Valuation of Goods under the Customs Act, 1962

The Customs Act, 1962 governs the import and export of goods in India and provides the legal framework for the valuation of goods for the purposes of calculating customs duties. Valuation of goods is a critical aspect of customs procedures, as it directly influences the amount of customs duty that an importer or exporter has to pay. The valuation process determines the assessable value of the goods, which forms the basis for the calculation of various duties, such as basic customs duty, countervailing duties, and other charges. 

Valuation of Goods under Section 14 of the Customs Act, 1962

Section 14 of the Customs Act, 1962, lays down the foundation for the valuation of goods for the purposes of levying customs duties. It mandates that the value of imported or exported goods shall be determined based on the transaction value. The transaction value is the price actually paid or payable for the goods when sold for export to India, for delivery at the time and place of importation. Similarly, for export goods, the transaction value refers to the price paid or payable for goods sold for export, delivered at the time and place of exportation.

For the purposes of this provision, the buyer and the seller of the goods should not be related, and the price should be the sole consideration for the sale. If the buyer and seller are related, or the price is not the sole consideration, other methods of valuation as prescribed by the Customs Act will be used. The transaction value, in such cases, includes not only the sale price but also additional amounts paid or payable for services and costs, including:

• Commissions and brokerage
• Engineering and design work
• Royalties and licence fees
• Transportation costs
• Insurance
• Loading, unloading, and handling charges

These additional charges must be factored into the assessable value of the goods as per the provisions of Section 14. This ensures that all costs associated with the importation or exportation of goods are included in the determination of customs duties.

Further, Section 14 also empowers the Central Board of Indirect Taxes and Customs (CBIC) to fix tariff values for certain imported goods. This is typically done when the transaction value is difficult to ascertain or when there is significant fluctuation in the market prices of goods. In such cases, the duty will be charged based on the fixed tariff values rather than the transaction value.

Date for Determination of Rate of Duty and Tariff Valuation (Section 15)

The determination of the rate of duty and tariff valuation for imported goods is governed by Section 15 of the Customs Act. The rate of duty applicable to imported goods is determined based on the date on which a bill of entry is presented for home consumption. In cases where the goods are cleared from a warehouse, the bill of entry for home consumption determines the date for the rate of duty and tariff valuation.

However, in instances where the bill of entry is presented before the entry inwards of the vessel or the arrival of the aircraft carrying the goods, the bill of entry will be deemed to have been presented on the date of entry inwards or the date of arrival of the goods. This provision ensures that the rate of duty and tariff valuation is determined based on the actual date of importation and not the date on which the documentation is filed.

For export goods, the rate of duty and tariff valuation is determined on the date when the proper officer permits the clearance and loading of goods for exportation. The applicable rate of duty and tariff valuation is thus linked to the date of exportation rather than the date of documentation.

Determination of Rate of Duty for Export Goods (Section 16)

The rate of duty and tariff valuation for export goods is governed by Section 16 of the Customs Act. Similar to the provisions for imported goods, the rate of duty for export goods is determined based on the date when the proper officer permits clearance for export. The provision also mentions that, for export goods, the rate and valuation in force at the time of clearance for exportation shall apply.

This provision plays a significant role in determining the correct rate of duty applicable to goods being exported from India. It helps in establishing consistency and predictability in the application of customs duties for export goods, which is crucial for businesses involved in international trade.

Assessment of Duty (Section 17)

After the importer has entered the goods under Section 46 or the exporter has entered the goods under Section 50, the imported or export goods may be subjected to examination and testing by the proper officer. The proper officer is empowered to assess the duty that is leviable on the goods after such examination and testing. This procedure ensures that the duty imposed on the goods is based on accurate and verified information about the goods in question.

The proper officer may require the importer or exporter to produce documents such as contracts, broker’s notes, insurance policies, catalogues, or other documents to ascertain the correct value of the goods and, consequently, the duty payable. If it is found that the value declared by the importer or exporter is not accurate, the goods may be re-assessed based on the information obtained during the examination or testing.

In cases where the importer or exporter disagrees with the assessment made by the proper officer, they have the right to contest the assessment and request a speaking order. The proper officer is required to issue a speaking order within 15 days from the date of assessment, providing the reasoning behind the duty assessment.

Provisional Assessment of Duty (Section 18)

In cases where the importer or exporter is unable to provide the necessary documents or information for the assessment of duty, or if the proper officer requires additional tests for the goods, the provisional assessment of duty can be carried out. Under Section 18, the proper officer may assess the duty provisionally pending the submission of further documents, completion of tests, or additional enquiries.

To ensure that the government is not at a loss in cases where the final duty assessment is higher than the provisional assessment, the importer or exporter is required to furnish security for the payment of any deficiency in duty. Once the duty is finally assessed, the excess or deficient duty paid is adjusted accordingly. If the duty paid is found to be in excess, the importer or exporter is entitled to a refund of the excess amount.

Interest is also payable on the amount due under the final assessment, from the first day of the month in which the duty is provisionally assessed until the date of payment. This provision ensures that both the government and the importer/exporter are protected in cases of provisional assessments.

Determination of Duty Where Goods Consist of Articles Liable to Different Rates of Duty (Section 19)

Section 19 of the Customs Act provides guidelines for determining the duty where goods consist of a set of articles that are liable to different rates of duty. In such cases, the duty is calculated based on the following principles:

• Articles liable to duty based on quantity are charged duty accordingly.
• Articles liable to duty based on value are charged at the highest rate if they are subject to different rates of duty.
• Accessories, spare parts, and maintenance implements are charged the same rate as the primary article to which they belong.
• If the importer provides proof regarding the value of the articles, each article can be charged duty separately at the applicable rate.

This provision is crucial for determining the correct duty when goods consist of multiple components, each subject to different duty rates. It ensures that the duty is accurately calculated based on the individual characteristics of each article in the set.

Conclusion

The valuation of goods under the Customs Act, 1962, plays a pivotal role in the calculation of customs duties and the regulation of trade in India. The provisions outlined in the Act ensure that goods are valued accurately, and the appropriate duties are levied based on the transaction value or other prescribed methods. Understanding the legal framework for valuation, including the relevant sections and rules, is essential for importers, exporters, and customs officers alike. The proper assessment of duty helps to maintain fairness in international trade, protect domestic industries, and generate revenue for the government.

The procedures outlined in Sections 14 to 19 of the Customs Act provide a comprehensive mechanism for the valuation of goods, addressing issues related to the determination of transaction value, the rate of duty, provisional assessments, and the duty on goods consisting of multiple articles. As trade practices evolve and global markets become more complex, these provisions remain critical to ensuring transparency and consistency in the import-export process.