at180 days credit (on FOB value): 12% p.a.10. Dividend paid to the foreign supplier of raw material: Rs.2 per share on 1 millionon their equity participation for the year 07-08 shares of face value Rs.10/share.• Importer supplied design and drawings worth Euro 10,000 to the foreign rawmaterial supplier.• Landing charges as per Customs provisions• Customs duty rates: BCD - 30%, CVD - 14%• Exchange rate: 1 Euro = Rs.68.Ans.: Computation of Assessable Value and Customs Duty PayableParticulars Amount in Euro Amount in Rs.FOB Value 10,00,000Add: Freight @ 20% of FOB 2,00,000Add: Insurance @ 1.125% of FOB 11,250Total 12,11,250Add: Designing and drawing charges 10,000Total CIF Value 12,21,250CIF Value in Rs.@ Rs.68.00 8,30,45,000Add: Local Agency Commission @ 5% 41,52,250Total Value (A) 8,71,97,250Add: Landing Charges @ 1% of (A) (B) 8,71,972Assessable Value (A+B) 8,80,69,222Duty on aboveBasic Customs Duty (BCD) @ 30% of AV 2,64,20,767CVD @ 14% is payable on (AV+BCD) 1,60,28,598[8,80,69,222+2,64,20,767]Education Cess @ 2% on (BCD + CVD) 8,48,987[2,64,20,767 + 1,60,28,598]SHEC @ 1% on [ 2,64,20,767 + 1,60,28,598] 4,24,494Total Customs Duty Payable(BCD + CVD + Education Cess +SHEC) 4,37,22,846http://success-gurus.blogspot.com
Notes :1) Since ocean freight is not available, it has to be taken at 20% of FOB.2) Insurance is taken @ 1.125% of FOB Value.3) Landing charges will be 1% of GIF Value, as per Customs Valuation Rules.4) It is assumed that selling commission to selling agent in India is payable on basis ofGIF Value of goods including cost of drawings supplied by buyer.5) Royalty on manufacture and sale of final products payable to foreign collaborators hasno relation to goods imported. Hence, it is not includible in Assessable Value forcustoms.6) Dividend paid to foreign supplier has no relation with supply of raw materials. It is notincludible in Assessable Value.7) Interest payable for credit is not includible in assessable value for customs purposes,as it is not part of 'transaction value".8) Freight from seaport to godown and transit insurance in India are post-importation costsand are not includible.9) As per rule 9(1)(b)(iv) of Customs Valuation Rules, cost of engineering drawings isincludible only if work was undertaken outside India. Since, payment has been made inEuro; it is assumed that the design and drawing work was done outside India.For more information, question papers download free http://success-gurus.blogspot.co
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1. Define 'Related Persons' as per Customs Valuation Rules,1988Answer: For the purpose of these rules, persons shall be deemed to be "related" only if –(i) they are officers or directors of one another's businesses;(ii) they are legally recognised partners in business;(iii) they are employer and employee;(iv) any person directly or indirectly owns, controls or holds 5 per cent or more of theoutstanding voting stock or shares of both of them;(v) one of them directly or indirectly controls the other;(vi) both of them are directly or indirectly controlled by a third person;(vii) together they directly or indirectly control a third person; or(viii) they are members of the same family.
2. When are the custom authorities precluded from enhancing the value on the basis ofcontemporaneous import at higher price invoking Rule 4 of the Customs (Determination ofPrice of Imported Goods) Rules, 1988 read with section 14 of the Customs Act, 1962.Answer: If methodology given under Rule 3 is not followed then custom authorities areprecluded from enhancing the value of goods imported on the basis of contemporaneousimports. According to Rule 3, the value shall be transaction value determined in accordance withRule 4 and where conditions of Rule 4 are not satisfied then valuation has to be done inaccordance with Rule 5 to 8. The value can be enhanced on the basis of identical or similargoods imported at or about the same time as the goods are being valued. If thecontemporaneous imports does not satisfy the criteria of the identical goods or similar goodsthen custom authorities cannot enhance the value.
3. In a particular case of import of goods, the seller in USA and the Indian buyer were found to betogether controlling a third company in India. What are the conditions subject to which thentransaction value of such goods would be accepted for customs purpose?Answer:(A) Rule 2(2) of Customs Valuation Rules, 1988 specifies the situations in which persons shallbe related. One of the specified situations is that the persons together directly or indirectlycontrol a third person. It has been further clarified in the explanation to this sub-rule that theterm' person' also includes legal persons. In view of the above, the seller and buyer are deemedto be related in the given case.(B) Rule 4(3) of Customs Valuation Rules deals with acceptance of transaction value where buyerand seller are related. Refer Rule 4(3) above.
4. Discuss the concept of 'Price actually paid or payable' with reference to 'Transaction Value' asgiven in Interpretative notes of Customs Valuation Rules, 1988.Answer:(a) The price actually paid or payable is the total payment made or to be made by the buyer to orfor the benefit of the seller for the imported goods.(b) The payment need not necessarily take the form of a transfer of money. Payment may be madedirectly or indirectly.(c) Activities undertaken by the buyer on his own account, other than those for which anadjustment is provided in Rule 9, are not considered to be an indirect payment to the seller,even though they might be regarded as of benefit to the seller. The costs of such activitiesshall not be added in determining the value of imported goods.(d) The value of imported goods shall not include the following charges or costs, provided that theyhttp://success-gurus.blogspot.com
• Charges for construction, erection, assembly, maintenance or technical assistance,are distinguished from the price actually paid or payable for the imported goods:undertaken after importation on imported goods such as industrial plant, machinery orequipment;• The cost of transport after importation;• Duties and taxes in India.(e) The price actually paid or payable refers to the price for the imported goods. Thus the flow ofdividends or other payments from the buyer to the seller that do not relate to the importedgoods are not part of the customs value.
