SOP & Company Ltd. has imported a machine from U.K. From the following particulars furnished by it, arrive at the assessable value for the…

CA Final · Indirect Tax Laws · MTP · May 2025
SOP & 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) Price of the machine 10,000 U.K. Pounds (ii) Freight (air) 3,000 U.K. Pounds (iii) Engineering and design charges paid to a firm in U.K. 500 U.K. Pounds (iv) License fee relating to imported goods payable by the buyer as a condition of sale 20% of Price of machine (v) Materials and components supplied in UK by the buyer free of cost valued at 20,000 (vi) Insurance paid to the insurer in India 6,000 (vii) Buying commission paid by the buyer to his agent in U.K. 100 U.K. Pounds Other particulars: (i) Inter-bank exchange rate:98 per U.K. Pound. (ii) CBIC had notified for purpose of section 14 of the Customs Act, 1962, exchange rate of 100 per U.K. Pound. (iii) Importer paid - 5,000 towards demurrage charges for delay in clearing the machine from the Airport. (Make suitable assumptions wherever required and show workings with explanations).

Suggested Answer and Working Notes:

Computation of assessable value of machine imported by SOP & Co. Particulars Amount (£) Price of the machine 10,000 Add: Engineering and design charges paid in UK [Note 1] 500 Licence fee relating to imported goods payable by the buyer as a condition of sale (20% of Price of machine) [Note 1] 2,000 Total 12,500 Value in Indian currency [£12,500 x 100] [Note 2] 12,50,000 Add: Materials and components supplied by the buyer free of cost [Note 1] 20,000 FOB 12,70,000 Add: Freight [Note 3] 2,54,000 Insurance paid to the insurer in India [Note 1] 6,000 CIF value 15,30,000 Assessable value 15,30,000 Notes: Engineering and design charges paid in UK, licence fee relating to imported goods payable by the buyer as a condition of sale, materials and components supplied by the buyer free of cost and actual insurance charges paid are all includible in the assessable value [Rule 10 of the Customs (Determination of Value of Imported Goods) Rules, 2007].As per Explanation to section 14(1) of the Customs Act, 1962, assessable value should be calculated with reference to the rate of exchange notified by the CBIC.If the goods are imported by air, the freight cannot exceed 20% of FOB price [Fifth proviso to rule 10(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007].Buying commission is not included in the assessable value [Rule 10(1)(a) of the Customs (Determination of Value of Imported Goods) Rules, 2007].Only ship demurrage charges on chartered vessels are included in the cost of transport of the imported goods. Thus, demurrage charges for delay in clearing the machine from the Airport will not be includible in the assessable value [Explanation to Rule 10(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007].

Topics: Customs: Valuation under the Customs Act, 1962

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