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CA Final · Indirect Tax Laws · Valuation under the Customs Act, 1962

Arjun Pharma of Hyderabad imports an active ingredient invoiced at USD 20,000. The bill of entry is presented under section 46 on 5 May, when the rate of exchange notified by the Board is Rs 80 per USD. On 8 May the rate becomes Rs 82 per USD, and duty is paid on 9 May. Ignoring all other additions, what is the price in rupees to be used for the transaction value?

The price is Rs 16,00,000. Under the proviso to section 14(1), conversion uses the rate of exchange in force on the date the bill of entry is presented under section 46, which is Rs 80 per USD on 5 May, giving 20,000 x 80.

  1. ARs 16,00,000, using the rate in force on 5 MayCorrect
  2. BRs 16,40,000, using the rate in force on 8 May
  3. CRs 16,40,000, using the rate in force on 9 May
  4. DRs 16,20,000, using the average of the two rates

Explanation

The third proviso to section 14(1) says the price is converted at the rate of exchange in force on the date a bill of entry is presented under section 46. That rate is Rs 80, so 20,000 x 80 = Rs 16,00,000. Using the later rate of Rs 82 gives Rs 16,40,000, which is wrong because payment or later dates are irrelevant.

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