CUSTOMS AUTHORITY FOR ADVANCE RULINGS
O/o THE CHIEF COMMISSIONER OF CUSTOMS (DZ)
NEW CUSTOM HOUSE, NEAR IGI AIRPORT, NEW DELHI-110037
[Email:cus-advrulings.dekggov.in]
Present
Samar Nanda (Customs Authority for Advance Rulings, New Delhi)
in
Application No. 13/2023 Delhi Dated 11.05.2023
F 44-A, NDSE, Part-1, 1st Floor, New Delhi-110049
Ruling
M/s. United Spirits Limited (having IEC No. 0703010361 and hereinafter referred to as 'the applicant', in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, New Delhi (CAAR in short). The Applicant is part of the Diageo group which is the world's leading spirits manufacturer. The said application was received in the secretariat of the CAAR, New Delhi on 11.05.2023 along with their enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act' also). The Applicant has 2 existing import streams: (i) Import of bulk scotch / spirit concentrate which is used in manufacture of bottled-in-India alcoholic beverages ('BIT) and Indian Manufactured Foreign Liquor (IMFL), and (ii) Import of bottled in-origin finished products ('BIO'). The present Application relates to proposed modifications to import pattern of bulk scotch / spirit concentrate ('bulk concentrate') having HSN code 2208 3093, referred at (i) above.
2. The Company currently imports bulk concentrate for whisky, etc. from its related supplier namely Diageo Brands B.V., Netherlands. Upon unloading of the goods at port / airport in India, the containers of bulk concentrate are transferred to designated Container Freight Station (CFS) for inspection. The Company files Bill of Entry for Warehousing and goods are warehoused at a customs bonded warehouse located near the port. Subsequently, as and when required, the goods are cleared for home consumption from the bonded warehouse upon payment of Customs duty and transferred to manufacturing units.
2.1 The bulk concentrate is used as a raw material for manufacturing of alcoholic beverages at manufacturing units across India.
2.2 Currently, the Company pays duty on CIF price of bulk including the loading, unloading and handling charges incurred at load port and transportation charges up to customs port in India. The loading, unloading and handling charges incurred at discharge port in India are not included in the value declared in bill of Entry for warehousing, as per provisions of Rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 ('the CVR, 2007') r/w Circular No. 39/2017 dated 26.09.2017. While clearing the goods for home consumption, duty is paid on the value as assessed in the Bill of Entry for warehousing.
2.3 Proposed import pattern: The Applicant, for commercial reasons, is required to import the bulk concentrates in larger quantities whereas the requirement for production is on a piecemeal basis.
2.3.1 Given this and to ensure that domestic manufacturing is more sustainable, the Applicant is contemplating to import bulk in a commercially feasible order quantity and store it in a Free Trade Warehousing Zone (FTWZ) in India. The FTWZ have requisite world-class infrastructure and would enable to store large quantities. From FTWZ, as and when required the goods will be cleared into Domestic Tariff Area ('DTA') upon payment of applicable Customs duty.
2.3.2 The applicant intends to warehouse the bulk concentrate at large storage tanks located in FTWZ. The containers of bulk concentrates will be unloaded in such large storage tanks in FTWZ for warehousing only. There would be no processing and manufacturing activity and the bulk concentrate will thereafter be cleared for home consumption. Thus, the change is that bulk concentrate will be warehoused at storage tanks at FTWZ (instead of warehousing in Customs Bonded Warehouse at present). Subsequently, considering the requirement, the bulk concentrates would be unloaded from the large storage tanks and loaded in small containers for clearance into DTA.
2.3.3 Benefits of FTWZ: The FTWZs were introduced in India with a view to facilitate foreign trade and replicate the success of such zones in other jurisdictions. The intention is that instead of using warehousing facilities in other jurisdictions, companies should use FTWZs in India. In terms of Section 2(n) of the Special Economic Zones Act, 2005 ('the SEZ Act'), FTWZ units are SEZ units wherein trading, warehousing and other related activities are carried on. The FTWZs inter-alia provide a host of facilities and world-class infrastructure such as temperature controlled area, state of art container and cargo yards, warehousing infrastructure, etc. These facilities will help the Applicant to increase operational efficiencies and ensure proper storage of raw material before its use.
