IDT Customs Notes

BHARADWAJ INSTITUTE
CMA & CS FINAL – CUSTOMS SHIVA KUMAR G FCA LLB
CMA AND CS
INDIRECT TAX
NOTES
CUSTOMS
Introduction
Duty on IMPORT and EXPORT of goods
Export means – taking of Goods from Indian to a place outside India
Import – Brining of goods into India from a place outside India.
The Actual Point of taxation is the Crossing of Customs Frontier
Definition of India
The Definition of Place India is territory of India upto Territorial waters.
Territorial waters – 12 nautical miles from Sea – part of India
Customs waters and EEZ
Indian Customs Waters – Upto 24NM. The Customs officers have

jurisdiction to check
Exclusive Economic Zone – from 12 NM to 200 NM. It is not part of Territory

of India, but India has exclusive right for economic activity.
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Taxable Event
The Taxable event under the Customs Act is explained as follows:
In case of Imports – Date on which the goods crosses the Customs Frontier
In case of Warehoused goods - the levy is day on which goods are cleared
from the Warehouse
In case of Export - when the proper officer permits export of goods that is
“let export order date”.
Rate of tax
The Rate of tax is rate that has to be applied on the Value of the Goods
imported or exported. The rate of tax will be as follows:
a. For Imports
i. In case of Normal Bill of Entry – i.e., the B/E is filed after
the goods have entered into India – then – Date of Bill of
Entry
ii. In case of Advanced Bill of Entry – i.e., the B/E is filed
EVEN BEFORE the goods enters into India – then – the
Date on which goods actually enters into India.
In short, it can be summarised as
i. Date of Bill of Entry or
ii. Date of Entry into India
whichever is LATER
b. In case of warehoused goods – date on which goods are cleared
from the Warehouse
i. When goods are cleared to Warehouse. No duty is payable
ii. Duty is payable only at the time of Home Consumption
Bill of Entry – i.e., removal of goods from Warehouse
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c. In case of EXPORT –
i. Date on which the “Let Export” Order permitting goods to
be exported is passed by the Officer
Rate of Exchange
Since the transaction are relating to Export and Import, the transaction will
be in Foreign currency – however, the same has to be converted into INR
using the Rate of Exchange.
The rate of exchange will be the Rate of Exchange notified by CBIC (earlier
known as CBEC).
The Rate of Exchange WILL ALWAYS BE THE CBIC Rate as on
- the date of Filing of Bill of Entry (in case of Imports) and

- Shipping Bill (in case of Exports).
Duty on Certain items
Pilferage – stolen or lost
Pilferage means goods stolen or lost Before Unloading of goods from the
ship– Duty is payable or After unloading but before Officer made an order
for home clearance
Any pilfered goods – no duty is payable by the Importer
However, if any pilferage happens after clearance – then, duty is payable.
In case the goods are restored back to Importer, then the same is liable to
Customs duty
Derelict, Jetsam, Floatsam and wreck are subject to Import duty
Derelict means a vessel or cargo which is abandoned in the sea without any
hope of recovery
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Jetsam or goods which are thrown or cast into the sea to reduce the weight
of the ship to prevent the ship from sinking.
Floatsam means any goods which floats in the sea
Wreckage means any part of the shipwreck which floats and comes ashore
Delelict, Jetsam, Floatsam and Wrecakge are liable to Customs Duty if

brought into India.
Relinquished goods
The Importer after import but before clearance of the Goods may relinquish
the tile of the goods in favour of the Department.
If the title is relinquished BEFORE Order of Home Clearance or Order for

Warehousing- then NO DUTY is payable. This is also known as
Abandonment of goods.
The importer can relinquish the title in the following cases
(a) goods not according to the specification

(b) the goods are damaged or deteriorated and may not be useful to the
importer
(c) there is a breach-of-contract and the Buyer/importer is not willing to
take delivery
No Relinquishment of title is allowed if any offences committed or appear to

have been committed on the goods.
Damaged goods
Damaged goods are goods which are damaged BEFORE OR DURING

Unloading of goods or after Unloading but before ASSESSMENT by Customs
Authorities.
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The goods damaged inside the warehouse before filing Home Consumption
bill of entry is also called as Damaged goods.
In case of Damaged goods – the Customs duty amount is proportionately

reduced depending the level of damage – this reduction is Duty is also
known as abatement
Note that It should be proved that the damage was not a wilful act of the
Importer
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Warehousing
Introduction
The importer may, instead of immediately paying the Customs duty at the
time of Import, may hold the goods under Customs Control and defer the
duty payment as and when the goods are actually required by him
Such process of transferring the goods from Port to warehouse is called

“Warehousing”
At the time of transfer to warehouse Bill of Entry for warehousing (In-Bond

Bill of Entry)
The Importer has to submit a Bond for twice the value of the Duty
Accordingly, the importer need not pay Customs Duty till the goods are in
the Warehouse subject to certain other conditions discussed in this chapter
Types of warehouse
Types of
Warehouse
Public Warehouse Private Warehouse Special Warehouse
Licensed - License Gold, silver, Duty

to operate the WH free Shop items etc
Subject to certain
conditions, if violated, the
License will be cancelled
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Period of warehouse – The Goods cannot be retained at the warehouse

indefinitely and the same has to be cleared within specified time limits as
follows
In case of EOU, the time limit is five years for Capital Goods and three years
for goods other than Capital Goods.
In case of person other than EOU, any goods have to be cleared within one
year.
Removal of goods from Warehouse (Deemed Removal)
Whenever the Importer wants, he may file Bill of Entry for Home
Consumption and pay the appropriate duties and remove the goods from the
Warehouse
If the time permitted (as explained above) expires –then the goods are
DEEMED TO HAVE BEEN removed from the Warehouse on the said date.
Accordingly, duty becomes payable on the said date of expiry.
Goods can also be exported from the Warehouse by filing Shipping Bill
The goods can also be transfer from one warehouse to another
Interest
Even though the goods can be held inside the warehouse for a period of one
year (in case of importer than EOU) the interest liability shall commence
after 90 days of warehousing.
In other words, after 90 days, whenever the goods are cleared, the importer
is liable to pay interest. However, the concept of interest is not applicable to
EOU.
For Example, if say the goods are cleared for Home Consumption & duty is
paid after 91 days, then interest needs to be paid for the one day at 15% per
annum – i.e., interest needs to be calculated for the period beyond 90 days
Things that can be done inside a warehouse
The importer has certain right towards the goods that are stored inside the
warehouse. The import can
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➢ Sort the goods

➢ Inspect the goods
➢ Bring in the customer to show the goods
➢ Take samples without payment of duty
➢ Export the goods
➢ Undertake manufacturing inside the warehouse
Transfer from one WH to another WH
The Importer may transfer the goods from One warehouse to another, if he
chooses. At the time of loading of the goods as well as unloading of the
goods, the customer office shall be present.
The entire loading and unloading is undertaken with a One time Lock (OTL)
Warehouse without warehousing
As discussed in this chapter, the Importer is the person who decides to

warehouse the goods instead of immediately paying the Customs duty for
various purposes discussed above.
However, in certain cases, the Customs Department may warehouse the

goods and not the importer. The Customs Department may seek additional
time for assessment of goods or report or some other information for proper
assessment of the goods.
In such cases, the Department shall order that the goods be transferred to a
warehouse without request from the importer and without any In-bond bill
of entry and without any requirement of bond to be furnished by the
Importer
EOU as warehouse
EOU means an Export Oriented Unit recognized by DGFT – Director General

of Foreign Trade
The recognition is given for a term of five years and the same may be
extended for another five years at a time.
The EOU premises itself will be treated as a Warehouse and hence for the
goods imported into EOU, then same will be without payment of Customs
Duty
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However, unlike regular warehouse, there is no time limit for goods inside
the EOU premises – i.e., no customs duty is payable as long as the goods
remain inside the factory. If the goods are cleared from the factory – then
Customs Duty becomes payable.
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Classification
The Goods under the Customs Act are divided in various Sections and
further into various Chapters. The Chapters are further sub-divided into
headings and sub-headings.
The classification under the sub-heading is relevant to decide
(a) The rate of tax

(b) Applicability of Exemption
(c) Eligibility of Drawback
(d) Quantum of Drawback
(e) FTP List and so and so forth.
GST and Customs has adopted the HSN Tariff.
The Classification under GST and Customs are made based on certain Rules
of Interpretation and the same is as follows:
Rule Content of the Rule

1 – Titles of Rule 1 says that that the titles of sections, chapters and
Section, sub-chapters are provided for ease of reference and
Chapter are headings along cannot be used for classification.
NOT
RELELVANT The determination as to where the goods fall would be
dependent on the relevant section and chapter notes
contained in the tariff.
Rule 2(a) Rule 2(a) specifies that if the incomplete or unfinished
goods have the essential characteristics of the complete or
finished goods, then such goods would be classified in the
same heading as the complete goods.
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Also, items in Semi Knocked Down Condition or

Completely Knocked Down Condition (CKD or SKD) will
also be classified as GOODS in the COMPLETE FORM
Eg: A Motor Car without Tyres, eventhough, it is

INCOMPLETE, still it would be classified as a Motor
Vehicle
Eg: A Fan which is sent as Blades separately, Motor

separately and rod separately in a BOX, will be classified
as a SINGLE FAN
Rule 2(b) Any reference in a heading to a material or substance
shall be taken to include a reference to mixtures or
combinations of that material or substance with other
materials or substances.
Also, Any reference to goods of a given material or

substance shall be taken to include a reference to goods
consisting wholly or partly of such material or substance.
The classification of goods consisting of more than one

material or substance shall be according to the principles
of rule 3.
Eg: Gold Chains will include Chains where Gold and

Copper are mixed.
However, in case of an item say MIXED PRODUCTS where

prima facie it is classifiable as BOTH THE PRODUCTS,
then ONE MUST Refer to Rule 3
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Rule 3(a) This Rule says that SPECIFIC Heading has to preferred
over General Heading
Eg: Glass for a CAR, will be more aptly classifiable as

PARTS of AUTOMOBILES (which is more specific), rather
than a GLASS ITEM (which is general)
If Still unable to classify, then PROCEED To Rule 3(b)

