Indirect Taxation in India An Analysis

NOTES ON
INDIRECT TAXATION
For
10th Semester BBA LLB(Hons.)
Prepared By on 11/11/2018
AJAY RATNAN
GOVERNMENT LAW COLLEGE, KOZHIKODE
CONTENTS
Title Page No.
MODULE 1 - CUSTOMS ACT 4-60
MODULE 2 - CENTRAL EXCISE ACT 61-98
MODULE 3 - GST ACT 99-125
MODULE 4 - KERALA VAT 126- 130
Disclaimer: This document is a compilation of extracts from various sources. The material is intended
for personal use and for educational purposes only (FREE OF CHARGE). Reproduction of the material
for any purposes other than what is intended is prohibited. Use this material at your own risk. Although
the authors and publishers have made every effort to ensure that the information in this document was
correct, the authors and publishers do not assume and hereby disclaim any liability to any party for any
loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from
negligence, accident, or any other cause.
NOTES ON INDIRECT TAXATION
MODULE 0
INDIRECT TAXATION
Taxation is one of the essential and decisive elements in the working of machinery of a Nation.
It forms a quintessential part of development of any country. The revenue that is collected in
the form of taxes is used for providing goods and services for public utility such as
infrastructure, transportation, facilities like rain shelters and common areas, sanitation and all
other such amenities which are provided by the government of the country.
There are two types of taxes levied in India, i.e., Direct tax, which is levied directly on income,
profession, etc, of an individual and where the tax burden cannot be passed on to any other
person. Indirect tax, on the other hand, is not paid on the direct income of an individual person
but is levied indirectly on the ultimate consumer of goods and services for consumption of
goods and services. Hence, the former is levied on the income while latter is levied on the
goods and services. In indirect taxes, immediate burden is on one person and ultimate burden
is on some other person i.e., the person who ultimately consumes.
Following are some of the distinctions between direct and indirect taxes:
MERITS OF INDIRECT TAXES

1. Convenient. —They are imposed at the time of purchase of a commodity or the
enjoyment of a service so that the taxpayer does not feel the burden of the tax as it is
hidden in the price of the commodity bought, They are also convenient because they
are paid in small amounts and in intervals and not in one lump sum
2. Difficult to Evade, —Indirect taxes are generally included in the price of commodities
purchased. Evasion of an indirect tax will mean giving up the satisfaction of a given
want
3. Elastic, —Taxes imposed on commodities with inelastic demand are elastic
4. Equitable, —Indirect taxes enable everyone, even the poorest citizens to contribute
towards the expenses of the State. Since direct taxes leave lower income groups from
their scope, indirect taxes make them share in the financial burden of the State.
5. Can be Progressive. —Indirect taxes can be made progressive by imposing heavy
taxes on luxuries and exempting articles of common consumption.
6. Productive. —The income from indirect taxes can be made highly productive, by
imposing few taxes each yielding a substantial amount of revenue.
7. Wide Coverage. —Through indirect taxes every member of the community can be
taxed, so that everyone may provide something to the government to finance the
services of public utilities.
Prepared by Ajay Ratnan Page | 2

8. Social Welfare. —Heavy taxation on articles which are injurious to the health and
efficiency of the people may restrict their consumption.
DEMERITS OF INDIRECT TAXES
1. Regressive. —The indirect taxes are generally regressive in nature as they fall more
heavily upon the poor than upon the rich.
2. Administrative Cost—The administrative cost of collecting such taxes is generally
heavy, because they have to be collected from millions ol individuals in small amounts.
Hence, they are un-economical.
3. Reduction in savings. —Indirect taxes discourage savings because they are included
in price and people have to spend more on essential commodities and left less to save.
4. Uncertainty. —The income from indirect taxes is said to be uncertain, because the
taxing authority cannot accurately estimate the total revenue from indirect taxes.
5. No civil consciousness. —Indirect taxes are collected through middle-men like traders
and hence they have no direct impact.
The following diagram summarizes the erstwhile INDIRECT TAXATION in India:

MODULE 1
CUSTOMS ACT
Customs Act – Preliminary, Officers, Customs Ports, Airports, Warehouses. – Prohibition on

Import/Export – Illegal Exports/ Imports – Detection & Prevention- Power to Exempt. -Levy
Customs Clearance, Transit, Warehousing, Duty Drawback, Coastal Goods, Baggage. –
Search, Seizure, Arrest, Confiscation, Penalties, Offences, Prosecution, Remedies, Settlement,
Advance Rulings.
Taxes are classified as Direct Taxes and Indirect Taxes; Direct taxes are paid by taxpayer
directly. Whereas indirect taxes are paid by taxpayer indirectly i.e. he pays the same at the time
of purchasing goods and commodities, paying for services etc. Important indirect taxes are
Customs, Goods and Service Tax “GST”
Brief History
Customs duties date back to 18th century when the British East India Company virtually came
to political power in India. The three Presidencies namely Bengal, Mumbai and Chennai had
their own customs regulations. Until 1859, there was a uniform tariff, however, the tariff
underwent important changes in 1867, 1870, 1894, 1932, 1934 and 1939. After independence
a major change was effected in 1975 when Customs Tariff was aligned with the Customs
Cooperation Council Nomenclature (CCCN) which is the internationally accepted
classification.
In 1985, the Customs Cooperation Council developed a new system of nomenclature known
as the harmonized commodity description and coding system. India also adopted this system
by making an amendment to the Customs Tariff Act, 1975 and substituting a new Customs
Tariff Schedule. As in the case of central excise, in the case of custom also, the levy is specified
in the Customs Act, 1962 whereas the detailed classification of goods is given in the Customs
Tariff Act, 1975. Customs Act, 1962 and Custom Tariff Act, 1975 are the two major Acts
governing the subject of Customs. These are supplemented by various set of Rules, Regulations
Notifications, circulars etc
PRELIMINARY - Extent & Commencement & Definitions
Custom Duty is an indirect tax, imposed under the Customs Act formulated in 1962. The power
to enact the law is provided under the Constitution of India under the Article 265, which states
that ―no tax shall be levied or collected except by authority of law‖. Entry No. 83 of List I to
Schedule VII of the Constitution empowers the Union Government to legislate and collect
duties on import and exports.
The Customs Act, 1962 is the basic statute which governs entry or exit of different categories
of vessels, aircrafts, goods, passengers etc., into or outside the country.
Customs Act, 1962 came into force from 1-2-1963. The whole Act is divided into 17 chapters
comprising of 161 sections. The Act extends to the whole of the India. Customs Act, 1962

just like any other tax law is primarily for the levy and collection of duties but at the same time
it has the other and equally important purposes such as:
(i) regulation of imports and exports;
(ii) protection of domestic industry;
(iii) prevention of smuggling;
(iv) conservation and augmentation of foreign exchange and so on.
Important Definitions
“Baggage” includes unaccompanied baggage but does not include motor vehicles [Section
2(3)];
“Coastal Goods” means goods, other than imported goods, transported in a vessel from one
port in India to another [Section 2(7)];
"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; Customs
area includes warehouse [Section 2(11)]
"Entry" in relation to goods means an entry made in a bill of entry, shipping bill or bill of
export and includes the entry made under the regulations made under section 84; [Section
2(16)];
“Export”, with its grammatical variations and cognate expressions, means taking out of India
to a place outside India [Section 2(18)];
“Export goods” means any goods, which are to be taken out of India to a place outside India.
[Section 2(19)]
“Goods” includes - (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and
negotiable instruments; and (e) any other kind of movable property [Section 2(22)].
“Import”, with its grammatical variations and cognate expressions, means bringing into India
from a place outside India [Section 2(23)];
“Import Manifest” or “Import Report” means the manifest or report required to be delivered
under section 30 [Section 2(24)];
“Imported Goods” means any goods brought into India from a place outside India but does
not include goods which have been cleared for home consumption [Section 2(25)];
“India” includes the territorial waters of India [Section 2(27)
“Indian Customs Waters” means the waters extending into the sea up to the limit of
contiguous zone of India under section 5 of the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act, 1976 (80 of 1976) and includes any bay, gulf,
harbour, creek or tidal river [Section 2(28)]
The concept of territorial waters and Indian customs waters are highly relevant for customs
law. Territorial waters extend upto twelve nautical miles from the baseline on the coast of
India.

Indian customs waters extend upto contiguous zone of India which twenty-four nautical
miles from the nearest point of base line. Thus, Indian customs waters extend upto twelve
nautical miles beyond territorial waters. The significance of Indian customs waters is that the
Customs Officer has powers to arrest a person; to stop and search any vessel; to confiscate a
vessel concealing goods; to search any person on board any vessel and; to confiscate goods in
these waters.
“Person-In-Charge” means - (a) in relation to a vessel, the master of the vessel;
(b) in relation to an aircraft, the commander or pilot-in-charge of the aircraft;
(c) in relation to a railway train, the conductor, guard or other person having the chief direction
of the train;
(d) in relation to any other conveyance, the driver or other person-in-charge of the conveyance
[Section 2(31)].
“Warehouse” means a public warehouse licensed under section 57 or a private warehouse
licensed under section 58 or a special warehouse licensed under section 58A; [Section 2(43)]
OFFICERS
Classes of officers of customs There shall be the following classes of officers of customs,
namely:
1) Chief Commissioners of Customs;
2) Commissioner of Customs;
3) Commissioners of Customs (Appeals);
4) Joint Commissioners of Customs;
5) Deputy Commissioners of Customs;
6) Assistant Commissioners of Customs; and
7) such other class of officers of customs as may be appointed for the purposes of this
Appointment of officers of customs The Central Government may appoint such persons as it
thinks fit to be officers of customs
The Central Government may authorise the Board, a Commissioner of Customs or a Deputy or
Assistant Commissioner of Customs or Deputy Commissioner of Customs to appoint officers
of customs below the rank of Assistant Commissioner of Customs or Deputy Commissioner of
Customs.
Powers of officers of customs
An officer of customs may exercise the powers and discharge the duties conferred or imposed
under this Act on any other officer of customs who is subordinate to him.
Notwithstanding anything contained in this section 5[a Commissioner (Appeals)] shall not
exercise the powers and discharge the duties conferred or imposed on an officer of customs
other than those specified in Chapter XV and section 108.


TYPES OF CUSTOM DUTY
(1) BASIC CUSTOM DUTY

It is levied under Section 12 of Customs Act, 1962, and specified under Section 2 of the
Customs Tariff Act, 1975. Normally, it is levied as a percentage of Value as determined under
section 14(1). There are different rates for different goods. But the general basic rate is 10%.
This basic duty may be exempted by a notification under Section 25. The basic duty may have
two rates under the First Schedule to Customs Tariff Act, 1975; viz. standard rates and
preferential rates
(2) ADDITIONAL CUSTOM DUTY/COUNTERVAILING DUTY [Section 3(1)]
This is levied under Section 3(1) of the Customs Tariff Act, 1975. The amount of this duty is
equivalent to the amount of excise duty payable on like goods manufactured or produced in
India. In S.K. Patnaik v. State of Orissa, 2000 S.C. it was held that countervailing duty is
imposed when excisable articles are imported in order to counter balance the excise duty, which
is leviable on similar goods if manufactured in India:
❖ Countervailing Duty is payable at effective rates.
❖ When excise duty is exempt/nil rate is applicable on goods imported, no Countervailing
Duty is levied (Collector v. J. K. Synthetics 2000 (120) E.L.T. 54(SC)
❖ Countervailing Duty is leviable even if similar goods are not produced in India.
❖ Exemption of basic customs duty doesn‘t automatically means exemption of
Countervailing Duty.
❖ Countervailing Duty is payable in case of goods leviable under State Excise also.
❖ When the imported goods are valued under Section 4A [valuation based on retail price],
or Tariff Values under section 3(2) the amount of Countervailing Duty is calculated
accordingly if the goods are sold in retail in India.
GST has already been brought into effect in India. By virtue of it, IGST (Integrated goods and
service tax) is chargeable on goods imported into India. CVD is still payable, wherever
applicable on the imported goods for which GST Laws are not applicable.
National Calamity Contingent Duty will be levied only on tobacco products and crude oil.
Additional duty of Customs is to be levied on pan masala and tobacco products imported.
Petroleum products such as motor spirit, high speed diesel, aviation turbine fuel, and tobacco
products will be outside the scope of GST and additional duties of Customs will be levied on
the import of the same.
(3) ADDITIONAL DUTY/SPECIAL ADDITIONAL DUTY (SAD) UNDER SECTION
3(5)
It is levied to offset the effect of sales tax, VAT, local tax or other charges leviable on articles
on its sale, purchase or transaction in India. It is leviable on imported goods even if article was
not sold in India.
The Central Government may levy additional duty to counter balance the sales tax, value added
tax, local tax or any other charges leviable in the like article on its sale, purchase or
transportation in India. The rate shall be notified by the Central Government which cannot
exceed 4%.

(4) PROTECTIVE DUTY - SECTION 6 & 7 OF THE CUSTOMS TARIFF ACT, 1975
Protective duties: are intended to give protection to indigenous industries. If resort to
protective duties is not made there could be a glut of cheap imported articles in the market
making the indigenous goods unattractive.
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. (b) It should be sufficiently attractive to
encourage imports to bridge the gap between demand and supply of those articles in the market.
Levied by Central Government: The protective duties are levied by the Central Government
upon the recommendation made to it by the Tariff Commission and upon it being satisfied that
circumstances exist which render it necessary to take immediate action to provide protection
to any industry established in India [Section 6].
Duration of protective duties: The protective duty shall be effective only upto and inclusive
of the date if any, specified in the First Schedule [Section 7(1)].
Power of Central Government to alter such duties: The Central Government may reduce or
increase the duty by notification in the Official Gazette. However, such duty shall be altered
only if it is satisfied, after such inquiry as it thinks necessary, that such duty has become
ineffective or excessive for the purpose of securing the protection intended to be afforded by it
to a similar article manufactured in India [Section 7(2)].
In case of increase in duty, approval of Parliament required: If there is any increase in the
duty as specified above, then the Central Government is required to place such notification in
the Parliament for its approval.
(5) SAFEGUARD DUTY - SECTION 8B OF CUSTOMS TARIFF ACT, 1975
Circumstances in which safeguard duty can be imposed: Central Government can impose
the safeguard duty if it is satisfied that,
(a) Any article is imported into India in increased quantities;
(b) Such increased importation is causing or threatening to cause serious injury to domestic
industry. The duty is imposed by issuing a notification in the Official Gazette.
Objective of safeguard duty: The safeguard duty is imposed for the purpose of protecting the
interests of any domestic industry in India aiming to make it more competitive.
Points which merit consideration
1. Safeguard duty is product specific i.e. the safeguard duty is applicable only for certain
articles in respect of which it is imposed.
2. This duty is in addition to any other duty in respect of such goods levied under this
Act or any other law for the time being in force.
3. Education cess and secondary and higher education cess is not payable on
safeguard duty.
Duration of safeguard duty: The duty imposed under this section shall be in force for a
period of 4 years from the date of its imposition.

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: -
(a) Domestic industry has taken measures to adjust to such injury or as the case may be to
such threat and
(b) It is necessary that the safeguard duty should continue to be imposed.
However, the total period of levy of safeguard duty is restricted to 10 years.
Exemptions from safeguard duty
(a) Articles from developing country: Articles originating from developing country, so
long as the share of imports of that article from that country does not exceed 3% of the
total imports of that article into India.
(b) 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.
(c) Imports by 100% EOU or units in a Special Economic Zone
(6) COUNTERVAILING DUTY ON SUBSIDIZED ARTICLES - SECTION 9 OF THE
CUSTOMS TARIFF ACT
Conditions to be satisfied: The countervailing duty on subsidized articles is imposed if the
following conditions are satisfied.
(a) Any country or territory, directly or indirectly, pays or bestows subsidy upon the
manufacture or production or exportation of any article. Such subsidy includes subsidy
on transportation of such article.
(b) Such articles are imported into India.
(c) The importation may/may not directly be from the country of manufacture/production.
(d) The article, may be in the same condition as when exported from the country of
manufacture or production or may be changed in condition by manufacture, production
or otherwise.
Amount of countervailing duty on subsidized articles: The amount of countervailing duty
shall not exceed the amount of subsidy paid or bestowed as aforesaid.
Points which merit consideration
(a) This duty is in addition to any other duty chargeable under this Act or any other law for
the time being in force.
(b) Countervailing duty shall not be levied unless it is determined that - (i) The subsidy
relates to export performance; (ii) The subsidy relates to the use of domestic goods over
imported goods in the export article; or (iii) The subsidy has been conferred on a limited
number of persons engaged in the manufacture, production or export of articles.
Duration of countervailing duty on subsidized articles: Unless revoked earlier, the duty
imposed under this section shall be in force for a period of 5 years from the date of its
imposition.

Extension of period: Central Government may extend the period of such imposition from the
date of such extension provided it, in a review, is of the opinion that such cessation is likely to
lead to continuation or recurrence of such subsidization and injury. However, the extension can
be for a maximum period of 5 years.
Retrospective imposition of countervailing duty Conditions to be satisfied: The following
conditions should be satisfied for imposition of countervailing duty with retrospective effect.
(a) The injury to domestic industry, which is difficult to repair, is caused by massive imports
in a relatively short period, of the articles benefiting from subsidies. (b) In order to preclude
recurrence of such injury, it is necessary to levy countervailing duty retrospectively. Note: The
retrospective date from which the duty is payable shall not be beyond 90 days from the date of
notification.
(7) ANTI-DUMPING DUTY (ADD) ON DUMPED ARTICLES - SECTION 9A OF THE
CUSTOMS TARIFF ACT, 1975
When the export price of a product imported into India is less than the Normal Value of ‘like
articles’ sold in the domestic market of the exporter, it is known as dumping. Although there
is nothing inherently illegal or immoral in exporter charging a price less than the price
prevailing in its domestic market,
Designated Authority can initiate necessary action for investigations and subsequent
imposition of anti-dumping duties, if such dumping causes or threatens to cause material injury
to the domestic industry of India. Anti-dumping action can be taken only when there is an
Indian industry which produces “like articles” when compared to the allegedly dumped
imported goods. Further, this duty is country specific i.e. it is imposed on imports from a
particular country.
Dumping means exporting goods to India, at prices lower than the ones in the domestic market
of the exporting country, subject to certain adjustments. The anti-dumping duty is dumping
margin or injury margin whichever is lower.
Period of Duty: The anti-dumping duty imposed under this section shall, unless revoked
earlier, cease to have effect on the expiry of five years from the date of such imposition.
However, if the Central Government is of the opinion that the cessation of such duty is likely
to lead to continuation or recurrence of dumping and injury, it may, from time to time, extend
the period of such imposition for a further period of five years and such further period shall
commence from the date of order of such extension.
(8) EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS
With effect from 10.07.2004, an education cess has been levied on items imported into India.
It is leviable @ 2% on the aggregate of duties of customs leviable on such goods. However,
following duties shall be excluded for computing this cess:
(a) Additional duty leviable under section 3(5) of the Customs Tariff Act, 1975;
(b) Safeguard duty under section 8B of the Customs Tariff Act, 1975
(c) Countervailing duty under section 9 of the Customs Tariff Act, 1975
(d) Anti-dumping duty under section 9A of the Customs Tariff Act, 1975

(e) Secondary and higher education cess

(f) Education cess itself on imported goods
Items attracting customs duty at bound rates under International Commitments are exempt from
this cess. The education cess so collected is utilized for providing and financing universalised
quality basic education.
Further, a secondary and higher education cess @ 1% has also been imposed on imported goods
with effect from 01.03.2007. The proceeds from this cess will be utilized to finance secondary
and higher education. It shall be chargeable on the aggregate duties of customs.
Emergency power of Central Government
Under section 8, if the Central Government is satisfied that the export duty leviable thereon
should be levied, and that circumstances exist which render it necessary to take immediate
action the Central Government may, by notification in the Official Gazette, direct an
amendment of the Second Schedule to be made so as to provide for an increase in the export
duty leviable or, as the case may be, for the levy of an export duty, on that article.
Similarly, Central Government may, by notification in the Official Gazette, direct an
amendment in the First Schedule to be made so as to provide for an increase in the import duty
leviable on such article to such extent as it thinks necessary:
Government actively encourages export, so there is export duty on every few products. Articles
on which export is leviable are given in second schedule to Customs Tariff. Out of these, many
have been exempted by way of notification. Export duty will be calculated on FOB price. If
duty rate is 15% and FOB price is Rs. 100, the export duty will be Rs. 15.
Section 26 of Customs Act makes the provision for refund of export duty. Export duty is
refundable if (a) Goods are imported within one-year (b) the goods returned are not ‘re-sale’
and (c) refund claim is lodged within six months from the date of clearance by customs officer
for re- importation.
Emergency powers of Central Government to increase or levy export duty. - section 8 of
Customs Tariff Act empowers Central Government to amend second schedule to Customs
Tariff (which contains articles on which export duty is leviable) and increase or impose export
duty on any product, by issue of a notification. Such notifications should be placed before the
Parliament within 15 days after it assembles.
CUSTOMS PORTS, AIRPORTS, WAREHOUSES

❖ Section 7 of the Customs Act, 1962 empowers the Board to appoint by notification in the
Official Gazette:
(a) customs ports and customs airports,
(aa) inland container depots or air freight stations, for the unloading of imported goods and
the loading of export goods or any class of such goods,
(b) land customs stations for the clearance of goods imported or to be exported by land or
inland water or any class of such goods,

(c) the routes by which alone goods or any class of goods specified in the notification may
pass by land or inland water into or out of India, or to or from any land customs station from
or to any land frontier,
(d) the coastal ports for the carrying on of trade in coastal goods or any class of such goods
with all or any specified ports in India.
(e) the foreign post offices for the clearance of imported goods or export goods or any class of
such goods;
(f) the international courier terminals for the clearance of imported goods or export goods
or any class of such goods.
❖ Section 8 of the Customs Act, 1962 empowers the Principal Commissioner/Commissioner of
Customs to: (a) approve proper places in any customs port or customs airport or coastal port
for the unloading and loading of goods or for any class of goods; (b) specify the limits of any
customs area.
❖ Section 9: Power to declare places to be warehousing stations The Board may, by
notification in the Official Gazette, declare places to be warehousing stations at which alone
public warehouses may be appointed and private warehouses may be licensed.
PROHIBITIONS ON IMPORTATION AND EXPORTATION OF GOODS
Chapters IV, IV A, IV B and IV C of the Customs Act deals with the provisions relating to
prohibition on importation and exportation of goods and detection of illegal imports and
exports. The relevant sections are sections 11, 11A to 11N. Before we understand these
provisions, we should understand the meaning of “prohibited goods”.
The term “prohibited goods” has been defined under section 2(33) meaning “any goods the
import or export of which is subject to any prohibition under this Act or any 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 to be imported or exported have been complied with”.
This definition can be split as follows:
any goods imports/exports of which is subject to any prohibition
under this Act or any other law for the time being in force
but does not include any such goods which complies with the conditions imposed.
Hence, this definition is of a wider scope which covers goods not only subject to prohibition
under this Act but also under any other law in force. One exception is those goods which
complies or fulfils the condition imposed on it.
The prohibition provided under the Customs Act is in four parts:
Provisions Sections Chapter

1) General power to prohibit importation and exportation of 11 IV
goods

2) Special prohibition relating to detection of illegally 11A to 11G IV A

imported goods and prevention/disposal thereof
3) Prevention or detection of illegal export of goods 11H to 11 M IV B
4) Power to exempt from the provisions of Chapters IVA and 11N IV C
IVB
Power to prohibit importation or exportation of goods [SECTION 11] (1) If the Central
Government is satisfied that it is necessary so to do for any of the purposes specified in sub-
section (2), it may, by notification in the Official Gazette, prohibit either absolutely or subject
to such conditions (to be fulfilled before or after clearance) as may be specified in the
notification, the import or export of goods of any specified description. (2) The purposes
referred to in sub-section (1) are the following: -
(a) the maintenance of the security of India;
(b) the maintenance of public order and standards of decency or morality;
(c) the prevention of smuggling;
(d) the prevention of shortage of goods of any description;
(e) the conservation of foreign exchange and the safeguarding of balance of payments;
(f) the prevention of injury to the economy of the country by the uncontrolled import or export
of gold or silver;
(g) the prevention of surplus of any agricultural product or the product of fisheries;
(h) the maintenance of standards for the classification, grading or marketing of goods in
international trade;
(i) the establishment of any industry;
(j) the prevention of serious injury to domestic production of goods of any description;
(k) the protection of human, animal or plant life or health;
(l) the protection of national treasures of artistic, historic or archaeological value;
(m) the conservation of exhaustible natural resources;
(n) the protection of patents, trademarks and copyrights;
(o) the prevention of deceptive practices;
(p) the carrying on of foreign trade in any goods by the State, or by a corporation owned or
controlled by the State to the exclusion, complete or partial, of citizens of India.
(q) the fulfilment of obligations under the Charter of the United Nations for the maintenance
of international peace and security;
(r) the implementation of any treaty, agreement or convention with any country;

(s) the compliance of imported goods with any laws which are applicable to similar goods
produced or manufactured in India;
(t) the prevention of dissemination of documents containing any matter which is likely to
prejudicially affect friendly relations with any foreign State or is derogatory to national
prestige;
(u) the prevention of the contravention of any law for the time being in force; and
(v) any other purpose conducive to the interests of the general public
DETECTION OF ILLEGALLY IMPORTED GOODS AND PREVENTION OF THE

DISPOSAL THEREOF [CHAPTER IVA]
Reasons for insertion of this Chapter: With an idea to keep a check over the large-scale
smuggling of silver out of the country and various consumer articles smuggled into the country,
this chapter was inserted in the Customs Act, in 1969. This Chapter is for detection of those
goods which have been imported illegally into India.
“Illegal import” means “the import of any goods in contravention of provisions of this Act or
any other law for the time being in force”. [S.11A(a)]
“Notified goods” means goods specified in the notification issued under section 11B.
[S.11A(d)]
POWER OF CENTRAL GOVERNMENT TO NOTIFY GOODS [SECTION 11B] If the
Central Government is satisfied that it is expedient in the public interest to take special
measures for the purpose of
- checking the illegal import,
- checking circulation or disposal of such goods, or
- facilitating the detection of such goods,
it may, by notification in the Official Gazette, specify goods of such class or description. Such
notification shall be issued having regard to the magnitude of the illegal import of goods of any
class or description.
PERSONS POSSESSING NOTIFIED GOODS TO INTIMATE THE PLACE OF
STORAGE, ETC. [SECTION 11C]
Intimation of possessing notified goods: Every person who owns, possesses or controls, on
the notified date, any notified goods, shall, within seven days from that date, deliver to the
proper officer a statement in relation to the notified goods owned, possessed or controlled by
him and the place where such goods are kept or stored.
Intimation of shifting of any notified goods: If any person intends to shift any notified goods
to any place other than the intimated place, he shall, before taking out such goods from the
intimated place, deliver to the proper officer an intimation containing the particulars of the
place to which such goods are proposed to be shifted. No person shall, after the expiry of
seven days from the notified date, keep or store any notified goods at any place other than the
intimated place.

Sale or transfer of notified goods: Where any notified goods have been sold or transferred,
such goods shall not be taken from one place to another unless they are accompanied by the
voucher referred to in section 11F.
PRECAUTIONS TO BE TAKEN BY PERSONS ACQUIRING NOTIFIED GOODS
[SECTION 11D] No person shall acquire (except by gift or succession, from any other
individual in India), after the notified date, any notified goods - unless such goods are
accompanied by, -
(a) the voucher referred to in section 11F or the memorandum referred to in sub-section (2)
of section 11G, as the case may be, or
(b) in the case of a person who has himself imported any goods, any evidence showing
clearance of such goods by the Customs Authorities; and
unless he has taken, before acquiring such goods from a person other than a dealer having a
fixed place of business, such reasonable steps as may be specified by rules made in this behalf,
to ensure that the goods so acquired by him are not goods which have been illegally imported.
PERSONS POSSESSING NOTIFIED GOODS TO MAINTAIN ACCOUNTS
[SECTION 11E] Every person who, on or after the notified date, owns, possesses, controls or
acquires any notified goods shall maintain a true and complete account of such goods and
shall, as often as he acquires or parts with any notified goods, make an entry in the said
account in relation to such acquisition or parting with, and shall also state therein the
particulars of the person from whom such goods have been acquired or in whose favour such
goods have been parted with, as the case may be, and such account shall be kept, along with
the goods, at the place of storage of the notified goods to which such accounts relate.
Every person who owns, possesses or controls any notified goods and who uses any such goods
for the manufacture of any other goods, shall maintain a true and complete account of the
notified goods so used by him and shall keep such account at the intimated place.
SALE, ETC., OF NOTIFIED GOODS TO BE EVIDENCED BY VOUCHERS
[SECTION 11F] On and from the notified date, no person shall sell or otherwise transfer any
notified goods, unless every transaction in relation to the sale or transfer of such goods is
evidenced by a voucher in such form and containing such particulars as may be specified by
rules made in this behalf.
SECTIONS 11C, 11E AND 11F NOT TO APPLY TO GOODS IN PERSONAL USE
[SECTION 11G] Nothing in sections 11C, 11E and 11F shall apply to any notified goods
which are- (a) in personal use of the person by whom they are owned, possessed or
controlled, or (b) kept in the residential premises of a person for his personal use.
If any person, who is in possession of any notified goods referred to in subsection (1), sells,
or otherwise transfers for a valuable consideration, any such goods, he shall issue to the
purchaser or transferee, as the case may be, a memorandum containing such particulars as
may be specified by rules made in this behalf and no such goods shall be taken from one place
to another unless they are accompanied by the said memorandum.

