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Tuesday, September 15, 2020 3:52 AM

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Example : Suppose Assessable Value (A.V.) including landing charges = ` 100/ -

(1) BCD - 10% (2) IGST - 12% (3) Social Welfare Surcharge – 10% (4) Compensation cess - 10%
In view of the above parameters, the calculation of duty would be as below:
(a) BCD = ` 10 [10% of A.V. ]
(b) Social Welfare Surcharge = 1 [10% of (a)]
(c) IGST - `13.32 [A.V. +(a)+( b )]x12%
(d) Compensation cess - ` 11.10 [A.V. +(a)+(b)]x 10%

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Tuesday, September 22, 2020 6:07 AM

• The Central Government may, pending the determination under sub-section (1) of Section 8B, impose a provisional safeguard
duty under this sub-section on the basis of a preliminary determination that increased imports have caused or threatened to
cause serious injury to a domestic industry;
• Provided that where, on final determination, 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;
• Provided further that the provisional safeguard duty shall not remain in force for more than two hundred days from the date on
which it was imposed.

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Tuesday, September 22, 2020 6:53 AM

Question: When shall the safeguard duty under section 8B of the Customs Tariff Act, 1975 be not imposed? Discuss briefly.

Answer: The safeguard duty under section 8B of the Customs Tariff Act, 1975 is not imposed on the import of the following types of
articles: (i) Articles originating from a developing country, so long as the share of imports of that article from that country does not
exceed 3% of the total imports of that article into India;
(ii) Articles originating from more than one developing country, so long as the 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;
(iii) Articles imported by a 100% EOU or units in a Free Trade Zone or Special Economic Zone unless the duty is specifically made
applicable on them.

Example : 4 Determine the safeguard duty payable by X Ltd., under section 8B of the Customs Tariff Act, 1975 from the following:
(i)X Ltd imported Sodium Nitrate from a developing country from 26th February, 2015 to 25th February, 2016 (both days inclusive)
Rs 50 crores.
Total imports of Sodium Nitrite (including developing country) is Rs 2,500 crores.
Note: Safeguard duty is @ 30%.
(ii) Whether your answer is different in case of import of Sodium Nitrite from a developing country ` 80 crores?

Answer:
Since, import from a developing country does not exceeds 3% (i.e. 2% only) of total import of that article in to India, Safeguard
duty is Nil.
In the given case safeguard duty will be payable by X Ltd.
Safeguard duty = ` 24 crores (i.e. ` 80 crores x 30%)
Since, import from a developing country exceeds 3% (i.e. 3.2%)

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Tuesday, September 22, 2020 6:58 AM

Question : Determine the safeguard duty payable by X Ltd., Y Ltd., Z Ltd. and A Ltd. under section 8B of the Customs Tariff Act,
1975 from the following:

Import of Sodium Nitrite from developing and developed countries from 26th February, 2015 to 25th February, 2016 (both days
inclusive) are as follows:-
Importer Country of Import Rs. (In Crores)
X Ltd. Developing Country 70
Y ltd. Developing Country 72
Z Ltd. Developing Country 52
A Ltd. Developing Country 50
Others Developed Country 2256
Total 2500

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Tuesday, September 22, 2020 7:03 AM

Question : 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: ` 60=US$1
Basic customs duty: 12%
Social Welfare Surcharge applicable as per the Finance Act, 2018.
As per the notification, the anti-dumping duty will be equal to the difference between the cost of commodity calculated @ US$70
per kg. and the landed value of the commodity as imported.
Appraise the liability on account of normal duties, cess and the anti-dumping duty.
Assume that only ‘basic customs duty’ (BCD) and Social Welfare Surcharge are payable. IGST @12% is also be applicable.

Ans : Custom duty payable : Rs8,52,000

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Tuesday, September 22, 2020 7:16 AM

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Tuesday, September 22, 2020 7:25 AM

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Thursday, September 24, 2020 6:57 AM

PARTICULARS AMOUNT
Value of Material (at ex-factory price)
Carriage/freight/insurance up to the port (sea/air) of shipment in the exporter’s country
Charges for loading on to the ship at the shipping port in the exporter’s country
Free on Board (FOB)
Add: If not included in the above [Rule 10(1)]
• Commission and brokerage (except buying commissions)
• Packing cost (except cost of durable and returnable packing)
• Cost of engineering, development and plan or sketches (Undertaken outside India)
• Royalties and license fee
• Value of subsequent re-sale if payable to foreign supplier
• Value of material supplied by the buyer free of cost

