CUSTOMS

CUSTOMS – INTRODUCTION
13
(Sec 12 to 16, 21 to 25)
Customs duty is a tariff or tax imposed on goods when transported across international borde₹.
The purpose of Customs Duty is to protect each country's economy, conserve foreign currency, and
protect locals industry from undue competition, by controlling the flow of goods, especially
restrictive and prohibited goods into and out of the country.
Customs duty is an important part of national tax revenue, a chief source of central fiscal revenue.
It is basically a tax imposed on imports and exports of goods.
In India, Central Government has been empowered by entry 83 of union list of schedule VII of
constitution of India, to levy customs duty. Thus powers to make laws in respect of custom duty
rests with Central Government. Body of custom law comprises of:
⮚ The Customs Act, 1962 provides for levy of import and export duties, collection of duty,
importation or exportation, transit and transshipment, prohibitions, duty drawback,
warehousing, appeals, settlement, advance rulings, prosecution etc.
⮚ The Customs Tariff Act, 1975 It has been enacted for classification of goods and contains
two schedules.
(a) First Schedule is known as "Import Tariff".
(b) Second Schedule is known as "Export Tariff".
⮚ Rules: It may provide for matters relating to the manner of determining value of imported
goods/export goods, duty drawbacks baggage etc.
⮚ Regulations: CBEC is empowered to make, regulations to carry out purpose of Act.

⮚ Notification: Notification are issued by Central Government for effective implementation of

provisions of customs Act, 1962.
DEFINITION:
Sec 2(9) Conveyance Conveyance includes a Vessel, an Aircraft and a vehicle’. The specific
terms are vessel (by sea), aircraft (by air) and vehicle (by land)
Sec 2 (7) Coastal Coastal goods means goods, other than imported goods,
Goods transported in a vessel from one port in India to another
Sec 53 Transit of These goods should be mentioned as Transit Goods in the Import General
goods Manifest (IGM). They are allowed by customs to be transited through
Indian port without payment of duty.
Sec 2 (13) Customs Customs station means any customs port, customs airport or land customs
Station station.
w.e.f. 10-5-2013:
CBEC empowered to permit landing of vessels and aircrafts at anyplace
other than customs port or customs airport [Section 29(1)]
Sec 2 (22) Goods Goods includes
(a) Vessels, aircrafts and vehicles (Not an Conveyance)
(b) Stores (e.g. Fuel, Oil, Diesel, Maintenance or repair)

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 (c) baggage
(d) currency and negotiable instruments and
(e) any other kind of movable property
Sec 2(11) Customs means the area of a custom station or a warehouse and includes any area in
area which imported goods or export goods are ordinarily kept before clearance
by Customs Authorities.
Sec 2 (14) Dutiable means any goods which are chargeable to duty and on which duty has not
goods been paid.
Sec 2(3) Baggage includes unaccompanied baggage but does not include motor vehicles.
Sec 2 (12) Customs ⮚ any port appointed u/s 7 (a) to be a customs port;
Port ⮚ and includes a place appointed u/s 7 (aa) to be an inland container deport
Sec 2(19) Export good means any goods which are to be taken out of India to a place outside India.
Sec 2 (25) Imported means any goods brought into India from a place outside India, but does not
goods include goods, which have been cleared for home consumption
Sec 2 (27) India “India” includes the territorial waters of India.
Meaning and Territorial waters of India extend to 12 nautical miles into sea from the
significance of appropriate base line.
territorial waters of Goods are deemed to have been imported if the vessel enters the imaginary
India line on the sea at the 12th nautical mile i.e. if the vessel enters the territorial
waters of India. Therefore, a vessel not bound to India should not enter these
waters India includes not only the surface of sea in the territorial waters, but
also the air space above and the ground at the bottom of the sea.
Sec 2 Indian “Indian customs waters” means the waters extending into the sea up to the
(28) customs limit of contiguous zone of India (under section 5 of the Territorial Waters,
waters Continental Shelf, Exclusive Economic Zone and other Maritime Zones
Act, 1976) and includes any bay, gulf, harbour, creek or tidal river

Few other important terms

1. Baseline It is the lower water mark along the coast.
2. Indian territorial waters Indian territorial waters extend up to 12
1 nautical nautical miles (22 km) from the baseline of India.
miles = 3. Contiguous zone of India It is an area 12 nautical miles beyond the
1.852 Indian territorial waters. Therefore, it is at a distance of twenty-four
kilometers nautical miles from the nearest point of the baseline.
4. Exclusive economic zone of India It is an area beyond the Indian
territorial waters. The limit of exclusive economic zone is 200 nautical
miles from the nearest point of the baseline.

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 5. Continental Shelf of India Continental shelf is the part of the sea floor
adjoining a land mass where the depth gradually increases before it
plunges into the ocean deeps. The maximum depth of sea water in the
continental shelf is 200 meters. Continental shelf of India extends
beyond the limit of its territorial waters throughout the natural
prolongation of its land territory to the outer edge of the continental
margin or to a distance of 200 nautical miles from the baseline
Sec 12 Charging Section 12 is the charging section which provides the following:
Section ● Levy of duty is on goods.
Or ● The goods must be imported into or exported from India.
● The rate at which duty of customs is to be levied is specified in Customs
Dutiable Tariff Act, 1975 or any other law for the time being in force.
goods ● Government goods shall be treated at par with the non-government
goods for the purpose of levy of customs duty.
● Therefore, the importation of goods in India or exportation of goods
from India is taxable event in Customs
Sec 13 No duty on pilfered goods
Sec 22 Reduced duty on damaged goods
Sec 23 Remission of duty on destroyed goods.
Case Garden Silk In case of goods cleared for home consumption The Supreme Court
Mills v. UOI observed that import of goods will commence when they cross the territorial
1999 (113) waters, but continues and is completed when they become part of the mass
E.L.T. 358 of goods within
(S.C.) the country; the taxable event being reached at the time when the goods
reach the customs barriers and bill of entry for home consumption is filed.
Case Kiran Spinning In case of goods cleared for warehousing In case of warehoused goods, the
Mills v. Collector
of Customs custom barriers would be crossed when they are sought to be taken out of
1999(113) (S.C.) customs and brought to the mass of goods in the country
Export Export of goods is complete when the goods cross the territorial waters of
India.
Sec 13 No Duty on If any imported goods are pilfered (loss of goods in small quantity by
pilfered reasons of theft etc.) after the unloading thereof and before the proper
goods officer has made an order for clearance for home consumption or deposit
in a warehouse, the importer shall not be liable to pay the duty leviable on
such goods except where such goods are restored to the importer after
pilferage.
However as per sec. 45(3) custodian of cargo shall be liable to pay duty on
such goods at such rate prevailing on date of delivery of an import report to
the proper officer.
Analysis Conditions to be satisfied for exemption from duty
(1) The imported goods should have been pilfered. The pilferage should
have occurred after the goods are unloaded, but before the proper officer
makes the order of clearance for home consumption or for deposit into
warehouse.
(2) The pilfered goods should not have been restored back to the importer.
(3) The term ‘pilfer’ means “to steal, especially in small quantities; petty
theft”. Therefore, the term does not include loss of total package.
Circumstances in which pilferage can be claimed In order to claim
pilferage the following circumstances should exist:
(1) there should be evidence of tampering with the packages;
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 (2) there should be blank space for the missing articles in the package; and
(3) the missing articles should be unit articles [and not part articles]
Pilferage noticed at the time of removal of goods by the importer The
pilferage of goods would normally be noticed at the time of physical
verification of goods by the customs authorities. However, in some
circumstances, it may so happen that the pilferage may be observed only at
the time of removal of goods by the importer. In such case, the order for
clearance, or as the case may be, for bonding would already have been
passed. Therefore, the importer has to ask for survey either by the steamer
agents or by the insurance surveyors and the report issued by them would
form the basis for claiming remission. As in such the circumstances, the
duty would already have been paid, there mission is allowed in the form of
a refund
Sec 21 Goods All goods, derelict (त्याग किया हुआ), jetsam (बोझ), flotsam (पानी में तैरने वाले जहाज़
derelict, िे टु िडे ) and wreck(नाश करना) brought or coming into India, shall be dealt
wreck, etc with as if they were imported into India, unless it be shown to the
satisfaction of the proper officer that they are entitled to be admitted duty-
free under this Act.
(If any boat or steamer or a vessel gets destroyed in any accident, the broken parts
thereof are referred as wreckage)
Derelict Derelict means vessel or cargo which is abandoned (छोडा हुआ) in sea
without any hope of recovering it.
(It means any boat or vessel or steamer, left in the sea unattended.)
Jetsam Jetsam means where goods are cast into sea to reduce weight of ship to
prevent it from sinking and the thrown goods sink.
(These are the goods which are intentionally thrown in the sea for protecting
the vessel in bad weather conditions.)
Flotsam Flotsam means when goods continue to float after thrown in sea.
(These are the goods remaining afloat when the ship has sunk)
Wreck Wreck means cargo or vessel or any property which are cast (डालना) a shore
(Crack) (ककनारे पर) by tides after ship-wreck
Sec 23 Remission 1- Without prejudice to the provisions of section 13, where it is shown to
of duty on the satisfaction of the Assistant Commissioner of Customs or Deputy
lost, Commissioner of Customs that any imported goods have been lost
destroyed (otherwise than as a result of pilferage) or destroyed, at any time before
or clearance for home consumption, the Assistant Commissioner of
abandoned Customs or Deputy Commissioner of Customs shall remit the duty on
goods such goods. (Analysis 1 to 5)
2- The owner of any imported goods may, at any time before an order for
(forgo) clearance of goods for home consumption under section 47 or an order
for permitting the deposit of goods in a warehouse under section 60 has
been made, relinquish his title to the goods and thereupon he shall not be
liable to pay the duty thereon. (Analysis 6 to 7)

Provided that the owner of any such imported goods shall not be allowed
to relinquish his title to such goods regarding which an offence appears to
have been committed under this Act or any other law for the time being in
force.

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 Analysis 1- An analysis of section 23 shows that it comes into play after the duty has
been paid and even after an order for home consumption has been passed,
but before the goods is actually cleared, and then it is found that they
have been lost/destroyed. In that case the provision is not that goods will
not be liable to duty, but duty paid on such goods shall be remitted by the
Assistant/Deputy Commissioner of Customs.
2- In respect of the goods which have been pilfered after they have been
unloaded but before the goods are cleared for home consumption or
deposit in a warehouse, section 13 would apply and the importer would
not be liable to pay the duty. In cases where section 23 is attracted, the
importer is entitled to remission of duty.
3- The remission of duty is permissible only in the case of total loss of
goods. This implies that the loss is forever and beyond recovery. The loss
referred to in this section is generally due to natural causes like fire, flood,
etc.
4- The loss referred to in sub-section (1) may be at the warehouse also.
5- In the above situation, the loss/ destruction have to be proved to the
satisfaction of the Assistant Commissioner or Deputy Commissioner.
Thereupon, he may pass remission orders canceling the payment of duty.
In case duty has already been paid, refund can be obtained after getting
the remission orders
6- “Relinquish” means to give over the possession or control of, to leave
off.
7- Sometimes, it may so happen that the importer is unwilling or unable to
take delivery of the imported goods. Some of the likely causes may be:
a) the goods may not be according to the specifications;
b) the goods may have been damaged or deteriorated during voyage and
as such may not be useful to the importer;
c) there might have been breach of contract and, therefore, the importer
may be unwilling to take delivery of the goods.
In all the above cases (a, b & c), the goods having been imported, the
liability to customs duty is imposed and, therefore, the importer has to
relinquish his title to the goods unconditionally and abandon (छोड दे ना)
them. Relinquishment is done by endorsing the document of title, viz.
Bill of Lading, Airway Bill, etc. in favour of the Principal
Commissioner/Commissioner of Customs along with the invoice. If the
importer does so, he will not be required to pay the duty amount
Sec. 23 : Remission of duty on lost, Destroyed and Abandoned goods

Goods lost or damaged Goods abandoned by Importer (Relinguishment)

If importer goods get destroyed or lost (Except by way If title for any of the imported goods is transferred in
of pilferage) at any time before, during or after unloading favour of commissioner of customs, in writing before an
in customs area or in warehouse, (i.e. before removal for order is passed for removal of goods u/s.47 or 60, the
home consumption), then no duty shall be payable on importer shall not be liable to pay duty in respect of such
such goods and AC/DC of customs shall allow the goods.
remission of customs duty on such goods
Any of the goods, in respect of which any offence is
deemed to have been committed, can’t be transferred in
favour of the commissioner

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Sec 22 Abatement of 1- Where it is shown to the satisfaction of the Assistant Commissioner of
duty on Customs or Deputy Commissioner of Customs –
damaged or (a) that any imported goods had been damaged or had deteriorated (कबगडी) at
deteriorated any time before or during the unloading of the goods in India; or
goods (b)that any imported goods, other than warehoused goods, had been
damaged at any time after the unloading thereof in India but before their
(Reduced
Amt of Duty examination under section 17, on account of any accident not due to
OR any willful (जान बूझिर किया हुआ) act, negligence (लापरवाही) or default (चूि)
Proportionate of the importer, his employee or agent; or that any warehoused goods had
amt of duty) been damaged at any time before clearance for home consumption on
account of any accident not due to any wilful act, negligence or default
of the owner, his employee or agent, such goods shall be chargeable to
duty in accordance with the provisions of sub-section (2).
2- The duty to be charged on the goods referred to in sub- section (1) shall
bear the same proportion to the duty chargeable on the goods before the
damage or deterioration which the value of the damaged or deteriorated
goods bears to the value of the goods before the damage or deterioration.
3- For the purposes of this section, the value of damaged or deteriorated
goods may be ascertained by either of the following methods at the option
of the owner:-
(a) the value of such goods may be ascertained by the proper officer, or
(b) such goods may be sold by the proper officer by public auction or by
tender, or with the consent of the owner in any other manner, and the
gross sale proceeds shall be deemed to be the value of such goods.
Sec. 22 : Abatement of duty (Value) on damaged Goods

Goods damaged before unloading Goods damaged after unloading

But before inspection U/s 17 or before order of removal

u/s 47 or sec 60 or sec 71.
(in short, before removal for home consumption)
Without any act or omission or negligence on the part of
importer or his agent.

The amount of duty will be reduced in proportion of the devaluation of the goods
Analysis Meaning of damage
The term ‘damage’ denotes physical damage to the goods. This implies that
the goods are not fit to be used for the purpose for which they are meant.
Meaning of deterioration
Deterioration is reduction in quality of goods due to natural causes.
Custom Normal Duty x Reduced Value
Duty Normal Value
Amount of duty chargeable after abatement =
Duty on goods before damage x value of damaged goods
value of goods before damage
⮚ Remission of duty is made if it shown to the satisfaction of Assistant Commissioner
of Customs if any imported goods have been lost at any time before clearance.
Powers to grant exemption from duty: u/s 25:

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 (a) General Exemption: The Central Government in public interest may by notification, exempt the
goods form duties of customs.
The exemption may be with conditions or unconditional (Absolute exemption)
(b) Special exemption or Adhoc Exemption: If Central Government is satisfied that it is necessary
in public interest, may by special order exempt goods from payment of duty.
⮚ No customs duty shall be collected if the amount of duty leviable is equal to or less than ₹. 100.
However government may insert an explanation to clarify scope of and applicability of an
exemption within a period of 1 year from its issue.
Taxable Event in case of Importation (Sec. 15)
In case of importation date of determining rate of duty and tariff valuation of Imported goods are
laid under section 15 as below:
⮚ In case of goods entered for home consumption:
(a) the date of presentation of Bill of Entry or
(b) the date of entry inwards of vessel or arrival of aircraft or the vehicle by which goodsare imported;
whichever is later.
⮚ In case of goods cleared from warehouse u/s 68; the date of presentation of Ex-bond clearance Bill
of Entry for home consumption.
⮚ In case of any other goods, the date of payment of duty.
However this does not apply to baggage and goods imported by post
Date for Determination Rate and Tariff Value Section 15(1)

An importer imported goods, chargeable to duty @ 15% ad valorem. Vessel arrived on 31st May
2023. A bill of entry for warehousing goods was completed on 3rd June 2023. Importer filed a bill
of entry for home consumption on 25th October, when effective rate was 10%.
Solution:
Relevant date of determining duty in above case would be 25th October, 2023 relevant rate will be
10% as per section 15.
Taxable event in case of exportation (Sec. 16):
In case of exportation, date of determining rate of duty and tariff valuation is as under:
(a) in case of goods entered for export u/s 50, date on which proper officer makes an order of
clearance and loading of goods.
(b) in case of any other goods, date of payment of duty (u/s 16).
However, section 16 shall not apply to baggage and goods exported by post.

