CA Final · Indirect Tax Laws · Types of Duty
Kaveri Components Ltd imports a machine with accessories and spare parts. The set also includes tools that are not liable to duty. The machine is liable to 15% ad valorem duty, and the accessories satisfy the conditions in the rules made for the purpose. Another article in the set is liable to 25% ad valorem. The importer has produced satisfactory evidence of the value of every article. Which statement is correct under the Customs Act, 1962?
Accessories that meet the prescribed rule conditions bear the same duty rate as the machine, and because the importer has produced satisfactory evidence of value, each article liable to a different rate is charged separately at its own rate. The highest-rate rule for sets is therefore displaced.
- AThe whole set is charged at 25% regardless of the evidence
- BThe accessories satisfying the rule conditions are charged at the same rate as the machine, and the importer's evidence permits separate rates for articles liable to different ratesCorrect
- COnly the machine is charged and all other articles are exempt
- DThe set is charged at the average of 15% and 25%
Explanation
The proviso says accessories and spare parts satisfying the rule conditions bear the same rate as the article they belong to. The second proviso lets an article liable to a different rate be charged separately where the importer produces evidence of its value. So the general highest-rate rule does not apply here. The 25% on the whole set option ignores the evidence proviso.
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