At the time of import of goods, in addition to basic customs duty, an additional duty of customs (CVD) is also levied among various other duties.

Since the CVD is equal to duties of excise on the similar products, the value to determine CVD is calculated in the same manner in which the value if determined under the provisions of Central Excise.

In central Excise, there are three main provisions to determine the value of manufactured goods:

a.       Transaction Value - Section 4

b.      MRP based value - Section 4A

 

In addition, in certain cases, central government specifies certain goods shall be chargeable to central excise on the basis of Tariff Value under section 3(2) of the Central Excise Act, 1994. Therefore, where the tariff value under central excise has been declared, the transaction value or MRP based valuation become redundant.

Now, in case of readymade garments, central government has notified tariff value for the purpose of calculation of the central excise duty. Incidentally the tariff value in case of readymade garments is similar to MRP based value. But the provisions and basics are different altogether.

Since the tariff value for readymade garments resembles with the MRP based valuation, the confusion arouse that whether CVD would be calculated as per tariff value declared under central excise or as per transaction value under central excise.

To clarify this issue, CBEC has issued a Circular No.17/2008-Customs dated 21-10-2008, stating that for the purpose of CVD, value is to be determined on the basis of Transaction Value in case of Garments.

But, we feel that CBEC forget the mention that PAN Masala is also subject to Tariff Value based excise duty and the above principal is equally applicable to import of PAN Masala also.

CVD valuation: transaction value governs calculation for imported garments, with tariff-value applicability for other goods noted. Calculation of the additional duty of customs (CVD) follows central excise valuation methods: primarily Transaction Value or MRP-based valuation, but a notified Tariff Value under section 3(2) governs excise valuation for specified goods. A tariff value notified for readymade garments raised uncertainty; a circular clarified CVD for garments must be determined on the basis of Transaction Value. The same principle is noted as applicable where tariff-value-based excise duty is prescribed for other goods, such as pan masala.