5. Explain whether the costs and services as given in Rule 9 of the Customs ValuationRules, 1988 are to be added to the value of the identical goods or similar imported goodsunder Rule 5 & 6 respectively.Answer:(a) Rule 5(1)(c) of the Customs Valuation Rules, 1988 provides that where imported goods arebeing valued as per Rule 5, the value of identical goods is adjusted to take into account thedifference attributable to the commercial level or to the quantity or both.(b) Rule 5{2) provides that where costs and charges referred to in Rule 9 are included in the valueof identical goods, adjustment has to be made for the difference in such costs and chargesbetween the imported goods and identical goods.(c)Therefore, if the value of the identical goods does not include certain specific costs andcharges relating to the imported goods, these are to be included as per Rule 9.
6. Determine Assessable Value from the following:Sale quantity Unit Price Number of Sales Total quantity sold ateach price1-10 units 100 10 sales of 5 units5 sales of 3 units6511-25 units 95 5 sales of 11 units 55Over 25 units 90 1 sale of 30 units1 sale of 50 units80Answer: The greatest number of units sold at a price is 80, therefore, the unit price in the greatestaggregate quantity is 90.
7. XYZ Co., the assessee, has claimed before the Customs Authority that since the exports of goods inits case attracted no duty, the value, for purposes of the Customs Act, 1962, to be declared shall be thevalue of goods, which he expects to receive on sale of goods in the overseas market.Briefly discuss giving reasons whether the stand taken by the XYZ Co. is correct.Answer: The Supreme Court has addressed this issue in M/s Om Prakash Bhatia V. Commissionerof Customs, Delhi 2003 (155) ELT 423. The Apex Court observed that for finding the value section 14of the Customs Act has £o be read with section 2(41) which defines the term Value'. According to itvalue means the value as determined in accordance with section 14(1).According to section 14(1) the value of such goods shall be deemed to be the price at which such orlike goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation orexportation, as the case may be, in the course of international trade, where the seller and the buyerhave no interest in the business of each other and the price is the sole consideration for the sale oroffer for sale. Therefore, irrespective of the fact whether duty is to be levied or not. the value has to bedetermined in accordance with the provisions of section 14 only. Hence, contention of XYZ Co. is tobe rejected.http://success-gurus.blogspot.com
gaskets, elements etc., from 00 Asia Private Limited, Singapore. The Special Valuation Branch8. DD India Private Limited Imported components and spares of diesel engines such as impellers,(SVB) Customs House Chennai Initiated Investigation into the question of admissibility of invoicevalue for the purpose of valuation of goods Imported and assessment of custom duty.The SVB found that DD India was re-selling the imported components at a margin of 65% (whichincludes expenses and profits) in the domestic market. The SVB felt that the said margin shouldnot be more than 45%.The SVB came to the following conclusions:1. DD India is related to DD Asia as per rule 2(2) of the Customs Valuation Rules, 1986 as DDIndia are the sole distributors in India of DD Asia.2. The "transaction value" shall be determined as per rule 8 of the Customs Valuation Rules, 1988.Consequently the invoice value of all imports by DD India was ordered t be loaded by 20% forthe purpose of assessment of the custom duty.DD India taken over the distribution from M/s Elandtee, who were the erstwhile distributors In India forDD Asia. During the enquiry proceedings DD India had placed evidence before the SVB that themargins enjoyed by M/s Elandtee was also 65%. However, this was ignored by SVB as not relevant.The SVB also rejected the price list of foreign suppliers produced by DD India without assigning anreasons. Write a brief note on the two conclusions arrived at by SVB and state, how as the Excise andCustoms consultant of DD India you would assail the same in the aforesaid facts and circumstances ofthe case.
Answer: According to explanation to rule 2(2) of the Custom Valuation Rules, 1988, a sole distributorcan be treated as a related person only if he is related in any of the manner specified under rules 2(r)to rule 2(viii). Therefore, in the given case, on the basis of given facts, DD India cannot be treatedas a related person. First conclusion of SVB is not sustainable.Second conclusion of SVB is also not sustainable. Assessment of duty has to be based on the priceactually paid or payable and not on any fictitious or notional price. Rule 5 to 8 are adopted only whentransaction value is not available. In Eicher Tractors Ltd. V. CC2000(122) ELT321, 325 the SupremeCourt has held that the reason should fall within the scope of rule 4{2). Before adopting rule 8 i.e. bestjudgment, all preceding rules shall be applied and it has to be determined why value cannot be decidedaccording to any of those rules. The adjudicating authority cannot directly adopt rule 8 without examiningthe applicability of preceding rules.It is to be noted that the facts given do not indicate that SVB has applied any of the preceding rules.Therefore, adoption of rule 8 is not correct.