2.3.4 The Applicant will follow the below mentioned procedure under the applicable legal provisions for proposed import pattern:
1
• Upon unloading of the bulk at Customs port 1 airport, the goods will be trans-shipped to FTWZ unit by filing Bill of Entry in accordance with Section 26 r/w Rule 29 of the Special Economic Zones Rules, 2006 ('the SEZ Rules'). No duty is payable on entry into Fl WZ in terms of Section 26 of the SEZ Act.
2
• The valuation and assessment of goods cleared from SEZ is required to be determined as per provisions of the Customs Act, 1962 ('the Customs Act* ) and Rules thereunder [Rule 47 of the SEZ Rules|
2.4 On the questions on which the advance ruling is required, the Company humbly seeks an Advance Ruling on whether the following expenses are includible in assessable value as per provisions of the Customs Act and Rules thereunder, for payment of duty during clearance to DTA from FTWZ:
(i) Loading, unloading and handling charges incurred at load port located outside India and transportation charges for bringing goods upto the discharge port in India.
(ii) Loading, unloading and handling charges incurred at the seaport I airport in India where goods are unloaded and transportation charges incurred for moving the goods from the seaport I airport to the FTWZ.
(iii) Charges incurred at FTWZ (including rent, unloading, loading charges, etc.).
3. As per the provisions of law: Scheme of valuation of imports under the Customs Act and SEZ Act:
I. Customs Act:
a. Section 14 of the Customs Act is the principal Section dealing with valuation of imports and it provides that the value of imported goods will be the transaction value of such goods when sold for export to India for delivery at the time and place of importation. The first proviso to Section 14( 1) of the Customs Act provides that costs of transportation, insurance, loading, unloading and handling charges shall be included to the extent and in the manner specified in the Rules. Relevant extract of Section 14 is as follows:
"1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf:
Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules
made in this behalf"
b. Rule 10(2) of the ( VR. 200 7 slates (lint the value of imported goods will include the transportation, insurance, loading, unloading and handling charges, associated with the delivery of imported goods to the place of importation. Relevant extract of Rule 10(2) is as follows:
"(2) for Ihe purposes of sub-section (!) of section II of the customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall he the value of such goods, and shall include -
(a) the cost of transport, loading, unloading and handling charges associated with the dIivery of the. imported goods to the place of importation;
(b) the cost of insurance to the place of importation:"
c. The term 'place of importation" is defined in Rule 2(da) of the CVR, 2007, to mean the customs station where the goods are brought for being cleared for home consumption or being removed for deposit in a warehouse. Relevant extract of Rule 2(da) is as follows:
"(da) "place of importation" means the customs station, where the goods are brought for being cleared for home consumption or for being removed for deposit in a warehouse "
II. It may now be relevant to refer to the provisions of the SEZ Act concerning FTWZ and valuation:
a. In terms of Section 2(n) of the Special Economic Zones Act, 2005 ('the SEZ Act'), FTWZ units are SEZ units wherein trading, warehousing and other related activities are carried on. Section 53 of the SEZ Act provides that the SEZ shall be deemed to be territory outside customs territory of India:
"A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations "
b. Section 26 of the SEZ Act inter-alia grants exemption from duties on goods imported into SEZ:
"(a) exemption from any duty of customs, under the Customs Act, 1962 or the Custom TariffAct, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur". Accordingly, goods imported into FTWZ are exempt from the levy of Customs duties by virtue of Section 26 of the SEZ Act.
c. Section 30 of the SEZ Act inter-alia states that any goods removed from a SEZ to the DTA shall be chargeable to duties of customs as leviable on such goods when imported.
