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F. No. 465/6/2010-Cus.V
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Customs-V Section
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New Delhi, June 3, 2010
To,
All Chief Commissioners of Customs,
All Chief Commissioners of Central Excise,
All Director Generals/Chief Departmental Representatives (CESTAT),
All Commissioners of Customs,
All Commissioners of Central Excise and
All Commissioners of Central Excise & Customs
Sir,
Subject: Determination of value under
Section 14 of the Customs Act, 1962 in respect of sale of warehoused goods –
clarification regarding.
The prevalence of divergent practices in field formations with respect to the
determination of assessable value of imported goods that are warehoused under
Section 58/59 of the Customs Act, 1962 and sold before being cleared for home
consumption has been brought to the notice of the Board. While one view is that
the sale of imported goods after warehousing does not affect the valuation of
imported goods, the other view is that the price at which the original importer
has sold the goods, before a Bill of Entry for home consumption is filed, should
be taken as the assessable value of the imported goods under Section 14 of the
Act, ibid.
2. The matter has been examined by the Board in the light of provisions of
Section 14 (1) of the Customs Act, 1962 as well as the relevant pronouncements
of Hon’ble Supreme Court. Section 14, at present, reads as:
“For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any
other law for the time being in force, the value of the imported goods and
export goods shall be the transaction value of 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.”
2.1 The current Section 14 states that the value of the imported goods shall
be the transaction value of 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. The sale of goods after warehousing them in India
cannot be considered a sale for export to India. It cannot be stated that the
export of goods is not complete even after the imported goods were cleared for
warehousing in the country of import. Thus, the price at which the imported
goods were sold after warehousing them in India does not qualify as the price
actually paid or payable for the goods when sold for export to India for
delivery at the time and place of importation and, hence, the value at which
such transaction takes place will not qualify as the transaction value, as per
Section 14.
3. For the period prior to October 2007, Section 14 read as:
“For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any
other law for the time being in force, where-under a duty of customs is
chargeable on any goods by reference to their value, the value of such goods
shall be deemed to be the price at which such or like goods are ordinarily sold,
or offered for sale, for delivery at the time and place of importation or
exportation, or as the case may be, in the course of international trade ---”.
3.1 The sale of imported goods made after warehousing cannot be considered to
have been made in the course of international trade and hence, the
price at which such sale takes place is not a price at which such or like goods
are ordinarily sold, or offered for sale, for delivery at the time and place of
importation, in the course of international trade, in terms of Section 14.
4. The CBEC manual also states at Para 15 of Chapter 10 that:
“The rate of duty applicable is as per provisions of Section 15 of the
Customs Act i.e. on the date on which the goods are actually removed from the
warehouse. However, when the warehousing period or the extended warehousing
period has expired, the duty payable is with respect to the date when the
warehousing/extended warehousing period expired and not the actual date of
removal. In so far as value for assessment of duty for warehoused goods is
concerned, it is not required to be re-determined and it is the original value
as determined at the time of filing of Into-Bond Bill of Entry and assessments
done before warehousing.”
5. In this connection, the decision of Hon’ble Supreme Court in the case of
Garden Silk Mills [1999 113 ELT 358 SC] was also examined. Hon’ble Supreme Court
had held in the case of Garden Silk Mills that “-- the value has to be
determined with relation to time when physical delivery to the importer can take
place. Physical delivery can take place only after Bill of Entry, inter alia,
for home consumption is filed and it is the value at that point of time which
would be relevant --”. However, in the case of Garden Silk Mills, the Court
was considering the issue of includibility of landing charges in the assessable
value of imported goods. The goods in that case were cleared for home
consumption after import and no warehousing or sale was involved before
clearance of the imported goods. The issue of whether sale of imported goods
after warehousing would constitute a sale in the course of international trade
was not an issue before the Hon’ble Court. Thus, the main issue involved as well
as the facts and circumstances of the present case are not identical to those of
Garden Silk Mills case. Hence, the rationale of the said case cannot be applied
to the present case.
6. Further, Board had examined the valuation of goods sold on
“high-seas-sales” basis and had issued Circular 32/2004 Customs dated May 11,
2004 stating that in such case, the actual high-seas-sale-contract price paid by
the last buyer would constitute the transaction value under Rule 4 of Customs
Valuation Rules, 1988 and inclusion of commission on notional basis may not be
appropriate and that, however, the responsibility to prove that the
high-seas-sales-transaction constituted an international transfer of goods lies
with the importer. The facts and circumstances of a sale of warehoused goods are
not similar to the case of “high-seas-sales” since the sale/transfer of imported
goods after warehousing cannot be considered to have been made in the course of
international trade. Further, the above-referred circular had clarified that the
inclusion of commission on notional basis may not be appropriate even in case of
“high-seas-sales”. Therefore, the question of adding any amount on notional
basis in the case of goods already warehoused in India and sold subsequently
would not arise.
7. Thus, in the case of sale of imported goods after they are warehoused on
Indian territory, the value at which such transaction took place will not
qualify as the transaction value, as per Section 14.
8. Pending assessments on the issue, if any, should be finalized accordingly.
9. Difficulties, if any, faced in the implementation of this circular, may be
immediately brought to the notice of the Board.
10. Please acknowledge receipt.
11. Hindi version follows.
Yours faithfully,
(Abhinav Gupta)
Under Secretary to the Government of India
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