Assessment & Date for Determination of Rate & Tariff Value

Q 1. Explain briefly the “relevant date” for determination of rate of duty leviable on the imported
material content in the waste or refuse.
Ans: As per section 15(1) of the Customers Act, 1962, the rate of duty and tariff valuation, if any,
applicable to any imported goods, shall be the rate and valuation in force,-
(a) In the case of goods entered for home consumption under section 46, on the date on which a
bill of entry in respect of such goods is presented under the section;
(b) In the case of goods cleared from a warehouse under section 68, on the date on which a bill of
entry for
(c) In the case of any other goods, on the date of payment of duty.

Q 2. As per section 16 of the customs Act, 1962 briefly discuss the date for determining the rate of
duty and tariff valuation of Export goods.
Ans:
In case of Export Goods [Sec. 16]-
(a) Goods entered for export u/s 50 16(1)(a) On the date on which the proper officer
makes an order permitting clearance and
loading of the goods for exportation
under section 51.
(b) For any other goods 16(1)(b) On the date of payment of duty.

Q 3. How will you determine in the customs duty where imported goods consist liable to different
rates of duty?
Ans: Section 19 of the Customs Act, 1962 prescribes the method for determination of duty where
goods consist of articles liable to different rates of duty. It lays down that where goods consist of a
set of article, duty shall be calculated as follows:-
(a) Article liable to duty with reference to quantity shall be chargeable to that duty;
(b) Article liable to duty with reference to value shall, if they are liable to duty at the same rate, be
chargeable to duty at that rate, and if they are liable to duty at different rates, be chargeable to
duty at the highest of such rates;
(c) Article not liable to duty shall be chargeable to duty at the rate at which articles liable to duty
with reference to value are liable under clause (b)
However:
(a) Accessories of, and spare parts or maintenance and repairing implements for, any article which
satisfy the condition specified in the rules made in this behalf shall be chargeable at the same
rate of duty as that article;
(b) If the importer produces evidence to the satisfaction of the proper officer regarding the value of
any of the articles liable to different rates of duty, such article shall be chargeable to duty
separately at the rate applicable to it.
These provisions are subject to anything provided otherwise in any law for the time being in force.

Q 4. What are the relevant dates for determining the-

(i) Rate of exchange, when warehoused goods are removed for home consumption.

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(ii) Rate of duty when warehoused goods are removed from warehouse for home consumption.
(iii) Rate of duty if the warehoused goods are not removed from warehouse within the permissible
period.
Ans:
(i) The importer presents an ‘Into-Bond’ Bill of Entry under section 46 while clearing the goods
to the warehouse and an ‘ex-Bond’ Bill of entry under section 68 while clearing the goods from
warehouse. The relevant date for rate of exchange is the date on which the bill of entry is
presented for warehousing under section 46 of the Custom Act, 1962 and not when bill of
entry is presented under section 68 for clearance from warehouse.
(ii) As per section 15(1) (b) of the Customs Act, 1962, rate of duty as prevalent on date of
presentation of bill of entry for home consumption for clearance from warehouse is
applicable and not the rate prevalent when goods were removed from customs port.
(iii) Goods which are not removed within the permissible period are deemed to be improperly
removed on the day it should have been removed. Thus, duty applicable on such date
i.e. last date on which the goods should have been removed is relevant and not the date on
which the goods were actually removed.

Q 5. Examine- Goods exempt from Basic Customs Duty would automatically be exempt from
Additional Duty of Customs
Ans: Exemption from BCD = Exemption from ACD u/s 3(1):
When Goods are exempted from Basic Customs Duty in terms of Sec. 12 of the Customs Act, 1962, it
would not mean that they are exempted from Additional Duty of Customs u/s 3(1) also, as BCD is
leviable by virtue of Sec. 12 of the Customs Act, 1962 while ACD is leviable u/s 3 of the Custom
Tariff Act, 1975.

Q 6. Explain briefly with reference to the changes effected by the Finance Act, 2010 to the Customs Tariff
Act, 1975 how additional custom duty has to be determined in respect of goods imported requiring MRP
based assessment under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.
Ans: The financial Act, 2010 has amended the first proviso to section 3(2)(ii) of the Customs Tariff Act,
1975 to provide date the value of the imported goods for the purpose of charging countervailing duty
(CVD) in respect of goods chargeable to excise duty on the basis of Maximum Retail Sales Price under
Medical and Toilet Preparation (Excise Duties) Act, 1955 would be deemed to be the retail sale price
declared on such imported goods less the amount of abatement, if any, from such retail price as the
Central Government may, by notification in the Official Gazette, allow in respect of such like article.

Moreover, where on any imported goods more than one retail price is declared, the maximum of
such retail sale price shall deemed to be the retail sale price for the purpose of this section

Q 7 A product is liable to 16% basic excise duty. However, a notification has granted exemption to the
said product whereby the rate of basic duty has been reduced from 16% to 8%. Further, a special excise
duty @5% is also leviable on such product by virtue of a Finance Act. This product has been imported by
‘Y’ from Brazil. Basic customs duty is leviable @8%.
You have to determine the rate of additional duty of customs (CVD) leviable, if any, on such product.
Ans: legal Provision
Section 3(1) of the Custom Tariff Act, 1975 provides that any article which is imported into India Shall,
in addition, be liable to a duty equal to the excise duty for the time being leviable on a like article if

