PRACTICAL PROBLEM

Q 8 ‘A’ imports by air from USA a Gear cutting machine complete with accessories and spares. Its HS classification is 84.6140 and Value US $ f.o.b. 20,000. - - Other relevant date/information: (1) At the request of importer, US $ 1,000 have been incurred for improving the design, etc. of machine, but is not reflected in the invoice, but will be paid by the party. (2) Freight - US $ 6,000. (3) Goods are insured but premium is not shown/available in invoice. (4) Commission to be paid to local agent in India Rs. 4,500. (5) Freight and insurance from airport to factory is Rs. 4,500. (6) Exchange rate is US $ 1 = Rs. 45. (7) Duties of Customs : Basic – 20% CVD – 16% Education cess on duty – 2%. Special CVD under section 3(5) of Customs Tariff Act is applicable. - - Compute (i) Assessable value (ii) Customs duty. How much Cenvat can be availed by importer, if he is manufacturer? [ICWA Inter December 2002 adapted]

Answer 8 (i) Computation of Assessable Value

FOB Value of Machine US $	$	20,000
Add: Expenditure for improving design	$	1,000
Add - Freight limited to 20% of FOB [Rule 9 (2)]	$	4,000
Insurance @ 1.125% of FOB [Rule 9(2)c(iii)]	$	225
Sub-Total	$	25,225
Sub-Total In Rs @ Rs 45 per Rupee			Rs	11,35,125
Add - Agents Commission [Rule 9(1)(i)]			Rs	4,500
Total CIF Value			Rs	11,39,625
Add – Landing charges 1% of CIF			Rs	11,396
Assessable Value			Rs	11,51,021

Duty payable will be as follows –

Calculation of duty payable is as follows -
		Duty Rate %	Amount Rs	Duty Rs
(A)	Assessable Value Rs		1,151,021.00
(B)	Customs Duty	20		230,204.20
(C)	Sub-total for calculating CVD (A+B)		1,381,225.20
(D)	CVD as % of C	16		220,996.03
(E)	Education cess of excise - 2% of 'D'	2		4,419.92
(F)	Sub-total for calculating Edu Cess (B+D+E)		455,620.15
(G)	Education Cess of Customs (2% of 'F')	2		9,112.40
(H)	Sub-total for Special CVD (C+D+E+G)		1,615,753.55
(I)	Special CVD (4% of 'H')	4		64,630.14
(J)	Total Duty Rs B+D+E+G			529,362.69
(K)	Total duty (rounded)			529,363.00