Valuation Of Imports And Exports – Advanced Tax Laws and Practice Important Questions
Question 1.
Calculate FOB Value, Cost of Insurance, Cost of Freight, and Assessable Value where only the CIF value Is given as the US $ 5,000. Exchange rates notified by RBI and CBEC are ₹ 50 and ₹ 48 respectively for one US $.
Answer:
As per rule 10(2) proviso 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 where FOB value of goods, cost of insurance, and freight are not ascertainable, then cost of insurance and cost of freight shall be computed as follows:
CIF value – US$ 5,000 × ₹ 48 = ₹ 2,40,000
Freight & Insurance – ₹ 2,40,000 × 21.125/121.125 = ₹ 41,858
FOB Value – ₹ 2,40,000 – ₹ 41,858 = ₹ 1,98,142
The exchange rate notified by CBECICBIC has to be taken i.e. ₹ 48,1US$. As per Rule 10 of Valuation Rules, freight, and insurance when not availab1e has to be taken as 20% and 1.125% of FOB value respectively
Question 2.
Compute the assessable value and total customs duty payable under the Customs Act, 1962 for an Imported machine, based on the following information:
| Particulars | Amount (US$) |
| Cost of the machine at the factory of the exporter | 20,000 |
| Transport charges from the factory of the exporter to the port of shipment | 800 |
| Handling charges paid for loading the machine in the ship | 50 |
| Buying commission paid by the importer | 100 |
| Lighterage charges paid by the importer | 200 |
| Freight incurred from the port of entry to the inland container depot | 1,000 |
| Ship demurrage charges | 400 |
| Freight charges from exporting country to India | 5,000 |
| Date of Bill of Entry: 20.02.2020 | |
| (Rate of BCD: 20%; Exchange rate as notified by CBIC: ₹ 60 per US$) | |
| Date of Entry Inward: 25.01.2020 | |
| (Rate of BCD: 12%; Exchange rate as notified by CBIC: ₹ 65 per US$) | |
| Rate of IGST: 12% |
Answer:
Computation of Assessable Value and total customs duty payable:
| Particulars | Amount US$ |
| Cost of the machine | 20,000 |
| Add: Transport charges from factory of exporter to the port of shipment | 800 |
| Add: Handling charges | 50 |
| FOB Value | 20,850 |
| Add: Insurance (20,850 x 1.125%) | 234.56 |
| Add: Freight | 5,000 |
| Add: Lighterage Charges | 200 |
| Add: Ship Demurrage charges | 400 |
| CIF Value/Assessable Value | 26,684.5625 |
| Amount (₹) | |
| Assessable Value (US$26,684.5625 x ₹ 60) | 16,01,074 |
| Add: Basic Customs Duty @ 20% (₹ 16,01,074 x 20%) | 3,20,215 |
| Add: Social Welfare Surcharge @10% of Basic Customs Duty | 32,022 |
| Value for the purpose of levy of IGST | 19,53,311 |
| Add: IGST @ 12% (₹ 19,53,311 x 12%) | 2,34,397 |
| Total Cost of Imported goods | 21,87,708 |
| Customs Duty payable (₹ 3,20,215 + 32,022 + 2,34,397) | 5,86,634 |
Question 3.
ABC Ltd. imported a machine from the UK in November 2020. The details in this regard are as under :
1. FOB value of the machine: 12,000 UK Pound
2. Freight (Air): 4000 UK Pound
3. Licence fee, the buyer was required to pay in the UK: 500 UK Pound
4. Buying commission paid in India ₹ 20,000
5. Designing charges paid to a consultancy firm in New Delhi, which was necessary for such machine ₹ 1,00,000 (vz) Actual landing charges paid at the place of importation ₹ 25,000.
6. Insurance premium details were not available.
7. For this purpose you may consider the following:
- Rate of exchange ₹ 98.00 per one pound.
- Rate of Basic Customs Duty (BCD) at 10%
- Integrated tax under section 3(7) of Customs Tariff Act at 12%
- Social Welfare surcharge as applicable
- Ignore GST Compensation Cess.
You are required to compute the total customs duty and integrated tax payable on the imported machine. You may make suitable assumptions wherever found necessary.
Answer:
Computation of Assessable Value and total Customs Duty and Integrated Tax payable
| Particulars | Amount UK Pound |
| FOB Value | 12,000 |
| Add: License fee required to be paid in the UK payable by the buyer as a condition of sale, are all includible in the assessable value – Rule 10(l)(c) | 500 |
| FOB Value for the purposes of Customs | 12,500 |
| Add: Air Freight (Restricted to 20% of UK Pounds 12,500) | 2,500 |
| Insurance: 1.125% of UK Pounds 12,500 | 140.625 |
| CIF Value | 15,140.625 |
| Amount (₹) | |
| Therefore, CIF Value/Assessable Value, converted in ₹ (UK Pound 15,140.625 x ₹ 98 per UK Pound) | 14,83,781 |
| Add: Basic Customs Duty @ 10% (₹ 14,83,781 x 10%) (A) | 1,48,379 |
| Add: Social Welfare Surcharge @ 10% of Basic Customs Duty (B) | 14,838 |
| Value for the levy of IGST | 16,46,998 |
| Add: Integrated Tax under section 3(7) of Customs Tariff Act @ 12% (C) | 1,97,640 |
| Total Cost of Imported Goods | 18,44,638 |
| Total Customs Duty and integrated tax payable (A + B + C) | 3,60,857 |
Notes:
1. In the case of goods imported by Air, where actual air freight is not known, it is restricted to 20% of the FOB value of goods. (Rule 10(2) of Customs Valuation Rules)
2. Insurance charges that were not ascertainable have to be included @ 1.125% of FOB Value of Goods. (Rule 10(2) of Customs Valuation Rules)
3. Buying commission is not included in the assessable value.
4. Designing charges paid for work done in India have not been included for the purpose of arriving at the assessable value. (Rule 10(1) of Customs Valuation Rules)
5. No landing charges are to be added to the CIF Value.
4. Compute the assessable value of an imported product as of 11.12.2020 in the following independent situations:
Case 1:
| Particulars | Figures in Euros |
| FOB Value | 2,000 |
| Freight, loading, unloading, and handling charges associated with the delivery of the imported goods to the place of importation | Not Known |
| Insurance charges | 20 |
Case 2:
| Particulars | Figures in Euros |
| FOB Value | 2,000 |
| Sea Freight, loading, unloading, and handling charges associated with the delivery of the imported goods to the place of importation | 100 |
| Insurance charges | Not Known |
Answer:
Computation of Assessable Value
CASE 1:
| Particulars | Euro |
| FOB Value | 2,000 |
| Add: Cost of Transportation (Since not known, taken at 20% of FOB value) | 400 |
| Add: Cost of insurance (Actual) | 20 |
| CIF Value i.e. Assessable Value | 2,420 |
CASE 2:
| Particulars | Euro |
| FOB Value | 2,000 |
| Add: Cost of Transportation (Actual) | 100 |
| Add: Cost of insurance (Not ascertainable, hence taken as 1.125% of FOB value) | 22.50 |
| CIF Value i.e. Assessable Value | 2,122.50 |
Question 4.
Particulars relating to the import of product Z by Mr. Prahalad on 23-12-20 from Antwerp, Belgium to the Chennai airport, are given hereunder:
- FOB value of the Product $10,000
- Cost of transport, loading, unloading, and handling $ 2,500 charges associated with the delivery of the imported goods to the place of importation
- Insurance $ 1,000
- Unloading charges at Chennai airport ₹ 34,000
- Exchange rate notified by CBEC on 23-12-20 1$ = ₹ 64
- Exchange rate notified by RBI on 23-12-20 1 $ = ₹ 64.50
- Basic customs duty 10%
Ascertain the assessable value and the amount of duty payable by Mr. Prahalad.
Answer:
Computation of Assessable Value and total tax and duty payable by Mr. Prahalad in respect of import of product Z
| Particulars | Amount(₹) |
| FOB Value of the product | $10,000 |
| Add Adjustments as per Rule 10(2) of Customs Valuation Rules: | |
| Cost of Transportation, loading, unloading, and handling charges associated with the delivery of the imported goods to the place of importation, restricted to 20% of FOB value (US$ 10,000 × 20%) | $2,000 |
| Insurance (Actual) | $1,000 |
| CIF Value Le. Assessable Value | $13,000 |
| The exchange Rate notified by CBIC, US$ 1 = ₹ 64 is to be considered for arriving at the assessable value of the imported product ($13,000 × ₹ 64) | 8,32,000 |
| Add: Basic Customs Duty @ 10% (A) | 83,200 |
| Add: Social Welfare Surcharge @ 10% of Basic Customs Duty (B) | 8,320 |
| Therefore, Assessable Value for levy of IGST | 9,23,520 |
| Add: IGST @ 12% (Assumed GST at 12% on the goods) (C) | 1,10,822 |
| Total Cost of imported goods | 10,34,342 |
| Therefore, Total Customs Duty Payable (A+B+C) or; (Total Cost of imported Goods less Assessable Value) | 2,02,342 |
Unloading charges at Chennai Airport are not to be added. It is to be noted that landing charges are not to be added to the CIF value in view of amendment in Rule 10(2) of the Customs Valuation Rules vide Notification No. 91/2017 – Cus. (NT) dated 26.09.2017.
Question 5.
Chandu Industries Ltd. imported some goods from the USA. The details of the transactions are as under:
| CIF Value of goods: | US$ 1,44,000 |
| Rate of basic duty: | 20% |
| SWS | 10% |
If similar goods were supplied in India, IGST payable as per tariff plan would be 12%. You are required to calculate the assessable value and total duty payable thereon as per provisions of customs law.
Note: Rate of Exchange is as follows:
As per CBIC: 1 US$ = ₹ 63
As per RBI: 1 US$ = ₹ 60
Answer:
Computation of Assessable Value and customs duty payable for goods imported by Chandu Industries from the USA
| Particulars | Amount(₹) |
| GIF Value (US$) i.e. Assessable Value | 1,44,000 |
| Assessable Value (Converted in ₹ by applying the rate of exchange notified by CBIC as on date of presentation of Bill of Entry. US$ 1,44,000 × ₹ 63) | 90,72,000 |
| Add: Basic Customs Duty at 10% | 9,07,200 |
| Add: Social Welfare Surcharge (S WS) @ 1096 of Basic Customs Duty | 90,720 |
| Assessable Value for the levy of IGST | 1,00,69,920 |
| Add: IGST u/s 3(7) @ 12% | 12,08,390 |
| Total cost of imported goods | 1,12,78,310 |
| Total Customs Duty payable (₹ 9,07,200 + ₹ 90,720 + ₹ 12,08,390) | 22,06,310 |
Question 6.
Following particulars are available in respect of consignment of goods imported:
- Cost at the factory of the exporter: US$ 20,000
- Carriage/Freight/insurance up to the port of shipment in the exporter’s country: US$ 400
- Charges for loading onto the ship at the shipping port: US$ 100
- Freight charges of the ship for transport up to Indian port: US$ 1,200
Compute the assessable value for the purpose of levy/payment of customs duty.
Answer:
Computation of Assessable value for imported goods as per section 14 of Customs Act read with Rule 10 of Customs Valuation Rules:
| Particulars | Amount in US$ |
| Cost of Goods at the factory of Exporter | 20,000 |
| Add: Carriage/Freight/insurance up to the port of shipment in the exporter’s country | 400 |
| Add: Charges for loading onto the ship at the shipping port | 100 |
| FOB Value of the goods | 20,500 |
| Add Freight charges of the ship for transport up to the Indian port – Rule 10(2) of Customs Valuation Rules. | 1,200 |
| Add:Insurance(UNASCERTAINABLE,therefore, 1.12596ofFOB Value) – Rule 10(2) of Customs Valuation Rules. | 230.63 |
| Therefore, CIF Value/Assessable Value | 21,930.63 |
Note:
1 Carriage/Freight/Insurance, as well as charges for loading onto the ship, shall be included in the assessable value as these charges are necessary for importation and are incurred at the place of export.
Question 7.
Care Energy Ltd. imported a lift from England at an invoice price of ₹ 20,00,000. The assessee had supplied raw material worth ₹ 5,00,000 to the supplier for the manufacture of said lift. Due to safety reasons, the lift was not taken to the jetty in the port but was unloaded at the outer anchorage. The charges incurred for such unloading amounted to ₹ 25,000 and the cost incurred on the transport of lift from outer anchorage to jetty was ₹ 50,000. The importer was also required to pay ship demurrage charges of ₹ 10,000. The lift was imported at an actual cost of transport of ₹ 45,000 and insurance charges of ₹ 20,000. Compute its assessable value.
Answer:
Computation of assessable value for Care Energy Ltd. of the Lift imported from England:
| Particulars | Amount(₹) | |
| FOB Value, being the Invoice price | 20,00,000 | |
| Add: Raw material supplied by the assessee (Adjustment of Rule 10(1) of Customs Valuation Rules) | 5,00,000 | |
| FOB Value of Customs | 25,00,000 | |
| Add: Adjustments as per Rule 10(2) of Customs Valuation Rules | ||
| Sea Freight | 45,000 | |
| Ship Demurrage charges | 10,000 | |
| Lighterage | 25,000 | |
| Barge charges | 50,000 | 1,30,000 |
| Insurance cost (Actual) | 20,000 | |
| CIF Value/Assessable Value | 26,50,000 |
Note:
The cost of transportation of the imported goods includes the ship demurrage charges on chartered vessels, lighterage and barge charges i.e. any 1 cost in relation to transport from exporter’s port to importer’s port should be added in the FOB as an adjustment of Rule 10(2) of Customs Valuation Rules while computing Assessable Value.
Question 8.
Bhaskar Ltd. has imported certain equipment from Japan at a CIF value of 5,00,000 Yen. Other details are as under:
| Air Freight | 90,000 Yen |
| Insurance charges | 10,000 Yen |
| Freight from airport to factory in India | ₹ 20,000 |
| Date of presentation of Bill of Entry (Exchange Rate notified by CBIC: 1 Yen = ₹ 0.40) | 28th April 2020 |
| Date of arrival of goods in India (Exchange rate notified by CBIC: 1 Yen = ₹ 0.42) | 8th May 2020 |
| Commission payable to an agent in India (Not included in CIF value of 5,00,000 Yen) | 10% of FOB cost in Indian ₹ |
Arrive at the Assessable Value for the purposes of customs duty providing brief notes wherever required with appropriate assumptions.
Answer:
| Particulars | Currency | Amount |
| CIF Value | Yen | 5,00,000 |
| Less: Air Freight | Yen | 90,000 |
| Less: Insurance charges | Yen | 10,000 |
| FOB Value | Yen | 4,00,000 |
| FOB Value in ? by applying the rate of exchange as notified by CBIC as on date of presentation of Bill of Entry. Yen 4,00,000 × ₹ 0.40) | ₹ | 1,60,000 |
| Add: Commission payable to Indian agent (Yen 4,00,000 × 10.40 × 10%) | ₹ | 16,000 |
| FOB Value | ₹ | 1,76,000 |
| Add: Air Freight, restricted to 20% of FOB Value as goods are imported by Air (Yen 90,000 × 0.40 = 136,000 or ₹ 1,76,000 × 20% = ₹ 35,200, whichever is-less) | ₹ | 35,200 |
| Add: Insurance charges (Actual. Therefore, Yen 10,000 × 0.40) | ₹ | 4,000 |
| Therefore, CIF Value/Assessable Value | ₹ | 2,15,200 |
Note:
Any post importation transport cost is to be neglected as it is not supposed to form part of assessable value. Therefore, Freight from airport to factory in India amounting to ₹ 20,000 is neglected while computing assessable value.
Question 9.
The following information is furnished by Kanha in respect of articles of Jewellery imported from the USA:
| FOB | US$ 20,000 |
| Exchange Rate | 1 US$ = ₹ 65 |
| Air Freight | US$ 4,500 |
| Insurance charges | Not known |
| Landing charges | ₹ 1,000 |
| Basic Customs Duty | 10% |
| IGST leviable u/s 3(7) | 12% |
Calculate the total customs duty payable by Kanha.
Answer:
Computation of Customs duty payable by Kanha:
| Particulars | Currency | Amount(₹) |
| FOB Value of goods | US$ | 20,000 |
| Add: Adjustments of Rule 10(2) of Customs Valuation Rules | ||
| Air Freight (Actual or 20% of FOB, whichever is lower ie. US$ 4,500 or 20% of US$ 20,000 = US$ 4,000, whichever is lower.) | us$ | 4,000 |
| Insurance (Not known, therefore, 1.125% of FOB i.e. 1.125% of US$ 20,000) | us$ | 225 |
| Therefore, CIF Value/Assessable Value | us$ | 24,225 |
| Assessable Value Converted int (US$ 24,225 × ₹ 65) | ₹ | 15,74,625 |
| Add: Basic Customs Duty @10% | ₹ | 1,57,463 |
| Add: Social Welfare Surcharge (SWS) at 10% of Basic Customs Duty | ₹ | 15,746 |
| Value for the purpose of levy of IGST | ₹ | 17,47,834 |
| Add: IGST u/s 3(7) @ 12% | ₹ | 2,09,740 |
| Total Cost of imported goods | ₹ | 19,57,574 |
| Total Customs Duty payable (₹ 1,57,463 + ₹ 15,746 + ₹ 2,09,740) | ₹ | 3,82,949 |
Question 10.
