When the Customs Department invoke the Contemporaneous import provisions to check the undervaluation imports into India?

[YAGAY andSUN]

The Contemporaneous Import Provisions are invoked by the Indian Customs Department to prevent undervaluation of goods being imported into India. These provisions specifically deal with cases where the declared value of goods being imported appears to be artificially low or under-reported, which can lead to customs duty evasion.

Under Section 14 of the Customs Act, 1962, the Customs Department has the power to investigate and verify the value of goods declared by importers. If the declared value is suspected to be incorrect, the Contemporaneous Import Provisions can be invoked.

Key Aspects of the Contemporaneous Import Provisions:

1. Application: The provisions are typically applied when there is suspicion that goods are being undervalued compared to the prevailing market price or the value of similar goods imported during the same time frame.
2. Undervaluation Check: The Customs Department can invoke these provisions if they suspect that the transaction value declared by the importer does not reflect the actual transaction price or the current market value.
3. Reference to Comparable Imports: Customs officers use the transaction value of contemporaneous imports (similar goods imported in the same period) as a reference point. This helps in determining whether the declared value is under-reported.
4. Assessment:
   • Verification of value: Customs will compare the declared import value with similar imports during the same period.
   • If the declared value of the goods is lower than what is considered reasonable, the Customs authorities may reject the declared value and proceed with a corrected value based on contemporaneous imports.
5. Corrective Action: If undervaluation is found, Customs may assess the duty payable on the revised value, which might lead to penalties or fines in addition to the payment of the correct customs duty.
6. Documentation: Importers may be required to provide additional documents such as purchase invoices, contracts, and sales agreements to substantiate the declared value.

Common Scenarios for Invocation:

• When there is a sharp difference between the declared value and the price of similar goods imported recently.
• When the classification of goods does not align with the valuation.
• When free-on-board (FOB) prices are reported lower than normal or market rates.

Legal Framework:

• The Customs (Valuation) Rules, 2007 play a critical role in the valuation of imported goods. These rules allow Customs authorities to use transaction value, comparable goods, or computed value methods to determine the correct value.
• Section 14 of the Customs Act specifically provides for the valuation of goods. Rule 4 of the Customs Valuation Rules permits Customs to use the transaction value of comparable goods as a benchmark for valuation.

Conclusion: The invocation of the Contemporaneous Import Provisions ensures that importers do not undervalue goods in order to evade customs duties. It creates a level playing field for all importers by enforcing fair trade practices and proper customs valuation.