(a) any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975, where applicable, as leviable on such goods when imported
d. Rule 47 of the SEZ Rules inter-alia provides that valuation and assessment of goods cleared from SEZ shall be determined as per provisions of the Customs Act and Rules thereunder:
(4) Valuation and assessment of the goods cleared into Domestic Tariff Area shall be made in accordance with Custom act and rules made thereunder";
e. Section 51 of the SEZ Act which of conflict with a non-obstinate clause stipulates that in case of conflict of any other law, the provisions of the SEZ Act shall prevail.
III In summary, the goods when brought into FTWZ will be exempt from duties of Custom under Section 26 of the SEZ ACT when the goods are cleared into the DTA, the same will be chargeable to duties of customs as leviable on such goods when imported under Section 30 of the SEZ Act. The valuation of such goods is to be determined as provisions of the Customs Act and rules thereunder, In light of above provisions, the includability of various charges in the assessable value for payment of Customs duty(ies) during clearance of goods from FTWZ (SEZ) to DTA will have to be determined as provisions of the Customs Act read with the CVR. 2017 thereunder. The same is examined hereunder:
Includability of charges mentioned at Question (i);
A. Given the provision of Section 14 of Customs Act r/w Rule 10 of CVR, 2007, the Applicant believes that the charges specified under Rule 10(2) of the Customs Valuation Rules, 2007 incurred at the load port prior to importation into India and transportation charges for bring goods upto the discharge port in India should be added in the assessable value of the imported goods for payment of Customs duty.
Includability of charges mentioned at Question (ii) above:
B. In the facts of the present case, the goods will be unloaded at Customs port / airport and thereafter transferred to FTWZ by filing Bill of Entry for home consumption under Rule 26 of SEZ Rules. Accordingly, the port / airport qualifies as the 'place of importation' under Rule 2(da) of the CVR, 2007.
IV. Scope of Rule 10(2) of CVR, 2007: Loading, unloading and handling charges associated with the delivery of goods "to" the place of importation are includible in the assessable value under Rule 10(2) of However, CVR, 2007. Reference is made to Circular No. 39/2017 Customs dated26.09.2017 ('Circular No. 39/2017') wherein it has been clarified as follows:
"Treatment of the loading, unloading and handling charges"
4. The Hon 'ble Supreme Court had ruled in the case of M/s. Wipro Ltd. v. Assistant Collector of Customs - 2015 (319) E.L.T. 177 (S.C.), dated 16-4-2015 that the landing charges to be added to the value of goods, should be based on actual charges incurred, and not a notional charge of 1% as has been provided in the Rules.
4.1 By virtue of the amendment now carried out to the CVR, 2007, the loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation, shall no longer be added to the CIF value of the goods.
4.2 The phrase "loading, unloading and handling charges " appearing in the amended Rule 10(2)(a) is to be understood in context of Article 8(2) of the WTO Agreement which reads as "the cost of transport of the imported goods to the port or place of importation Thus, only charges incurred for delivery of goods "to " the place of importation (such as the loading and handling charges incurred at the load port) shall now be includible in the transaction value.
3.1 The Applicant submits that the charges mentioned at Question (ii) above, inasmuch as these are not incurred at load port (located overseas) and as clarified by Circular No. 39/2017 the same will not fall within the ambit of Rule 10(2) of the CVR, 2007. The Applicant submits that even under the current import pattern, various charges referred to at Question (ii) above are not included in the assessable value.
