INTRODUCTION

In the general sense, tax is any contribution imposed by the government upon
individuals, for the use and service of the state, whether under the name of toll,
tollgate, tribute, gabel, impost, duty, customs, excise, subsidy, aid, supply or other
name.

Customs is a form of indirect tax. Standard English dictionary defines the `customs`
as duties imposed on imported or less commonly exported goods. This term is
usually applied to those taxes which are payable upon goods or merchandise
imported or exported.

The term `customs` derives its color and essence from the term custom, which
means a habitual practice or course of action that characteristically is repeated in like
circumstances. Duties on import and export of goods have been levied from time
immemorial by all the countries.

In India, the customs Act was passes and promulgated by the Parliament in the year
1962 which replaced the erstwhile sea customs act, 1878. Further, The Customs
Tariff Act was passed in the year 1975 to replace the Indian Tariff Act, 1934. The
customs tariff act was amended in the year 1985 to move in times with and to deal
with the complexities resulting from the rapid development in science and technology
and consequent industrial development and expansion of manufacturing and trading
activities.

SOME IMPORTANT TERMINOLOGY

Assessment: [Sec 2(2)]:

Assessment is the name given to the process of determining the tax liability in
accordance with the provisions of the act.

Conveyance: [Sec 2(9)]:

The term is defined to include a vessel, an aircraft and a vehicle. As the customs act
seeks to consolidate the laws relating to levy of duties on import and export of
goods, it is necessary to cover all the modes of transport.

Dutiable goods: [Sec 2(14)]:

The term is defined to mean any goods which are chargeable to duty and on which
duty has not been paid.

Export: [Sec 2(18)]:

The term with its grammatical variations and cognate expressions is defined to mean
taking out of India to place outside India.

Export goods: [Sec 2(19)]

The term is defined to mean ay goods, which are to be taken out of India to a place
outside India.
Foreign going vessel or aircraft: [Sec 2(21)]:
The term is defined to mean any vessel or aircraft for the time being engaged in the
carriage of the goods or passengers between any port or aircraft in India and any
port or outside India, whether touching any intermediate port or airport in India or not.

Goods: [Sec 2(22)]:

Goods include vessels, aircraft and vehicles;
Stores;
Baggage;
Currency and negotiable instruments;
Any other kind of movable;
There are two fundamental aspects for any thing to be called as goods and they are
move ability and marketability.

Import: [Sec 2(23)]:

The term with its grammatical variations and cognate expressions is defined to mean
bringing into India from a place outside India.

Imported goods: [Sec 2(25)]:

The term is defined to mean any goods brought into India from a place outside India
but does not include goods which have been cleared for home consumption.

Importer: [Sec 2(26)]:

Importer in relation to any goods at any time between their importation and the time
when they are cleared for home consumption includes any owner or any person
holding himself out to be the importer.

India: [Sec 2(27)]:

“India “includes the territorial waters of India. Territorial waters of India extend to 12
nautical miles into sea from the appropriate base line. Goods are deemed to have
been imported if the vessel enters the imaginary line on the sea at the 12 th nautical
mile i.e. if the vessel enters territorial waters of India.

Indian customs waters: [Sec 2(28)]:

“Indian customs waters” means the waters extending into the sea up to the limit of
contiguous zone of India under section 5 of the territorial waters, continental shelf,
exclusive economic zone and other maritime zones act,1976 and includes any bay,
gulf, harbour, creek or tidal river.

Person-in-charge: [Sec 2(31)]:

-In relation to a vessel, the master of the vessel;
-In relation to an aircraft, the commander or the pilot-in-charge of the aircraft;
-In relation to a railway train, the conductor, guard or other person having the chief
direction of the train;
-In relation to any other conveyance, the driver or other person-in-charge of the
conveyance.

Stores: [Sec 2(38)]:

“Stores” means goods for use in a vessel or aircraft and includes fuel and spare
parts and other articles of equipment, whether or not for immediate fitting.

Tariff value: [Sec 2(40)]:

In relation to any goods, means the tariff value fixed in respect thereof under sub-
section (2) of section 14.

Value: [Sec 2(41)]:

In relation to any goods, means the value thereof determined in accordance with the
provision of sub-section(1) or sub-section(2) of section 14.

Typesofduties

Under the custom laws, the following are the various types of duties which are
leviable. 

BasicDuty: 
This is the basic duty levied under the Customs Act. The rate varies for different
items from 5% to 40%.