FOB value as per the Customs

+Cost of freight if not specified @ 20% of FOB value as per Customs [Rule 10(2)]
+Ship demurrage charges on chartered vessels [Rule 10(2)]
+Lighterage or barge charges [Rule 10(2)]
+Insurance if not specified @1.125% of FOB value as per Customs [Rule 10(2)]
+Cost, Insurance and Freight (CIF)/Assessable Value

Note: (1) Assessable Value of Imported Goods=(Free On Board (FOB) + Insurance + Freight)

(2) Service charges paid to canalizing agent: It is includible in the assessable value of imported goods
[Hyderabad Industries Ltd. v. UOI 2000]. Who is a canalizing agent: He is not the agent of the importer nor does
he represent the importer abroad. He use to buy goods from foreign seller and subsequently sells to Indian
importer.

(3) Inspection/Certification Charges: If contract specify for certification by the independent agency for imported
goods then charges incurred on such inspection are includible in assessable value [Bombay Dyeing & Mfg. v. CC
1997]

As per Notification No. 91/2017-CUSTOMS (N.T.), dt. 26.09.2017, the following changes are made to the Customs Valuation
(Determination of Value of Imported Goods) Rules 2007 (or CVR, 2007), namely:-
(1) “place of importation” means the customs station, where the goods are brought for being cleared for home consumption or
for being removed for deposit in a warehouse;”
(2) the value of the imported goods shall include –
(a) the cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the
place of importation;
(b) the cost of insurance to the place of importation
• Provided that where the cost referred to in (a) is not ascertainable, such cost shall be twenty per cent of the free on board
value of the goods:
• Provided further that where the free on board value of the goods is not ascertainable but the sum of free on board value of
the goods and the cost referred to in (b) is ascertainable, the cost referred to in (a) shall be twenty per cent of such sum:
• Provided also that where the cost referred to in (b) is not ascertainable, such cost shall be 1.125% of free on board value of
the goods:
• Provided also that where the free on board value of the goods is not ascertainable but the sum of free on board value of the
goods and the cost referred to in (a) is ascertainable, the cost referred to in (b) shall be 1.125% of such sum:
• Provided also that in the case of goods imported by air, where the cost referred to in (a) is ascertainable, such cost shall not
exceed twenty per cent of free on board value of the goods:
• Provided also that in the case of goods imported by sea or air and transshipped to another customs station in India, the
cost of insurance, transport, loading, unloading, handling charges associated with such transshipment shall be excluded.
Explanation: The cost of transport of the imported goods referred to in (a) includes the ship demurrage charges on charted
vessels, lighterage or barge charges.”

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Thursday, September 24, 2020 7:11 AM

Example 1: From the particulars given below, find out the assessable value of the imported goods under the Customs
Act, 1962.
S.No Particulars US $
1 Cost of the machine at the factory of the exporting country 10,000
2 Transport charges incurred by the exporter from his factory to 500
the port for shipment.
3 Handling charges paid for loading the machine in the ship 50
4 Buying commission paid by the importer 50
5 Freight charges from exporting country to India 1,000
6 Exchange Rate to be considered 1$ = ` 65
Ans : Rs 7,58,465

Example 2: XYZ Industries Ltd., has imported certain equipment from Japan at an FOB cost of 2,00,000 Yen (Japanese).
The other expenses incurred by M/s. XYZ Industries in this connection are as follows:
(i) Freight from Japan to India Port 20,000 Yen
(ii) Insurance paid to Insurer in India ` 10,000
(iii) Designing charges paid to Consultancy firm in Japan 30,000 Yen
(iv) M/s. XYZ Industries had expended ` 1,00,000 in India for certain development activities with respect to the
imported equipment
(v) XYZ Industries had incurred road transport cost from Mumbai port to their factory in Karnataka ` 30,000
(vi) The Central Board of Excise and Customs had notified for purpose of section 14(3)* of the Customs Act, 1962
exchange rate of 1 Yen = ` 0.3948. The inter bank rate was 1 Yen = ` 0.40
(vii) M/s XYZ Industries had effected payment to the Bank based on exchange rate 1 Yen = ` 0.4150
(viii) The commission payable to the agent in India was 5% of FOB cost of the equipment in Indian Rupees.
Arrive at the assessable value for purposes of customs duty under the Customs Act, 1962 providing brief notes
wherever required with appropriate assumptions.
Ans : Rs 1,12,648

Example 3: BSA & Company Ltd. have imported a machine from U.K. From the following particulars
furnished by them, arrive at the assessable value for the purpose of customs duty payable:
S.No. Particulars Amount
1 F.O.B. cost of the machine 10,000 U.K.
Pounds
2 Freight (air) 3,000 U.K. Pounds
3 Engineering and design charges paid to a firm in U.K 500 U.K. Pounds