3.2 Furthermore. sixth proviso Io Rulo 10(2) of CVR, 2007 stales that in case of goods imported by sea or air al any customs station and transhipped to another customs station m India, the transportation and other handling charges associated with such transhipment shall he excluded from the assessable value ol imported goods. Relevant extracts of the sixth proviso to Rule 10(2) are as follows:
"Provided also that in the case of goods imported by sea or air and transhipped to another customs station in India, the cost of insurance, transport, loading, unloading, handling charges associated with such transhipment shall be excluded"
3.3 Reference is made to the Circular No. 39/2017, wherein in respect to transhipment cost it is categorically clarified that costs related to transhipment of goods within India will be excluded from the assessable value. Relevant extract of Circular No. 39/2017 is as follows:
"Now, by virtue of the 6th proviso to Rule 10(2), costs related to transhipment of goods (from ports to IC Ds; port to port, port to CFS, Airport to Airport, etc.) within India will be excluded, providing uniform treatment to different modes of transhipment. "
Movement from port to FTWZ is covered under 6,h proviso to Rule 10(2) of the CVR, 2007:
The 6th Proviso to Rule 10(2) of the CVR, 2007 deals with costs associated with trans-shipment from one Customs station in India to another.
3.4 In the facts of the present case, the goods will be transferred from port of discharge in India directly to the FTWZ unit. Such movement is specified as trans-shipment as per the applicable provisions as follows:
a. Rule 28 of the SEZ Rules states that the goods imported by a unit shall be transhipped to the SEZ. Relevant extract of the Rule 28 is as follows: "(6) The goods imported by a Developer or Unit shall be transhipped by the carrier or its agent directly to the Special Economic Zone. "
b. Regulation 7 of the Sea Cargo Manifest and Transhipment Regulations, 2018, inter-alia states that for the purposes of transhipment of imported goods between a port and SEZ, the authorized carrier shall file an arrival manifest in Form- VIII. Relevant extract of the Regulation 7 is as follows:
"7. Transhipment of imported goods or export goods. -
An authorised carrier shall file a departure manifest before the departure of a train or a truck and arrival manifest upon arrival of the train or truck, as the case may be, -
(I) in Form- VIII for purposes of transhipment of imported or export goods between a port/ICD and Inland Container Depot / Container Freight Station / Special Economic Zone (SEZ)/ Foreign post Office and vice versa. "
c. For movement of goods from Customs port to FTWZ, the Customs Authorities issue a transhipment permit under Rule 29(2) of SEZ Rules.
d. Procedure to be followed in ICES (Customs EDI system) for such trans-shipment is set-out in Public notice no. 43 dated 14.05.2015.
3.5 Further, the term 'customs station' is defined under Section 2(13) of Customs Act to inter-alia mean "any customs port, customs airport or land customs station". The term 'customs port' is defined under Section 2(12) of the Customs Act to mean 'any port appointed under Section 7(a) and an inland container depot appointed under Section 7(aa) of the Customs Act'. Multiple notifications have been issued under by the Central Government (in the past decade) to notify various SEZ as customs port / land customs stations.
3.6.1 In view of the above, it is manifested that the in the present case, the goods are unloaded at a Customs station and trans-shipped to another Customs station in India.
3.6.2 Given the foregoing, the loading, unloading and handling charges incurred at the seaport / airport in India where goods are unloaded and the costs of transportation from port to FTWZ arc outside the purview of Rule 10(2) of the CVR, 2007. Circular No. 39/2017 has clarified that the said charges incurred in India are excludible from assessable value. Furthermore, these charges are specifically excluded by virtue of 6,h proviso the Rule 10(2).
3.6.3 Accordingly, the charges specified at Question (ii) are excludible from the assessable value of imported goods for payment of customs duty.
Includability of charges mentioned at (iii) above
(i) FTWZ is a statutorily notified customs port in India. The Applicant will incur warehousing rent, unloading, loading charges, etc. while the goods are at FTWZ.
(ii) As per the scheme of Rule 10(2) of the CVR, 2007 and as clarified by Circular No. 39/2017 loading, unloading and handling charges incurred "at" or "after" the place of importation in India should not be added in the assessable value of imported goods. The charges mentioned at Question (iii) above, inasmuch as they are not incurred at load port (located overseas), the same will not fall within the ambit of Rule 10(2) of the CVR, 2007.