PREVENTION OR DETECTION OF ILLEGAL EXPORT OF GOODS [CHAPTER

IV B]
"Illegal export" means the export of any goods in contravention of the provisions of this Act
or any other law for the time being in force; [SECTION 11H (a)]
"Specified area" includes the Indian customs waters, and such inland area, not exceeding 100
kms in width from any coast or other border of India, as the Central Government may, having
regard to the vulnerability of that area to smuggling, by notification in the Official Gazette,
specify in this behalf. [SECTION 11H (c)]
“Specified goods” means goods of any description specified in the notification issued under
section 11-I in relation to a specified area. [SECTION 11H (e)]
POWER OF CENTRAL GOVERNMENT TO SPECIFY GOODS [SECTION 11I]
Central Government is empowered to specify goods by notification in the Official Gazette,
having regard to the magnitude of the illegal export of goods of any class or description for the
purpose of checking the illegal export or facilitating the detection of goods which are likely to
be illegally exported.
At present, acetic anhydride, drug formulations containing codeine or its salts and ephedrine
and pseudo-ephedrine have been so notified.
PERSONS POSSESSING SPECIFIED GOODS TO INTIMATE THE PLACE OF
STORAGE, ETC. [SECTION 11J] Every person who owns, possesses or controls any
specified goods on the specified date, the market price of which exceeds Rs.15,000 shall,
within seven days from that date, deliver to the proper officer an intimation containing the
particulars of the place where such goods are kept or stored within the specified area.
Every person who acquires (within the specified area), after the specified date, any specified
goods, - (i) the market price of which, or (ii) the market price of which together with the market
price of any specified goods of the same class or description, if any, owned, possessed or
controlled by him on the date of such acquisition, exceeds Rs. 15,000 shall, before making
such acquisition, deliver to the proper officer an intimation containing the particulars of the
place where such goods are proposed to be kept or stored after such acquisition.
TRANSPORT OF SPECIFIED GOODS TO BE COVERED BY VOUCHERS
[SECTION 11K] Transport of specified goods has to be covered by vouchers, in such form
and containing such particulars as may be specified by rules made in this behalf.
PERSONS POSSESSING SPECIFIED GOODS TO MAINTAIN ACCOUNTS
[SECTION 11L] Every possessor of specified goods is required to maintain accounts in the
prescribed form, inter alia, showing details of receipts and disposal.
STEPS TO BE TAKEN BY PERSONS SELLING OR TRANSFERRING ANY
SPECIFIED GOODS [SECTION 11M] Except where he receives payment by cheque drawn
by the purchaser, every person who sells or otherwise transfers within any specified area, any
specified goods, shall obtain, on his copy of the sale or transfer voucher, the signature and full
postal address of the person to whom such sale or transfer is made and shall also take such
other reasonable steps as may be specified by rules made in this behalf to satisfy himself as to
the identity of the purchaser or the transferee, as the case may be, and if after an inquiry made

by a proper officer, it is found that the purchaser or the transferee, as the case may be, is not
either readily traceable or is a fictitious person, it shall be presumed, unless the contrary is
proved, that such goods have been illegally exported and the person who had sold or otherwise
transferred such goods had been concerned in such illegal export.
EXEMPTIONS FROM THE OPERATION OF CHAPTERS IV A & IV B [CHAPTER-

IVC]
Section 11N empowers the Central Government to exempt generally, either absolutely or
subject to such conditions as may be specified in the notification, goods of any class or
description from all or any of the provisions of Chapter IVA or Chapter IVB.
LEVY & CUSTOMS CLEARANCE
LEVY OF CUSTOM DUTY

There are four stages in any tax structure, viz., levy, assessment, collection and postponement.
The basis of levy of tax is specified in Section 12, charging section of the Customs Act. It
identifies the person or properties in respect of which tax or duty is to be levied or charged.
Under assessment, the liability for payment of duty is quantified and the last stage is the
collection of duty which is may be postponed for administrative convenience.
As per Section 12, customs duty is imposed on goods imported into or exported out of India as
per the rates specified under the Customs Tariff Act, 1975 or any other law. On analysis of
Section 12, we derive the following points:
(i) Customs duty is imposed on goods when such goods are imported into or exported out
of India;
(ii) The levy is subject to other provisions of this Act or any other law;
(iii)The rates of Basic Custom Duty are as specified under the Tariff Act, 1975 or any other
law;
(iv) Even goods belonging to Government are subject to levy, though they may be exempted
by notification(s) under Section 25.
Custom Tariff Act, 1975 has two schedules. Schedule I prescribes tariff rates for imported
goods, known as ―Import Tariff‖ and Schedule II contains tariff for export goods known as
―Export Tariff‖.
Levy is the 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 charged.
Assessment is the procedure of quantifying the amount of liability. The liability to tax or duty
does not depend upon assessment.
The final stage is where the tax or duty is actually collected. The collection of tax or duty
may for administrative or other reasons be postponed to a later time as done in the case of
excise duty, wherein the liability towards duty arises upon manufacture of excisable goods, the
duty is collected only upon removal of goods from the factory.
The liability towards customs duty is broadly based upon the following 3 factors:

1. the goods, the point and the circumstances under which the customs duty becomes
leviable;
2. the procedure, the mechanism and the organization for determining the amount of
customs duty and collection thereof;
3. the exemption to the levy either on grounds of morality or equity or as a result of the
discretionary powers vested in the Government as a tool for planning tax structure and control
of economic growth of the country.
The customs duty is considered to be levied on the goods and not on the person importing the
goods or paying the duty. Equitability requires charging of duty at the same level if the
circumstances of importation are similar. This has given rise to a deemed provision under
section 12 of the Customs Act.
Taxable event-Import of goods into India/export of goods from India Section 12 makes it
abundantly clear that importation or exportation of goods into or out of India is the taxable
event for payment of the duty of customs.
The main test for determining the taxable event is the happening of the event on which the
charge is affixed.
I. Imports
(a) In case of goods cleared for home consumption
The Supreme Court observed that import of goods will commence when they cross the
territorial waters, but continues and is completed when they become part of the mass of goods
within the country; the taxable event being reached at the time when the goods reach the
customs barriers and bill of entry for home consumption is filed. [Garden Silk Mills v. UOI
1999 (113) E.L.T. 358 (S.C.)]
(b) In case of goods cleared for warehousing
In case of warehoused goods, the custom barriers would be crossed when they are sought to be
taken out of customs and brought to the mass of goods in the country. [Kiran Spinning Mills
v. Collector of Customs 1999 (113) E.L.T. 753 (S.C.)]
II. Exports
Export of goods is complete when the goods cross the territorial waters of India.
DISTINCTION BETWEEN CLEARANCE FOR HOME CONSUMPTION AND

CLEARANCE FOR WAREHOUSING
Clearance for home consumption implies that, the customs duty on import of the goods has
been discharged and the goods are therefore cleared for utilization or consumption. The goods
may instead of being cleared for home consumption be deposited in warehouse and cleared at
a later time.
When the goods are deposited in the warehouse the collection of customs duty will be deferred
till such goods are cleared for home consumption. The revenue for the Government is

safeguarded by the importer executing a bond binding himself in a sum equal to twice the
amount of duty assessed on the goods at the time of import. The importer is also liable to pay
interest, rent and charges for storage of goods in warehouse.
DUTY LIABILITY IN CERTAIN SPECIAL CIRCUMSTANCES
(A) Re-importation of goods produced/manufactured in India [Section 20] It implies that
goods manufactured or produced in India, which are exported and thereafter re-imported are
treated on par with other goods, which are otherwise imported.
(B) Goods derelict, wreck etc. [Section 21] All goods, derelict, jetsam, flotsam and wreck
brought or coming into India, shall be dealt with as if they were imported into India, unless it
be shown to the satisfaction of the proper officer that they are entitled to be admitted duty-free
under this Act.
Meaning of the various terms
Derelict – This refers to any cargo, vessel, etc. abandoned in the sea with no hope of recovery.
Jetsam – This refers to goods jettisoned from the vessel to save her from sinking.
Flotsam – Jettisoned goods which continue floating in the sea are called flotsam.
Wreck – This refers to cargo or vessel or any property which are cast ashore by tides after ship wreck.
ARRIVAL OR DEPARTURE AND CLEARANCE OF IMPORTED OR EXPORT

GOODS
Goods are imported in India or exported from India through sea, air or land. Goods can come
through post parcel or as baggage with passengers. Different procedures are there for import
and export of goods by different mode of transportation.
PROVISIONS RELATING TO CONVEYANCES CARRYING IMPORTED OR
EXPORT GOODS
Chapter VI contains section 29 to 43 prescribing the provisions for arrival or departure of goods
by vessel or aircraft.
PROVISIONS RELATING TO ARRIVAL OR DEPARTURE OF GOODS
(1) NOT TO LAND AT ANY PLACE OTHER THAN CUSTOMS PORT OR CUSTOMS
AIRPORT (SECTION 29) The person-in-charge of a vessel or an aircraft entering India from
any place outside India shall not cause or permit the vessel or aircraft to call or land at any
place other than a customs port or a customs airport –
(a) for the first time after arrival in India; or
(b) at any time while it is carrying passengers or cargo brought in that vessel or aircraft as the
case may be, unless permitted by the Board.
Exception in case of: accident, stress of weather or other unavoidable cause
However, in such situation the person-in-charge of any such vessel or aircraft –

(a) shall immediately report the arrival of the vessel or the landing of the aircraft to the
nearest customs officer or the officer-in-charge of a police station and shall on demand produce
to him the log book belonging to the vessel or the aircraft;
(b) shall not without the consent of any such officer permit any goods carried in the vessel
or the aircraft to be unloaded from, or any of the crew or passengers to depart from the vicinity
of, the vessel or the aircraft; and
(c) shall comply with any directions given by any such officer with respect to any such goods,
and no passenger or member of the crew shall, without the consent of any such officer, leave
the immediate vicinity of the vessel or the aircraft:
The departure of any crew or passengers shall not be prohibited from the vicinity of, or the
removal of goods from, the vessel or aircraft where the departure or removal is necessary for
reasons of health, safety or the preservation of life or property.
(2) DELIVERY OF IMPORT MANIFEST (SECTION 30) In accordance with Section 30 of
the Customs Act, 1962 the person in charge (Master / Agent) of the vessel or an aircraft has to
deliver an import manifest electronically (an import report in case of a vehicle), prior to
arrival in the case of a vessel and an aircraft or within 12 hours of arrival in case of a vehicle
in the prescribed form. The time limit for filing the manifest is extendable on showing sufficient
cause, but otherwise a penalty not exceeding Rs.50,000/- can be imposed on account of any
delay. A person filing the manifest/report declarations under this section has to declare the
truthfulness of contents, which has legal consequences.
The forms of the Import Manifest are prescribed in the Import Manifest (Vessels) Regulations,
1971 and Import Manifest (Air Craft) Regulations, 1976, which have been made under Section
157 of the Customs Act, 1962.
In practice the Steamer Agents, acting on behalf of the Master of the Ship, file the Import
Manifest in the Import Department of the Customs House before the actual arrival of the ship
at the port. This is done to enable the importers to file their documents and complete as much
of the Customs formalities as possible, before the arrival of the ship so that, there is no delay
in the clearance of the cargo when they are landed. Proviso (a) to Section 30(1) of the Customs
Act provides for presentation of Import Manifest even before the arrival of the Steamer.
The Import Manifest is required to be delivered in duplicate in the Import Department with
full particulars in respect of the following: (i) General declaration (giving information mainly
about the vessel, its Master, number of crew, passengers); (ii) Cargo declaration; (iii) Vessel ‘s
Store List; and (iv) List of private property in the possession of Master, Officers and Crew.
Separate particulars are required to be furnished in the cargo declaration in respect of: (a) Cargo
to be landed; (b) Same Bottom Cargo - Cargo in transit; (c) Cargo for transhipment; and (d)
Unaccompanied Baggage.
In regard to Air Consignments, the ‘Import Cargo Manifest’ is presented in Triplicate or
Quadruplicate by the persons concerned immediately on landing of the Aircraft and the cargo
as detailed in the Manifest as intended for landing are checked by the Customs Officers (Import
Freight Officers of the Preventive formation) and then made over for custody to the
International Airports Authority of India (IAAI). The cargo manifest is then sent to the Customs
Appraising Formation (Air Cargo Complex) by the Import Freight Officer.

Passenger and crew arrival manifest and passenger name record information [Section
30A] 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.
In case of default, penalty not exceeding Rs.50,000/-
(3) IMPORTED GOODS NOT TO BE UNLOADED FROM VESSEL UNTIL ENTRY
INWARDS GRANTED (SECTION 31) The master of a vessel shall not permit the unloading
of any imported goods until an order has been given by the proper officer granting entry
inwards to such vessel. No order until an import manifest has been delivered or the proper
officer is satisfied that there was sufficient cause for not delivering it. Nothing in this section
shall apply to the unloading of baggage accompanying a passenger or a member of the crew,
mail bags, animals, perishable goods and hazardous goods.
(4) IMPORTED GOODS NOT TO BE UNLOADED UNLESS MENTIONED IN IMPORT
MANIFEST OR IMPORT REPORT (SECTION 32) No imported goods required to be
mentioned under the regulations in an import manifest or import report shall, except with the
permission of the proper officer, be unloaded at any customs station unless they are specified
in such manifest or report for being unloaded at that customs station.
(5) GOODS NOT TO BE UNLOADED OR LOADED EXCEPT UNDER SUPERVISION
OF CUSTOMS OFFICER (SECTION 34) Imported goods shall not be unloaded from, and
export goods shall not be loaded on, any conveyance except under the supervision of the proper
officer.
(6) RESTRICTIONS ON GOODS BEING WATER-BORNE (SECTION 35) No imported
goods shall be water-borne for being landed from any vessel and no export goods which are
not accompanied by a shipping bill, shall be water-borne for being shipped, unless the goods
are accompanied by a boat-note in the prescribed form.
(7) RESTRICTIONS ON UNLOADING AND LOADING OF GOODS ON HOLIDAYS,
ETC. (SECTION 36) No imported goods shall be unloaded from, and no export goods shall
be loaded on, any conveyance on any Sunday or on any holiday observed by the Customs
Department or on any other day after the working hours, except after giving the prescribed
notice and on payment of the prescribed fees, if any
However, no fees shall be levied for the unloading and loading of baggage accompanying a
passenger or a member of the crew, and mail bags.
(8) POWER TO BOARD CONVEYANCES (SECTION 37) The proper officer may, at any
time, board any conveyance carrying imported goods or export goods and may remain on such
conveyance for such period as he considers necessary.
(9) POWER TO REQUIRE PRODUCTION OF DOCUMENTS AND ASK QUESTIONS
(SECTION 38) For the purposes of carrying out the provisions of this Act, the proper officer

may require the person-in charge of any conveyance or animal carrying imported goods or
export goods to produce any document and to answer any questions and thereupon such person
shall produce such documents and answer such questions.
EXPORT
(10) EXPORT GOODS NOT TO BE LOADED ON VESSEL UNTIL ENTRY-OUTWARDS
GRANTED (SECTION 39) The master of a vessel shall not permit the loading of any export
goods, other than baggage and mail bags, until an order has been given by the proper officer
granting entry-outwards to such vessel.
(11) EXPORT GOODS NOT TO BE LOADED UNLESS DULY PASSED BY PROPER
OFFICER (SECTION 40) The person-in-charge of a conveyance shall not permit the loading
at a customs station –
(a) of export goods, other than baggage and mail bags, unless a shipping bill or bill of export
or a bill of transhipment, as the case may be, duly passed by the proper officer, has been handed
over to him by the exporter;
(b) of baggage and mail bags, unless their export has been duly permitted by the proper officer.
(12) DELIVERY OF EXPORT MANIFEST OR EXPORT REPORT (SECTION 41) The
person-in-charge of a conveyance carrying export goods shall, before departure of the
conveyance from a customs station, deliver to the proper officer in the case of a vessel or
aircraft, an export manifest electronically and in the case of a vehicle, an export report, in the
prescribed form.
The export manifest may be presented in manner other than electronically if it is allowed by
Principal Commissioner of customs. The person delivering the export manifest or export report
shall at the foot thereof make and subscribe to a declaration as to the truth of its contents. If the
proper officer is satisfied that the export manifest or export report is in any way incorrect or
incomplete and that there was no fraudulent intention, he may permit such manifest or report
to be amended or supplemented.
(14) NO CONVEYANCE TO LEAVE WITHOUT WRITTEN ORDER (SECTION 42) The
person-in-charge of a conveyance which has brought any imported goods or has loaded any
export goods at a customs station shall not cause or permit the conveyance to depart from that
customs station until a written order to that effect has been given by the proper officer.
No such order shall be given until –
(a) the person-in-charge of the conveyance has answered the questions put to him under section
38;
(b) the provisions of section 41 have been complied with;
(c) the shipping bills or bills of export, the bills of transhipment, if any, and such other
documents as the proper officer may require have been delivered to him;
(d) all duties leviable on any stores consumed in such conveyance, and all charges and penalties
due in respect of such conveyance or from the person-in-charge thereof have been paid or the
payment secured by such guarantee or deposit of such amount as the proper officer may direct;

(e) the person-in-charge of the conveyance has satisfied the proper officer that no penalty is
leviable on him under section 116 or the payment of any penalty that may be levied upon him
under that section has been secured by such guarantee or deposit of such amount as the proper
officer may direct;
(f) in any case where any export goods have been loaded without payment of export duty or in
contravention of any provision of this Act or any other law for the time being in force relating
to export of goods, -
(i) such goods have been unloaded, or
(ii) where the Assistant Commissioner of Customs or Deputy Commissioner of Customs is
satisfied that it is not practicable to unload such goods, the person-in-charge of the
conveyance has given an undertaking, secured by such guarantee or deposit of such
amount as the proper officer may direct, for bringing back the goods to India.
(15) EXEMPTION OF CERTAIN CLASSES OF CONVEYANCES FROM CERTAIN
PROVISIONS OF THIS CHAPTER (SECTION 43) The provisions of sections 30, 41 and
42 shall not apply to a vehicle which carries no goods other than the luggage of its occupants.
The Central Government may, by notification in the Official Gazette, exempt the following
classes of conveyances from all or any of the provisions of this Chapter –
(a) conveyances belonging to the Government or any foreign Government;
(b) vessels and aircraft which temporarily enter India by reason of any emergency
CLEARANCES OF IMPORTED GOODS AND EXPORT GOODS

(SECTION 44 TO 51)
Chapter VII contains the provisions pertaining to clearances of imported or export goods under
section 44 to 51. As per Section 44, the provisions of this chapter shall not apply (a) Baggage
and (b) Goods imported or to be exported by post.
The following terms need to know before moving to the provisions of clearances:
1. ―bill of entry means a bill of entry referred to in section 46 [Section 2(4)]
2. ―bill of export means a bill of export referred to in section 50 [Section 2(5)]
3. ―entry in relation to goods means an entry made in a bill of entry, shipping bill or bill of
export and includes in the case of goods imported or to be exported by post, the entry referred
to in section 82 or the entry made under the regulations made under section 84 [Section 2(16)]
FLOW PATTERN FOR IMPORT

The following steps would illustrate the complete operation in this regard.
1. The vessel is escorted into the harbor by the pilot vessel of the port.
2. After entering the harbour, the vessel is brought to the particular quay or berth, where it
is berthed and anchored.

3. The health department officials and police officials go on board the vessel. The health
officials check
(a) Whether the vessel has called during its voyage at any port which is susceptible to
epidemic diseases; and if so, whether the ship has been cleared by the Quarantine
authorities.
(b) Whether any crew or passenger in the vessel has any contagious or epidemic for
contagious disease;
(c) Whether the vessel or any crew/passenger requires to be quarantined
(d) Whether the vessel carries any cargo contaminated by such epidemic diseases,
affecting the health of people or crop, etc. The immigration authorities check whether
the ship has proper documents to call at an Indian airport.
4. The Customs Officer, who boards the vessel on its arrival alongside the health and police
officials
(a) Collects the arrival report with its supporting papers from the master of the vessel.
(b) Scrutinizes the arrival report for details on
(i) import cargo/same bottom cargo;
(ii) Special goods like arms, ammunition, explosives, and dangerous drugs.
(iii) Proper clearance from the last port of call, health certificate, payment of
light dues etc.
(c) Calls for necessary information/documents from the Master/mate/Chief officer/
Ship’s doctor to carry out the above checks;
(d) If satisfied, collects the arrival report and the Import Manifest if it has not been
already filed and sends these papers to the Custom House.
(e) If entry had been given by the proper officer, allows the unloading to commence.
5. Once the unloading of the cargo starts, supervises and checks whether the landing is done
by proper tally maintained by Steamer Agents tally clerks and Port Trust’s tally clerks.
6. Keeps a general surveillance to ensure that the goods are not illicitly removed from the ship
or the storage godowns.
PROCEDURE FOR CLEARANCE OF IMPORTED GOODS
The procedures for clearance of imported goods are contained in Section 45 to Section 49 of
the Customs Act. These procedures are not applicable to Baggage and Goods imported or to
be exported by post.
RESTRICTIONS ON CUSTODY AND REMOVAL OF IMPORTED GOODS
[SECTION 45] Once the imported goods have entered the Customs area, there arises the
question of who is responsible for the safe custody of goods. This section requires that until
the imported goods are cleared for home consumption or are warehoused or are exported for
transhipment, they shall remain in the custody of such person as may be approved by the
Principal Commissioner/Commissioner of Customs [Section 45(1)]. This person is called
the custodian.
The responsibility of the custodian commences in respect of imported goods the moment the
ship is berthed in the harbour or the goods are ready for unloading from the aircraft.

In major ports, the custodian is the Port Trust. In other places, the custodian are the ware
house keepers. In Inland Container Depots, the Container Corporation of India is the
custodian of the imported cargo. In case of air cargo, the custodian is the National Airport
Authority. For goods brought by rail, the custodian is the Station Master.
Responsibility of Custodian of goods: During the time the goods are in the custody of the
custodians, they have the following responsibilities [Section 45(2)]. 1. Maintain a proper
record of goods received from the carriers and send a copy of the record to the proper officer.
2. Not to permit such goods to be removed from the customs area or allow them to be dealt
with otherwise except under the specific permission in writing of the proper officer. In
pursuance to this responsibility, the custodian is required to tally the particulars of the goods
landed by a vessel, and send a report known as out turn statement to the customs authorities.
This enables the customs authorities to check whether all goods manifested in the import
general manifest for landing in a particular palace have actually been landed. In case of the
goods are not so landed, action is taken against the carriers.
Liability of the Custodians [Section 45(3)] if any imported goods are pilfered after unloading
in any customs area, while in the custody of the custodian, such custodian shall be liable to pay
duty on such goods. Therefore, in respect of pilfered goods covered by section 13, the loss of
revenue is compensated by the custodian. The duty shall be paid at the rate prevailing on the
day of delivery of the import manifest or as the case may be, an import report to the proper
officer under section 30 for the arrival of the conveyance in which such goods were carried.
Section 45 holds the custodian responsible only in respect of the Customs duty in respect of
pilfered goods. It does not extend to the value of goods lost. If the custodian has no explanation
at all to show how the loss occurred in respect of goods in its custody, the custodian is liable
for loss of goods.
FILING OF IMPORT BILL OF ENTRY [SECTION 46] It is the duty of the importer of
any goods to make an application electronically to the proper officer for clearance of the goods.
The importer is required to make an electronic integrated declaration to the Customs Computer
Systems through network facility. The Bill of Entry (Electronic Integrated Declaration)
Regulations, 2011, provides the details.
However, the Principal Commissioner/ 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. Hence, manual submission of Bill of Entry is allowable in cases where electronic
submission is not feasible. The form of the bill of entry is governed by Bill of Entry (Forms
Regulations, 1976). The goods may be cleared for home consumption or for deposit in a
warehouse or for transit or transhipment.
Therefore, there are three types of Bills of Entries prescribed for these three different purposes.
Form I (White) – for home consumption.
Form II (Yellow) – for warehousing (into bond).
Form III (Green) – for ex-bond clearance for home consumption (ex-bond).
When Bill of Entry is filed electronically, it is in four copies:
(a) Original, meant for the customs authorities for assessment and collection of duty;

(b) Duplicate, intended as an authority to the custodian of the cargo to release cargo to the
importer from his custody;
(c) Triplicate, as a copy for record for the importer; and
(d) Quadruplicate, as a copy to be presented to the bank or Reserve Bank of India for the
purposes of making remittance for the imported goods.
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.
Importer unable to furnish details: If for any reason the importer is unable to furnish these
details, he may request the customs officials to examine the goods in his presence to enable
him to ascertain the necessary details for making a proper declaration in the bill of entry.
Alternatively, he can seek permission to deposit the goods in a public bonded warehouse
appointed under section 57 pending receipt of the necessary information and the supporting
documents under section 49. This is also called warehousing without warehousing. Such goods
shall not be deemed to be warehoused goods for the purpose of the Act and accordingly
warehousing provisions shall not apply to such goods.
Bill of Lading: The Bill of Lading given by the carrier of the goods is the importer’s document
of title to the goods. The Bill of Lading covers all the goods imported with full description.
Time limit for filing: According to section 46(3), the importer shall present the bill of entry
before the end of the next day following the day (excluding holidays) on which the
aircraft/vessel/vehicle carrying the goods arrives at a customs station at which such goods are
to be cleared for home consumption or warehousing: The proviso to section 46(3) provides that
a bill of entry may be presented within 30 days of the expected arrival of the
aircraft/vessel/vehicle by which the goods have been shipped for importation into India:
However, 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
prescribed charges for late presentation of the bill of entry.
CLEARANCE OF GOODS FOR HOME CONSUMPTION [SECTION 47] Once the
customs check and payment of duty is completed, the customs officers allow clearance of the
goods. Section 47 provides that where the proper officer is satisfied that the goods entered
for home consumption are not prohibited and the appropriate import duty and any charges
payable thereon has been paid, he can make an order permitting clearance of the goods for
home consumption.
However, Central Government may permit certain class of importers to make deferred
payment of said duty or any charges in such manner as may be provided by rules. In this
respect, 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). AEO means Authorized Economic Operator certified by the
Directorate General of Performance Management under CBIC. On making this order, which is
popularly known as “pass out of customs charge order” the bill of entry (duplicate) copy is

produced to the custodian who delivers the goods to the importer. Some major importers have
been given the green channel clearance facility. It means clearance of goods is done without
routine examination of the goods.
Time limit for payment of import duty: 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, from such due date as may be specified by rules made in
this behalf, and if he fails to pay the duty either in full or in part within the time so specified,
he shall pay interest on the duty not paid or short-paid till the date of its payment.
The rate of interest shall be not below 10% and not exceeding 36% per annum and shall be
fixed by the central government. However, the interest may be waived by the CBIC in public
interest. [Section 47(2)]
PROCEDURE FOR DISPOSAL OF GOODS NOT CLEARED [SECTION 48] If there
are any goods imported from a place outside India, which are not cleared within 30 days from
the date of unloading, the custodian of the cargo is unnecessarily burdened with the custody of
the goods. It also deprives the customs department of its legitimate revenue in the form of
customs duty.
The 30 days have been considered to be sufficient time for any importer to make up his mind
whether the goods should be cleared into town on payment of duty or whether they should be
transhipped or whether they should be deposited in a warehouse. If such imported goods are
not cleared either for home consumption or for warehouse within 30 days or within such
further time as the proper officer may allow or if the title to any imported goods is relinquished,
the custodian of the goods is permitted, with the approval of the customs department and after
giving notice to the importer, to sell the goods by auction. In the case of sensitive goods like
animals, foodstuffs and hazardous goods etc. the custodian with the approval of the proper
officer can sell the goods even before the expiry of the 30 days limit. Similarly, in the case
of arms or ammunition, which cannot be sold in public auction, the disposal is regulated by the
rules made in this regard.
PROCEDURE FOR CLEARANCE OF EXPORT GOODS
While there is very urgent need to promote exports and earn the most needed valuable foreign
exchange/it does not necessarily mean that the export goods can be allowed without restriction
and/or, without observing any formalities.
Export should be in accordance with rules and regulations to be implemented ―at the point of
exit‖ and the authority which can enforce such rules and regulations is the Customs Department.
ENTRY OF GOODS FOR EXPORTATION [SECTION 50] The exporter is, under section
50 of the Customs Act, required to present electronically to a proper officer of customs a
shipping bill in case of export by a vessel or by air and a bill of export, in case of export by a

vehicle. However, the Principal Commissioner/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. The form of the shipping bill is regulated by the Shipping Bill
(Forms & Regulations) Act, 1991.
Normally a shipping bill is permitted to be filed only after an entry outward has been granted
for the particular vessel or aircraft by which the goods are to be exported. However, under
special circumstances the Principal Commissioner/Commissioner of Customs may permit
advance shipping bill to be filed. The exporter of any goods, while presenting a shipping bill
or bill of export, shall make and subscribe to a declaration as to the truth of its contents.
There are four categories of shipping bills viz. those
(i) for Free goods;
(ii) for Dutiable goods, assessable to duty and/or cess;
(iii) for shipment under claim for drawback (Green Shipping bill); and
(iv) for shipment from bond i.e., ‘Ex-bond‘.
CLEARANCE OF GOODS FOR EXPORTATION [SECTION 51] After the shipping bill
is filed, they are presented for the customs appraisal. After the customs officer is satisfied that
the goods are not prohibited and the exporter has paid the duty and other charges payable in
respect of same, he makes the order for shipment on the duplicate copy of the shipping bill.
This is known as “Let Export” orders.
FLOW PATTERN FOR EXPORT
Let us now consider the various steps and controls exercised by the Customs department on
the export goods.
1) The exporter files an application for export of goods known as Shipping Bill.
2) After the appraising department, assesses the export duty on the shipping bill, export cess etc.
are collected.
3) Thereafter the Shipping Bill along with the export cargo is presented to the Customs officers
in charge of supervision of the loading of the Cargo. (These officers are generally called
Preventive Officers in the major Custom Houses.) The Preventive Officer after satisfying
himself that all the customs checks including Export Trade Control license and export duty
payment have been completed, will endorse the shipping bill with a “Let Ship” order.
4) If the ship is not berthed alongside the quay and the goods have to be taken to the ship by
boats/lighters the boat note procedure would be followed.
5) When the Shipping Bill is presented to the master/agent/mate of the vessel, the export cargo
will be permitted to be loaded.
6) On receipt of the cargo on board the ship, the master/mate/agent of the ship issues a receipt of
the quantity and particulars of the cargo loaded on the ship.
7) The Customs Officer endorses on the Shipping Bill the quantity of the goods loaded into the
ship under the Shipping Bill.