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 Illustration 2:
Mihir exported goods valuing ₹. 15,00,000 to UK by vessel. He filed shipping bill on 20.02.22
when rate of duty was 10%.
Let export order was made by proper officer on 5th March 2022 (Rate of duty - 15%). However
vessel crossed territorial waters on 20th March 2022 (when rate of duty was 12%)
➢ In this case custom duty payable for exported goods is 15% (when let export order was made by
proper officer) i.e. 5th March 2022)
Duty payable will be 15% x 15,00,000 = ₹.2,25,000.
Illustration 3:
If an importer, imported goods chargeable to duty @ 15% ad valorem.
Bill of entry for home consumption was presented on 20th February 2022, on which rate of duty
was 10%. Vessel arrived on 10th March, 2022 rate of duty was 20%.
Solution:
In this relevant date of determining duty would on date 10th March 2022 and relevant rate would
be 20% as per section 15.
Illustration 4:
Tanmay exported goods valuing ₹.20,00,000 to US by a vessel. He filed shipping bill on
28/03/2022 (Rate of duty 5%) order permitting clearance was made by proper officer on
05/04/2022 (rate of duty 10%). The ship left for US on 10/04/22 and ship crossed territorial waters
of India on 15/04/22 (when goods were made exempt from duty).
Solution:
In this case relevant date of determining rate of duty is date on which proper officer makes an order
for clearance i.e. 05/04/22 and applicable rate of duty is 10%.
Export duty payable by Mr. Tanmay will be 10% x 20,00,000 = ₹. 2,00,000.
CLASSIFICATION OF GOODS
Classification of goods consists of determining the heading or sub headings of customs tariff
under which said goods will be covered so that rate of duty is determinable and eligibility of
exemptions can be determined.
Such classification is done at time of importation or exportations of goods.
Harmonised system of nomenclature (HSN) is an internationally accepted product coding
system which is formulated under GATT (General Agreement on Tariffs and Trade). It forms basis
of system of classification in Customs Tariff Act, 1975

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 The customs Tariff Act, 1975 provides the classification of goods and rates of duties in two
schedule:
⮚ The schedule lists goods chargeable with import duty. It is known as “Import Tariff” which
comprises of 98 chapters grouped under 21 Section.
⮚ Second Schedule list goods chargeable with export duty. It is known as “Export Tariff”
⮚ Rate of custom Duty: The basic custom duty are 5%, 7.5% and 10%. Highest rate of basic customs
duty is 10% for non-agricultural items, with some expectation. On baggage, general rate of duty is
35% and no additional duty of customs is leviable on baggage.
(Note: w.e.f. 2nd February 2022 - Social Welfare Surcharge (SWS) @ 10% of. total custom duties
- Hence effective rate of BCD = 10% of BCD + SWS @ 10% of BCD = 11%. No Education Cess
@ 2% and Secondary and Higher Education Cess @ 1% is leviable on imports w.e.f. 02/02/22).
Illustration:-5
Rancho Ltd. imported some goods in a vessel from Singapore. The assessable value of the imported
goods is ₹. 10,00,000/ -. Compute the customs duty payable from the following information:
1) Date of Bill of Entry for Home consumption = 20.7.2022 (Rate of BCD is 10%).
2) Date of Entry inwards = 10.08.2022 (Rate of BCD is 20%).
3) IGST is payable @ 12%.
Will your answer change, if the goods are imported in a vehicle?
Answer:
Customs Duty Payable by M/s Rancho Ltd.
[Link] Particulars Amount
1 Assessable Value ₹. 10,00,000
2 Rate of BCD (Bill of Entry for Home Consumption or grant of
entry inwards, whichever is later) 20%
3 Amount of BCD 2,00,000
4 Social Welfare surcharge [10% of 2,00,000] ₹. 20,000
5 Total value for charging IGST ₹. 12,20,000
6 IGST @ 12% ₹. 1,46,400
Total Customs Duty plus IGST Payable [3 + 4 + 6] ₹. 3,66,400
Note: Answer will not change, even if goods are imported in a vehicle.

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 Illustration:6
What will be the impact on the customs duty if the goods are:
(i) damaged inside the warehouse before clearance for home consumption_
(ii) deteriorated inside the warehouse before clearance for home consumption
(iii) destroyed in the warehouse before clearance for home consumption.
(iv) destroyed on the wharf, before clearance for home consumption.
(v) destroyed after clearance from warehouse
Answer : [NITP - May 2018]
(i) When the goods are damaged inside the warehouse abatement in customs duty, on resultant loss in
value, has been provided through section 22 of the Customs Act, 1962. Section 22 contemplates
that for claiming abatement of duty, the damage (not deterioration) should occur at any time before
clearance of the imported goods for home consumption from the warehouse. However, the damage
should not be attributable to the importer. It should be proved to the satisfaction of Assistant
Commissioner or Deputy Commissioner of Customs that the imported goods have actually suffered
damages. The claim for abatement is not tenable unless the importer factually proves the damage.
The following equation provides the way to calculate the abatement of duty.

Duty leviable on such damage =

Value of the damage goods x Duty chargeable on the goods before damage
Value of goods before damage.
(ii) As discussed above, in case of warehoused goods, only damages are covered and not deterioration,
hence abatement will not be available in this case and full duty will have to be paid.
However, as per first proviso to section 68 of Customs Act, 1962, owner of any warehoused
goods may, at any time before an order for clearance of goods for home consumption has been
made in respect of such goods, relinquish his title to the goods. Upon such relinquishment, duty
will not be payable on such goods but rent, interest, other charges and penalties would be payable.
(iii) When the goods are destroyed in the warehouse before clearance for home consumption, customs
duty will be remitted as per the provisions of section 23 of the Customs Act, 1962. Section 23(1)
applies when the goods have been lost (otherwise than as a result of pilferage) or destroyed in
entirety i.e. whole or part of goods is lost once for all. The goods cease to exist and cannot be
retrieved. The loss is generally on account of natural causes such as fire, flood etc., and no human
element is present as in section 13 of the Customs Act, 1962. The loss or destruction may occur at
any time before clearance for home consumption. The loss/destruction has to be proved to the
satisfaction of Assistant Commissioner or Deputy Commissioner.
(iv) As all the conditions of section 23 of the Customs Act, 1962 are fulfilled, duty will be remitted in
this case also.
(v) As per the discussion made in (iii) above it is clear that remission of duty is possible only when
destruction occurs before clearance for home consumption. In case of destruction after clearance
from a warehouse, no remission of duty is possible.

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 14 TYPES OF CUSTOMS DUTIES
TYPES OF DUTIES
(1) Basic Custom Duty (BCD)
(2) IGST
(3) GST Compensation Cess
(4) Protective Duty Custom Tariff Act, 1975
(5) Safeguard Duty
(6) CVD on Subsidized articles
(7) Anti-Dumping Duty

(1) BASIC CUSTOMS DUTY (BCD)

Basic Customs Duty is levied under the provisions of:-
✔ section 12 of the Customs Act and
✔ section 2 of the Customs Tariff Act
Sec 12 of Charging section: The duties of customs shall be levied
Customs Act ● at such rates as may be specified under the Customs Tariff Act, 1975 or any
other law for the time being in force.
● on goods imported into or exported from India
Sec 2 of The rates at which duties of customs shall be levied under the Customs Act 1962
Customs Tariff are specified in the First and Second Schedules.
Act First Schedule: Import Duty
Second Schedule: Export Duty
Standard rate Generally, Basic rate of duty is standard rate of duty.
of Duty
Preferential The Government may by notification under section 25 of the Customs Act prescribe
rate of duty preferential rate of duty in respect of imports from certain preferential areas
(2)INTEGRATED TAX (IGST)
Sec 3(7) of Any article which is imported into India shall, in addition, be liable to integrated tax
Customs Tariff at such rate, not exceeding forty per cent as is leviable under section 5 of Integrated
Act Goods and Services Tax Act, 2017 on a like article on its supply in India, on the
value of the imported article as determined under sub-section (8).
(3) GOODS AND SERVICES TAX COMPENSATION CESS

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Sec 3(9) of GST compensation cess is a compensation cess levied under section 8 of the Goods
Customs Tariff and Services Tax (Compensation to State) Act, 2017. GST compensation cess is
Act levied on intra- state supply of goods or services and inter-state supply of goods or
services to provide compensation to the States for loss of revenue due to
implementation of GST in India.

It may be noted that GST compensation cess would be applicable only on those
supply of goods or services that have been notified by the Central Government. As
of now, GST compensation cess is levied on luxury goods and sin goods like pan
masala, tobacco etc
IMP NOTE:-
Following tax/cess would not be included while computing the assessable value for
computation of Integrated tax and GST compensation cess:-
(a) Integrated tax
(b) Goods and Services Tax compensation cess

(4) PROTECTIVE DUTY: (Because of WTO Agreement, this duty is not yet enforced)
TYPES OF DUTIES

REVENUE DUTIES PROTECTIVE DUTIES

Protective Safeguard
(1) From O/s India se India me cheap level ka (1) Koi good import sasta ho raha hai even if
goods nahi purchase karpaye quality acha ho
(2) Standard maintain rahe (2) To safe guard industry, safeguard duty charge
hoti hai
(3) Cheap level ka good import na ho paye (3) to safeguard indigenous industry
Sec 6(1) of Protective duties are levied by the central govt. upon the recommendation made by
Customs Tariff the Tariff Committee and upon it being satisfied that circumstances exist which
Act, 1975 render it necessary to take immediate action to provide protection to any
INDUSTRY established in India. As per WTO, protective duty is not supposed to
be levied, hence, at present this duty is not in force.
The two types of custom duties are revenue duties and protective duties:-
(a) Revenue duties: are those which are levied for the purpose of raising customs
revenue.
(b) Protective duties: are intended to give protection to indigenous industries. If
resort to protective duties is not made there could be a glut of cheap imported
articles in the market making the indigenous goods unattractive.
Factors to be The protection through protective duties is given considering the following facto₹.
considered while (a) The protective duties should not be very stiff (rigid) so as to is courage imports.
giving protection(b) It should be sufficiently attractive to encourage imports to bridge the gap between
through demand and supply of those articles in the market.
protective duties
Levied by The protective duties are levied by the Central Government upon the
Central recommendation made to it by the Tariff Commission and upon it being satisfied
Government that circumstances exist which render it necessary to take immediate action to
provide protection to any industry established in India
Duration of The protective duty shall be effective only up to and inclusive of the date if any,
protective specified in the First Schedule

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duties
Power of Central Government to alter such duties: The Central Government may
reduce or increase the duty by notification in the Official Gazette.
Increase in In case of increase in duty, approval of Parliament required: If there is any increase
Duty in the duty as specified above, then the Central Government is required to place
such notification in the Parliament for its approval.
(5) Safeguard Duty (to safe guard Indigenous Industry)
Sec 8 B (1) of - Safeguard duty is imposed for the purpose of protecting the interests of any
Customs Tariff Act, domestic industry in India.
1975 - It is product specific.
- The Central Government of India can impose provisional safeguard duty,
pending final determination up to 200 days.
- The duty imposed under this section shall be in force for a period of 4 years
from the date of its imposition and can be extended with the total period of
levy not exceeding 10 years
Duration of The duty imposed under this section shall be in force for a period of 4 years
safeguard from the date of its imposition.
duty Extension of period: The Central Government may extend the period of such
imposition from the date of first imposition. The total period of levy of
safeguard duty is restricted to 10 years.
Exemptions (a) Articles from developing country: Articles originating from developing
from safeguard country, so long as the share of imports of that article from that country
duty does not exceed 3% of the total imports of that article into India.
(b)Articles originating from more than one developing country: Articles
originating from more than one developing country, so long as the
aggregate of imports from developing countries each with less than 3%
import share taken together does not exceed 9% of the total imports of
that article into India.
(c) Imports by 100% EOU or units in a Special Economic Zone: Safeguard
duty shall not apply to articles imported by a 100% EOU/unit in aSEZ.
Provisional (a) The Central Government is also empowered to impose provisional
Assessment safeguard duty pending determination of the final duty.
(b) This provisional duty may be imposed on the basis of preliminary
determination that increased imports have caused or threatened to cause
serious injury to a domestic industry.
(c) The provisional duty shall be in force for a maximum period of 200 days
from the date of its imposition.
If upon final determination, the Central Government is of the opinion that
the increased imports have not caused or threatened to cause serious injury
to a domestic industry, the duty collected shall be refunded
e.g. tax collected provisionally 10% and actual safeguard duty 6%
then in such case 4% refunded

6- COUNTERVAILING DUTY ON SUBSIDIZED ARTICLES

Section 9 of the Duty levied if the articles are imported into India by getting the subsidies from
Customs Tariff Act, other country. While calculating Countervailing Duty on Subsidized articles
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1975 we should not calculate the education cess and secondary and higher education
cess. It shall be in force for a period of 5 years from the date of its imposition
and can be extended for a further period of 5 years. (Max. 10 years)
Conditions tobe The countervailing duty on subsidized articles is imposed if the following
satisfied conditions are satisfied.
(a) Any country or territory, directly or indirectly, pays or bestows subsidy
upon the manufacture or production or exportation of any article. Such
subsidy includes subsidy on transportation of such article.
(b) Such articles are imported into India.
(c) The importation may/may not directly be from the country of manufacture
/ production.
The article, may be in the same condition as when exported from the country
of manufacture or production or may be changed in condition by manufacture,
production or otherwise
Amount of CVD on The amount of countervailing duty shall not exceed the amount of subsidy
Subsidized articles paid or bestowed as aforesaid.
Duration of Unless revoked (cancelled) earlier, the duty imposed under this section shall
countervailing duty be in force for a period of 5 years from the date of its imposition.
on subsidized Extension of period: Central Government may extend the period of such
articles imposition from the date of such extension provided it, in a review, is of the
opinion that such cessation is likely to lead to continuation or recurrence of
such subsidization and injury.
However, the extension can be for a maximum period of 5 years. If the
review is not completed before the expiry of the period of imposition (5
years) then the duty may continue to remain in force pending the outcome
of such review for a further period not exceeding 1year.
Provisional (a) When the determination of the amount of subsidy is pending, the Central
countervailing duty Government may impose a provisional countervailing duty not
on subsidized exceeding the amount of such subsidy as provisionally estimated by it.
articles (b) If the final subsidy determined is less than the subsidy provisionally
determined, then the Central Government shall reduce such duty and also
refund the excess duty collected.
Retrospective Conditions to be satisfied: The following conditions should be satisfied for
imposition of imposition of countervailing duty with retrospective effect.
countervailing duty (a) The injury to domestic industry, which is difficult to repair, is caused by
massive imports in a relatively short period, of the articles benefiting from
subsidies.
(b) In order to preclude recurrence of such injury, it is necessary to levy
countervailing duty retrospectively.
Note:
The retrospective date from which the duty is payable shall not be beyond 90
days from the date of notification.
7- ANTI-DUMPING DUTY
(DUMP KAR DO SO THAT DOMESTIC MARKET BAND HO JAYE)
Anti Dumping Duty

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Margin Dumping Injury Dumping

(Whichever is lower)
Note:
Margin Dumping = Normal Price Less Export Price
Export Price is also divided into two part
Normal Export Price
Constructed Export Price (price with warranty etc )
Injury Dumping = Fair Selling Price Less Landed Value
Fair Selling Price is also known as Non Dumping Price(Agar me yehi same product India me kitne
me sell ho raha hai)
Landed Value means India me Imported Goods kitne me aa raha hai
Section 9A This duty is country specific. It is imposed on imports of a particular country. Dumping
of the exists when a product is exported from one country to another country at an export price
Customs which is less than its normal value prevailing in the exporting country. The difference
Tariff between the normal value and the export price is the dumping margin based on which
Act,1975 the Anti Dumping Duty is imposed.
Computatio Anti-dumping duty is:
n of anti- Margin of Dumping OR Injury Dumping, whichever is lower
dumping
duty The anti-dumping duty chargeable under this section is in addition to any other duty
imposed under this Act or any other law for the time being in force.
Margin of In relation to an article, it means the difference between its export price (₹.90) and
dumping normal value (₹.100). It is generally expressed as a percentage of the export price.
Note 1 : Export price: in relation to an article, means of goods imported into India is the price of
an article exported from the exporting country or territory.
Note 2 : Constructed export price: In cases where there is no export price or the export price is
unreliable because of association or a compensatory arrangement between the exporter
and the importer or a third party, the export price may be constructed at the price at
which the imported articles are first resold to an independent buyer.

In case where the article is not resold to an independent buyer or not resold in the
condition as imported, the export price shall be constructed on such reasonable basis as
may be determined in accordance with the rules made.
Note 3 : Normal value: in relation to an article, means comparable price, in the ordinary course
of trade, for the like article when destined for consumption in the exporting country or
territory as determined in accordance with the rules.

When there are no sales of the like article in the ordinary course of trade in the domestic
market of the exporting country or territory, or when because of the particular market
situation or low volume of sales in the domestic market of the exporting country or
territory, such sales do not permit a proper comparison, the normal value shall be either-

(i) Comparable representative price of the like article when exported from the exporting

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 country or territory or an appropriate third country as determined in accordance with the
rules made; or

(ii) The cost of production of the said article in the country of origin along with reasonable
addition for administrative, selling and general costs, and for profits, as determined in
accordance with the rules made:

However, in case the article is imported from a country other than the country of origin
or where the article has merely been transhipped through the country of export or such
article is not produced in the country of export or there is no comparable price in the
country of export, the normal value shall be determined with reference to its price in the
country of origin.
Note 4 : Injury margin: Injury margin is the margin adequate to remove the injury to the domestic
industry. It is the difference between the Fair Selling Price [Non-Injurious Price (NIP)]
due to the Domestic Industry and the Landed Value of the dumped imports.
Note 5 : Fair Selling Price (FSP) [Non-Injurious Price]: is that level of price, which the industry
is, expected to have charged under normal circumstances in the Indian market during the
period defined. This price would have enabled reasonable recovery of cost of production
and profit after nullifying adverse impact of those factors of production which could
have adversely effected the company and for which dumped imports can’t be held
responsible. In other words, it is the fair selling price of a product for the domestic
industry.
Note 6 : Landed Value: is taken as the assessable value under the Customs Act and the
applicable basic customs duties except CVD, SAD and special duties
Extention In case of circumvention of anti-dumping duty imposed on an article, Central
of Anti Government may extend the anti-dumping duty to such article or an article originating
Dumping in/exported from such country: Where the Central Government, on such inquiry as it
Duty may consider necessary, is of the opinion that circumvention of anti-dumping duty has
taken place, by either of the following ways:-
(i) by altering the description or name or composition of the article subject to such
anti-dumping duty
(ii) by import of such article in an unassembled or disassembled form
(iii) by changing the country of its origin or export or
(iv) in any other manner, whereby the anti-dumping duty so imposed is rendered in
effective
Provisional When determination of the normal value and margin of dumping in relation to any
anti- article in accordance with this section and rules made there under is pending, the
dumping Central Government may impose anti-dumping duty on the basis of provisional
duty estimate of such value and margin. If the provisional duty is higher than the margin
finally determined, then the Central Government shall reduce the anti-dumping duty
and shall also refund the excess duty collected
No anti- Notwithstanding anything contained in sub-section (1) and sub- section (2), a
dumping notification issued under sub-section (1) or any anti- dumping duty imposed under
duty to sub-section (2), shall not apply to articles imported by a hundred per cent, export-
articles oriented undertaking unless, —
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imported (i) specifically made applicable in such notifications or such impositions, as the case
by a may be; or
100% (ii) the article imported is either cleared as such into the DTA or used in the
EOU manufacture of any goods that are cleared into the DTA, and in such cases anti-
dumping duty shall be levied on that portion of the article so cleared or so used as
was leviable when it was imported into India.
Imposition of If the following conditions are satisfied, then the Central Government may by
duty with notification in the Official Gazette levy anti-dumping duty retrospectively from a date
retrospective prior to the date of imposition of anti-dumping duty. Notwithstanding anything
Effect contained in any law for the time being in force, such duty shall be payable at such
rate and from such date as may be specified in the notification. The retrospective date
from which the duty is payable shall not be beyond 90 days from the date of such
notification.
● There is a history of dumping which caused injury or that the importer was, or should
have been, aware that the exporter practices dumping and that such dumping would
cause injury; and
● The injury is caused by massive dumping of an article imported in a relatively short
time which in the light of the timing and the volume of the imported article dumped
and other circumstances is likely to seriously undermine the remedial effect of the
anti-dumping duty liable to be levied.
Duty The anti-dumping duty imposed under this section shall, unless revoked earlier, cease
ceases to to have effect on the expiry of five years from the date of such imposition
have However, if the Central Government, in a review, is of the opinion that the cessation
effect on of such duty is likely to lead to continuation or recurrence of dumping and injury, it
expiry of may, from time to time, extend the period of such imposition for a further period of 5
5years years and such further period shall commence from the date of order of such extension.
(No time limit, but extension should be in 5 years only)
Rules The Central Government will determine and ascertain the margin of dumping as
relating to referred to in sub-section (1) or sub-section (2) from time to time after carrying out
anti necessary inquiry. Central Government, by notification in the Official Gazette, make
dumping rules for the purposes of this section, and without prejudice to the generality of the
duty foregoing, such rules may provide for the manner:
1- in which articles liable for anti-dumping duty may be identified, in which the export
price, the normal value, the margin of dumping in relation to such articles may be
determined and
2- for the assessment and collection of such anti-dumping duty.
Refund of Where an importer proves to the satisfaction of the Central Government that he has
anti - paid anti-dumping duty imposed, in excess of the actual margin of dumping in relation
dumping to such article, the Central Government shall, as soon as may be, reduce such anti-
duty dumping duty as is in excess of actual margin of dumping so determined, in relation
to such article or such importer, and such importer shall be entitled to refund of such
excess duty.
Prior to Additional Duty of Customs or Countervailing Duty (CVD) As per sec 3(1) of the
GST Law Customs Tariff Act, 1975, any article which is imported into India is subject to liable
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 to duty (in addition to BCD) equal to the excise duty for the time being leviable on a
like article if produced or manufactured in India. This duty can be levied only if the
article is such that, it could be manufactured or produced in India.
Special additional customs duty (Under section 3(5) Customs Tariff Act) The imported
goods shall in addition to basic customs duty and additional duty shall also be liable to
special additional duty, which shall be levied at a rate to be specified by the Central
Government Such rate shall be notified by the central govt. having regard to the
maximum sales tax, local tax or any other charge.
Calculation of Custom Duty:
Particulars Import Export
A] Assessable Value U/s 14(1) or Tariff Value U/s 14(2) xx xx
Add:
B] Basic Custom Duty xx xx
C] Value for Purpose of Levy of ACD U/s 3(1) [A+B] xx xxx
D] Additional Custom Duty Sec 3(1) [A+B] x % of ACD xx -
E] Social Welfare Surcharges [B+D] x % SWS xx -
F] Value for purpose of levy of SACD u/s 3(5)[C+D+E] xxx xx
Add:
G] Additional duty u/s 3(5) xx -
Total Cost of Imported Goods [ F+G] xxx xx
Total Custom duty payable [B+D+E+G] xxx xxxx
Note:-
(1) Landing Charges is excluded from assessable value under Rule 10(2).
(2) In case of Air, Cost of Transportation cannot exceed 20% of FOB.
(3) CIF = FOB + Transportation + Insurance (Where as CIF means Cost Insurance Freight)
(4) Social Welfare Surcharges (SWS) is applicable from 2nd Feb, 2022, So Education cess and
secondary and Higher Secondary Education cess ignored.
(5) Rate of SWS is 10% applicable
PRACTICAL PROBLEM
Q.1. Assessable value of imported goods is ₹. 20,00,000. The basic custom duty is 10% integrated
tax leviable u/s 3(7) is 12%. GST Compensation Cess is leviable @ 15%. SWS @ 10%.
Compute total customs duty and imported cost of goods.
Computation of Imported Cost and Customs Duty. (Ans:₹.28,19,400 & ₹.8,19,400)
Q.2. F.O.B. price of imported goods (Laptop) = ₹. 1,00,000
Cost of Transportation = ₹. 20,000
Cost of Insurance = ₹. 5,000
Landing Charges 1% of CIF
Calculate total customs duty payable if
(a) BCD rate is 10% (b) Integrated tax u/s 3(7) is 18% (Ans:₹.1,63,725 & ₹.38,725)

FOB = Free On Board

FOB = CIF – Insurance – Freight
OR
= Price + Insurance + Freight
FOB = Price of Export + Freight(from factory to airport) + Loading & Unloading
Charges
Q.3. F.O.B. price of imported goods (Luxury car) = ₹. 40,00,000
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 Cost of Transportation = ₹. 2,50,000
Cost of Insurance = ₹. 80,000
Landing Charges 1% of CIF
Calculate total customs duty payable if BCD rate is 10%
Like article subject to GST @ 28%
GST compensation cess @ 15% (Ans: ₹.1,02,78,554& ₹.2,59,48,554)

Q.4. CIF Price (Mobiles) = ₹.20,00,000

Cost of Transportation = ₹.4,00,000
Cost of Insurance = ₹.80,000
Landing charges = 1% of CIF
BCD rate = 10% and
GST (Integrated tax) = 12%.
Calculate Customs Duties. (Ans:₹.23,67,052.80& ₹.4,63,052.80)
Q.5. Determine customs duty payable under Customs Tariff Act, 1975 including safeguard duty of
30% u/s 8B, with the following details available on hand.
Import of ethane from developing country in January 2022 ₹. 6,00,000
Share of Imports of Ethane against total imports in India 5%
Basic custom duty 12%
Integrated tax u/s 3(7) 18% (Ans:₹.10,13,856& ₹.4,13,856)
Q.6. Determine safeguard duty payable by X Ltd., Y Ltd., Z Ltd. and K Ltd. u/s 8 B from the
following:
Import of "X" from developing and developed countries in month of March 2022 is as under:
₹. in
Importer Country of Import
crores
X Ltd. Developing Country 140
Y Ltd. Developing Country 164
Z Ltd. Developing Country 104
K Ltd. Developing Country 100
Others Developed Country 4,492
5,000
Safeguard duty is 30%. (Ans: ₹.49.20 crore + ₹.1,347.60 crore = ₹.1,396.80 Crore)

☼☻☼☻☼☻☼☻☼☻☼☻☼☻☼☻☼☻☼

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 15 VALUATION (Rule 3 to 10)
CONCEPT OF VALUE:
Sec. 2(41) of customs Act, 1962 defines value in relation to any goods as the value thereof
determined in accordance with the provision of Sec. 14(1).
As per Sec. 14(1) the value of the
(1) (a)Imported goods and
(b)Export goods
shall be transaction value of such goods, that is to-say,
⮚ The price actually paid or payable for the goods when sold for
● Export to India or delivery at the time and place of importation (for imported goods) or
● Export from India for delivery at the time and place of exportation (for exported goods).
⮚ Where the buyer and seller of the goods are not related and
⮚ Price is the sole consideration for the sale.
⮚ Subject to such other conditions as may be specified in the rules made in this behalf.
(2) Provided that such transaction value in the case of imported goods shall include, in addition to the
price, any amount paid or payable for costs and services
⮚ Commissions and brokerage
⮚ Engineering, design work
⮚ Royalties and licence fees
⮚ Cost of transportation to place of importation (20% of F.O.B)
⮚ Insurance (@ 1.125%of CIF) ….. whereas CIF means Cost of Insurance and Freight)
⮚ Loading, unloading and handling charges to the extent and in manner specified with rules. (@
1.125%)
(3) However, value of imported goods shall not include the following charges or cost, because they are
distinguished from price actually paid or payable for the imported goods and all charges or cost are
post importation expenses.
⮚ Charges of construction, erection, assembly, maintenance, or technical assistance.
⮚ Cost of transport after importation.
⮚ Duties and taxes in India.

(4) Price to be computed with reference to exchange rate: Rule 4 and 5

(a) For imported goods, the conversion in value shall be done with reference to the rate of
exchange prevalent on date of filing bill of entry u/s 46.
(b) For export goods, the conversion in value shall be done with reference to the rate of exchange
prevalent on date of filing shipping bill (vessel or aircraft) or bill of export u/s 50.
Further, for purpose of valuation under customs laws, rate of exchange notified by CBIC board
shall be taken into account.
The CBIC (Central Board of Indirect taxes and customs) board notifies rates on a monthly basis
applicable from first day of month. There are separate rates for imported goods (selling rate) and
export goods (buying rate).
Relevant date for duty rate and exchange rate
Sr. Relevant date for duty Relevant date for
Particulars
No u/s 15/16 Exchange Rate
(1) If goods entered for home consumption:
⮚ B/E presented after entry Date of B/E Date of B/E
⮚ B/E presented before entry Date of Entry Inward Date of B/E
(2) If goods cleared from warehouse Date of Ex-bond B/E Date of into bond B/E

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 (3) If goods entered for export under Date of let export order Date of shipping bill or bill of
export
VALUATION OF IMPORTED GOODS: (IMPORT VALUATION RULES)
Value of imported goods shall be determined in accordance with Sec. 14(1) read with customs
valuation (Determination of value of imported goods) Rules, 2007.
Rule 3 of import valuation rules provides that value of imported goods shall be transaction value
adjusted in accordance with Rule 10. However, where for any reason the transaction value cannot
be determined or, the same is not acceptable, then value shall be determined as per the methods laid
down under rules 4 to 9.
Rule 3  Transaction value or Determination of the method of valuation
Rule 4  Transaction values of identical goods
Rule 5  Transaction values of similar goods
Rule 6  Changes of order of Rule 7 and Rule 8
Rule 7  Deductive value
Rule 8  Computed value
Rule 9  Residual method
In all methods of valuation given in Rule 4 to 9, adjustments for costs and services are to be made
in accordance with Rule 10(2) of said rules.
➢ Tariff value u/s 14(2): has been given an overriding effect over Sec. 14(1).
As per Sec. 14(2), if CBIC is satisfied that it is necessary or expedient to do so, it may by notification
in the official Gazette, fix tariff values for any class of imported goods or export goods, and the
duty shall be chargeable with reference to such tariff value.
At present, tariff value has been fixed for some essential edible oils, brass scrap, gold or silver etc.
Rule 3: TRANSACTION VALUE:
As per Rule 3, Value of the imported goods shall be transaction value adjusted in accordance with
provisions of Rule 10. As per Sec. 14(1) transaction value means the
● "price actually paid or payable" for goods when sold for export to India
● for delivery at the time and place of importation
● where buyer and seller of goods are not related and
● price is sole consideration for sale.
Conditions for Transaction Value under Rule 3(2):
(1) No restrictions as to disposition or use of goods, other than restrictions which are:
⮚ Imposed or required by law or
⮚ limit the geographical area in which goods may be resold or
⮚ Do not substantially affect the value of goods. .
Illustration 1:
A seller required a buyer of automobiles not to sell or exhibit them prior to fixed date which
represents beginning of model year.
Solution:
Restriction of seller does not substantially affect value hence transaction value is acceptable.
Illustration 2:
Machine is sold at a nominal price on a condition that buyer uses it only for charitable purpose.
Solution:
Restriction, here substantially affect value. Hence transaction value is not acceptable.
The sale or price is not subject to some condition or consideration for which value cannot be
determined in respect of goods being valued.
Illustration 3:

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 The seller establishes price of imported goods on a conditions that buyer will also buy other goods
in specified quantities.
No part of proceeds of any subsequent resale, disposal or use of goods by the buyer will accrue
directly or indirectly to seller unless appropriate adjustment can be mode in accordance with Rule
10.
The buyer and seller are not related or where buyer and seller are related, that transaction value is
acceptable for customs purpose under provision of Rule 3(3).
Rule 3(3):
Transaction value acceptable even through buyer and seller are related.
Where the buyer and seller are related, Related
the transaction value shall be accepted
Rule 2(2) Related
Person shall be deemed related only if they are:
Officer or Directors of one another’s business
Legally recognized partners in business
Examination of circumstances Whenever importer demonstrates Employer and Employee
of sale of the imported goods the declared value of goods being Any person directly holds, controls or owns 5%
indicate that the relationship value closely approximately to one or more of outstanding voting stock or shares
did not influence the price of the following values ascertained of both of them
at or about same time: One of them directly or indirectly control the
Transaction value of Identical others
goods or similar goods in sales to Both of them are directly or indirectly
unrelated buyer in India. controlled by third person.
The deductive value for Identical or Together they directly or indirectly control a
similar goods. third person.
Computed value for Identical goods They are members of same family.
or similar goods under Rule 3(4).

