Customs valuation mechanism upheld where assessable value includes customs duty and no separate tax is created.

Entry 83 of the Seventh Schedule authorises Parliament to legislate on duties of customs, including export duties. Section 3(1) of the Customs Tariff Act, 1975 is the charging provision for countervailing duty, while Section 3(2) operates only as a valuation mechanism by prescribing how assessable value is determined with reference to Section 14(1) of the Customs Act and the basic customs duty paid. The provision was treated as a computational measure, not a separate tax, so the objections based on lack of legislative competence and impermissible tax on tax failed. Section 3(2) was upheld.

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Issues: Whether Section 3(2) of the Customs Tariff Act, 1975 was beyond legislative competence under Entry 83 of the Seventh Schedule to the Constitution of India and invalid on the ground that it amounted to tax on tax or impermissible double taxation.

Analysis: Entry 83 of the Seventh Schedule authorises Parliament to legislate in respect of duties of customs, including export duties. Section 3(1) of the Customs Tariff Act, 1975 is the charging provision for countervailing duty, while Section 3(2) only prescribes the method of determining assessable value by taking into account the value under Section 14(1) of the Customs Act and the basic customs duty paid. The provision was therefore treated as a measure for computation and not as a separate charging section. The challenge based on tax on tax and lack of competence was rejected on the ground that Parliament could validly prescribe the method of valuation and include customs duty in the assessable value.

Conclusion: The challenge to Section 3(2) of the Customs Tariff Act, 1975 failed; the provision was upheld and the petition was dismissed.

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