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    Customs Law CH 20-24

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    jerstudying this chapter, youshall tounderstand the following: eable 1s Sources of Customs Laws 's impact of GST on Customs 1s Inportant Definitions 1 Types of Goods « Charging Section under Customs 's Taxable Event for |e Imports |e Exports IF CUSTOMS LAW The word ‘Customs’ means a habitual practice or course of action that repeats in like circumstances. The duties on import and export of goods have been levied from the traditional times by all the countries. It has been described as "SHULKA’ in Kautilya’s Arthashastra which consists of import duty and export duty to be collected at the city gates on both goods coming in and coming out. It is clear that in ancient monarchy system of governance, the trader bringing goods to a particular kingdom had to take permission from the King to sell his goods in that kingdom, In order to take that permission, the trader had to offer certain gifts to the king. Over a period of time, this custom took a paradigm shift from monarchy in favour of democracy. ‘The Customs Act was passed in 1962 by replacing erstwhile Sea Customs Act, 1878, Further Customs Tariff Act was passed in 1975 to replace Indian Tariff Act, 1934. At present, the Customs Act consolidates the provisions as to levy and collection of duties on import and export of goods. INDIRECT TAX Customs duty is a form of indirect tax. It is levied by the Central Government on import of goods and export of goods from India through Air, Water and Land Route. 20.2 SOURCES OF CUSTOMS LAW ‘The following are the sources of customs laws in India: (1) The Customs Act, 1962 : It extents to the whole of India and, save as otherwise provided in this Act, it appliesalso to any offence or contravention thereunder ‘committed outside India by any person. [Inserted by the Finance Act, 2018, w.e.f. 29-3-2018). 20.1 oNNVINXVL TAXMANN® Para 20.3 BASIC CONCEPTS OF CUSTOMS LAW It is the principal act which provides for levy of import and export d goods imported into or exported from India. It also contains provision: exportation, duty drawback, appeals, offences, prosecution, etc. (2) The Customs Tariff Act, 1975: It contains the provisions relating to v; duties and the classification of imported and exempted goods. This act Schedule 1: The first schedule gives the classification and rate: into India, It is also called as “Import Tariff.” Schedule II: The second schedule gives the classification and rates of dutic es for ex goods from India. Itis also called as “Export Tariff.” Ports of (3) Rules under Customs Act, 1975: The section 156 of the Custom Central Government to make rules. Such rules may provide for ner of determining the value of imported goods/export goods, The rules so framed are consistent with the provisions of the is Act, 1962 matters relati duty drawbac Customs Act, (4) Regulations under Customs Act, 1975: The CBIC toms) is empowered under section 157 of the Cus' the purposes of the Act. These regulations are to as well as the rules framed by the Central Gover Import Regulations, Customs House Agency Lic (5) Circulai mity in classification of goods or with respect to the levy of duty thereon. (6) Notifications: The Central Government sections like for prohibition of im (section 11B), ete. be consistent with the provi ensing Regulations, etc. luties of IS for in arious types of contains two. s of duties for impor (Central Board of Indirect Taxes a toms Act to make regulation: ment. Some of the regulation: ‘he CBIC can issue circulars, instructions or directions for the purpose of unifor. has the power to issue notifications under different port or export of goods (Under section 11), notified goods My “Ustong 5 i ri POrtation Us, chee Sf go EMPOWErS the ing to the may, , baggage 962, : nd Cis S 10 carry ou sof the At S are Project Impact of introduction of GST on Customs The following are the implications of GST introduction on imports and exports; 1. Import as Inter-State Supply: Under the GST regime, Article 269A constitutionally mai supply of goods/services/both 2. Import of Services: The Section 7(1)(b) of CGST 3. Import of Goods: The levy of the IGST on it Customs Act, 1962 read with the Customs 4. Export of Goods/Services: On the ex section 16(1)(a) of IGST Act, 2017. import of goods would be levied under sect Tariff Act, 1975. What about duties under Customs Act, 1962 The introduction of GST has no impact on levy of Basic Customs duty, Education Cess, Anti Safeguard duty and the like. However, the Addi Special Additional duty of Customs (SAD) would be replaced with the Tax (IGST). But this CVD will continue on few excep' etc. These duties have been explained in detail in Chapter 21. 20.3 GEOGRAPHICAL JURISDICTION OF CUSTOMS J ie The Customs Act, 1962 applies to the whole of India. It may be noted that w.e, 29- applies to any offence or contravention thereunder committed outside India by any includes territorial waters of India. h in the course of import into India shall be deemed to be supply in the course of inter-State trade or commerce for levy of integrated tax. Therefore, such import of goods| oF services will be treated as deemed inter-State supplies and would be subject to Integrated tar. integrated tax on such services would be leviable under the IGST Act. Te Act, 2017 has also included the import of services for a consideration as Supp! ‘ports side, export would be treated as zero-rated supply unde?) itional duties of Customs ie. Countervailing Duty (CVD) levy of Integrated Goods and Series tional items like pan masala, certain petroleum produ indates thatthe tion 3(7) of he dumping duty 3.2018, it a8? person. India eg GEOGRAPHICAL JURISDI C ICTION OF CUSTOMS ACT, 1962 Para 20.3 First 12 NM jndian Ferritorial Waters Next 12 NM Next 176 NM. S fe Contiguous Zone Indian Customs Waters (Up to 200 Nautical Miles) Indian Exclusive Economie Zone (Up to 200 Nautical Miles) ‘Total 200 Nautical Miles from the Base Line HIGH SEAS Fatieal Mile (NM) = 1.1515 miles = 1,853 Kms.] Ue ge isthe tower water mark along the coast. aus qerritorial Waters: Tet torial waters mean that position of sea which is adjacent to the india? Og a country. Ter ritorial waters extend up to 12 nautical miles from the base line on the ores a aa of India and include any bay, gulf, harbor creck or tidal river. All the provisions of Customs quae applicable. ‘This determines taxable event. Thus, in case of importation, import of goods wil commence when they cross territorial waters and exportation is completed when the goods he territorial waters. pifieance of Territorial Waters of India Gods are deemed to have been imported if the vessel enters the imaginary ipatical mile be. if the vessel enters the territorial waters of India. Therefore, Gould not enter these waters. the surface of sea in the territorial waters, Tine on the sea at the 12th a vessel not bound to India | but also the air space above and the india includes not only ‘ound at the bottom of the sea. {oniguous Zone: It the zone that starts after 12 vrautical miles from the base line (ie. beyond terr- tart eters) and extends up to next 12 nautical miles. Tis important to note that, the contiguous zoneis the part of ( Indian Customs Water and (i) Exclusive Economic Zone. Indian Customs Water [Section 2(28)]': “Indian Customs Waters” means the waters extending into the sea up to the limit of Exclusive Economic Zone (under section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976) and includes any tay, gulf, harbor, creek or tidal river. It is clear hat vide amendment through Finance Act, 2018, thelmit of Indian Custom Water has been extended for the coverage under the Customs Act. TheCentral Government is empowered to take measures in ICW for security of India, immigration, n within ICW. Any ship or vessel Sanitation, etc. The customs officer has power to arrest any persot n y canbe stopped and searched in this area and can te fired upon and confiscated if it does not stop when demanded. Siificance of Indian Customs Waters Ind customs waters cover both the Indian territori ‘nificant as; al waters and exclusive economic zone as well Tt is blo uncler customs lawwithin the Indian customs. waters, + tFaperson has committed any offence punish hemay be arrested. + The goods may also be confiscated. The vessel is stopped in the Indian customs waters if the same * The prohibited goods can also be confiscated if brought witht = Ul Asay _ 'Stiended bythe Finance Act, 2018, wef, 2932018 found to be used in the smuggling. the Indian customs waters. $$$ $$$ gL | ' ‘TAXMANN® Para 20.4 BASIC CONCEPTS OF CUSTOMS LAW ay Indian Exclusive Economic Zone: It extends up to 200 nautical