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produced or manufactured in India. This duty shall be called as additional duty (CVD). If such excise duty
on a like article is leviable at any percentage of its value, the additional duty to which the imported
article shall be so liable shall be calculated at that percentage of the value of the imported article.
Since, the CVD should be equal to the excise duty for the time being leviable on a like article if
produced or manufactured in India, therefore, the rate of CVD will be 8% basic excise duty (effective
rate after exemption) and 5% special excise duty.
Special excise duty levied by the Finance Act would also be considered for computing the rate of
CVD as the Supreme Court in the case of J.K. Synthetics Ltd. v. Union of India 2006 (204) ELT 369 (Del.)
has held that the purpose of levying CVD would be defeated if the rate had to be restricted to basic excise
duty when the local manufacturers have to compulsorily pay the special excise duty as well. If special
excise duty is not considered while levying CVD, the CVD so levied would not counterbalance the excise
duty payable by the local manufactures on a like product in order to be ensure a level playing field.
The Supreme Court elaborated that the expression “excise duty for the time being leviable” is not
qualified by any word which limits the excise duty to be payable only under the Central Excise Act, 1944.
In other words, it can also include a special duty of excise payable in terms of the Financial Act.

Q 8. M/s A.B.L. imported asbestos fibre abroad. Asbestos fibre is extracted from rocks. When the
department asked the importer to pay the Additional Custom Duty (Counter- veiling duty) under section
3(1) of the Custom Tariff Act, 1975, the importer argued that duty is not leviable as asbestos fibre has
not been obtained as a result of manufacture. Is the contention of M/s A.B.L. correct? Discuss.
Ans: As per Sec. 3(1) of Custom Tariff Act-1975, “Additional customs duty” is charged on imported
goods, which is equal to the excise-duty on a like article, produced or manufactured in India”
If like article is not produced or manufactured in India, the excise duty is levied as per class of goods, to
which imported goods belong. But if the imported goods are not subject to excise levy, as they do not fall
in the ambit of production or manufacture, then no additional custom duty under section 3(1).
The above view was also confirmed in a landmark judgment of apex court in “Hyderabad industries
Ltd. v UOI”. In the given case imported asbestos fibre will not attract ACD because, there is no
manufacturing or production has taken place.

Q 9. Assessable value of certain Goods imported from USA is Rs. 10,00,000. The packet contains 10,000
Pieces with Maximum Retail Price Rs. 200 each. The Goods are Assessable under Section 4A of the
Central Excise Act, 1944, after following an abatement of 40% the excise duty rate is 8% advalorem.
Calculate the amount of Additional duty of Customs under section 3(1) of the Custom Tariff Act, 1975;
assuming Basic Customs Duty @ 10% advalorem.
Ans:
1. Since product is covered under MRP provisions, ACD u/s 3(1) is payable on the basis of MRP.
2. Computation of ACD u/s 3(1):
Particulars Rs.
Assessable Value u/s 4A of CEA, 1944 (60% x 200x 10,000) 12,00,000
Additional duty of Customs (8%x 12,00,000) 96,000

MRP of Imported Goods Rs. 200

Less: Abatement 40% Rs. 80
Value u/s 4A Rs. 120
Total value (10,000x120) Rs. 12,00,000
ACD 3(1) @ 8% Rs. 96,000

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Q 10. From the following information, compute the amount of basic customs duty and additional duty of
customs payable u/s 3(1) of Customs Tariff Act, 1975 in respect of import of readymade garments-
(a) Assessable value under Customs: Rs. 1 lakh;
(b) Tariff value notified under Central Excise for levy of excise duty: 45% of Retail Price;
(c) Retail Sale Price: Rs. 2,66,667 (readymade garments are not notified u/s 4A of the Excise Act);
(d) Basic Customs Duty: 10%; Excise Duty: 14%; and Education Cesses: 3% in all.

Ans: Computation of additional duty of customs under section 3(1) of the Customs Tariff Act, 1975-
Basic customs duty = 10% of assessable value under customs law= 10% of 1 lakh 10,000
Retail sale price of the goods 2,66,667
Tariff value (45% of RSP), it is the value for purpose of levy of additional duty of customs 1,20,000
Additional duty of customs @ 14%
Note: In case of goods liable to excise duty based on tariff value, the value, for the purpose of levy of
additional duty of customs, shall be such tariff value.
However, the basic customs duty is leviable on the assessable value of goods under customs law only.

Q 11. M/s Marwar industries imported finishing agents, dye-carries, printing paste etc. to be used for
manufacture of textile article. The imported claimed exemption for Additional duty of customs (CVD)
leviable under Section 3 of the Customs Tariff Act, 1975, on the ground that there was an exemption for
excise duty in respect of said goods used in the ‘same factory’ for manufacture of textile articles.
The Department contended that CVD is payable on the ground that the goods which were to be used
must also be manufactured in the ‘same factory’1.
You are request to comment upon the contention of Department, with reference to a decided case law, if
any.
Ans:
1. Court Ruling in Malwa Industries (2009) 235ELT 214 (SC):
(a) Meaning of Same Factory: Reference to “Same Factory” in the notification means that the
imported goods should be used in the “factory” belonging to the importer where manufacturing
activity takes place.
(b) Interpretation:
 Notification must be construed having regarded to purpose and object it seeks to achieve,
hence statutory scheme for issuance of such notification should also be considered.
 Exemption cannot be deprived by taking a narrow interpretation. “Imported” Goods cannot
be “manufactured” in the same factory.
 A narrower interpretation would deny the benefit of exemption to the importer
manufacturer.
2. Analysis: In the instant case, importer has imported and used the goods only for the manufacturer
of specified ducts, as provided in the notification. Hence, he is eligible for exemption.
3. Conclusion: Hence, contention of the Department is incorrect.

