Concept of indirect tax and valuation for the same :

Customs duty is considered to be an indirect tax. It is a tax on the goods and it is not a tax on the person having or owning the goods. The charge of tax attaches to the goods. Unless the tax liability is discharged, the goods are not allowed to proceed further. It becomes therefore necessary for the importer, who desires to take clearance of the goods into town for home consumption, to discharge the duty liability. Similarly in case of baggage the passenger cannot take his goods, unless the duty liability is discharged.

The essence is simple. Like articles in similar situations should attract the same burden. As a corollary it follows that

(i) There should be uniformity in tax – burden.

(ii) Since the rate of duty is already fixed for like goods, the value of goods should be uniform for all imports / exports for like good at the same time and place.

(iii) The value of the goods should be proximate to the point of taxation i.e. in the case of import the value at the point of import is relevant.

(iv) Variations in the price/agreed in each transaction on account of factors other than in the course of normal international wholesale trade should be adjusted.