miles Rom the base line: Kis exclusive rights to exploit it for economic purposes such as fishing, oil exploration, power Bene research, etc. : High Sea; High sea is the distance beyond 200 nautical miles from the base line. All Countries hes equal rights over this area. fe 20.4 IMPORTANT DEFINITIONS UNDERICUSTO! The following are some of the important definitions given under the act: (1) Baggage: “Baggage” includes unaccompanied baggage but does not include motor vi @) Beneficial Owner: It means any person on whose behalf the goods are bein, ported or who exercises effective control over the goods being imported or 2(3A)]. Chiles, i imported org, xported [Section, (3) Board (As amended by the Finance Act, 2018, w.e.f. 29-3-2018): “Board” me: Board of Indirect Taxes and Customs(CBIC) constitut. Act, 1963, (4). Conveyance: ‘ans the Central ‘ed under the Central Boards. of Revenue Itincludes a vessel, an aircraft and a vehicle, (8) Customs Area: It means the area ofa custom: (6) Customs Port: It means any port appointed under clause (a) of section 7 to be a customs por and includes a place appointed under clause (aa) of that section to be an inland container (7) Customs Station: It means any customs port, customs airport or land customs station. (8) Export: with its grammatical variations and cognate expressions, means taking out of India toa place outside India, or aircraft for the time being engaged Port or airport in India and any port or diate port or airport in India or riot, and (0) any vessel or aircraft proceedin (10) Import: It is with its grammatical vai 8 toa place outside India for any purpose whatsoevet 2 vations and cognate expressions, means bringing it India from a place outside India. (11) India: India includes the territorial waters of India, (12) ‘Smuggling: In relation to any goods, means any act or omission which will render such g00¢ liable to confiscation under section 111 or section | 13, (13), Warehouse: It means a public warehouse licensed under section 57 or a private warehous? licensed under section 58 or a special ware hones licensed under section 58A [Section 2(43)! fe i rovisions for duties ol rovides pI Act P n import and es fd EXPOTt Of goods 2 : et ge gves the inclusive definition of goody pa “sod ne 00229 Bosom d vehicles; cust ircrafts and ve ; oe ls ait sel hi 4 gioress Bae i instruments; and and negotiable ins currency other kind of movable property, @ Any # goods have been classified under various wing types of thefallow ) Inported Goods: The goods brow i) Sections of Customs Act, imported goods. ight to India from a place outside India are referred toas goods the import or export of which is subject to any ly other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted tobe imported or exported, have been complied with, 6) Coastal Goods: These are the goods, other than imported goods, transported in a vessel from one port in India to another, Tansit without payment of duty. These are also referred to as cane bottom goods i | yancetoanother 9) Transshipment Goods: ‘These are unloaded in India to transfer from one conveyancetoan lobe taken fr i i hipment to ide Be cUStoms station to any customs station in Toor fe ialipa oe side India. These are also allowed to be transshipped wit in detail in Para 23.3 of [he concept of transit of goods and transshipment of goods is dealt in de ler 23. (Page 391) oT Tey Spon 8 deals with th any place out PORT EXPORT ROU i i import and of goods into India and outs Ind called as impo © Movemen ta (9 See npnt/@l. This movement can be routed through thre y _ Water) Route i MrRoute Nd Route, oNNVIXYL, ”AXMANN® BASIC CONCEPTS OF CUSTOMS LAW Para 20.8 Land Route | Mode of Transport | Water Route 4 Mode of Transport | Vessel/Ship Vehicle Person in charge Person in charge Person in charge 4 { ' Master of Pilot of the Driver of Vessel/Ship Aireraft Vehicles Landed on Landed on Landed on 4 4 t Custom Port Custom Airport Land Station [20.7 STAGES OF IMPOSITION OF TAXES The imposition of taxes is the Government's practice of levy of tax on the subjects covered underits jurisdiction. Alltaxes and duties are imposed in three stages, namely levy, assessment and collection (@ [Levy It is the FIRST stage where the declaration of liability is made and the persons or the properties in respect of which the tax or duty is to be levied is identified and ct (8) | Assessment | In the context of the customs duty, the term assessment means quantification of te) ‘amount of duty payable. The process of assessment involves the following stages () Determin; ion of the quantity and total value of the consignment. (#) Determination of the proper tariff classification of the goods. | (iif) Determination of the appropriate rate of duty after considering the various exem®"| tions, abatements, remissions. | j git (iv) Determining whether the goods are to be cleared for home consumption oF 1 & deposited in the warehou (6 |eollection | Its the FINAL stage where the tax or duty is actually collected, The collection of 8") duty may for administrative or other reasons be postponed to a later time: The liability towards customs duty is broadly based upon the following three fuctors: ms (1) The goods, the point and the circumstances under which the customs duty becomes evi (2) The procedure, the mechanism and the organization for determining the amount of cus" duty and collection thereof; TAXABLE EVENT: IN CASE OF IMPORT/EXPORT Para 20.10 tion to the levy either on grounds of morality or equity or as a result of the dis: ‘owers vested in the Government as a tool for planning tax structure and control growth of the country. ¢ exemP! 0) cetionaty Ps of econo o note that the customs duty is considered to be levied on the goods and not on the jmportant ‘ He inept ng the goods or paying the duty. so" CHARGING SECTION [SECTION 12 OF THE CUSTOMS ACT, 1962] “.puties of customs shall be levied at such rates as may be specified under the Customs Tariff Ms oF av for the time being in force, on goods imported into and exported from ace 2 ce provisions shall apply in respect of all goods belonging to Government as they apply ins Te of goods not belonging to Government ares . ecific equipment required by police, Ministry of Defence. Cos tal by Indian Navy, s july exempt from customs duty by virtue of specific notifications st d/or procedure set out in the said notifications. ee Imports Brand tt ae Geonditions avd vat which duties of customs shal be levied under the Customs A Therate TeFetand Second Schedules of the Customs Tariff Act, 1975. ibject to fulfilment t, 1962 are specified in ‘The Customs Tariff — First Schedule Second Schedule i T List of goods liable to List of goods liable to import duty export duty [eae ne 20,10 TAXABLE EVENT: IN CASE OF IMPORT/EXPORT “the taxable event for payment of the duty of customs is the /out of India’. Initially the determination of point at which ersial issue. The basic reason was the definition of Aspersection 12 of Customs Act, 1962, inportation or exportation of goods into, importation or exportation occurs was a controv' ‘dia, which included the territorial waters of India. The Supreme Court of India has given landmark judgments’ in cases of Union of India v. par Industries Limited (1999) and further in the case ‘of Garden Silk Mills Limited v. UOL (£999), The import of goods will commence when they cross the territorial waters but continuesandis completed ‘hen they become part of the mass of goods within the country, and the taxable event being reached the time when goods reach the customs barriers and Bill of Entry for home consumption is filed. The confusion in determining the point at whi ea by the numerous legal decisions rendered judgments are as follows:— (TAXABLE EVENT IN CASE OF IMPORTS (9) Im case of goods cleared for home consump! ation or exportation takes place was xl. The major principles derived by Jn the impo 1 this reg tlon: Import of goods commences when they cros: the territorial waters, but continues and is completed when they become part of the mass of t00ds within the country; the taxable event being reached at the tinte when the goods reach, the customs barriers and bill of entry for home consumption is tiled. Tn ease of goods cleared for warehousing: In case of warehoused goods, the goods continue {oben customs bond. Hence, import takes place when the goods are cleared from the ware. Oe, The care ae barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country . a ® Para 20.11 BASIC CONCEPTS OF CUSTOMS LAW Clearance for home consumption: It implies that customs duty on eee Ae Paid andi goods can be removed by the importer for utilization or consumption wi ny. Clearance for warehousing: In case where the goods are not immediately cleared for home consi they may be deposited in a warehouse aud cleared! at a later point of time. In such a case, the collects customs duty will be deferred till such goods are cleared from warehouse for home consumption, (ii) TAXABLE EVENT IN CASE OF EXPORTS Export of goods is complete when the goods cross the territorial waters of India. thete If ship sinks within ‘orial waters, export is not complete. However the duty has to be collected before Ship leaves the port. Therefore, taxable event arises when proper officer makes an order permitting cleaane ie entry outward is granted and loading of the goods takes place. 