Rule 3(b) This RULES requires us to identify the ESSENTIAL
CHARACTER of the goods in question and classification
must be made accordingly.
A watch with 20 gms of Gold and Diamond, the essential

character seems to be Gold Ornament and not a wrist
watch. Accordingly, it will be classified as Jewellery
IF THE RIVAL CLASSIFICATIONS are EQUALLY

SPECIFIC, i.e., there is a tie among the different
classification still, then proceed to Rule 3(C)
Rule 3(c) This Rules says that among the various CLASSIFICATION
option, select the Classification which comes LATER.
Eg: if 8433 and 8467 both are applicable, then choose,

8467
Rule 4 If the goods are NOT DIRECTLY available in the Tariff,
(Akin Rule) then the classification of the goods must be made in the
Tariff Heading goods which are SIMILAR (AKIN) to the
goods under consideration.
Eg: Clay toy for kids made out of Wheat, will be classified
as CLAY TOYS made out of SOIL as it is the similar goods.
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Rule 5 Packing material will be classified under the MAIN

(Packing PRODUCTS’ Tariff Heading itself.
materials)
Eg: Eye wear (Glasses)’s box will be classified as Eye wear
itself
Please note that the above rules must be applied in ORDER.
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Types of Duties
The First Schedule of the Customs Act deals with goods liable for import
duty & the Second Schedule deals with goods liable for export duty.
Different Import duties are:-
• BCD
• CVD
• IGST & Compensation Cess, if any
• SAD
• Protective Duty
• Safeguard Duty
• Anti Dumping Duty
The above duties are seen in detail as under
BCD
Basic Customs Duty is the main duty which is leviable for goods imported.
The Rate generally is 10%
CVD
This is Additional Duty of Customs and also known as Counter Vailing Duty
(CVD)
It is levied in lieu of Excise Duty – ED payable had the goods been

manufactured in India, will be paid as CVD.
If ED is payable on MRP basis, CVD will also be calculated on MRP basis
Rate – generally 12.5%. But correct rate of ED is to be seen
Note: After introduction of GST, CVD is paid only on Goods which are
outside GST – i.e., Petrol Diesel and all other items are only liable to IGST
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IGST
IGST is payable on all Import of goods. Compensation Cess (where

applicable) is also collected on Import of goods. – Refer to GST Notes
SAD
This is Special Additional Duty of Customs levied in lieu of Sales Tax / VAT.
Note: After introduction of GST, SAD is abolished.
Anti- Dumping Duty
This Duty will be imposed, if the Exporter Outside India is dumping goods
into India.
Dumping of goods exporting to India at a price which is lower than the

DOMESTIC PRICE in his country.
Eg: In Australia, a product’s cost is say Rs.40. The Exporter exports the said
product to India at say Rs.25. Then, anit-dumping duty will be imposed.
The Anti-Dumping duty can be levied based on two parameters
(a) One – Dumping Margin – i.e., the difference between the Cost to the
Exporter and the Actual Export price to India
(b) Another – Injury Margin – this takes into consideration Domestic price
and the Export price into India for determining the Injury caused to
the Domestic Industry and the same is imposed as Duty.
Protective Duty
This Duty is imposed to protect domestic industry from the Foreign

Business based on Recommendation of Tariff Committee.
At present, no protective duties are levied as WTO prohibits it.
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Safeguard Duty
To Safeguard the domestic market from the injury caused by the

International import market
Period
It can be imposed only upto 4 years.
The time period can be extended – however put together – maximum only 10
years.
Exception
No safeguard duty will be imposed when
(a) goods are imported from a developing country-where the total

percentage of import into India from that developing country is less
than or equal to 3 percentage
(b) if goods are imported from more than one developing country,
a. then the share of each country is less than or equal
to 3% and
b. the total aggregate import of all developing countries
put together is less than or equal to 9%
In other words – Imports from Developed Countries – Safeguard duty will be

imposed.
Imports from Developing countries will be divided into two buckets
➢ If a developing country’s share is more than 3% - then duty will be levied

for that country.
➢ If a developing country’s share is less than or equal to 3% - then all such
developing countries’ share whose individual share is less than or equal
to 3% shall be aggregated and if the aggregate is
o Less than or equal to 9% - then no safeguard duty
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o Greater than 9% - then safeguard duty on all countries.
Safeguard Duty
Which Country is the Exporter From?
Developed Developing
Country Country
Is your Export
Liable to SGD Share to India >
3%
Yes No
Liable to SGD Go to Bucket
Is the Total of the

