Air freight valuation must be capped at 20% of FOB value when transport cost is ascertainable

Where imported goods were shipped by air and the freight component was separately ascertainable from the invoice, purchase order and airway bills, the Customs Valuation Rules required freight to be capped at 20% of FOB value under Rule 9(2). The lower authorities erred by treating the invoice as CIF value and by ignoring the proviso that applies when transport cost can be determined. The separate mention of insurance in the documents did not prevent application of the valuation rule, because the cost of transport remained capable of proper ascertainment. The valuation adopted below was therefore set aside and the assessee's claim was accepted.

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Issues: Whether, in the case of goods imported by air, the freight component was required to be restricted to 20% of the FOB value under Rule 9(2) of the Customs Valuation Rules, 1988, where the actual freight was ascertainable and shown separately in the documents.

Analysis: The invoice, purchase order and airway bills disclosed the freight and insurance amounts separately, and the cost of transport was ascertainable. The lower authorities erred in treating the invoice value as CIF and in ignoring the proviso to Rule 9(2), which limits air freight to 20% of FOB value where the transport cost can be determined. The presence of insurance in the invoice did not justify denial of the rule's application, since the documents still enabled a proper valuation exercise under the rule.

Conclusion: The freight was required to be limited to 20% of FOB value, and the assessee's claim was accepted.

Final Conclusion: The valuation adopted by the lower authorities was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the cost of air transport is ascertainable, freight must be restricted in accordance with the statutory cap under Rule 9(2), and the invoice being described as CIF does not override that valuation rule.

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