Q 12. Explain briefly the following with reference to the provisions of the Customs Act, 1962: (i)
Meaning of “Assessment”
Ans: (ii) As per section 2(2) of the customs Act, 1962, the term “assessment” is defined to include
provisional assessment, self assessment, reassessment and any order of assessment in which the duty
assessed is nil.

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Assessment is the name given to the process of determining the tax liability in accordance with the
provision of this Act. The process of assessment involves determining:
 The quantity and total value of the consignment
 The proper tariff classification of the goods
 The appropriate rate of duty after all abatements
Section 17(1) of custom act 1962 makes it clear that assessment is basically ‘Self Assessment’,
subject to verification by ‘proper officer’ under section 12(2).

Q 13. Write a brief note on self assessment in customs under the Customs Act, 1962.
Ans: The provisions relating to self assessment of duty, contained in the section 17 of the Customs
Act,1962, are as follows:
(i) The importer or the exporter has to self-assess the duty leviable on goods imported or exported.
(ii) The proper officer may verify the self-assessment of such goods by examining/testing the goods, if
necessary. He may also ask the importer or the exporter to furnish any document or information
for ascertaining the duty.
(iii) After verification, if it is found that the self-assessment has not been done correctly, the proper
officer may re-assess the duty leviable on such goods.
(iv) If the order of the reassessment is country to the self assessment, the proper officer should pass a
speaking order on the reassessment within 15 days from the date of reassessment.
(v) Where re-assessment has not been done or a speaking order has been passed on re-assessment, the
proper officer may audit the assessment of duty of the imported/export goods at his office or at the
premises of the importer/exporter.

Q 14. Mr. Krishna Bhansali, has imported some garments from Paris. He is unable to make self-
assessment under section 17(1) of the Customs Act, 1962 and hence has made a request in writing to the
proper officer of provisional assessment. Can he apply for provisional assessment? Discuss.
Ans: Yes, Mr. Krishna Bhansali can apply for provisional assessment under section 18 of the Customs
Act, 1962. Section 18(1), provides that provisional assessment can be resorted to, inter alia, where the
importer or exporter is unable to make self- assessment under sub-section
(1) of section 17 and makes a request in writing to the proper officer for assessment.
In such a circumstance, the proper officer may order for provisional assessment of duty if the
importer/exporter, furnishes such security as the proper officer deems fir for the payment of the
deficiency, if any between the final re-assessed duty and the provisionally assessed duty. After the
finalization of assessment, if the importer/exporter is entitled to refund of duty, such refund shall be
subject to doctrine of unjust enrichment.

Q 15. State briefly the provisions of the Custom Act, 1962 relating to payment of interest in case of
provisional assessment.
Ans: The provision of the Customs Act, 1962 relating to payment of interest in case of provisional
assessment are as under:
(i) Interest payable by the importer/ exporter on amount payment to the Central Government,
consequent to the final assessment/re-assessment:
(a) The importer or exporter shall be liable to pay interest, on any amount payable to the Central
Government, consequent to the final assessment order/re-assessment order under sec. 18(2).
(b) The interest shall be payable at the rate prescribed under section 28AB of the Customs Act,
1962. Presently, the rate of interest has been fixed @ 18% p.a.

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 (c) The interest shall be payable from the first day of the month in which the duty is provisionally
assessed till the date of payment thereof.
(ii) Interest payable by the Central Government to the importer/exporter on amount refundable
to the importer/exporter on final assessment of duty/re-assessment of duty:
(a) Subject to the provisions of unjust enrichment, if any refundable amount is not refunded to the
import/exporter on final assessment of duty or re-assessment of duty, within three months
from the date of final assessment of duty or re-assessment of duty.
(b) The interest shall be payable at the rate prescribed under section 27A of the Customs Act, 1962.
Presently, the rate of interest has been fixed @ 6% p.a.
(iii) The interest shall be payable from the first day immediately succeeding the period of three months
from the date of assessment of duty final or re-assessment of duty till the date of refund of such
amount.

Q 16. Write brief note on the speaking order issued under section 17 of the Custom Act, 1962.
Ans: Section 17 of the Customs Act, 1962 governs the provisions in respect of assessment. A new sub-
section (5) has been interest after sub-section (4) in section 17 vides the Taxation Laws Amendment Act,
2006. The new subsection (5) days down that where any assessment done under sub-section (2) is
contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption
or concessions of duty availed consequent to any notification and in cases other than those where the
importer or the exporter, as the case may ne, confirms his acceptance of the said assessment in writing,
the proper officer shall pass a speaking order within 15 days from the date of assessment of the bill of
entry or the shipping bill, as the case may be.

Q 17. With reference to the Customs Act, 1962, discuss giving reasons whether the following statements
are true or false:
Interest is payable by the importer/exporter on the duty difference when the duty paid during the
provisional assessment is less than the duty determined in the final assessment.
Ans: True. Section 18 of the Customs Act has been amended by the Taxation Laws Amendment Act,
2006. A new sub-section (3) has been interest in section 18 to levy interest on the duty difference
between the provisional and final assessment of duty. Sub-section (3) provides that the importer or
exporter shall be liable to pay interest, on any amount payable to the Central Government,
consequent to the final assessment order. The interest shall be payable at the rate fixed by the Central
Government under section 28AB. This interest shall be payable from the first day of the month in which
the duty is provisionally assessed till the date of payment thereof.