GOODS IN TRANSIT (SECTION 52 TO 56)
A conveyance / vessel may reach a port but may not unload the goods at that port. It may halt
at the port for any other purpose such as repairs, replenishment of supplies, refuelling etc. Once
the purpose is over, it may start sailing to the destination port. In this case two ports are
involved. Halting port (known as transit port) intermediate port and destination port (called as
port of clearance). Such a phenomenon of temporary stay at a port other than a destination port
is called transit goods. In transit goods same vessel reaches the port of clearance.
In transhipment, the vessel reaching an intermediate port, transfers the goods to another vessel
and the second vessel into which the goods are transferred (loaded) from the 1st vessel, carries
the goods to the destination port.
In brief, in case of transit goods, same vessel reaches the port of clearance after some halt at an
intermediate port, but in transhipment some other vessel carries the goods to the destination
port. Thus, in transhipment, at least two vessels are involved. And in the case of both transit
and transhipment, the destination port may be Indian Port or Foreign port but the
transit/transhipment port is necessarily Indian.
Customs Act, 1962 contains separate provisions for goods in transit in Chapter VIII of the
Act. This Chapter consists of Sections 52 to 56. Section 52 of the Act makes it very clear that
the provisions of Chapter VIII do not apply to: (a) baggage; (b) goods imported by post; (c)
stores.
Sections 53, 54 and 55 also allow for the transit and transhipment of goods in the following
circumstances:
(a) where goods have arrived in India at a land customs station and are intended to be
transhipped to another land customs station or to a port or airport outside India;
(b) where goods have been carried in a conveyance other than a vessel or aircraft; and
(c) where goods that have arrived at the port or airport on a vessel or aircraft are required to
be transhipped to a land customs station.
TRANSIT OF CERTAIN GOODS WITHOUT PAYMENT OF DUTY (SECTION 53)
Section 53 of the Act deals with this. Accordingly, any goods imported in a conveyance and
mentioned in the import manifest or the import report, as the case may be, as for transit in the
conveyance to any place outside India or any Customs station may be allowed to be so transited
without payment of duty, subject to such conditions, as may be prescribed.
The provisions of Section 53 are subject to the provisions of Section 11. It should be noted that
Section 53 talks about transit of goods in the same conveyance and not transhipment of goods
from one conveyance to another. (Section 54 deals with transhipment of goods imported into
India, from one land customs station to another land customs station or to a port or airport
outside India)

DISTINCTIONS BETWEEN TRANSIT AND TRANSHIPMENT GOODS
TRANSIT GOODS TRANSHIPMENT OF GOODS
1.Goods are lying in the ship at an Goods are transferred at the intermediate
intermediate port. port.
2. Only import manifest has to be submitted Bill of transhipment/ declaration is also
for entry. required for transhipment.
3. Transit is allowed in every port normally. Transhipment is allowed in specified ports
only.
4. No supervision is required for transit Transhipment takes place under the
goods. supervision of the proper officer.
5. No additional conditions or formalities are Specific conditions are imposed if the goods
required. are deliverable at Indian port.
6. Only one conveyance is involved in transit At least two conveyances are involved in
of goods and the same carries the goods to transhipment and the transferee ship reaches
the port of clearance. the destination port.
WAREHOUSING (SECTION 57 TO 73)
The concept of warehousing is a trade practice involving trade-off between (a) the economics
of importation and (b) the quantitative requirement of the importer at any given point of time.
Warehousing is resorted to in case where the importer does not want to clear the goods
immediately:
due to lack of storage facilities or
in case of arrival of shipment much earlier than planned or
in case of working capital issues.
When goods are warehoused, no customs duty is payable on such goods at such point of time.
Sections 57 to 73 deal with warehousing provisions. This facility is available to traders as well
as to direct importers.
The consideration the importer is required to pay for this facility was that:- (i) he should bind
himself to pay to the government a sum equal to thrice the amount of total duty determined,
with such surety or security as may be required and (ii) he should agree to pay duty on the
goods cleared from such warehouse at the rate of duty and valuation prevalent on the date on
which a bill of entry in respect of such goods is presented
An importer who intends to gets his goods warehoused files an Into-bond Bill of Entry [Bill
of entry for Warehousing], which is assessed to customs duty at the port of import. The importer
is required to execute a bond to cover the risk to customs duty, interest, penalty etc. Once the
bond is executed by the importer, the assessing officer at the port of import permits the goods
to be deposited without payment of duty in a warehouse.
Into Bond‖ Bill of Entry is also known by these names: ―Yellow Bill of Entry; ―Warehousing
Bill of Entry; and Buff Bill of Entry.

TYPES OF WAREHOUSES
*CCus- Commissioner of Customs; PO – Proper Officer

An importer desirous of warehousing the goods without paying customs duties needs to execute
an indemnity bond to cover the risk to government revenue. The bond can be executed in
respect of a particular consignment [Consignment Bond] or it can be a General Bond to cover
the duty on goods to be imported by the person during a specified period. In addition to the
bond, importer will also be required to furnish security as may be prescribed. The importers
are required to submit bond for an amount equal to thrice the duty amount involved. The
rationale being that the importer's potential liability can extend to duty plus a mandatory
penalty of 100%, as well as fine and interest.
The Assistant/Deputy Commissioner of Customs may permit an importer to execute a general
bond in such amount as he may approve in respect of the warehousing of goods to be imported
by the importer within a specified period. The bond amount is determined by Assistant/Deputy
Commissioner of Customs, having regard to: past imports warehoused and the duty involved
in such consignments; anticipated imports and expected revenue involved.
Warehousing Period The period for which imported goods may be kept in a warehouse
without payment of duty is called warehousing period. Such period may be extended to a
limited extent, with interest on the duty thus deferred.
(i) EOUs, EHTPs, STPs, or warehouses where manufacture/ other operations are
permitted under section 65 It had been observed that EOUs, EHTPs and STPs have to
constantly keep track of multiple warehousing bonds and extension thereof. In order to address
this issue, the warehousing period for capital goods is till their ex-bonding and for goods other
than capital goods, it is till their ex-bonding/consumption. Similar warehousing period has been
kept for warehouses where manufacture/ other operations are permitted under section 65.
(ii) Other cases In other cases, warehousing period is till the expiry of 1 year from the date
of order under section 60(1).

When the imported goods are warehoused, the temporary possession and the custody of the
goods are passed on to the warehouse keeper. However, the remaining titular rights of the goods
vest with the owner. Thus, the owner has every access to the goods. In the course of his dealings
with the goods, he may be required to (i) see and inspect the goods; (ii) ensure that the goods
do not deteriorate or get damaged during storage in the warehouse; (iii) sort the goods; or (iv)
show the goods for sale.
DUTY DRAWBACK (SECTION 74 TO 76)
Indirect taxes are taxes on domestic consumption. They are destination based. Goods exported
shall be free from local taxes. It is in tune with the slogan ‘export goods and services, don‘t
export taxes ‘. To implement the policy, govt of India introduced export promotion schemes
making the exports tax free.
Duty Drawback scheme is an export promotion scheme under customs. Sections 74 to 76 deal
with duty drawback scheme. Under the scheme, if import duty paid goods are exported with or
without any value addition, the import duties and other taxes paid on such goods at input level
are refunded in the form of duty drawback. Duty drawback is basically a refund of import
duties. There are two variants of duty drawback scheme under Customs.
1. Re-exportation of duty paid imported goods [Section 74]
2. Export of final products/ processed goods using duty paid imported material [Section 75]
In both the cases, there are three common features.
(i) There is import of some goods;
(ii) The imported goods suffered import duty;
(iii) The same goods in same form or in a different form have been exported.
The provisions relating to drawback are enumerated in Chapter X, in Sections 74, 75, 75A and
76 of the Customs Act, 1962.
Drawback is allowed subject to conditions mentioned in Sections 74 to 76 and notifications
issued thereunder, in respect of duty paid on: (a) imported goods, which are re-exported as
such (without use), (b) imported goods, which are re-exported after use, (c) imported material
used in the manufacture of goods exported
Conditions under section 74: The substance of this provision is that
(a) The goods should have been imported into India
(b) The duty of customs should be paid thereon
(c) The goods should be capable of being easily identified as the goods, which were originally
imported.
(d) The goods should have been entered for export either on a shipping bill through sea or air;
or on a bill of export through land; or as baggage; or through post and the proper officer after
proper examination of the goods and after ensuring that there is no prohibition or restriction on
their export should have permitted clearance of the goods for export.

(e) the goods are identified to the satisfaction of the Assistant or Deputy Commissioner of
Customs as the goods, which were imported, and
(f) the goods are entered for export within two years from the date of payment of duty on the
importation thereof.
Once these conditions are satisfied, then the export goods are entitled to payment of drawback
of an amount equal to 98%. The conditions could be amended or modified depending upon
other factors.
Time limit for section 74 drawback: Under sub-clause (b) of section 74(1), it has been
provided that such imported goods should be entered for export within two years from the date
of payment of duty on the importation. It may be noted that the time period is related to the
date of payment of duty and not date of importation.
Non-applicability of Drawback scheme
Duty Drawback is not allowed in the following cases as per the Rule 3 of the Drawback Rules:
a. if the said goods, except tea chests used as packing material for export of blended tea, have
been taken into use after manufacture;
b. if the said goods are produced or manufactured, using imported materials or excisable
materials or taxable services in respect of which duties or taxes have not been paid; or;
c. on jute batching oil used in the manufacture of export goods, namely, jute (including
Bimlipatam jute or mesta fibre), yarn, twist, twine, thread, cords and ropes;
d. if the said goods, being packing materials have been used in or in relation to the export of –
(i) jute yarn (including Bimlipatam jute or mesta fibre), twist, twine, thread and ropes in
which jute yarn predominates in weight;
(ii) jute fabrics (including Bimlipatam jute or mesta fibre), in which jute predominates in
weight;
(iii) jute manufactures not elsewhere specified (including Bimlipatam jute or mesta fibre)
in which jute predominates in weight.
(iv) on any of the goods falling within heading 1006 or on wheat falling within heading
1001 of the First Schedule to the Customs Tariff Act, 1975.
COASTAL GOODS
Coastal goods are defined u/s 2(7) which means goods, other than imported goods, transported
in a vessel from one port in India to another.
It basically consists of provisions of Section 91 to 99. Let us see the provisions related to
Coastal Goods.
Section 91: The provisions of sections 92 to 99 shall not apply to baggage and stores.
Entry of Coastal Goods [Section 92]: An entry shall be made by the consignor of any coastal
goods by presenting to the proper officer a bill of coastal goods in the prescribed forms. Every
such consignor while presenting a bill of coastal goods shall, at the foot thereof, make and
subscribe to a declaration as to the truth of the contents of such bill.

Coastal Goods not to be Loaded until Bill relating thereto is passed [Section 93]: The
master of a vessel shall not permit the loading of any coastal goods on the vessel until a bill
relating to such goods presented under section 92 has been passed by the proper officer and has
been delivered to the master by the consignor.
Clearance of Coastal Goods at Destination [Section 94]: It covers following points, -
a. The master of the vessel who is carrying the coastal goods will have to carry on board all
bills relating to such goods delivered to him u/s 93 and shall, immediately on arrival of the
vessel at any customs or coastal port, deliver to the proper officer of that port all bills relating
to the goods which are to be unloaded at that port.
b. The proper officer shall permit clearance where any coastal goods are unloaded at any port
only when he is satisfied that they are entered in a bill of coastal goods delivered to him by the
master.
Master of a coastal vessel to carry an advice book [Section 95]: It covers following points-
a. The master of every vessel carrying coastal goods is supplied by the custom authorities with
a book called the ‘advice book’.
b. The proper officer shall make such entries in the advice book as he deems fit, relating to the
goods loaded on the vessel at that port.
c. The master of vessel shall carry the advice book on board the vessel and on arrival at each
port of call shall deliver it to the proper officer at that port for his inspection.
Loading and Unloading of Coastal Goods at Customs Port or Coastal Port Only [Section
96]: All the coastal goods shall be loaded on or unloaded from a customs port or a coastal port.
No Coastal Vessel to Leave Without Written Order [Section 97]: Until a written order has
been given by the proper officer the vessel shall not depart from the port by the master of the
vessel which has brought or loaded any coastal goods at such customs or coastal port. Such
order shall be given only after: -
a. the master of the vessel has answered the questions put to him u/s 38;
b. all charges and penalties due in respect of that vessel or from the master thereof have
been paid or the payment secured by such guarantee or deposit of such amount as the
proper officer may direct;
c. the master of the vessel has satisfied the proper officer that no penalty is leviable on
him u/s 116 or the payment of any penalty that may be levied upon him under that
section has been secured by such guarantee or deposit of such amount as the proper
officer may direct;
d. the provisions of sections 92 to 99 and any rules and regulations relating to coastal
goods and vessels carrying coastal goods have been complied with.
Application of certain provisions of this Act to coastal goods, etc. [Section 98]: For coastal
goods provisions of section 33, 34 and 36 shall apply whereas the provisions of sections 37 and
38 shall apply to vessel carrying coastal goods. Further, the central government may notify that
all or any of the other provisions of section 29 to 43 and of section 45 shall apply to coastal
goods or vessels carrying coastal goods subject to exceptions and modifications specified in
the notification.

Power to make rules in respect of coastal goods and coastal vessels [Section 99]: The
Central Government may make rules for: -
a. the export of any coastal goods i.e. preventing any coastal goods to be taken out of India
which is dutiable or prohibited under this act or any other law for the time being in force.
b. preventing the substitution of imported or exported goods by coastal goods in the case of a
vessel carrying coastal goods as well as imported or exported goods.
BAGGAGE
The term “baggage” has been defined under section 2(3) of the Customs Act, to include
unaccompanied baggage as well but does not include motor vehicles. The term baggage is a
comprehensive term which means the luggage of a passenger accompanied or unaccompanied,
and comprises of trunks or bags and the personal belongings of the passenger. It is not limited
to the meaning of bonafide baggage as defined in clause 3 of Tourist Baggage Rules, 1958.
The term “goods” has been defined under section 2(22) of the Customs Act, to include inter
alia, baggage also. Therefore, the restrictions and regulations governing the import and export
of goods will apply mutatis mutandis to baggage also.
The customs duty is an indirect tax. It is on the goods. It is no way influenced by the parties
to the transaction or the nature of the transaction. The only relevant factors are:
(i) whether the goods are imported into India;
(ii) whether they are subject to the levy of customs duty under provisions of the
Customs Act and
(iii) whether there is any relief of payment of duty.
It is in this context that the provisions of the Customs Act have to be examined in their
applicability to baggage. The duty cast on the person-in-charge of the conveyance is to file an
Import General Manifest in the case of imported goods and an Export General Manifest in the
case of export goods. In both the cases, “baggage goods” are required to be declared in separate
sheets.
STATUTORY PROVISIONS The statutory provisions relating to Baggage are covered by
sections 77 to 81 of the Customs Act.
ENTRY OF BAGGAGE BY OWNER [SECTION 77] Under this section the owner of the
baggage has to make a declaration of its contents to the proper officer of customs, for the
purpose of clearing it. This is known as Baggage Declaration Form. Declaring packing list is
sufficient declaration.
RATE OF DUTY AND TARIFF VALUATION APPLICABLE TO BAGGAGE

[SECTION 78] Section 78 of the Customs Act stipulates that the rate of the duty and tariff
valuation, if any applicable to baggage shall be the rate of and valuation in force on the date on
which a declaration is made in respect of such baggage under section 77. Therefore, the
relevant date is the date of filing baggage declaration under section 77.
Rate of duty on baggage is 35% ad valorem. This rate of duty is not applicable to fire arms,
cartridges of fire arms exceeding 50, cigarettes, cigars or tobacco in excess of the quantity

prescribed for importation free of duty under the relevant baggage rules and goods imported
through a courier service.
DUTY EXEMPTION TO BAGGAGE [SECTION 79] Section 79(1) of the Customs Act
refers to the duty relief available in respect of baggage. It stipulates that the proper officer,
may subject to any rules made under sub-section (2) pass free of duty
(a) any article in the baggage, of a passenger or a member of the crew, in respect of which
the said officer is satisfied that it has been in his use for such minimum period as may
be specified in the rules;
(b) any article in the baggage of a passenger in respect of which the officer is satisfied that
it is for the use of the passenger or his family or is a bonafide gift or souvenir, provided
that the value of each such article and the total value of all such articles does not exceed
such limits as may be specified in the rule.
The law thus envisages two categories of baggage, namely those belonging to
(a) passengers; and
(b) members of the crew.
Similarly, it envisages three classes of goods, namely
(a) personal effects, which have been in the use of the person for a minimum period;
(b) household effects, which is used by the family including the person; and
(c) gifts and souvenirs.
PASSENGER BAGGAGE RULES In pursuance of the powers conferred under section 79
of the Customs Act, the Government had earlier passed the Baggage Rules 1998. The Baggage
Rules, 1998 have been substituted with the new Baggage Rules, 2016.
The salient features of the Baggage rules 2016 are discussed hereunder:
General duty-free baggage allowance: The general duty-free baggage allowance for
different class of passengers coming from different countries is given hereunder:
When a passenger is an infant, only used personal effects will be allowed duty free. The general
duty-free baggage allowance of a passenger cannot be pooled with the general duty free
baggage allowance of any other passenger.