9. Due to congestion in the ports or non-availability of deep draught all ports are not navigable untothe jetty. Goods have to be discharges or transshipped at the outer anchorage with the help of barges.The charges associated with the delivery of cargo at outer anchorage are called 'barging/lighteragecharges'. State giving the reasons whether such charges have to be included for purpose ofdetermination of assessable value under the Customs Valuation (Determination of price of importedgoods) Rules, 1988.Answer: AS per MF (DR) Circular No. 29/2004 - Cus dated 13.04.2000, the barging /lighteragecharges borne by the importer in bringing the goods from outer anchorage to the landmass should beincluded in the assessable value as 'extended cost of transportation' under rule 9{2)(a) of theCustoms Valuation Rules, 1988. The value of goods is deemed to be the price at which such goodsare ordinarily sold or offered for sale for delivery at the time and place of importation in the course ofinternational trade. The importation gets completed when the goods reach the landmass of thecountry and not at the outer anchorage point. Therefore, all the expenses incurred by the importer inbringing the goods to the landmass of the country will be includible in the assessable value.http://success-gurus.blogspot.com
10. A consignment of 800 metric tones of skimmed milk powder of US origin was imported by a non-profitmaking organization for free distribution of milk to the children In a tribal area under a World HealthProgramme. This being a special transaction a nominal price of US $ 10 per metric ton was charged forthe consignment to cover freight and insurance charges. The customs department found out at or aboutthe importation of this gift consignment there were the following imports of the skimmed milk powder of USorigin:Sl. No. Quantity importedIn metric tonnesUnit price in US $ CIF1 20 2602 100 2203 500 2004 900 1755 400 1806 780 160The rate of exchange as on the relevant date was 1 US$ = Rs. 40.Briefly explain how the assessable value for the purposes of the customs duty will be arrived at in thiscase under the Customs Act, 1962 and the Customs Valuation Rules, 1988.Answer: In the given case only a nominal value of US$ 10 has been charged for covering up the costof transportation and insurance of the goods. Not being the actual price of the goods, value cannotbe determined in accordance with Rule 4 and hence, valuation has to be done on the basis of Rule 5i.e. identical goods.As per Rule 5, the contemporaneous imports at the same commercial level and in substantially samequantity will be considered. Therefore, consignments of 20 tonnes and 100 tonnes cannot be consideredwhile the remaining four consignments can be considered to be of substantially the same quantity.According to Rule 5(3) if more than one transaction is found for identical goods then lowest of them shall beconsidered for determination of import value of the goods. Therefore, unit price in the given case will betaken at US $ 160 per metric tonne.Particulars Value1.CIF value of 800 metric tones @ US $ 160 per MT 1,28,0002.Rate of Exchange 1US $= Rs.403. CIF in Indian Rupees= (1) x (2) Rs.51,20,0004. Add: Landing Charges @ 1% of CIF value (3) Rs.51,2005. Assessable Value = (3) + (4) Rs.51,71,200
11: M/s SAS imported 10000 citizen calculators model No. CT 500 of Chinese origin from Singaporeand declared value to be US$0.90 per piece in the Bill of Entry. The customs authorities enhancedthe value to be US$ 1.80 per piece on the basis of price list of citizen calculator and contemporaneousimports at the same value. Is the action of Customs justified.Answer: The customs authorities have enhanced the value of the goods based on price list of thecontemporaneous imports of identical goods. Now, it is for the importer to prove that the price declaredby him in the Bill of Entry is the genuine price and it is not affected by any other consideration. Thefacts of the case are similar to that of SAS Impex V. CC 2002 (144) ELT 215 (T) where the Tribunal heldthat enhancement of value on the basis of contemporaneous imports is sustainable in absence of anyevidence that the price declared in the Bill of Entry is the genuine price.http://success-gurus.blogspot.com
12. Gujrat Dry Fruits Limited imported dry fruits and declared the value as under –Date of imports Quantity Declared value per MT Country of importNovember 2008 250 25,000 EgyptNovember 2008 150 25,000 EgyptIt was found that imports were also made by some other dealers as indicated belowDate of Imports:Date of import andimporterQuantity (MT) Declared Value Rs. perMTCountry of importSeptember 2008Mumbai Intil50 35,000 DubaiOctober 2008Chennai Fruits Ltd20 40,000 PersiaThe Customs Department has sought to assess the imports made by the Gujarat Fruits Ltd. ascontemporaneous imports under section 14 read with Rule 5 of the Customs Valuation Rules, 1988. Brieflyexamine whether the action proposed by the Department is correct.Answer: The goods are said to be identical only if the goods to be valued have been produced in the samecountry. In the given question, the goods in question have been imported from Egypt while other importershave imported goods from other countries. Moreover, there is a substantial difference in the quantity of thegoods imported and contemporaneous imports taken by the customs for enhancing the value. Inaccordance with the provisions of section 14 and the Customs Valuation Rules. 1988 the action taken bythe Department is not correct.
13. C & Co. imported second hand machinery and declared the transaction value in the Bill of Entry filed forthe purpose of assessment of import duty. The Assistant Commissioner ignored the transaction value andbased on the chartered engineer's certificate showing that the machinery was in working condition and had aresidual life of 10 years, he completed the assessment under Rule 8 of the Customs Valuation (Determination ofvalue of Imported Goods) Rules, 1988 after allowing maximum depreciation of 70%.Discuss briefly giving reasons whether the action of the Assistant Commissioner is valid inlaw.Answer: The facts given in the case are similar to the facts in Tolin Rubber Pvt. Ltd. V. COC, Cochin,[2004] 163 ELT 289 (SC). In this case the Supreme Court stated that the value of the goods has to bedetermined as per rule 4(1) of the Customs Valuation Rules, 1988 and only in the circumstances referredunder rule 4(2) the transaction value can be rejected and further determination has to be made as per rule 8.The assessing authority has not given any reason for rejecting the transaction value. It was held by theSupreme Court that the price declared by the company in the Bill of Entry has to be accepted by theDepartment.Applying the same ratio in the given situation, it may be concluded that the decision of the AssistantCommissioner is not valid in law.
14. V Steels imported various items for its captive power plant with technical know-how from Nengineering USA. The relevant drawings of the turbine shaft and lay out of the turbine with other items werealso supplied. One of the items which was turbine shaft was in semi-finished condition. Before fitting theturbine shaft had to be further ground and finished as per the dimensions of the shaft indicated in the lay outdrawings. V Steels paid US$ 2000 for the layout drawings and did not pay any custom duty on this amount.The Customs Department claims that this amount of USS 2000 forms part of the transaction value under Rule9(1) of the Custom Valuation Rules, 1988. The counter of V steels to this claim made by the Department isthat the drawings indicating the dimensions of the turbine shaft was merely a layout drawing of the turbinewith other items of the turbine room.Explain with reference to the provisions of Rule 9 of the Customs Valuation Rules, 1988, whether theclaim made by the Department is tenable.Answer : In accordance with Rule 9(1){e) of the Customs Valuation Rules, 1988, in determining thetransaction value, any payment made by the buyer as a condition of sale of goods will be included inthe value of the goods.http://success-gurus.blogspot.comIn the given case, the turbine shaft was imported in the semi-finished condition and before lilting, ithas to be finished as per the specifications in the drawing. Therefore, drawing becomes essential forfinishing and fitting of the shaft. Therefore, amount of USS 2000 paid towards the drawings, which isessential for working of the turbine, has to be included in the assessable value.
