Mr. Mitchell imported second-hand goods from a UK supplier by air, which was contracted on CIF basis. However, there were changes in prices in the…

Computation of custom duty payable Particulars Amount CIF value (negotiated price) [Note-1] 5,500 £ Less: Air freight 500 £ Less: Insurance 600 £ FOB value 4,400 £ ₹ FOB Value (in ₹) [4,400 £ x 102] [Note-2] 4,48,800 Add: Vendor inspection charges [Note-3] Nil Add: Commission payable to local agent [1% of FOB value] [Note-4] = (US $ 4,400 × ₹ 102) × 1% 4,488 FOB value as per Customs 4,53,288 Freight [Note-5] [500 £ x 102] 51,000 Insurance [Note-6] [600 £ x 102] 61,200 Assessable value 5,65,488 Add: Basic custom duty @ 10% [Note-7] – rounded off 56,548.80 Social Welfare Surcharge (10% of 56,548.80) [rounded off] 5,655 Customs duty payable [rounded off] 62,204 Notes: 1. As per section 14 of the Customs Act, 1962, the value of the imported goods is the transaction value, which means the price actually paid or payable for the goods. In this case, since the contract was re-negotiated and the importer paid the re-negotiated price, the transaction value would be such re-negotiated price and not the contract price. 2. Rate of exchange notified by CBIC on the date of filing of bill of entry will be considered as per third proviso to section 14 of the Customs Act, 1962. 3. Only the payments actually made as a condition of sale of the imported goods by the buyer to the seller are includible in the assessable value under rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Charges of vendor inspection on the goods carried out by foreign supplier on his own and not required for making the goods ready for shipment, are not includible in the assessable value of the imported goods [Bombay Dyeing & Mfg. v. CC 1997 (90) ELT 276 (SC)]. 4. Commission paid to local agent (since it is not buying commission) is includible in the assessable value on the presumption that local agent has been appointed by the exporter [Rule 10(1)(a)(i) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007]. 5. Actual amount incurred towards freight will be considered since freight is not more than 20% of FOB value [Fifth proviso to rule 10(2) of Customs Valuation Rules]. 6. Actual insurance charges paid are includible in the assessable value as per rule 10(2)(b) of the Customs Valuation Rules. 7. As per proviso to section 15 of the Customs Act, 1962, rate of duty will be the rate in force on the date of presentation of bill of entry or on the date of arrival of the aircraft, whichever is later.