TaxTMI 
TaxTMI 
2023 (1) TMI 1520
X X X X Extracts X X X X
X X X X Extracts X X X X
....res namely "Laterite" ("subject goods") under customs tariff item 26060090 and has IEC No. 1112005048. The applicant has sought advance ruling on the method of computation of transaction value of export of goods and calculation of Export duty thereon. 2. The applicant, in their original CAAR-1 application has stated that they propose to export items such as Red & Yellow Ochre, White Clay China Clay, Red Oxide, Bauxite, Laterite, Black Carbon, Iron Ore etc., falling under the Customs tariff of export items. It is submitted that the applicant is an exporter of laterite and major countries of exports is Nepal through various Land Customs Station across Indo-Nepal border of Uttar Pradesh. The preliminary hearing for admission of the application was held online on 09.11.2022 which was attended by S/shri Manas Chugh (CA), Rajnish Kumar (CA) and Shri Sham Bansal. Mistake/misrepresentation at serial no. 6 of the CAAR-1 was brought to the notice of applicant/representatives. They agreed to rectify their statement/data at sl. No.6 of CAAR-1 and after correcting the application only, the next hearing date would be decided. The rectified CAAR-1 was submitted on 15.11.2022 wherein they made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f exported goods, as there is nothing mentioned in case of exported goods. It is further stated that Office of the Commissioner, Customs (Prev.) Uttar Pradesh & Uttarakhand vide Instruction No. 01/2022 dated 20-06-2022 instructed to compute the export duty on the FOB (Free on Board) price of the goods. 2.3 It is also submitted that Nepal (Country of Export) is a landlocked county, and as stated above the exporter is charging and collecting only the price of goods from the importer and other associated cost such as transportation etc. is arranged by the importer themselves for which freight is directly paid to the transporter by the importer, and in such case whether the export duty is to be paid on the price of goods or on the price of goods plus freight from premises of exporter to the land custom station from where goods are exported to foreign country. Therefore, applicant has sought advance ruling as to: (i) Whether export duty will be levied on transaction value (Price declared in invoice) or FOB Value; (ii) If export duty to be calculated on FOB value, then whether freight, insurance, etc., paid by the overseas buyer to other person (other than exporter) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....saction value (Price declared in invoice) or FOB (Free on Board) Value; (ii) if export duty to be calculated on FOB value, then whether freight, insurance, etc., paid by the overseas buyer to other person (other than exporter) is relevant or irrelevant for determination of transaction value of export goods in case of landlocked countries namely Nepal; and (iii) if export duty to be calculated on transaction value, then whether method of computation of transaction value of export of goods shall be the price declared in invoice or to be calculated otherwise in case of landlocked countries namely Nepal. 5.1 Applicant has referred to the Instruction no. 01/2022 issued by the Office of the Commissioner, Customs (Prev.) Uttar Pradesh and Uttarakhand which is aimed at streamlining the practice to be followed in respect of valuation of export goods and calculation of export duty thereon keeping in view the Board's Circular no. 18/2008-Cus dated 10.11.2008, wherein it is categorically mandated to compute the export duty on the FOB price of the goods. The same has also been explained with an illustration too. The relevant text is reproduced herein below: "It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf: Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: Provided further that the rules made in this behalf may provide for, - (i) ... ... ... ... (ii) ... ... ... ... (iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue shall be accepted even where the buyer and seller are related, provided that the relationship has not influenced the price. (3) If the value cannot be determined under the provisions of sub-rule (1) and sub-rule (2), the value shall be determined by proceeding sequentially through rules 4 to 6." 5.4(b) Rule 4 provides for determination of export value by comparison. Rule 5 provides for Computed value method. It states, if the value cannot be determined under rule 4, the transaction value shall be based on a computed value, which shall include the following: (a) cost of production, manufacture or processing of export goods; (b) charges, if any, for the design or brand; (c) an amount towards profit. I find that the elements of costs at (a), (b) and (c) above mention only inclusions but the transaction value is not limited to summation of only those elements of costs. 5.4(c) Rule 6 provides Residual method which inter-alia states that, subject to the provisions of rule 3, where the value of the export goods cannot be determined under the provisions of rules 4 and 5, the value shall be determined using reasonable means consistent with the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bill of export, shall make and subscribe to a declaration as to the truth of its contents. (3) The exporter who presents a shipping bill or bill of export under this section shall ensure the following, namely: - (a) the accuracy and completeness of the information given therein; (b) the authenticity and validity of any document supporting it; and (c) compliance with the restriction or prohibition, if any, relating to the goods under this Act or under any other law for the time being in force." 5.6 Section 51 of the Customs Act, 1962 deals with clearance of goods for exportation as follows: - "(1) Where the proper officer is satisfied that any goods entered for export are not prohibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance and loading of the goods for exportation: Provided that such order may also be made electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria: Provided further that the Central Government may, by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ya Pradesh. For the process of export to be complete, the goods need to be taken out of India to a place outside India. This event can take place only after goods cross Indian land border, and hence on this ground alone the applicant's claim to construe the invoice price as the transaction value is legally untenable. Further the definition of the term 'export' does not distinguish between the landlocked country vis-à-vis other than landlocked country as an export destination. 6.2 Value of the export goods is the price actually paid or payable for the goods for delivery at the time and place of exportation. Present case is not the case that the price paid to the exporter against the invoice value alone constitutes an export value. This is more so because the price has to be taken for sale of export goods when sold for export from India 'for delivery at the time and place of exportation'. These words are very significant. The time and place of delivery will be when and where the goods are given a Let Export Order (LEO) by the jurisdictional Customs officer after examining the compliance to Customs law. By implication, all elements of cost that are requir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anding the manner of organizing financial transaction. It is amply clear that without incurring associated expenses the export goods cannot be simply brought to the place of exportation at the time of export in view of legal provisions discussed above. Thus, in the applicant's case, the price payable for the export goods for delivery at the time and place of exportation can be arrived at only after inclusion of associated costs to the invoice price declared by the applicant. 6.4 The Shipping Bill and Bill of Export (Forms) Regulations, 2017 issued vide Notification no. 60/2017-Customs (N.T.) dated 29.06.2017 provides for the manner how the shipping bill/bill of export is processed and the export goods need to be presented. The information is to be provided as prescribed in the specified format of Shipping Bill and/or Bill of Export as mandated in the above said notification. A column in the shipping bill/bill of export is provided whereby the 'Analysis of Export Value' is mandated and seeks the break-up of (i) FOB, (ii) Freight, (iii) Insurance, (iv) Commission, (v) Discount and (vi) Other Deductions. This indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration too. The relevant text, at the cost of repetition, is reproduced herein below for clear understanding: "It is proposed that for the purposes of calculation of export duty, the transaction value, that is to say the price actually paid or payable for the goods for delivery at the time and place of exportation under section 14 of Customs Act 1962, shall be the FOB price of such goods at the time and place of exportation. For example, if the transaction is at Rs 100 FOB, and the duty is 15%, the export duty will be 15% of FOB price, that is Rs 15. In case the transaction is on CIF basis, the FOB price may be deduced from the CIF value, and then the export duty be calculated as 15% of such FOB price." 7.1 I don't find any infirmity in the instructions based on the CBIC Circular quoted above that is binding on all field formations under the CBIC. Further it is not a case that the FOB price is not explained anywhere under the Customs Act, 1962 as observed in earlier discussion. As can be seen from the above discussion definite legal provisions are in place to govern the procedures involved in the valuation of export of goods and accordingly, the export goods need to....