Q 18. Mr. Krishna Bhansali, an importer has imported some garments from Paris in 02.04.2012. He is
unable to make self- assessment under section 17(1) of Customs Act and hence has made a request in
writing to the proper officer for Provisional assessment. Can he apply for Provisional assessment? Will
your answer be same had he imported the goods on 10.12.2011.
Ans: Section 18(1) of Customs Act has been amended vide Finance Act, 2011 to provide that the
importer may make a request for assessment of goods by the officer when he is not in a position to self-
assess. Section 18(1) provides as follows:-
Notwithstanding anything contained in this Act but without prejudice to the provisions of section 46,-
(a) Where the importer or exporter is unable to make self-assessment under sub-section (1) of section
17 and makes a request in writing to the proper officer for assessment; or
(b) Where the proper officer deems it necessary to subject any imported goods or export goods to any
chemical or other test; or

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(c) Where the importer or exporter has produced all the necessary documents and furnished full
information but the proper officer deems it necessary to make further enquiry; or
(d) Where necessary document have not been produced or information has not been furnished and the
proper officer deems it necessary to make further enquiry, the proper officer may direct that the
duty leviable on such the proper officer deems fit for the payment of the deficiency, if any, between
the duty as may be finally assessed or re-assessed as the case may be, and the duty provisionally
assessed.
Hence, Mr. Krishna can apply for Provisional assessment for the garments imported on 02.04.2012.
However, had he imported the goods on 10.12.2022, he could not apply for Provisional Assessments
as Prior to Finance Act, 2011 importer was not eligible to apply for Provisional assessment. Only
Proper Officer was authorized to direct Provisional assessment of duty in certain specified
situations.

Q 19. Write a note on “Project Imports” under the Custom Tariff Act, 1975.
Ans: Project Imports are the imports of machinery, instruments, an apparatus etc., falling
under different classifications, required for initial set up of a unit or for substantial
expansion of a existing unit.
Heavy customs duty on imported machinery for project make the initial project cost very high and
project may become unviable. Hence, concept of ‘project import’ is introduced to bring machinery
etc. required for initial setup or substantial exemption at concessional customs duty.
In a project several difference items are required, each of which is importable at different rates of
customs duties. Thus, this simple method is adopted, as otherwise, classifying each machinery and
its parts in different heads and valuing them would have been cumbersome and would have delayed
clearance, which would cause demurrages.
The items eligible for project import are specified in Heading 9801 of the Customs Tariff Act, 1975.
This include all items of machinery, instrument, apparatus and applications, components or raw
material etc. for initial setting up of a unit or for substantial expansion of the same. The spare parts,
raw material and consumables stores upto 10% of the value of goods can be imported.
Few of the eligible projects are:
(i) Industrial plant
(ii) Irrigation project
(iii) Power project
(iv) Mining project
(v) Oil & mineral exploration project
(vi) Other projects as notified by the Central Government

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 Valuation
Q 1. When can the transaction value be accepted under rule 3(2) of the Custom Valuation
(Determination of Price of Imported Goods) Rules, 1988? Discuss.
Ans:
(i) The transaction value can be accepted under rule 4(2) of the Custom Valuation
(Determination of Price of Imported Goods) Rules, 1988 if:
(a) There are no restrictions as to the disposition or use of the goods by the buyer other than
restrictions which-
(i) Are imposed or required by law or by the public authorities in India; or
(ii) Limit the geographical area in which the goods may be resold; or
(iii) Do not substantially affect the value of the goods;
(b) The sale or price is not subject to same condition or consideration for which a value cannot
be determined in respect of the goods being valued;
(c) No part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer
will accrue directly or indirectly to the seller, unless an appropriate adjustment can be
made in accordance with the provisions of Rule 10 of these rules; and
(d) The buyer and seller are not related.

Q 2. Explain briefly with reference to the provisions of the Customs Act, 1962 the following:-
Tariff value
Ans: As per section 2(40) of the Customs Act, ‘Tariff Value’ in relation to any goods, means the tariff
value fixed in respect thereof under sub-section (2) of section 14.
As per section 14(2) of the Act, notwithstanding anything contained in section 14(1), if the Board is
satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix
tariff value for any class of imported goods or export goods, having regards to the trend of value of
such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with
reference to such tariff value.

Q 3. Examine the validity of the following statements with reference to the Custom Act, 1962 giving
brief reasons.
(i) Service charges paid to canalizing agent are not includible in the assessable value of imports.
(ii) Design and engineering charges are includible in the assessable value of the imported goods
only if the goods imported are specifically manufactured on the basis of the design and
engineering specifications provided by the importer.
(iii) Goods exempt from basic customs duty would automatically be exempt from additional duty of
customs.
Ans:
(i) The statement is not correct. Since the canalizing agent is not the agent of the importer not
does he represent the importer abroad, purchases by canalizing agency from foreign seller
and subsequent sale by it to Indian importer are independent of each other. Hence, the
commission or service charges paid to the canalizing agent are includible in the assessable
value as these cannot be termed as buying commission [Hyderabad Industries Ltd. v. UOI
2000 (115) ELT 593 (SC)].