15. Rule 4 of the Customs Valuation Rules, 1988, states that the transaction value of the good shall be theprice actually paid or payable for the goods when sold for export to India adjusted in accordance with provisionsof Rule 9 with regard to costs and services. What is the benefit available to the importer with respect to cost oftransportation for importation by air when FOB value is ascertainable.Answer : The cost of transportation is required to be added with the FOB value for valuation purposes.Where the import is by air, if the cost of import exceeds 20% of FOB value then for the purpose ofvaluation it shall be restricted to 20% of the FOB value.
16. M/s H.R.C. imported a consignment of computer software and manual valued at USS 42 lacs andcontended that the actual value was only US S 10 lakhs and the balance amount represented licence feefor using the software at multiple locations and as such custom duty Is payable only on the actual value ofUS $ 10 lakhs. Is the contention raised by M/s HRC correct? Discuss.Answer : The facts of the case are similar to that of the case of Slate Bank of India v. C.C, Bombay2000 (115) ELT 597 (SC). The Supreme Court held that the license for country wide use cannot beconsidered as the charges for the right to reproduce the imported goods as envisaged in theinterpretative Note to Rule 9(1)(c) of the Valuation Rules. Therefore, total cost incurred in transactionvalue on which custom duty has to be paid and total cost for the purpose of assessment of customduty would include single site licence fee as well as country wide licence fee.Since software cannot be used at multiple location unless licence fee is paid for such use, it becomes apart of the software and therefore contention of M/s HRC is not correct.
17. Rl is an indenting agent of an Italian Company. The agreement provides for payment of 20%commission on the Imported equipments supplied by Rl to users in India. However, in respect of Rl's ownrequirement of equipments supplied by the Italian company no commission was payable as there was to beno value addition by the indenting agent. The department wants to enhance the value of import by 20% asaccording to them the indenting agent is a 'Related Person'. Examine briefly whether the stand taken by thedepartment is correct with reference to Section 14 of the Customs Act, 1962 and Rule 9 of the CustomsValuation Rules, 1988 regarding "cost and services" and Rule 2(2) regarding "Related Persons".Answer: Valuation of imported goods has to be done in accordance with the provisions of section 14of the Customs Act, 1962 read with the Customs Valuation Rules, 1988 for the purpose of chargingcustom duty.Rule of 9 of the aforesaid Rules provide that the value of the services paid by importer but not includedin the value of goods shall be added. 'Related person' has been defined under Rule 2(2). Rule 4provides that when sale is to a related person, the transaction value may be accepted if therelationship has not affected the price in any way.Going by the definition of Rule 2(2) the indenting agent cannot be treated as a related. As per rule 9 onlythe cost of services paid by the importer is to be included in the value of goods. In the instant case thecommission of 20% cannot be added. Therefore, contention of the department is not correct.
18: Discuss briefly with reference to decided case laws as to how the 'value' shall be determined undersection 14 of the Customs Act, 1962 read with the Customs Valuation Rules, 1988 in the following cases -(i) Goods are offered at specially reduced price to buyer and buyer is asked not to disclose speciallyreduced price to any other party In India.(ii) There has been a price rise between the date of contract and the date of importation. Thecontract was over 6 months before the date of shipment.(iii) The sale involves special discounts limited to exclusive agents.(Iv)The goods are purchased on high seas.http://success-gurus.blogspot.com
Answer:(i) Where sale is made at a specially reduced price then such price cannot be said to be the ordinaryprice. In the case of Padia Sales Corporation V. Collector of Customs [1993] 66 ELT 35 (SC) theSupreme Court has stated that where goods are offered to the buyers at specially reduced price and thebuyer has been asked not to disclose this to any other party, then the discounted price will not beacceptable.(ii) The value of imported goods is to be determined at the time of importation thereof. Therefore, wherethere has been a price rise between the date of contract and the date of actual importation then value atthe time of actual importation i.e. after price hike, is to be considered for the purpose of levy of customduty. Rajkumar Knitting Mills Pvt. Ltd. V. Collector of Customs [1998] 98 ELT (SC).(iii) In the case of Eicher Tractors Ltd. V. Commissioner of Customs, Mumbai [2000] 122 ELT 321 (SC), theSupreme Court observed that the price paid by the importer to the vendor in the ordinary course of commerceshall be taken to be the value of imported goods. Therefore, where seller and buyer are not related personand sale price is the genuine price, it shall be accepted for the purpose of custom duty. But according torevised rules, where special discounts are offered to the exclusive agents such discounted price shall not beaccepted as the assessable value.(iv) In the case of Godavari Fertilizers V. C.C.Ex [1996] 81 ELT 535(T) the Tribunal observed that in case ofhigh seas sales the price charged from the assessee will be value of the imported goods.19. M/s Agrawal Industries imported by Air from USA certain goods on CIF value $ 6,500. Air freightUS$ 1,400 and insurance charges US$ 100 were also paid. Bill of entry was presented on 28.02.08 butthe Entry Inward was granted on 10.3.08. Other relevant information is as follows -As on 28.02.08 As on 10.03.08Rate of exchangeAs announced by CBEC US$ 1 Rs. 46.80 Rs. 46.70As announced by RBI US$ 1 Rs. 46.60 Rs. 46.50Rates of custom dutyBasic Custom Duty 25% 16%Additional Custom Duty 20% 16%The same goods are exempt from Excise duty in India, if manufactured without the aid of power.Compute the assessable value and give the rates of basic and additional custom .duty to be adopted inthis case, as also the basis for arriving at the Basic and Additional custom duty (actual dutycalculation need not be given.
Answer: When import is by air, the cost of air freight should not exceed 20% of FOB value, hence theFOB value is as under -CIF Value US$ 6,500Less: Air freight US$ 1,400Insurance US$ 100FOB Value of imports US$ 5,000Add: Air freight 20% ofAssessable value US$1,000Insurance US$ 100TOTAL US$ 6,100CIF Value in Indian Rupees US$ 1 = Rs. 46.80US$ 6,100 X 46.80 Rs.2,85,480.00Add : 1% of GIF value towards handling charges Rs. 2.854.80Assessable Value Rs. 2,88,334.80http://success-gurus.blogspot.com
20. Infotech Limited has imported a machine from Japan at FOB cost of 50,000 Yen (Japanese). Theother expenses incurred are as follows -(i) Freight from Japan to Indian port 5000 yen.(ii) Insurance paid to insurer in India Rs. 2500(iii) Designing charges paid to consultancy firm in Japan 7500 yen(iv) M/s Infotech spent Rs. 25,000 in India for development work connected with the machine.(v) Transportation cost from Indian port to factory Rs. 7500.(vi) Central Government has announced exchange rate of 1 yen = Rs. 0.40 by notification under section14(3) of the Customs Act, 1962. The exchange rate prevailing on that day in the market was 1 yen = Rs.0.4052.(vii) M/s Infotech made payment to the bank based on the exchange rate of 1 yen = Rs. 0.4150.(viii)The commission payable to the agent in India was at 5% of the FOB price in Indian rupees.The rate of custom duty is 35%. Similar goods are subject to 15% excise duty in India.Clearly show your working to arrive at the total assessable value in rupees for purposes of Ivey of custom duty.Ans. Computation of Assessable ValueFOB Value 50,000Freight 5,000Designing charges paid in Japan 7,500Total 62,500 yenFOB value in Indian rupees = 62,50 x 0.40 Rs. 25,000Add:Insurance Rs. 2,500Agents Commission @ 5% of 50,000 yen x 0.40 Rs. 1,000Total CIF value Rs. 28,500Add: 1% of CIF value as handling charges Rs. 285Assessable value Rs. 28,785Notes :• Designing charges paid in India have not been included in assessable value.• Transportation charges paid in India for transportation from port to factory have not beenincluded in the assessable value as this is post importation expenditure.
21. Discuss briefly with reference to the decided case law whether the landing charges imposed afterthe landing of the goods, but prior to their clearance for custom purposes are to be included fordetermining the value under section 14 of the Customs Act, 1962 and arriving on the custom dutypayable.Answer. In Garden Silk Mills Ltd. V. UOI [1999] 113 ELT 358 (SC) the Supreme Court held that indetermining the deemed price in international trade the element of port charges, which are borne by theimporter, have to be added in the assessable value.As per the Customs Valuation Rules, 1988, handling charges are added in the CIF value @ 1% of GIFvalue irrespective of the actual amount of landing charges.
22. Discuss the Includibility or otherwise to the assessable value under the Customs Ac 1962 of thefollowing payments made by the importer to the overseas supplier of second hand plant in India:(i) Dismantling charges for removing the second hand plant at the supplier's place an shipping to Indianimporter.(ii) Fees for supervision of erection and commissioning of plant in India. For this purpose theforeign supplier deputed their technician in India.(iii) Payments for tools, dies and moulds (imported along with plant) for use in connection with themanufacture of excisable goods on successful commissioning of the plant.(iv) Lump sum payment and annual royalty for transfer of technical know-how for manufacturing goods.http://success-gurus.blogspot.com
Answer:(i) Dismantling charges - According to Rule 9 of the Custom Valuation Rules, 1988. a paymentsactually made or payable by the importer in connection with the import c goods, to the extent notincluded in the price of the goods are to be included. In the give case payment of dismantling chargesis certainly incidental and essential for import c machine. Therefore, it is to be included in theassessable value.(ii)Fees for supervision of erection and commissioning - The activity of erection ancommissioning is post import activity and thus, any amount of supervision for the same are notincludible in the assessable value. It is also to be noted that such cost is not included in price of theplant at the time of importation into India, as required under section 14 of the Customs Act, 1962.iii) Payments for tools, dies and moulds (imported along with plant) - If the tools, die andmoulds etc imported along with the plant are to be used with the same plant the value thereof is to beincluded in the assessable value of the plant otherwise not.(iv) Lump sum payment and annual royalty for transfer of technical know-how - As per rule 9 ofthe Customs Valuation Rules. 1988, the transaction value is inflated by cost c services and expenses asspecified. Under rule 9(1)(c) royalties and licence fee related t the imported goods that the buyer isrequired to pay as a condition of sale of goods being valued, is added to the transaction price. It is to benoted that only such amount c royalties and licence fee which relate to the imported goods is to be addedback. In this case the lump sum payment and annual royalty are related to the manufacture of goodand do not relate to the imported goods. Hence, this amount is not includible in this assessable value.
23. Discuss the Includibility of the following payments made by an importer to the overseas supplier of animported machine/equipment, to the assessable value of imported machine:(a) Process licence fee and technology transfer fee(b) Dismantling charges for removing the machine before shipment to India at theforeign supplier's site(c) Training charges paid to supplier, for imparting training to Indian company'spersonnel, on how to use the equipment.Your answer shall be with reference to section 14 of the Customs Act, 1962. You may draw supportfrom decided cases.Answer: According to section 14, the value shall be the price at which goods are ordinarily sold in thecourse of international trade.(a) Process licence fee and technology transfer fee - In Collector V. Essar Gujarat Ltd. [1996] 88ELT 609, the Supreme Court held that process licence fees, cost of technical services paid are inciudiblein the assessable value vide section 14 of the Customs Act, 1962 read with rule 9 of the CustomsValuation Rules, 1988.(b) Dismantling charges - According to Rule 9 of the Custom Valuation Rules, 1988, all paymentsactually made or payable by the importer in connection with the import of goods, to the extent notincluded in the price of the goods are to be included. In the given case payment of dismantling chargesis certainly incidental and essential for import of machine. Therefore, it is to be included in theassessable value.(c)Training charges - Training charges are not includible in the assessable value because it is a costto be incurred after the arrival of goods in India and not at the time of importation. Collector V.Essar Gujarat Ltd. [1996] 88 ELT 609 (SC)http://success-gurus.blogspot.com
24. Explain briefly, how the following would be treated for purposes of valuation under section 14 ofthe Customs Act, 1962 and the Customs Valuation Rules, 1988 -• Dismantling charges paid by the importer of a machine to the foreign supplier forremoval of the machine before shipment at the foreign supplier's place• Demurrage charges actually incurred by the importer of goods.Answer: According to Rule 9 of the Custom Valuation Rules, 1988, all payments actually made orpayable by the importer in connection with the import of goods, to the extent not included in the price ofthe goods are to be included. In the given case payment of dismantling charges is certainly incidental andessential for import of machine. Therefore, it is to be included in the assessable value.Demurrage charges are the charges which are payable by the importer for failure to remove the goodsfrom the port within the permitted time limit. Rule 9(4) provides that any cost incurred in connectionwith the import but not provided in the rule shall not be included in the assessable value.Therefore, demurrage charges are not to be included therein. Moreover, according to section 14, thevalue shall be the price at which goods are ordinarily sold in the course of international trade. Payment ofdemurrage is not an ordinary situation. Therefore, it is not inciudible in the assessable value.
25. ABC Ltd. a manufacturer of fertilizers, imported large quantity of rock phosphate and sulphur.Goods were purchased by ABC Ltd. on high seas and the responsibility of unloading in India was theirsand they maintained their own wharf at port unloading equipment and staff for the same. Customauthorities assessed the landing charges at 1.4% on CIF value thereof (then assessed rate) and theimporter had paid the same as demanded. Later on, custom authorities claimed that the said 1.4% didnot include stevedoring charges or unloading charges and therefore they added them separatelycalculating them upon the basis of inter-alia unloading labour charges, custom staff over time, post-hirecharges for dining hall, fuel, electricity, depreciation, maintenance cost, administrative over-heads andnotional interest on capital.State what your advise to the company would be, bearing in mind the provisions of the' Customs Act,1962 and decided cases.Answer: The main issue in the question is 'landing charges'. Custom authorities are within the powersto charge landing charges at a percentage basis or on actual basis. In the given case though the entirework of unloading is done by the assessee himself, the department added 1.4% of the CIF value aslanding charges which are paid by the assessee. Later on department has claimed additional amount.The facts of the case are similar to that of Coromondal Fertilizers Ltd.V. Collector of Customs in whichthe Supreme Court observed that:(a) 'Landing charges' means the expenditure incurred by the importer for bringing goods on board theship to land. Landing charges, if any, in law, must be assessed on actuals, but as a matter ofpractice, particularly to facilitate expeditious clearance, landing charges are issued at a percentage ofthe value of goods and such assessment is accepted. When so assessed, landing charges coverthe totality of all that an importer spends to bring the imported goods to land.(b) Stevedoring charges or unloading charges are not to be added when landing charges are assessedon percentage basis.Thus, assessee is not required to pay any additional duty as demanded by the customauthorities.
26. M/s XYZ, a 100% Export Oriented Undertaking imported DG sets and furnace oil duty free forsetting up captive power plant for Its power requirements for export production. They used the power sogenerated for export production but sold surplus power In domestic tariff area. Is custom departmentjustified In demanding duty on DG sets and furnace oil as surplus power has been sold in domestictariff area.Answer: No. the department cannot demand duty on DG set and furnace oil because the 100% EOUhas already used power for production of export goods and it is only the surplus that has been sold in thedomestic tariff area. CCE&CV. Hanil Era Textiles Ltd. [2005] 180 ELT A 44 (SC)http://success-gurus.blogspot.com
27. An importer has imported certain goods and while determining the assessable value, landing charges@ 1% of CIF value were added. The importer has claimed that actual landing charges are much lower than1% of the CIF value in his case. You have been asked to advise whether the importer can file a bill of entryby adding actual landing charges instead of notional 1% of CIF value or not.Answer: The importer cannot file Bill of Entry by adding actual landing charges. Rule 3(2)(b) ofCustoms Valuation Rules, 1988 has statutorily laid down a fixed 1% charge on free on board value(F.O.B Value) of the goods plus the cost of transport plus the cost of insurance.In Wipro Ltd. Vs ACC, it was held that handling charges of 1% of CIF Value, which isvery nominal, are not arbitrary. It has been fixed under the power conferred by theParliament on the rule making authority and such an act cannot be considered beyond thepower conferred by Section 14(1) or Section 156 of the Customs Act. 1962.Accordingly, the importer should have filed Bill of Entry by adding the statutorily fixed 1%charges in the CIF value regardless of the actual handling charges being much lower inthe present case.
28. A consignment of 20 tonnes of chemicals produced by Company A in Berlin, West Germany is imported byCompany B at $ 20 per kg., C.I.F. Mumbai. At about the same time a consignment of 16 tonnes of samechemical manufactured by same company viz., Company A in Berlin, is imported by Company C at Mumbai; fortheir principals at $ 16 per kg., C.I.F., Mumbai. What value should be taken for assessment of consignments of boththe importers i.e. Company B and C? Give reasons in support of your determination of value. Quoterelevant sections of Customs Act, 1962.Answer: The value is determined as per Section 14(1) of the Customs Act.• It is clear from the given problem that the same exporter has supplied the goods, almostat the same time but quoting two different rates based on the quantity.• A show cause notice has to be issued to importer for the lower price of goods.• If the explanation provided by the importer is not satisfactory, then the customs officercan finalise the assessment on the basis of $20 per kg.
