Customs duty on replacement

7874 views 3 replies

Vijay

Manager

25 Points Joined October 2008

Hi All, we are doing re-selling biz of imported high end RFID readers. We have warranty for all our import purchases, whereby for all defective goods, within warranty period, the supplier either replaces or repairs the readers, if we send it to them. We send the items for repair/replacement under our export invoice, along with GR waiver (Guaranteed Remittance waiver) from our bank, that the export transaction does not involve any commercial value or any forex payment/receipt by us. We obtain export certificate for such export. We don't claim any duty refund for sending back the goods on which we have paid duty when we originally imported. When the shipment received back from supplier, either after repair or replacement, we always used to get it cleared from customs with duty being levied only on the freight and insurance portion and not on the actual value of the readers sent.

This time around Customs is asking us to pay duty on the original value also, as they are "replacements" and not "repair". In the past also we have got "replacements", but in those cases, the export certificate didn't mention the serial no./unique id of the reader sent. Recently customs made it compulsory (I leanr that it was always mandatory, but but we were never asked nor we showed it earlier). Obviously, the replaced readers' serial no./unique id doesn't match with what we sent. And my suppliers' zero value invoice clearly shows that these are replacements uner warranty. And I learn, as per customs rules/regulations, they will have to charge for replacements. That's how they interpret.

So, I met the officer directly to present my case. He was sympathetic to our case, he understood our situation, but said rules are rules. He asked us to file the papers and he'd scrutinize for availability any exemption available in this matter. I'd like to know if there any specific rules/notifications/circulars which exempts levy on the orginal value of the replacement items.

It is a like for like replacement of the whole reader and not any parts in it. We are not an STP or an SEZ unit.

Replies (3)

RAMESH KUMAR VERMA

CS PURSUING

43853 Points Joined December 2009

Notification No. 80-Cus., dated 29-8-1970

free warranty - articles supplied as replacement for defective ones

In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts articles and component parts thereof, when imported respectively for the replacement of defective articles or of component parts thereof, from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), and from the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act, subject to the following conditions, namely :-

(i) the defective articles were brought into India earlier from places outside India and are private personal properties of the importer;

(ii) the articles or component parts thereof, as the case may be, are imported within the warranty period and are supplied free of charge by the foreign manufacturer in terms of the warranty given by the manufacturer in accordance with the established trade practice pertaining to the articles;

(iii) the repairs including replacement of the defective parts are done free of charge by the manufacturer through his agent or branch in India;

and

(iv) the defective articles or component parts thereof if not re-exported, are destroyed, or surrendered to the Customs.

Notification No. 80-Cus., dated 29-8-1970 as amended by Notification No. 129/86-Cus., dated 17-2-1986.

Vijay

Manager

25 Points Joined October 2008

Thanks Mr. Ramesh.....

In our case, the items are not "for personal use" but is part of our inventory. The replacement is done as a part of warranty and normal trade practice. But it is done by supplier directly from Italy and not through his agent in Inda (there are no agents for supplier in India). The defective items have been re-exported to supplier already. In this scenario, can we still claim exemption from customs and additional duty?