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3 Engineering and design charges paid to a firm in U.K 500 U.K. Pounds
4 License fee relating to imported goods payable by the buyer as a 20% of F.O.B. Cost
condition of sale
5 Materials and components supplied by the buyer free of cost valued Rs 20,000
6 Insurance paid to the insurer in India Rs 6,000
7 Buying commission paid by the buyer to his agent in U.K. 100 U.K.
Pounds

Other Particulars: (i) Inter-bank exchange rate as arrived by the authorized dealer: `72.50 per U.K. Pound.
(ii) CBIC had notified for purpose of Section 14 of the Customs Act, 1944, exchange rate of `70.25 per U.K.
Pound.
(iii) Importer paid `5,000 towards demurrage charges for delay in clearing the machine from the Airport.
(Make suitable assumptions wherever required and show workings with explanations)

Ans : Rs10,83,750

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Friday, September 25, 2020 12:51 AM

Example 4: Compute the duty payable under the Customs Act, 1962 for an imported equipment based
on the following information:
(i) Assessable value of the imported equipment US $10,100.
(ii) Date of Bill of Entry 25.4.2018 basic customs duty on this date 12% and exchange rate notified by the
Central Board of Excise and Customs Us $ 1 = ` 65.
(iii) Date of Entry inwards 21.4.2018 Basic customs duty on this date 16% and exchange rate notified by
the Central Board of Excise and Customs US $ 1 = ` 60.
(iv) IGST u/s 3(7) of the Customs Tariff Act, 1975: 12%.
Social Welfare Surcharge @ 10% in terms of the Finance Act, 2018.

Ans : Rs1,75,837

Example 5: Compute the assessable value and Customs duty payable from the following information:
S.No. Particulars Amount
1 F.O.B value of machine 8,000 UK Pounds
2 Freight paid (air) 2,500 UK Pounds
3 Design and development charges paid in UK 500 UK Pounds
4 Commission payable to local agents @ 2% of F.O.B in Indian
Rupees
5 Date of bill of entry (Rate BCD 12%; Exchange rate as notified by 24.10.2017
CBIC ` 68 per UK Pound)
6 Date of entry inward (Rate of BCD 18%; Exchange rate as notified 20.10.2017
by CBIC ` 70 per UK Pound)
7 IGST payable 18%
8 Insurance charges actually paid but details not available
Ans : Rs7,13,281 ; Rs2,39,491

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Example 6: Liberty International Group has imported a machine by air from United States. Bill of entry is
presented on 18.07.2017. However, entry inwards is granted on 7.08.2017. The relevant details of the
transaction are provided as follows:
CIF value of the machine imported $ 13,000
Airfreight paid $ 2,800
Insurance charges paid $200
Rate of exchange as Announced by As on 18.07.2017 As on 7.08.2017
CBIC 1 US $ = ` 66 1US $ = ` 65.80
RBI 1 US $ = ` 66.10 1 US $ = ` 66.10
Calculate the assessable value (in rupees) for the purposes of levy of customs duty as well as total customs
duty. BCD = Nil IGST = 18% Make suitable assumptions wherever necessary.
Ans : Rs8,05,200

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Friday, September 25, 2020 1:02 AM

Note :- A condition for adjustment because of different commercial levels or different quantities is that such
adjustment, whether it leads to an increase or a decrease in the value, be made only on the basis of demonstrated
evidence that clearly establishes the reasonableness and accuracy of the adjustment, e.g. valid price lists
containing prices referring to different levels or different quantities.

Example : 8 Gujarat Dry Fruits Limited imported dry fruits and declared the value as under —
Date of imports Quantity (MT) Declared value per MT Country of import
November 20XX 250 25,000 Egypt
November 20XX 150 25,000 Egypt
It was found that imports were also made by some other dealers as indicated below: -
Date of Imports: Quantity (MT) Declared Value ` per MT Country of import And importer
September 20XX 50 35,000 Dubai : Mumbai Intil
October 20XX 20 40,000 Persia : Chennai Fruits Ltd
The Customs Department has sought to assess the imports made by the Gujarat Fruits Ltd. as Contemporaneous imports under
section 14 read with Rule 4 of the Customs Valuation Rules, 2007. Briefly examine 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 same country. In the give n
question, the goods in question have been imported from Egypt, while other importers have imported goods from other
countries. Therefore, the department action is not correct.