RULE 4 : TRANSACTION VALUE OF IDENTICAL GOODS

Definition of Identical Goods: [Rule 2(1)(d)]
The Goods are said to be identical if:
• They are identical in appearance, Performance, quality & reputation;
• Manufactured in the Same Country;
• by the same or another manufacturer.
Note:
The goods for which drawings or designs were supplied from India either free of cost or at
concessional rates will not be regarded as identical goods.
1. Where the Goods have been assessed provisionally, then such Goods cannot be regarded as
identical Goods (The value of such goods are non-comparable).
2. The transaction value of identical goods will be used in determining the value of imported goods
only if following condition are fulfilled:
(a) Identical goods are sold at the same commercial level and
(b) They are in substantially same quantities as the goods being valued.
3. If there are no other transactions for comparable quantity & commercial level then reasonable
adjustment shall be made for difference in quantity & commercial level.
4. In all cases, adjustment is to be made for the time gap between transactions.
5. After determining comparable values, the lowest of them shall be adopted.
RULE 5 : TRANSACTION VALUE OF SIMILAR GOODS
Definition of Similar Goods: [Rule 2(1)(f)]
• These are the Goods which are not absolutory alike but capable of performing same function and
these are commercially inter changeable;
• Manufactured in same country;

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• Whether by the same or another manufacturer.
Note:
The goods for which drawing or designs were supplied from India either free of cost or at
concessional rate will not be regarded as similar Goods.
1. Where the Goods have been assessed provisionally, then such Goods cannot be regarded as Similar
Goods (The value of such Goods are non-comparable).
2. The transaction value of similar goods will be used in determining the value of imported goods
only if following condition are fulfilled:
(a) Similar goods are sold at the same commercial level,
(b) They are in substantially same quantities as the goods being valued.
3. If there are no other transactions for comparable quantity & commercial level then reasonable
adjustment shall be made for difference in quantity & commercial level.
4. In all cases, adjustment is to be made for the time gap between transactions.
5. After determining comparable values, the lowest of them shall be adopted.
RULE 6: CHANGE OF ORDER OF RULE 7 AND RULE 8
1. If the value of imported goods cannot be determined under the provisions of Rule 3 to 5, then the
value shall be determined under provisions of Rule 7 or 8.
2. At the request of importer, & with the approval of the proper officer, the order of applicability of
Rules 7 & 8 can be reversed.
RULE 7 : DEDUCTIVE VALUE
1. This method is called for when the transaction value of identical goods & similar goods cannot be
determined as per Rule 4 & 5.
2. Conditions to be fulfilled for valuation under Rule 7:
(a) Transaction value of the imported goods or identical goods or similar goods is not ascertainable,
but the goods are sold in India after importation,
(b) Sale should be in the same condition as they are imported,
(c) Sale should be to unrelated persons,
(d) Sale is made at or about the time at which the declaration for determination of value is presented
or at the earliest date after importation but within a maximum of 90 days after import.
3. Method of valuation and computation of deductive value:
Unit price at which the imported goods or identical or similar imported goods xxxx
are sold in the greatest aggregate quantity to unrelated buyers at or about the
time at which the declaration for determination of value is presented
Less : Deductions
● Commission, Selling expenses, general expenses and selling profit made xxxx
in connection with sale of imported goods
● Transport, insurance and associated costs xxxx
● Customs Duties, GST, etc xxxx
Deductive Value xxxx
4. (a)If neither the imported goods nor identical nor similar imported goods are sold in India in the
same condition as imported, then, the value shall be based on the unit price at which the imported
goods, after further processing, are sold in the greatest aggregate quantity to persons who are
not related to the seller in India.
(b)But, in such determination, deduction should also be made for the value added by processing
along with other deductions as provided above.

Illustration 1:
MNO Pvt. Ltd. imported machinery declaring transaction value of ₹. 3,20,000, which was rejected.
Rule 4 and 5 of the Import Valuation Rules are found inapplicable, as no similar/ identical
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machinery are imported in India. MNO Pvt. Ltd. furnishes you the following data and requests you
to compute the value of imported goods as per Rule 7:
Sale price in India (after value addition): ₹. 6,30,000 (inclusive of GST @ 5%)
Commission to Indian agent on above sale: 3% of sale price (before GST)
Value addition after import: ₹.40,000
Freight and Insurance from port of import to factory of importation: ₹.40,000 and ₹.20,000.
General Expenses after importation: ₹.60,000.
Net profit margin (normally earned by others also): 10% of sale price (before GST)
Rate of basic customs duty @10%. IGST @ 5% under section 3(7) of CGST Act, [Link]
welfare surcharge applicable (no other duty leviable).
Solution:
Computation of Customs Value under Rule 7
Amount
Particulars
(in ₹.)
Selling price (inclusive of IGST) 6,30,000
Less: IGST (₹. 6,30,000 x 5/105) 30,000
Sale Price before IGST 6,00,000
Less: Post importation expenses
Commission on sale to Indian agents 18,000
Value addition after import 40,000
Freight and insurance from port of import to factory of importation 60,000
(₹. 40,000 + 20,000 = 60,000)
General Expenses after importation 60,000
Net profit margin in India 60,000
Cum-duty price inclusive of IGST on import 3,62,000
Less: IGST u/s 3(7) @ 5% (₹.3,62,000*5/105) 17,238
Cum-duty price exclusive of IGST on imports 3,44,762
Less: Customs duty @ 11% (₹. 3,44,762*11/111) [BCD including SWS] 34,166
Assessable value 3,10,596
RULE 8: COMPUTED VALUE
Subject to the provisions of rule 3, the value of imported goods shall be based on a computed value,
which shall consist of the sum of:
(a) The cost or value of materials and fabrication or other processing employed in producing the
imported goods;
(b) An amount for profit and general expenses equal to that usually reflected in sales of goods of
the same class or kind as the goods being valued which are made by producers in the country of
exportation for export to India;
(c) The cost or value of all other expenses under sub-rule (2) of rule 10 i.e. cost of insurance,
transport, loading, unloading & handling charges.
Note:
This method can be adopted only if the supplier of goods is willing to provide complete aforesaid
details.
Illustration 2 :
Mr. Singh imported certain goods from a related person Mr. Lee of UAE and transaction value has
been rejected. Rule 4 and 5 of the Import Valuation Rules are found inapplicable, as no similar/
identical goods are imported in India. Mr. Singh furnishes cost related data of imports and requests
Customs Authorities to determine value accordingly as per Rule 8. The relevant data are-
Cost of materials incurred by Mr. Lee $ 5000
Fabrication charges incurred by Mr. Lee $ 3000
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 Other chargeable expenses incurred by Mr. Lee $ 1500
Other indirect costs incurred by Mr. Lee $ 1200
Freight from Mr. Lee factory to UAE port $ 1300
Loading charges at UAE port $ 1000
Normal net profit margin of Mr. Lee @ 20% of FOB
Air freight from UAE port to Indian port $ 3750
Insurance from UAE port to Indian port $ 500
Exchange Rate ₹. 60 per $
The Customs Authorities are of the opinion that since value as per Rule 7 can be determined at ₹.
13,00,000, there is no need to apply Rule 8.
Solution:
Computation of Customs Value under Rule 8
Amount
Particulars
(in $)
Cost of materials incurred by Mr. Lee $ 5,000
Fabrication charges incurred by Mr. Lee $ 3,000
Other chargeable expenses incurred by Mr. Lee $1,500
Other indirect costs incurred by Mr. Lee $1,200
Cost of goods at Mr. Singh's Factory $ 10,700
Normal Total Loading FOB net profit margin of Mr. Lee $3,250
[20% of FOB or 25% of cost = 25% of $ 13,000] Cost till US Port = Cost of the
Goods at Factory + Freight from factory to US Port and charges at US Port = $
13,000 [$ 10,700 + $ 1300 + $ 1000] Value = Total cost till port + profit = $
16,250 [$ 13,000 + $ 3,250]
Air freight from UAE port to India [Actual = $ 6,050 ($ 3,750 + $ 1,300 + $ $ 3,250
1,000)] [Air Freight cannot exceed 20% of FOB, hence, restricted to 20% of $
16,250 i.e. $ 3,250]
Insurance from UAE port to Indian port $500
CIF/Assessable Value under Customs $ 17,700
Exchange Rate ₹. 60
Assessable value under Customs ₹. 10,62,000
Note:
As per Rule 6, at the request of importer and with the approval of proper officer, Rule 8 can be
applied before Rule 7 also. Therefore, in this case, value can be determined using Rule 8 instead of
Rule 7, as per Rule 6.
RULE 9 : RESIDUAL METHOD
Where the value cannot be determined u/r 3 to 8, the custom officer may determine the value on
any other basis, but it shall not be based on :
a) Selling prices of those goods in the country of origin.
b) Selling prices of those goods in India.
c) Selling prices of those goods to any other country by that seller.
d) Any system which provides for adopting the highest value.
e) Cost of production of the goods.
f) Minimum custom value.
g) Arbitrary or fictitious value.
h) Price of the goods for export to a country.
RULE 10 : ADDITIONS IN THE VALUE

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 Rule 2(1)(da): "Place of Importation" means the customs station, where the goods are brought
for being cleared for home consumption or for being removed for deposit in a
warehouse.
RULE 10(1) - OPTIONAL ADDITIONS:
[These expenses are included while computing the assessable value of imported goods, only if these
are incurred by the assessee (if separately given in question)].
In determining the transaction value, there shall be added to the price actually paid or payable for
the imported goods, the following to the extent they are incurred by the buyer but are not included
in the price actually paid or payable for the imported goods, namely:
1. Commission /Brokerage:
(a) Payable in India in Indian rupees or abroad in foreign Currency, BUT If it is buying
Commission, then it is not to be added.
(b) "Buying Commission" refers to the fees paid by an importer to his agent for service of
representing him abroad in purchase of goods being valued.
(c) If question is silent regarding the type of commission or brokerage then it is not to be considered
as Buying Commission.
2. Container:
Cost of containers imported along with the goods is to be added if the containers are not
returnable (i.e. if containers are returnable then its cost is not to be added).
3. Packing Charges : Added whether it is for labour or materials
4. Materials / Tools / Moulds / Dies Supplied from India:
(a) If supplied Free of cost, then add its full value.
(b) If supplied at concessional rate, then add the amount of concession.
5. Engineering, development, art work, design work, and plans and sketches which are
necessary for the production of the imported goods:
(a) If done in India, then the cost is not to be added.
(b) If done abroad, then the cost is to be added.
6. Royalty for Imported Goods:
(a) Only Royalties & License fees, related to the imported Goods that the Buyer is required to pay
as a condition of sale of goods being valued, is added.
(b) It includes payments in respect to patents, trademarks and copyrights.
(c) The charges for the right to reproduce the imported goods in India shall not be added.
(d) Where the royalty, license fee or any other payment for a process (whether patented or
otherwise) is includible in the value, then, such charges shall be included even if imported goods
are subjected to the said process after importation of such goods in India.
7. Any part of Subsequent sale proceeds to be payable, directly or indirectly, to the supplier is
required to be added.
8. Any payment by importer on behalf of the supplier to any other person, directly or indirectly,
is required to be added.
Notes:
(i) Expenses will be added if those are incurred at the time of importation of goods, but if expenses
are incurred after arrival of Goods in India, then it is not to be added.
All the optional additions and other adjustments while computing the Assessable Value of
imported goods are to be done in Price/FOB. And, the adjusted Price/FOB after
making the aforesaid adjustments will be taken for the purpose of computation of
insurance, freight, loading, unloading and handling charges. And, then, assessable
value will be computed.

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 Rule 10(2) - Compulsory Additions: [Whether ascertainable (Given in Question) or not, these
expenses are compulsorily included while computing the assessable value of
imported goods]
For the purposes of Section 14(1) of the Customs Act, 1962 and these rules, the
value of the imported goods shall be the value of such goods, and shall include –
(1) Cost of transport, loading, unloading and handling charges associated with the delivery of the
imported goods "TO" the place of importation:
If Not Ascertainable (Not
If Ascertainable (Given in Question)
Given in Question)
If imported by Air route If imported by Water or 20% of Free on Board
Land route Value of Goods (FOB),
Restricted to 20% of Free on Board Value Actual cost whether imported by Air,
of Goods (FOB) [i.e. 20% of FOB or Water or Land route
Actual cost, whichever is less]
Note:
(i) Where FOB value of goods is not ascertainable, but, sum of FOB and Insurance is
ascertainable, then, Cost of transport, loading, unloading and handling charges associated with
the delivery of the imported goods to the place of importation shall be 20% of sum of FOB and
Insurance.
(ii) Ship Demurrage charges on charted vessels, lighterage or barge charges are always included
in the cost of Transport.
(iii) In case of goods imported by sea or air and transshipped to another customs station in India
(i.e. from port to Inland Container Depots, or port to container freight station, or port to port,
or airport to airport), the Cost of insurance, transport, loading, unloading and handling charges
associated with such transshipment shall be excluded.
(iv) Any transport cost after place of importation shall not be included in the cost of transport.
(2) Cost of Insurance to the place of importation:
If Ascertainable (Given in question) If Not Ascertainable (Not Given in question) Actual 1.125%
of Free on Board Value of Goods (FOB)
Note:
(i) Where FOB value of goods is not ascertainable, but, sum of FOB and cost of transport, loading,
unloading and handling charges is ascertainable, then, Cost of insurance of the imported goods
to the place of importation shall be 1.125% of such sum of FOB and cost of transport, loading,
unloading and handling charges.
(ii) Any insurance cost after place of importation shall not be included in the cost of insurance.
Rule 10(3): Additions to the price actually paid or payable shall be made under this rule on the
basis of objective and quantifiable data.
Rule 10(4): No addition shall be made to the price actually paid or payable in determining the
value of the imported goods except as provided for in this rule.
Mechanism to Compute Assessable Value under Customs
Price / Cost / FOB Value xx
Add : Optional Additional (like Commission, Packing Charges, etc.) if any xx
Less : Charges for post-importation activities, if any (xx)
Adjusted Price/FOB Value xx
Add : Insurance Charges xx
Add : Freight, loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation xx
CIF Value being Assessable Value for the purpose of Calculating Duties of Customs xx
(195)
 COT is not If FOB is not If cost of
If FOB is not In case of In case of goods,
ascertainm ascertainable Insurance is
ascertainable goods imported by sea
ent such but sum of not
but sum of imported or air and
cost shall FOB and ascertainmen
FOB value by air, transshipped to
20% of Cost of t than cost of
and COT is COT another custom
free on Insurance is Insurance
available then shall not station in India,
board ascertainmen shall be
cost of exceed COT and Cost of
(FOB) t COT = 20% 1.125% of
Insurance = 20% of Insurance
value of such sum. FOB value of
1.125% of FOB associated with
goods.
such sum. such
transshipment is
excluded.