AdditionalDuty(CountervailingDuty)(CVD): 
This additional duty is levied under section 3 (1) of the Custom Tariff Act and is equal
to excise duty levied on a like product manufactured or produced in India. If a like
product is not manufactured or produced in India, the excise duty that would be
leviable on that product had it been manufactured or produced in India is the duty
payable. If the product is leviable at different rates, the highest rate among those
rates is the rate applicable. Such duty is leviable on the value of goods plus basic
custom duty payable. eg. If the customs value of goods is Rs. 5000 and rate of basic
customs duty is 10% and excise duty on similar goods produced in India is 20%,
CVD will be Rs.1100/-.

Additional Duty to compensate duty on inputs used by Indian manufacturers. This

Additional Duty is levied under section 3(3) of the Customs Act. It can be charged on
all goods by the central government to counter balance excise duty leviable to raw
materials, components and other inputs similar to those used in the production of
suchgood. 

Anti-dumpingDuty:
Sometimes, foreign sellers abroad may export into India goods at prices below the
amounts charged by them in their domestic markets in order to capture Indian
markets to the detriment of Indian industry. This is known as dumping. In order to
prevent dumping, the Central Government may levy additional duty equal to the
margin of dumping on such articles, if the goods have been sold at less than normal
value. Pending determination of margin of dumping, such duty may be provisionally
imposed. After the exact rate of dump ing duty is finally determined, the Central
government may vary the provisional rate of dumping duty. Dumping duty can be
imposed even when goods are imported indirectly or after changing the condition of
goods. There are however certain restrictions on imposing dumping duties in case of
countries which are signatories to the GATT or on countries given "Most Favoured
Nation Status" under agreement. Dumping duty can be levied on imports on such
countries only if the Central Government proves that import of such goods in India at
such low prices causes material injury to Indian industry. 

ProtectivDuty: 
If the Tariff Commission set up by law recommends that in order to protect the
interests of Indian industry, the Central Government may levy protective anti-
dumping duties at the rate recommended on specified goods. The notification for
levy of such duties must be introduced in the Parliament in the next session by way
of a bill or in the same session if Parliament is in session. If the bill is not passed
within six months of introduction in Parliament, the notification ceases to have force
but the action already undertaken under the notification remains valid. Such duty will
be payable upto the date specified in the notification. Protective duty may be
cancelled or varied by notification. Such notification must also be placed before
Parliament for approval as above. 

DutyonBountyFedArticles: 
In case a foreign country subsidises its exporters for exporting goods to India, the
Central Government may import additional import duty equal to the amount of such
subsidy or bounty. If the amount of subsidy or bounty cannot be clearly deter mined
immediately, additional duty may be collected on a provisional basis and after final
determination, difference may be collected or refunded, as the case may be. 

ExportDuty: 
Such duty is levied on export of goods. At present very few articles such as skins
and leather are subject to export duty. The main purpose of this duty is to restrict
exports of certain goods. The Central Government has been granted emergency
powers to increase import or export duties if the need so arises. Such increase in
duty must be by way of notification which is to be placed in the Parliament within the
session and if it is not in session, it should be placed within seven days when the
next session starts. Notification should be approved within 15 days.
Safeguard Duty

Central Government is empowered to impose 'safeguard duty' on specified

imported goods if Central Government is satisfied that the goods are being
imported in large quantities and under such conditions that they are causing or
threatening to cause serious injury to domestic industry. Such duty is permissible
under WTO agreement. Safeguard duty is a step in providing a need-based
protection to domestic industry for a limited period, with ultimate objective of
restoring free and fair competition
National Calamity Contingent Duty

A National Calamity Contingent Duty (NCCD) of customs has been imposed vide
section 129 of Finance Act, 2001. This duty is imposed on pan masala,a
href="http://www.infodriveindia.com/Indian-Customs-Duty/2401-
UNMANUFACTURED-TOBACCO-TOBACCO-REFUSE.aspx">chewing tobacco and
cigarettes. It varies from 10% to 45%. - - NCCD of customs of 1% was imposed on
PFY, motor cars, multi utility vehicles and two wheelers and NCCD of Rs 50 per ton
was imposed on domestic crude oil, vide section 134 of Finance Act, 2003. 20.3.5
Rate of duty applicable There are different rates of duty for different goods there
are different rates of duty for goods imported from certain countries in terms of
bilateral or other agreement with such countries which are called preferential rate
of duties the duty may be percentage of the value of the goods or at specified
rate.
Cesses

