We are a private limited company, engaged in the import of computer systems, peripheral devices and software components. The customs authorities are adding 1% of the free on board (FOB) value of goods as loading, unloading and handling charges for computing the assessable value and the customs duty thereon. Please confirm whether addition of such charges for computation of customs duty is correct?
In terms of Section 14 (1) of the Customs Act 1962 (Act) read with Rule 10(2)(b) (Rule) of the Customs Valuation (Determination of Price of Imported Goods) Rules 2007, the value of the imported goods shall be the value of such goods for delivery at the time and place of importation, and shall include loading, unloading and handling charges associated with the delivery of goods at the place of importation. The proviso to the rule mentions that the charges of loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation shall be one per cent of the FOB value of the goods. Thus, based on the statutory provisions, the addition of 1% of FOB value towards loading, unloading and handling charges is correct.
However, it is relevant to mention here that in a recent judgment of the Supreme Court in the case of Wipro Ltd. Vs Assistant Collector of Customs 2015 (4) TMI 643 dated April 16, 2015, the Supreme Court has held that charges of one per cent of loading, unloading and handling charges would be applied only when actual charges incurred on such account are not ascertainable by the importer of goods, and such charges incurred are not in consonance with the actual price of goods. Therefore, if actual cost of loading, unloading and handling charges is ascertained, then value of one percent of such charges need not be taken.
No clarity on credit of EC and SHEC paid before March
WE are a private limited company manufacturing electronic spare parts. We have received certain goods in our factory from our vendor in March 2015 for manufacturing parts, however, payment in respect of the same had been made in February 2015 which included payment of excise duty, education cess (EC) and secondary higher education cess (SHEC) to such vendors. We understand that EC and SHEC have been subsumed in the excise duty in the Finance Bill 2015. Can we take credit of such EC and SHEC paid against our output excise duty in future?
The government vide Finance Bill 2015 has subsumed EC and SHEC in excise duty and increased the rate of excise duty to 12.5% from 12.36%. However, no clarity was provided with respect to the unutilised credit of EC and SHEC that may be lying with manufacturers. In order to partially overcome this issue, the government has recently clarified vide Notification No. 12/2015-Central Excise (N.T.) (Notification) dated April 30, 2015, that in a situation wherein payments for any inputs, capital goods or input services have been made to vendors, which includes payment of EC and SHEC prior to March 1, 2015 but goods/services have been received in the factory of manufacture of final product on or after March 1, then credit of such EC and SHEC can be utilised for payment of excise duty leviable under the First Schedule to the Excise Tariff Act, even after March 1. Thus, credit of EC and SHEC can be taken for payment of excise duty.
However, as a word of caution, please note that the said notification does not specifically state, whether any unutilised credit of EC and SHEC lying in the books of accounts as on February 28 which pertains to goods and/or services received before March 1 can be adjusted against any output excise duty liability.
The replies do not constitute professional advice. Neither EY nor FE is liable for any action taken on the basis of these replies. Readers may mail their queries to sme@expressindia.com
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