Currency [Rule 7]: The import and export of currency under these rules will be governed in
accordance with the provisions of the Foreign Exchange Management (Export and Import of
Currency) Regulations, 2015, and the notifications issued thereunder.
Export and import of Indian currency and currency notes
a) Any person resident in India,
(i) may take outside India (other than to Nepal and Bhutan) currency notes of
Government of India and Reserve Bank of India notes up to an amount not
exceeding Rs.25,000 (Rupees Twenty-Five Thousand only) per person.
(ii) may take or send outside India (other than to Nepal and Bhutan) commemorative
coins not exceeding two coins each.
(iii) who had gone out of India on a temporary visit, may bring into India at the time of
his return from any place outside India (other than from Nepal and Bhutan), currency
notes of Government of India and Reserve Bank of India notes up to an amount not
exceeding Rs.25,000 (Rupees Twenty-Five Thousand only) per person.
b) Any person resident outside India, not being a citizen of Pakistan or Bangladesh,
and visiting India,
(i) may take outside India currency notes of Government of India and Reserve Bank of
India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty-Five
Thousand only) per person
(ii) may bring into India currency notes of Government of India and Reserve Bank of
India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty-Five
Thousand only) per person
Unaccompanied Baggage [Rule 8]: The various provisions in the above rules are also
applicable to the unaccompanied baggage, unless specifically excluded, if unaccompanied
baggage had been in possession, abroad, of the passenger and is dispatched within 1 month of
his arrival in India or such further period as the Deputy/Assistant Commissioner may allow.
The said unaccompanied baggage can also land in India upto 2 months before the arrival of the
passenger. However, if the passenger is not able to arrive in India within two months due to
circumstances beyond his control like sudden illness to himself or any member of family,
natural calamities, disturbed conditions, disruption of the transport or travel arrangements in
the country etc., the Deputy/Assistant Commissioner may extend the said period of 2 months
upto a maximum of 1 year for reasons to be recorded.
Crew baggage [Rule 9]: These baggage rules are also applicable to the members of the crew
engaged in foreign going conveyance for importation of their baggage, when they are finally
paid off on termination of their engagement. However, other crew members of a vessel and
aircraft will be allowed to bring items like chocolates, cheese, cosmetics and other petty gift
items for their personal or family use for a value not exceeding Rs.1500.
TEMPORARY DETENTION OF BAGGAGE [SECTION 80] Section 80 of the Customs
Act, provides that, where the baggage of a passenger contains any article which is dutiable or
the import of which is prohibited and in respect of which a true declaration has been made
under Section 77, the proper officer may at the request of the passenger, detain such article for
the purpose of being returned to him on his leaving India.

REGULATION IN RESPECT OF BAGGAGE [SECTION 81]

Baggage is exempt from CVD. Section 81 lays down that the Board may make regulations:
(a) providing for the manner of declaring the contents of any baggage;
(b) providing for the custody, examination, assessment to duty and clearance of baggage;
(c) providing for the transit or transhipment of baggage from one customs station to another
or to a place outside India.
SEARCHES, SEIZURE AND ARREST
[POWERS OF CUSTOMS OFFICER]
The Customs Law seeks to regulate imports and exports. It is, therefore, necessary for the
customs Department to be fully equipped to meet situations where there is any illegal export
or import of goods. In any fiscal enactment, it is common to find provisions relating to searches,
seizure and arrest. These provisions only advance the primary objective of the law namely
‘Prevention of illegal imports and exports’. At the same time, it should be remembered that the
Customs Act does not aim at detection of a crime. The Customs Officers are also not primarily
concerned with the detection and punishment of a crime but they are entrusted in ensuring that
there is no smuggling of contraband articles. They have to safeguard the recovery of customs
duty properly applicable to the goods. Chapter XIII of the Act consisting of Sections 100 to
110A contains detailed provisions in regard to searches, seizure and arrest. These are discussed
below:
1. POWER TO SEARCH SUSPECTED PERSONS ENTERING OR LEAVING INDIA,
ETC. [SECTION 100] If the proper officer has reason to believe that any person to whom this
section applies has secreted about his person, any goods liable to confiscation or any
documents relating thereto, he may search that person [Sub-section (1)].
Persons who can be searched: This section applies to the following persons, namely: –
(a) any person who has landed from or is about to board, or is on board any
vessel within the Indian customs waters;
(b) any person who has landed from or is about to board, or is on board a foreign-
going aircraft;
(c) any person who has got out of, or is about to get into, or is in, a vehicle, which
has arrived from, or is to proceed to any place outside India;
(d) any person not included in clauses (a), (b) or (c) who has entered or is about
to leave India;
(e) any person in a customs area [Sub-section (2)].
2. POWER TO SEARCH SUSPECTED PERSONS IN CERTAIN OTHER CASES
[SECTION 101] Without prejudice to the provisions of section 100, if an officer of customs
empowered in this behalf by general or special order of the Principal
Commissioner/Commissioner of Customs, has reason to believe that any person has secreted
about his person any goods* of the description specified in sub-section (2) which are liable to
confiscation, or documents relating thereto, he may search that person [Sub-section (1)].

*Specified goods: The goods referred to in sub-section (1) are the following: – (a) gold (b)
diamonds (c) manufactures of gold or diamonds (d) watches (e) any other class of goods which
the Central Government may, by notification in the Official Gazette, specify [Sub-section (2)].
3. PERSONS TO BE SEARCHED MAY REQUIRE TO BE TAKEN BEFORE
GAZETTED OFFICER OF CUSTOMS OR MAGISTRATE [SECTION 102]
(a) Person may require to be searched before Gazetted Officer/Magistrate: When any
officer of customs is about to search any person under the provisions of section 100 or section
101, the officer of customs shall, if such person so requires, take him without unnecessary delay
to the nearest gazetted officer of customs or magistrate [Sub-section (1)].
(b) Gazetted Officer/Magistrate may discharge the person/direct the search to be made:
The gazetted officer of customs or the magistrate before whom any such person is brought
shall, if he sees no reasonable ground for search, forthwith discharge the person but otherwise
shall direct that search be made [Sub-section (3)].
(c) Two or more persons to attend and witness search : Before making a search under the
provisions of section 100 or section 101, the officer of customs shall call upon two or more
persons to attend and witness the search and may issue an order in writing to them or any of
them so to do; and the search shall be made in the presence of such persons and a list of all
things seized in the course of such search shall be prepared by such officer or other person and
signed by such witnesses [Sub-section (4)].
(d) Female to be searched only by a female: No female shall be searched by any one
excepting a female [Sub-section (5)].
4. POWER TO SCREEN OR X-RAY BODIES OF SUSPECTED PERSONS FOR
DETECTING SECRETED GOODS [SECTION 103]
(a) Detention of the person referred to in section 100(2): Where the proper officer has reason
to believe that any person referred to in sub-section (2) of section 100 has any goods liable to
confiscation secreted INSIDE HIS BODY, he may detain such person and produce him
without unnecessary delay before the nearest magistrate [Sub-section (1)].
(b) Magistrate may discharge the person: A magistrate before whom any person is brought
under sub-section (1) shall, if he sees no reasonable ground for believing that such person has
any such goods secreted inside his body, forthwith discharge such person [Sub-section (2)].
(c) Magistrate may order to X-ray the body of such person: Where any such magistrate has
reasonable ground for believing that such person has any such goods secreted inside his body
and the magistrate is satisfied that for the purpose of discovering such goods it is necessary to
have the body of such person screened or X-rayed, he may make an order to that effect [Sub-
section (3)].
Hence, a person [referred to in section 100(2)] can be screened/X-rayed only if he is suspected
to have secreted any goods INSIDE HIS BODY. Otherwise, he can only be searched.
(d) Person to be X-rayed to be taken before radiologist: Where a magistrate has made any
order under sub-section (3), in relation to any person, the proper officer shall, as soon as
practicable, take such person before a radiologist possessing qualifications recognized by the

Central Government for the purpose of this section, and such person shall allow the radiologist
to screen or X-ray his body [Sub-section (4)].
(e) Radiologist shall forward report to magistrate: A radiologist before whom any person
is brought under sub-section (4) shall, after screening or X-raying the body of such person,
forward his report, together with any X-ray pictures taken by him, to the magistrate without
unnecessary delay [Sub-section (5)].
(f) Magistrate may direct to bring out such goods: Where on receipt of a report from a
radiologist under sub-section (5) or otherwise, the magistrate is satisfied that any person has
any goods liable to confiscation secreted inside his body, he may direct that suitable action for
bringing out such goods be taken on the advice and under the supervision of a registered
medical practitioner and such person shall be bound to comply with such direction. However,
in the case of a female no such action shall be taken except on the advice and under the
supervision of a female registered medical practitioner [Sub-section (6)]. Where any person is
brought before a magistrate under this section, such magistrate may for the purpose of
enforcing the provisions of this section order such person to be kept in such custody and for
such period as he may direct [Sub-section (7)].
(g) No screening if person himself admits that goods are secreted in his body: Nothing in
this section shall apply to any person referred to in subsection (1), who admits that goods liable
to confiscation are secreted inside his body, and who voluntarily submits himself for suitable
action being taken for bringing out such goods [Sub-section (8)].
5. POWER TO ARREST [SECTION 104] To tackle the menace of smuggling and other
serious economic offences including commercial frauds effectively, apart from penal action in
departmental adjudication, the Customs Act, also provides for criminal prosecution action.
The persons involved can be arrested and prosecuted in a Court of Law. Prosecution action can
also be taken for providing false documents/ declarations to Customs and for obstructing
Customs officers working intentionally. A customs officer duly authorised by the Principal
Commissioner/ Commissioner can arrest any person, in India or within the Indian customs
waters, who is guilty of an offence punishable under section 132 or section 133 or section
135 or section 135A or section 136 of the Customs Act [Section 104(1)].
Under the law, the person being arrested is entitled to be informed about the grounds for such
arrest under the law. The said section also enjoins that provides that every person arrested under
the Act has to be taken without unnecessary delay to the nearest Magistrate [Sub-section (2)].
Where an officer of customs has arrested any person under sub-section (1), he shall, for the
purpose of releasing such person on bail or otherwise, have the same powers and be subject to
the same provisions as the officer-in-charge of a police-station has and is subject to under the
Code of Criminal Procedure, 1973 [Sub-section (3)].
It has been clarified that powers of arrest should be exercised in exceptional situation.
However, such threshold limit would not apply in case of offences relating to Fake Indian
Currency Note (FICN), arms, ammunitions and explosives, antiques, art treasures, wild life
items and endangered species of flora and fauna. In such cases, arrest, if required on the basis
of facts and circumstances of the case, may be considered irrespective of value of offending
goods involved.

6. POWER TO SEARCH PREMISES [SECTION 105] Section 105 provides that if the
Assistant/Deputy Commissioner of Customs or in any area adjoining the land frontier or the
coast of India an officer of customs specially empowered by name in this behalf by the Board,
has reason to believe that any goods liable to confiscation, or any documents or things which
in his opinion will be useful for or relevant to any proceeding under this Act, are secreted in
any place, he may authorise any officer of customs to search or may himself search for such
goods, documents or things.
The provisions of the Code of Criminal Procedure, 1898 relating to searches shall, so far as
may be, apply to searches under this section.
7. POWER TO STOP AND SEARCH CONVEYANCES [SECTION 106] Section 106 (1)
provides that where the proper officer has reason to believe that any aircraft, vehicle or animal
in India or any vessel in India or within the Indian customs waters has been, is being, or is
about to be, used in the smuggling of any goods or in the carriage of any goods which have
been smuggled, he may at any time stop any such vehicle, animal or vessel or, in the case of
an aircraft, compel it to land, and –
(a) rummage and search any part of the aircraft, vehicle or vessel;
(b) examine and search any goods in the aircraft, vehicle or vessel or on the animal;
(c) break open the lock of any door or package for exercising the powers conferred by
clauses (a) and (b), if the keys are withheld.
8. POWER TO INSPECT [SECTION 106A] Any proper officer authorised in this behalf by
the Principal Commissioner/Commissioner of Customs may, for the purpose of ascertaining
whether or not the requirements of this Act have been complied with, at any reasonable time,
enter any place intimated under Chapter IVA or Chapter IVB, as the case may be, and inspect
the goods kept or stored therein and require any person found therein, who is for the time being
in charge thereof, to produce to him for his inspection the accounts maintained under the said
Chapter IVA or Chapter IVB, as the case may be, and to furnish to him such other information
as he may reasonably require for the purpose of ascertaining whether or not such goods have
been illegally imported, exported or are likely to be illegally exported.
9. POWER TO EXAMINE PERSONS [SECTION 107] Any officer of customs empowered
in this behalf by general or special order of the Principal Commissioner/Commissioner of
Customs may, during the course of any enquiry in connection with the smuggling of any goods,
- (a) require any person to produce or deliver any document or thing relevant to the enquiry;
(b) examine any person acquainted with the facts and circumstances of the case.
10. POWER TO SUMMON PERSONS TO GIVE EVIDENCE AND PRODUCE
DOCUMENTS [SECTION 108] Any Gazetted officer of Customs shall have power to
summon any person whose attendance he considers necessary either to give evidence or to
produce a document or any other thing in any inquiry which such officer is making under this
Act. A summons to produce documents or other things may be for the production of certain
specified documents or things or for the production of all documents or things of a certain
description in the possession or under the control of the person summoned. All persons so
summoned shall be bound to attend either in person or by an authorised agent and state the
truth upon any subject respecting which they are examined or make statements and produce
such documents and other things as may be required. Every such inquiry as aforesaid shall be

deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the
Indian Penal Code, 1860
11. OBLIGATION TO FURNISH INFORMATION [SECTION 108A] Any specified
person who is responsible for maintaining record of registration or statement of accounts or
holding any other information under any of the Acts which is considered relevant, shall furnish
such information to the proper officer in such manner as may be prescribed by rules.
12. SEIZURE OF GOODS DOCUMENTS AND THINGS [SECTION 110] An officer of
Customs can seize any goods, if he has reason to believe that the same are liable to confiscation,
under the Customs Act. Whenever goods are being seized, the proper officer must also pass an
appropriate order (seizure memo/order/etc.) in addition to panchnama, clearly mentioning the
reasons to believe that the goods are liable for confiscation.
13. PROVISIONAL RELEASE OF GOODS, DOCUMENT AND THINGS SEIZED
PENDING ADJUDICATION (SECTION 110A) Any goods, documents or things seized
under Section 110 may, pending the order of the adjudicating authority, be released to the
owner on taking a bond from him in the proper form with such security and conditions as the
adjudicating authority may require.
CONFISCATION OF GOODS & IMPOSITION OF PENALITIES

(SECTION 111 TO 127) XIV
Goods become liable to confiscation if the Importer or Exporter contravenes any of the
provisions of the Customs Act, 1962 or any other Act for the time being in force in relation to
the importation and exportation of goods.
Confiscation means seizure of private property by the Government without compensation to
the owner, often as a consequence of conviction for crime, or because possession or use of the
property was contrary to law.
(A) CONFISCATION OF IMPROPERLY IMPORTED GOODS ETC. (SECTION 111)
Under Section 111, the following goods brought from a place outside India shall be liable to
confiscation: -
(i) any goods imported by air or sea, unloaded or attempted to be unloaded at any place
other than a customs port or customs airport.
(ii) any goods imported by land or inland water through any route other than a route
specified
(iii)any dutiable or prohibited goods brought into any bay, gulf, creek or tidal river
(iv) any dutiable or prohibited goods found concealed in any manner in any conveyance
(v) any dutiable or prohibited goods required to be mentioned under the regulations in an
import manifest or import report which are not so mentioned;
(vi) any dutiable or prohibited goods removed or attempted to be removed from a customs
area or a warehouse without the permission of the proper officer
(For More: Read the relevant Section)

PENAL PROVISIONS UNDER THE CUSTOMS ACT
PENALTIES ON PERSONS The personal penalty is a heavy punishment. The entire

Customs Act being in the nature of an indirect tax, no person can be penalised unless he is
known to have personally committed the offence with full knowledge of the illegality of his
action. However, this element of mens rea would defeat the very objective of deterrent action
against persons involved in smuggling. Therefore, the persons involved in smuggling have
been categorised into two, namely,
1. those directly involved in doing any act or omission which legally constitutes
smuggling and
2. others, who wittingly or unwittingly get themselves involved in the various
stages of smuggling.
The word ‘penalty’ means punishment under the law, i.e., such punishment as is provided in
penal laws. It also means the sum payable as a punishment for a default.
PENALTIES IN RESPECT OF IMPROPER IMPORTATION OF GOODS, ETC.
[SECTION 112] (1) Any person who, in relation to any goods, does or omits to do any act
which act or omission would render such goods liable to confiscation under section 111, or
abets the doing or omission of such an act, OR
(2) Any person who acquires possession of or is in any way concerned in carrying, removing,
depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner
dealing with any goods which he knows or has reason to believe are liable to confiscation under
section 111, shall be liable to penalty in the following manner:
SL. GOODS MAX. PENALTY
No.
1 In the case of prohibited goods (a) Value of the goods or (b) Rs. 5,000,
whichever is greater
2 In the case of dutiable goods other than (a) 10% of the duty sought to be evaded
prohibited goods on such goods or (b) `Rs.5,000,
whichever is greater.
3 In the case of goods in respect of which: - (i) (a) Difference between the declared
Value stated in Bill of entry or (ii) in the case value and the value thereof or (b) Rs.
of baggage, in the declaration made under 5,000, whichever is greater
section 77 is higher than the value thereof.
4 In case the goods are prohibited and value is (a) Value of the goods or (b) Difference
mis-declared between the declared value and the value
thereof or (c)Rs.5,000, whichever is
highest
5 In case the goods are dutiable (other than (a) Duty sought to be evaded on such
prohibited goods), and the value is mis- goods or (b) Difference between the
declared declared value and the value thereof or
(c) Rs.5,000, whichever is highest

PENALTIES IN RESPECT OF ATTEMPT OF IMPROPER EXPORTATION OF

GOODS, ETC. [SECTION 114] Improper exportation of goods, which would render such
goods liable to confiscation under section 113 of the Customs Act, is liable to penalty under
section 114 of the Act as under:
SL. GOODS MAX. PENALTY
No.
1 In the case of prohibited goods (a) Three times the value of the goods
declared by the exporter or (b) Three
times the value as determined under the
Customs Act, whichever is greater
2 In the case of dutiable goods other than (a) 10% of the duty sought to be evaded
prohibited goods on such goods or (b) Rs. 5,000,
whichever is greater.
3 In case of any other goods (a) Value of the goods declared by the
exporter or (b) Value as determined
under the Customs Act, whichever is
greater
MANDATORY PENALTY FOR SHORT-LEVY OR NON-LEVY OF DUTY IN

CERTAIN CASES [SECTION 114A]
(a) Penalty for non-levy/short levy of duty/where the interest has not been charged/
paid/has been part paid or duty/interest has been erroneously refunded: In cases of non-
levy or short levy of duty or where the interest has not been charged or paid or has been part
paid or the duty or interest has been erroneously refunded by reason of:- (i) collusion or (ii)
any wilful mis-statement or (iii) suppression of facts person who is liable to pay the duty or
interest, as the case may be, as determined under sub-section (8) of section 28 shall also be
liable to pay a penalty.
(b) Amount of penalty: Amount of penalty shall be equal to the duty or interest so determined.
(c) Benefit of reduced penalty available if duty/interest and interest on delayed payment
of duty paid within thirty days: Where such duty or interest, as the case may be, and the
interest on delayed payment of duty, is paid within thirty days from the date of the
communication of the order, the amount of penalty to be paid shall be reduced to 25% of the
duty or interest. However, aforementioned benefit of reduced penalty is available only if the
amount of penalty so determined has also been paid within the said period of thirty days.
USE OF FALSE AND INCORRECT MATERIAL TO BE PENALIZED [SECTION
114AA] Section 114AA lays down that if a person knowingly or intentionally: -
• makes,
• signs or uses, or
• causes to be made,
• signed or used,

any declaration, statement or document which is false or incorrect in any material

particular, in the transaction of any business for the purposes of the Customs Act,
shall be liable to a penalty.
Maximum penalty: Penalty shall not exceed 5 times the value of goods.
PENALTY FOR NOT ACCOUNTING FOR GOODS [SECTION 116]
If:- (i) any goods loaded in a conveyance for importation into India, or (ii) any goods
transhipped under the provisions of this Act or (iii) coastal goods carried in a conveyance are
not unloaded at their place of destination in India, or if the quantity unloaded is short of the
quantity to be unloaded at that destination, and if the failure to unload or the deficiency is not
accounted for to the satisfaction of the Assistant/Deputy Commissioner of Customs, the person-
in charge of the conveyance shall be liable to penalty as follows:-
SL. IN CASE OF MAX. PENALTY
No.
1 goods loaded in a conveyance for importation twice the amount of duty that would
into India or goods transhipped under the have been chargeable on the goods not
provisions of this Act unloaded or the deficient goods, as the
case may be, had such goods been
imported
2 coastal goods amount of export duty that would have
been chargeable on the goods not
unloaded or the deficient goods, as the
case may be, had such goods been
exported
PENALTIES FOR CONTRAVENTION, ETC., NOT EXPRESSLY MENTIONED –

RESIDUAL PENALTY [SECTION 117] Any person who contravenes any provision of this
Act or abets any such contravention or who fails to comply with any provision of this Act with
which it was his duty to comply, where no express penalty is elsewhere provided for such
contravention or failure, shall be liable to a penalty not exceeding Rs.1,00,000.

OFFENCES AND PROSECUTION
OFFENCES
The scheme of offences under the Customs Act can be understood with the help of the
following diagram:
PROSECUTION: No prosecution proceedings can be launched in a Court of Law against

any person under Customs Act, and no cognizance of any offence under sections 132 to 135 of
the Customs Act, 1962 can be taken by any Court, except with the previous sanction of
concerned Principal Commissioner/Commissioner of Customs. Based upon the results of

investigations and evidence brought on record, Principal Commissioner/Commissioners of

Customs apply their mind before sanctioning prosecution- after being satisfied that there are
sufficient reasons justifying prosecution. Criminal complaint is thereafter filed in appropriate
Court of law and followed up with a view to get expeditious orders/conviction.
Revised guidelines have been issued on prosecution under Customs Act, 1962 vide Circular
No. 27/2015 Cus dated 23.10.2015. The significant aspects of the guidelines are:
(a) Person liable to be prosecuted: As per the provisions of the Customs Act prosecution may
be launched against any person including legal person for offences covered under sections 132,
133, 134, 135, 135A or 136 of the Customs Act, 1962.
(b) Threshold limits for launching of prosecution: CBIC has laid down the following
threshold limits for launching prosecution:

(c) Exceptions: Threshold limit will not apply in following cases:

(i) In case of habitual offenders or where criminal intent is evident in ingenious way of
concealment, where prosecutions can be considered irrespective of the value of goods/currency
involved in such professional or habitual offenders, etc. provided the cumulative value of 3 or
more such offences in past 5 years from the date of the decision exceeds the threshold limit(s)
indicated in above table.
(ii) In cases involving offences relating to items i.e., fake Indian currency notes (FICN), arms,
ammunitions and explosives, antiques, art treasures, wild life items and endangered species of
flora and fauna, prosecution would be launched invariably, irrespective of value of offending
goods involved.
(iii) In respect of cases involving non-declaration of foreign currency by foreign nationals and
NRIs detected at the time of departure back from India, exceeding the threshold limits of Rs.20
lakh, if it is claimed that the currency has been legally acquired and brought into India,
prosecution would not be considered as a routine. Prosecutions will not be launched as a matter
of routine and/or in cases of technical nature, where the additional claim for duty is based solely
on a difference of interpretation of the law.
(d) Authority to sanction prosecution: Prosecution may be launched after due sanction by
the Commissioner / Principle Commissioner or Additional Director General / Principle
Additional Director General of Revenue Intelligence (collectively known as ‘sanctioning
authority’). However, in case of habitual offenders and appraising cases/commercial frauds,
prior approval of the Chief Commissioner/Principal Chief Commissioner or Director
General/Principal Director General of Revenue Intelligence, as the case may be, will be
required for launching prosecution.
(e) Stage for launching of prosecution: Normally, prosecution may be launched immediately
on completion of adjudication proceedings.
Sections 132 to 140 contain detailed provisions regarding the offences which are liable to
prosecution in a criminal court of law, the cognisance of the offences, the procedure to try these
offences and the presumption that can be had in such proceedings. These provisions are briefly
discussed below:
1. FALSE DECLARATION, FALSE DOCUMENTS, ETC [SECTION 132] Whoever
makes, signs declaration, statement or document in the transaction of any business relating to
the customs, knowing or having reason to believe that such declaration, statement or document
is false in any material particular, shall be punishable with imprisonment for a term which may
extend to 2 years, or with fine, or with both.
2. OBSTRUCTION OF OFFICER OF CUSTOMS [SECTION 133] If any person
intentionally obstructs any officer of customs in the exercise of any powers conferred under
this Act, such person shall be punishable with imprisonment for a term, which may extend to
two years, or with fine, or with both.
3. REFUSAL TO BE X-RAYED [SECTION 134] If any person resists or refuses to allow a
radiologist to screen or to take X-ray picture of his body in accordance with an order made by
a Magistrate under section 103, or resists or refuses to allow suitable action being taken on the
advice and under the supervision of a registered medical practitioner for bringing out goods

liable to confiscation secreted inside his body, as provided in section 103, he shall be
punishable with imprisonment for a term which may extend to six months, or with fine, or with
both.
4. EVASION OF DUTY OR PROHIBITIONS [SECTION 135] If any person—
(a) is in relation to any goods in any way knowingly concerned in misdeclaration of value or
in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any
prohibition for the time being imposed under this Act or any other law for the time being in
force with respect to such goods; or
(b) acquires possession of or is in any way concerned in carrying, removing, depositing,
harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any
goods which he knows or has reason to believe are liable to confiscation under section 111 or
section 113, as the case may be; or
(c) attempts to export any goods which he knows or has reason to believe are liable to
confiscation under section 113; or
(d) fraudulently avails of or attempts to avail of drawback or any exemption from duty provided
under this Act in connection with export of goods, then,
However, in the absence of special and adequate reasons to the contrary to be recorded in the
judgment of the court, such imprisonment (mentioned in point (i) above) shall not be for less
than 1 year. If any person is convicted for a second time, he shall be punishable for the second
and subsequent offence with imprisonment for a term which may extend to seven years and
with fine.

OFFENCES TO BE TRIED SUMMARILY [SECTION 138] Notwithstanding anything

contained in the Code of Criminal Procedure, 1898, an offence under this Chapter (ie., Chapter
XVI) may be tried summarily by a Magistrate. However, the exceptions are:
1. Offence under clause (i) of sub-section (1) of section 135
2. Offence under sub-section (2) of section 135.
Customs Act is a special enactment. This section provides for summary trial of all offences
under the Act. Therefore, the provisions of section 262 of Cr. P.C., which allows trial as warrant
case of all offences punishable with imprisonment more than 2 years is inapplicable to the
offences under this Act.
ADVANCE RULING
Appreciating the need for foreign investors to be assured in advance of their likely indirect tax
liability, the Central Government has set up an Authority for Advance Rulings, Customs to
provide binding ruling on important issues so that intending investors will have a clear-cut
indication of their duty liability in advance. The legal provisions relating to advance rulings
were introduced in Chapter VB of Customs Act, 1962 by Finance Act, 1999.
The advance rulings scheme has the following advantages:
(a) It ensures clarity and certainty of the tax liability under the Customs Act in advance in
relation to an activity (means import or export under the Customs Act, proposed to be
undertaken by the applicant.
(b) Finality and thereby avoidance of protracted litigation.
(c) Speedy decisions.
(d) Inexpensive process.
(e) Transparency
As per section 28E(a) of Customs Act, “activity” means import or export and includes any
new business of import or export proposed to be undertaken by the existing importer or
exporter, as the case may be.
(b) "advance ruling" means the determination, by the authority of a question of law or fact
specified in the application regarding the liability to pay duty in relation to an activity
proposed to be undertaken, by the applicant;
(c) “Applicant” means a –
(i) (a) a non-resident setting up a joint venture in India in collaboration with a non-resident or
a resident; or
(b) a resident setting up a joint venture in India in collaboration with a non-resident; or
(c) a wholly owned subsidiary Indian company, of which the holding company is a foreign
company, who or which, as the case may be, proposes to undertake any business activity in
India;
(ii) a joint venture in India; or

(iii) a resident falling within any such class or category of persons, as the Central Government
may, by notification in the Official Gazette, specify in this behalf, and which or who, as the
case may be, makes application for advance ruling under sub-section (1) of section 28H.
For the said purpose, Central Government has specified the following: -
(a) a resident who proposes to import goods claiming for assessment under heading 9801
(items eligible for project import) of the First Schedule to the Customs Tariff Act, 1975
(b) a public sector company
(c) a resident public limited company
(d) a resident private limited company
(e) a resident firm Resident
AUTHORITY FOR ADVANCE RULING (CENTRAL EXCISE, CUSTOMS AND
SERVICE TAX) [SECTION 28F] The Authority for Advance Rulings constituted under
section 245-O of the Income-tax Act, 1961 shall be the Authority for giving advance rulings
for the purposes of this Act. The said Authority shall exercise the jurisdiction, powers and
authority conferred on it by or under this Act.
The question on which the advance ruling is sought shall be in respect of the following:
(a) classification of goods under the Customs Tariff Act, 1975;
(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing
on the rate of duty;
(c) the principles to be adopted for the purposes of determination of value of the goods under
the provisions of this Act.
(d) the applicability of notifications issued in respect of duties under the Customs Act, 1962,
the Customs Tariff Act, 1975 and any duty chargeable under any other law for the time being
in force in the same manner as duty of customs leviable under the Customs Act.
(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff
Act, 1975
The application shall be made in quadruplicate and be accompanied by a fee of ten thousand
rupees. An applicant may withdraw his application within thirty days from the date of the
application.
Time limit for pronouncing advance ruling: The Authority shall pronounce its advance
ruling in writing within six months of the receipt of application. [Sub-section (6)]
APPLICABILITY OF ADVANCE RULING [SECTION 28J]
The advance ruling pronounced by the Authority under section 28-I shall be binding only -
(a) on the applicant who had sought it;
(b) in respect of any matter referred to in sub-section (2) of section 28H;
(c) on the Principal Commissioner/Commissioner of Customs, and the customs authorities
subordinate to him, in respect of the applicant.
The advance ruling shall be binding as aforesaid unless there is a change in law or facts on the
basis of which the advance ruling has been pronounced.