Honest importers imported a machine with accessories from the USA. Compute the assessable value and customs duty payable thereon from
the following data:
| CIF Value of the machine (including accessories) | US$1,50,000 |
| CIF Value of accessories compulsorily supplied along with machine | US$ 30,000 |
| (Not shown separately in the invoice) | |
| Rate of basic customs duty on machine | 10% |
| Rate of basic customs duty on accessories | 20% |
| Social Welfare Surcharge (SWS) | 10% |
| Exchange Rate | 1 US$ = 1 60 |
| The effective rate of IGST on similar goods in India | 12% |
Answer:
Computation of Assessable Value and Customs Duty payable by Honest Importers on Machine imported from the US:
| Particulars | Amount (₹) |
| CIF Value of the machine (inclusive of accessories) (US$1,50,000 × ₹ 60}/Assessable Value | 90,00,000 |
| Add: Basic Customs Duty @10% | 9,00,000 |
| Add: Social Welfare Surcharge @ 10% of Basic Customs Duty | 90,000 |
| Value for the purpose of levy of IGST | 99,90,000 |
| Add: IGST u/s 3(7) @ 12% | 11,98,800 |
| Total Cost of imported goods | 1,11,88,800 |
| Therefore, Total customs duty payable (₹ 9,00,000 + ₹ 90,000 + ₹ 11,98,800) or; (Cost of imported goods – Assessable Value) i.e. 1,11,88,800 less 90,00,000 | 21,88,800 |
Note:
As per Accessories (Conditions) Rules, 1963, accessories and spare parts compulsorily supplied with main implements are chargeable at the same rate as applicable to the main machine. Therefore, such accessories shall also be chargeable with duty at the rate applicable to the machine i.e. @ 10% ad valorem.
Question 11.
Determine the assessable value for computation of customs duty from the following information relating to a machine imported from the USA by an Indian Company:
| Cost of Machine | US$ 25,000 |
| Cost of goods supplied by the importer to the exporter to be used in the manufacturing of machine | ₹ 2,00,000 |
| Design and development charges payable to exporter | US$ 9,000 |
| Installation charges of a machine | ₹ 1,00,000 |
| Packing and Insurance charges | US$ 1,000 |
| Freight | US$ 1,000 |
| Transportation charges of the machine from port to the place of installation | ₹ 50,000 |
Note:
The exchange rate declared by RBI was ₹ 61 per US$ while the rate declared by the Board was ₹ 60 per US$.
Answer:
Computation of Assessable Value in case of imported goods:
| Particulars | Amount(₹) |
| Cost of Machine (US$ 25,000 × ₹ 60) | 15,00,000 |
| Add: Cost of goods supplied by the importer to the exporter to be used in the manufacturing of machine (Rule 10(1) of Customs Valuation Rules) | 2,00,000 |
| Add: Development and design charges payable to the exporter (US$ 9,000 × ₹ 60) | 5,40,000 |
| Add: Packing and insurance charges (US$ 1,000 × 60) | 60,000 |
| FOB Value | 23,00,000 |
| Add: Freight (US$ 1,000 × 60) | 60,000 |
| Therefore, CIF Value/Assessable Value | 23,60,000 |
Note:
The rate of Exchange as notified by CBIC is to be considered and hence it is taken at US$ 1 = ₹ 60. The exchange rate declared by RBI is to be neglected.
Question 12.
Zhi Ltd. has imported a machine to be used for providing a taxable service. The assessable value of the imported machine as approved by customs is ₹ 5,00,000. Customs Duty at 10% is payable. Further, if the machine is supplied in India, IGST @ 12% is leviable on such machine. Social Welfare Surcharge is applicable at prevailing rates.
You are required to:
- Calculate the total customs duty payable on such machine; and
- Examine whether Zuhi Ltd. can avail Input Tax Credit and if yes, how much Input Tax Credit can be availed.
Answer:
1. Computation of total Customs Duty payable:
| Particulars | Amount (₹) |
| Assessable Value of imported machine | 5,00,000 |
| Add: Basic Customs Duty at 10% | 50,000 |
| Add: Social Welfare Surcharge at 10% of Basic Customs Duty | 5,000 |
| Value for the purpose of levy of IGST | 5,55,000 |
| Add: IGST @ 12% | 66,600 |
| Total Cost of imported Goods | 6,21,600 |
| Therefore, Total Customs Duty payable | 1,21,600 |
2. Zuhi Ltd. can avail Input Tax Credit only for IGST of ₹ 66,600. It should g be noted that Input Tax Credit cannot be availed with respect to basic p customs duty as well as Social Welfare Surcharge (SWS).
Question 13.
SM Ltd. imported machinery at a FOB value of ₹ 34,00,000. Does this sum include ₹ 4,00,000 attributable to post importation activities to be called by the seller? SM Ltd. had supplied raw material to the seller worth ₹ 10,00,000 for the manufacture of said machine. The goods were imported by vessel and the actual cost of transport is ₹ 1,60,000. The importer has also paid demurrage charges of ₹ 10,000 and lighterage and barge charges ₹ 30,000, in addition, to said ₹ 1,60,000. SM Ltd. also paid ₹ 50,000 for transportation of goods from the port of entry to the Inland Container. The actual cost of insurance is ₹ 1,00,000.
Compute the assessable value based on Rule 3 read with Rule 10 of the Customs Valuation Rules, 2007, assuming the amount attributable to post importation activities is not payable as a condition of sale of imported goods.
Answer:
Computation of Assessable Value of imported goods
| Particulars | Amount(₹) | Amount(₹) |
| Invoice Price of goods including amount attributable to post importation activities | 34,00,000 | |
| Less: Amount attributable to post importation activities included above | (4,00,000) | |
| Net Amount to be considered | 30,00,000 | |
| Add: Raw material supplied by the assessee as per Rule 10(1) of Customs Valuation Rules | 10,00,000 | |
| FOB Value of Goods | 40,00,000 | |
| Add Adjustments as per Rule 10(2) of Customs Valuation Rules. | ||
| Transport cost | ||
| Sea Freight | 1,60,000 | |
| Ship Demurrage charges | 10,000 | |
| Lighterage and Barge charges | 30,000 | 2,00,000 |
| Insurance (Actual) | 1,00,000 | |
| Therefore, CIF Value/Assessable Value | 43,00,000 |
Notes:
1. The cost of transport of imported goods includes the ship demurrage charges on charted vessels, lighterage or barge charges. Therefore, amounts towards those are added to the FOB value of goods while computing assessable value.
2. Charges for post importation activities shall not form part of the assessable value of goods, since the same are not payable as a condition of sale. Hence, they are deducted from ₹ 34,00,000 Le. Invoice price as it included the same.
3. Freight incurred from the port of entry to inland container depot is not includible in assessable value as it is posted importation transportation cost.
Question 14.
A material was imported by air at a CIF price of US$ 5,000. Freight paid was US$ 1,500 and insurance cost was US$ 500. The banker realized the payment from the importer at the exchange rate of ₹ 65 per US dollar. Central Board of Indirect Taxes and Customs (CBIC) notified the exchange rate at ₹ 63 per US$. Find the value of material for the purpose of levying customs duty.
Answer:
Computation of Assessable Value of imported goods:
| Particulars | Amount |
| CIF Value of goods | 5,000 |
| Less: Air Freight | (1,500) |
| Less: Insurance Charges | (500) |
| FOB Value | 3,000 |
| Add: Adjustments as per Rule 10(2) of Customs Valuation Rules | |
| Freight (As it is by air, it shall be lower of 2: Actual i.e. US$ 1,500 or 20% of FOB i.e. 20% of US$ 3,000 = US$ 600) | 600 |
| Insurance (Actual) | 500 |
| CIF Value/Assessable Value in US$ | 4,100 |
| Therefore, Assessable Value converted in ₹ by applying the rate of exchange as notified by CBIC as on date of presentation of Bill of Entry (the US $ 4,100 × ₹ 63) | 2,58,300 |
Question 15.
Compute the total customs duties and integrated tax payable based on the following information:
- FOB Value of Solar cells: US$ 1,000
- Freight from exporting country: US$ 250
- Insurance: US$10
- Buying Commission: US$ 50
- Date of filing Bill of Entry: 20th January 2020 (Rate of Basic Customs Duty: 5%, Safeguard Duty: 70%)
- Exchange rate notified by RBI: ₹ 70.05 and by CBIC: 170 for 1 US$ on date of presentation of the bill of entry.
Answer:
Computation of total Customs duty and Integrated tax payable
| Particulars | Amount (US$) |
| FOB Value of solar cells | 1,000 |
| Freight from exporting country (Note 1) | 200 |
| Insurance | 10 |
| Buying commission (Note 2) | – |
| CIF Value | 1,210 |
| Amount (₹) | |
| CIF Value (US$1,210 × ₹ 70 per US$) (Note 3) i.e. Assessable Value in ₹ | 84,700 |
| Basic Customs Duty @ 5% (Note 4) (₹ 84,700 × 5%) (A) | 4,235 |
| Safeguard Duty @ 70% (Note 5) (B) | 59,290 |
| Social Welfare @ 10% of Basic Customs Duty (Note 6) (C) | 424 |
| Value for levy of IGST | 1,48,649 |
| Integrated Tax leviable @ 5% (₹ 1,48,649 × 5%) (Note 7) (D) | 7,432 |
| Total Cost of imported goods | 1,56,081 |
| Total Customs Duty payable (A + B + C + D) | 71,381 |
Notes:
1. Actual freight incurred or 20% whichever is less has to be adopted when the import is by air (Assumed). If it is assumed that goods are imported by any mode other than by air then the full value of freight US $ 250 shall be included in the assessable value.
2. “Buying commission” is not included in the assessable value as it is the amount paid by the importer to his agent [Any amount paid to exporter directly or indirectly is only included],
3. Rate of exchange notified by CBIC on the date of presentation of the bill of entry is considered.
4. Rate of duty is the rate prevalent on the date of presentation of the bill of entry or the rate prevalent on the date of entry inwards whichever is later (Section 15 of Customs Act, 1962)
5. Safeguard duty has to be applied on the CIF Value
6. Social welfare surcharge is levied @10% on Basic Custom Duty only.
7. Integrated tax is levied on the sum total of the assessable value of the imported goods, customs duties, and applicable Social Welfare Surcharge. The integrated tax rate is assumed to be 5%.
Question 16.
A commodity is imported into India from a country covered by a notification issued by the Central Government under section 9A of the Customs Tariff Act, 1975. Following particulars are made available:
CIF Value of the consignment: US$ 25,000
Quantity imported: 500 kgs
Exchange rate applicable: ₹ 65 = 1 US$
Basic customs duty: 10%
SWS as applicable.
As per the notification, the anti-dumping duty will be equal to the difference between the cost of the commodity calculated at US$ 70 per kg. and the landed value of the commodity as imported.
Appraise the liability on account of normal duties, cess, and anti-dumping duty. Assume that only Basic customs duty and SWS are payable.
