Customs Duty

Export Goods:
Export goods means any goods, which are to be taken out of India, to a place outside India.

Import Goods:
Imported goods means any goods brought into India from a place outside India It excludes goods, which have been cleared for Home Consumption

Components of Customs Law

Customs Act, 1962 Customs Tariff Act, 1975
a) This Act contains two Schedules
Schedule I gives classification and rate of duties for import of all goods ii. Schedule II gives classification and rate of duties for export of some specified goods. i. b) It also provides for Additional Duty, Preferential Duty,

Anti Dumping Duty, Protective Duty, etc.

Types of Duties
1. 2. 3. 4. 5. Basic Customs Duty u/s 12 Additional Customs Duty U/S 3 Protective Duty u/s 6 Anti-Dumping Duty u/s 9A Safeguard Duty u/s 8B/8C

1) Basic Customs Duty u/s 12

Basic customs duty is levied u/s 12 of customs Act. Normally, it is levied as a percentage of Value as determined u/s 14.

2) Additional Customs Duty U/S 3( Counter Vailing Duty - CVD)

Additional Customs Duty is often called Countervailing Duty(CVD). This duty is addition to Basic Customs Duty Rate - Duty is equal to excise duty levied on a like product manufactured or produced in India. The duty is leviable on value of goods plus customs duty payable (Assessable value + Basic Custom Duty) While calculating CVD Education Cess is not considered.

2) Additional Customs Duty U/S 3( Counter Vailing Duty - CVD)

Where there is a concession or exemption under excise law, the same can be taken into account while calculating additional duty of customs. Where a product is exempt from basic customs duty, it does not mean that there is no CVD unless there is a corresponding exemption under the excise law. CVD payable even if similar goods not produced in India Additional duty is leviable even if like goods are not produced in India.

Rate of CVD
Sl. NO. 1 Situation Like articles produced or manufactured in India CVD rate is equal to ED leviable on like article

Like articles not produced or manufactured in India

Alcoholic Liquor for human consumption

ED leviable on the class or description of articles to which the imported article belongs. Rate notified by the Central Government

Board Circular on Calculation of CVD Example: When CVD u/s 3(1) is leviable (assuming ED Rate @ 10%)
Sl No. A B Particulars Assessable Value Basic Customs Duty 10 Duty Amount 10000 1000 1000 Total Duty

C
D E F G

Sub-Total for calculating CVD (A+B)

CVD Education cess of excise 2% of D SAH Education cess of excise 1% of D Sub-total for education cess on customs B+D+E+F 10 2 1

11000
1100 22 11 2133 1100 22 11

H
I J K

Edu Cess of Customs 2% of G

SAH Edu Cess of Customs 1% of G Sub-total for Spl CVD C+D+E+F+H+I Total Duty

2
1

42.66
21.33 12196.99

42.66
21.33

2196.99

Valuation of Imported Goods

Customs duty is payable as a percentage of Value often called Assessable Value or Customs Value. The value ma be either
1. Value (transaction value) as defined in Sec 14(1) of Customs Act or 2. Tariff value prescribed u/s 14(2) of Customs Act.

Customs Valuation (Transaction Value) on basis of transaction value

Section 14(1) of Customs Act states that value of imported and export goods will be transaction Value of such goods i.e., price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or for export from India for delivery at the time and place of exportation. Where the buyer and seller of the goods are not related and price is the sold consideration for the sale, subject to such other conditions as may be specified in the rules made in this behalf.
Note: Transaction value is not acceptable if buyer and seller are related.

Inclusions in Transaction Value (if these are not already included in the invoice price)
For Imported Goods, Transaction Value includes the following amounts that the Buyer is liable to pay 1. Price actually paid or payable for the goods when sold for export to India 2. Amount towards Cost and Services including
1. Commissions and Brokerage (except Buying Commission) 2. Assists, Engineering, Design Work, 3. Royalties and License Fees,

3. 4. 5. 6.

Cost of Transportation to the place of importation, Packing Cost ( Except durable and re-usable container ) Insurance, and Loading, Unloading and Handling Charges.

Packing cost is includible

Cost of containers which are treated as being part of goods for customs purposes are addible for valuation purposes (e.g. cases for camera, necklaces etc. especially shaped for the article suitable for long term) Similarly, cost of packing both labour and material is to be included Cost of durable and re-usable containers not to be added

Cost of Transport and Insurance

For the purpose of Sec 14(1) of the Customs Act, 1962 and these rules the value of the imported goods shall be the value of such goods for delivery at the time and place of importation and shall include A. The cost of transport of the imported goods to the place of importation B. Cost of Insurance C. Loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation provided
Continued

.. Cost of Transport and Insurance

Where the cost of transport referred to in (A) above is not ascertainable, such cost shall be 20% of the Free On Board Value (FOB) of the goods. Where the cost of insurance referred to in (B) above is not ascertainable, such cost shall be 1.125% of the Free On Board Value Loading, unloading and handling charges shall be 1% of [FOB value + cost of transport + Cost of insurance]

Cost and Services

Rule 10 of Customs Valuation Rules, 2007 provide that following cost and services are to be added, if these are not already included in the invoice price Commission and brokerage, except buying commission
Buying Commission: Fee paid by an importer to his agent for the service of representing him abroad in the purchase of the goods being valued. Commission to Local Agent: Exporters from abroad often appoint local agents in India to promote their sales in India. These agents get commission in Indian Rupees which is paid directly by Indian Importer. This commission is includible for purpose of valuation.

Royalties and license fees related to the imported goods that the buyer is required to pay, directly or indirectly.

Exclusions from Transaction Value (if these are included in the Invoice Price)
1. Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods, e.g., industrial plant, machinery or equipment. 2. Cost of transport after importation, 3. Duties and Taxes in India 4. Dividends or other payments from the Buyer to the Seller that do not relate to the imported goods. 5. Payment made for activities undertaken by the Buyer on his own account, other than those for which an adjustment is provided in Rule 10

CIF
CIF (cost, insurance, and freight): used by a seller to indicate that the price quoted includes the cost of the merchandise, packing, and freight to a specified destination plus insurance charges. CIF = FOB + Cost + Insurance + Freight

FOB
Free On Board value is the value excluding cost, insurance and freight. Or It is cost of equipment excluding transport and other charges.

Cenvat Credit of CVD

Cenvat credit is available of CVD paid on imported goods, if the imported goods are used in manufacture of final products or for provision of output service. Cenvat of CVD paid on capital goods imported is also available I terms of Cenvat Credit Rules.

Problem 1
From the following particulars determine the A V of the imported equipment. FOB cost of equipment 2,00,000yen Freight Charges 20,000 yen Insurance paid in India for transportation from Japan Rs. 15,000 Charges for development connected to equipment paid in India Rs. 60000 Commission payable to agent in India Rs. 15000 Exchange rate as per RBI is 1 yen = Rs. 0.45 Exchange rate as per CBEC is 1 yen = Rs. 0.50 Landing charges 1% of CIF cost.