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Friday, September 25, 2020 1:13 AM

Similar Goods means Which although not alike in all respects, have like characteristics and like component
materials which enable them to perform the same functions and to be commercially interchangeable with the
goods being valued having regard to the quality, reputation and the existence of trade mark;

Valuation:
• Produced in the country in which the goods being valued were produced; and
• Produced by the same person who produced the goods being valued, or where no such goods are available, goods
produced by a different person, but shall not include imported goods where engineering, development work, art
work, design work, plan or sketch undertaken in India were completed directly or indirectly by the buyer on these
imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of
these imported goods;

Identical goods Similar goods

Goods must be same in all respects, except for Goods have like characteristics and
minor differences in appearance components and perform same functions
Example: Hero Honda two Wheeler Products Example: Hero Honda Splendor and Bajaj
namely Splendor and Passion scooter.

Example 9
A Ltd., sell in India from a price list which grants favourable unit prices for purchases made in larger quantities.
Sale quantity Unit price in ` (Exclusive of duties and taxes) Number of sales
1-10 units 100 10 sales of 5 units
5 sales of 3 units
11-25 units 95 5 sales of 11 units
Over 25 units 90 1 sale of 30 units
1 sale of 50 units
The selling price includes the following post shipment expenses: Freight from port to factory in India for ` 24,000 Insurance to
cover transit damage from port to factory in India for ` 6,000 Number of units imported from high seas 5,000 units. Find the
assessable value and total customs duty. Note: BCD @12%.
Ans : Rs 4,20,000

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Friday, September 25, 2020 3:09 AM

Example : 10 X Ltd., imported 500 units of minerals from High Seas for sale in
India. Selling price exclusive of duties and taxes. Freight from port to depot in India
is ` 10,150 and Insurance ` 1,250.
Sale quantity Unit price
400 units Rs 100
300 units Rs 90
150 units Rs100
500 units Rs 95
250 units Rs105
350 units Rs 90
50 units Rs 100
Basic Customs Duty 12% and Social Welfare Surcharge as applicable. Calculate
total customs duty as per Rule 7 of Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007. Assume there is no IGST applicable for the product.
Ans : Duty : Rs4,435.20

Residual method is also called as Best Judgment Method. This method is applicable when all aforesaid methods are not
applicable. The value determined under this method cannot exceed normal price at which such or like goods are ordinarily sold
or offered for sale for delivery at the time and place of importation in course of International Trade, when seller or the buyer are
non-relatives and the price is sole consideration for such sale.

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Friday, September 25, 2020 3:22 AM

Rule 11: Declaration by the Importer As per this rule, the importer shall declare value and furnish all documents or
information called for by the proper officer for the purposes of valuation. Wrong declaration of value under Rule 10
may call for penal provisions in Customs Act, 1962

Rule 12: Rejection of Declared Value: If the proper officer feels that the declaration made under Rule 11 are not fair values
he may reject it as not suitable in the determination of Transaction value under Rule 3, after procuring further information
or documents. However, final decision under Rule 12 shall be taken after proper hearing only

Rule 13: Interpretative Notes: These notes specified in the schedule to these rules are meant to render help in the
interpretation of these rules.

GENERAL INTERPRETATIVE RULES for Classification of Goods

Classification
Classification enables categorising the goods into groups / sub-groups, in order to apply a single rate of duty on
each group / sub-group. This classification is based on the concept of Harmonised System of Nomenclature
(HSN). HSN is an internationally accepted coding system and the same was formulated and thereby enunciated
under the General Agreement on Tariffs & Trade (GATT). At international level, the HSN classification of goods is
a six digit coding system but India follows 8 digit coding system, wherein first two digit represent chapter
number, next two digits represents heading number, next two digits represents sub heading number and last
two digits product code. Interpretation Rules under the Customs Tariff Act, 1975.

General Rule for Classification [Rule 1] The essence of this rule is that the reference to the rules may be made
in case of ambiguity, that is, the reference to the six rules of interpretation is not required when classification of
the goods is possible on the basis of description in the heading, sub-heading etc.

Unfinished Articles & Mixtures [Rule 2] a) Any reference in a heading to an article, shall be deemed to include a
reference to that article in an unfinished stage too, as long as in the present stage, the incomplete article
exhibits the essential character of that article in complete / finished form Example : Car without tyres or
without seats would be still construed as Cars, but not Cars without engines b) Any reference in a heading to a
material or substance, shall be deemed to include a reference to the mixtures and combinations of that
material / substance with other materials / substances Example : natural rubber would include its mixture with
synthetic or other forms of rubber.