(iii) Furthermore, the movement from port to FTWZ is movement from one Customs station in India to another Customs station in India. Accordingly, in as much as such costs incurred at the FTWZ are associated with movement from one customs station in India to another, they are not includible in the assessable value as per 6,h proviso to Rule 10(2) of the CVR, 2007.
(iv) Additionally, it is noteworthy that the CVR, 2007 nowhere provides for inclusion of warehousing rent in the value of goods. In-fact, Rule 10(4) of CVR,2007 clearly states that - no addition shall be made to the price actually paid or payable in determining the value of the imported goods except as provided for in this rule.
(v) Reference can be made to the past precedents including Tata Iron & Steel Co. Ltd-2000 (116) E.L.T. 422 (S.C.) wherein the Courts have inter-alia held that no addition except as provided for by Rule 10 [Rule 9 in erstwhile Customs (Valuation) Rules, 1988] is permissible. To illustrate, on whether demurrage charges are includible (prior to when it was specifically included) the Hon'ble Orissa High Court in Tata Steel Limited [2019 (370) E.L.T. 100 (Ori.)] noted that -proviso (to Section 14) has included the costs and services, including commissions and brokerage, engineering, design work, royalties and license fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the Rules. The demurrage has not been included as a part of cost envisaged by the legislation. Hence, charges which are specifically mentioned can only be included for the purposes of valuation and nothing more.
3.6.4 In view of the foregoing, it is manifested that the charges incurred at FTWZ (including rent, unloading, loading charges, etc.) are not to be added in the assessable value of imported goods. The Applicant submits that even under the current import pattern, various charges incurred at Customs bonded warehouse are not includible in the assessable value.
3.6.5 Therefore, in summary, the various charges listed at Annexure 11 (except those listed in Query (i)] are not includible in the assessable value of the imported goods.
All the grounds submitted arc without prejudice to each other, and the Applicant also craves leave to add, to alter, amend and/or modify all or any of the foregoing submissions before any ruling is pronounced by the Authority on the above questions.
4. A personal hearing was held on 11.10.2023. The advocate representing the applicant started by giving introduction of the applicant company, in brief. He mentioned that presently they are involved in import of goods which are normally warehoused on import and thereafter cleared for home consumption from the warehouse, however, the applicant now proposes to change their import pattern as after import of goods, they intend to take such goods to FTWZ and accordingly, they wish to have certainty on the matter related to valuation of imported goods viz various charges which are required to be included for the purposes of assessment of such goods. He further stated that comments of the concerned Commissionerate are in conformity with their suggestions and then reiterated the submissions made in the application for advance ruling.
5. The office of the Specified Officer, Arshiya Ltd. Free Trade Warehousing Zone (FTWZ), SEZ, Village-SAI, taluka-Panvel, District- Raigad, Maharashtra-410221 has given the following comments:
On the questions on which the advance ruling is required, the Company humbly seeks an Advance Ruling on whether the following expenses are includible in assessable value as per provisions of the Customs Act and Rules thereunder, for payment of duty during clearance to DTA from FTWZ:
(i) Loading, unloading and handling charges incurred at load port located outside India and transportation charges for bring goods upto the discharge port in India.
(ii) Loading, unloading and handling charges incurred at the seaport / airport in India where goods are unloaded and transportation charges incurred for moving the goods from the seaport / airport to the FTWZ.
In this regard it is pertinent to mention that as per Rule 47(4) of SEZ Rules 2006, the valuation and assessment of the goods cleared into Domestic Tariff Area (DTA) shall be made in accordance with Customs Act and Rules made thereunder. Thus, the questions above should be scrutinized in accordance with Section 14 of Customs Act 1962 read with Customs Valuation (determination of Value of Imported Goods) Rules, 2007.
A. With respect to Question No. (i), kind attention is invited to Customs Valuation (determination of Value of Imported Goods) Rules 2007 (CVR 2007):
(i) As per Rule 3 of CVR 2007, the value of the imported goods shall be transaction value adjusted in accordance with provisions of Rule 10.
(ii) Rule 10(2) of CVR 2007 is produced as follows:
The value of the imported goods shall be the value of such goods and shall include-
(a) The cost of transport, loading, unloading and handling charges associated with delivery of the imported goods to the Place of importation.
(iii) In light of Supreme Court judgment in case of M/s Wipro Ltd vs Assistant Collector of Customs-2015 (319) ELT 177-SC dated 16.04.2015, CVR 2007 were amended vide Notification No.91/2017 (NT) dated 26.09.2017 and CBIC issued Circular No. 39/2017-Customs dated 26.09.2017.
(iv) As per Circular No. 39/2017-Customs dated 26.09.2017, Place of Importation has been defined as follows:
"Place of Importation" means the customs station where the goods are brought for being cleared for home consumption or for being removed for deposit in a warehouse.
(v) As per 4.1 of this Circular, the loading, unloading and handling charges associated with the delivery of the imported goods nt the place of Importation, shall no longer be added to the CIF value of goods.
(vi) Para 4.2 of this circular is as follows:
The phrase "loading, unloading and handling charges" appearing in the amended Rule 10 (2) (a) is to be understood in context of the Article 8(2) of the WTO Agreement which read as "the cost of transport of the imported goods to the port or place of importation". Thus, only charges incurred for delivery of goods "to" the place of importation (such as the loading and handling charges incurred at the loading port) shall now be includible in the transaction value.
B. With respect to Question No. (ii), kind attention is invited to Proviso 6 to Rule 10(2) of Customs Valuation (determination of Value of Imported Goods) Rules 2007:
(i) Proviso 6 to Rule 10(2) of CVR 2007 is produced as follows:
Provided that in the case of goods imported by sea or air and transhipped to another customs station in India, the cost of insurance, transport, loading, unloading, handling charges associated with such transhipment shall be excluded.
(b) Para 6 of CBIC Circular No.39/2017 dated 26.09.2017 is produced as follows:
In the erstwhile 4lh Proviso to Rule 10(2), while the transhipment charges with respect to a container being moved from port to an ICD and CFS were excluded from the transaction value of the goods, there was no mention of a similar treatment to transhipment of goods by sea or air. Now, by virtue of the 6th Proviso to Rule 10(2), costs related to transhipment of goods (from ports to ICDs; port to port, port to CFS, Airport to Airport etc.) within India will be excluded, providing uniform treatment to different modes of transhipment.
C. With respect to Question No. (iii), Para 4.2 of this Circular is as follows:
The phrase "loading, unloading and handling charges" appearing in the amended Rule 10(2) (a) is to be understood in context of the Article 8(2) of the WTO Agreement which reads as "the cost of transport of the imported goods to the port or place of importation". Thus, only charges incurred for delivery of goods "to" the place of importation (such as the loading and handling charges incurred at the loading port) shall now be includible in the transaction value.
In view of the above, it is submitted that the 3 questions on which Advance Ruling is sought by M/s United Spirits Ltd. are well addressed vide CVR 2007 and CBIC Circular No.39/2017-Customs dated 26.09.2017.
The nature of activity proposed to be undertaken by the applicant as per SI. No.6 of CAAR-I is that applicant will store the goods in the FTWZ after importation and will subsequently clear them to DTA as and when required. It was asked by CAAR New Delhi to specify, whether the claim of applicant regarding nature of activity is correct or not.
In this regard, kind attention is invited to Rule 28, Rule 37 and Rule 47 of SEZ Rules 2006.
i. As per Rule 28, a unit or developer may import goods directly into SEZ through any port & airport etc.
ii. As per Rule 37, the goods admitted into SEZ shall be utilized, exported or disposed off in accordance with act and rules within the validity period of Letter of Approval issued to the Unit.
iii. As per Rule 47. a unit may sell goods and services in the DTA on payment of Customs duties under Section 30 of SEZ Act 2005.
