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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Indirect Tax Laws

Case: Kaveri Precision Tools Pvt Ltd, Pune, imports CNC machine parts from Germany. Invoice (FOB) is EUR 40,000. The exchange rate notified by CBIC on the relevant date is Rs 90 per EUR. Freight is Rs 2,70,000 and insurance is actually incurred at Rs 30,000. Basic customs duty (BCD) is 10%, and other duties are to be ignored. What is the BCD payable on the assessable value?

BCD is Rs 3,90,000. The assessable value is the CIF value: FOB of Rs 36,00,000 plus freight of Rs 2,70,000 and insurance of Rs 30,000, giving Rs 39,00,000. Ten percent duty on this gives Rs 3,90,000. Ignoring freight and insurance would understate the value.

  1. ARs 3,60,000
  2. BRs 3,90,000Correct
  3. CRs 3,87,000
  4. DRs 3,63,000

Explanation

FOB = 40,000 x 90 = Rs 36,00,000. Add freight 2,70,000 and insurance 30,000 to get CIF = Rs 39,00,000. BCD at 10% = Rs 3,90,000. Rs 3,60,000 is wrong because it ignores freight and insurance, which must be added to the transaction value of imported goods.

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