Bucket <=9%
No - it exceeds
Yes
9%
No SGD Liable to SGD
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➢ Example 1
SGD =
15%
000 Dollars
Group
/
Bucket
Import From % Liable to SGD?
Developed
Country 1000 90.25% Yes 150.00
DV 1 40 3.61% Yes - Greater than 3% 6.00
DV 2 50 4.51% Yes - Greater than 3% 7.50
No since the aggregate is not
DV 3 10 0.90% 0.90% more than 9% 0
No since the aggregate is not
DV 4 8 0.72% 0.72% more than 9% 0
1108 100% 1.62% 163.5
➢ Example 2
000 Dollars
Import
From Liable to SGD?
Developed
Country 1000 87.26% Yes 150
DV 1 40 3.49% Yes - since it is greater than 3% 6
Yes. Since even though each's share is
less than 3, the aggregate is greater
DV 2 32 2.79% 2.79% than 9% 4.8
DV 3 30 2.62% 2.62% than 9% 4.5
DV 4 26 2.27% 2.27% than 9% 3.9
DV 5 18 1.57% 1.57% than 9% 2.7
1146 100% 9.25% 171.9
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Calculation of duty –BCD and IGST
Duty calculation will include Basic Customs Duty, IGST and Compensation
Cess. The Duty calculation may be with Compensation Cess and without
Compensation Cess. We shall see both.
Duty Calculation without Compensation Cess
Let’s Say
Assessable Value - Rs.1,00,000
BCD Rate - 10%
IGST Rate - 18%.
The Duty Calculation will be as follows
Amount
S.No Particulars Notation Calculation
(Rs.)
Assessable Value for Customs
A
1 Duty Given 1,00,000
2 BCD at 10% B AX10% 10,000
3 Social Welfare Cess at 10% C BX10% 1,000
4 Assessable Value for IGST D A+B+C 1,11,000
5 IGST at 18% E DX18% 19,980
6 Total Customs Duty is F B+C+E 30,980
Duty Calculation WITH Compensation Cess
Let’s Say
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Assessable Value - Rs.1,00,000
BCD Rate - 10%
IGST Rate - 28%.
Compensation Cess - 1%
The Duty Calculation will be as follows
Amount
S.No Particulars Notation Calculation
(Rs.)
Assessable Value for Customs
A
1 Duty Given 1,00,000
2 BCD at 10% B AX10% 10,000
3 Social Welfare Cess at 10% C BX10% 1,000
4 Assessable Value for IGST D A+B+C 1,11,000
5 IGST at 28% E DX28% 31,080
6 Compensation Cess at 1% F DX1% 1,110
7 Total Customs Duty is G B+C+E+F 43,190
Note : Even if the Question does not mention Social Welfare Cess,
it has to be calculated at 10% as indicated in above Illustration
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Valuation under Customs
The Customs Duties are levied based on the Assessable Value. The
Assessable Value is the transaction value
Transaction value means
• Price at which such or like goods are ordinarily sold or offered for
sale
• for delivery at the time and place of importation
• in the course of international Trade
• When Seller and buyer have no interest in the business of each other
and
• Price is the sole consideration for sale
If any of the aforesaid conditions are not satisfied, then the value has to be
arrived as the Valuation Rules.
Customs Valuation Rules FOR IMPORT
The Valuation Rules have to be gone through sequentially. In other words

first value must be arrived in terms of rule three, if not by rule three, then
by Rule 4, if not by rule 4, then by Rule 5 so on and so forth.
The rules are as follows
Rule Brief What does it say

No Heading
3 Transaction • The value shall be the transaction value
value provided
o the buyer and seller are not related.
o There is no restriction as to the
disposition of use of the goods by the
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buyer
o there are no restrictions which
prevents the valley to be determined
o no part of the proceeds from
subsequent sale or disposal will be
payable to the seller directly or
indirectly
• The value will be accepted they are related if
the importer is able to the relationship is not
influence the price
• if value is unable to be determined under this
rule then the subsequent rules are to be
applied sequentially
• the transaction value will be accepted subject
to certain additions and deletions as detailed in
rule 10 below.
4 Identical • Identical goods means
Goods o the goods must be same in all aspects
o the goods are from the same country
o the goods are from the same exporter.
If the same exporter is not available
then any other exporter but from the
same country
• the value of the identical goods will be
treated as the value of the goods under
consideration.
• The value of the identical goods will be a play
subject to adjustments for
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o difference in quantities
o difference in commercial level example
availability of warranty, nature of
relationship, due date for payment etc.
• if more than one identical values available
then lowest of the same must be taken
4 Similar • Similar goods means
Goods o the goods ARE NOT same in all aspects
but have similar characteristics which
enable them to perform the same
function and are commercially
interchangeable.
o the goods are from the same country
o the goods are from the same exporter.
If the same exporter is not available
then any other exporter but from the
same country
• the value of the identical goods will be
treated as the value of the goods under
consideration.
• The value of the identical goods will be a play
subject to adjustments for
• if more than one identical values available
then lowest of the same must be taken
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6 Swap The Importer at his option may chose to value the

Option goods as per Rule 8, instead of Rule 7.
7 Deductive The selling price of the imported goods in India will
Value be taken as the base and all post importation
expenses will be reduced thereby arriving at the
assessable value value at the point of import.
If more than one selling price is available then the

normal selling price (Refer note after the table)
that is, the price at which the greatest aggregate
quantity is sold. Please refer to rule seven depot
valuation under Central Excise for the detailed
meaning of normal selling price
The expenses that can be reduced
• Any selling commission in India

• transportation within India
• insurance within India
• any expenses incurred in India
• any duties and taxes payable in India
8 Computed Assessable Value will be arrived as per the cost
Value sheet method
Cost of Materials and General expenses for
producing the imported good s = xxx
Add : profit of the exporter = xxx
Add : all expenditure as per
Rule 10 = xxx
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——
Assessable Value = XXX
9 Residual If value is unable to be arrived under any of the
Method rules from rule 3 to rule eight then, the Assessing
officer can arrive at the value of the goods
• Based on the information available

• on the best of his judgement
• within the parameters of the above rules
The assessing officer CANNOT take the following

value
• selling price of goods manufactured in India
• sale price of the goods sold in the domestic
market of the exporting country.
• The price of goods exported to other
countries other than India
• minimum customs value
• arbitrary or fictitious value
• any system of evaluation where higher of any
values is selected is rejected
10 Certain Additions
additions • freight up to the place of import.
and o The freight includes demurrages or like
deletions lighterage or barge charges.
o in case of air - the freight is restricted
to 20% of the FOB value. In case of
Other – Freight is at actuals
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o In case the freight is not available then

the freight will be assumed as 20
percentage of the FOB value
• insurance-
o actuals
o if actuals is not available then at the
rate of 1.125 percentage of the F0B
value.
• Handling Charges
o Handling charges AT port of Import
WILL NOT BE ADDED
o Handling charges TO Port of Import
will be added at Actuals
• any cost incurred up to the place of import
into India
• commission or brokerage except buying
commission
• packing cost except durable and returnable
packing
• cost of engineering development and plan or
sketches undertaken outside India
• royalties and license fees
• any amount payable to the foreign supplier
out of the sale proceeds of the subsequent
resale in India by the importer
• value of any free materials supplied by the
importer/buyer to the foreign supplier
• commission or service charges payable to a
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canalising agent
• inspection charges
Exclusion
• buying commission
• returnable or durable backing
• duties and taxes in India
• transportation and insurance in India
• any post import expenses
• installation and erection in India
Note
Under Rule 7, if multiple sale price in India are available, the normal sale
price is to be taken. What is “Normal” Sale price?
Normal Sale price means – the price at which the Greatest Aggregate
quantity is sold.
For e.g.: Following Sales data in India for an imported goods is
At what price per

Transaction
Quantity piece
1 25 400
2 40 410
3 125 390
4 500 300
5 120 400
6 200 390
7 250 375
8 180 390
9 20 500
10 2 600
11 175 390
12 30 430
13 25 390
1,692
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Calculation of Aggregate quantity AT EACH SALE PRICE
Aggregate
Quantity Price
145 400
40 410
705 390
500 300
250 375
20 500
2 600
30 430
1,692
At Rs.390/ piece, the Greatest Aggregate Quantity (705) is sold – therefore –

it is the normal Sale price. Please note that a single largest quantity is not
the criterium but the aggregate quantity. For instance, in one sale 100
quantity may be sold at Rs.20 but if there is 15 separate sales of 10 each at
Rs.18, then Normal Price is Rs.18 as the 150 items have been sold at that
price.
If the Imported goods is say 5000 pieces and local freight and insurance is
say Rs.1,50,000/-. Assume that the above price is exclusive of all duties and
taxes.
Sale Price in India - 390

Sale price for 5000 piece - 19,50,000/-
Less: Local Freight and ins - 1,50,000/-
AV - 18,00,000/-
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Customs Valuation Rules FOR EXPORT
The valuation rules have to be gone through sequentially. In other words

first value must be arrived in terms of rule three, if not by rule three, then
by Rule 4, if not by rule 4, then by Rule 5 so on and so forth.
The rules are as follows
Rule Brief What does it say

No Heading
3 Transaction • The value shall be the transaction value
value provided
o the buyer and seller are not related.
o And price is the sole consideration
• The value will be accepted they are related if
the importer is able to the relationship is not
influence the price
4 Comparable • the value of the comparable goods will be
goods treated as the value of the goods under
consideration.
• The value of the comparable goods will be a
applied subject to adjustments for
o difference is date of export
o difference is quality, design,
composition etc.
5 Computed Assessable Value will be arrived as per the cost
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Value sheet method
Cost of Materials and General expenses for

producing the imported good s = xxx
Add : profit of the exporter = xxx
——
Assessable Value = XXX
6 Residual If value is unable to be arrived under any of the
Method rules from rule 3 to rule eight then, the Assessing
officer can arrive at the value of the goods
• Based on the information available

• on the best of his judgement
• within the parameters of the above rules
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Miscellaneous Topics
Transit of goods:
Any goods imported in any conveyance (SHIP) will be allowed to remain on
the Ship without payment of duty to
• Transfer to a place outside India