The nature of activity declared in the application is a proposed activity which is required to be earned in compliance with provisions of SEZ Act 2005 and Rules 2006.
6. After going through the elaborate reply of the field Commissionrate on the applicability of valuation principles, the following points are reiterated:
On the questions on which the advance ruling is required, whether the following expenses are includible in assessable value as per provisions of the Customs Act and Rules thereunder, for payment of duty during clearance to DTA from FTWZ:
(i) loading, unloading and handling charges incurred at load port located outside India and transportation charges for bring goods upto the discharge port in India.
6.1 The nature of activity proposed to be undertaken by the applicant as per SI. No.6 of CAAR-1 is that applicant will store the goods in the FTWZ after importation and will subsequently clear them to DTA as and when required. In this regard it is pertinent to mention that as per Rule 47(4) of SEZ Rules 2006, the valuation and assessment of the goods cleared into Domestic Tariff Area (DTA) shall be made in accordance with Customs Act and Rules made thereunder. Thus, the questions above needs to be scrutinized in accordance with Section 14 of Customs Act 1962 read with Customs Valuation (determination of Value of Imported Goods) Rules 2007.
(a) The cost of transport, loading, unloading and handling charges associated with delivery of the imported goods to the place of importation.
(iii) In light of Supreme Court judgment, whereby the Hon'ble Supreme Court had ruled in the case ofM/s. Wipro Ltd. v. Assistant Collector of Customs - 2015 (319) E.L.T. 177 (S.C.), dated 16-4-2015 that the landing charges to be added to the value of goods, should be based on actual charges incurred, and not a notional charge of 1% as has been provided in the Rules, CVR 2007 were amended vide Notification No.91/2017 (NT) dated 26.09.2017 and CB1C issued Circular No. 39/2017-Customs dated 26.09.2017.
(iv) As per Circular No. 39/2017-Customs dated 26.09.2017, 'Place of Importation' has been defined as follows: "Place of Importation" means the customs station where the goods are brought for being cleared for home consumption or for being removed for deposit in a warehouse.
(v) As per 4.1 of this Circular, the loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation, shall no longer be added to the CIF value of goods.
The phrase "loading, unloading and handling charges" appearing in the amended Rule 10 (2) (a) is to be understood in context of the Article 8(2) of the WTO Agreement which read as "the cost of transport of the imported goods to the port or place of importation". Thus only charges incurred for delivery of goods "to" the place of importation (such as the loading and handling charges incurred at the loading port) shall now be includible in the transaction value.
3 With respect to Question No. (ii), kind attention is invited to Proviso 6 to Rule 10(2) of Customs Valuation (determination of Value of Imported Goods) Rules 2007:
(i) Proviso 6 to Rule 10(2) ofCVR 2007 is produced as follows:
The value of the imported goods shall be the value of such goods and shall include-(a) The cost of transport, loading, unloading and handling charges associated with delivery of the imported goods to the Place of importation.
In the erstwhile 4th Proviso to Rule 10(2), while the transhipment charges with respect to a container being moved from port to an ICD and CFS were excluded from the transaction value of the goods, there was no mention of a similar treatment to transhipment of goods by sea or air. Now, by virtue of the 6th Proviso to Rule 10(2), costs related to transhipment of goods (from ports to ICDs; port to port, port to CFS, Airport to Airport etc.) within India will be excluded, providing uniform treatment to different modes of transhipment.
In view of the above, it is submitted that the 3 questions on which Advance Ruling is sought by M/s United Spirits Ltd. are well addressed vide CVR 2007 and CBIC CircularNo.39/2017-Customs dated 26.09.2017.
7. On the basis of aforesaid, I fully accord with the views of the field Commissionerate made in this regard as elaborated in the aforesaid paras.
8. I rule accordingly.
(SAMAR NANDA)
Customs Authority for Advance Rulings, New Delhi