Mr. Manmeet imported certain goods from his son, Mr. Harbhajan residing in US and transaction value has been rejected. Rules 4 and 5 of the Customs…

(a) Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred to as Import Valuation Rules), inter alia , provides that persons shall be deemed to be "related" if they are members of the same family. Thus, since Mr. Manmeet and his son are related, transaction value has been rejected [Rule 3]. Rules 4 and 5 are found inapplicable as no similar/ identical goods are imported in India. Rule 6 provides that if the value of imported goods cannot be determined under the provisions of rules 3, 4 and 5, the value shall be determined under the provisions of rule 7 or, when the value cannot be determined under that rule, under rule 8. Thus, the value of the imported goods is determined under rule 8 if the same cannot be determined under the earlier rules. However, the order of application of rules 7 and 8 can be reversed at the request of the importer and with the approval of the proper officer. Thus, request of Mr. Manmeet for determination of value under rule 8 is legally acceptable, if the same is also approved by the proper officer. Assuming that the request of Mr. Manmeet has been approved by the proper officer, the assessable value of the imported goods under rule 8 will be the sum of- (a) the cost of materials and fabrication or other processing (b) an amount for profit and general expenses (c) the cost or value of all other expenses under rule 10(2) of the said rules. Computation of assessable value Particulars Amount ($) Cost of materials 2,000 Add: Fabrication charges 1,000 Other chargeable expenses 400 Other indirect costs 250 Cost of the goods at Mr. Harbhajan's factory 3,650 Add: Net profit margin @ 20% of FOB, i.e. 25% of total cost 1,000 Total cost till US port = Cost of the goods at factory + Freight from factory to US port and loading charges at US port = $ 4,000 [$ 3,650 + $ 250 + $ 100] FOB value = Total cost till port + profit = $ 5,000 ($ 4,000 +$ 1,000) Add: Freight & loading/unloading charges [In case of import by air, the cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation are restricted to 20% of FOB value] 1,000 Insurance charges 50 Assessable value 5,700 Particulars Amount (₹) Assessable value in Indian Rupees (Exchange rate -85 per $) 4,84,500