Cesses are leviable on some specified articles of exports like coffee, coir, lac, mica,
tobacco (unmanufactured), marine products cashew kernels, black pepper,
cardamom, iron ore, oil cakes and meals, animal feed and turmeric. These cesses
are collected  as parts of Customs Duties and are then passed on to the agencies
in charge of the administration of the concerned commodities.
Education cess on customs duty

An education cess has been imposed on imported goods w.e.f. 9-7-2004. The cess
will be 2%  and wef 01.03.2007 2%+1% of the aggregate duty of customs
excluding safeguard duty, countervailing duty,Anti Dumping Duty.
VALUATION UNDER THE CUSTOMES ACT,1962

 Concept of value
Section 2(41) of the customs act,1962, defines value in relation to any
goods as the value thereof determined un accordance with the provision of
sub-section (1) or (2) of section 14.

Some of the values commonly to the public are:

 Cost price to be manufacturer: it is the total cost incurred by the

manufacturer of an article or product in producing or manufacturing the
product.

 Sale price of the manufacture: it is the price at which the manufacturer is

selling the goods to the buyers.

 There are two sales prices namely a domestic sale price and an export
price in the course of international trade.

 In the course of sale, there are two situations namely, wholesale

transactions and retail trade. Thus we have whole sale price and retail
price.

 The sale may be on down right cash basis, or payment on delivery of the
goods or the title documents or deferred payment say either on installment
or after 30 or 90 days.

 There are situations where the manufacturer himself may not be exporting
the goods in the course of international trade. This give rise to the concept
of suppliers. As a result we have supplier’s price.

 In the course of international trade, where the buyer is in another country,

the seller has often to report price list or catalogues. This is in turn gives
rise to list price.

 There are situations where the goods are defective, sub-standard or there
is a glut of stock and the goods have to be sold at the best price available.
This yields disposal price.

 The price may vary from consignment from consignment even thought
there may not be any underhand dealing in the transaction. Such a price is
called transaction value.

 Lastly, if we have no information of any of the matters relating to the

transaction and we have only the commercial invoice used in the
transaction, the price is invoice price.
 Terms used in commercial parlance

It would be useful to know and understand the terms and contents of documents
used in the international trade transactions.

1. Invoice : This is the basic commercial document showing particulars

regarding description of goods quantity and unit price, discounts and net
price, names of consignor and consignee, payment particulars.

2. Packing specification: Giving particulars of the contents of each of each

of the package in the consignment.

3. Certificate of origin: A certificate issued by the competent authority in

the country of manufacture giving the extent of the manufacture in that
country.

4. Bill of lading: A negotiable document given by the carriers of the cargo

giving particulars of port of shipment, no. of packages covered by the
consignment, marks and numbers on the page, name of the vessel in
which the goods have been dispatched, name of the consignee of the
goods.

5. Air consignment note: It is a document corresponding to bill of landing.

In the case of cargo imported or exported by air.

6. Indent: It is a document showing the particulars of the consignment for

which the buyer has placed an order with the supplier.

7. Quotation: It is a document, which indicates the price, the terms and

other condition on which the seller is willing to supply goods to the buyer.

8. Acceptance: It refers to the formalization of the contract of sale between

the buyer and seller. Once the seller of the goods sends his acceptance
of the order of the buyer the contact is complete.

9. Letter of credit: This is an instrument delivered by the bank intimating

the seller that the buyer has instructed the bank and the bank will
according to these instructions pay the seller of the goods, the bill amount
for the supply of the goods on presentation of certain documents
evidencing shipment of the goods.

10. Sight draft: A document evidencing the amount of money paid for the
importation.

11. Delivery order: An authorization given by the local agent of the carries,
on surrender of the original negotiable copy of the bill of landing or air
consignment note, directing the custodian of the cargo to deliver the
consignment to the importer or his agent.
 12. Mate’s Receipt: A receipt given by the First mate or First officer or cargo
supervisor of the conveyance certifying the total quantity of the
consignment received on board the vessel or the aircraft.

13. Retirement of documents: The original negotiable copies of the

shipment documents like invoice packing specification, certificate of
origin.

14. Non-negotiable documents: Since retirement of the original document

takes time, non negotiable documents are given to the importer to
facilitate clearance.

15. Landing charges: The port authorities have to pay for unloading the
cargo from the conveyance, light house charges, forklift.