Classification of Goods classifiable under more than one head [Rule 3]

a) “Specific Identification”, i.e., the goods shall be classified under the heading which is closest to the specific
description Example : Mint Tea is not separately classified, but the classification should be tea as the product is
closest to the one under the heading “tea”, mint is only a flavour.
b) “Essential Character Principle”, i.e., if composite goods cannot be classified as per Rule 3(a), then, shall be
classified on the basis of material / substance that defines the essential character Example : If one imports
“Liquor Gift Sets” that have both, liquor and glasses, it should be classified under the heading, “Liquor”, as the
essential character of the composite item is the liquor itself and the glasses are pure ancillaries
c) “Latter the Better Principle”, i.e., when goods can’t be classified under rules 3(a) or 3(b), the goods would be
classified under the heading that appears last in the numerical order amongst those which equally merit
consideration Example : A gift set, which has socks and ties, can be classified under any of the above rules, and
therefore should be classified as ties (heading 6117) over socks (heading 6115)

Akin Principle [Rule 4]

This rule states that the goods which cannot be classified in accordance with Rules 1, 2 or 3, shall be classified
under the heading which includes goods that are the most “akin or similar”. An example would be anti-glare
films used for car windows, venetian blinds, all of these are not separately classified, they would be classified
under the heading for “builders’ ware of plastic”, as that’s the closest these fit into.

Cases / Containers for packaging of goods [Rule 5]

Goods which are in the nature of containers / packages such as necklace boxes, camera cases, musical
instrument cases, will be classified with the specific article which are generally sold within these packages.
However, this is applicable to containers, which are fitted for the article they will contain, are suitable for long

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However, this is applicable to containers, which are fitted for the article they will contain, are suitable for long
term use, protect the article when not in use, and are of a kind normally sold with such articles.

Sub-headings [Rule 6] Only sub-headings at the same level are comparable.

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Friday, September 25, 2020 3:28 AM

The Customs Valuation (Determination of Value of Export Goods) Rules, 2007 is applicable only if the aforesaid conditions are not satisfied:

Rule 1: (i) These rules may be called the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.
(ii) They shall come into force on the 10th day of October, 2007.
(iii) They shall apply to export goods.

Rule 2: Definitions Some important definitions are:

(a) “goods of like kind and quality” means export goods which are identical or similar in physical characteristics, quality and reputation as the
goods being valued, and perform the same functions or are commercially interchangeable with the goods being valued, produced by the same
person or a different person; and
(b) “transaction value” means the value of export goods within the meaning of sub-section (1) of section 14 of the Customs Act, 1962.

Rule 3: Determination of the method of valuation

1. Subject to rule 8, the value of export goods shall be the transaction value.
2. The transaction value shall be accepted even where the buyer and seller are related, provided that the relationship has not influenced the price.
3. If the value cannot be determined under the provisions of sub-rule (1) and sub-rule (2), the value shall be determined by proceeding sequentially
through rules 4 to 6.

Rule 4: Determination of export value by comparison

(1) The value of the export goods shall be based on the transaction value of goods of like kind and quality exported at or about the same time to
other buyers in the same destination country of importation or in its absence another destination country of importation adjusted in accordance
with the provisions of sub-rule (2).
(2) In determining the value of export goods under sub-rule (1), the proper officer shall make such adjustments as appear to him reasonable, taking
into consideration the relevant factors, including—
• difference in the dates of exportation,
• difference in commercial levels and quantity levels,
• difference in composition, quality and design between the goods to be assessed and the goods with which they are being compared,
• difference in domestic freight and insurance charges depending on the place of exportation

Rule 5: Computed value method If the value cannot be determined under rule 4, it shall be based on a computed value, which shall include the
following:—
• cost of production, manufacture or processing of export goods;
• charges, if any, for the design or brand;
• An amount towards profit.

Rule 6: Residual method Subject to the provisions of rule 3, where the value of the export goods cannot be determined under the provisions of
rules 4 and 5, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules provided
that local market price of the export goods may not be the only basis for determining the value of export goods.

Rule 7: Declaration by the exporter The exporter shall furnish a declaration relating to the value of export goods in the manner specified in this
behalf.

Rule 8: Rejection of declared value

(1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any export goods, he may ask the
exporter of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in
the absence of a response from such exporter, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared,
the transaction value shall be deemed to have not been determined in accordance with sub-rule (1) of rule 3.
(2) At the request of an exporter, the proper officer shall intimate the exporter in writing the ground for doubting the truth or accuracy of the value
declared in relation to the export goods by such exporter and provide a reasonable opportunity of being heard, before taking a final decision under
sub-rule (1).

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Friday, September 25, 2020 4:08 AM

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