ee VALUE OF IMPORTED Goons anion paid by importer a Eee atl 1 local agent appuin " — yon DPented by exporter —_ 1 ston Hares (wo require 1 — Y ble vi as ct na , assess Per section 14 of Cu ye sailed 14 of Customs Act, 1962 ff en Vg ‘alu is a je ent commision (HS NOt a Buying Commission) | port, loading, unload ah it jog eanopont loaetnns wnlosdingand handling charges associated withthe delives a nds to the place of importation: 20% of FOB. [Work ee 35200 Note 2] pce (1et25% of FOB] = (1.125% of 21,76,000) yl agsessable val S 1, rule 1012) of the Customs Valuation (Determination 1 Rae 102) of the Customs Jetermination of Value of Imported Gi les, pene cost ofr eae K. uunlaing anid hanuingcharpes areca ci eens vf gos 1 Me ple importation ave include inthe assessable vale. Further, where teh por ascertinail t shll be 20% ofthe fre on baa (FOB) vale of the goods which would ale de demurrage charges I has been assumed tha the demurrage charges have been paid a the port pale will be stun total cost of machine, freight fromt factory of exporter to port for shipment, han. 708 Fyne ctsarses batd for loadings the machine in the ship and commission paid to local agent appointed by imorier, which will be& 1,76,000 [@ 1,50,000-+ & 20,000 4% 5000-4 & 1,000)} «_ asper {Rule 10(2) of the Customs Valuation Determination of Value of Imported Goods) Rules, 2007: 3 hija incurred from port of entry to Inland Container depot is not includible in assessable vale sper Rule 10(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007: ls the payments actually made as a condition of sale of the imported goods by the buyer tothe seller re inclucdible in the assessable value. Vendor inspection charges not required under contract are thus serincludible in the assessable value, 7 Tutorial Note: Intheabove answer, demurrage charges have not been added separately in the cost of transport loading, inloading and handling charges by taking a view that where unascertainable cost of transport ete. has been computed as 20% of FOB value, the same includes all elements of costs of transport. However, itis also possible to take an alternative view that actual demurrage charges should be separately added in the cost of transport by virtue of explanation to rule 10(2) of the Customs Valuation (Determination of Value of imported Goods) Rules, 2007 irrespective of whether the cost of transport has been contputed as 20% of FOB value or on the basis of actual values. 229 VALUE OF IMPORTED GOODS WHEN CONDITIONS OF RULE 3(2) ARE NOT SATISFIED [1.E. VALUATION ER RULE 4TO RULES] 3 Value of Imported Goods) Rules, 2007, “If Asper Rule i ermination of Per Rule 3(4) of Customs Valuation (Determination eee ao ia deterred the value cannot be determined under the provisions of Rule 3(1), b proceeding sequentially through rules 410 9.” Acareful analysis of above provision shows that, the valuation shal $108, in the following two circumstanc (1) When conditions of Rule 3(2) are not satisfied: These conditions have already been explained in Para 2: II be made as per the rules from © scanned with OKEN Scanner‘TAXMANN® ‘OMS ‘VALUATION UNDER cusTt say Para 22.9 Rule 12 (2) Whe transaction values rejected under f declared value. As per sub-rule (I) of is, : i rejection ol 7 ine Rule 12is related with the abe T le or has reason to doubt the truth or aru A o the ae a . When the proper offer ods, he mayask the importer of such goo ur re relation to: B Demme orotherevidence and if,after receiving such further info, mation inluding of i rma »per officer still has r. he absence of a response of such importer, the proper offic easonaby or in the absence about the truth or accuracy of le doup, th nae so decaed it shal be deemed tha he ra ne gods cao be deermined der the provisions of ue 3 value of such impor ity: d reasonable opportuni , Intimation and re: importer, the proper officer, shall intimate the importer in itn the A era hing thetruthr accuracy ofthe valuedecaredin elation ogoudsimpest Fennec a provide a reasonable opportunity of being heard, before taking et decison of rejection of | declared value