TaxTMI 
TaxTMI 
2026 (4) TMI 1522
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....OF 2018 M/s Schenker India Pvt. Ltd. CC (A)/CUS/D-I/Import/88/ 2018 dated 20.03.2018 2. The importer is engaged in manufacture and import of various pharmaceuticals and for this purpose it filed 173 Bills of Entry between 06.03.2009 and 29.12.2011 through the customs broker. The goods were imported by air. They were purchased from their overseas supplier on ex-works basis but the ex-works price was indicated in the Bills of Entry as Free on Board [FOB] value. The appellant also declared the freight incurred by it including the freight incurred for transportation from the factory of the exporter up to the port of export and the freight for transportation of goods up to the place of importation. 3. Duties of customs have to be paid as per the customs tariff based on quantity (specific rate of duty) or value (ad valorem rate of duty). If duty has to be paid on value, the transaction value, i.e., the price paid or payable for delivery of the goods at the time and place of importation should be reckoned. This price is generally referred to as Cost, Insurance and Freight [the CIF] price. Thus, CIF and FOB are two of the International Commercial Terms [INCOTERMS] and so is ex-....
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....s should be added towards cost of transport to arrive at the assessable value. 6. In this case, invoices were not issued on CIF or FOB basis but were issued on ex-works basis. The importer filed Bills of Entry declaring the ex-works values shown in their invoices as FOB values and the cost of local transport up to the port of export as well as the cost of transport up to the place of port of import and transit insurance were added and transaction values were determined. The Bills of Entry were assessed accordingly. 7. In view of the cap on the amount of freight which can be included in the assessable value in case of air freight, the assessment were computed reckoning 20% of the ex-works price towards the cost of freight instead of 20% of the FOB value. The cost of transport from the factory up to the port of import should have been added to the ex-works price to determine the FOB value and the freight should have been reckoned as 20% of such FOB value instead of taking 20% of the ex-works value only. Thus there was short assessment and short payment of duty in the Bills of Entry. Directorate General of Revenue Intelligence [DRI] investigated the matter and issued a show caus....
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....ex-works charges and calculate assessable value from ex-works price, the appellants cannot be held liable for its bona fide actions. (iv) Fiscal status are to be construed strictly. If Valuation Rules have not prescribed a specified method, then calculation for the purposes of determining duty liability cannot rest on a method for a different term of payment/nature of value. Thus, in the present case, the method used to calculate assessable value is incorrect wherein the CIF value is determined from ex-works price using a valuation method based on FOB price. (v) Interest and penalties are not liable to be imposed on the appellants. Submissions on behalf of the Revenue 10. Learned authorized representative for the Revenue made the following submissions :- (i) Wilful mis-declaration and suppression of facts justify demand under section 28 (4). The appellants intentionally mis-declared the nature of their imports in two significant ways: they declared ex-works/FCA prices as FOB in the Bills of Entry, and declared lesser freight amounts than those actually charged and paid and failed to amend the Bills of Entry even after clearance. These mis-declaratio....
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....mechanism, thereby justifying invocation of penalty provisions. (vi) The use of the word "shall" in section 46 of the Customs Act imposes a mandatory obligation. Failure to declare accurate assessable value invites consequences statutorily prescribed, including penalties and extended limitation under section 28 (4). 11. We have considered submissions advanced by both sides and perused the records. 12. The facts of the case are not in dispute. Revenue was correct in asserting that the cost of air freight that was to be included in the assessable value should have been 20% of the FOB value and not 20% of the ex-works price. This legal position is not in dispute. 13. The contention of the learned counsel that the value cannot be determined from ex-works price under the Valuation Rules is incorrect. As per Rule 10 (2) of the Valuation Rules, the cost of transportation upto the place of import has to be included in the assessable value. It certainly means not only the cost of transport from port of export but also the cost of transport upto the port of export. Learned counsel's submissions that FOB value cannot be determined from ex-works price is also not correct. FOB....