Provi Provi Provis Provis Provi Provi

sion sion ion 3 ion 4 sion sion
1 2 5 6

Means customs Note: Cost of

stations, where Transports
goods are bought includes
cleared for home ship
consumption or demurrage
removed in charges on
warehouse. charted
vessels,
lighterage or
barge
charges
Cost of Cost of
transportation Insurance
loading, of place
unloading and Importatio
handling n
Rule charges (COT)
10 with the
(2) delivery of
imported goods
to the place of
importation.
Adjustm For determining the transaction value, there shall be added
ents for to price actually paid or payable:
cost Commission and brokerage except buying commission.
and Cost of containers which are treatment as being one for
customs purpose.
service Rule 10: Rule Cost of goods or services supplied by buyer free or at
s for Adjustmen 10 concessional rate.
valuati t in (1) Example:
on of Transaction Tools, dies, moulds, engineering design work, materials plan
Value sketches etc.
importe
Royalty and licence fees payable as condition of sale
d goods Subsequently payback to the seller
All Other payments actually made as conditionals of sale.

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 VALUATION OF IMPORTED GOODS:
Determination of Assessable Value after adjustments under Rule 10:
Particulars ₹.
FOB price xxx
Add: Charges for cost and services as per Rule 10(1) xxx
Transaction value/Custom FOB xxx
Add: Cost of transportation [as per Rule 10 (2)] xxx
Add: Cost of insurance (as per Rule 10 (2)) - xxx
CIF value / Assessable value (cost insurance freight) xxx
Note:
Unloading and Handling charges are not the part of assessable value.

PRACTICE PROBLEM
Q.1. Compute assessable value from the following information:
(a) FOB value of machine - 2,00,000 $.
(b) Cost of insurance, cost of transport, loading, unloading and handling charges associated with
delivery of imported goods to place of importation are not ascertainable.
(c) Unloading and handling charges at place of importation - ₹. 35,000.
(d) Exchange rate notified by CBEC ₹. 68 per $. (Ans: $2,42,250, ₹.1,64,73,000)
Q.2. Compute assessable value from the following information:
(a) FOB value of machine - $ 15,000.
(b) Airfreight, loading, unloading and handling charges - $ 4,000.
(c) Cost of insurance - $ 1,000.
(d) Unloading and handling charges at place of importation = ₹. 35,000.
(e) Exchange rate notified by CBEC 1 $ = ₹. 65. (Ans: $19,000, ₹.12,35,000)
Q.3. Compute assessable value from following information:
(1) FOB = $ 20,000.
(2) Cost of transportation, airfreight, loading, unloading charges to place of importation - $ 1,000
(3) Cost of insurance not ascertainable.
(4) Exchange rate notified by CBEC 1 $ = ₹. 70.

Q.4. Compute assessable value:

(1) FOB value not ascertainable.
(2) Cost of insurance not ascertainable.
(3) FOB value and airfreight, loading, unloading and handling, charges to place importation is $
1,00,000.
(4) Exchange rate notified by CBEC 1 $ = 68.
(5) Unloading and handling charges at place of importation - ₹. 45,000.
Q.5. Product 'A' was imported by Mr. Mihir by air. The details of import transaction are as
follows:
Particulars US $
(a) Price of 'A' at exporter's factory 16,000
(b) Freight from factory of exporter to load airport 500
(airport in country of exporter)
(c) Loading and handling charges at the load airport 500
(d) Freight form load airport to airport of importation in India 7,000
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 (e) Insurance charges 4,000
Through the aircraft arrived on 22nd September 2018, bill of entry for home consumption was
presented by Mr. Mihir on 19th September 2018.
Other details.
Particulars 19/09/2018 22/09/2018
Rate of Basic Custom duty 18% 15%
Exchange Rate notified by CBEC ₹. 64 per $ ₹. 62 per $
Exchange rate prescribed by RBI ₹. 65 per $ ₹. 61 per $
Integrated tax u/s 3(7) of CTA, 1975 18% 12%
Compute:
1) Value of product 'A' for purpose of levying customs duty.
(Ans:AV–24,400$, ₹.15,61,600/-)
2) Customs duty and tax payable.(Ans: 2,34,240 + 23,424 + 2,18,31.68 = ₹.4,75,975.68)

[Link] assessable value and customs duty payable from following information:
(1) FOB value of machine = £ 10,000.
(2) Freight paid (air) = £ 2,500.
(3) Design and development charges paid in UK = £ 500.
(4) Commission payable to local agent @ 2% FOB in Indian '₹.'.
(5) Date of Bill of entry = 25th November, 2018.
(6) Date of arrival of Aircraft = 20th November, 2018 (Rate BCD = 15%, exchange rate notified by
CBEC = ₹.98 per £)
(7) Integrated tax leviable under 3(7) of CTA, 1975 = 12%.
(8) Insurance charges paid but not ascertainable.
Computation of Assessable Value and Customs Duty (Ans: ₹.12,96,038, ₹.3,95,038)
Q.7. Compute assessable value from following details provided by X Ltd. who imported a lift from
London at a invoice price of ₹.25,00,000.
● He had supplied raw material worth ₹.7,50,000 to supplier for manufacture of said lift.
● To due to safety reasons, the lift was not taken to the jetty in the port but was unloaded at the outer
anchorage. The charges incurred for such unloading amounted to ₹. 50,000 and cost incurred on
transport of lift from outer anchorage to jetty was ₹. 35,000.
● The importer was also required to pay ship demurrage charges ₹. 15,000.
● The lift was imported at an actual cost of transport ₹. 60,000.
● Insurance charges ₹. 30,000. (Ans: ₹.34,40,000)
Q.8. Compute assessable value and total customs duty payable from the following particulars:
(a) Date of presentation of bill of entry - 20/05/2017 (Rate of BCD 15%, Rate of exchange by CBEC
₹. 67.00)
(b) Date of arrival of goods in India is - 30/05/2017 (Rate of BCD - 12%, rate of exchange by (BECG)
- ₹. 66.00)
(c) Integrated tax rate @ 28%.
(d) CIF value 5,000 US$; Airfreight 1,200 US$, Insurance cost is 150 US$.
(e) SWS 10 %.
(f) GST compensation cess @ 10%. (Ans: ₹.4,74,130 & ₹.1,70,620)
Q.9. Compute customs duty payable from the following data.
a) Machinery imported from US by air US $.20,000
b) Accessories worth $.4,000
c) Compulsorily supplied with machine, price is not included in price of machine:
Air freight$.6,400
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 Insurance US $ 250
Local agents commission₹.5,000
Exchange rate1$ = ₹.67.50
d) Customs duty on machine 10% ad volrem
e) Customs duty on accessories20% ad volrem
f) Integrated tax 12%
j) GST compensation cess 5%
k) Social welfare Surcharges 10%. (Ans: ₹.14,34,058& ₹.3,29,834)
[Link] Assessable Value for purpose of valuation under customs Act, 1962.
P Ltd., has imported certain equipments from Japan at FOB cost of ¥.1,50,000(Japanese Yen). The
other expenses incurred by P Ltd. in this connection are as under:
a) Freight from Japan to Indian port yen (¥)15,000.
b) Insurance paid to insurer in India (for importation) ₹. 7,000.
c) Designing charges paid to consultant in Japan yen (¥).25,000.
d) P Ltd. had expended ₹. 75,000 in India for certain developmental activities with respect to imported
machine.
e) P Ltd. incurred road transport cost from Mumbai port to their factory in Karnataka ₹. 45,000.
f) CBEC notified exchange rate 1 yen = ₹. 0.75.
g) Commission payable to agent in India was 5% of FOB cost in Indian Rupees.
h) P Ltd. has effected payment based on exchange rate 1 yen = ₹. 0.76.

Transaction value of identical goods/similar goods (Rule 4 and Rule 5)

MEANING

Rule 2(1) (d) Rule 2(1) (f)

Identical Goods Similar Goods

Means imported goods which are Means imported goods which although
same in all respects including not like in all respects, have

Same physical Like Like component material Connectivity inter chargeable

Characteristic Characteristic which enable to perform with goods being valued
Quality Regulation
same function having regards to quality
reputation and trade mark

Except for minor difference in appearance which

does not affects price of goods being valued

(1) Produced in the country in which the goods being valued were produced, and
(2) Produced by some person who produced the goods, or where no such goods are available, goods
produced by a different person,
But shall not include imported goods where engineering, development work, design work, plan
or sketch undertaken in India were completed directly or indirectly by the buyer on these imported
goods free of charge or at a reduced cost for use in connection with the production and sale for
export of these imported goods.

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 Transaction value for identical goods / similar goods Rule 4/5

Subject to the provision of Rule 3 of these rules, value

of imported goods shall be the transaction value of
Identical goods / similar goods sold for export to India

Such identical / similar goods are Such identical / similar goods are
imported at or about the same time. imported at substantially same
quantity and same commercial value

Where no sale at the same commercial level

and in substantially the same quantity is
found, then

Conditions of sale of IG / SG Adjustments to be made

A Sale at same commercial level but Adjust quantity factor i.e.
in different quantities Quantity discount
A Sale at different commercial level Adjust Commercial level
but in substantially same quantities factor i.e. discount
A Sale at different commercial level
and different quantities Adjust both factors

(1) Where the costs and charges referred to in Rule 10 (2) are included in Transaction value of
identical goods/similar goods an adjustment shall be made, if there are significant differences in
such cost and charges between the goods being valued and the identical goods/similar goods in
question arising from differences in distances and means of transport.
(2) In applying this rule, if more than one transaction value of identical goods/similar goods is found,
the lowest of such value shall be used to determine the value of imported goods.
[Link] the assessable value of imported goods -under customs Act, 1962 from following
particulars.
An importer from Cochin import goods from an exporter in US. The vessel carrying the goods
reaches Mumbai port first and from there goods are transhipped to Cochin port.
Details:
(1) Cost of machine at factory US$ 20,000 of exporter.
(2) Transport charges from factory US$ 1,000 of exporter to port for shipment.
(3) Handling charges paid for loading US$ 100 the machine in the ship.
(4) Buying commission paid by the US$ 100 importer.
(5) Freight charges from exporting US$ 2,000 country to India.
(6) Actual insurance charges paid are not ascertainable.
(7) Charges for design work undertaken for machine US$ 5,000.
(8) Unloading and handling charges ₹. 2,500 paid at place of importation.
(9) Transport charges from Mumbai ₹. 30,000 to Cochin port.
(10) Exchange rate 1 $ = ₹. 60.
Q.12.A consignment of 1,200 metric tonnes of edible oil of Malaysian Origin was imported by
charitable organisation in India for free distribution to below poverty line citizens in a backward
area under the scheme designed by Food and Agricultural Organisation. This being a special

(200)
 transaction, a nominal price of US$ 15 per metric tonne was charged for consignment to cover the
freight and insurance charges. The customs house found out that at or about the time of
importation of this consignment there were following imports of edible oil of Malaysian Origin.

Quantity Imported in Unit Price in

Sr. No.
Metric Tonnes US$ (CIF)
1 30 275
2 150 235
3 750 195
4 1,350 175
5 600 185
6 1,170 180
The rate of exchange on relevant date was 1 US$ = ₹. 60 and rate of BCD was 10%. Calculate the
amount of duty leaviable on consignment under the customs Act, 1962.
Rule 6:
If value of imported goods, cannot be determined under the provision of Rules 3, 4 and 5, the
value shall be determined under the provisions of Rule 7, or when value cannot be determined
under that rule, under Rule 8. However, at request of the importer, and with approval of proper
officer, order of application of Rule 7 and 8 shall be reversed.
Rule 7: Deductive Value:
If the value of imported goods cannot be determined as per provisions of Rule 4 and Rule 5, then
value is to be determined as per Rule 7 i.e. deductive value.
(1) Deductive value is the unit price at which greatest aggregate quantity sold to persons who are not
related to the seller in India.
(A) At the time when declaration for value is presented.
(B) Not at same time of importation of the goods being valued-shall be based on unit price at
which imported goods or identical or similar goods are sold in India, at earliest date after
importation but before expiry of ninety days after such importation.
(C) Unit price under (A) and (B) are subject to following deductions:
(i) Commission paid or agreed to be paid or additions usually mode for profits and general
expenses in connection with sales in India of imported goods of same class.
(ii) Usual costs of transport and insurance costs incurred within India.
(iii) The customs duties and taxes payable in India by reason of importation or sale of the goods.
(2) Note in condition as imported then, the value shall be based on the unit price at which imported
goods, after further processing, are sold to the seller in India. In such determination, due allowance
shall be made for the value added by processing and the deductions provided for in (C) above.
Q.13.X Ltd. imported goods declaring transaction value of ₹. 2,000 per unit, which was rejected. Rule
4 and 5 are found inapplicable Y Ltd., furnishes you the following data and requests you to
compute the value of imported goods as per Rule 7:
(a) Sale price in India (after value addition) = ₹. 3,150 per(including GST @ 5%)
(b) Commission on above sales: 4% of sales pike (before GST).
(c) Value addition after Import = ₹. 75 per unit.
(d) Freight and insurance from port of import to factory of importation ₹. 75 and ₹. 35 per units.
(e) General expenses after importation ₹. 100 per unit.
(f) Net profit Margin'. 20% of sale price (before GST).
(g) BCD= 10% IGST = @ 5%. SWS is applicable 10%.

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 Rule 8: Computed Value:
Computed value means value of imported goods determined in accordance with Rule 8, shall
consist of is less of:
(a) cost of value of materials and fabrication or other processing employed in producing the
imported goods;
(b) an amount for profit and general expenses equal to that usually reflected is sales of goods of
same class or kind of goods being valued, which are made by producers in the country of
exportation for export to India;
(c) the cost or value of all other expenses under Rule 10 (2).
Rule 9: Residual method:
Subject to provisions of Rule 3, where the value of imported goods cannot be determined under
the provisions of any of the preceding rules, then:
(a) The value shall be determined using:
(i) Reasonable means consistent with the principles and general provisions of these rules and
(ii) On the basis of data available in India.
(b) No value shall be determined under the provisions of this rule on the basis of:
(i) The selling price in, India of the goods produced in India.
(ii) A system which provides for the acceptance for customs purpose of highest of two alternative
values.
(iii) The price of the goods on the domestic market of the country of exportation.
(iv) The cop other than computed values as per provisions of Rule 8.
(v) The price of the goods for the export to a country Other than India.
(vi) Minimum customs values; or
(vii) Arbitrary or fictitious values.
VALUATION OF EXPORT GOODS:
Determination of valuation of export goods as per customs valuation (Determination of
value of export goods) Rule, 2007.
Rule 3: The value of export goods shall be the transaction value subject to rule 8.
Rule 3(2) the transaction value shall be accepted even where the buyer sellers are related provided
that the relationship has not influenced the price.
Rule 3(3) If the value cannot be determined under sub Rule (1) and sub Rule (2) the value shall
be determined by proceeding sequentially through rules 4 to 6.
Rule 4: Determination of export value by comparison.
(1) The value of the export goods shall be based on:
● the transaction value of goods of like kind and quality.
● exported at and about the same time.
● To other buyers in the same destination country of importation or
● in its absence another destination country of importation adjusted in accordance with
provision of sub rule (2).
(2) In determining the value of export goods under sub-rule (1), the proper officer shall make such
adjustments as appear to him reasonable, taking into consideration the relevant factors,
including.
● 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 place of exportation.

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 Rule 5: Computed value method:
If the value cannot be determined under rule 4, it shall be based on a computed value, which shall
include the following:
(a) Cost of production, manufacture or processing of export goods.
(b) Charges, if any, for design or brand.
(c) An amount towards profit.
Rule 6: Residual Method
Subject to provisions of rule 3, when the value of export goods cannot be determined under
provisions of rules 4 and 5, the value shall be determined using reasonable means consistent with
the principles and general provisions of these rules provided that local market price of export
goods may not be the only basis for determining the value of export goods.
Rule 7: Declaration by the exporter:
The exporter shall furnish a declaration relating to the value of exports in the manner specified in
this behalf.
Rule 8:Rejection of declared value of exports.
Rule 11:Declaration by importer.
Rule 12:Rejection of declared value of imports
PRACTICE PROBLEM
Q.1.D Ltd. imported a machine from Australia at a FOB value of ₹.38 lakhs (inclusive of accessories
of market value of ₹.5 lakhs compulsorily supplied along with machine.) Other details are as
follows:
(1) FOB value includes ₹.8,00,000 attributable to post-importation activities to be carried out by
seller.
D Ltd. had supplied raw material worth ₹.10 lakhs to seller for manufacturer of said machine.
(3) Design & Development charges were paid to a consultancy firm in Australia ₹.2,00,000. (INR
Converted)
(4) D Ltd. spent an amount of ₹.75,000 in India for development work connected with machinery.
The goods were imported & cost of transportation is ₹.9,25,000.
Importer paid demurrage charges ₹.50,000, lighterage and barge charge ₹.25,000.
Importer paid₹.75,000 for transportation of goods from fort of entry to Inland Container Depot.
Loading and handling charges paid for loading machine in vessel ₹.54,900
Unloading and handling charges paid at place of importation ₹.40,000
Cost of insurance (actual)₹.10,000
(11) Commission payable to agent ₹.1,90,000
Compute assessable value. [Ans.: 55,44,900]
Q.2. T Ltd. imported some goods from LEXUS Inc of US by air freight. You are required to
compute Assessable value of imported goods under the Act from following particulars:
(1) CIF value - US $6,000
(2) Freight, loading unloading and handling charges associated with delivery of imported goods to
place of import= US $2,000
(3) Insurance cost = US $700
The bank had required payment from importer at exchange rate US $ 1 = ₹.46 while CBEC
notified US $1 = ₹.45.5. [Ans.: US $ 4,660 (in ₹.2,12,030)]
Q.3. Compute assessable value of machine imported by M/s Excel Ltd. under Customs Act, 1962.
(a) FOB price is US $.10,000

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(b) Air freight, loading, unloading and handling charges associated with delivery of good to place of
import - US $2,500
(c) Insurance - not ascertainable.
(d) Cost of development work in India -₹.40,000
(e) Local agent's commission = ₹.10,000
(f) Unloading & handling charges at place of importation ₹.3,000.
(g) Cost of Local transport ₹. 5,000
Exchange Rate applicable US $ 1 = ₹.46 [Ans.: ₹.5,57,175]

Q.4. B Ltd. have imported a machine from US. From the following particulars furnished by them,
arrive at the assessable value for purpose of Customs duty payable.
(a) FOB cost of the machine 10,000 US $
(b) Air freight, loading, unloading and handling charges associated with the delivery of imported goods
to place of importation — 3,000 US $.
(c) Engineering and design charges paid to a firm is US = 500 US$
(d) Licence fee related to imported goods payable by buyer as condition of sale @20% of FOB cost.
(e) Materials supplied by buyer free of cost valued at ₹.20,000
(f) Insurance paid to insurer in India ₹.6,000.
(g) Buying commission paid by buyer to his agent in US = 100 US$
(h) Importer paid ₹.5,000 towards demurrage charges for early in clearing machine from Airport.
(i) CBEC notified 1$ = ₹.70.25 and Inter Bank exchange rate as arrived by the authorized dealer =
₹.72.50 per $.
(Ans.: ₹.10,83,750 : Hint: demurrage charges for delay is not included)
Q.5. G Ltd., an Indian Company located at Jaipan, imported into India certain commodities in July
2018 from a country which is covered by a notification issued u/s 9A of Customs Tariff Act, 1975.
Further Information:
(a) CIF value of consignment = $35,000
(b) Quantity imported - 1,400 kg
(c) Exchange rate applicable - 1 US $ -₹.62
(d) Basic Custom Duty - 20%
As per notification, anti-dumping, duty leviable will 75% of difference between cost of
commodity. Calculated @ US $ 40 per kg and landed value of commodity as imported.
You are required to calculate the amount of total customs duty (including with dumping duty)
payable by G Ltd. [Ans.: 20, 95, 850]

SOLVED EXAMPLES

Q.1. Dabang Ltd. imported a machine from Australia at a FOB value of ₹. 38,00,000 (inclusive of
accessories of market value ₹. 5,00,000 compulsorily supplied along with the machine). Other
details are as follows:
(i) FOB value includes ₹.8,00,000 attributable to post-importation activities to be carried out by the
seller.
(ii) Dabang Ltd. had supplied raw materials worth ₹.10,00,000 to the seller for the manufacture of
the said machine.
(iii) Design and development charges were paid to a consultancy firm in Australia ₹. 2,00,000 (INR
converted).
(iv) Dabang Ltd. also spent an amount of ₹. 75,000 in India for development work connected with the
machinery.

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 18 DUTY DRAW BACK (Sec 74 to 76)
Duty draw back

Sec 74 Sec 75
Duty Drawback In case, where the imported Duty Drawback in case, where the imported
goods are re-exported in Identifiable goods are re-exported in Un-Identifiable
Conditions Conditions

Sec 74 (1) Sec 74 (2)

Goods being Re-exported without Goods being Re-exported after
being putting them into use. putting them into use.

Duty drawback @ Good are taken into use after Goods imported for personal
98% if goods are Importation (other than use and motor car
exported within 2 Personal Use and Motor Car) subsequently re-exported
years without
being putting in
use.

REFUND OF DUTIES/TAXES AS AN INCENTIVES FOR EXPORT:

Sr. Sec. 74 (Draw back allowable on re- Sec. 75 (Drawback on materials used in the
Basis
No export of duty paid imported goods) manufacture of exported goods)
(1) Identity Identity of the goods exported should be Goods exported under this section are
of Goods the one which was imported on payment different from the inputs. Because, the
exported of duty. The goods must be capable of inputs are manufactured, processed or any
being easily identified other operations are carried on them before
their export
(2) Eligible Available on all goods. Available on notified goods.
Goods
(3) Nature of Export goods should have been The goods to be exported may be
goods imported and custom duty be paid manufactured or processed from imported
exported thereon. or indigenous inputs.
(4) Rate of The rate of drawback is 98% in case the Rate per unit of final article to be exported
Drawback goods are exported without use. is fixed by taking into account :
(a) Mode of manufacture
(b) Input- output ratio
(c) Standardization of the products.
(5) Period for Goods should be exported within 2 years No such restrictions.
exports of from the date of payment of duty or such
Goods extended time as the board may allow.
(6) Criteria of No criteria of minimum value addition. There should not be negative value
value addition and in case where minimum value
addition addition is specified, the same should be
achieved for the claim of drawback.
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 (7) Rules The drawback is governed by the Re- Drawback in this case, is governed by the
Framed export of Imported Goods (Drawback of Customs and Central Excise Duties
Customs Duties) Rules, 1995. Drawback Rules, 2017.
(8) Duties / Drawback of Customs Duty or tax or Drawback of Customs Duty and Central
Taxes cess as referred to in the Customs Tariff Excise Duty (but not GST).
Act, 1975 (including GST).

RATES OF DRAWBACK U/S 74, IF THE GOODS ARE TAKEN INTO USE AFTER IMPORTATION
Sec. 74(2) empowers the Central Govt. to fix the rate of Drawback in case of those goods, which are exported
after having been put to use subsequent to their importation
Length of period-between the date of clearance for home consumption % of import duty to be paid
and the date when goods are placed under customs control for export as Drawback
Not more than 3 months 95%
More than 3 months but not more than 6 months 85%
More than 6 months but not more than 9 months 75%
More than 9 months but not more than 12 months 70%
More than 12 months but not more than 15 months 65%
More than 15 months but not more than 18 months 60%
More than 18 months NIL

How drawback is allowed on goods imported for personal use and subsequently re-exported:
In respect of a motor car or goods imported by a person for his personal & private use, drawback of duty shall
be calculated by reducing the import duty paid in respect of such motor car or goods by following percentage:
Length of period between the date of clearance for home consumption and the % of Reduction
date when goods are placed under customs control for export
First year - for every quarter or part 4%
Second year - for every quarter or part 3%
Third year - for every quarter or part 2.50%
Fourth year - for every quarter or part 2%
Note:
(1) Where the period is more than 2 years, drawback shall be allowed, only if the Board, on sufficient cause
being shown, has in that particular case extended the period of 2 years.
(2) NO drawback shall be allowed if such motor car or goods have been used for more than 4 years.

No drawback on certain goods, if exported after use:

The goods in respect of which no drawback of import duty shall be allowed on export, if they have been used
in India after importation, are as follows:
1) Wearing apparel e.g. (dress, clothes, clothing, article of clothing, vesture , wear ; (verb) :
dress , clothe , enclothe , garb , raiment , tog , garment , habilitate , fit out
, change state , turn)
2) Tea chests
(e.g. a light metal-lined
wooden box in which tea is
transported.)

3) Exposed cinematograph film passed by the Board of film Censors in India.

4) Unexposed photographic films, paper and plates and X-ray films.

Problem No:-1 (based on Sec 74 to Sec.76)

Calculate the amount of drawback available U/s 74 of Customs Act, 1962 in following separate cases.

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(1) “A” imported computer for office use and paid R.10,00,000 as import duty the computer are re-exported
after 14 months.
(2) “B” imported for his personal use and paid ₹.2,50,000 as import duty. Such goods are re-exported after 3
months 15 days.
(3) “C” imported wearing apparel and paid ₹.15,000 imported duty. These are re-exported after 6 month.
Solution:-
(1) Since computer have been taken into use and then re-exported duty drawback shall be allowed as per sec
75(2). 65% of import duty paid will be allowed as drawback.
Hence amount of drawback is 10,00,000 x 65%=₹.6,50,000.

(2) In respect of goods imported for personal use, drawback of duty shall be equal to the import duty paid in
respect of such goods as reduced by 4%, 31%, 2.5% and 2% for use for each quarter or part thereof during
the period of first year, second year, third year and fourth year respectively.
Hence 92% of import duty so paid shall allowed as drawback.
Hence duty drawback
= 2,50,000 x 92%
= ₹.2,30,000

(3) No duty drawback shall be allowed on wearing apparel which has been taken into use. (Re-exported)

Problem No:- 2 [Drawback u/s 74]

K Ltd. of Mumbai imported printing machinery from Gruber Inc. Canada on 04/02/2018 by paying custom duty
of ₹.44,50,000/- at time of import. The printing machinery developed some faults in August 2018, initially
Gruber Inc. sent its technicians to Mumbai to fix the machinery, but when it didn't work, K Ltd. re-
shipped/returned the machinery to Gruber Inc. on 07/02/2019. Can K Ltd. claim duty drawback at the time of
returning the machinery? If yes, how much of duty can be claimed as drawback?
Solution
Yes, duty drawback can be claimed by K Ltd. u/s 74 of Customs Act, 1962 subject to conditions given
below —
1) Export as such — Section 74 allows duty drawback of import duty only when goods are exported back out
of India in same form without any processing or manufacture.

2) Import & export by same person — Drawback shall be allowed only if goods are imported and export
back out of India by the same person. That is the owner of the goods has not changed in the process of
import and re-export of such goods.

3) Identity of goods — Goods re-exported should be easily identifiable to the satisfaction Assistant
Commissioner of Customs or Deputy Commissioner of customs as the goods that were initially imported.
In other words, the description of goods mentioned in 'Bill of entry' of imported goods should match. with
the description of goods being re-exported. Therefore, 'Bill of entry' should be attached with 'shipping bill'
or 'bill of export' filed at the time of re-exportation of such goods.

4) Time limit for re-export — Goods should be re-exported within 2 years of being imported into India. In
current case, all the above conditions are satisfied by K Ltd. Therefore, it can claim a maximum of 98% of
duty paid as drawback. But as the printing machinery is used goods, the drawback shall be available as
follows —
Length of period between the date of clearance for home % of import citify to
consumption be
No.
and the date when the goods are placed under Customs paid as Draw back
control for export
1 < 3 months ( 1 Q) 95%
2 > 3 months but < 6 months (1 Q to 2 Q) 85%
3 > 6 months but < 9 months (2 Q to 3 Q) 75%
4 > 9 months but < 12 months (3 Q to 4 Q) 70%
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 5 > 12 months but < 15 months (4 Q to 5 Q) 65%
6 > 15 months but < 18 months (5 Q to 6 Q) 60%
7 > 18 months >6Q Nil
In the current case, goods were kept in India from 04/02/2018 and 07/02/2019, therefore it was in India for
> 12 months but < 15 months, therefore K Ltd. can claim 65% of duty paid as drawback which is
₹.28,92,500/- [₹.44,50,000 x 65%].

Problem No:- 3 [Drawback u/s 74]

Mr. Kailash imported a car from Japan by paying import duty of ₹.49,60,000/- on 05/09/2020. He sold the car
to Mr. Yamamoto of Japan on 31/08/2022, let export order of the car was received on 07/09/2022. Mr. Mangesh,
a friend of Mr. Kailash advised him that Mr. Kailash cannot claim any duty drawback for import duty paid on
the car as it was re-exported after 2 years of being imported. Is Mr. Mangesh correct in his advice? If yes, why
and if no, what amount of duty can Mr. Kailash claim as duty drawback?
Solution
No, Mr. Mangesh is not correct in his advice and Mr. Kailash can claim duty drawback u/s 74 of Customs Act,
1962 as all conditions given below are satisfied -
1. Export as such - Section 74 allows duty drawback of import duty only when goods are exported back out
of India in same form without any processing or manufacture.
2. Import & export by same person - Drawback shall be allowed only if goods are imported and export back
out of India by the same person. That is the owner of the goods has not changed in the process of import
and re-export of such goods.
3. Identity of goods - Goods re-exported should be easily identifiable to the satisfaction Assistant
Commissioner of Customs or Deputy Commissioner of customs as the goods that were initially imported.
In other words, the description of goods mentioned in 'Bill of entry' of imported goods should match with
the description of goods being re-exported. Therefore, 'Bill of entry' should be attached with 'shipping bill'
or 'bill of export' flied at the time of re- exportation of such goods.
4. Time limit for re-export - Goods should be re-exported within 2 years of being imported into India. But in
case of car time period can be extend as given below.
5. Special drawback rates for motor car - It has been specifically provided that where such cars are exported
after the expiry of the period of two years, the drawback would be allowed only if the Central. Board of
Excise and Customs, on sufficient cause being shown, extends the period for expiry beyond two years. It is
further provided that no drawback shall be allowed if such motor car or goods have been used for more than
four years.
The rate of duty drawback on cars shall be reduced as follows —
No Year Drawback of duty to be reduced as % per quarter
1 1 st 4% per quarter or part thereof
2 2nd 3% per quarter or part thereof
rd
3 3 2.5% per quarter or part thereof
4 4th 2% per quarter or part thereof
Amount of Duty drawback
Date of import 05/09/2020
Date of re-export (date of let export order) 07/09/2022
Time period in quarters 9 quarters
Reduction in rate
For quarters in first year 4% x 4 Quarters = 16%
For quarters in second year 3% x 4 Quarters = 12%
For quarters in third year 2.5% x 1 Quarter = 2.5%
Total reduction 30.50%
Total drawback available 69.50%
Amount of drawback (₹.49,60,000 x 69.50%) ₹.34,47,200

Problem No:- 4 [Duty drawback calculation]

Mr. X exported goods to Alpha Inc. of USA, these goods Were imported from Chao Ltd. of China. An import
duty of ₹.12,50,000 was paid at the time of imports. While the goods were being exported to USA from India,
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 the ship carrying the goods sank before crossing Indian territorial waters. Can Mr. X claim duty drawback on
these goods? In no, why? If yes, what amount is the maximum amount that can be claimed as duty drawback?
Solution:-
Rule 2(c) of the CCE Duties Drawback Rules, 2017 among other things provides that "export" means "taking
out of India to a place outside India". Section 2(27) of the Customs Act, 1962 provides that India includes the
territorial waters of India.
In the current case when the goods were being exported, the ship sank before it could cross territorial waters of
India. Therefore, no export has taken place rule 2(c) because goods have not been sent outside India.
Therefore, duty drawback cannot be claimed by Mr. X in the current case.

CUSTOM CENTRAL EXCISE DUTIES AND SERVICE TAX DRAWBACK RULE, 1995

All Industry Rate (AIR) Brand Rate Special Brand Rate

(Rule 3) (Rule 6) (Rule 7)

(1) It is notified by the central Brand rate shall be issued for such When the drawback rate is low, a
government. goods for which no AIR is SPECIAL BRAND RATE will be
(2) It is based on FOB price of announced by the Central applicable, where the rate is lower
export goods subject to Government. Exporter shall apply than 4/5th (i.e. 80%) of the
Value cap. for brand rate within 3 months duty/taxes paid, reversed rate may
(3) Normally it is revised on 1st from the date of announcement of be applied for within 3 months
June after considering AIR from the date of announcement of
changes in budget. Extension for AIR.
(4) It shall be determined after AC/DC further 3 Extension for
considering the following AC/DC further 3
months
information:
Principal Further months
● Average duty paid on inputs.
● Average service tax paid on Comm/ extension Principal Further
input services. Comm. for 6 months Comm/ extension
● Average FOB price of export For this purpose exporter shall Comm. for 6 months
goods. submit to the CG records Proper rate will be fixed by the
● Average quantity of inputs pertaining to: Government brand rate letter will
used. ● Actual duties or taxes paid on be issued accordingly and
inputs or inputs services. provisional payment will be
● Average quantity of inputs used. allowed budget to adjustment.
CG after carrying necessary
enquiry fix brand rate of reach
exporter

Applicable only for Standard Applicable for those who get less
goods than 80% of duty drawback

Problem No:-5
With reference to the Customs & Central Excise Duties Drawback Rules, 2017, briefly state whether an exporter
who has already filed a duty draw back claim under All Industry Rates, can file an application for fixation on
special brand rate. [RTP-CA Final -Nov. 2019]
Answer.
Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017 provides that application for Special
Brand Rate cannot be made where a claim for drawback under rule 3 or rule 4 has been made.
In other words, where the exporter has already filed a duty drawback claim under All Industry Rates (AIR)
Schedule, he cannot request for fixation of Special Brand Rate of drawback. Thus, the exporter should determine
prior to export of goods, whether to claim drawback under AIR or Special Brand Rate.

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Rule 4: REVISION OF DD RATES
The Central Government may revise the amount or rate of duty drawback determined under Rule 3.

RULE 5: DETERMINATION OF DATE FROM WHICH THE AMOUNT OR RATE OF

DRAWBACK IS TO COME INTOFORCE AND THE EFFECTIVE DATE FOR
APPLICATION OF AMOUNT OR RATE OF DRAWBACK
In case of Goods exported by filing Shipping Date of Let Export Order
Bill / Bill of Export in case of goods exported by Post Date of Delivery of Export Goods to the Postal
Authority

Extension of due date of filing of the form and fees therefore under Rule 6 and Rule 7 can be given as below:
Period of Extension
Extending Authority Fees Payable
Allowable
Assistant Commissioner / Deputy Further 3 months 1% of FOB value of exports or ₹.1,000
Commissioner (AC/DC) (i.e. total 3 + 3 months) whichever is less (Max.₹.1,000)
Principal Commissioner of Further 6 month 2% of FOB value of exports or ₹.2,000
customs or Commissioner of (i.e. 3 + 3 + 6) whichever is less (i.e. Max ₹.2,000)
customs

Problem: 6 [Calculation of duty drawback u/s 75]

Mr. K, an exporter exported 4,500 pair of sports shoes at ₹.800 per pair. All industry rate of drawback on
average basis is 12% of F.O.B. subject to maximum of ₹.95 per pair. Mr. K has paid actual import duty paid on
inputs was ₹.4,70,000/-. He has approached you as a consultant to apply under rule 7 of the drawback rules for
application under the special brand rate. Give him suitable advice. Would your be different if actual import duty
paid would have been ₹.5,40,000/-.
Solution
No. Particulars ₹.
a) 12% of F.O.B. [4,500 pairs x ₹.800 per pair x 12%] 4,32,000
b) Limit on per pair basis [4,500 pairs x 95 per pair] 4,27,500
c) Duty drawback under rule 3 = Lower of (a) or (b) 4,27,500
d) Actual import duty paid on inputs 4,70,000
e) Minimum duty below which Special Brand Rate can be applied for (80% of d) 3,76,000
As (c) is higher than (e) special brand rate cannot be applied for under rule 7
If Actual import duty paid on input = 5,40,000
f) Actual import duty paid on inputs 5,40,000
g) Minimum duty below which Special Brand Rate can be applied for (80% of f). 4,32,000
As (c) is lower than (1) special brand rate can be applied for under rule 7

CASES WHERE DRAW BACK CLAIM IS NOT ADMISSABLE

1) No drawback shall be allowed [Sec. 76(1)] :
(a) If the market price of the goods is less than the amount of drawback; or
(b) If the drawback in respect of any goods is less than ₹. 50/-.

2) Upper limit of drawback (Rule 9):

Drawback amount or rate determined under Rule 3 shall not exceed 1/3rd of the market price of export
product. And if it exceeds 1/3rd, then duty drawback upto 1/3rd will be allowed.

Analysis:
If the amount of Duty drawback exceeds market price of the exported goods, then no duty drawback shall
be allowed.

But, if the amount of Duty drawback is less than the market price of the exported goods but more than 1/3rd
of the market price of the exported goods, then Duty drawback will be allowed but only upto 1/3rd of the
market price of the exported goods.
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3) Minimum Value Addition Criteria (Rule 8):
No amount or rate of drawback shall be determined in respect of any goods or class of goods under rule 6
or rule 7, as the case may be, if
(a) the export value of each of such goods or class of goods in the bill of export or shipping bill is less than the
value of the imported materials used in the manufacture of such goods or class of goods, or
(b) the export value is not more than such percentage of the value of the imported materials used in the
manufacture of such goods or class of goods as the Central Government may, by notification in the Official
Gazette, specify in this behalf.

4) No duty drawback allowable in certain cases (Rule 3) :

No duty drawback will be allowed -
(i) If goods are produced/manufactured using imported materials or excisable materials in respect of which
duties have not been paid;
(ii) If the goods, except tea chests used for packing material for the export of blended tea, have been taken into
use after manufacture;
(iii)On jute batching oil used in the manufacture of export goods, namely, jute (including Bimlipatam jute or
mestafibre) yarn, twist, twine, thread, cords and ropes,
(iv)If the imported goods are used as packing materials in or in relation to the export of –
(A) jute yarn (including Birnlipatam jute or mestafibre), twist, twine, thread and ropes in which jute yarn
predominates in weight;
(B) jute fabrics (including Bimlipatam jute or mestafibre), in which jute predominates in weight;
(C) jute manufactures not elsewhere specified (including Bimlipatam jute or mestafibre) in which jute
predominates in weight.

5) Sec. 76(2): If the Central Government is of the opinion that goods of any specified description in respect
of which DD is claimed, are likely to be smuggled back into India, it may, by notification in the official
gazette, direct that –
a) Duty Drawback shall not be allowed in respect of such goods; or
b) Duty Drawback may be allowed subject to such restrictions and conditions as may be specified.

Problem No:- 7 [Upper limit of drawback and no drawback]

Paresh Ltd. a manufacturer has exported following goods to Brazil. You are required to calculate duty drawback
for these goods based on information given below -
FOB value of exported Market price of goods Duty drawback
Product %
goods (₹.) (₹.)
P 8,70,000 7,20,000 28% of FOB
Q 12,00,000 13,00,000 3% of FOB
R 2,40,000 1,80,000 0.80% of FOB
S 6,00,000 7,00,000 1.20% of FOB
Other information —
1) Imported value of Product Q is ₹.16,00,000.
2) Product S is manufactured out of duty free inputs.
Working notes should form part of your answer.
Solution
Statement showing duty drawback on goods
Product FOB value of Market price Duty Duty Upper Limit Maxi.
exported goods of goods (₹.) drawback% drawback rule 9 (1/3 of D.D.
(₹.) ₹. M.P.)
P 8,70,000 7,20,000 28% of FOB 2,43,600 2,40,000 2,40,000
Q 12,00,000 13,00,000 3% of FOB N.A. N.A. Nil
R 2,40,000 1,80,000 0.80% of FOB 1,920 80,000 1,920
S 6,00,000 7,00,000 1.20% of FOB N.A. N.A. Nil
Comments:
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1) For P - Drawback cannot exceed 1/3rd of market value of goods in India as per Rule 9 of CCE drawback
Rules, 2017.
2) For Q- Duty drawback cannot be claimed if value of output is lesser than value of input as per Rule 9
of CCE Drawback Rules, 2017 and 1st Proviso to section 75(1).
3) For R- Duty drawback can be claimed only if it is more than ₹.50 subject to satisfaction of other
provisions.
4) For S- Import duty paid on inputs is zero. Therefore, drawback cannot be claimed.

Problem No:- 8
Discuss whether any duty drawback is admissible under section 75 in the following cases and if yes, what is
the quantum of such duty drawback:
FOB value of Rate or amount of Market price of Value of imported material
Exported Goods (₹.) drawback Goods (₹.) used in goods (₹.)
(a) 3,000 1.5% of FOB value 3,100 2,500
(b) 2,00,000 40% of FOB value . 1,50,000 1,20,000
(c) (2,000 Kgs.)
₹. 30 per kg. 55,000 40,000
1,00,000
(d) 4,00,000 3.5% of FOB value 4,60,000 4,50,000
(e) 4% of FOB value
4,20,000 4,10,000 *3,00,000
[SBR]
In case of (e), the Central Government has specified a minimum value addition (for rule 6 & 7) to be achieved
@ 40% of imported material in terms of FOB value.
Answer:
The admissibility. or otherwise of duty drawback in the aforesaid cases is discussed hereunder -
(a) Drawback Inadmissible:
Drawback will be inadmissible as the amount thereof is 1.5% of ₹.3,000 i.e. ₹. 45, which is less ₹.50.
(b) Drawback Admissible ₹.50,000:
The amount of drawback i.e. 40% of ₹.2,00,000 i.e. ₹.80,000 shall be restricted to 1/3rd of the Market price
of the goods i.e. 1/3rd of ₹.1,50,000 i.e. ₹.50,000. Hence, the amount of drawback admissible shall be
₹.50,000.
(c) Drawback Inadmissible:
In this case the market price of the goods ₹.55,000 is less than the amount of drawback i.e. 2,000 kgs x
₹.30 i.e. ₹.60,000.
Hence, no drawback shall be allowed.
(d) Drawback Inadmissible:
No drawback shall be allowed in the case, as the export value i.e. FOB value of the goods is less than the
value of imported materials used therein.
(e) Drawback Admissible ₹. 16,800:
Minimum value - addition of 40% of imported material i.e. 40% of ₹. 3 lakh amounts to ₹. 1,20,000. Since
FOB value of the goods is ₹. 4,20,000 i.e. the criteria of minimum value -addition has been achieved, so,
drawback of special brand rate u/r 7 is allowable
= 4% of 4,20,000
= ₹. 16,800

Problem No:-9
CBZ Ltd. has exported following goods to Germany. Write a brief note with reasons whether any duty
drawback is admissible under Section 75 of the Customs Act, 1962 in each of the following cases:
FOB value of Exported Goods Market Price of Goods
Product Duty drawback rate
(Amount in ₹.) (Amount in ₹.)
A 4,30,000 3,50,000 30% of FOB
B 6,00,000 7,00,000 3.50% of FOB
C 1,20,000 60,000 0.75% of FOB
D 3,00,000 3,50,000 1,50% of FOB
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Note:
a) Imported value of Product B is ₹. 8,00,000
b) Product D is manufactured out of duty free inputs.
c) Working notes should form part of the answer
Solution:-
Duty drawback under section 75 of the Customs Act, 1962 -
(1) is allowed on imported materials used in the manufacture of export goods
(2) cannot exceed 1/3rd of the market price of export product under rule 9 of the Customs and Central Excise
duties drawback rules, 2017.

A. Drawback amount =
= 30% of ₹.4,30,000
= ₹.1,29,000
Duty drawback is allowed, but amount is restricted to 1/3rd of ₹.3,50,000
= ₹.1,16,667 (rounded off).

B. No duty drawback is admissible.

Product B is imported and the same product is exported without any manufacturing operation being carried
out on the same. However, in such a case, drawback on Product B may be allowed under section 74 of the
Customs Act, 1962 which allows drawback on re-export of duty-paid good.

C. Duty drawback is admissible.

The amount of drawback
= (₹.1,20,000 x 0.75% = ₹.900)

D. No duty drawback is allowed if exported goods are manufactured out of duty free inputs.

RULE 17 : REPAYMENT OF ERRONEOUS OR EXCESS PAYMENT OF DRAWBACK AND

INTEREST
Where an amount of drawback and interest, if any, has been paid erroneously or the amount so paid is in excess
of what the claimant is entitled to, the claimant shall, on demand by a proper officer of Customs repay the
amount so paid erroneously or in excess, as the case may be, and where the claimant fails to repay the amount
it shall be recovered in the manner laid down in section 142(1) of the Customs Act, 1962.

Section 75 A: Interest on Drawback:

**Specified time
Sr.
Period for payment Rate of Amount on
No Circumstances of which Interest from'
Interest
. drawback and Interest payable
interest
(1) Any drawback payable to One month from the 6% p.a. Amount of The date after expiry
a claimant u / s 74 or 75 is date of filing of drawback of the said period of
not paid within specified drawback claim. remaining unpaid one month till the date
time period**. to the claimant. of payment to the
claimant.
(2) Drawback hasbeen paid to Two months from 15% p.a. Amount of The date of
the claimant erroneously or date of demand of the (Sec.28 drawback payment of such
it becomes otherwise amount of drawback AA) erroneously ' paid drawback to the
recoverable under this Act erroneously paid or to the claimant or claimant till the date
or rules made there under. otherwise recoverable. otherwise of recovery of such
recoverable from drawback from the
him claimant.
Note:

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For recovery of duty drawback, recovery order shall be passed. Drawback shall be recoverable with interest.
Interest shall be payable from the date of payment of drawback till re-payment by exporter. If exporter fails to
payback the erroneous drawback within 2 months, then case shall be forwarded to the Recovery Cell.

Problem No:-10
Calculate the amount of duty drawback (if any) allowable under the Customs Act, 1962 and the rules made
thereunder in the following independent cases:
(i) Hema Ltd. has exported goods worth ₹. 80,000 (FOB value). Rate of duty drawback on such export of goods
is 0.8%.
(ii) High Value Ltd. exported 1,000 kgs. of goods of FOB value of ₹. 1,50,000. Rate of duty drawback on such
export is 50 per kg. Market price of goods is ₹. 48,000 (in wholesale market).
Answer:
(i) ₹. 80,000 x 0.8% = ₹. 640/-
(ii) NIL (because, amount of DD (i.e. ₹. 50,000) exceeds market price of the goods (i.e. ₹. 48,000)].

Problem No:-11
Answer the following with reference to the provisions of the Customs Act, 1962 and rules made thereunder:
(1) Mr. A filed a claim for payment of duty drawback amounting to ₹. 50,000 on 30.07.2020. But the amount
was received on 28.10.2020. You are required to calculate the amount of interest payable to Mr. A on the
amount of duty drawback claimed.
(2) Mr. X was erroneously refunded a sum of ₹. 20,000 in excess of actual drawback on 20.06.2020. The same
was returned to the department on 20.10.2020. You are required to calculate the amount of interest
chargeable from Mr. X.
Provide brief reasons for your answer.
Answer:
(1) Interest payable by Government to Mr. A
= ₹. 50,000 x 6% x 60 Days (30.08.20 to 28.10.20))/365 Days
= ₹. 493

(2) Interest payable by Mr. X to Government

= ₹. 20,000 x 15% x 122 Days (21.06.20 to 20.10.14))/365 Days
= ₹. 1,003

Problem No:-12
Answer the following with reference to the provisions of the Customs Act, 1962 and rules made thereunder:
(1) Sudhakar filed a claim for payment of duty drawback amounting to ₹. 61,500 on 23.07.20XX. However,
the amount was received on 21.10.20XX. You are required to calculate the amount of interest payable to
Sudhakar on the amount of duty drawback claimed.
(2) Lalit was erroneously refunded a sum of ₹. 27,000 in excess of actual drawback on 16.06.20XX. A demand
for recovery of the same was issued by the Department on 24.08.20XX. Lalit returned the erroneous refund
to the Department on 16.10.20XX. You are required to calculate the amount of interest chargeable from
Lalit:
Provide brief reasons for your answer. [MTP, 2018]
Solution:-
(1) Computation of interest payable to Sudhakar on duty drawback claimed
Particulars
Duty drawback claimed ₹. 61,500
No. of days of delay [(23.08.20XX) to (21.10.20XX)] 60 days
Rate of interest 6%
Quantum of interest (rounded off) [₹. 61,500 x 60/365 x
₹. 607
6/100]
Note:

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 Since the claim of duty drawback is not paid to claimant within 1 month from the date of filing such claim,
interest @ 6% per annum is payable from the date after the expiry of the said 1 month period till the date of
payment of such drawback [Section 75A(1) of the Customs Act, 1962].