16. Boat/Lighterage charge: Some times the vessel is unable to get a berth
alongside the quay in the harbour. The goods are then transported from
the ship to the shore by boats.

17. Custom house agent: Since the importers may not be able to devote
time and energy to clear imported goods or export goods, and since it
involves running about several organization apart from customs, like port,
trust, steamer agents, insurance companies.

18. Insurance cover: It is customary to insure all goods in the course of

international trade. The general cover relates to risk on account of loss,
pilferage, fire, storm etc. However loss of goods on account of seizure of
goods due to war, is a separate cover.

Two approaches for computing the assessable value

In the course of import, the goods take the following route.

1 2 3 4 5
Manufacturer  supplier  port of shipment  port of import  cost to
importer 
6 7
cost of wholesale dealer  cost of retailer/consumer

Theoretically the value of the goods at stages (1) (2) (3) (4) (5) (6) (7) is tangible
and ascertainable. Furthermore, these values are documented and capable of
verification by comparison with corresponding values for such or similar goods.
The documents involved in such stages are
 Manufacturer’s price list
 Supplier’s sale invoices
  Customs approved attested documents showing value adopted for levy of
export duty and allied controls.
 Importer’s account books
 Sale invoices issued by importer to the wholesale dealer or the next
purchaser. Market trend of the price of the goods
 Sale invoice of wholesale dealers; and trend of prices in the market.

Date for determination of rate of duty and tariff value

For imported goods [section 15]:

Section 15 of the customs act, 1962 specifies that the relevant date for
determining the rate of duty and tariff valuation of imported goods. They are different
for different situations as given below:
(a) Goods are entered for home consumption under section 46-
The relevant date for three modes of transport as laid down by section
15(1)(a) read with proviso would be as follows:
 For goods imported by vehicle at land customs station- the relevant
date is the date of filing the B/E under section 46.
 For goods imported by a vessel at a customs port- the relevant date is
the of filing the B/E under section 46 or date of entry inwards to vessel
under section 31, whichever is later.
 For goods imported by aircraft at a customs airport- the relevant date is
the date of filing the B/E under section 46 or date of aaival of aircraft,
whichever is later.

(b) Goods cleared from a warehouse under section 68-

The relevant date is the date on which a bill of entry for home
consumption in respect of such goods is presented.

(c) In the case of any other goods-

The relevant date is the date of payment of duty. These provision
relating to determination of relevant date do not apply to baggage and imports by
post, in which section 78 and 83 apply respectively.

For export goods [section 16]:

The relevant date for export goods is determined as per section 16.
However, the provisions do not apply to baggage and imports by post.

The provisions are as follow:

(a) In case of goods entered for export (irrespective of the mode of
transport)-
The relevant date is the date of the ‘let export’ order of the proper officer
permitting export and loading of cargo on board under section 51.

(b) In case of any other goods-

The relevant date is the date of payment of duty.
Customs Classification
Similar to that of excise except Customs Tariff contains only two schedules and tariff
contains two rates of duty viz., standard rate and preferential rate. If no rate is
mentioned in the column ‘Rate for Preferential Area', then Standard rate is
applicable.

Customs Valuation
Customs duty is payable as a percentage of ‘Value’ called ‘Assessable Value’
The Value may be either
Transaction Value’ as per Section14 (1) or
Tariff value prescribed as per 14 (2).

Tariff Value Sec 14 (2)

Tariff Value can be fixed by CBE&C (Board)
Government should consider trend of value of such or like goods
Once T V fixed, duty is payable as percentage of this value.
The percentage applicable is as per Customs Tariff Act
Example for tariff value fixed were crude palm oil; RBD Palmolein and palm oil

Transaction value as per section 14 (1)

Transaction value Requirements
The price actually paid or payable for the goods
The price shall be for delivery at the time and place of importation or exportation,
The seller and the buyer are not related price is the sole consideration for the sale :

Price should be for delivery at the place of importation/exportation

In case of import
All expenses up to the destination port, including freight, transit insurance, unloading
and handling charges are to be included.
In case of export all expense up to Indian port/airport to be included

Price should be for delivery at the time of importation –

Time of importation means price ruling when the goods were imported is relevant.
Price prevalent on date of contract not relevant

Buyer or Seller should be treated as relatives in the following circumstances

They are officers or directors of one another’s businesses;
They are legally recognized partners in business;
They are employer and employee;
Any person directly or indirectly owns, controls or holds 5 per cent or more of the
Outstanding voting stock or shares of both of them;
One of them directly or indirectly controls the other;
Both of them are directly or indirectly controlled by a third person;
Together they directly or indirectly control a third person; or
They are members of the same family.
Person includes legal person
Persons who are associated in the business of one another in that one is the sole
agent or sole distributor or sole concessionaire, howsoever described, of the other
shall be deemed to be related for the purpose of these rules, if they fall within the
criteria of this sub-rule.