• a transfer to another custom station in India
In Transit of Goods no unloading of goods or changing the conveyance (ship)

happens.
Transhipment of goods
It means transfer of goods from one conveyance to another conveyance

without payment of duty
After transfer to the new conveyance the goods can either
• go outside India or
• go to a custom station in India
Bill of Transhipment should be filed with the proper officer before carrying
good such transfer
Confiscation of goods
The goods can be confiscated in the following cases
1. Any goods imported by sea or air which are unloaded or attempted to

be unloaded at any place other than a customs port or customs airport.
2. Any good s imported by land or inland water through any route other
than a route specified by the Govt. Any dutiable or prohibited good
brought into any bay, gulf, creek or tidal river for the purpose of being
3. landed at a place other than a customs port.
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4. Any good s which are imported or attempted to be imported or are

brought within the Indian customs waters contrary to the provisions
which are in force.
5. Any dutiable or prohibited good s found concealed (i.e. hided) in any
manner in any conveyance
6. Goods not mentioned in the Import manifest or import report
7. Goods unloaded in contravention of the provisions of customs law
8. any dutiable or prohibited good s found concealed in any manner in
any package either before or after the unloading thereof
9. any dutiable or prohibited good s removed or attempted to be removed
from a customs area or warehouse without the permission of the proper
officer.
10. Any dutiable or prohibited good s which are not included or are in
excess of those included in the entry mad e under this Act, or in the
case of baggage in the declaration mad e under section 77.
11. Any goods which do not correspond in respect of value or in any other
particular with the entry mad e under this Act or in the case of baggage
with the declaration mad e under section 77.
12. Any dutiable or prohibited good s transited with or without
transhipment in contravention of the provisions of customs.
The Confiscated goods can be redeemed on payment of Redemption fine
ICD and CFS

ICD or Inland Container Depot is place where containers are aggregated for
onward movement to and from the Port.
CFS or Container Freight Station is a place where containers are loaded or

unloaded or segregation or aggregation of cargo takes place
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ICD and CFS may be owned by a Public or a private entity but both are
under Customs Control.
It acts as an extension of the Port so that port activities can be carried out at
ICD and CFS so as to reduce the turn around time in the Port
Stores
Stores means goods (including Fuel) which are meant for use in a Vessel or
an aircraft. It also includes spare parts and equipment, which are meant for
the Vessel or Aircraft though it may not be put to immediate use.
Stores are treated as “Goods” under Customs Act and hence liable to
Customs Duty.
However, some exemptions are provided to the Stores from Customs Duty
(a) Stores can be stored in warehouse without payment of Customs Duty

(b) Transit and Transhipment of Stores are allowed without payment of
Customs Duty
(c) Stores consumed on a foreign going vessel or an aircraft is exempt
from Customs Duty even if the Stores are consumed when such vessel
or aircraft was in Indian Territory
(d) Stores are exempted from Export Duty subject to certain conditions
Coastal Goods
Coastal Goods are goods which are transported from one port in India to
another except on account of Import. For eg: Good transported from
Chennai Port to Cochin Port.
The Goods can be loaded in the Port only on filing of a document called as
“Bill of Coastal Goods” and approved by the Proper Customs Officer.
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The Bill has to be immediately submitted to the Customs Officer after

reaching the destination port of the goods.
Clearance at the destination port can also be done only after the permission
by the Proper officer of Customs
High Seas Sales
Goods sold when the goods are in High Seas are called as “High Seas” Sale.
In other words, the transaction should have happened between Port of

Loading and Port of Discharge.
High Seas are not subject to the GST or Customs Duty.
When the goods are imported, the actual buyer may file the Bill of Entry and
pay the applicable customs duties.
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DRAWBACK
Drawback refers to when the Customs Duty paid will be refunded back to
the assessee in certain specific circumstances. Such instances may be
classified as follows:
➢ Goods imported are re-exported

➢ Goods imported are used as Inputs to manufacture a finished product
and the said finished products get exported
First Scenario – Goods imported are re-exported as such with or

without use
Drawback for Re-export
By Business By personal
Reexporting
Reexporting after No effect whether the
without using the
using the goods goods are used / not used
goods
Re-export within 18 2 years - without any permission

Re-export within
months (1 and half
two years
years) 4 Year - with permission
98% of the Original Percentage as per Percentage as per

Duty as DBK Table 1 below Table 2 below
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Table 1 – Drawback for Re-export by a business entity after using the

goods
Period of usage Drawback percentage of

Original Duty paid
Upto 3 months 95%
3m < P <= 6m 85%
6m to 9m 75%
9m to 12m 70%
12m to 15m 65%
15m to 18m 60%
Greater than 18m Nil
E.g.:
AV for a goods is say Rs.100 Crores. Duty is say 10%. Ignore SWC. The duty
paid at the time of import is Rs.10 Crores. After 4 months the goods
(Camera) is returned after use in India.
Since the goods are used for less than six months but more than three
months – the importer is eligible for DBK of 85%.
Therefore, 8.5 Crores (10 Crores X 85%) will be the value of the Drawback
Table 2 – Duty drawback for Re-export of goods imported for personal

use
➢ I year – 4.0% per quarter

➢ II year – 3.0% per quarter
➢ III Year – 2.5% per quarter
➢ IV Year – 2.0% per quarter
Year Quarter % of DBK Year Quarter % of DBK

I Year 1 96 III Year 1 69.50
2 92 2 67.00
3 88 3 64.50
4 84 4 62.00
II Year 1 81 IV Year 1 60
2 78 2 58
3 75 3 56
4 72 4 54
After 4th year – no DBK
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Second scenario – Drawback on Inputs imported which is used to

manufacture of goods – which got exported
In this case, there are further three scenarions:
➢ All India Rate of Duty Draw Back (AIRDDBK)