Answer:
Computation of basic customs duty, SWS, and Anti-Dumping duty payable:
| Particulars | Amount(?) |
| CIF Value of the Consignment/Assessable Value (US $ 25,000 X ? 65 per US $) | 16,25,000 |
| Add: Basic Customs Duty @10% | 1,62,500 |
| Add: Social Welfare Surcharge at 10% of Basic Customs Duty | 16,250 |
| Landed Value | 18,03,750 |
| Cost of commodity for purpose of Anti-Dumping duty notification (500 Kg X US$70 per kg X ? 65 per US $) | 22,75,000 |
| Anti-Dumping Duty (? 22,75,000 – ? 18,03,750) | 4,71,250 |
Notes:
1. IGST under section 3 (7) of Customs Tariff Act is not leviable as the question clearly states that only Basic Customs Duty and SWS are chargeable apart from Anti-Dumping Duty.
2. For the purpose of notification imposing Anti-Dumping Duty, “landed value” means the assessable value as determined under the Customs Act, 1962 and includes all duties of customs except duties levied under sections 3, 8B, 9, and 9A of the Customs Tariff Act.
3. No SWS is imposable on Anti-Dumping Duty.
Question 17.
Miss Priya imported certain goods weighing 1000 kgs having a CIF value of US$ 40,000. The exchange rate of 1 USD was ₹ 65 on the date of presentation of a bill of entry. Basic customs duty chargeable is @ 10% and Social Welfare Cess is as applicable. However, vide Notification issued by the Government of India, anti-dumping duty has been imposed on these goods.
The anti-dumping duty will be equal to the difference between the amount calculated @ USD 60 per kg and the ‘landed value’ of goods. You are required to compute the amount of customs duty and of the anti-dumping duty payable by Miss Priya.
Note:
Neglect GST.
Answer:
Computation of amount of Customs Duty payable including the Anti-Dumping duty
| Particulars | Amount (₹) |
| CIF Value of the consignment i.e. Assessable Value in ₹ (US$ 40,000 × ₹ 65 per US$) | 26,00,000 |
| Add: Basic Customs Duty @ 10% | 2,60,000 |
| Add: Social Welfare Surcharge (S’W S) @ 10% of Basic Customs Duty | 26,000 |
| Therefore, Landed Value of the Goods | 28,86,000 |
| Cost of commodity for the purposes of Anti-Dumping notification (1,000 kgs × US$ 60 per kg × ₹ 65 per dollar) | 39,00,000 |
| Anti Dumping Duty payable (₹ 39,00,000 – ₹ 28,86,000) | 10,14,000 |
| Therefore, Total Customs Duty payable (₹ 2,60,000 + ₹ 26,000 + ₹ 10,14,000) | 13,00,000 |
Note: For the purposes of notification imposing Anti-Dumping duty, landed | value means the assessable value as determined under the Customs Act,1962 and includes all duties of customs except duties levied under sections 3, 8B, 9, and 9A of the said Customs Tariff Act, 1975.
Question 18.
With reference to section 9AA of the Customs Tariff Act, 1975, state briefly the provisions of refund of anti-dumping duty with reference to relevant case law.
Answer:
According to the provisions of Section 9AA of the Customs Tariff Act, 1975, wherein importer proves to the satisfaction of the Central Government that he has paid any anti-dumping duty imposed on any article, in excess of the actual margin on dumping in relation to such article, he shall be entitled to refund of such duty. However, the importer will not be entitled to a refund of provisional anti-dumping duty under Section 9AA as the same is refundable under section 9A(2) of the said Act. Refund of excess anti-dumping duty paid is subject to provisions of unjust enrichment. This view was held by Apex Court in the case of – Automotive Type Manufacturers Association v. Designated Authority 2011 (63) ELT 481 Whether Anti-dumping duty/safeguard duty is to be added for determining the value for integrated tax?
Question 19.
The assessable value of an article imported into India is ₹ 100; Basic Customs Duty is 10% ad valorem; Social Welfare Charge is 10%; Safeguard duty is ₹ 20; Integrated tax rate is 18% and Compensation cess is 15%. Compute total tax liability
Answer:
Yes. In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for calculation of IGST as well as Compensation Cess shall also include Anti-Dumping Duty amount and Safeguard duty amount.
| Particulars | Amount (₹) |
| Assessable Value | 100 |
| Basic Customs Duty @10% | 10 |
| Social Welfare Surcharge (SWS) @ 10% of 10 | 1 |
| Safeguard Duty | 20 |
| Value for purpose of IGST (₹ 100 + 10 + 1 + 20) | 131 |
| Integrated Tax @ 18% (₹ 131 × 18%) | 24 |
| Compensation Cess @ 15% of ₹ 131 | 20 |
| Total Tax liability (₹ 10 + 1 + 20 + 24 + 20) | 75 |
Question 20.
A consignment of 800 metric tonnes of edible oil of Malaysian origin was imported by a Charitable organization in India for free distribution to below poverty line citizens in a backward area under the scheme designed by the Food and Agricultural Organisation. This being a special transaction, a nominal price of US$ 10 per metric tonne was charged for the consignment to cover the freight and insurance charges. The Customs house found out that at or about the time of importation of this gift consignment, there were the following imports of edible oil of Malaysian origin:
| Quantity imported in metric tonnes | Unit Price in US$ CIF |
| 20 | 260 |
| 100 | 220 |
| 500 | 200 |
| 900 | 175 |
| 400 | 180 |
| 780 | 160 |
The rate of exchange on the relevant date was 1 US$ = ₹ 65 and the rate of basic customs duty was 10% ad valorem. There is no Integrated tax and GST Compensation Cess.
Calculate the amount of duty leviable on the consignment under the Customs Act, 1962 with appropriate assumptions and explanations where required.
Answer:
Computation of Assessable Value as per Rule 4 of Customs Valuation Rules i.e. Valuation on basis of Identical goods and total Customs duty payable: 1
| Particulars | Amount(₹) |
| CIF Value i.e. Assessable Value of 800 metric tonnes @ US$ 160 per metric tonne (Converted in ₹ : 800 × 160 × ₹ 65) | 83,20,000 |
| Add: Basic Customs Duty @10% | 8,32,000 |
| Add: SWS at 10% of Basic Customs Duty | 83,200 |
| The total cost of imported goods | 92,35,200 |
| Total Customs Duty payable (₹ 8,32,000 + ₹ 83,200) or (₹ 92,35,200 – 83,20,000) | 9,15,200 |
Notes:
1. In the given case, US$ 10 per metric tonne has been paid only towards freight and insurance charges and no amount has been paid or payable towards the cost of goods. Thus, there is no transaction value for the said goods. In such a case, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued. (Rule 4 of Customs Valuation Rules)
2. The transaction value of comparable imports should be at the same commercial level and in substantially the same quantity as the goods being valued. Therefore, consignments of 20 and loo metric tonnes cannot be considered to be substantially the same quantity. Hence, the remaining 4 consignments are left for our consideration.
3. Remaining 4 consignments are incomparable quantities that can be considered for valuation purposes. However, the unit prices in the 4 consignments are different. Rule 4 of Customs Valuation Rules stipulates that in applying Rule 4 of said Rules if more than one transaction value of identical goods is found, the lowest of such value shall be used to determine the value of imported goods. Accordingly, the unit price of consignment undervaluation is taken at US$ 160 per metric tonne.
Question 21.
From the following information you are required to determine the export duty and explain your assumptions:
- FOB Price of goods: US$ 1,20,000
- Shipping Bill presented electronically on: 26.04.2020
- The proper officer passed the order permitting clearance and loading of goods for export on: 5.5.2020
- The rate of Exchange and Rate of Export duty is as under:
| Date | Rate of Exchange | Rate of Export Duty |
| 26.04.2020 | 1 US $ = > 60 | 9% |
| 05.05.2020 | 1 US $ = > 61 | 10% |
(e) Rate of exchange is notified for export by CBIC.
Answer:
Computation of Export Duty payable
| Particulars | Amount(₹) |
| Transaction Value of exports is FOB price of goods (No Further adjustment is to be made) | US$ 1,20,000 |
| Rate of Exchange (it is to be taken as notified by CBIC as on date of presentation of shipping bill as per section 14 of Customs Act) | ₹ 60 per US$ |
| Assessable Value in ₹ (US$ 1,20,000 × ₹ 60) | ₹ 72,00,000 |
| Rate of duty (it is as on the date on which Proper Officer makes an order permitting clearance and loading of the goods for exportation) | 10% |
| Exports Duty payable @ 10% (No Social Welfare Surcharge is levied on exports) | ₹ 7,20,000 |
Question 22.
Ms. Poorvisha has exported some goods to Sydney, Australia. She provides the following details to you:
- CIF value of the goods = AUD 2,10,000.
- FOB price of goods: (Australian $) AUD 2,00,000.
- Shipping bill presented electronically on 29th April 2020.
- The proper officer passed an order permitting clearance and loading of goods for export (Let Export Order) on 2nd May 2020.
- During the interval between the presentation of the shipping bill and clearance of goods, there were changes in the rate of export duty as well as the rate of exchange.
The rate of export duty and rate of exchange details are as follows:
| Date | Rate of exchange | Rate of Export duty |
| 29-04-2020 | 1 AUD = ₹ 70 | 11% |
| 02-05-2020 | 1 AUD = ₹ 70.50 | 10% |
You are required to calculate the export duty payable by the exporter.
Answer:
Computation of export Duty Payable
| Particulars | Amount(₹) |
| FOB price of goods [Note 1] | AUD 200,000 |
| Value in Indian currency (AUD 2,00,000 × t 70) [Note 2] | ₹ 1,40,00,000 |
| Export duty @ 10% [Note 3] | ₹ 14,00,000 |
Notes:
1. As per section 14(1) of the Customs Act, 1962, the assessable value of the export goods is the transaction value of such goods which is the price actually paid or payable for the goods when sold for export from India for delivery at the time and place of exportation.
2. As per the third proviso to section 14(1) of the Customs Act, 1962, assessable value has to be calculated with reference to the rate of exchange notified by the CBIC on the date of presentation of a shipping bill of export.
3. As per section 16(7)(n) of the Customs Act, 1962, in case of goods entered for export, the rate of duty prevalent on the date on which the proper officer makes an order permitting clearance and loading of the goods for exportation, is considered.
Question 23.
Is the transaction value under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, acceptable even if goods are sold to related persons? Give reasons.
Answer:
As per Rule 3(3), of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 in the following two cases the transaction value shall be accepted even if goods are sold to related persons:
1. the examination of the circumstances of the sale of the imported goods indicates that the relationship did not influence the price.
2. whenever the importer demonstrates that the declared value of the goods being valued closely approximates to one of the following values ascertained at or about the same time:
- the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India;
- the deductive value for identical goods or similar goods;
- the computed value for identical goods or similar goods:
Provided that in applying the values used for comparison, due account | shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of Rule 10, and cost incurred by the seller in sales in which he and the buyers are not related.
Question 24.
St. Thomas Hospital and Research Centre imported a machine from Long Life Scientific Ltd., the USA for in-house research. The price of the machine was settled at the US $ 8,000. The machine was shipped on 10th March 2020. Meanwhile, the hospital authorities negotiated for a reduction in the price. As a result, Long Life Scientific Ltd. agreed to reduce the price by $ 500 and communicated the revised price of $ 7,500 by sending a fax message dated 14th March 2020. The machine arrived in India on 17th March 2020. The Commissioner of Customs has decided to take the original price as the transaction value of the goods on the ground that the price is reduced only after the goods have been shipped. Do you agree with the step taken by the commissioner? Give reasons in support of your answer.