Price must be the sole consideration

Price should be sole consideration for sale.
If there is other consideration, it should be added to the transaction value.

For import goods price also include

Commissions and brokerage,
Engineering, design work,
Royalties and licence fees,
Costs of transportation to the place of importation,
Insurance
Loading, unloading and handling charges
The price of goods for valuation shall be calculated with reference to the rate of
exchange as in force on the date on which a bill of entry is presented in case of
imported goods and as a shipping bill or bill of export,
The rate of exchange is notified by CBEC is to be considered for valuation.
The valuation rules provide to determine the value if the above conditions are not
satisfied. For Example if there is no sale, buyer and seller are relatives and when
price is not sole consideration.

Customs Valuation Rules

Export goods valuation Rules (new rules comes to effect from
10.10.2007)
Transaction value Rule 3
The values will transaction value as per sec 14. The transaction value will be
accepted even buyer and seller are relatives, if the price is not influenced.

Determination of export value by comparison. Rule 4

If the value cannot be determined as per rule 3 value can be determined as per Rule
4 as below.
The value of the export goods shall be based on the transaction value of goods of
like kind and quality goods.
The price of such goods should be at the same time and same country and same
manufacturer. If the above are not fulfilled the value to be determined by proper
officer as it appears reasonable by adjusting with respect to 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.

Computed value method Rule 5

If the value cannot be determined as per rule 4 the value will be determined as per
rule 5 by computed value method which include following
cost of production , manufacture or processing of export goods;
charges, if any, for the design or brand; an amount towards profit.
Export goods
Import goods

Residual method Rule 6

Where the value of the export goods cannot be determined as per rule 4 and 5, the
value shall be determined with respect to general provisions of these rules
The local market of export goods not only the basis and other factors will be
considered,

Declaration of value by exporter Rule 7

The exporter shall furnish a declaration relating to the value of export goods in the
specified manner.

Rejection of declared value Rule 8

When the proper officer has reason to doubt the truth or accuracy of the value
declared for export goods, he may ask the exporter to furnish information,
documents or other evidence,
After receiving such further information, or in the absence of a response of
such exporter, the proper officer still has reasonable doubt about the truth or
accuracy of the value, it is deemed that transaction value not determined
properly.
At the request of an exporter, the proper officer should inform in writing and
should give reasonable opportunity to exporter, before taking final decision.

Explanation to rule 8
This rule by itself does not provide a method for determination of value.
This rule provide mechanism and procedure for rejection of declared value in the
case of doubt on truth and accuracy
Where the value transaction value rejected under this rule, value will be
determined sequentially following Rule 4 to 6
Declared value shall be accepted where the proper officer is satisfied about the
truth or accuracy after the said enquiry in consultation with the exporter.

Reasons where Proper officer will get doubt about truth and accuracy
the significant variation in value at which goods of like kind and quality exported
at or about the same time in comparable quantities in a comparable commercial
transaction were assessed.
The significantly higher value compared to the market value of goods of like
kind and quality at the time of export.
The misdeclaration of goods in parameters such as description, quality, quantity,
year of manufacture or production.

Import goods valuation Rules (new rules comes to effect from

10.10.2007)
Determination of the method of valuation. Rule 3
The value of the imported goods is the transaction value as per sec 14 adjusted with
the cost and services as per rule 10

The transaction value will be accepted under the following conditions

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;
The sale or price is not subject to some condition or consideration for which a
value cannot be determined in respect of the goods being valued;
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 the buyer and seller are not related,