29. What would be the value for the purpose of customs, If a consignment imported by air has a GIF priceof US $ 2,500 including freight US $700 and insurance US $ 90? The exchange rate notified by theGovernment of India under section 14(3)(a)(i) of the Customs Act, 1962 is Rs.42.50.Computation of Assessable ValueParticulars Amount Amount( in US $) (in Rs.)CIF Value $2,500Less : Freight $700Less : Insurance Cost $90FOB Value $1,710Computation of Assessable Value:FOB Value as computed above $1,710Add : Freight (restricted to 20% of FOB Value) $342Add : Insurance Cost $90CIF Value $2,142Exchange rate 1$ = Rs.42.50Total CIF in Rs. ($12,000 X Rs.42.50) A 91,035Add : Landing Charges @ 1% of 'CIF value' B 910Assessable Value (A+B) 91,945http://success-gurus.blogspot.com
30. A consignment is imported by air. CIF price is US$ 12,500. Freight is US$ 2,450 andinsurance cost is US$ 300. On the date of presentation of bill of entry, RBI floor rate wasUS$ = Rs.42.80 and rate notified by Government of India was Rs.41.75. Find the value ofthe consignment for customs purposes.Computation of Assessable ValueParticulars Amount Amount( in USD) (in Rs.)CIF Value $12,500Less : Freight $2,450Less : Insurance Cost $300FOB Value $9,750Computation of Assessable Value :FOB Value as computed above $9,750Add : Freight (restricted to 20% of FOB Value) $1,950Add : Insurance Cost $300CIF Value $12,000Exchange rate 1$ = Rs.41.75Total CIF in Rs. ($12,000 X Rs.41.75) A 5,01,000Add : Landing Charges @ 1% of 'CIF value' B 5,010Assessable Value (A+B) 5,06,010
31. An importer in India imported raw materials @ US $ 25,000 FOB. The goods were packed for which US $600 were charged extra. The goods were stuffed in Container, the price of which was US $ 2,000. Insurancecharges and ocean freight of US $ 250 and 800 respectively were paid. A commission of US $ 500 had to be paidto a broker for arranging the deal:1 US $ = Rs.41.38 ; Customs Duty is 30%; Excise duty on similar goods in India is 14%.Determine the duty payable.Computation of Assessable Value and Customs Duty PayableParticulars Amount Amount(in USD) (in Rs.)FOB Value $25,000Add: Packing Charges at USA $600Add: Freight charges (20% of FOB valueor actual whichever is less) $800Add: Commission to broker who madenecessary arrangement at USA $500Add: Insurance Charge $250CIF Value $27,150Exchange rate $1=Rs.41.38Total CIF Value in Rs. A 11,23,467Add: Landing Charges @ 1 % of 'CIF value' B 11,235Assessable Value (A+B) 11,34,702http://success-gurus.blogspot.comBasic Customs Duty (BCD) @ 30% of AV 3,40,411Duty on Assessable Value:(11,34,702 x 30/100)Countervailing Duty (CVD) @ 14% is payableon (AV + BCD) [11,34,702 + 3,40,411]= (14,75,113 x 14/100) 2,06,516Total (BCD+CVD) 5,46,927Education Cess @ 2% on (BCD + CVD) 10,939SHEC@1%on (BCD+CVD) 5,469Total Duty Payable (BCD + CVD + Education Cess + SHEC) 5,63,335Notes :1. Container is durable and returnable, so no Customs Duty is charged on the cost of containers.2. Any expenses incurred outside India and any expenses committed outside India but paidin India shall be included to consider or calculate GIF Value, duty.32. A consignment is imported by air.• CIF price is 2,000 Euro.• Air freight is 550 Euro.• Insurance cost is Euro 50.• Exchange rate announced by CBE&C as per customs notification is 1 Euro = Rs.67.10.• Basic Customs duty payable is 30%.• Excise duty on similar goods produced in India is 14%.Find Value for customs purposes and total customs duty payable.Computation of Assessable Value and Customs Duty PayableParticulars Amount Amount(In Euro) (In Rs.)FOB Value (Refer Note 1) 1,400Add: Freight (Refer Note 2) 240Add: Insurance 50CIF Value 1,730Value as landing charges (1% of GIF Value) 17Assessable Value 1,747Exchange Rate 1Euro = Rs.67.10Assessable Value in Indian currency 1,17,224Duty on aboveBasic Customs Duty (BCD) @ 30% of AV 35,167Countervailing Duty (CVD) @14% ispayable on (AV + BCD) [1,17,224 + 35,167}] 21,335Total [BCD + CVD] 56,502Add: Education Cess @ 2% on (BCD+CVD) 1,103(56,502 x2/100)Add: SHEC @ 1% on (BCD + CVD) 565Total Customs Duty Payable(BCD + CVD + Education Cess + SHEC ) 58,170Notes :1. FOB Price of consignment is 1,400 Euro [2,000-550-50].2. Air freight is to be restricted to 20% of FOB Value for purpose of customs valuation.Hence, freight will be considered as 20% of 1,400 i.e. 280 Euro for purpose of valuation.http://success-gurus.blogspot.com
33. Determine the total Customs Duty payable from the following data -• Quantity imported : 100 MTs• FOB value : Swiss Franc 10000• AIR Fright: Swiss Franc 2500• Insurance : Data not available• Exchange rate : 1 Swiss Franc = Rs.34• Rate of BCD - 30%• Rate of CENVAT under First Schedule to CETA : 14%• Rate of SED under Second Schedule to CETA : 14%• Rate of AED(GSI) under Additional Duties of Excise (GSI) Act: Rs.10/kg,• Rate of NCCD 1%.Ans.: Computation of Assessable Value and Customs Duty PayableParticulars Computation AmountFOB Value - Swiss Francs 10,000Freight @ 20% of FOB 10,000x20% = 2,000Insurance @ 1.125% of FOB 10,000 x 1.125%= 113CIF Value 12,113Add: Landing Charges @ 1% of CIF 12,112 x 1%= 121Total Assessable Value in Swiss Francs 12,234Total Assessable Value (in Rupees) 12,234 x 34 = 4,15,956Duty on above :Basic Customs Duty (BCD) @ 30% Rs.4,15,956 x 30% = Rs.1, 24,787NCCD (1% of