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(ii) The Supreme Court in the case of TISCO Ltd. v. CCEx & Cus. 2000 (116) ELF 422 (SC) has held
that design and engineering charges paid for use during construction, erection, assembly etc.
of imported goods, being relating to post import activity, are not includible in the value. Thus,
the design and engineering charges which relate to pre- importation activity are only
includible in the value. Since, in this case the design and engineering charges are paid for
manufacturing the imported product, i.e., they relate to pre-importation activity, the same are
includible in the value. Thus, the statement is correct.
(iii) The statement is not correct. Exemption from basic customs duty would not mean
exemption from additional duty. When goods are exempted from basic customs duty in terms
of section 12 of the Customs Act, 1962 it would not mean that they are exempted from
additional duty of customs also, as basic customs duty is leviable by virtue of section 12 of the
Customs Act, 1962 while additional customs duty is leviable under section 3 of the Customs
Tariff Act, 1975 [Kaur Sarin Traders v. Union of India 2006 (199) ELT 224 (Pat.)]

Q 4. Answer the following with reference to the provisions of section 14 of the Customs Act, 1962
and the rules made there under:
(i) What shall be the value, if there is a price rise between the date of contract and the date of
actual importation?
(ii) Whether the payment for post-importation process is includible in the value if the same is
related to imported goods and is a condition of the sale of the imported goods?
Ans:
(i) The value of the imported goods or export goods is its transaction value, which means the
price actually paid or payable for the goods at the time & place of importation.
Where a contract has been entered into, the transaction value shall be the price stated in
the contract, unless it is not acceptable.
Price rise between date of contract and date of actual import is irrelevant, as the price
actually paid or payable shall be taken to be the value. Thus, price stated in the contract
(unless unacceptable) shall be taken.
As per Rule 10(1)(e) any payment made by buyer to seller as a condition of sale is
includible in Assessable value.
(ii) As per explanation to Rule 10(1) of the Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007, the payment for post-importation process is includible in the
value of the imported goods if the same is related to such imported goods and is a condition of
the sale thereof.

Q 5. Explain when are the costs and services as given in Rule 10 of the Customs Valuation
(Determination of Value of Imported Goods) Rule, 2007 to be added to the value of the identical
goods under rule 4.
Ans: As per Rule 4(1)(c) of the Customs Valuation (Determination of Value of Imported Goods
Rules, 2007) where Imported Goods are being valued as per rule 4, the value of the identical goods
is adjusted to take into account the difference attributable to the commercial level or to the quality
or both.
According to Rule 4(2) where costs and charges referred to in Rule 10 are included in
the value of identical goods, adjustment has to be made of the difference in such costs and
charges between the imported goods and the identical goods.
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Therefore, if the value of the identical goods does not include certain specific costs and charged
relating to the imported goods, these are to be included as per Rule 10.

Q 6. When can the ‘transaction value’ be accepted under the Customs Act, 1962 and the Custom
Valuation (Determination of Price of Imported Goods) Rule 2007 even if the buyer and seller are
related persons? Write a brief note.
Ans: Rule 3(3) of Customs Valuation Rules provides for acceptance of transaction value of sale
between related persons provided:
(a) The examination of the circumstances of the sale of the imported goods indicates that the
relationship did not influence the price.
(b) The Importer demonstrates that the price is similar goods sold to unrelated buyers in India.
The value of identical or similar goods any may be ascertained from
(i) Transactions value or
(ii) Deductive value or
(iii) Computed value of identical or similar goods.

Q 7. M/s IES ltd. (assessee) imported certain goods at US $ 20 per unit from an exporter who was
holding 30% equity in the share capital of the importer company. Subsequently the assessee
entered into an agreement with the same exporter to import the said goods in bulk at US $ 14 per
unit. When imports at the reduced price were affected pursuant to this agreement, the Department
rejected the transaction value stating that the price was influenced by the relationship and
completed the assessment on the basis of transaction value of the earlier imports i.e., at US$ 20 per
unit under Rule 4of the Customs Valuation (Determination of Value of Imported Goods) Rule 2007.
State briefly, whether the Department’s action is sustainable in law, with reference to decided
cases, if any.
Ans: No the Department’s action is not sustainable in law.
Rule 2(2) of Custom Valuation (Determination of Value of Imported Goods) Rules, 2007, inter
alia, provides shall be deemed to be “related” if one of them directly or indirectly controls the other.
The word “control” has not been defined under the said rules. As per common parlance,
control is established when one enterprise holds at least 51% of the equity shareholding of the
other company.
However, in the instant case, the exporter company held only 30% of shareholding of the
assessee. Thus, Exporter Company did not exercise control over the assessee. So, the two parties
cannot be said to be related.
The fact that assessee had made bulk imports could be a reason for reduction of import price. The
burden to prove under-valuation lies on the Revenue and in absence of any evidence from the
Department to prove under- valuation, the price declared by the assessee is acceptable.
In the light of foregoing discussion, it can be inferred that Department’s action is not sustainable in
law.

Q 8. Briefly explain the following with reference to the Customs (Determination of Value of
Imported Goods) Rules, 2007:
(i) Computed value
Ans: As per rule 8, subject to the provisions of rule 3, the value of imported goods shall be based on
a computed value, which shall consist of the sum of-

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(a) The cost or value of materials and fabrication or other processing employed in producing the
imported goods;
(b) An amount for profit and general expenses equal to that usually reflected in sale of goods of the
same class or kind as the goods being valued which are made by producers in the country of
exportation for export to India;
(c) The cost or value of all other expenses under sub-rule (2) of rule 10.

Q 9. What is residual method of valuation? Discuss with reference to the Customs Valuation
(Determination of Price of Imported Goods) Rule, 1988.
Ans: Rule 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988
prescribes residual method of valuation. This rule is used of imported goods cannot be determined
under the provisions of any other rule. According to this rule, the value of imported goods
should be determined using reasonable means consistent with the principle and general
provisions of the rules and section 14(1) of the customs Act and n the basic of the data available in
India.
While determining the value under this method, the following should not be considered-
(i) The selling price in India of the goods produced in India
(ii) A system of accepting the highest of the two alternative values
(iii) Price of goods in the domestic market in the country of export
(iv) The cost of production other than the computed value of identical goods or similar goods as
determined in rule 8
(v) The price of the goods for export to a country other than India
(vi) Minimum customs values
(vii) Arbitrary of fictitious values
Thus, the value of imported goods determined in accordance with the provisions of Rule 9 should to
the greatest extent possible, be based on previously determined customs values.

Q 10. Explain the meaning of:-

(i) Similar goods (ii) Identical goods
Ans:
(i) As pr rule 2(e) of Customs Valuation (Determination of Price of Imported Goods) Rule, 1988
similar goods mean imported goods.
(a) Which although not alike in all respects, have like characteristics and like component
material 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;
(b) Produced in the country in which the goods being valued were produced; and
(c) Produced by the same person who produced the goods being valued, or were no such
goods are available, goods produced by a different person,
But shall not include imported goods where engineering, development work, at 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.
(ii) As per rule 2(c) of Customs Valuation (Determination of Price of Imported Goods) Rules,
1988, identical goods mean imported goods.

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 (a) Which are same in all respects, including physical characteristics, quality and reputation
as the goods being valued except for minor differences in appearance that do not affect the
value of the goods;
(b) Produced in the country in which the goods being valued were produced; and
(c) Produced by the same person who produced the goods, 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.

Q 11. Mother Mary Hospital and Research Center imported a machine from Delta Scientific
Equipment, Chicago for in house research. The price of the machine was settled at US $ 5,000. The
machine was shipped on 10.4.2014. Meanwhile, the Hospital Authorities negotiated for a reduction
in the price. As a result, Delta Scientific Equipments agreed to reduce the price by $ 850 and sent
the revised price of $ 4,150 under a telex dated 15.04.2014. The machine arrived in India on
18.04.2014. 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 goods have been shipped.

Do you agree to the stand taken by the Commissioner? Give reasons in support of your answer.
Ans: No, the Commissioner’s approach is not correct in law.
As per sec 14 of the Customs Act, the transaction value of the goods is the price actually paid or
payable for the goods at the time and place of information.

Further, the Supreme Court in the case Garden Silk Mills v. UOI had held that information gets
complete only when the goods become part of mass of goods within the country. Therefore,
since in the instant case the price of the goods was reduced while they are 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.

Q 12. A material was imported by air at CIF price of 5,000 US$. Freight paid was 1,500 US$ and
insurance cost was 500 US$. The banker realized the payment from importer at the exchange rate
of Rs. 61 per dollar. Central Board of Excise and Customs notified the exchange rate as Rs. 60 per
US$. Find the value of the material for the purpose of levying duty.

Q 13. M/s Foreign Trade International Ltd. Have imported one machine from England. They have
given the following particulars:
(i) F.O.B. Value of machine 8,000 UK Pounds
(ii) Freight paid (air) 2,500 UK Pounds
(iii) Design and development charges paid in UK 500 UK Pounds
(iv) Commission payable to local agent @ 2% of
F.O.B. in Indian Rupees
(v) Date of Bill of Entry 24.10.2014 (Rate BCD 10% Exchange rate as
notified by CBEC Rs. 100 per UK Pound)
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(vi) Date of entry inward 24.10.2014 (Rate BCD 20% Exchange rate as
notified by CBEC Rs. 98 per UK Pound)
(vii) Additional duty leviable u/s 3(1) of the Customs Tariff Act, 1975 is 12%
(viii) Additional duty leviable u/s 3(5) o the Customs Tariff Act, 1975 is as applicable
(ix) Insurance charges have been actually paid details are not available.
Compute the assessable value of the machine and the custom duty payable by M/s. Foreign Trade
International Ltd.

Qn 14. Assessable value of an item imported is Rs. 1,00,000. Basic customs duty is 10%, additional
duty of customs leviable u/s 3(1) of The Customs Tariff Act is 12%, and education cesses are 3% on
duty. Additional duty of customs duty payable. Also, state the amount of CENVAE credit available to
the importer and how it be utilized by him.

Qn 15. XYZ Industries Ltd., has imported certain equipment from Japan at an FOB value 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 Indian Port 20,000 Yen
(ii) Insurance paid to insurer in India Rs. 10,000
(iii) Designing charges paid to Consultancy firm in Japan 30,000 Yen
(iv) M/s. XYZ Industries had expended Rs. 1,00,000 in India for certain
development activities with respect to the imported equipment
(v) M/s. XYZ Industries had incurred road transport cost from Mumbai
port to their factory in Karnataka Rs. 30,000
(vi) The Central Board of Excise and Customs had notified for purpose of
section 14 of the Customs Act, 1962 exchange rate of 1Yen= Rs. 0.63.
The interbank rate was 1 Yen = Rs. 0.65
(vii) M/s. XYZ Industries had effected payment to the Bank based on
exchange rate 1 Yen=Rs. 0.66
(viii) The commission payable to the agent in India was 5% of FOB value
of the equipment in Indian Rupees.

Qn 16. From the particulars given below, find out the assessable value of the imported goods under
the Customs Act, 1962
US $
(i) Cost of the machine at the factory of the exporter 10,000
(ii) Transport charges from the factory of exporter to the port for shipment 500
(iii) Handling charges paid for loading the machine in the ship 50
(iv) Buying commission paid by the importer 50
(v) Freight charges from exporting country to India 1,000
(vi) Exchange rate to be considered : 1$ = Rs. 60

Qn 17. Jagat Corporation Limited imported some goods from US. The details of the transaction are
as follows:-

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 Authority Authority
CBEC 1US$ = Rs. 62
RBI 1US$ = Rs. 61

CIF value of the goods is $ 1,50,000 Rate of basic custom duty is 10% Rate of education cess is 2%
Rate of secondary and higher education cess is 1%
If similar goods were manufactured in India, excise duty payable as per Tariff is 12%. Additional
duty of customs leviable u/s 3(5) of the Customs Tariff Act is exempt.

Calculate assessable value and total duty payable thereon.

Qn 18. BSA & Company Ltd. has imported a machine from U.K. from the following particulars
furnished by it, arrive at the assessable value for the purpose of customs duty payable.
Particulars Amount
(i) F.O.B Cost of the machine 10,000 U.K. Pound
(ii) Freight (air) 3,000 U.K. Pound
(iii) Engineering and design charges paid to a firm in U.K. 500 U.K. Pound
(iv) License fee relating to imported goods payable by the buyer 20% OF F.O.B. cost
as a condition of sale Material and components supplied in
UK by the buyer free of cost valued at Rs. 20,.000

(v) Insurance paid to the insurer in India Rs. 6,000

(vi) Buying commission paid by the buyer to his agent in U.K. 100 U.K. Pound

Other particulars:
(i) Inter-bank exchange rate as arrived by the authorized dealer: Rs. 98 per U.K. Pound.
(ii) CBEC had notified for purpose of section 14 of the Customs Act, 1962, exchange rate of Rs. 100
per U.K. Pound.
(iii) Importer paid Rs. 5,000 towards demurrage charges for delay in clearing the machine from the
Airport.
(Make suitable assumptions wherever required and show working with explanations)

Qn 19. Laminates International Group has imported a machine by air from United States. Bill of
entry is presented on 18.07.2016. However, entry inwards is granted on 7.08.2016
The relevant details of the transaction are provided as follows:-
CIF value of the machine imported $ 13,000
Air fright paid $ 2,800
Insurance charges paid $200

Rate of exchange as exchange as announced by As on 18.07.2016 As on 7.08.2016

CBEC 1 US $ = Rs. 46 1 US $ = Rs. 45.80
RBI 1 US $ = Rs. 46.10 1 US $ = Rs. 46.10
Calculate the assessable value (in rupees) for the purpose of levy of Customs duty. Make suitable
assumptions wherever necessary.

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Qn 20. M/s. Neeraj Containers imported by air from USA certain goods at CIF value $8400.00. Air
freight US $1,600 and insurance charges US $ 800 were also paid. Bill of Entry was presented on 28-
216, but the date of arrival of the aircraft was 10-03-16. Other relevant information is as follows:
As on As on
Rate of Exchange 25-02-16 10-03-16
As announced by CBEC US $ 1= As Rs. 48.50 Rs. 48.20
Announced by RBI US $ 1= Rs. 48.90 Rs. 48.50

Rate of Custom Duty

Basic Customs Duty 14% 16%
Additional Customs Duty 16% 16%
Special Additional Duty 4% 4%

The same goods are exempted excise duty in India, if manufactured without the aid of power.
Compute the assessable value and give the rates of Basic, Additional and Special Additional Duty to
be adopted in this case, and also the basis for arriving at the Basic, Additional and Special
Additional Duty (actual duty calculations need not be given). Clearly show your assumptions.

Qn 21. Hitech ltd. imported a machine from Japan by Air at FOB cost of 32000 Yen (Japanese). The
other expenses insured are as follows:-
Japanese Yen
FOB value of accessory compulsorily supplied with machine (Electric motor) 8000
Air freight
Insurance 12000
Local Agents commission to be paid in Indian rupees is Rs. 200 400
CBEC had announced exchange rate of 1 Yen = Rs. 0.40.
Custom duty on machinery – 10% advalorem
Custom duty on accessory – 20% advalorem
CVD 14% (effective rate is 8% vide an exemption notification
You are required to compute the assessable value from the above data.

Qn 22. Compute the assessable value and total customs duty payable under the Custom Act, 1962
for an imported machine, based on the following information:
US $
(i) Cost of the machine at the factory of the exporter 20,000
(ii) Transport charges from the factory of exporter to the port for shipment 800
(iii) Handling charges paid for loading the machine in the ship 50
(iv) Buying commission paid by the importer 100
(v) Lighter age charges paid by the importer 200
(vi) Freight incurred from port of entry to Inland Container depot 1,000
(vii) Ship demurrage charges 400
(viii) Freight charges from exporting country to India 5,000

Date of bill entry 20.01.2014 (Rate BCD 20% Exchange rate as

notified by CBEC Rs. 60 per US $)

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Date of entry inward 25.01.2014 (Rate BCD 10% Exchange rate as
notified by CBEC Rs. 65 per US $)
Additional duty payable u/s 3(1) of the Customs 12%
Tariff Act, 1975
Additional duty payable u/s 3(5) of the Customs 4%
Tariff Act, 1975

Qn 23. Compute export duty from the following data:

(i) FOB price of goods: US $ 1,00,000.
(ii) Shipping bill presented electronically on 26-05-2014.
Proper officer passed order permitting clearance and loading of goods for export on 04-06-2014.
(i) Rate of exchange and rate of export duty are as under:
Rate of Exchange Rate of Exchange Duty
On 26-05-2014 1 US $ = Rs. 55 10%
On 04-06-2014 1 US $ = Rs. 56 8%

Rate of exchange is notified for export by Central Board of Excise and Customs. (Make suitable
assumptions wherever required and show the workings.)