20.11 CUSTOMS DUTY IN CASE OF RE-IMPORTATION OF GOODS. (SECTION 20] As per section 20, In case if any goods are imported into India after exportation therefrom, suc goods shall be liable to duty and be subject to all the conditions and restrictions, if any, to which goods of the like kind and value are liable or subject, on the importation thereof. It implies tht normal customs duty will be payable on re-imports. However, certain concessions and exemptions are available for re-imports. The re-imports ar entitled for the following concessions/ exemptions. [Notification No. 158/95 as amended by 60/2018 and Notification No. 45/2017 Cus.] s. Description of Goods Exported Amount of Import Duty payable if RE. & |No. IMPORTED 2 | () | Goods exported: © | Amount of incentive availed of at the time| g (a) under claim for duty drawback of export, | (6) Under claim for refund of IGST paid on export goods | In case of point (d) amount of IGST and) ‘01 mn ii 2 (©) Under bond without payment of IGST Compensation Cess leviable at the ae : and place of importation of goods sub (@ Under duty exemption scheme (DEEC/AA/DFIA) or | to specified conditions. | EPCG [First Entry] } (2) | Goods other than those falling under S. No. (1) exported Duty of customs which would beleviableil| for repairs abroad [Second Entry] the value of re-imported goods afterrepsiss| Were made up of the fair cost of re carried out including cost of materi used in repairs (whether such costs a actually incurred or not), Insurance 8 freight charges, both way (3) | Goods other than falling under S. Nos(1) & @) above | NIL [Residuary Entry] Basic Principle: The export incentives obtained at the time of export will be recovered. 20.11.1 Conditions to be satisfied for claiming the above two concession/exemptions (a) ] Time-timit for | The ime limit For re-imporialion is yenra whichoanlbo = a period siepotealiSa de te 2 voce vars which can be extended further for aP* USTO! CUSTOMS DUTY IN CASE OF RE-IMPORTATION OF oops Para 20.11 In case of goods exported under DI Duty Entitlement Passbook Schem Foreign Trade Policy, period upto 1 year, EEC/Advance Authorisation/DFIA or EPCG or eo aed ¢ (DEPB) or any reward scheme of Chapter 3 of s ime limit is 1 year which can be extended further for a The exported goods and the ré ds i Game £00 ; -imported goods must be the same. The goods shall not be deemed to be the same if these are re-imported after being subjected to Fe- nanuifacturing or reprocessi manufacturing or reprocessing through melting, recycling or recasting abroad. Fo change in | In case of goods at 8. No. (2) (ie exported for repairs abroad), the ownership of the No tship | goods should not have changed, pusration 20-2 jram of Mumbai imported a machinery on Ist July 2021 from Japan at Rs. 220 lakh on payment afall duties of customs. Later, Mr. Balram fount that there is some manufacturing defect in the chine. After telephonic conversation, he sent back that machinery to supplier (in Japan) for eic. abroad and incurred Rs. 1,25,000 as cost of insurance and freight from India to Japan. wpa, the supplier took delivery and carried out the required repair work with the following cost: {ast of Material used = Rs. 1,40,000 (ost of labour = Rs. 45,000 The supplier also paid Rs. 1,50,000 as cost of insurance and freight for repaired goods from Japan toDelhi. nce the machine was under warranty period, the repairs were carried out free of cost. The rate of basic customs duty is 10% and integrated tax is 12%, Ignore GST compensation cess. Compute the amount of customs duty payable (if any) on re-import of the machine after repairs. The ownership of the machine has not been changed during the period. Answer Inview of section 20, re-import is also liable to duty. However as per concession given in this behalf tide Notification No. 45/2017 Customs dated 30.06.2017, the duty payable on re-importation of toods which had been exported for repairs abroad is the duty of customs on value comprising of thefair cost of repairs carried out including cost of materials used in repairs (whether such costs are tually incurred or not), insurance and freight charges, both ways. Therefore, the duty would be: \alue of goods re-imported after exports: Rs. 140,000 (Material) + Rs. 45,000 (labour) + Rs. 1,25,000 + Rs. 1,50,000 (Insurance and Freight- both ways) = Rs. 4,60,000 Computation of duty payable: Value of goods re-imported after exports (a) 4.60,000 Add Basic Customs Duty @ 10% of A (8) 36.000 Add ~~ Social Welfare surcharge @ 10% on Rs. 46,000 ie. on B © 4.600 Value for computing integrated tax @) 510,600, Integrated tax @ 12% on Rs. 510,600 ie.on D (E) 61,272 Gisiomns Duty and Integrated Tax payable ((B) + (©) + @)) Ree x F 11.2 Non-availability of above concessions ot be appli 1% Export Oriented Undertaking (EOU) or a unit ie F Concessions mentioned in above Para would ni |") Reimported goods had been exported by 100 in Free Trade Zone (FTZ)- ——— gNNVIVXVL, — cy Para 20.11 BASIC CONCEPTS OF CUSTOMS LAW 2) Re-imported goods had been exported from a public/private warehouse, () Resimported goods which fall under Fourth schedule tothe Central Excise Act, 1944 (oy products and petroleum products). cco 20.11.3 Clarification on goods which were exported earlier for exhibition Purpos consignment basis ey The Department of Revenue has received of Notification No. 45/2017-Customs [Giv | been earlier exported either for participati representations for clarifying the issue of a en in Para 20.11] on the re-import of goods ion in exhibition or on consignment basis, Th | Plicabiy | Which hag le CBIC h, issued following clatification: 2 | [(@) | CireutarNo.108/27/2019G8T] ~* The activity of sending/taking the specified goods (ie pom] | | | dated 18.07.2019: sent/taken out of India for exhibition or on consignment bass | for export promotion except the activities satisfying the tests laid down in Schedule I of the CGST Act, 2017) out of India do not. Constitute supply within the scope of Section 7 of the CGST Act} | as there is no consideration at that point in time. * Sincesuch activity is not a supply, the same cannot be. ‘considered| \ | &s “zero rated supply’ as per the provisions contained in Secigs | 16 of the IGST Act, 2017. | * Also, thereis no requirement of filing any LUT/bond as required) under section 16 of IGST Act, 2017 for such activity of taking ; | specified goods out of India | | ‘* Therefore, no integrated tax is required to be Paid for specified goods at the time of taking these out of India, the activity ot a supply, Issue involved: | a Circular No. 21/2019 Customs || dated 24-7-2019: The situation mentioned at Sl. No. 1(d) of the Notification no. || 45/2017-Customs dated 30.06.2017 [Given in Para 20.11] re- | auire payment at the time of re-import of integrated tax not | paid initially at the time of export, for availing exemption under, | the said notification. The question arises as to the applicability | of this 1(d). | Clarifications made: | * SI. No. 1(d) of Notification is NOT APPLICABLE: Since in the case of re-import of specified goods,nointegrated tax wasted \o be paid for specified goods at the time of taking these out of| India, the activity being not a supply; hence the said cand requiring payment of integrated tax at the time of re-import Specified goods in such cases is not applicable. Accordingly. st re-import cannot be taken to be falling under situation at SLNC- 1(d) of the said Notification, * Residuary Entry ts APPLICABLE: These cases will fall more appropriately under residuary entry at SL No. 5 of the Notification even though those specified goods were export under LUT, In view of the fact that the activity of sending / taking specified goods out of India is nei nor a zero rate \er a supply In case of related parte agents, ete. This clarification is ALSO APPLICABLE to cases wh ated here exports have been made torela CUSTOMS puTY j IN ot} CASE OF RE-IMPORTATION OF GOODS Para 20.11 iB distinct persons or to ‘or participation in exh principals or agents, as the case may be, oti eden elton oF on consignment basis, but such the poor tate Feurned after participation in exhibition oF oF accoptaats returned by such consignees without approval ‘eapply anaes le ease may be, the basic requirement of nally’ as defined cannot be said to be met as there has been acceptance of the goods by the consignees, Analysis of clarification: * Since the given cases will fall/ more appropriately under re wary entry, thus the exemption is available. * The re-import of such goods after return from such exhibition or from such consignees will be covered under residual entry of the Notification No. 45/2017 dated 30.06.2017, provided re-import happens before 6 months from the date of delivery challan. ni Inward and Outward Proces NN 60/2019) qhe Finance Act, 2018 has inserted two sections in relation with inward and outward processing af goods, which are as under: 1g of goods (Section 25A/B & NN 158/95 with (1) Inward processing of Goods [Section 25A] Where the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification, exempt such of the goods which are imported for the purposes of repair, further processing or manufacture, as may be specified therein, from the whole or any part of duty of customs leviable thereon, subject to the following conditions, namely:— (a) the goods shalll be re-exported after such repair, further processing or manufacture, as the case may be, within a period of one year from the date on which the order for clearance of the imported goods is made; (b) the imported goods are identifiable in the export goods; and (c) Such other conditions as may be specified in that notification. 2) Outward processing of goods [Section 25B] Notwithstanding anything contained in section 20, where the Central Government is satis- fied that it is necessary in the public interest so to do, it may, by notification, exempt such of the goods which are re-imported after being exported for the purposes of repair, further processing or manufacture, as may be specified therein, from the whole or any part of duty of customs leviable thereon, subject to the following conditions, namely:— (@) the goods shall be re-importe ufacture, as the case may be, order permitting clearance for (b) the exported goods are identifiable in the re-imported goods; and (6) Such other conditions as ma 4 important to note that the provisions of section 25B have been given an overriding effect over yrovsons of section 20. tification No, 158/95 Customs dated 14.11.1 ‘ustoms dated 11.09.2018 trefallowing is the extract of the not ‘eof for repairs, reconditioning, '¢ into India after such repair, further processing or man- within a period of one year from the date on which the export is made; y be specified in that notification. 995 as amended vide Notification No. 60/2018 ification regarding exemption to re-import of goods and parts processing, remaking or similar other process: ‘TAXMANN® oS BASIC CONCEPTS OF CUSTOMS LAW Para 20.13 201 a Fi 1 2 : Particulars Goods manufactured In India| Goods manufactured In India ang me and re-imported for repairs or | imported for for reconditioning other than | () Reprocessing the specified goods nails (0) Re-making (d) Subject to any process similar to the processes referred to in clauses 2 (0) above. ‘TimeLimitforre-importation | 3 yearsIncase of export toNepal, | 1 Year from the date of exportation | Such time limit is 10 years Other conditions to be| (a) Goods must be re-exported within SIX months (extendable ill one yeas) satisfied of the date of re-importation. (b) The Assistant Commissioner/Deputy Commissioner of Customs are satisfied as regards identity of the goods. () The importer at the time of importation executes a'bond. Note: In 2nd above, if any loss of imported goods is noticed during such operation, such loss shall be exempted from whole of the custom duties subject to the satisfaction of Assistant Deputy Commissioner of Customs. The exemption is available even if quantity re-imported is short or low in quantity as long as nature and variety of goods is same 20.12 DUTY TOBE PAID ON GOODS DERE ECTION 21] : : All goods, derelict, jetsam, flotsam and wreck brought or coming into India, shall be dealt with as if they were imported into India. Thus, even though such goods had not been actually imported, they would be liable to import duty. However, if such goods are entitled to be admitted duty-free under this Act, duty would not be levied provided itis shown to the satisfaction of the proper officer that they are so entitled. Meaning of Important terms vessel, etc. abandoned in the sea with no hope of recovery. Jetsam: This refers to goods jettisoned from the vessel to save the vessel from sinking Flotsam: Jettisoned goods which continue floating in the sea are called flotsam, Wree Derelict: This refers to any cargo, This refers to cargo or vessel or any property which are cast ashore by tides after ship wreck: 20.13 CUSTOMS DUTY NOT LEVIABLE IN CERTAIN CASES» The customs duty shall not be levied on the following: (a) No duty on pilfered goods (Section 13) (b Reduced duty on damaged goods (Section 22) (0) Remission of duty on destroyed goods [Section 23(1)] (@ No duty on relinquishment of the ttle to the goods [Section 23(2)] cusroms 3 DUTY Ni 4 (OT LEVIABLE IN CERTAIN CASES Para 20.13 0. 332 No Duty on Pilfered Goods [Section 13] “mported goods are pilfer i a0 order fer elear sag Tae ter the unloading thercof but before the proper officer hat © consumption oF deposit in a warehouse, the importer shall at Je to pay the duty I pe liable to P: 'y leviable on such got be ee after pilferage, the i h goods. However, where such goods are restored to pt Mote afte iferage, the fnporter becomes Hai turn seat cent ream pifer” means fo steal, especially i ilaee s ie it include loss of total aeleae ly in small quantities ie. petty theft, Therefore, the term ‘ereason behind this provision is that when the goods are not under the control of the importer, pe should not be required to pay duty on such goods. fonations to be satisfied for exemption from duty ’» The imported goods should have been pilfered. ided, but before the proper » The pilferage should have occurred after the goods are unl 0 warehouse officer makes the order of clearance for home consumption or for deposit int ¢ The pilfered goods should not have been restored back to the importer. cyeumstances in which pilferage can be claimed jnorder to claim pilferage the following circumstances should ex (@ there should be evidence of tampering with the packages: (@ there should be blank space for the missing articles in the package; and (0 the missing articles should be unit articles {and not part articles] t the time of removal of goods by the importer time of physical verification of goods by the hhat the pilferage may be 's by the importer. In such case, the order for clearance. have been passed. Therefore, the importer has to xk for survey either by the steamer agents or by the insurance surveyer™ and the report issued by them would form the basis for claiming remission. As in ‘such the circumstances, the duty would aheady have been paid, the remission is allowed in the form of @ refund. The following points are noteworthy: (@ Section 13 deals with only pilferage- not apply i Pilferage noticed at Thepilferage of goods would normally be noticed at the customs authorities. However, in some circumstances, it may so happen t observed only at the time ‘of removal of good: oras the case may be, for bonding would already It does not deal with loss/destruction of goods. (b Provisions of section 13 would if it can be shown that pilferage took place prior to the unloading of goods. (0 If goods are pilfered after the order 0 cloned section 13 is not applicable and thus, duty @ In case of pilferage, only section 13 appl nd rem permissible. f clearance is made but before the goods are actually would be leviable. ion of duty under section 23(1) is not st or Destroyed [Section 23(1)] fon 13, where it is shown to the satisfaction of the | goods have been lost (otherwise than as a result nice for home consumption, the Concerned n of Duty on Goods Lo: tithout prejudice to the provisions of secti ncemed Officer of Customs that any imported Fillerage) or destroyed, at any time before cle cer shall remit the duty on such goods: 2013.2 Rem NVIVXVL, — TAXMANN® = BASIC CONCEPTS OF CUSTOMS LAW 20.14 Para 20.13 The following are the important inferences: (@ This section is applicable in case of loss/destruction of imported goods at any time before their clearance for home consumption. (B) The remission of duty is permissible only in the case of total loss of goods. This implies thay the loss is forever and beyond recovery. © The loss referred to in this section is generally due to natural causes like fire, flood, ete. @ The loss of goods may be at the warehouse also. (c) Since section 23(1) is subject to the provisions of section 13, in case the goods have been pil. fered after they have been unloaded but before order for clearance for home consumption or deposit in a warehouse, section 13 would apply and the importer would not be liable to pay the duty. DISTINCTION BETWEEN SECTION 13 AND SECTION 23(1) The provisions of section 13 and section 23(1) can be better appreciated after going through the following points of distinction:- ‘Basic Pilferage of goods under section 13 Loss or destruction of goods under section 23(1) ‘Meaning ‘The word ‘plfer' meanstosteal, especially | The word ‘lost’ or ‘destroyed’ refers to in small quantities; petty theft total loss of goods ie. loss is forever and beyond recovery. Duty on goods Duty is not at all leviable on such goods. | The duty paid on the goods shall be re- mitted to the importer. Subsequentrestoration | Where the pilfered goods are restored to | In case of destruction of goods, the res- of goods theimporter after pilferage, the importer | toration of goods is not possible. becomes liable to duty. Warehoused goods Provisions of section 13 arenot applicable to warehoused goods. Provisions of section 23(1) apply to ware- housed goods also, Time of occurrence of pilferage or loss/ destruction The imported goods must have been pilfered after the unloading thereof and before the proper officer has made an or- der for clearance for home consumption or deposit in a warehouse. The imported goods should have been lost/destroyed at any time before clear- ance for home consumption. 20.13.3 Right to Relinquish the Title to the Goods [Section 23(2)] Relinquish means to give over the possession or control of, to leave off, The importer may be unwilling or unable to take deli of the following reasons: (a The goods may not be according to the specifications; (i) The goods may have been dama; useful to the importer; (ii), There might have been breach of contra: take delivery of the goods. In all the above cases, the goods havin; but the importer may avoid this liability by abandon them. Therefore, if the importer di ivery of the imported goods due to one or more ged or deteriorated during voyage and as such may not be ct and, therefore, the importer may be unwilling ‘9 ig been imported, the liability to customs duty is imposed ¥ relinquishing his title to the goods unconditionally at loes so, he will not be required to pay the duty amount IADLE IN CERTAIN CASES Para 20.13 joner/Comn Of title, viz, Bill of Lading, Airway Bill, etc. in ft pentotheiMPOrierIOexercisethesbove gma nn ttoms alone with the invoice. is se the above option at any ti ance for home consumption or before okie at any time before the passing of the order for lea fa Tmitting the deposit of goods in a warehouse. owner of any such imported goods shall not be ring which an offence appears to have been com- ime being in force, jt to relinquish not available: Aig" od to relinquish his title to sty under this Act or any other However, the ich good t law for the alow ite where it is shown to the s: ommissioner of Customs— {a) that any imported goods had been damaged or had deteriorated ; es / Oa eae Indian Bed oF had deteriorated at any time before or during (6) that any imported goods, other t the unloading thereof in India b any accident not due t. agent; or than warehoused goods, had been damaged at any time after \ but before their examination under section 17, on account of ‘0 any wilful act, negligence or default of the importer, his employee or (9 that any warehoused goods had been damaged at any time before clearance for home con- sumption on account of any accident not due to any wilful act, negligence or default of the owner, his employee or agent, Such goods shall be entitled to abatement of duty. |imeans the duty to be charged on the goods shall bear the same proportion to the duty chargeable onthe goods before the damage or deterioration which the value of the damaged or deteriorated spods bears to the value of the goods before the damage or deterioration, The amount of duty chargeable after abatement will be calculated as follows: = Duty on goods before damaged or deterioration X Value of damaged or deteriorated goods Value of goods before damaged /deterioration For example: The value of goods is ¥ 90,000 and after damage the value is @ 36,000. The duty on Bods before damage was € 9,270. The duty chargeable after abatement will be calculated as follows: 2209 90,000 = © 3.708 13.5 Denaturing or Mutilation of Goods [SECTION 24] Section 24 of the Customs Act, 1962 empowers Central Government to make rules for permitting ‘denature/mistilate the imported goods, which are ordinarily used for more than one purpose ‘Orender them unfit for one or more of such purpose. v imported be used for more than one purpose and duty is leviable on the basis goods can be used for m oh patho Sa i : S bury ilisati denaturing or mutilation of such goods is useful. By denaturing, ‘Pose of utilisation, then goods can be used only for one E. ‘any it neare made unfit forether purposes, Alter denaturing proce and accordingly duty can be levied. a ring of Spirit Rules, 1972 specify procedure for denaturing spivit, “a ae ty @NNVINXVE | | i (20114 EXEMPTION FROM CUSTOMS DUTY [SECTION 25) See The power to grant exemption from payment of customs duty is given to Central Government, The power of the Central Government to alter the duty rate structure is known as delegated legislation, The reason for calling it delegated legislation is because the power is delegated by the Parliament yy the Central Government. This power is always subject to superintendence and check by Parliament, (For detailed provisions, please refer Para 24.6 to Para 24.8 of chapter 24), TEST.YOUR KNOWLEDGE Q.1. Define the following term: per Customs Act, 1962: (a) Customs Station/ Area. (b) Exclusive Economic Zone (©) Goods (@) High Sea | Q.2 Explain the various sources of customs law in India. Q.3 “The custom’s duty is payable on DERELICT, WRECK, etc. but not on PILFERED Goods”. Comment. Q.4 What is geographical jurisdiction of Customs Act, 1962? Q.5 Explain the charging section under the Customs Act, 1962? Q.6 How to determine the taxable event for import and export of goods? Q.7 Explain the provisions relating to determination of taxable event in case of imports and exports under Indian Customs Laws. [DU B.Com.(H) May 2013] BASIC CONCEPTS OF CUSTOMS LAW Aterstudying this: ‘chapter, you shall beable to understand the following types of Customs Duties: 1 Basic Custom Duty 1 Integrated Goods and Services tax under section 3(7) 1 GST compensation Cess 1 Education Cess on customs duty. ¥ Additional duty of custom * Countervailing duty * Additional duty section 3(3) ® Additional duty section 3(5). "Protective Duties "Safeguard duty *Countervailing Duty on subsi- dized goods “Antidumping Duty "National Calamity Contingent Duty 21.1 INTRODUCTION The purpose of imposing duties by the Government is two- fold. The first purpose is obviously to generate revenue for the state but at the same time, by imposing duties the government might try to achieve some objectives in the public interest, which could be to protect the local and in- digenous industries, to deter foreign nations from dumping their mass production and making the products available in India at cheaper prices than the prevailing domestic prices and to safeguard some other interests. The Basic duties and Countervailing duties, the Education and Secondary Higher Education cess generate revenue for the state whereas the protective duty, anti-dumping duties and safeguard duties aim to protect Indian industries and achieve social objec- tives. These duties, rates, nature, manner of imposition and the authority to levy have been discussed in this chapter. 31.2 TYPES OF DUTIES AND CESS UNDER CUS- TOMS Soca oS ‘The following are the various types of customs duties and cess levied with the authority of law: 1, Basic Customs Duty [Section 12 of Customs Act] 2, Social Welfare Surcharge {w.e. 2nd February, 2018} 3, Integrated GST [Section 3(7) of CTA] 4, GST Compensation Cess [Section 3(9) of CTA] 5, Additional Duty of Customs under section 3: (@ Additional Duty under section 3(1) of CTA (b) Countervailing duty under section 3(3) of CTA (o Special Additional Duty under section 3(5) of CTA. 214 oNNVIVXVL ‘TAXMANN® TOMS DUTY Para 21.2 ‘TYPES OF CUS’ a 6. Protective duties [Sections 6 & 7 of CTA] 7, Emergency power of Central Government to impose or enhance: (@) Export Duties [Section 8 of CTA] (B) Import Duties [Section BA of CTA] 8. Safeguard Duty [Section 8B of CTA] 9. Countervailing Duty on Subsidized Articles [Section 9 of CTA] 10. Anti-Dumping Duty [Section 9A of CTA] 11, Road and Infrastructure Cess [w.e.f. 2nd February, 2018] 12. National Calamity Contingent Duty (NCCD) 13, Health Cess on import of Medical Devices [w.e.f. 27-3-2020] CTA: Customs Tariff Act Note: The Anti-Dumping Duty has been discussed in detail under separate Para 21.3. 21.2.1 Basic Customs Duties [BCD] Itis the most common duty levied on almost all imports and some exports. It is levied under sec- tion 12 of the Customs Act and Section 2 of the Customs Tariff Act, 1975 as a percentage of value as determined under section 14(1) or (2) of the Customs Act, 1962. The rates at which the duties are imposed may be specified under the Customs Tariff Act, 1975 or under any other law for the time being in force. These rates are specified in the First Schedule and the Second Schedule of the Customs Tariff Act, 1975. Schedule 1 specifies the goods liable to import duty, whereas Schedule TI enlists the goods liable to export duty. But the central government has the power to reduce or exempt any goods from these duties. In exercise of these powers, the government has notified that in case of imports from preferential areas, preferential rate of duty should be applicable. Thus, we can say that there are two rates of BCD: (@) Standard Rate (Generally this rate is applicable) (b) Preferential Rate. The Finance Act, 2020 has inserted a new section 28D, A to provide procedure regarding claim of preferential rate of duty. It is effective from 27-3-2020. It has been discussed in Para 21.4 No EC & SHEC wae.f. 2" February, 2018 While presenting the General Budget 2018-2019 in Parliament, the Union Minister for ‘Finance and Corporate Affairs Shri Arun Jaitley proposed to abolish the Education Cess & Secondary and Higher Education Cess on imported goods. The following are the subsequent notifications in this regard: (1) Notification No.7/2018- Customs dated 2-2-2018 seeks to exempt levy of the whole of the Education| Cess (leviable thereon under section 94 of the Finance Act, 2004) on all goods in the First Schedule to the Customs Tariff Act, 1975. (2) Notification No.8/2018- Customs dated 2-2-2018 seeks to and Higher Education Cess (leviable thereon under. in the First Schedule to the Customs Tariff Act, 1975. It is important to note that “Social Welfar SHEC. exempt levy of the whole of the Secondary n 139 of the Finance Act, 2007) on all goods charge" has been imposed wee. -2018 in place of EC & TYPES OF. ys PES OF DUTIES Para 21.2 : jal Welfare Surchar 1 22504 MOC) one tS) on imported goods (we.f.2™ February, 2018) coi ee 1 et Finance Act, 2018, “Th ct ‘it ¢ provisions Fina ear a ost vi skal cape a Sane be 2018, a duty of Customs, to be called a Social Welfare gost hg the goods imported ees gPeeilied in the First Schedule to the Customs Tariff 1975; be ported into India, This surcharge shall be utilized for the purpose of ach fc ne education, health and social s . he soil ac ea al be calculated at the rate of 10% on the aggregate of duties, ee aa ed an collected by the Central Government under section 12 of Tere en ae en am adden Chargeable on the goods specified in the First Schedule of the qustoms TATU as an addition to, and in the same manner as, a duty of customs. ste Socal Welfare Cess shall not be levied on the followin (a the Safeguard Duty referred under sections 8B and 8C of the Customs Tariff Act {p the countervailing duty referred to in section 9 of the Customs Tariff Act | {9 the anti-dumping duty referred to in section 9A of the Customs Tariff Act; and | | | shall be levied and collected, in accor- (a) the Social Welfare Surcharge on imported goods levied under section 110(1) of Finance Act, 2018. sper Notification No. 13/2018-Customs dated 2-2-2018, the levy of Social Welfare Surcharge on egrated Tax and GST Compensation Cess on imported goods is fully exempt. 212.3 Integrated Goods and Services Tax (IGST) tinder the GST regime, Article 269A constitutionally mandates that the supply of goods/services/ tah in the course of import into India shall be deemed to be supply in the course of inter-State sade or commerce for levy of integrated tax. Therefore, such import of goods or services will be ated as deemed inter-State supplies and would be subject to Integrated tax. Ieforethe introduction of GST, countervailing duty (CVD) equal to excise duty and special additional daty SAD) equal to value added tax (VAT) or sales tax was imposed on goods imported into India. ASGST has subsumed these taxes on most of the goods, IGST is now levied wef. 1-7-2017, under scion 3(7) of the Customs Tariff Act. The rate of duty is determined on the basis of like article Teupplied in India. This rate shall not exceed 40% and is applied on value of imported goods as termined under section 3(8) of the Customs Tariff Act. g Zz 3 % | | | | | | ‘sper section 3(8) of the Customs Tariff Act, the value will include: (Q) Value of imported goods as determined under section 14(1) of the Customs Act or tariff value Under section 14(2). (Assessable Value) (6 Duty of Customs leviable on the article under section 12 ofthe Customs Act, (Basic Customs Duty) (eee chargeable under ny Jaw for the time being in force as an addition to, duty of customs, except IGST under section 3(7) and compensation Cess under section 3(9) of Customs Tariff Act. i above discussion may be summarized as that the following tax/cess would not be included while Puting the assessable value for comp! Integrated tax [Section 3(7) of Customs Tariff Act] [Section 3(9) of Customs Tariff Act} watation of Integrated tax and GST compensation cess:- @ Goods and Services Tax compensation cess Rew ‘TAXMANN?, Para 21.2 ‘TYPES OF CUSTOMS DUTY 214 Example 21.1 [Basic Customs Duty] i Mr, Sanjay imported rubber from Malaysia with the following particulars: (0 Assessable Value as per section 14: Rs. 14,00,000 (i) Basic Customs Duty as per section 12: Rs. 1,40,000 (iid) Social Welfare Surcharge: Rs. 14,000 (i) Safeguard Duty: Rs. 420,000 Required: a What is the Assessable Value for levy of ‘Integrated tax" as per the manner of computation given in section 3(8) of Customs Tariff Act? (8) What is the Assessable Value for levy of ‘GST Compensation Cess’as per the manner of computation given in section 3(10) of Customs Tariff Act ? Ans. (a) Assessable Value for levy of ‘Integrated tax’ as per the manner of computation given in section 3(8) ‘of Customs Tariff Act: ‘Value of the imported article determined under sub-section (1) of section 14 of the | 14,00,000 | Customs Act, 1962 [i.e. Assessable Value] ‘Any duty of customs chargeable on that article but does not include IGST/GST | 5,74,000 | Compensation Cess [1,40,000 + 14,000 + 4,20,000] | Assessable Value for levy of ‘Integrated tax’ as per section 3(8) of Customs Tariff Act: | 19,74,000__| The Integrated tax shall be calculated as a given percentage on Rs. 19,74,000. (& Assessable Value for levy of ‘GST Compensation Cess’ as per the manner of computation given in section 3(10) of Customs Tariff Act: As per section 3(10) of Customs Tariff Act, the assessable value for levying GST compensation cess is to be computed in the same manner as given in section 3(8) of Customs Tariff Act. Therefore, the assessable value for computation of GST Compensation Cess will also be Rs. 19,74,000. Example 21.2: The Assessable value of imports is US $ 10,000. The Basic Custom duty is @ 10%. The Exchange rate at the relevant date is 1US$ = @ 67. IGST is Payable @ 12% and Social Welfare Surcharge is 10%. The IGST and the total Customs duty will be calculated as follows: Computation of Customs Duty & Integrated Tax Payable thereon Anomt@] Assessable Value of article imported (10,000 X & 67) 6,70,000 Basic Customs Duty (10% of % 6,70,000) 67,000 (+) Social Welfare Surcharge (10% of BCD ie. & 67,000) 6,700 | Total Customs Duty 73,700 any real Customs duty after rounding off (as per section 154A of Customs Act, B. sid iat Total Value for levy of Integrated Tax 7,43,700 Integrated tax leviable er section of ‘aril Integrate tax leviable under seetion 37) of Customs Tariff Act (12% of ® 743,700 ie, Rounding off of IGST under section 170 of CGST Act, 2017 s9244 ‘Total Landed Cost 332,984 Total Customs Duty = % 73,700 + © 89,244 = ¢ 1,62,944 ES ys TYPES OF DUTIES Para 21.2 t js 1A GsT Compensation Cess [Section 3(9)) w jon cess is levi is St aa ee es seston 8 of the Goods and Services tax (Compensation to G18 eee ment, o provide ee those goods and services that have been notified by the cai oot OST. Pensation to the States for loss of revenue due tothe imple- ent : cess is no levied on all goods but on luxury and sin goods like Pan Masala, tobacco etc. ste which is imported into India shall be abl ; Any such rate, as is leviable under section 8 of 5844, 2017, on lke article, on it supply inf le to the goods and services tax compensation Coots and Services Tax (Compensation to States) india, assessable eran: GST compensation cess is to be computed in the same manner a5 devalue computed for IGST under section 3(1) ofthe Customs Tariff Act js means it will be levied on assessable value plus Basic Customs duty plus Education cess + feondary higher education cess. Proforma Showing Computation of Customs Duty add Basic duty of customs u/s 12 on (A) above B | XXX [\dd_ Social Welfare Surcharge (SWS)on Basic Customs duty @ 10% of (B) iC) | Value for the purpose of levy of Integrated Tax u/s 3(7) and GST Compensation Cess |D_ | XXX u/s3Q)(A+B+C) ‘Ad Integrated tax u/s 3(7) at the applicable rate on (D) E | Xxx |Add GST compensation cess u/s 3(9) at the applicable rate on (D) F | Xxx ‘Total cost of Imported Goods (D + E +F) G | xxx Total Customs Duty Payable= (G-A) [ x’ Pease Note: The Notification No. 13/2018-Customs dated 2-2-2018 seeks to exempt Integrated Tax and GST Compensation Cess on imported goods from the whole of levy of Social Welfare Surcharge (SWS) Example 21,3: The Assessable value of imports is € 2,00,000. The Basic Custom duty is @ 10%. IGST is Payable @ 12%, Compensation tax is 10% and Social Welfare Surcharge is 0%, The IGST, Compensation ‘ax and the total Customs duty will be calculated as follows: Computation of Customs Duty & Integrated Tax/GST Compensation Cess gNNVINXVE Amount (€) Assessable Value of goods imported 2,00,000 Basie Customs Duty (10% of € 200,000) 20,000 ) Social Welfare Surcharge (10% of BCD ie. € 20,000) 2,000 Total Customs Duty | 22,000 ‘Total Customs duty after rounding of 22,000 (as per section 154A of Customs Act, 1962) otal Value for levy of Integrated Tax and Compensation Ces} 2,22,000 Ke WANMANN® — Para 21.2 ‘TYPES OF CUSTOMS DUTY tig Integrated tax leviable under section 3(7) of Customs Tariff Act (12% of €2,22,000) | 26,640 GST Compensation Cess leviable under section 3(9) ‘of Customs Tariff Act (10% 22,200 of €2,22,000) 48,840 Rounding off of IGST 48,840 Total Landed Cost] 2,70,849 Total Customs Duty = ¥ 22,000 4: £48,840 = € 70,840 Manner of Computing Value in case of Warchoused goods [Section 3(8A) of Customs Tariff Act] (1) Where the goods deposited in a warchouse under the provisions of the Customs Act, 1962 are sold to any person before clearance for home consumption or the value of such goods for the purpose of calculating the IGST under ion (7) shall be- (@) where the whole of the goods are sold, the value determined under sub-section (8) or the trans.| action value of such goods, whichever is higher; or (8) Where any part of the goods is sold, the proportionate value of such goods as determined under sub-section (S) or the transaction value of such goods, whichever is higher. (2) However, where the whole of the warehoused goods or any part thereof are sold more than once before such clearance for home consumption or export, the transacuun value of the last such transaction shall be the transaction value for the purposes of clause (a) or clause (2). (3) Further, in respect of warehoused goods which remain unsold, the value or the proportionate value, as the case may be, of such goods shall be determined In accordance with the provisions of sub-section 8). (4) For the purposes of this sub-section, the expression “transaction value’, In relation to warehoused goods, means the amount paid or payable as consideration for the sale of such goods. The manner discussed above will also be used for determination of value for levying GST compensation cess in case of warehoused goods. 21.2.5 Additional duty of customs under section 3 of Customs Tariff Act The following additional duties have been provided under section 3 of Customs ‘Tariff Act: (1) Additional duty Under section 3(1): Any article which is imported into India is also liable to a duty equal to the excise duty forthe time being leviable on a like article if produced or manufactured in India. If the article is not produced or manufactured in India, the duty of customs will be equal to the duty of excise that would be leviable on the article, had it been produced in India. If the product is leviable with different rates, the highest rate would be applicable. This duty is called as additional duty or countervailing duty. This duty or tax or cess shall be in addition to any other duty of fax or cess imposed under Customs Tariff Act or under any other law. The value on which the duty is levied is assessable value plus the basic excise duty. Impact of GST: After introduction of GST, excise duty has been restricted to few goods such as petroleum products (crude, diesel, petrol, ATF, natural Bas) and tobacco products, the above said addi- tional duty is also restricted to the above products, Additional duty in case of alcoholic liquor: The rate of additional duty in case of alcoholic liquor for human consumption imported int0 India willbe levied at a rate notified by the Central Government, having regard to the Stale Excise Duty for the time being leviable on like aleoholic liquor produced or manalact in different States, Tre ; ES OF DUTIES. Para 21.2 special Additional Duty of Customs under geo @ here may be a case where the final ‘al, components. lon 3(3) [Countervalling Duty Le. CVD] roduc i Fj 86d 10 Mami Uet is not subject to excise duty but the related raw Aclure the product are subject to excise duty. In that mmatetiow Sdditional di “jo, additional duty cam a gcenarii not be levied under section 3(1) discussed in above point (1). ect 3) empows ¢ Centra a ction 33) empowers the Central Government to levy duty of customs on goods which are not Ieviable to addition Has 1 duty under sub section (1) on account of there being no excise id goods when manufactured in India aS =e ‘Thus in order to ensure that dome is levied, as domesti crncat manufacturers are at par with foreign manufacturers Is, components noe eeelurers would have incurred tax cost as excise duty on s, $ used o manufacture goods which are not liable to excise duty. nportant to note that the Central Government can levy such duty if it is satisfied that necessary in the public interest to do so even j icle is li iti : " s ‘en if such is le to additional dut nee ee as article is liable to add y Due to introduction of GST, the applicability of additional duty of customs is very limited. {@) Special Additional duty of Customs [Section 3(5)]:(Special CVD -SAD) The Central government has the power to levy duty to counter-balance the sales tax, value added tax (VAT) local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India. This duty is in addition to duty leviable under section 3(1) and 3(3) of Customs Tariff Act. The duty is levied by notification in the Official Gazette, at a rate not exceeding 4% of the value of imported article as specified in the notifi- cation. {impact of GST on additional duties of Customs under section 3 of Customs Tariff Act Due to introduction of GST, the applicability of additional duty of customs is very Limited. As already discussed in chapter 2, the GST is levied on all supplies of goods and for services except supply of alcoholic liquor for human consumption. Further, vide section 9(2) of CGST Act, 2017, GST on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Gov- emment on the recommendations of the Council. Thus, additional duty of customs will be Levied only on those fewer products which are not leviable to GST. | 2.26 Protective duties under section 3 of Customs Tariff Act The Protective duties are intended to give protection to the indigenous (domestic) industry in India. Thefollowing are the features of protective duties: (1) Levied by Central Govt. : This duty is imposed by the Central Government upon the recom- mendation of Tariff Commission to protect the interest of the Indian industry. The rate of ion and imposed under section 6 of the Customs duty is recommended by the Tariff Commis Tariff Act, Approval of Parliament: The notification imposing protective duty should be introduced in the parliament by way of bill and should be passed within 6 months. If the bill is not passed Within 6 months ft shall cease to have force, but nothing done during the said period will be 9 midated. Q ) Duration: The protective duty shal (a) lied in the first schedule ) Alteration in Duty: The duty once Y the Central Government by nottl a I be effective only up to and inclusive of the date, if any, levied may be altered, rescinded reduced or increased fication in the Olficial Gazette, However, such duty shall pes OF CUSTOMS DUTY Para 21.2 TYPES OF CU . stisfied after such inquiry as it thinks necessary, that such duty ha for the purpose of securing the protection intended tot. din India. be altered only if it is become ineffective or excessive 4 afforded by it to a similar article manufact Tn cave of Increase In duly, approval of Parliament required AT there is any inerease in the duty as specified above, then the C place such notification in the Parliament for its appr ‘oval. a vides that, every notification insofar as it relates to increase of such duty, shalt The setton 1 eof Pararne f siting a 30 a ay be after the issue ofthe na Pte eh ae ot stig within seven days ofits recassentbly, and the Central Government shall sae vie approval of Parliantent 10 the notification by a resolution moved within a period of fifteen| See eae with the day on which the notification isso laid before the House of the People. If te| Fe eee nmernds any change in the notification, then the notification shall have effect subject aeeich changes However, anything done pursuant to the notification before the recommendation by the Parliament shall be valid. Factors to be considered while giving protection through protective duties: The protection through protective duties is given considering the following factors. (a) The protective duties should not be very stiff so as to discourage imports, (8) It should be sufficiently attractive to encourage imports to bridge the gap between demand and supply of those articles in the market. ral Government is required to 21.2.7 Emergency Power of Central Government to. Impose/Enhance Duties ‘The sections 8 and 8A of the Customs Tariff Act, gives emergency powers to Central Government to impose /enhance the import/export duties. But, as per Proviso to section 8(1), the Central Government shall not issue any notification under this section unless the earlier notification amending the rate of duty has been placed before the Parliament and the same has been passed with or without modifications. In this regard, the following are the powers of Central Govt: (1) Impose or Enhance Export Duties [Section 8 of Customs Tariff Act]: The Central Government may impose or enhance export duties by making amendment to the Second Schedule by issue of a notification in the Official Gazette. Conditions to be satisfied: S 2 The Central Government may impose or enhance export duties if the following conditions are satisfied: = (a) The goods mayor may not be specified in the Second Schedule. (b) The Central Governmentis satisfied that circumstances exist, which render it necessity for the imposition or enhancement of export duties, (2) Impose or Enhance Import Duties [Section 8A of Customs Tariff Act]: The Central Government may impose or enhance import duties by ms the First Schedule by issue of'a notification in the Official Gazette. Conditions to be satisfied: king amendment (© The Central Government may impose or enhance import duties ifthe Following conditions re sa (@ The goods mayor may not be specified in the First Schedule, (2) The Central Government is satisfied that circumstances exist, which render it necesstY for the imposition or enhancement of import duties, TYPES OF DUTIES Para 21.2 : | a ard Duty [SECTIO} | safe Guar N 8B OF THE CUSTOMS TARIFF j | 1 Sed by Finance Act, 2020, wef, 27-3-2020] pet i fl gpis related with the power of Ce i c | i ste eare the yelevanl provisions: - Central Government to apply safeguard measures. The | 1 La circumstances In which safeguard Duty can be imposed: : | ee a cor ment alt ndlucting enquiry can impose the safeguard measures if it is | ticle is imported into India in increased quantities, and eastdl | eased importation is causing or threatening to cause seriousinjury todomestic | @ Notification: are imposed by issuing a notification in the Official Gazette. | ‘The measur jeaning of important terms: @) M G@ [Domestic industry | It means the producers- (9 as a whole of the like article or a directly competitive article in India; or | (i) whose collective output of the like article or a directly competitive: article in India constitutes a major share of the total production of the said article in India Temeans an injury causing significant overall impairment in the position of a domestic industry Itmeans a clear and imminent danger of serious injury Temeans a country notified by the Central Government in the Official Gazette (b) | Serious injury eNNVIVXWL — (© | Threat of seriousinjury (a) | Developing country (4) Objective of safeguard measures: ‘The safeguard measures are imposed for the purpose of protecting the interests of any do- mestic industry in India aiming to make it more competi (3) Modes of safeguard measures: ‘The Central Government may impose following safeguard measures to curb the increased quantity of imports of an article for preventing serious injury to domestic industry: (@ imposition of safeguard duty; or (4) application of tariff-rate quota; or (0 other measures as the Central Government deems appropriate. (8) Misc. Important Points: (@) The Central Governmet a substantial interest i ()) The safeguard duty is in additi under this Act or any other law (© The Central Government may, by notification in the Official Gazette, exempt such guantty of any article as it may speely in the wotiteation, when imported fron any country teretory into Indie, from payment of the whole/part of the safeguard duty leviable thereon. nt may allocate tariff-rate quota to supplying countries having | supplying the article in the prescribed manner, jon to any other duty in respect of such goods levied | for the time being in force, TAXMANN®. a Para 21.2 TYPES OF CUSTOMS DUTY 2a (7) Minimum level of tariff rate quota: The minimum level of tariff rate quota is the average level of imports in the last three repro, sentative yeats for which statistics are available, unless a different level is deemed necessan, to prevent/remedy serious injury. (8) Duration of safeguard measures: The measures imposed under this section shall be in force for a period of 4 years from the date of its imposition. (9) Extension of period: The Central Government may extend the period of such imposition from the date of first imposition provided it is of the opinion that:- (@ Domestic industry has taken measures to adjust to such injury or as the case may be to such threat and (8) Itis necessary that the safeguard measures should continue to be imposed. However, the total period of levy of safeguard measures is restricted to 10 years. (10) Applicability of all machinery provisions of the Customs Act, 1962 The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply io the duty chargeable under this section as they apply in relation to duties leviable under that Act. (11) Exemptions from safeguard measures (@) Articles from developing country: Articles originating from developing country, solong as the share of imports of that article from that country does not exceed 3% of the total imports of that article into India. (}) Articles originating from more than one developing country: Articles originating from more than one developing country, so long as the aggregate of imports from developing countries each with less than 3% import share taken together does not exceed 9% of the total imports of that article into India. (o) Imports by 100% EOU or units in a Special Economic Zone: Safeguard measures shall not apply to articles imported by a 100% EOU/SEZ unit unless - (specifically made applicable; or (i The articleimportedis either cleared as such into DTA or used in the manufacture of any goods that are cleared into DTA and in such cases safeguard measures shall be applied on that portion of the article so cleared or so used as was leviable when it was imported into India. (12) Provisional Assessment (@ The Central Government is also empowered to impose provisional safeguard measures. (8) This provisional safeguard measures may be imposed on the basis of preliminary 4¢- termination that increased imports have caused or threatened to cause scrious injury to1a domestic industry. (o The provisional safeguard measures shall be in force for a maximum period of 20° days from the date of its imposition. a f upon final determinati aes Para 21.2 imports have not cease Government is of the opinion that the increased the safeguard duly collected shall beetwaded ey 8 domestic industry, jp woaientton of notification tested tncler section 88 09) ery notification issued under this section shall be laid after issuance before each House parliament, while it is in se: ceed it of Patti se comprised in ; a total peri ays which ma sion or in (wo or mo 4 tutal period of 30 days which may be sions, ¢ before the expir e ses ' c ei ue the session immediately following the session or the succe ina Jouses agree in making any modification in the notification or both € notification should not be isstied, the notification be effective only iF

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