Answer:
No, the commissioner’s approach is not correct in the law. As per section 14 of the Customs Act, 1962, the transaction value is the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. Further, the Supreme Court in the case of “Garden Silk Mills y. U 01” has held that importation gets complete only when the goods become part of the mass of goods within the country.
In the given case, the price of the goods was reduced while the goods were in transit, it could not be contended that the price was revised after importation took place. Hence, the goods should be valued as per the reduced price, which was the price actually paid at the time of importation.
Question 25.
Write a short note on the following:
(a) Safeguard Duty
(b) Anti-dumping duty
Answer:
(a) Safeguard Duty (Section 8 of Customs Tariff Act, 1975)
The Central Government may impose safeguard duty on specified imported goods if it is satisfied that the goods are being imported in large quantities and they are causing serious injury to the domestic industry. The safeguard duty is imposed for the purpose of protecting the interests of any domestic industry in India aiming to make it more competitive.
Conditions:
1. Safeguard duty is product-specific.
2. It is in addition to any other duty.
Safeguard duty, unless revoked earlier, cease to have an effect on the expiry of four years from the date of imposition. If the Central Government is of the opinion that the domestic industry has taken measures to adjust to such injury or threat thereof and it is necessary that the safeguard duty should continue to be imposed, it may extend the period of such imposition.
However, in no case, the safeguard duty shall continue to be imposed beyond a period of ten years from the date on which such duty was first imposed. If the Central Government is of the opinion that increased imports have not caused or threatened to cause serious injury to a domestic industry, it shall refund the duty so collected.
Exemptions from safeguard duty:
1. If an article originating from a developing country and the share of imports of that article from that country does not exceed 3% of the total imports of that article in India it should be exempted from safeguard duty.
2. If an article originating from more than one developing country and aggregate of imports from developing countries each with less than 3% import share taken together does not exceed 9% of the total imports of that article into India then it should be exempted from safeguard duty. Articles imported by 100% EOU or units in a free trade zone or Special Economic Zone safeguard duty shall not be applicable unless specifically made applicable in the notification.
(2) Anti-Dumping Duty (Section 9 of Customs Tariff Act, 1975)
Dumping: Dumping means exporting goods to India, at prices lower than the price in the domestic market of the exporting country, subject to certain adjustments.
When the export price of a product imported into India is less than the normal value of like articles sold in the domestic market of the exporter the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article. Anti-dumping duty is country-specific ie. it is imposed on imports from a particular country. Normal value means the comparable price in the ordinary course of trade, in the exporting country, after making adjustments to the extent of conditions of sale, taxation, etc.
Computation of Anti-dumping duty: The anti-dumping duty is the margin of dumping or injury margin whichever is lower.
The margin of dumping: Difference between the export price and normal value of an article.
Normal Value means the comparable price in the ordinary course of trade, in the exporting country, after making adjustments to the extent of conditions of sale, taxation, etc.
Injury Margin: It means the difference between the fair selling price of domestic industry and the landed cost of imported products.
Fair Selling price: Price at which the industry has expected to charge under normal circumstances in the Indian market.
Valuation Of Imports And Exports Notes
- Format for computation of Assessable Value in case of imported | goods as per section 14 of Customs Act read with Rule 10 of Customs Valuation Rules: I
| Particulars | Amount |
| a. Price of the goods at exporter’s factorv/godown/shop | xxxx |
| b.Add: Cost of transporting goods from exporters factory to the exporter’s port, insurance, loading charges at exporter’s port, etc. | Xxxx |
| c. Free on Board Price (FOB) of the goods | Xxxx |
| d. Add: Adjustments as per Rule 10(1) of Customs Valuation Rules (Excluding buying commission, charges for post importation activities) | Xxxx |
| e. Customs FOB (As per ICAI’s recommendation) | Xxxx |
| f. Add: Adj ustnwnts as per Rule 10(2) of Customs Valuation Rules: | Xxxx |
| (a) Actual Cost of transportation, loading, unloading and handling charges associated with the delivers’ of imported goods to the place of importation. (In case of AIR, it shall be actual or 20% of FOB, whichever is lower). If Transport cost is UNASCERTA1NABLE, then 20% of FOB value.
If FOB Value is also not ascertainable, then it will be 20% of “FoB Value + Cost of Insurance” |
Xxxx |
| (b) Actual cost of Insurance. If UNASCERTAINABLE – 1.125% of the FOB. If FOB value is not ascertainable, then it will be 1.125%of “FOB + cost of transportation, loading, unloading and handling charges” | Xxxx |
| CIF Value i.e. Assessable Value for the purpose of computing customs duties. (1f it is in foreign currency, convert in by applying rate of exchange as notified by CBIC as on date of presentation of Bill of Entry) | xxxx |
However, if the valuation cannot be done as per section 14, then sequentially, the following rules will be applied:
Rule 4: Identical Goods
Rule 5: Similar Goods
Rule 6: Residual method
Rule 7: Deductive Value
Rule 8: Computed Value
- Types of duties under customs:
a. Basic customs duty
b. Integrated Tax – Section 3(7) of Customs Tariff Act, 1975
c. Goods and Services Tax Compensation Cess – Section 3(9) of Customs Tariff Act, 1975
d. Additional Duty of Customs (Countervailing Duty i.e. CVD) – Section 3 of Customs Tariff Act (Equivalent to Excise duty which still is leviable on the manufacture of some goods)
e. Special Additional Duty (Special Countervailing Duty Le. Special CVD) – It is to offset the effect of VAT (It is applicable on some limited goods)
f. Protective Duty
g. Safeguard Duty
h. Countervailing Duty on subsidized articles Anti-Dumping Duty
j. Social Welfare Surcharge
k. Road and Infrastructure Cess
Valuation for Exports:
Price paid/payable for delivery at the time and place of Exportation which essentially means that the price up to a port in India when goods are exported has to be considered. (Le. FOB Value of Exports is its assessable value)