Assessable Value) Rs.4, 15,956 x 1% Rs.4,160CVD @ 28% of (AV + BCD + NCCD) Rs.5,44,885 x 28% Rs.1, 52,568AED (GSI) Rs.10 per Kg.Hence for 100 MT 10,000x10 = Rs.10,00,000Education Cess @ 2% on [BCD + NCCD +CVD + AED (GSI)] =Rs.12,81,515 x 2% = Rs.25,630SHEC@1%on[BCD+NCCD+CVD+AED(GSI)] =Rs.12,81,515 x1% = Rs.12,815Total Customs Duty Payable= (BCD +NCCD + CVD + AED +Education Cess + SHEC) Rs.13,19,960Notes:1. Since air freight is more than 20% of FOB, freight is required to be limited to 20% ofFOB i.e. 2,000 SF (Swiss Francs).2. Since insurance data is not available, insurance cost is to be taken @ 1.125% on FOB,i.e. 113 SF (Approximately).3. Basic Excise Duty (Cenvat) is 14% and Special Excise Duty (SED) is 14%. Hence,CVD, which is equal to excise duty will be 28%.http://success-gurus.blogspot.com
34. 'A' imports by air from USA a Gear cutting machine complete with accessories and spares. Its HSclassification is 84.6140 and Value US $ FOB 20,000.Other relevant date/information:(1) At the request of importer, US $ 1,000 have been incurred for improving the design,etc. of machine, but is not reflected in the invoice, but will be paid by the party.(2) Freight - US $ 6,000.(3) Goods are insured but premium is not shown/available in invoice.(4) Commission to be paid to local agent in India Rs.4,500.(5) Freight and insurance from airport to factory is Rs.4,500.(6) Exchange rate is US $ 1 = Rs.42.(7) Duties of Customs: Basic - 30% CVD - 14%.Compute (i) Assessable value (ii) Customs duty.Computation of Assessable Value and Customs Duty PayableParticulars Amount Amount(in $) (in Rs.)FOB Value of Machine 20,000Add: Expenditure for improving design 1,000Add: Freight limited to 20% of FOB [Rule 9 (2)] 4,000Insurance @ 1.125% of FOB [Rule 9(2)(c)(iii)] 225Sub-Total 25,225Sub-Total In Rs. [@ Rs. 42 per $] 10,59,450Add: Agents Commission [Rule 9(1)(i)] 4,500Total CIF Value 10,63,950Add: Landing charges 1% of CIF 10,640Assessable Value( A.V ) 10,74,590Duty on aboveBasic Customs Duty (BCD) @ 30% of A.V 3,22,377Countervailing Duty (CVD) @14% 1,95,575on (A.V + BCD) [10,74,590+3,22,377)Education Cess @ 2% on (BCD + CVD) 10,359[3,22,377+1,95,575]SHEC @ 1% on (BCD + CVD) 5,180Total Customs Duty Payable(BCD + CVD + Education Cess + SHEC) 5,33,491http://success-gurus.blogspot.com
35. Determine the assessable value and customs duty amount from the following data:1. Name of the raw material: XL-1052. FOB value: Euro 1 million3. Ocean freight: Actual data not available4. Ocean Insurance: Actual data not available5. Freight from sea port to godown paid in India: Rs.10,0006. Transit insurance in India: Rs.2,0007. Selling commission paid to agent in India: 5%8. Royalty on manufacture and sale of finalproduct payable to foreign collaborator: 5%9. Interest payable on raw material imported at180 days credit (on FOB value): 12% p.a.10. Dividend paid to the foreign supplier of raw material: Rs.2 per share on 1 millionon their equity participation for the year 07-08 shares of face value Rs.10/share.• Importer supplied design and drawings worth Euro 10,000 to the foreign rawmaterial supplier.• Landing charges as per Customs provisions• Customs duty rates: BCD - 30%, CVD - 14%• Exchange rate: 1 Euro = Rs.68.Ans.: Computation of Assessable Value and Customs Duty PayableParticulars Amount in Euro Amount in Rs.FOB Value 10,00,000Add: Freight @ 20% of FOB 2,00,000Add: Insurance @ 1.125% of FOB 11,250Total 12,11,250Add: Designing and drawing charges 10,000Total CIF Value 12,21,250CIF Value in Rs.@ Rs.68.00 8,30,45,000Add: Local Agency Commission @ 5% 41,52,250Total Value (A) 8,71,97,250Add: Landing Charges @ 1% of (A) (B) 8,71,972Assessable Value (A+B) 8,80,69,222Duty on aboveBasic Customs Duty (BCD) @ 30% of AV 2,64,20,767CVD @ 14% is payable on (AV+BCD) 1,60,28,598[8,80,69,222+2,64,20,767]Education Cess @ 2% on (BCD + CVD) 8,48,987[2,64,20,767 + 1,60,28,598]SHEC @ 1% on [ 2,64,20,767 + 1,60,28,598] 4,24,494Total Customs Duty Payable(BCD + CVD + Education Cess +SHEC) 4,37,22,846http://success-gurus.blogspot.com
Notes :1) Since ocean freight is not available, it has to be taken at 20% of FOB.2) Insurance is taken @ 1.125% of FOB Value.3) Landing charges will be 1% of GIF Value, as per Customs Valuation Rules.4) It is assumed that selling commission to selling agent in India is payable on basis ofGIF Value of goods including cost of drawings supplied by buyer.5) Royalty on manufacture and sale of final products payable to foreign collaborators hasno relation to goods imported. Hence, it is not includible in Assessable Value forcustoms.6) Dividend paid to foreign supplier has no relation with supply of raw materials. It is notincludible in Assessable Value.7) Interest payable for credit is not includible in assessable value for customs purposes,as it is not part of 'transaction value".8) Freight from seaport to godown and transit insurance in India are post-importation costsand are not includible.9) As per rule 9(1)(b)(iv) of Customs Valuation Rules, cost of engineering drawings isincludible only if work was undertaken outside India. Since, payment has been made inEuro; it is assumed that the design and drawing work was done outside India.For more information, question papers download free http://success-gurus.blogspot.co
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