as per Rule 12(1). Clarifications under Rule 12: ; The explanation to this rule clarifies the following: is y rovide a method for determination of value, it Provides a (heb i trove td es dtrnaton va pi sonable doubt that the declared value does not represent the transaction value; where the declared valueis rejected, the value shall be determined by proceeding sequently in accordance with rules 4 to 9. (i) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers. (di) The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include— (@ the significantly higher value at which or about the same time in comparable transaction were assessed. identical or similar goods imported at quantities in a comparable commercial () thesale involves an abnormal discount or abnormal reduction from the ‘ordinary competitive price, (0 the sale involves special discounts limited to (@ the mis-declaration of goods in parameters country of origin, year of manufacture or (© thenon-declaration of parameters such as relevance to value, exclusive agents, such as description, quality, quantity, production, brand, grade, specifications that have ) the fraudulent or manipulated documents, 22.9.1 Rule 4 - Transaction Value of I (a) When Transaction Value is rej i Value of identical good, “ited, the value of imported goods shall be the transaction identical Goods (b) As per Ri et aubmenranapseton {ale of identical goods ina sale atthe same commerciale an ‘ z the value of imported gous ey athe goods being valued shall ene 4 © scanned with OKEN Scanner2a “, VALUy where no Such sale ig POF ta ¢@ Norcia level or in ge! the tpg A005 Mibutable to con adjustments shall be sre reasonableness jnorease oF decreage Para 22.9 Kerem Me transac tion y ore quan Wa : Mercia eve gn i OF both we tical goods sold ata different com- Made on the jo the quanti "eM 10 take account of the difference nd accu basis OF demoneen et shall be used, provided that such inthe pi of he adjustments whe nenee which clearly establishes . * whether such adjustment leads to an Rule 2(@) of Customs Vay ort Rule 200 of Customs Valuatig esmeans imported goods ~ fh i ‘ue of Imported Gi Fy wth are same in all espet ;oods) Rules, 2007, Identical 1 heing valued except for mince ae Physical charact. ieee " eRECS in appen arte! go rodced in the country in which te Pains 0 Peer Patni edad J/ produced by alferent person, but shat | RR ork dion work an orshetcn sino by the buyer on these imported poode ot t¥ertaken in India the production and sale for export of yee of “barge or at these imported goods. sstation 22.11 [Transaction Value of Identical Goods as per Rule 4] ssbLeysian company donated 1,000metric tons depoor and the needy citizens, istics, quality and rey hat do not affect the Were produced; and “the goods, or w i ;Putation as the goods value of the goods; here no such goods are available, goods lowing imports of palm oil of Malaysian origin into India 2 StNo. | Quantity impored i metietons [Unit pes in US Dotan (ly 2 1 500 400 Z 2 900 350 , 3. 780 300 The rate of exchange on the relevant date was 1 US § = Rs. 65 and the rate of customs duty was 20% ad ‘alrem Calculate the amount of customs duty payable on the consignment under the Customs Act, 1962 ‘wth appropriate assumptions and explanations. It would be sufficient if only basic customs duty is calculated, Ans, Statutory Provision: lathe given case, there is no transaction value for the subject goods. Therefore, value has to be determined inaceordance with Rule 4 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, reas oods shall be valued : th the identical goods, . ir is rejected then such goods shall be valued at par with the identical goods, 2 Adjustments are allowed to be made for: (2) Time gap (6 Quantity difference (6 Difference of commercial level Note: After determining comparable values, the Jowest of them shall be adopted. the giver ally the same quantity. Hence, remain- n case: J tobe of substantially the same quantity. Hence, ye considered to ¢ of identical goods is found, the * consignment of $00 tonnes cannot ‘an one transaction value of