The ABCs Of Assessable Value Under The Customs Act

MCQ SELF CHALLENGE #0098 ON ASSESSABLE VALUE AS PER CUSTOMS ACT

Assessable Value as per Customs Act

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Welcome once again to the informative quizzes of top chartered accountant firm in India. Here is the Next post of #MCQ on concept-based practical professional knowledge on Assessable Value as per Customs Acting in a unique manner to be self-answered by participants. The detailed answer to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 98.1: A Company has imported machinery worth Rs 150 Crore for the manufacture of Air Conditioners: The Cost of Royalty and Production fees (worth RS 20 Crore) was included in the goods. Concerning the Assessable Value of customs duty on the same answer the following question.

A. The assessable value on which customs duty is payable is Rs 130 Crore.

B. The assessable value on which customs duty is payable is Rs 150 Crore.

C. Assessable Value on which customs duty is payable is 75 Crore

D. None of the Above

MCQ 98.2: If in the above case, Company had paid its 130 Crore with no hidden cost. But Technical Know Charges (Rs 20 Crore) are incurred by the company after the installation of Machinery.

A. Assessable Value on which customs duty is payable is 130 Crore.

B. Assessable Value on which customs duty is payable is Rs 150 Crore.

C. Assessable Value on which customs duty is payable is 75 Crore

D. None of the Above

Answer MCQ Self Challenge #0098

This post of MCQ is on provisions relating Assessable Value of Customs Duty.

Answer MCQ 98.1:

B) Assessable Value on which customs duty is payable is Rs 150 Crore

Practical Analysis of MCQ 98.1:

• As per Custom Valuation (Determination of Value of Imported Goods) Rule 2007 Rule 10 (c). Royalty and License fees are added to the transaction value of the imported goods only when the following conditions are satisfied-

1. Such Royalties of License fees are related to the imported goods

2. The buyer is required to pay the same as a condition of the sale of the goods being valued In the above case royalties and license fees are related to the imported goods and can be directly identified. Royalty fees for the Manufacture of AC and license to operate the same directly form a part of the product.

• Based on the above Analysis: Answer to MCQ 9.1: B) The Assessable Value on which customs duty is payable is Rs 150 Crore.

Answer MCQ 98.2:

A) Assessable Value on which customs duty is payable is 130 Crore.

Practical Analysis of MCQ 98.2:

• In Commissioner of Customs. Chennai Versus M/s. Denso Kirloskar Industries Pvt Ltd Supreme Court held that the Cost of Technical Knowhow having been incurred post-implementation in relation to the manufacture of Machinery will not be added to arrive at the assessable value of the components raw material imported for the said manufacture
• The assesse imported machinery components to manufacture air conditioners and for the same, it entered into a technical know-how arrangement with a foreign company and paid fee as consideration
• It was held that the know-how fee paid would not be added to arrive at the assessable value of imported machinery components since technical information was provided by the foreign company after the components were imported and the plant for the production of air conditioners was set up. Also, the said know-how fee is related to the installed product and not the imported components

Based on the above Analysis. Answer to MCQ 98,1: A) The Assessabile Value on which customs duty is payable is Rs 130 Crore.

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different Please do not treat this as professional opinion you can definitely have your own opinion)

Sincere Regards!

CA Sarjay Kumar Agrawal

Mobile: 9810116321