Vide Notification No. 03/2023-Customs (N.T.) dated 11.01.2023, the Central Board of Indirect Taxes and Customs (board) issued Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023 (hereinafter referred to as “CAV Rules”). The CAV Rules have been issued under the powers conferred by section 156 read with section 14 of the Customs Act, 1962 (hereinafter referred as the “Customs Act”) and will be effective from 11.02.2023.
The rationale behind the issuance of CAV Rules is to provide a mechanism to check the undervaluation of the class of imported goods. The government firmly believes that importers are avoiding taxes by undervaluing their commodities, which eventually lowers the value of the products to the government. In order to prevent this practice by the importer, the government has issued these rules. In situations where authorities suspect systematic undervaluation of imports, which deprives the government of revenue, the new rules provide authorities with the power to impose additional disclosure and certification requirements that must be complied with by importers of such class of goods.
As per the rules, two committees will be constituted for the analysis of certain classes of goods that the board thinks are undervalued or receives any reference concerning the undervaluation of these classes of goods. The screening committee will do the preliminary examination of the class of goods [Rule 3], and the evaluation committee has the duty to do the detailed evaluation of the class of goods [Rule 5] which will be forwarded to it after screening.
SOURCES FOR EXAMINING CASES FOR IDENTIFIED GOODS
Rule 6 provides the source for the examination of identifiable goods. Any individual who has reason to think that the value of any class of imported goods or a subset thereof may not have been declared honestly or accurately may make a written reference to the Board, on which the Board will rely. With the caveat that the referral may also come from a Customs officer, such as a commissioner or Additional Director General, or a representative of another Government Department.
When CBIC has reasons to think that certain commodities may not be declared at their true or accurate value but below it, taking into account the trend of the stated value of such goods or any other pertinent criteria, the Board may, by an Order, designate such commodities as identifiable goods and thereafter forward it for the preliminary examination.
STEP-WISE ANALYSIS
Preliminary Examination
- Under Rule 7, the Screening Committee will conduct the preliminary examination after receiving the written reference forwarded by the Board. This will be done in order to determine whether the class of goods or a portion of it is a case that has to be taken up for in-depth analysis by the evaluation committee.
- For the preliminary review, the written reference’s contents and supporting information must be carefully examined, with material factors, relevant trends in declared values, and any other pertinent criteria being taken into consideration.
- When the committee believes that, there is no sufficient reason for the detailed analysis of the specific commodities based on written reference the Screening Committee shall note the explanations and close the aforementioned reference.
- On the other hand, if the committee has reason to believe that the goods in the written reference need a detailed analysis then it will be forwarded to the evaluation committee.
- This shall be completed preferably within 15 days but not later than 21 days.
Detailed Evaluation
- The Evaluation Committee will thoroughly examine the written reference, or a portion of it deemed suitable for a detailed examination to determine whether the value of the relevant class of goods or a subset thereof, may not have been declared truthfully or accurately based on the preponderance of probabilities by taking into account all the factor provided under Rule 8 (1).
- When the outcome of the evaluation is against the written reference then the report will be handed over to the screening committee for filing after the evaluation committee noted that the references have been closed.
- When the report of the examination suggests that the value of the relevant class of goods has been taken maliciously and not declared truthfully and accurately.
- Then the report shall specify the: HSN code, Unique Quantity Code, Model, Brand, Size, etc.
- The whole evaluation shall be completed within 30 days and with the permission of the screening committee it can be extended to 30 more days
After this, the report shall be transferred to the Screening Committee which will cure the deficiency (if any) and will recommend the report to the Board. If the board is satisfied with the report of the committee, it will furnish an order with all the necessary detail of the goods like the HSN code and Unique code along with the additional obligation of the importer (if any).
Importer of the identifiable goods shall have the obligation to declare among other things, the cost of the goods using the Unique Quantity Code provided under the order. The importer of identified goods shall also comply with any additional obligations specified by the Customs Automated System, and the assessment of goods or the goods themselves shall be subjected to specified checks to enable and assist the importer in establishing the accuracy and truthfulness of the declared value. Where the importer does not provide the required information and documents or does not fulfil other obligations, further proceedings will be taken as per Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
When half of the Order’s validity time has passed, the Screening Committee is required to conduct a mid-term assessment to determine whether the identified goods can be de-specified before the validity period expires or if the validity period needs to be extended. The Screening Committee may review before mid-term or as and when necessary, in addition to the mid-term review described in sub-rule (1). The Screening Committee must submit a report with recommendations to the Board to withdraw or prolong the Order issued under Rule 5 based on the review that was completed.
EXEMPTION
CAV Rules 2023 also provided relaxation to the following category of imports.
a. imports not involving duty;
b. goods for which tariff value has been fixed by the Board in terms of subsection (2) of Section 14 of the Act;
c. goods that attract import duty on a specific rate basis;
d. imports made in terms of authorization or license issued under the duty exemption scheme of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) in which the inputs imported before export are physically contained in the export product;
e. imports where buyer and seller are related and an investigation into the relationship has already been contemplated or finalized;
f. Project imports;
g. imports by Government, Public Sector Undertakings;
h. imports made in non-commercial quantities;
i. goods imported for re-export; or
j. imports specified by the Board.
OPINION
The objective behind this notification is to identify those classes of goods that are undervalued or under-invoicing at the time of import so that the board can impose additional disclosure obligations to determine the true value of identifiable goods under Rule 10. It is a welcome move by the government to stop the undervaluation of identifiable goods but it does have one problem, when there is reasonable doubt about the truth or correctness of the declared value, the proper officer has the option of rejecting it under Rule 12, read with Rule11 (7) of CVR 2023. The authorities may abuse these rules to deny importers’ claimed transaction values, even when they are valid. Misuse of Rule 11(7) may result in delays, unpredictability, and increased trade expenses for businesses.
The only option that the importer will be left with is to challenge the order and prove to the competent authorities that the value mentioned by him is the true value of the identifiable class of goods. This can be proved fatal for the business houses as the challenge of order could take a long time to decide. In my opinion, there should be additional authorities to be constituted under these rules, which could decide whether the act of a proper officer is regular, or not.
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Co Author Name – Anchal Raghuwanshi | Designation – Student | Year – 4th | Collage – DNLU, Jabalpur
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