identical p re th “ 7 eof Be consignments will only be rare the value of imported goods. Accordingly, the unit pric o del t be used sr metric tonne. a on woud USS 3 ee © scanned with OKEN Scanner‘TAXMANN® 24g US $ 3,00;095 1,95,00,009 1,95,00,009) Para 22,9 ayst0MS CIF value CIE y, F 1000 mei ‘a . ‘tric tonne: x $ 300) ale Gn a et ons [900% 3 - 15, atthe exchange rate of $1= RSS ads shall be the transaction valye When vat | ported £00 ea rcicallar a alue as under e3isre e value of importe? jon value of similar goods sojq : "The ale of opr go a trans goods may be valued. of similar : On unilar goods. The value of imported goods shall be, ‘Xport to India and imported at or about the same tim Gimilar Goods ie of ‘Meaning of i er Rule 2()) of Customs Valuation (Determination of Vali 'oods means imported goods— @ which although not alike in all respects, have li ‘enable them to perform the same functions a” being valued having regard to the quality, repul (ii) produced in the country in which the goods being valued were P! : (iit) produced by the same person who produced the goods being vai ; available, goods produced by a different person, but shall not include impo ing, development work, art work, design work, plan or sketch unde take directly or indirectly by the buyer on these imported goods free of charge OF ot in connection with the production and sale for export of these imported goods 4 Imported Goods) Rules, 2007, Similar like component materials which interchangeable with the goods of trade mark; e characteristics and id to be commercially ation and the existence roduced; and ed, or where no such goods are ted goods where engineer- India were completed at a reduced cost for use ation of value where value can not be determi ed under rules 22.9.3 Rule 6 - Deter 3,4and5 If the value of imported goods cannot be determined under the provisions of rules 3, 4 and 5, the value shall be determined under the provisions of rule 7 or, when the value cannot be determined under that rule, under rule 8, It is also provided that at the request of the importer, and with the Approval of the proper officer, the order of application of rules 7 and 8 shalll be reversed. Illustration 22.12 [Reversal of application of rules 7 and 8] _ Anil imported a customized fully automatic machine fi «o Shiraz Mr: afution value has been rejected Rules 4and'5 ofthe Import alee oe Mio Shiai of Japan and Ho similar/identical goods are imported in India. Mr. Anil requests custeng tes ore found inapplicable 2s no Se stoms Authorities to determine value es are of the , “The customs authorities are ofthe opinion that since value as to apply rule B. Can the request of Mr. Anil be legally ieee oe 7 can be determined, there is no need Ans. e ted goods is deters The value ot rted Goods) Rules, 2007 ithe sane ae fw 8 Of the Custom, Valve oF i application of rules 7 and 8 can be revercey ot ee determined under weation (Determination of the onsproper officer. Thus request of Mr. Anil for “reel tthe request of the ite eatlier rules, However, of Me game is also approved bythe proper officer "Nation of value tind tet and with the approval 22.9.4 Rule 7 - Deductive value tule 8 is legally acceptable, le 7, the value of imported goods g under Bt ‘Mlentical or similar imported goods a Pe base goods ‘d on the unj ood Jated to thesellers in Indi are sold in unit pri gonarenore nda. The following ae Breatest aggre At Which the imported ctions are ate quantit; -rsons allow. ry to pel TI mineral © scanned with OKEN ScannerNS Ce. a _ VALUE op. f thet a COMMISSION yy, SF apo roland gener a8 Sty ‘Coons Para 22.9 Mes or kind, Pensesin congested -" ection iyi .