Qn 24. Compute the assessable value for purpose of determination of customs duty from the
following data:
US $
1. Machinery imported from USA by air (FOB price) 5,000
2. Accessories compulsorily along with the machinery 1,000
3. Air freight 1,800
4. Insurance charges Actuals not available
5. Local agent’s commission to be paid in Indian currency Rs. 9,300
6. Transportation from Indian airport to factory Rs. 4,000

Exchange rate 1 US $ = Rs. 52

Provide explanation where necessary.

Qn 25. The assessable value of a unit of an imported product is Rs. 100 u/s 14 of Customs Act,
1962. 10,000 pieces of such product have been imported. The maximum retail sale price of each
piece of the product is Rs. 200 each. The goods are assessable u/s 4A of the Central Excise Act,
1944, after allowing an abatement of 40%. The excise duty rate is 12% ad valorem. Calculate the
amount of additional duty of customs leviable u/s 3(1) of the Customs Tariff Act, 1975 assuming
basic customs suty @10% ad valorem.

Qn 26. A consignment of 800 metric tines 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 Organization. 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 following imports of edible oil of Malaysian origin:
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S No. Qnty imported in metric tones Unit price in US $ (CIF)
1. 20 260
2. 100 220
3. 500 200
4. 900 175
5. 400 180
6. 780 160
The exchange rate on the relevant date was 1$=60.00 and the rate of basic custom duty was 10% ad
valorem. There is no countervailing duty or special additional duty. Calculate the amount of duty
leviable on the consignment under the Custom Act, 1962 with appropriate assumptions and
explanations, where required.

Qn 27. Compute the duty payable under the Customs Act, 1962 for imported equipment based on
the following information:
(i) Assessable value of the imported equipment US $ 10,00
(ii) Date of bill of entry is 25.4.2014. Basic customs duty on this date is 10% and exchange rate
notified by the Central Board of Excise and Customs is $ 1=Rs. 65.
(iii) Date of entry inwards is 21.4.2014 Basic customs duty on this date is 20% and exchange rate
notified by the Central Board of Excise and Customs is $ 1=Rs. 60.
(a) Additional duty payable U/S 3 (1)of the Customs Tariff Act, 1975: 12%
(b) Additional duty U/S 3(5) of the Customs Tariff Act, 1975:4%.
(c)Educational cess @ 2% and secondary and higher educational cess @1%.
Make suitable assumption where required and show the relevant workings and round off your
answer to the nearest rupee.

Qn 28. From the following particulars, calculate assessable value and total customs duty payable:
(i) Date of presentation of bill of entry: 20.6.2014 [Rate of BCD 20%; Exchange Rate:
Rs. 61.60 and rate notified by CBEC Rs. 62].
(ii) Date of arrival of goods in India: 30.6.2014 [Rate of BCD 10%. Exchange Rate: Rs. 61.80 and
rate notified by CBEC Rs. 63.00]
(iii) Rate of addition duty of customs leviable U/S 3(1) of the Customs Tariff Act: 12%.
(iv) CIF value 2,000 US Dollars; Air freight 500 US Dollars, Insurance cost 100 US Dollars [Landing
Charges not ascertainable].
(v) Education Cess 2% & Secondary & Higher Education Cess 1%
(vi) Assume there is no additional duty of customs leviable U/S 3(5) of the Customs Tariff Act.

Qn 29. Manchanda & Co. has exported some goods by aircraft. The FOB price of the goods exported
is US $ 5,00,000. The shipping bill is presented electronically on 12.12.2014 and Let Export Order is
passed on 25.12.2014. The rates of exchange notified by CBEC ON 12.12.2014 and 25.12.2014 are 1
US $ = Rs. 60 and 1 US $ =Rs. 62 respectively.
You are required to compute export duty with the help of the following details provided by
Manchanda & Co.:-
Date Rate of Export Duty
Presentation of shipping bill 12.12.2014 10%
Let Export order 25.12.2014 8%
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Will your answer change, if the goods are exported by a vehicle, date of filling of bill of export is
17.12.2014, rate of export duty prevalent on 17.12.2014 is 12%, rate of exchange notified by CBEC
on 17.12.2014 is 1 US $ = 60 and particulars relating to Let Export Order remain the same?

Qn 30. How is the assessable value of “packaged software” determined for the purpose of charging
additional duty of customs leviable U/S 3(1) of Customs Tariff Act, 1975 where affixation of retail
sale price (RSP) thereon is;
(i) Mandatory
(ii) Not required
Under the Legal Metrology Act, 2009?
Note: Packaged software is notified U/S 4A of Central Excise Act, 1944.

Qn 31. Briefly explain the following with reference to the Customs (Determination of Value of
Imported Goods) Rules, 2007:
(i) Goods of the same class or kind

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