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CA Final · Indirect Tax Laws · Types of Duty

Kaveri Engineering Ltd imports a machine as a set that includes an article not liable to any duty. Other articles in the set are liable to duty with reference to value at 5% and 12%. No value evidence is produced for the individual articles. At what rate is the non-dutiable article chargeable under section 19?

The non-dutiable article is charged at 12%. Section 19(c) treats such articles at the rate fixed under clause (b) for value-based articles, and clause (b) takes the highest rate where the rates differ. So 12% applies, not nil, the lowest rate or an average.

  1. ANil, as it is not liable to duty
  2. B5%, the lowest rate in the set
  3. C12%, the highest rate among value-based articlesCorrect
  4. DThe average of 5% and 12%, i.e. 8.5%

Explanation

Section 19(c) says articles not liable to duty are chargeable at the rate applicable to value-based articles under clause (b). Under clause (b) this is the highest rate, i.e. 12%. Nil is wrong because clause (c) overrides it, and no averaging is provided.

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