° be pai i. id oF the adit jy The usual costs of "2NSport ang sles in Ina ee . ind i ° i) The customs duties ang oth ‘surance ang me fakes payables Cited costs incurred within Ind a india; in In ; yotion 22.3 [Deductive yy a by reason of importation or sale of the Ue Meth imported certain lod as yan Boods dec, Per Rule 7; reed vide aoe 12, The Rules ¢ mee the transaction y 1 tes 20048 are IpOrted ing age the Import ahaa 150 per unit. The declared value was Mr Rules lue are found inapplicable, as no similar/ ing data: i furnishes the followi Per unit from Port of import tof General expenses after importation: Rs. 125 per we RE 0a RS 0 pon 125 per uni ly earned by ol : (g) [Basic Customs Duty: 10% others also 15% of sale price before GST) (i) Integrated tax as per section 3(7) of CTA, 1975: 5% (| Social Welfare Cess: 10% | Cis not admissible under GST laws 3 Compute the assessable value as per Rule 7. g as, g ‘Computation of Assessable Value as per Rule 7 age RG 7 Particulars Amount (Rs.) Selling Price (inclusive of IGST) 5250 lass: IGST [(Rs. 5,250 x 5%) = 1054] 250 Sale Price before IGST 5,000 les: Post Importation Expenses: ‘ol Commission to Indian agent (3% of Rs. 5,000) ( (370) Value addition after import Freight and insurance fro port of import to factory of importation (Rs. 90 and (140) Rs. 50 per unit) ' «ws General expenses after importation ‘i (750) Net profit Margin in India (15% of Rs. 5,000) sama nae iet profit Margi “Cum-duty price inclusive of IGST on imp\ es) x:5)+ 105] Me GST u/s 30) Ce react oHGST onions] 3308 x 108) + 110%) ; exe: Customs duty @ 10 [R530 ‘Assessable Value (in Rs.) 3.000 2295 Rule 8 Computed VN ported goodsshall bebased on computed ais theval Wtbiet othe provisions of ule ich shall consist of the s6™ OF © scanned with OKEN Scanner‘TAXMANN® per customs 221g VALUATION UN! other processing employed in producn, | in 5 Para 22.9 ; fabrication © alue of materials and ly reflected in sales of good, of ja) The cost OF ¥: to that usual dl de by producers in the coun, the imported goods; 2 profit and general expenses eat roma end as the goods Beine value for export to Indias 1 expenses ¥ as per Rule 81 a related persom ind inapplicable. Mr. (8) anamount for the same class of exportation (c) The cost or value of all othe! der sub-rule (2) of rule 10. Mr. Richard of US and transaction value has Mlustration 22.14 [Com| ported certain £0 Prabhakar furnishes the following Mr. Prabhakar imy been rejected. tion Rules are fou Rules 4,5 and 7 of the Import Valuat cost related data of imports: Mr Richard [$60] $2,000 Fy [cost of materials incurred by + [Fabrication charges incured bs Mr Richard 3 _| Other chargeable ass incurred by Me Richard [$500] fa pea peurtin Reese T3- [Freight from Mr. Richard 's factory to us port [___ s2m] & [Loading charges at us port Fi al et post margin of Mr. Richard is 20% ‘of FOB @ Tir freight from us port to Indian port 7) 9 insurance from us port to Indian port a 10 | Exchange rate Ba Gi pers ion (Determination of Value of Imported Compute the assessable value as per rule 8 of the Customs Valuatis Goods) Rules, 2007. Ans. ‘The assessable value of the imported goo (@ The cost of materials and fabrication or other processing: (8) Anamount for profit and general expenses; (0) The cost or value of all other expenses under rule 10(2) of the said rules. Computation of Assessable Value as per Rule 8 : Particulars Cost of materials : = stAmowsi() + Fabrication charges 5m Othe uy + ore 4 rgeable expenses 2000 lirect co costs: ao 300 Cost of the goods at Mr. Richard’s factory + Normal net 1et profit me Re a Nacht mara Of Mr Richard is 20% of FOB, Ze 256 of 8,800 , of total cost [25% of 2,300 «is under rule 8 is the aggregate of the following: = + _ Freight & loadi ing/unloadi {fri lati charges to Indian port Note-2 Assessable Value (in $) ; Ass . sable Value (In Rs.) =$ 13,515X Rs, o8 = R : =Rs.9,19,020. = © scanned with OKEN Scanner9 VALUE OF EXPORT Goons Para 22.10 Note-1 Calculation of total cost till US, Port = Cost of the goods at factory + Frei = $8800 + $ 250+ § 150 = § 9.209 FOB value = Total cost till port + Profit = Note-2 Incase of import by air, the delivery of the imported goo $9,200 + § 2,300 = § 11,500 Cost of transport, loading, unloading ds to the place of importation are rest 22.9.6 Rule 9 - Residual method Subject to the provisions of r the provisions of any of the ‘consistent with the principl in India: Provided that the value so determined shall not exceed the price at wl ordinarily sold or offered for sale for delivery