➢ Brand Rate of Duty Drawback
➢ Special Duty Drawback
AIRDDBK
The Government will notify the AIRDDBK Schedule wherein the Drawback
for all the finished goods exported will be mentioned in that Schedule.
The Schedule is decided by the Fixation committee. Generally, the Drawback

amount is calculated as a percentage of FOB or on per item / per kg basis.
E.g.: - 2% of FOB or Rs.100 per pair of slippers or Rs.25 per Kg.
Key features of this Drawback
➢ There is no actual calculation of ACTUAL CUSTOMS Duties contained

in the Inputs used in the goods export
➢ Instead, if the FOB Value of Exports is Rs.1,00,000/-, then the
Drawback amount is Rs.2000 (i.e., 2% of FOB in this example)
➢ At the time of filing of Shipping Bill, based on the HSN Code the
Drawback amount is calculated and mentioned in the Shipping Bill
itself.
➢ The bank details are also provided in the shipping bill itself
➢ The Shipping Bill itself is treated as an application for DBK and
➢ The calculated drawback amount is Credited to the bank account
within a few days itself.
Brand rate of Duty Drawback
If the final product exported is not available in the DBK Schedule, then the
exporter can request the Government to fix the rate of Drawback for the
final product.
This fixation by the Government is called as BRAND RATE of Duty

drawback.
Actual Rate of Drawback
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BHARADWAJ INSTITUTE
This issue arises when the actual customs duties paid on the Imports (used
in the manufacture of exported goods) is more than the DBK amount as per
the AIRDDBK.
The importer may chose to avail the actual drawback instead of the
AIRDDBK. However, the actual drawback may be claimed only if the
AIRDDBK is less than 80% of the actual amount. In other words, as long as
the AIRDDBK is greater than or equal to 80% of actuals, then, only
AIRDDBK can be claimed.
This concept of requesting actual Customs Duties is referred to as “Special

Rate of Duty Drawback”
Say, for instance, the actual amount of customs duties in the Inputs is say
Rs.2200/-
What is the actual amount in our example - 2200

What is 80% of Rs.2200 - 1760
What is the AIRDDBK - 2000
The AIRDDBK amount (i.e., Rs.2000) is more than 80% of the Actual
amount (i.e., Rs.1,760). Therefore, the exported cannot apply for SPRDDBK
So, in our example, you may apply for SRDDBK if the amount of drawback
as per AIRDDBK is less than Rs.1760/-
Time limit to claim drawback
The Drawback should be claimed within THREE MONTHS of the Let

Exporter Date. Extension by Further three months may be allowed if
sufficient reason for delay is shown.
Drawback is not eligible
In the following cases, Drawback is not eligible
(a) if the market price of which is less than the amount of drawback
(b) If the Central Government is of the opinion that goods of any specified
description in respect of which drawback is claimed under this
Chapter are likely to be smuggled back into India.
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(c) If Credit has been claimed, then to the extent of Credit claimed, no
drawback (no longer applicable post GST)
(d) If any DEPB or Export benefit has been claimed
(e) If the sale proceeds not received within the time period allowed by
Reserve Bank of India.
(f) Export to Nepal and Bhutan and the export proceeds are not received
in hard currency (it means USD, GBP or Pounds).
(g) Iron and Steel
(h) IF THE duty drawback is more than 1/3rd of market value of exported
goods, then amount of duty drawback is restricted to 1/3rd of market
value.
(i) No amount or rate of drawback is to be determined IF
a. Drawback amount is less than Rs.500 or
b. Less than 1% of FOB Value
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Project Imports
For Setting up of a new project in India, concessional rate of Customs Duty

is provided. This scheme is known as Project Imports.
The Project should be registered with the concerned authority
ALL THE GOODS imported under the registered Project is CLASSIFIED

UNDER CHAPTER 9801 of the Tariff, even thought the individual items
imported may fall under various tariff.
The Rate of BCD is 5%
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Baggage
Baggage means:
i. all dutiable goods imported by a passenger or a member of a crew

in his baggage.
ii. Unaccompanied baggage
The following ARE NOT Baggage:
1. Motor Vehicle
2. Alcoholic Drinks
3. Goods imported through courier
The Rate of duty and the Value will be determined on DATE OF MAKING
THE DECLARATION OF BAGGAGE
The Rate of duty will be 35% + 10% Social Welfare Cess
Bonafide Baggage
Bonafide baggage is exempted from Customs Duty
They are:
1. Goods used by the passenger or crew of certain minimum period

2. For the use of the passenger or his family or
3. a bona fide gift or souvenir
provided that the value of each such article and the total value of
all such articles does not exceed such limits as may be specified in
the rules.
General allowance is Rs.50,000 is provided for the baggage for a passenger.
Specific allowances may be referred to from the Study Material.
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Temporary detention of baggage:
The proper officer may detain the baggage of a passenger which contains
any article which
1. is dutiable or
2. the import of which is prohibited
and in respect which a true declaration has been made by the

passenger
The proper officer may do so, at the request of the passenger for the purpose
of being returned to the passenger either:
1. At the time of his leaving India or

