Levy, Assessment of Duty & Valuation of Goods; Dutiable Goods — Law of Taxation Notes

Levy, Assessment of Duty & Valuation of Goods; Dutiable Goods

Two identical televisions are imported — one declared at ₹10,000, one at ₹30,000. If duty is a percentage of value, the importer has every incentive to under-declare. The valuation rules of the Customs Act exist to stop exactly that, by fixing what “value” the duty is charged on. Get valuation right and you have the base of the whole customs charge.

Levy, dutiable goods, and valuation

A. The charge — s.12 (the charging section). Customs duty is levied on goods imported into, or exported from, India at the rates specified in the Customs Tariff Act, 1975. Import duty is the main revenue; export duty is levied only on a few items.

Section 12(1): “Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 … on goods imported into, or exported from, India.”

B. Dutiable goods — s.2(14). “Dutiable goods” means any goods chargeable to duty and on which duty has not been paid. The taxable event for import duty is the crossing of the customs barrier (for home consumption, when the bill of entry is filed / goods cleared).

C. Types of customs duties: Basic Customs Duty (BCD); IGST on imports (Unit IV) plus GST compensation cess; anti-dumping duty and safeguard duty (to protect domestic industry); protective duty. The old additional/countervailing duties were largely subsumed by IGST.

D. Valuation of goods — s.14. Duty (where ad valorem) is charged on the value, which is the transaction value — the price actually paid or payable for the goods when sold for export to India (for imports) / from India (for exports), at the time and place of importation/exportation, where buyer and seller are unrelated and price is the sole consideration. To it are added freight, insurance and landing charges (CIF value for imports). Where the transaction value cannot be accepted (related parties, under-valuation), it is determined under the Customs Valuation Rules by prescribed methods (identical goods, similar goods, deductive, computed, residual).

E. Assessment (s.17). Import/export is now on self-assessment — the importer/exporter assesses the duty in the bill of entry/shipping bill; the proper officer may verify and re-assess. Provisional assessment (s.18) is allowed where duty cannot be finally determined (e.g. valuation pending).

The Format (pro-forma)

Learn this skeleton first, then see it applied below. XXXX stands for a figure; amounts in brackets (XXXX) are subtracted. Duty is built up on the assessable (CIF) value.

Format — Computation of Assessable Value & Customs Duty (ss.14, 12)

🧩 WORKED EXAMPLE — Computing import duty on transaction value

Facts. Goods are imported at an invoice price of ₹1,00,000 (FOB); freight ₹10,000; insurance ₹1,000; basic customs duty 10%.

Rule. Assessable value under s.14 = CIF value (price + freight + insurance + landing charges); BCD is charged on that value.

Apply.

• Assessable value = 1,00,000 + 10,000 + 1,000 = ₹1,11,000
• Basic customs duty at 10% = ₹11,100 (IGST and cess, where applicable, are then charged on value + BCD)

Conclusion. Duty is charged on the CIF transaction value (₹1,11,000), not the bare invoice — which is why freight and insurance are added, and why under-declaration is policed under the Valuation Rules.

In Simple Terms: Customs duty is charged on goods crossing the border (s.12), at the rates in the Customs Tariff Act, on “dutiable goods” (s.2(14)). Where duty is a percentage, it is charged on the transaction value (s.14) — the real price paid, plus freight and insurance (CIF). Importers self-assess (s.17), and officers can verify and re-assess.

flowchart TD
    ROOT["Customs duty"]:::root
    ROOT --> A["Charge s.12<br/>on goods imported/exported, Tariff Act rates"]:::leaf
    ROOT --> B["Dutiable goods s.2(14)<br/>chargeable + duty unpaid"]:::leaf
    ROOT --> C["Valuation s.14<br/>transaction value = price + freight + insurance (CIF)"]:::leaf
    ROOT --> D["Assessment s.17 self-assessment<br/>(officer may verify/re-assess); s.18 provisional"]:::leaf
    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

Case Laws

• Garden Silk Mills Ltd. v Union of India (1999) — import is complete, and the taxable event occurs, when the goods cross the customs barrier and are cleared for home consumption.
• Eicher Tractors Ltd. v Commissioner of Customs (2000) — the transaction value must ordinarily be accepted unless it falls within the exceptions in the valuation rules.

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