atthe time and place 0 of international trade, when the seller or buyer has no interest in the b the sole consideration for the sale or offer for sale. and handling charges associated with the ricted 10 20% of FOB value. ule 3, where the value of i Preceding rules, the valu: les and general provisions imported goods cannot be determined under shall be determined using reasonable means of these rules and on the basis of data available hhich such or like goods are f importation in the course uusiness of other and pi As per Rule 9(2), the following cannot be applied for the purpose of Rule 9: 1. The selling price in India of the goods produced in India. 2. A system which provides for the acceptance for customs purposes of the higher of the two alternative values. @NNVINXVL 3. The price of the goods on the domestic market of the country of exportation, 4. The cost of production other than computed values which have been determined foridentical or similar goods in accordance with the provisions of rule 8. 5. The price of the goods for the export to a country other than India, 6. Minimum customs values; or 7. Arbitrary or fictitious values. © scanned with OKEN Scannerpov ye Notification No. 95/2007 Cus. (NT) dated 13-09-2007, the Gover yaluation (Determination of Value of Export Goods) Rules, 2007, whi LUE OF EXPORT Goops nment has notified Customs ch applies to value of export good. Rule hese rules are as follows: Explanation of Rule 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, pro- vided 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. © scanned with OKEN ScannerTAXMANN® Para 22.10 VALUATION UNDER CUSTOMS nx Rule Explanation of Rule RULE 4 | DETERMINATION OF EXPORT VALUE BY COMPARISON — : ; ‘The value of the export goods: ‘shall be based on the transaction value of goods of like king (2) Te alu of he au the ae BE ( e ant al ofimportationorinitsabsence another "Festination country of mportationadjusey vneeordance with the provisions of ‘sub-rule (2). , _— | cermining the value of export goods under sub-rule (1), the proper officer shall make| ty a *sjuatmentsasappeatohi reasonable, taking into consideration therelevant factors | including— (@ difference in the dates of exportation, Gi difference in commercial levels and quantity levels, Gy difference in composition, quality and design Petween the goods to be assessed and the goods with which they are being compared, (jo) difference in domestic freight and insurance charges depending on the place of exportation. RULES | COMPUTED VALUE METHOD the value cannot be determined under rule 4, it shall be based on & computed value, which shall include the following— (@ cos of production, manufacture or processing of export goods, (b) charges if any, for the design or brand (an amount towards profit. RULES | RESIDUAL METHOD Subject tothe provision of rule 3, where the value of the export goods cannot be determined “sand 5, the value shall be determined using reasonable means under the provisions of rules acestent with the principles and general provisions of these rules provided that local market price ofthe export goods may not be the only bass for determining the value of export goods. RULE DECLARATION BY THE EXPORTER The exporter shall furnish a declaration relating to the val specified in this behalf. lue of export goods in the manner RULES REJECTION OF DECLARED VALUE When the proper officer has reason to doubt the truth or accuracy of the value declared in rela- tion 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, orin the absence of a response of 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. Mlustration 22.15 [Computation of Export Duty] Consider the following data: (8) FOB price of goods: US § 0,000. @ sures) bill presented electronically on 29-12-2021 roper offi i ‘ icer passed order permitting clearance and loading of goods for export (Let Export Order) on 03.01 -2022, (tv) Rate of exchange and rate of export duty are as under: __ Date ms Exchi Prevallin; me 29-12-2021 | 1US$=Rs.71 —_ oe - comer ioe 03-01-2022 | 1 US $=Rs. 715 a 10% © scanned with OKEN | Scanner