Inclusions of costs and services in transaction value Rule 10

The following will be included if the following are not included in the price
Commission and Brokerage paid to local agent in India
Service charges paid to canalizing agency: when canalizing agency makes imports,
goods are sold to Indian buyer on ‘high sea sale’ basis. Indian buyer clears the
imported goods. In such cases, ‘service charges’ payable to the canalizing agency to
be included
Packing cost labour and material
Cost of containers
Value of Goods supplied by buyer at free/concessional rate
Cost of tooling:
If purchased the cost of tooling, if manufactured production cost
If previously used the tooling, its original cost less depreciation.
Apportioning of Cost of Tools to the value - apportioned over the quantity
produced.
Such apportionment should be made on basis of documentation provided by
importer.
engineering, development, art work, design work, and plans and sketches
undertaken
work undertaken outside India necessary for the production of the imported goods;
materials, components, parts and similar items incorporated in the imported goods;
The value of any part of the proceeds of any subsequent resale, disposal or use of
the imported goods that accrues, directly or indirectly, to the seller;
All other payments actually made or to be made as a condition of sale of the
imported goods, by the buyer to the seller or by the buyer to a third party to satisfy
an obligation of the seller to the extent that such payments are not included in the
price actually paid or payable.

Royalty and license fees

Royalties and license fees related to imported goods that the buyer is required to
pay, directly or indirectly, as a condition of sale of the goods are not included in the
price

The following types of royalty not includable

Royalty payment to collaborators un-connected with imported goods
charges for the right to reproduce the goods in India payments made by buyer
(importer) for right to distribute or resale the imported goods Charges for
reproduction of software in India
Other inclusions in Valuations
Freight Actual, if actual data not available 20% of FOB
In case of Air. Actual freight or 20% of FOB w e l
Insurance actual, If actual data not given 1.125% of FOB
Handling/Landing Charges 1% on CIF

Exclusions from Customs valuation

Charges of purchasing agent abroad
Cost of durable and re-usable containers, if importer agrees to execute a bond to re-
export the containers within six months.
Charges for construction, erection, maintenance, installation etc, after importation of
machinery, equipment Transport insurance after import (transport from port/airport to
factory
Local taxes in India
Demurrage charges for later clearance of goods.
Bank charges paid to banker for services rendered by them

Valuation when import from relative

Where the buyer and seller are related, the transaction value shall be accepted when
That the relationship did not influence the price.
the importer demonstrates that the declared value of the goods being valued, closely
approximates to one of the following values ascertained at or about the same time—
The transaction value of identical goods, or of similar goods, in sales to unrelated
buyers in India;
The deductive value for identical goods or similar goods;
The computed value for identical goods or similar goods in applying the values used
for comparison, Rule 10 additions of costs to be considered.

Transaction value of identical goods Rule 4

If transaction value of same goods not available because of
abnormal discount, unconditional sale,
sale not in competitive conditions,
No sale because lease, hire, gift and sample ,In such cases transaction value of
identical goods will be considered.

Meaning of identical goods

Goods should be thee same in all respects, including physical characteristics, quality
and reputation; except for minor differences in appearance

When applying the value of identical goods the following should be

considered
Goods have been produced in the same country
They should be produced by same manufacturer, if same manufacturer not available
price of goods produced by another manufacturer in the same country. However
brand reputation and quality of other manufacturer should be comparable.Imported
at or around about same time adjustment for distances and transport costs if any
required to be considered costs and services as per rule 10 are required to add. If
more than one value of identical goods is available, lowest of such value should be
taken.

Transaction value of similar goods Rule 5

If Transaction value of identical goods cannot be used, valuation is to be done based
on transaction value of similar goods are same as with identical goods additional
requirement is that performing same function and commercially inter-changeable
,When applying the value of similar goods consideration should be governed will be
the same as identical goods value adopted under provisional assessment cannot be
considered for valuing under rule 4 and rule 5

Value When value cannot be determined under Rule 3 4 and 5 Rule 6

When Value cannot be determined under Rule 3, 4 and 5, the value can be
determined under deductive value method (rule 7) or computed value method (rule
8.)

Deductive Value method Rule 7.

If T V of identical & similar goods is not available then deductive value method is
used. When same, identical or similar imported goods are sold in India and price in
India is available and the sale should be in the same condition as they are imported.
Assessable Value is calculated by reducing post-importation costs and expenses
from this selling price.