(2) Computation of interest chargeable from Lalit on excess duty drawback paid
Particulars
Duty drawback erroneously refunded ₹. 27,000
No. of days of delay [17.06.20XX to 16.10.20XX] 122 days
Rate of interest _ 15%
Quantum of interest (rounded off) [₹. 27,000 x 122/365 x 15/100] ₹. 1,354
Note:
Interest is payable by the claimant on erroneous refund of duty drawback @ 15% per annum for the period
beginning from the date of payment of such drawback to the claimant, till the date of recovery of such
drawback [Section 75A(2) of the Customs Act, 1962].

Problem No:-13
Alpha Corporation has imported goods and the following particulars are available for claiming duty drawback
under sections 74 & 75 of Customs Act, 1962:
(i) Custom duty has been paid on goods imported for use and have been out of ₹. 14,00,000
customs control for 14 months
(ii) Baadshah exports manufactured goods having FOB value ₹. 86,000.
Rate of duty drawback on FOB value of exports 40%
Market value of the export product ₹. 96,000
Determine duty drawback with explanations in the above cases
Answer:
(i) As per section 74(2) of Customs Act, 1%2 read with Notification No. 19/65 Cus dated 06.02.1995 as
amended, 65% of import duty is to be paid as duty drawback if goods are used after importation and have
been out of customs control for export for a period of more than 12 months but not more than 15 months.

Therefore, amount of duty drawback

= ₹. 14,00,000 x 65%
= ₹. 9,10,000

Amount of duty drawback

= ₹. 86,000 x 40%
= ₹. 34,400

However, the drawback amount should not exceed one third of the market price of the export product as per
rule 9 of Customs & Central Excise Duties Drawback Rules, 2017.
Thus, upper limit of drawback amount
= ₹. 96,000/3
= ₹. 32,000
Thus, the amount of duty drawback in the present case will be restricted to ₹. 32,000

Problem No:-14
Infinity Corporation has imported goods and the following particulars are available for claiming duty drawback
under section 74 & 75 of Customs Act, 1962:
(a) Custom duty has been paid on goods imported for use and have been out of customs control for 14 months
-₹. 14,00,000
(b) Raghuveer exports manufactured goods having FOB value of ₹. 86,000 Rate of duty drawback on FOB
value of exports - 40%
Market Value of the export product - ₹. 96,000

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 Determine duty drawback with explanations in above cases. [CA Final, May 2018 - Old]
Solution:-
Duty Drawback under Section 74 & 75 of Customs Act, 1962
(a) Custom duty has been paid on goods imported for use and have been out of customs
control for 14 months [sec. 74(2)] @ 65% of Rs 14,00,000 ₹. 9,10,000
(b) Duty Drawback under section 75
FOB value of goods ₹. 86,000
Rate of duty drawback on FOB value of exports 40%
Amount of drawback (40% of ₹.86,000) ₹. 34,400
Or
1/3 of Market Value of goods (1/3 x ₹.96,000) ₹. 32,000
W.E. is lower shall be the amount of duty drawback ₹. 32,000

Problem No:- 15 [Interest on drawback u/s 75A]

Mr. Q filed a claim for payment of duty drawback amounting to ₹.1,00,000 on 30/07/2022. However, the
amount was received on 28/10/2022. You are required to calculate the amount of interest payable to Mr. Q on
the amount of duty drawback claimed.
Solution: Statement showing interest payable to Mr. Q u/s 75A
Particulars
Date of application for duty drawback 30/07/2022
One month from the date of application 30/08/2022
Start of interest period 31/08/2022
End of interest period - Date on which drawback was received 28/10/2022
Total number of days delayed (4 - 3) 60 days
Amount of duty drawback 1,00,000
Rate of interest p.a. 6%
Amount of interest [₹.1,00,000 x 60/365 x 6%] (rounded off) ₹. 986.30/-

Problem No:- 16 [Interest on erroneous drawback u/s 75A]

Mr. Y was erroneously refunded a sum of ₹.40,000 in excess of actual drawback on 20/06/2022. A demand for
recovery of the same was issued by the Department on 28/08/2022. Mr. Y returned the erroneous refund to the
Department on 20/10/2022. You are required to calculate the amount of interest chargeable from Mr. Y.
Solution:- Statement showing interest payable by Mr. Y u/s 75A
Particulars
Date of demand by department for repayment of erroneous drawback 20/06/2022
Repayment of erroneous duty drawback 20/10/2022
Start of interest period 21/06/2022
End of interest period - Date on which drawback was received 20/10/2022
Total number of days delayed (4 - 3) 122 days
Amount of duty drawback 40,000
Rate of interest p.a. 15%
Amount of interest [40,000 x 122/365 x 15%] (rounded off) 2,005/-

ADDITIONAL SOLVED PROBLEM

Problem No:-1
With reference to the Customs & Central Excise Duties Drawback Rules, 2017, briefly state
whether an exporter who has 'already filed a duty draw back claim under All Industry Rates, can
file an application for fixation on special brand rate. [RTP-CA Final -Nov.2019]
Answer.
Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017 provides that application
for Special Brand Rate cannot be made where a claim for drawback under rule 3 or rule 4 has
been made.
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 In other words, where the exporter has already filed a duty drawback claim under All Industry
Rates (AIR) Schedule, he cannot request for fixation of Special Brand Rate of drawback. Thus, the
exporter should determine prior to export of goods, whether to claim drawback under AIR or
Special Brand Rate.
Problem No:-2
Discuss whether any duty drawback is admissible under section 75 in the following cases and if
yes, what is the quantum of such duty drawback:
Value of imported
FOB value of Exported Rate or amount of Market price of
material used in
Goods (₹.) drawback Goods (₹.)
goods (₹.)
(a) 3,000 1.5% of FOB value 3,100 2,500
(b) 2,00,000 40% of FOB value 1,50,000 1,20,000
(c) (2,000 Kgs.)1,00,000 ₹. 30 per kg. 55,000 40,000
(d) 4,00,000 3.5% of FOB value 4,60,000 4,50,000
4% of FOB value
(e) 4,20,000 4,10,000 *3,00,000
[SBR]
*In case of (e), the Central Government has specified a minimum value addition (for rule 6 & 7)
to be achieved @ 40% of imported material in terms of FOB value.
Answer:
The admissibility or otherwise of duty drawback in the aforesaid cases is discussed hereunder -
(a) Drawback Inadmissible:
Drawback will be inadmissible as the amount thereof is 1.5% of 3,000 i.e. ₹. 45, which is less ₹.50.
(b) Drawback Admissible ₹.50,000:
The amount of drawback i.e. 40% of ₹.2,00,000 i.e. ₹.80,000 shall be restricted to 1/3rd of the
Market price of the goods i.e. 1/3rd of ₹.1,50,000 i.e. ₹.50,000. Hence, the amount of drawback
admissible shall be ₹.50,000.
(c) Drawback Inadmissible:
In this case the market price of the goods ₹.55,000 is less than the amount of drawback i.e. ₹.2,000
kgs x ₹.30 i.e. ₹.60,000. Hence, no drawback shall be allowed.
(d) Drawback Inadmissible:
No drawback shall be allowed in the case, as the export value i.e. FOB value of the goods is less
than the value of imported materials used therein.
(e) Drawback Admissible ₹.16,800:
Minimum value - addition of 40% of imported material i.e. 40% of ₹.3 lakh amounts to ₹.1,20,000.
Since FOB value of the goods is ₹.4,20,000 i.e. the criteria of minimum value - addition has been
achieved, so, drawback of special brand rate u/r 7 is allowable = 4% of ₹.4,20,000 = ₹.16,800.
Problem No:-3
CBZ Ltd. has exported following goods to Germany. Write a brief note with reasons whether any
duty drawback is admissible under Section 75 of the Customs Act, 1962 in each of the following
cases:
FOB value of Exported Market Price of Duty drawback
Product
Goods (Amount in ₹.) Goods (₹.) rate
A 4,30,000 3,50,000 30% of FOB
B 6,00,000 7,00,000 3.50% of FOB
C 1,20,000 60,000 0.75% of FOB
D 3,00,000 3,50,000 1,50% of FOB
(236)
 Note:
a) Imported value of Product B is ₹.8,00,000
b) Product D is manufactured out of duty free inputs.
c) Working notes should form part of the answer.
Answer:
Duty drawback under section 75 of the Customs Act, 1962 -
(i) is allowed on imported materials used in the manufacture of export goods
(ii) cannot exceed 1/3rd of the market price of export product under rule 9 of the Customs and Central
Excise duties drawback rules, 2017.
A. Drawback amount = 30% of ₹.4,30,000 = ₹.1,29,000 Duty drawback is allowed, but amount is
restricted to 1/3rd of ₹.3,50,000 = ₹.1,16,667 (rounded off).
B. No duty drawback is admissible. Product B is imported and the same product is exported without
any manufacturing operation being carried out on the same. However, in such a case, drawback on
Product B may be allowed under section 74 of the Customs Act, 1962 which allows drawback on
re-export of duty-paid good.
C. Duty drawback is admissible.
The amount of drawback = (₹.1,20,000 x 0.75% = ₹.900).
D. No duty drawback is allowed if exported goods are manufactured out of duty free inputs.
Problem No:-4
Calculate the amount of duty drawback (if any) allowable under the Customs Act, 1962 and the
rules made there under in the following independent cases:
(i) Hema Ltd. has exported goods worth ₹.80,000 (FOB value). Rate of duty drawback on such export
of goods is 0.8%.
(ii) High Value Ltd. exported 1,000 kgs. of goods of FOB value of ₹.1,50,000. Rate of duty drawback
on such export is 50 per kg. Market price of goods is ₹.48,000 (in wholesale market).
Answer:
(i) ₹.80,000 x 0.8% = ₹.640/-
(ii) NIL (because, amount of DD (i.e. ₹.50,000) exceeds market price of the goods (i.e. ₹.48,000)].
Problem No:-5
Answer the following with reference to the provisions of the Customs Act, 1962 and rules made
there under:
(1) Mr. A filed a claim for payment of duty drawback amounting to ₹.50,000 on 30.07.2022. But the
amount was received on 28.10.2022. You are required to calculate the amount of interest payable
to Mr. A on the amount of duty drawback claimed.
(2) Mr. X was erroneously refunded a sum of ₹.20,000 in excess of actual drawback on 20.06.2022.
The same was returned to the department on 20.10.2022. You are required to calculate the amount
of interest chargeable from Mr. X.
Provide brief reasons for your answer.
Answer:
(1) Interest payable by Government to Mr. A
= ₹.50,000 x 6% x 60 Days (30.08.22 to 28.10.22))/365 Days
= ₹.493
(2) Interest payable by Mr. X to Government
= ₹.20,000 x 15% x 122 Days (21.06.22 to 20.10.22))/365 Days
= ₹.1,003
Problem No:-6

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 Answer the following with reference to the provisions of the Customs Act, 1962 and rules made
there under:
(1) Sudhakar filed a claim for payment of duty drawback amounting to ₹.61,500 on 23.07.20XX.
However, the amount was received on 21.10.20XX. You are required to calculate the amount of
interest payable to Sudhakar on the amount of duty drawback claimed.
(2) Lalit was erroneously refunded a sum of ₹. 27,000 in excess of actual drawback on 16.06.20XX. A
demand for recovery of the same was issued by the Department on 24.08.20XX. Lalit returned
the erroneous refund to the Department on 16.10.20XX. You are required to calculate the amount
of interest chargeable from Lalit.
Provide brief reasons for your answer. [MTP - May 2018]
Answer:
(1) Computation of interest payable to Sudhakar on duty drawback claimed:
Particulars ₹.
Duty drawback claimed ₹. 61,500
No. of days of delay [23.08.20XX to 21.10.20XX] 60 days
Rate of interest 6%
Quantum of interest (rounded off) [₹. 61,500 x 60/365 x 6/100] ₹. 607
Note:
Since the claim of duty drawback is not paid to claimant within 1 month from the date of filing such
claim, interest @ 6% per annum is payable from the date after the expiry of the said 1 month
period till the date of payment of such drawback [Section 75A(1) of the Customs Act, 1962].
(2) Computation of interest chargeable from Lalit on excess duty drawback paid
Particulars
Duty drawback erroneously refunded ₹. 27,000
No. of days of delay [17.06.20XX to 16.10.20XX] 122 days
Rate of interest 15%
Quantum of interest (rounded off) [₹. 27,000 x 122/365 x 15/100] ₹. 1,354
Note:
Interest is payable by_ the claimant on erroneous refund of duty drawback @ 15% per annum for
the period beginning from the date of payment of such drawback to the claimant, till the date of
recovery of such drawback [Section 75A (2) of the Customs Act, 1962].
Problem No:-7
Alpha Corporation has imported goods and the following particulars are available for claiming duty
drawback under sections 74 & 75 of Customs Act, 1962:
(i) Custom duty has been paid on goods imported for use and have ₹. 14,00,000
been out of customs control for 14 months
(ii) Baadshah exports manufactured goods having FOB value ₹. 86,000

Rate of duty drawback on FOB value of exports 40%

Market value of the export product ₹. 96,000
Determine duty drawback with explanations in the above cases.
Answer:
(i) As per section 74(2) of Customs Act, 1962 read with Notification No. 19/65 Cus dated 06.02.2015
as amended, 65% of import duty is to be paid as duty drawback if goods are used after importation
and have been out of customs control for export for a period of more than 12 months but not
more than 15 months. Therefore, amount of duty drawback = ₹. 14,00,000 x 65% = ₹. 9,10,000

(238)
 Amount of duty drawback = ₹. 86,000 x 40% = ₹. 34,400
However, the drawback amount should not exceed one third of the market price of the export
product as per rule 9 of Customs & Central Excise Duties Drawback Rules, 2017.
Thus, upper limit of drawback amount = ₹. 96,000/3 = ₹. 32,000
Thus, the amount of duty drawback in the present case will be restricted to ₹. 32,000
Problem No:-8
M/S. RIL Ltd. claimed duty drawback in respect of its export products. Over 97% of the inputs by
weight of the product were procured indigenously and were not excisable. All Industry Rates
under the Customs & Central Excise Duties Drawback Rules, 1995 were fixed taking into account
the incidence of customs duty on imported inputs.
Explain briefly with reference to clause (ii) of second proviso to rule 3 of the said rules whether the
claim of M/s. RIL will merit consideration by the authorities. [MTP, May 2019]
Solution:-
Clause (ii) of second proviso to rule 3(c) of the Customs and Central Excise Duties Drawback Rules,
2017 inter alia provides that no drawback shall be allowed if the exported goods have been produced
or manufactured using imported materials or excisable materials or taxable service in respect of
which duties or taxes have not been paid.
Problem No:-9
Infinity Corporation has imported goods and the following particulars are available for claiming
duty drawback under section 74 & 75 of Customs Act, 1962:
(a) Custom duty has been paid on goods imported for use and have been out of customs control for 14
months - ₹.14,00,000
(b) Raghuveer exports manufactured goods having FOB value of ₹. 86,000 Rate of duty drawback on
FOB value of exports - 40%
Market Value of the export product - ₹. 96,000
Determine duty drawback with explanations in above cases. [CA Final, May 2018 - Old]
Solution:
Duty Drawback under Section 74 & 75 of Customs Act, 1962
(a) Custom duty has been paid on goods imported for use and have been out of customs control for 14
months [sec. 74(2)] @ 65% of ₹.14,00,000 ₹. 9,10,000
(b) Duty Drawback under section 75
FOB value of goods ₹. 86,000
Rate of duty drawback on FOB value of exports 40%
Amount of drawback (40% of ₹.86,000) ₹. 34,400
OR
1/3 of Market Value of goods (1/3 x ₹.96,000) ₹. 32,000
W.E. is lower shall be the amount of duty drawback ₹. 32,000

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