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CA Final · Indirect Tax Laws · Types of Duty

Kaveri Industries imports a set consisting of Article P, liable to duty with reference to value at 12%, Article Q, liable to duty with reference to value at 18%, and Article R, which is not liable to duty. No evidence of separate values is produced. Which statement is correct under section 19 of the Customs Act, 1962?

Article R is chargeable at 18%. Under section 19(c), a non-dutiable article in a set takes the rate applying under clause (b) to articles liable by value, and where those rates differ clause (b) prescribes the highest rate, which is 18% here.

  1. AArticle R is exempt and the set is charged at 18% only on P and Q
  2. BArticle R is chargeable at the rate applicable to articles liable to duty by value under clause (b), i.e. 18%Correct
  3. CArticle R is charged at 12%, the lowest rate
  4. DArticle R is charged at the average of 12% and 18%

Explanation

Section 19(c) provides that articles not liable to duty are chargeable at the rate at which articles liable to duty by value are liable under clause (b). With different rates, clause (b) gives the highest, 18%. Hence R is charged at 18%, not exempt, lowest or averaged.

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