Deductions
Selling Expenses (commission etc,)and selling profits direct and indirect cost of
marketing the goods in India.
Transport, insurance and associated costs within India.
Customs duties, sales tax and other taxes levied in India.
The price will be Unit price sold in greatest numbers of quantity to be considered
for valuation ,If the imported goods, identical similar imported goods are not sold at
or about the same time of importation of the goods being valued, the valuation will be
unit price at the earliest date after importation but before the expiry of ninety days
after such importation.
If the imported goods, identical similar imported goods are not sold, but goods sold
after processing, adjustments should be made for processing cost if any

Computed Value Rule 8

If valuation is not possible by deductive method, computing the value can be used.
This method can be used before deductive value method If Customs Officer
approves
In this method, value is the sum of
Cost of value of materials, labour and processing charges for producing the imported
goods amount General expenses and profit.
The cost or value of all other expenses under rule 10 transport, insurance, loading,
unloading and handling charges.

Residual Method Rule 9

similar to ‘best judgment method’
This method can be considered if valuation is not possible by rule 3 to 8
Mix of the all other rules and general provisions of all rules.
Assessment will be done based on with available data in India.

Residual value cannot be determined on the basis of

The selling price in India of the goods produced in India;
A system which provides for the acceptance for customs purposes of the
highest of the two alternative values;
The price of the goods on the domestic market of the country of exportation;
The cost of production other than computed values which have been determined
for identical or similar goods in accordance with the provisions of rule 8;
The price of the goods for the export to a country other than India;
Minimum customs values; or Arbitrary or fictitious values.

Declaration by the importer. Rule 11

The importer or his agent shall furnish -
A declaration disclosing full and accurate details relating to the value of
imported goods; and any other statement, information or document including an
invoice necessary for determining the value of imported goods proper officer of
customs can ask any document to verify the truth and accuracy of value of imported
goods. If the importer furnishes wrong declaration, submit wrong information, the
provisions of Customs Act with regard to confiscation and penalty will apply.

Rejection of declared value. Rule 12

When the proper officer has reason to doubt the truth or accuracy of the value
declared for imported goods, he may ask the exporter to furnish information,
documents or other evidence,
After receiving such further information, or in the absence of a response of
such importer, the proper officer still has reasonable doubt about the truth or
accuracy of the value, it is deemed that transaction value not determined
properly.
At the request of an exporter, the proper officer should inform in writing and
should give reasonable opportunity to importer, before taking final decision.

Explanation to rule 12
This rule by itself does not provide a method for determination of value.
This rule provide mechanism and procedure for rejection of declared value in the
case of doubt on truth and accuracy
Where the value transaction value rejected under this rule, value will be
determined sequentially following Rule 4 to 9 declared value shall be accepted
where the proper officer is satisfied about the truth or accuracy after the said enquiry
in consultation with the importer.
Reasons where Proper officer will get doubt about truth and
accuracy
The significantly higher value at which identical or similar goods imported at or
about the same time in comparable quantities in a comparable commercial
transaction were assessed;
The sale involves an abnormal discount or abnormal reduction from the ordinary
competitive price;
The sale involves special discounts limited to exclusive agents;
The misdeclaration of goods in parameters such as description, quality, quantity,
country of origin, year of manufacture or production;
The non declaration of parameters such as brand, grade, specifications that
have relevance to value;
The fraudulent or manipulated documents.

Valuation of old machinery/cars

The concept of transaction value is applicable to second hand machinery also,
When exactly comparable imports can be found or exist.
Invoice value of second hand machine supported by Chartered Engineer's certificate
is acceptable.
Depreciation will be allowed on value of old machinery on following scale:
for every quarter in 1st year: 4%
for every quarter in 2nd year: 3%
for every quarter in 3rd year 2.5%
for every quarter in 4th and
Subsequent year : 2%
Maximum: 70% [Vadodara Commissionerate No. Cus/t/93 dated 15-6-1993].
Same depreciation rate applied for old cars also.

Customs Valuation Format for solving numerical problems

(Imported Goods)
FOB ( Free on board) Value xxxxxxxxxxx
Add: Freight – Actual freight ,If actual is not given 20% of F O B xxxxx
Note; In case of air, 20% of F O B or actual air freight which
ever is less has to consider
Add: Insurance- Actual insurance, if actual is not given 1.125% of xxxxx
Add: Inclusions in valuation if not included in price (rule 10) xxxxx
Less: deductions if any not includable (if included in price) xxxxx
C I F( Cost insurance and freight) value
Convert the C I F value in to Indian rupees as per
rate of exchange announced by CBEC/Central government
Note: Do not consider rate announced by R B I, Banks, FEDAI xxxxx
Add: 1% towards handling charges xxxxx
Total C I F Value (Assessable value for the purpose of duty payment) xxxxx