Valuing Imported Goods Under Section 14: Rule 10 Adjustments, Rule 12 Doubts and the Duty Build-Up

This article explains how the assessable value of imported goods is arrived at under Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, how basic customs duty (BCD), Social Welfare Surcharge (SWS) and IGST follow from that value, and what happens when the declared value is questioned.

An importer's invoice figure is rarely the value on which duty is paid. Adjustments under Rule 10, the way IGST is computed on a base that already includes duty, and the possibility of rejection under Rule 12 mean that valuation errors are multiplied through the whole duty computation. No notification or date-specific event is involved; the provisions discussed are in force.

The governing provision

Under Section 14, where goods are sold for export to India, the value is the transaction value, being the price actually paid or payable for the goods, subject to prescribed conditions and adjustments. Amounts for transport, insurance, loading, unloading and handling may need to be included as specified in the Valuation Rules. The invoice figure is therefore not automatically the customs value.

In Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai, (2001) 1 SCC 315; 2000 (122) ELT 321 (SC), the Supreme Court emphasised the price actually paid or payable for the particular transaction, and held that the subsequent valuation methods come into play only when the transaction value is not acceptable under the Rules.

Rule 3 gives primary importance to the transaction value. Subject to Rule 12, the value is the transaction value adjusted under Rule 10. If it cannot be applied, Rules 4 to 9 apply in sequence.

Rule 10 adjustments

The following are added where they are not already included in the price: