FULL CUSTOM CLASS NOTES FOR AUG & DEC 2021 EXAMS by CA VIVEK GABA

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AMENDMENTS CUSTOM LAWS CA VIVEK GABA
Amendments
Important for EXAMS
in
CUSTOM LAWS
(With PRACTICAL QUESTIONS
Must Read with CLASS NOTES)
CS – EXECUTIVE (NEW SYLLABUS) & CS PROFESSIOANL STUDENTS
By
CA VIVEK GABA (TAX LOVE)
VALUATION UNDER CUSTOM [AMENDMENTS]

1. Customs (Determination of Value of Imported Goods) Rules, 2007 amended
(i) Definition of place of importation inserted [Rule 2(d) inserted]
The term “place of importation” was used in the CVR; however, the said term was
not defined. In order to bring in clarity, the definition of term place of importation has
been inserted in said rules.
Place of importation has been defined to mean the customs station, where the
goods are brought for being cleared for home consumption or for being removed for
deposit in a warehouse.
In view of the above definition, the transaction value of the imported goods in terms
of section 14 of the Customs Act, 1962 would include the costs incurred up to the
place of importation, as defined above.
(ii) Rule 10(2) substituted by a new sub-rule

The new rule 10(2) provides that for the purposes of sub-section (1) of section 14 of
the Customs Act, 1962 and these rules, the value of the imported goods shall be the
value of such goods, and shall include -
(a) the cost of transport, loading, unloading and handling charges associated with the
delivery of the imported goods TO the place of importation;
(b) the cost of insurance to the place of importation.
However, where the cost referred to in clause (a) is not ascertainable, such cost
shall be 20% of the free on board value of the goods.
Further that where the free on board value of the goods is not ascertainable but
the sum of free on board value of the goods and the cost referred to in clause
(b) is ascertainable, the cost referred to in clause (a) shall be 20% of such sum:
Where the cost referred to in clause (b) is not ascertainable, such cost shall
be 1.125% of free on board value of the goods.
Where the free on board value of the goods is not ascertainable but the sum of
free on board value of the goods and the cost referred to in clause (a) is
ascertainable, the cost referred to in clause (b) shall be 1.125% of such sum.
In the case of goods imported by AIR, where the cost referred to in clause (a)
is ascertainable, such cost shall not exceed 20% of free on board value of the
goods.
In the case of goods IMPORTED BY SEA OR AIR and transshipped to another

customs station in India, the cost of insurance, transport, loading, unloading,
handling charges associated with such transshipment shall be excluded.
Explanation - The cost of transport of the imported goods referred to in clause (a)
includes the ship demurrage charges on charted vessels, lighterage or barge
charges.
Treatment of the loading, unloading and handling charges under the amended
provisions
Thus, under the amended provisions of rule 10(2) of CVR, the loading, unloading
and handling charges associated with the delivery of the imported goods at the
place of importation, shall no longer be added to the CIF value of the goods.
The phrase “loading, unloading and handling charges” appearing in the amended
rule is to be understood in context of Article 8(2) of the WTO Agreement which reads
as “the cost of transport of the imported goods to the port or place of importation”.
Thus, only charges incurred for delivery of goods “to” the place of importation
(such as the loading and handling charges incurred at the load port) shall now be
includible in the transaction value.
Computation of freight and insurance
Second and fourth provisos to rule 10(2) impart more clarity in computation of transport
and insurance charges, when actuals of each individual element are not known, but
the cumulative value of FOB and freight, or, FOB and insurance charges are known.
Treatment of transshipment costs

In the erstwhile fourth proviso to rule 10(2), while the transshipment charges with
respect to a container being moved from port to an ICD and CFS were excluded
from the transaction value of the goods, there was no mention of a similar treatment to
transshipment of goods by sea or air. Now, by virtue of the sixth proviso to rule 10(2),
costs related to transshipment of goods (from ports to ICDs; port to port, port to CFS,
Airport to Airport, etc.) within India will be excluded, providing uniform t reatment to
different modes of transshipment.
An importer from Cochin imports goods from an exporter in US. The vessel carrying the
goods reaches Mumbai port first and from there goods are transshipped to Cochin port.
Determine the assessable value of the imported goods under the Customs Act, 1962
from the following particulars:
MOST IMPORTANT CHANGE:

SOCIAL WELFARE SURCHARGE SHALL BE LEVBIED INSTEAD OF EC & SHEC @
10% and in Some Cases @3% (Discussed Already in Class)
Question : 1 [Amendment Based)
S.No. Particulars Amount

(i) Cost of the machine at the factory of the exporter US $ 20,000
(ii) Transport charges from the factory of exporter to the port for shipment US $ 1,000
(iii) Handling charges paid for loading the machine in the ship US $ 100
(iv) Buying commission paid by the importer US $ 100
(v) Freight charges from exporting country to India US $ 2,000
(vi) Actual insurance charges paid are not ascertainable —
(vii) Charges for design and engineering work undertaken for the machine in US $ 5,000
(viii) Unloading and handling charges paid at the place of importation Rs. 1,500
(ix) Transport charges from Mumbai to Cochin port Rs. 25,000
(x) Exchange rate to be considered: 1$ = Rs. 60
Answer :
Computation of assessable value of imported goods
Particulars Amount (US $)
Price of the machine at the factory of the exporter 20,000
Add: Transport charges up to the port in the country of the exporter [Note 1] 1,000
Handling charges at the port in the country of the exporter [Note 1] 100
Charges for design and engineering work undertaken for the
machine in US [Note 2] 5,000
Buying commission [Note 3] Nil
FOB value 26,100.00
Add: Freight charges up to India 2,000.00
Insurance charges @ 1.125% of FOB [Note 4] 293.63
Transport charges from Mumbai to Cochin port [Note 5] Nil
CIF value 28,393.63

Add: Unloading and handling charges paid at the
place of importation [Note 6] Nil
Assessable value 28,393.63
Assessable value in Indian rupees @ ` 60/ per $ Rs. 17,03,617.80
Assessable value (rounded off) Rs. 17,03,618
Notes:
(1) The cost of transport, loading, unloading and handling charges associated with the
delivery of the imported goods to the place of importation are includible in the assessable
value [Rule 10(2)(a) of the Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007 (CVR)].
(2) Design and engineering work undertaken elsewhere than in India and necessary for the
production of the imported goods is includible in the assessable value [Rule 10(1)(b)(iv) of
the CVR].
(3) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of the
CVR].
(4) If insurance cost is not ascertainable, the same shall be added @ 1.125% of FOB
value of the goods [Third proviso to rule 10(2) of the CVR].
(5) Cost of insurance, transport, loading, unloading, handling charges associated with
transshipment of imported goods to another customs station in India is not included in the
assessable value [Sixth proviso to rule 10(2) of the CVR].
(6) By virtue of the amendment carried out in rule 10(2) of the CVR vide Notification No.
91/2017Cus. (NT) dated 26.09.2017, only charges incurred for delivery of goods “to” the
place of importation are includible in the transaction value. The loading, unloading and
handling charges associated with the delivery of the imported goods at the place of
importation are not to be added to the CIF value of the goods. [Circular No. 39 / 2017
Cus. dated 26.09.2017].
Question 2: (Amendment Based)

Product 'Z' was imported by Mr. X by air. The details of the import transaction are as
follows:
Particulars US $
Price of 'Z' at exporter's factory 8,500
Freight from factory of the exporter to load airport 250
(airport in the country of exporter)
Loading and handling charges at the load airport 250
Freight from load airport to the airport of importation in India 4,500
Insurance charges 2,000
Though the aircraft arrived on 22.08.20XX, the bill of entry for home consumption was
presented by Mr. X on 20.08.20XX.
The other details furnished by Mr. X are:

20.08.20XX 22.08.20XX
Rate of basic customs duty 20% 10%
Exchange rate notified by CBEC 60 per US$ 63 per US$
Exchange rate prescribed by RBI 61 per US$ 62 per US$
Integrated tax leviable under section 3(7) 18% 12%
of the Customs Tariff Act, 1975
Compute
(i) value of product 'Z' for the purpose of levying customs duty
(ii) customs duty and tax payable
Answer :
Approach 1
Particulars Amount
Ex-factory price of the goods 8,500 US $
Freight from factory of the exporter to load airport 250 US $
(airport in the country of exporter)
Loading and handling charges at the load airport 250 US $
FOB Price 9000 US $
Adjustment under Rule 10(1) Nil
Adjusted FOB 9000 US $
Add: Cost of transport, loading, unloading and handling charges 1,800 US $
associated with the delivery of the imported goods to the place of importation
(restricted to 20% of FOB value)
Insurance (actual) 2,000 US $

CIF for customs purpose 12,800 US $
Value for customs purpose 12,800 US $
Exchange rate as per CBEC Rs. 60 per US $
Amount (Rs.)
Assessable value (` 60 x 12,800 US $) 7,68,000
Add: Basic customs duty @ 10% [Note 3] 76,800
Add: Social Welfare Surcharge/Cess [10% of ` 76,800] 7,680
Value for the purpose of levying integrated tax 8,52,480
Add: Integrated tax leviable under section 3(7) @ 12% 1,02,297.6
Total duty & tax payable (rounded off) 1,86,777.6
Notes :
1) As per Rule 10(2) of CVR 2017 cost of transport, loading, unloading, handling upto
place of importation would be includible in transaction value. Provided that if goods
imported by aircraft, such cost to be added on actual basis which shall not exceed 20% of
FOB.
2) As per Rule 10(2) of CVR 2017, if cost of insurance is ascertainable then it would be
added on actual basis.
3) As per Sec 14(3), Exchange rate is the rate as prescribed by CBIC.
4) As per proviso to Sec. 14, if relevant date for exchange Rate for conversion of price is
date of presentation of BOE v/s 46 i.e. 20th August, 20XX and applicable Exc Rate = 1$ =
60
5) as per Sec. 15, Relevant date for duty & value rate is date of arrival of aircraft if BOE
presented prior to arrival
Approach 2
Particulars Amount
Ex-factory price of the goods 8,500 US $
Adjustment under Rule 10(1) Nil
Adjusted FOB 8,500 US $
Add: Cost of transport, loading, unloading and handling charges 1,800 US $
associated with the delivery of the imported goods to the place of importation
(restricted to 20% of FOB value) (Note 1)

Insurance (actual) 2,000 US $
CIF for customs purpose 12,300 US $
Value for customs purpose 12,300 US $
Exchange rate as per CBEC (Note 2) Rs. 60 per US $
Amount (Rs.)
Assessable value (` 60 x 12,800 US $) 7,38,000
Add: Basic customs duty @ 10% [Note 3] 73,800
Add: Social Welfare Surcharge/Cess [10% of ` 76,800] 7,380
Value for the purpose of levying integrated tax 8,19,180
Add: Integrated tax leviable under section 3(7) @ 12% 98,310.6
Total duty & tax payable (rounded off) 1,79,482
Note : 1
Actual Charges u/r 10(2)(a) Calculation of Adj. FOB
- Freight in Country of Export $ 250 -Ex factory price $ 8500
- Loading & Handling Charges $ 250 - Freight in Country of Export $ 250
- Freight from load airport to $ 4500 - Loading & Handling $ 250
place of importation FOB $ 9000
Actual cost $ 5,000 Adj. u/r 10(1) Nil
U/R 10(2)(a)
Adjusted FOB $ 9000
20% of such FOB $ 1800
In the case of goods imported by air, the cost of transport, loading, unloading and handling
charges associated with the delivery of the imported goods to the place of importation shall
not exceed 20% of the FOB value of the goods. [Fifth proviso to rule 10(2) of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR)].
FOB value in this case is the ex-factory price of the goods (8,500 US $) plus the cost of
transport from factory to load airport (250 US $) plus loading and handling charges at the
load airport (250 US $) which is 9,000 US $.
(2) Rate of exchange determined by CBEC is to be considered [Clause (a) of the

explanation to section 14 of the Customs Act, 1962].
(3) Section 15 of the Customs Act, 1962 provides that rate of duty shall be the rate in
force on the date of presentation of bill of entry or the rate in force on the date of arrival
of aircraft, whichever is later.
(4) Integrated tax is levied on the sum total of the assessable value of the imported goods
and customs duties [Section 3(8) of the Customs Tariff Act, 1962]. Education Cess and
Secondary Higher Education Cess leviable on integrated tax have been exempted vide
Notification Nos. 54 & 55 Cus both dated 30.06.2017.
(5) No landing charges are to be added to the CIF value in view of the amendment in rule
10(2) of the CVR vide Notification No. 91/2017 – Cus. (NT) dated 26.09.2017.
Important Note :
1) Students may adopt any approach with working note but 1st approach is recommend
by author
2) In case of sea/land, entire charges are addable without restriction of 20%; hence,
the choice of approach may not matter. However, if freight is given as unascertainable,
then, this approach becomes relevant.
Question : 3 (Amendment Based)

Determine the Assessable Value of Imported Goods in the following Cases:
Case I
Particulars US $
FOB value 1,000
Freight, loading, unloading and handling charges associated with the Not known
delivery of the imported goods to the place of importation
Insurance charges 10
Case II
Particulars US $
FOB value plus Insurance Charges 1,010
Freight, loading, unloading and handling charges associated with the Not known
Case III
Particulars US $
FOB value 1,000

Freight, loading, unloading and handling charges associated with the 60
Insurance charges Not Known
Case IV
Particulars US $
FOB value plus Sea Freight, loading, unloading and
handling charges associated with the delivery 1,060
of the imported goods to the place of importation
Insurance Charges `` Not Known
Case V (Import by Air)

Particulars US $
FOB value 1,000
Air Freight, loading, unloading and handling charges associated with the 250
Insurance charges 10
Answer:
Compuation of Assessable Value
Case I
Particulars US $
FOB value 1,000
Add: Cost of transport, loading, unloading and
handling charges associated with the delivery of the imported goods 200
to the place of importation [20% of FOB value
in terms of first proviso to rule 10(2) of CVR]
Cost of insurance [Includible in terms of rule 10(2)(b) of CVR] 10
Assessable value [CIF value] 1,210
Case II
Particulars US $
FOB value 1,010
to the place of importation [20% of FOB value
in terms of first proviso to rule 10(2) of CVR]

Cost of insurance [Includible in terms of rule 10(2)(b) of CVR] 10
Case III
Particulars US $
FOB value 1,000
to the place of importation [Actual Exepnditure]
Cost of insurance [[1.125% of sum of FOB value of the goods rule 10(2)(b)] 11.25
Assessable value [CIF value] 1,071.25
Case IV
Particulars US $
FOB value 1,060
Cost of insurance [[1.125% of sum of FOB value of the goods rule 10(2)(b)] 11.925
Assessable value [CIF value] (Round off) 1,072
Case V
Particulars US $
FOB value 1,000
Add: Cost of air transport, loading, unloading and
to the place of importation [20% of FOB]
Cost of insurance [[Actual Expenditure] 10
Question 4:
Niketan Industries Ltd., New Delhi has imported certain machine (by sea) from Japan. From
the following particulars furnished by it, work out the assessable value of the machine and
customs duty payable by Niketan industries Ltd. with appropriate working notes:
Particulars Rs.
CIF value of the machine 4,23,379.69
Freight incurred from port of entry to Inland Container depot 25,000.00
Unloading and handling charges paid at the place of importation 40,000.00
Designing charges paid to Consultancy firm in Mumbai 10,000.00

Basic Customs duty leviable 10% advalorem
IGST 18% advalorem
Answer:
Particulars Rs.
CIF value of the machine 4,23,379.69
Freight incurred from port of entry to Inland Container depot
[Not includible in value as per Rule 10(2)(a). as it is specifically excluded] Nil
Unloading and handling charges paid at the place of importation

[Unloading or handling “at” the place of importation is not includible in value.
Only charges “upto” i.e., prior to the place of importation are includible in value.] Nil
Designing charges paid to Consultancy firm in Mumbai

[As per rule 10(1)(b), engineering, development, art work,
design work, and plans and sketches undertaken
elsewhere than in India are includible; since design
is carried out in India, hence, not includible] Nil
CIF Value or Assessable Value [A]
[Notional addition at 1% of CIF is discontinued] 4,23,379.69
Basic Customs duty @ 10% 42,337.97
Social Welfare Surcharge/Cess (10% of 42,337.97) 4,233.797
Total Value for charge of IGST 4,69,951.456
IGST @ 18% u/s 3(7) of Customs Tariff Act, 1975 84,591.26
Total Customs Duties [BCD + SWS + IGST] 1,31,163
Some OtherImportant
Amendments in CUSTOM LAWS
Definitions
SEC 2(26) IMPORTER

Importer in relation to any goods at any time between their importation and the time when
they are cleared for home consumption includes any owner, beneficial owner or any person
holding himself out to be the importer.
Sec 2(3A) Beneficial Owner

Means any person on whose behalf the goods are being imported or exported or who
exercises effective control over the goods being imported or exported.
SEC 2(20) EXPORTER

In relation to any goods MEANS At any time between their entry for export and the time
when they are exported, INCLUDES Any owner, Beneficial Owner or any person holding
himself out to be the exporter
SEC 2(11)“CUSTOMS AREA”

Means the area of a customs station and Includes any area in which imported goods or
export goods are ordinarily kept before clearance by Customs Authorities.
SEC 2(13) “CUSTOMS STATION”

Means any customs port, customs airport or land customs station.
SEC 2(20A) “FOREIGN POST OFFICE”

Means any post office appointed under clause (e) of sub-section(1) of sec. 7 to be a
foreign post office
SEC 2(28A) “INTERNATIONAL COURIER TERMINAL”

Means any place appointed under clause (f) of subsection (1) of section 7 to be an
international courier terminal exported
SEC. 30A - SPECIAL PASSENGER AND CREW MANIFEST
(1) The person-in-charge of a conveyance that enters India from any place outside India or
any other person as may be specified by the Central Government by notification in the
Official Gazette, shall deliver to the proper officer :
(i) The passenger and crew arrival manifest before arrival in the case of an aircraft or a
vessel and upon arrival in the case of a vehicle; and
(ii) The passenger name record information of arriving passengers, in such form, containing
such particulars, in such manner and within such time, as may be prescribed.
(2) Where the passenger and crew arrival manifest or the passenger name record
information or any part thereof is not delivered to the proper officer within the prescribed
time and if the proper officer is satisfied that there was no sufficient cause for such delay,
the person-in-charge or the other person referred to in sub-section (1) shall be liable to
such penalty, not exceeding fifty thousand rupees, as may be prescribed.
SECTION 46: ENTRY OF GOODS ON IMPORTATION
1. Meaning: It is an application by Importer to Customs authority for assessment and

clearance of goods from customs area.
2. Presentation: The importer of any goods, other than goods intended for transit or
transshipment, shall make entry thereof by presenting electronically to the proper officer
a bill of entry for home consumption or warehousing in the prescribed form.
Provided that the Commissioner of Customs may, in cases where it is not feasible to
make entry by presenting electronically, allow an entry to be presented in any other
manner:
3. Types of Bill of Entry: There are three types of B/E prescribed by regulation
Form I : For Home Consumption
Form II : For warehousing (Into bond)
Form III : clearance for Home Consumption from warehouse (Ex-bond).
[This Bill of Entry is to be submitted U/S 68 & not under Sec. 46]
A bill of entry shall include all the goods mentioned in the bill of lading or other receipt
given by the carrier to the consignor.
4. Bill of Lading: The Bill of Lading given by carrier of the goods is importer's document
of titles of goods. The Bill of Lading covers all the goods imported with full description.
5. Content of Bill of Entry: The importer is required to declare in the Bill of Entry amongst
other things the particulars of packages, the descriptions of the goods, in terms of the
description given in the Customs Tariff to enable proper classification of the goods and
the correct value of the goods for the determining the amount of duty. Since the
assessment is based on the declaration made by the importer, the onus is cast upon
him to make a declaration and solemn affirmation about the truth of the contents in the
Bill of Entry.
6. Incomplete Bill of Entry: If the importer unable to furnish all the particulars of the goods
required under this sub-section and if he confesses his predicament to the department,
the proper officer may, pending the production of such information, permit him,
a) To examine the goods in the presence of an officer of customs, or
b) To deposit the goods in a public warehouse appointed under section 57 without
warehousing the same. Accordingly such goods shall not deemed to be warehoused
goods and no provision of warehousing shall apply. (Warehousing without Warehousing)
7. Time Limit: The importer shall present the bill of entry before the end of the next day
following the day (excluding holidays) on which the aircraft or vessel or vehicle carrying
the goods arrives at a customs station at which such goods are to be cleared for home
consumption or warehousing
8. Prior Bill of Entry: Provided that a bill of entry may be presented within thirty days of
the expected arrival of the aircraft or vessel or vehicle by which the goods have been
shipped for importation into India: Provided further that where the bill of entry is not
presented within the time so specified and the proper officer is satisfied that there was
no sufficient cause for such delay, the importer shall pay such charges for late
presentation of the bill of entry as may be prescribed.
SECTION 47: CLEARANCE OF GOODS FOR HOME CONSUMPTION

Where the proper officer is satisfied that
 any goods entered for home consumption are not prohibited goods and
 the importer has paid the import duty, if any, assessed thereon and any charges
payable under this Act in respect of the same,
the proper officer may make an order permitting clearance of the goods for home
consumption.
“Provided that the Central Government may, by notification in the Official Gazette,
permit certain class of importers to make deferred payment of said duty or any
charges in such manner as may be provided by rules.
The importer shall pay the import duty—
(a) on the date of presentation of the bill of entry in the case of self-assessment;
or
(b) within one day (excluding holidays) from the date on which the bill of entry is
returned to him by the proper officer for payment of duty in the case of
assessment, reassessment or provisional assessment; or
(c) in the case of deferred payment under the proviso to sub-section (1), from such
due date as may be specified by rules made in this behalf,
and if he fails to pay the duty within the time so specified, he shall pay interest @
15% on the duty not paid or short-paid till the date of its payment.
SECTION 41A: Passenger or Crew Manifest
(1) The person-in-charge of a conveyance that departs from India to a place outside
India or any other person as may be specified by the Central Government by

notification in the Official Gazette, shall deliver to the proper officer—
(i) the passenger and crew departure manifest; and
(ii) the passenger name record information of departing passengers, in such form,
containing such particulars, in such manner and within such time, as may be
prescribed.
(2) Where the passenger and crew departure manifest or the passenger name record
information or any part thereof is not delivered to the proper officer within the
prescribed time and if the proper officer is satisfied that there was no sufficient cause
for such delay, the person-in-charge or the other person referred to in sub-section (1)
shall be liable to such penalty, not exceeding fifty thousand rupees, as may be
prescribed.

With reference to the recent amendments made in the Customs Act, 1962, examine
the validity of the following statements:
(a) A beneficial owner of imported goods is a person on whose behalf the goods are
being imported.
(b) Customs area does not include a warehouse.
(c) Customs station includes international courier terminal.
Answer:
(a)The statement is valid. A new section 2(3A) has been inserted in the Customs
Act, 1962 vide the Finance Act, 2017 to define beneficial owner to mean any person
on whose behalf the goods are being imported or exported or who exercises effective
control over the goods being imported or exported.
(b)The statement is not valid. The definition of customs area as provided under
section 2(11) of the Customs Act, 1962 has been amended vide the Taxation Laws
(Amendment) Act, 2017 to include within its ambit a warehouse too. The customs area
is now defined to mean the area of a customs station or a warehouse and includes
any area in which imported goods or export goods are ordinarily kept before clearance
by customs authorities.
(c)The statement is valid. The Finance Act, 2017 has included international courier
terminal and foreign post office within the scope of customs station as defined under
section 2(13) of the Customs Act, 1962. As per the amended section 2(13), a customs
station means any customs port, customs airport, international courier terminal, foreign
post office or land customs station.
With reference to the recent facility, 'Clear first-Pay later' extended to importers under
the customs law, answer the following questions:
(i) What is the objective of the facility?
(ii) Who is eligible to avail this scheme?
(iii) What are the due dates for payment of duty under this facility?
(iv) What are the circumstances when the deferred payment facility will
not be available?
Answer:
(i) 'Clear first-Pay later' i.e., deferred duty payment is a mechanism for delinking
dutypayment and customs clearance. The aim is to have a seamless wharf to
warehouse transit in order to facilitate just-in-time manufacturing. This scheme is
in force w.e.f. 16th November, 2016.
(ii) Central Government has permitted importers certified under Authorized

Economic Operator programme as AEO (Tier-Two) and AEO (Tier-Three) to
make deferred payment of import duty (eligible importers).
As a part of the ease of doing business focus of the Government of India, the
CBEC has rolled out the AEO (Authorized Economic Operator) programme.
It is a trade facilitation move wherein benefits are extended to the entities who
have demonstrated strong internal control systems and willingness to comply
with the laws administered by the CBEC.
(iii) The due dates for payment of deferred duty are:

S.NO Goods corresponding to bill of entry Due date of payment of
returned for payment from duty, inclusive of the
period (excluding
holidays) as mentioned
in section 47(2)
1 1st day to 15th day of any month 16th day of that month
2 16th day till the last day of any month 1st day of the following
other than March month
3 16th day till the 31st day of March 31st March
(iv) If there is default in payment of duty by due date more than once in three
consecutive months, the facility of deferred payment will not be allowed
unless the duty with interest has been paid in full. The benefit of deferred
payment of duty will not be available in respect of the goods which have not
been assessed or not declared by the importer in the bill of entry.

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VG STUDY HUB CUSTOM NOTES MISC. TOPICS
CUSTOM MISC. TOPICS NOTES

Source: ICSI Module
Rules & Regulations

The rule making power is delegated to the Central Government while the regulation
making power delegated to the Central Board of Indirect Taxes and Customs (CBIC).
Differences between Rules and Regulations
Parameter Rules Regulations

Power to Section 156 Section 157
make
Authority Central Government is authorized to CBIC is authorized to make the
make the rules regulation
s
Purpose To supports the Act To support the Act and the Rules
Content Transaction Value; Chargeability of The form of Bill of Entry; shipping
accessories & Repairs & Maintenance Spare bill; bill of export; import & export
Parts; Detention & Confiscation of Goods; manifest; form & manner of
Goods mentioned in the shipping bill / Bill making application for refund of
of Export but either not exported OR duty; conditions for transhipment
exported and subsequently & removal of good without
re-landed; payment of duty; manner of
conducting audit of duty
assessment of imported / exported
goods
www.vgstudyhub.com, 7703880232 1
TYPES OF CUSTOMS DUTIES
Social Welfare Surcharge (SWS) on imported goods [Section 110 of Finance Act,
2018 w.e.f 02-02-2018]
It is a duty of customs levied for the purpose of the Union on the goods specified in
the First Schedule to the Customs tariff Act,1975,being goods imported into India. It is
levied @10% on the aggregate of duties, taxes and cesses which are levied and collected
by the Central Government under section 12 of the Customs Act, 1962.It is not
applicable on safeguard duty, countervailing duty, antidumping duty, IGST and GST
Compensation cess.
Road and Infrastructure Cess on imported goods [Section 111 of Finance Act,2018
w.e.f 02-02-2018]
It is levied as duty of custom @ rupee 8 per litre on motor spirit(petrol) and high
speed diesel(HSD) imported into India for the purpose of financing infrastructure
projects.
Introduction of Health Cess (Finance Act, 2020)

Finance Act 2020 has imposed a Health Cess on import of medical equipment of
classified in 4th schedule for augmenting and financing health infrastructure and
related services.
Salient features are below
o The applicable rate is 5% on the assessable value of the imported goods;
o Medical devices which are exempt from Basic Customs Duty would not be
subjected to Health Cess; and
o Credit of Health Cess is not available to the importer
CLASSIFICATION & VALUATION OF IMPORT AND EXPORT GOODS

Classification enables categorising the goods into groups / sub-groups, in order to apply
a single rate of duty on each group / sub-group. This classification is based on the
concept of Harmonised System of Nomenclature (HSN).
HSN is an internationally accepted coding system and the same was formulated and
thereby enunciated under the General Agreement on Tariffs & Trade (GATT). At
international level, the HSN classification of goods is a six digit coding system but
India follows 8 digit coding system, wherein first two digit represent chapter number,
next two digits represents heading number, next two digits represents sub heading
number and last two digits product code.
Interpretation Rules under the Customs Tariff Act, 1975

General Rule for Classification [Rule 1]
The essence of this rule is that the reference to the rules may be made in case of
ambiguity, that is, the reference to the six rules of interpretation is not required when
classification of the goods is possible on the basis of description in the heading, sub-
heading etc.
Unfinished Articles & Mixtures [Rule 2]
a) Any reference in a heading to an article, shall be deemed to include a reference

to that article in an unfinished stage too, as long as in the present stage, the
incomplete article exhibits the essential character of that article in complete /
finished form
Example : Car without tyres or without seats would be still construed as Cars,
but not Cars without engines
b) Any reference in a heading to a material or substance, shall be deemed to

include a reference to the mixtures and combinations of that material /
substance with other materials / substances
Example : natural rubber would include its mixture with synthetic or other forms
of rubber
Classification of Goods classifiable under more than one head [Rule 3]
a) “Specific Identification”, i.e., the goods shall be classified under the heading
which is closest to the specific description
Example : Mint Tea is not separately classified, but the classification should be
tea as the product is closest to the one under the heading “tea”, mint is only
a flavour
b) “Essential Character Principle”, i.e., if composite goods cannot be classified as

per Rule 3(a), then, shall be classified on the basis of material / substance
that defines the essential character
Example : If one imports “Liquor Gift Sets” that have both, liquor and glasses,
it should be classified under the heding, “Liquor”, as the essential character of
the composite item is the liquor itself and the glasses are pure ancillaries
c) “Latter the Better Principle”, i.e., when goods can’t be classified under rules
3(a) or 3(b), the goods would be classified under the heading that appears
last in the numerical order amongst those which equally merit consideration
Example : A gift set, which has socks and ties, can be classified under any of
the above rules, and therefore should be classified as ties (heading 6117) over
socks (heading 6115)
Akin Principle [Rule 4]
This rule states that the goods which cannot be classified in accordance with Rules 1,
2 or 3, shall be classified under the heading which includes goods that are the most
“akin or similar”. An example would be anti-glare films used for car windows, venetian
blinds, all of these are not separately classified, they would be classified under the
heading for “builders’ ware of plastic”, as that’s the closest these fit into.
Cases / Containers for packaging of goods [Rule 5]
Goods which are in the nature of containers / packages such as necklace boxes,
camera cases, musical instrument cases, will be classified with the specific article
which are generally sold within these packages. However, this is applicable to
containers, which are fitted for the article they will contain, are suitable for long term
use, protect the article when not in use, and are of a kind normally sold with such
articles.
Sub-headings [Rule 6]
Only sub-headings at the same level are comparable.
EXEMPTIONS
Exemptions under the Customs Act
If the Central Government is satisfied that it is necessary in the public interest to do

so, it may, by notification in the Official Gazette, exempt generally or subject to such
conditions as may be specified in the notification, which would need to be fulfilled
before / after clearance, goods of the specified description from the whole or any part
of the duty of customs.
It may, by special order, exempt from duty, any goods, on which duty is leviable only
under exceptional circumstances. Further, no duty is to be collected, if the amount
of duty leviable is less than or equal to INR 100.
Both the general and specific exemptions mentioned above, may be granted by
providing for the levy of duty at a rate expressed in a form which is different from the
statutory rate.
An exemption notification cannot be withdrawn and the duty cannot be demanded with
retrospective effect.
OFFICERS OF CUSTOMS LAW
Power of Customs Officers
The Customs Officers are authorised to :
a) Declare warehousing stations
b) Allow setting up warehouses (Public / Private)
c) Power to search any vessel / conveyance / person
d) Power of Seizure of Goods
e) Power to Arrest
Types of Ports
a) Sea Ports
b) Airports
c) Land Customs Stations (LCS)
d) Inland Container Depots (ICD)
e) Container Freight Stations (CFS) attached to ports
Mode of Clearance
a) Regular Cargo
b) Courier
c) Foreign Post Office
d) Baggage
DEMAND & RECOVERY
The notice of demand, must be served in writing, clearly mentioning the reasons, and
providing the party an opportunity of being heard.
Generally, the Show Cause Notice, should be served within 1 year from the relevant date;
that is; 1 year from the date of assessment / payment of duty.
However, in specific cases, where the duty or interest is not paid, or short paid, by
reason of collusion, wilful
suppression of facts, or misstatement, then the notice could be served within a period of
5 years.
The demand of duty provisions also calls for attachment of property for upto 6 months,
for protection of interest of revenue and that could be extended for another period of 6
months, but the attachment period cannot exceed 2 years.
Post which the duty must be collected, in the name of customs duty and paid to the
credit of the Government.
CONFISCATION OF GOODS & CONVEYANCES
Confiscation would generally tend to connote the forceful seizure / repossession of goods
by the Government, without any compensation to the owner, as the possession of the
goods was contrary to the law.
 Section 111 states that the following improperly imported goods, shall be liable to
confiscation
 those which are imported by sea / air and offloaded / attempted to be

offloaded in a port other than
the appointed customs’ port
 those which are imported by land / inland water, through a route other than
a specified route
 any dutiable / prohibited goods brought in to any bay / creek / gulf etc.
for the purpose of being landed at a place other than customs’ port
 any dutiable / prohibited goods, found concealed in a conveyance
 any dutiable / prohibited goods which should have been disclosed in the
Import General Manifest but were not
 any dutiable / prohibited goods removed / attempted to be removed from a

warehouse / customs station, without permission
 goods which do not match the description in the documents, vis-à-vis value /
any other particulars
 any goods, which were exempted from duty subject to a condition, which was
eventually not met
 Section 113 states that the following improperly exported goods, shall be liable to
confiscation
 those which are exported by sea / air and loaded / attempted to be loaded
in a port other than the appointed customs’ port
 those which are exported by land / inland water, through a route other than
a specified route
 any dutiable / prohibited goods brought near any bay / creek / gulf etc.
for the purpose of being exported from a place other than customs’ port
 any dutiable / prohibited goods, found concealed in a conveyance
 any goods loaded in a wrongful manner without necessary permissions

 goods which do not match the description in the documents, vis-à-vis value /
any other particulars
 any goods, on which import duty wasn’t paid and entered for export under a
claim for drawback
 Section 115 deals with Conveyances which are liable to confiscation
 Any vessel which has been within the Indian customs waters, any aircraft
in India, or any vehicle, which has been adapted or fitted or structured in a
manner that it purports or enables the concealment of goods
 Any conveyance from which the goods are destroyed to prevent seizure
 Any conveyance which had to stop / land but didn’t do so except for
sufficient cause
 Any vessel from which goods which have been cleared for exportation, under
a claim for drawback, were unloaded without necessary permissions
 Any conveyance which carried goods into India, but which were later
missing without any account for the loss
 Any conveyance / animal used for smuggling
 Section 118 deals with confiscation of packages
 Where the goods imported / exported are liable to confiscation, the
packages within which they are cased and carried, are also liable for
confiscation
 Section 119 states that any goods used to conceal the smuggled goods are also
liable to confiscation
 Section 120 & 121 state that where the smuggled goods undergo a change in
their physical form, post smuggling, even then they would be liable for
confiscation (example : gold bars, later converted to ornaments). Also, where the
smuggled goods are mixed in a manner with other goods such that they are
inseparable, entire goods would be liable to confiscation, and if the smuggled
goods are sold off, the sale proceeds thereof are liable to confiscation
 Section 122 states that the adjudicating authorities shall be give an

opportunity of being heard to the party concerned
 Section 123 clearly states that if goods are seized, the onus is on the owner to
prove that they were not smuggled
 Section 124 clearly states that before confiscation, it is necessary that a show
cause notice (SCN) is issued to the owner, citing grounds and he should be
given an opportunity to make a representation / of being heard. The SCN can
be issued by a person not below the rank of Assistant Commissioner of
Customs
 Section 125 states that the authorised officer may allow the owner an option
to pay fine in lieu of confiscation
 Section 126 mentions that confiscated goods vest with the Central Government
 Section 127 clarifies that any award of confiscation / penalty shall not
interfere with or prevent the owner from being punished under any other
provisions of this or any other law for the time being in force.
REFUND
Refund of Export Duty
Where on the export of goods; any duty has been paid, such duty shall be refunded to
the person by whom or on whose behalf it was paid, if –
(a) the goods are returned to such person otherwise than by way of re-sale;
(b) the goods are re-imported within one year from the date of exportation; and
An application for refund of such duty is made within 6 months from the date on which
the proper officer makes
an order for the clearance of the goods when they are imported back.
Refund of Import Duty

Where on the import of any goods, duty has been paid upon clearance for home
consumption, such duty can be refunded to the person by whom or on whose behalf it
was paid, if -
a) The goods are found to be defective or not in conformity with the specifications
b) The importer does not claim any duty draw back with respect to these goods
c) If the goods are exported back / importer relinquishes his title to the goods /
they are destroyed in the
presence of the proper officer
An application for refund of duty is to be made within 6 months from the relevant date,
i.e.,
a) The date when the proper officer makes an order for clearance of goods when
they are exported back
b) Date of relinquishment if the importer relinquishes his title to the goods
c) Date of destruction, where the goods are destroyed
Moreover, for all general refunds of duty, apart from the ones covered above, have a
limitation period of 1 year, that is, the refund application must be filed within 1 year
from the date of payment of such duty.
Offences
The following would constitute offences under the Act.
a) Any mis-declaration in respect of the goods vis-à-vis its value or description or

weight or origin
b) Violation of allied acts, example, Violation of wild life, Drug & Cosmetics Act, Food
laws etc.
c) Landing of Goods at unauthorised ports
Such offences could result in civil or criminal liabilities or both and both could run
simultaneously. Criminal prosecution could result in imprisonment + fines, and civil
prosecution could result in alienation of wealth and penalties.
Criminal Liabilities
 Punishment up to 7 years
 Offences involving duty evasion of more than INR 50 Lakhs, or prohibited goods,
are non-bailable
 Fraudulent duty drawback claims, exceeding INR 50 Lakhs is also non bailable
Civil Liabilities
 Recovery of duties short paid
 Interest charge
 Penalties
 Confiscation of import / export goods
 Confiscation of conveyances used for smuggling
 Up to 200% duty for unaccounted goods
 Up to 5 times the value of goods for forged documents
The normal limit for the above prosecution is one year, whereas for intended fraud, the
time limit is 5 years.
Advance Ruling
This refers to the determination, by the authority, of a question of law / fact specified in
the application, regarding the liability to pay duty in relation to an activity proposed to
be undertaken by an applicant.
In the context of Customs Act, the activity above in the definition would imply import /
export.
The application is made in quadruplicate with the fees specified, and can be withdrawn
within 30 days of the application. It is imperative to note that, for matters already
pending before the Tribunal / Court, would not be admissible under Advance Ruling
separately.
The ruling must be made within 90 days of the application.
Settlement Commission
Settlement Commission has been constituted under the Customs Act to provide speedy
resolution of disputes pending before an adjudicating authority. The cases can be
referred by applicants with the Commission. However, no application for determining the
Once the case is submitted before it, it enjoys exclusive jurisdiction over it and then
can consequently perform the functions of a customs officer, and thereafter the
customs officer cannot investigate, adjudicate or issue notice / corrigendum.
The application will be disposed effectively and suitable orders would be issued by the
Commission.
The orders of the Commission are non – appealable, however, amenable to writ
jurisdiction of High Court.
The appellants can also take the route of Tribunal / High Court and Supreme
Court under the litigation mode.

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CS – EXECUTIVE (NEW SYLLABUS) & CS PROFESSIOANL STUDENTS

VALUATION UNDER CUSTOM [AMENDMENTS]

(i) Definition of place of importation inserted [Rule 2(d) inserted]

(ii) Rule 10(2) substituted by a new sub-rule

(b) the cost of insurance to the place of importation.

In the case of goods IMPORTED BY SEA OR AIR and transshipped to another

Computation of freight and insurance

Treatment of transshipment costs

MOST IMPORTANT CHANGE: