2017 (5) TMI 931 - AT - Customs

Valuation - Credit Insurance Charges - includibility - rate of insurance to be included - Held that - Rule 10 of the Customs Valuation Rules read with Section 14 of the Customs Act 1962 provides for addition of an amount at the rate of 1.125% of the free on board value of the goods plus the cost of transport in cases where cost of insurance is not ascertainable. However such loading is required to be done only in respect of the transaction value of the goods for import. The Credit Insurance Charges have been paid by the appellant to its principal to cover the insurance in respect of payments to be received by the appellant for supply of goods made to customers in India - It is also evident that such goods are those which are manufactured by the appellant in India - there is absolutely no justification to add amounts towards the Credit Insurance Charges to the value of goods imported by the appellant from its principal. To arrive at the correct nature of the credit insurance charges, it will be necessary to verify the terms of the insurance policy entered into by the principal with insurance company M/s. Euler Herms - appeal allowed by way of remand for such verification.

Summary

Issues:
1. Challenge to the order in appeal regarding Credit Insurance Charges.
2. Interpretation of Customs Valuation Rules and Customs Act provisions.
3. Justification for inclusion of Credit Insurance Charges in transaction value.
4. Necessity to verify insurance policy terms for Credit Insurance Charges.

Analysis:
The appeal pertains to a manufacturer importing goods from a related foreign principal, challenging the modification of the original order regarding "Credit Insurance Charges." The impugned order added these charges to the transaction value for duty payment based on Customs Valuation Rules and the Customs Act. The appellant argued that these charges were unrelated to the imported goods but covered insurance for payments by customers in India. The Tribunal noted the requirement to add insurance cost only if not included in the transaction value and directed verification of the insurance policy terms between the principal and the insurance company, M/s. Euler Herms, to determine the justification for adding the charges.

The Tribunal deliberated on the Customs Valuation Rules and the Customs Act, emphasizing the necessity to add insurance cost at a specified rate only if not ascertainable and if not included in the transaction value. The appellant contended that the Credit Insurance Charges were for insurance related to payments for goods manufactured in India, not those imported from the principal. The Tribunal highlighted the importance of verifying the insurance policy terms to ascertain the justification for including these charges in the transaction value.

The Tribunal concluded that the authorities had not verified the insurance policies to determine the nature of the Credit Insurance Charges properly. Therefore, they remanded the matter to the original adjudicating authority for verification. If the insurance policies covered payments for goods manufactured in India, there would be no basis for adding the insurance charges to the transaction value. Consequently, the impugned order was set aside, and the appeal was disposed of with the direction to verify the insurance policy terms to establish the justification for including the Credit Insurance Charges in the transaction value.