2. Through any other passenger authorized by him and leaving India
or
3. As a cargo consigned in his name.
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CUSTOMS (IMPORT OF GOODS AT CONCESSIONAL RATE OF DUTY)

RULES, 2017
If the Customs duty is either NIL / a reduced rate when used for a
particular purpose, then the procedure as per the rules herein needs to be
followed. The normal rate may be 10% but if used for a specific purpose,
then rate may be 5% or NIL.
For example, for Steel, the BCD Rate is, say, 10%.
If you import steel for manufacture of Wheelchair ➔ 2.5% or Exempted,
then if the Importer wants to claim the lower rate because he is going to use
for wheelchair has to follow the procedure below
Rule What does it say
1 Name of the Rule
2 Application – the exemption is based on a condition on how the
imported goods should be used
3 Definitions
4 Give information to the Customs officer that you intend to avail
the concessional rate of tax
5 Procedure –
➢ The Importer should provide the quantity of output to be

exported by him and the corresponding quantity of input
required to be imported.
➢ The Importer shall also furnish a Bond stating that the inputs
shall be used for the intended purpose and further state that if
any conditions are not fulfilled, then the actual Customs duty
will be paid along with interest
➢ Based on the information and bond, the DC will give
permission to import the goods at a lower rate
6 Maintenance of Records of receipt, consumption and disposal of

the goods in question
7 With the permission of DC, you may export the goods (no duty
liability)
With the permission of DC, you may dispose the goods locally in
any manner (after payment of the differential tax along with
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BHARADWAJ INSTITUTE
Interest)
Interest to be calculated from Date on which Duty originally ought

to have been paid till the date of actual payment
8 If you don’t follow these rules properly then the officer has got
powers to recover the tax along with interest
Page 44 of 44

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BHARADWAJ INSTITUTE

CMA & CS FINAL – CUSTOMS SHIVA KUMAR G FCA LLB

Duty on IMPORT and EXPORT of goods

Export means – taking of Goods from Indian to a place outside India

Import – Brining of goods into India from a place outside India.

The Actual Point of taxation is the Crossing of Customs Frontier

The Definition of Place India is territory of India upto Territorial waters.

Territorial waters – 12 nautical miles from Sea – part of India

Customs waters and EEZ

Indian Customs Waters – Upto 24NM. The Customs officers have

Exclusive Economic Zone – from 12 NM to 200 NM. It is not part of Territory

The Taxable event under the Customs Act is explained as follows:

The Rate of Exchange WILL ALWAYS BE THE CBIC Rate as on

- the date of Filing of Bill of Entry (in case of Imports) and

Duty on Certain items

Pilferage – stolen or lost

Any pilfered goods – no duty is payable by the Importer

However, if any pilferage happens after clearance – then, duty is payable.

Derelict, Jetsam, Floatsam and wreck are subject to Import duty

Floatsam means any goods which floats in the sea

Delelict, Jetsam, Floatsam and Wrecakge are liable to Customs Duty if

If the title is relinquished BEFORE Order of Home Clearance or Order for

The importer can relinquish the title in the following cases

(a) goods not according to the specification

No Relinquishment of title is allowed if any offences committed or appear to

Damaged goods are goods which are damaged BEFORE OR DURING

In case of Damaged goods – the Customs duty amount is proportionately

Such process of transferring the goods from Port to warehouse is called

At the time of transfer to warehouse Bill of Entry for warehousing (In-Bond

Public Warehouse Private Warehouse Special Warehouse

Licensed - License Gold, silver, Duty

Period of warehouse – The Goods cannot be retained at the warehouse

Removal of goods from Warehouse (Deemed Removal)

The goods can also be transfer from one warehouse to another

Things that can be done inside a warehouse

➢ Sort the goods

Transfer from one WH to another WH

Warehouse without warehousing

As discussed in this chapter, the Importer is the person who decides to

However, in certain cases, the Customs Department may warehouse the

EOU means an Export Oriented Unit recognized by DGFT – Director General

The classification under the sub-heading is relevant to decide

(a) The rate of tax

GST and Customs has adopted the HSN Tariff.

Rule Content of the Rule

Also, items in Semi Knocked Down Condition or

Eg: A Motor Car without Tyres, eventhough, it is

Eg: A Fan which is sent as Blades separately, Motor

Also, Any reference to goods of a given material or

The classification of goods consisting of more than one

Eg: Gold Chains will include Chains where Gold and

However, in case of an item say MIXED PRODUCTS where

Eg: Glass for a CAR, will be more aptly classifiable as

If Still unable to classify, then PROCEED To Rule 3(b)

A watch with 20 gms of Gold and Diamond, the essential

IF THE RIVAL CLASSIFICATIONS are EQUALLY

Eg: if 8433 and 8467 both are applicable, then choose,

Rule 5 Packing material will be classified under the MAIN

Please note that the above rules must be applied in ORDER.

Different Import duties are:-

The above duties are seen in detail as under

The Rate generally is 10%

It is levied in lieu of Excise Duty – ED payable had the goods been