Advance ruling to be void when obtained by fraud or misrepresentation [section 28k]

POWERS OF AUTHORITY [SECTION 28L] The Authority shall, for the purpose of
exercising its powers regarding
(a) discovery and inspection,
(b) enforcing the attendance of any person and examining him on oath,
(c) issuing commissions and compelling production of books of account and other records,
have all the powers of a civil court under the Code of Civil Procedure, 1908.
The Authority shall be deemed to be a civil court for the purposes of section 195, but not for
the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding
before the Authority shall be deemed to be a judicial proceeding within the meaning of
sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code.
SETTLEMENT COMMISSION
Settlement Commission was set up to evolve a mechanism for speedy settlement of cases
involving high revenue stakes. This is an alternative channel for resolution of dispute for
assessees without going into the prolonged litigation in adjudication/appeals/revisions etc.
Customs, Central Excise and Service Tax Settlement Commission is constituted by Central
Government. Section 127A to 127N contained in Chapter XIV A of the Customs Act deals
with the provisions relating to settlement of cases. Presently, four Benches in the Settlement
Commission have been constituted and are functioning at Delhi, Mumbai, Kolkata and
Chennai.
"Settlement Commission" means the Customs, Central Excise and Service Tax Settlement
Commission constituted under section 32 of the Central Excise Act, 1944. [SECTION 127A(f)]
CONSTITUTION AND COMPOSITION OF SETTLEMENT COMMISSION
The Central Government has constituted the Customs, Settlement Commission. The
commission has principal Bench at Delhi. Principal Bench is headed by the chairman and the
others by the vice-chairman. Two other members will be assisting them at each bench. The
commission provides quick and easy settlement of tax disputes involving high revenue stake.
The purpose is to save time and energy of both the tax payer and the Department. The procedure
followed by the commission is much less costly and is beneficial to the assessee.
POWERS OF THE COMMISSION
The commission will exercise its powers for settling the cases as a bench consisting of three
members, and all decisions will be by majority. The Chairman has the power to constitute a
large bench or special bench, wherever necessary. The commission has power to regulate its
own procedures and procedures of its benches.
The commission has power to have exclusive jurisdiction to exercise the powers and perform
the functions of any officer of customs/excise/service tax.
The commission can grant immunity from prosecution for any offence under Customs Act/. It
can also withdraw the immunity granted if the conditions specified under its order are not
complied with.

The commission has power to grant waiver either wholly or in part from imposition of any
penalty, fine, but NOT interest under excise/customs/service tax in respect of the case covered
under the settlement.
It can order provisional attachment of property belonging to the applicant if found necessary
to protect the interests of the revenue.
APPLICATION TO THE COMMISSION [SECTION 127B]
The following categories of people fulfilling the requirements can make an application for
settlement commission:
(a) An importer/exporter or a manufacturer can approach the settlement commission by
filing an application in the prescribed form. It may be noted that the department cannot
approach the commission for settlement.
(b) The application can only be made to admit the liability, not to contest it. The admitted
liability shall be more than Rs,3,00,000.
The applicant can file an application in the following cases:
(a) Admission of short levy on account of misclassification.
(b) Under valuation.
(c) Inapplicability of exemption notification/input tax credit.
Note: Application cannot be made in case where no return has been filed.
The applicant has to deposit the additional duty with interest along with the application. An
application has only one opportunity to avail the settlement in his lifetime. The cases involving
the valuation dispute can be taken up with the commission. Cases relating to interpretation of
law and notifications can be taken up. An application for settlement once made shall not be
allowed to be withdrawn by the applicant.
VALUATION UNDER THE CUSTOMS ACT, 1962
VALUATION OF GOODS FOR LEVY OF CUSTOMS DUTY

The method of valuation of goods for both import and export for the purposes of levy of
customs duty on the basis of transaction value has been set out under Section 14 of the
Customs Act, 1962 (effective from 10.10.2007).
The transaction value is the price actually paid or payable for the goods when sold for export
to India for delivery at the time and place of importation, or for export from India for delivery
at the time and place of exportation, where the buyer and seller of the goods are not related
and the price is the sole consideration for sale, subject to such other conditions as may be
specified in the rules made in this behalf
VALUATION OF IMPORTED GOODS
Section 14(1) provides that the value of imported goods shall also include various items of
costs and services to the extent provided by the rules. Proviso to section 14(1) states that the
price shall be calculated as per the rate of exchange as in force on the date of presentation of
bill of entry or shipping bill or bill of export under section 46 or section 50, as the case may be.
Further, if transaction value is not determinable (in case of no sale or buyer or seller being

related or price not being sole consideration), value is determined in accordance with valuation
rules. Hence, the value of imported goods shall be computed in accordance with section 14(1)
read with the Customs Valuation (Determination of Value of imported Goods) Rules, 2007
CUSTOMS VALUATION (DETERMINATION OF PRICE OF IMPORTED GOODS)
RULES, 2007
DETERMINATION OF THE METHOD OF VALUATION - RULE 3
Rule 3 of Import valuation rules provides that the value of the imported goods shall be
transaction value adjusted on accordance with rule 10. However, where for any reason the
transaction value cannot be determined, or the same is not acceptable for any reason, then, the
value shall be determined as per the methods laid down in Rules 4 to 9, which are to be
preceded sequentially.
In Short: The Transaction value should be taken as the assessable value.
Conditions to be fulfilled (Rule 3(2))
(i) The price on the invoice is the sole consideration
(ii) The parties to the transaction are not related persons
(iii)The Assessing Officer (A.O.) has no other reason to doubt on the invoice value.
As per rule 2(2), Persons shall be deemed to be "related" only if -
(i) they are officers or directors of one another's businesses;
(ii) they are legally recognised partners in business;
(iii) they are employer and employee;
(iv) any person directly or indirectly owns, controls or holds five per cent or more of the
outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family
Rules [4,5,7,8,9] are called Other Valuation Methods
DETERMINATION OF TRANSACTION VALUE IN CASE OF IDENTICAL GOODS
(RULE 4)
The value shall be the transaction value of the identical goods
Identical goods [Rule 2(1)(d)
Identical goods mean imported goods -
(i) which are same in all respects, including physical characteristics, quality and reputation as
the goods being valued except for minor differences in appearance that do not affect the
value of the goods;
(ii) produced in the country in which the goods being valued were produced; and

(iii) produced by the same person who produced the goods, or where no such goods are
available, goods produced by a different person, but shall not include imported goods where
engineering, development work, art work, design work, plan or sketch undertaken in India
If the price of such goods is not available, price of goods produced by another manufacturer in
the same country can be taken.
TRANSACTION VALUE OF SIMILAR GOODS (RULE 5)
The value of imported goods shall be the transaction value of similar goods.
Similar Goods [Rule 2(1)(f)]:
"similar goods" means imported goods -
(i) which although not alike in all respects, have like characteristics and like component
materials which enable them to perform the same functions and to be commercially
interchangeable with the goods being valued having regard to the quality, reputation and the
existence of trade mark;
(ii) produced in the country in which the goods being valued were produced; and
(iii) produced by the same person who produced the goods being valued, or where no such
goods are available, goods produced by a different person
but shall not include imported goods where engineering, development work, art work, design
work, plan or sketch undertaken in India.
DEDUCTIVE VALUE (RULE 7)
Rule 7(1), subject to the provisions of rule 3, if the goods being valued or identical or similar
imported goods are sold in India, in the condition as imported at or about the time at which the
declaration for determination of value is presented, the value of imported goods shall be
based on the unit price at which the imported goods or identical or similar imported goods
are sold in the greatest aggregate quantity to persons who are not related to the sellers in
India, subject to the following deductions : —
(i) either the commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported goods of the same
class or kind;
(ii) the usual costs of transport and insurance and associated costs incurred within India;
(iii) the customs duties and other taxes payable in India by reason of importation or sale of the
goods.
If neither the imported goods nor identical nor similar imported goods are sold in India in the
condition as imported, then, the value shall be based on the unit price at which the imported
goods, after further processing, are sold in the greatest aggregate quantity to persons who are
not related to the seller in India.
COMPUTED VALUE (RULE 8)
Subject to the provisions of rule 3, the value of imported goods shall be based on a computed
value, which shall consist of the sum of: -

(a) the cost or value of materials and fabrication or other processing employed in producing
the imported goods;
(b) an amount for profit and general expenses equal to that usually reflected in sales of
goods of the same class or kind as the goods being valued which are made by producers in the
country of exportation for export to India;
(c) the cost or value of all other expenses under rule 10(2).
RESIDUAL METHOD (RULE 9)
Subject to the provisions of rule 3, where the value of imported goods cannot be determined
under the provisions of any of the preceding rules, the value shall be determined using
reasonable means consistent with the principles and general provisions of these rules and
on the basis of data available in India;
However, the value so determined shall not exceed the price at which such or like goods are
ordinarily sold or offered for sale for delivery at the time and place of importation in the course
of international trade, when the seller or buyer has no interest in the business of other and price
is the sole consideration for the sale or offer for sale [Rule 9(1)].
As per rule 9(2), no value shall be determined under the provisions of' this rule on the basis of;
(i) the selling price in India of the goods produced in India;
(ii) a system which provides for the acceptance for customs purposes of the highest of the
two alternative values;
(iii) the price of the goods on the domestic market of the country of exportation;
(iv) the cost of production other than computed values which have been determined for
identical or similar goods in accordance with the provisions of rule 8;
(v) the price of the goods for the export to a country other than India;
(vi) minimum customs values; or
(vii) arbitrary or fictitious values.
ADJUSTMENTS IN TRANSACTION VALUE (RULE 10)
I. Adjustments specified in Rule 10(1)
In determining the transaction value, there shall be added to the price actually paid or payable
for the imported goods, —
(a) the following to the extent they are incurred by the buyer but are not included in the price
actually paid or payable for the imported goods, namely: -
(i) commission and brokerage, except buying commissions; Buying commission refers
to fees paid by an importer to his agent for service of representing him abroad in
purchase of goods being valued.
(ii) the cost of containers imported along with the goods;
(iii) the cost of packing whether for labour or materials;
(b) The value, apportioned as appropriate, of the following goods and services where supplied
directly or indirectly by the buyer free of charge or at reduced cost for use in connection
with the production and sale for export of imported goods, to the extent not included in the

price actually paid or payable namely: - materials, components, parts, tools, dies,
moulds, materials consumed in the production of the imported goods;
(iv) engineering, development, art work, design work, and plans and sketches undertaken
elsewhere than in India and necessary for the production of the imported goods;
(c) royalties and licence fees related to the imported goods that the buyer is required to pay,
(d) The value of any part of the proceeds of any subsequent resale, disposal or use of the
imported goods that accrues, directly or indirectly, to the seller;
(e) all other payments actually made or to be made as a condition of sale of the imported
goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the
seller to the extent that such payments are not included in the price actually paid or payable
(refer the box ),.
Explanation- Where the royalty, licence fee or any other payment for a process, whether
patented or otherwise, is includible referred to in clauses (c) and (e), such charges shall be
added to the price actually paid or payable for the imported goods, notwithstanding the fact
that such goods may be subjected to the said process after importation of such goods.
II. Adjustments specified in Rule 10(2)
The value of the imported goods shall be the value of such goods, for delivery at the time and
place of importation and shall include –
(a) the cost of transport of the imported goods to the place of importation;
(b) loading, unloading and handling charges associated with the delivery of the
imported goods at the place of importation; and
(c) the cost of insurance actually incurred
The following points shall also be considered while determining the assessable value:
Where the cost of transport is not ascertainable, such cost shall be 20% of the free on-
board value of the goods.
In the case of goods imported by air, even where the cost of transportation is ascertainable,
such cost shall not exceed 20% of free on-board value of the goods.
where the cost of insurance is not ascertainable, such cost shall be 1.125% of free on board
(FOB) value of the goods;
FOB means the stage at which the goods are placed on board the conveyance carrying the
vessel.
loading, unloading and handling charges shall be 1% of the free on board (FOB) value of the
goods + the cost of transport + cost of insurance i.e. CIF Value
C.I.F. (Cost Insurance Freight): It is the cost at which the goods are delivered at the Indian
port. It covers cost of goods. Sometimes there is referred as CFC also.
Computation where FOB value and Cost of Insurance & Transport not ascertainable:
Where the free on-board value of the goods is not ascertainable, then

Costs of transportation shall be 20% of the FOB value of the goods + cost of insurance
and
Cost of insurance shall be 1.125% of the free on-board value of the goods + cost of
transport.
Other

MODULE 2
Central Excise Act – Basic Concepts Levy and Collection Indicating Amount of Duty- Powers
and Duties of Officers, Valuation, Registration, Settlement, Confiscation, Penalty -Remedies
Presumptions
BASIC CONCEPTS
Excise is derived from the Latin word “Excisum/Excidere” which means to “cut out”.
The duty of excise is levied on a manufacturer or producer in respect of the commodities
produced or manufactured by him. It is a tax upon manufacture of goods and not upon sales
or proceeds of sale of goods.
‘Duty of excise’ has been renamed as Central Value Added Tax (CENVAT). CENVAT
includes ‘duty’, ‘duties’ ‘duty of excise’ or ‘duties of excise’. Although excise started as a pure
duty on manufacturing activity, over a period of time it has included deemed manufacture and
became a value added tax.
Article 272 mentions “Union duties of excise other than such duties of excise on medicinal or
toilet preparations as are mentioned in the Union List shall be levied and collected by the
Government of India…”
VIIth
Entry No.84 of List I Entry No. 51 of List II
a) Tobacco
SCHEDULE Excise duty on the following
b) Other Goods manufactured or goods only
produced in India
c) Includes Medicinal and toilet a) Alcoholic liquor for Human
preparations containing consumption
alcohol; opium; Indian Hemp b) Opium; Indian hemp (or)
or other narcotic drugs and other narcotic Drugs and
narcotics. narcotics
d) Excludes Alcoholic liquor for
Human consumption; opium;
Indian Hemp or other narcotic
drugs & narcotics
Types of Excise Duties: The following types of duties are levied under the excise law and
through provisions of other Acts from time to time:
1.) Basic Excise Duty: This duty, also known as CENVAT, is levied under section 3(1)(a) of
Central Excise Act. It is levied at the rates specified in First Schedule to the Central Excise

Tariff Act, read with exemption notifications, if any. Currently, the general rate of excise duty
on non-petroleum products is 12.5%. This duty is applicable to majority of the excisable goods.
2.) National Calamity Contingent Duty (NCCD): A ‘National Calamity Contingent Duty’
(NCCD) has been imposed vide section 136 of Finance Act, 2001 on pan masala, branded
chewing tobacco, cigarettes, domestic crude oil and mobile phones. Note: If Goods are
exempt from Excise Duty then NCCD is also exempt.
3.) Additional Duty of Excise: It is imposed by way of surcharge on pan masala and certain
specified tobacco products vide section 85 of the Finance Act, 2005.
4.) Education Cess: It is levied on excisable goods manufactured in India @ 2% of the
aggregate duties of excise levied on such goods.
5.) Secondary and Higher Education cess: It is levied on excisable goods manufactured in
India @ 1% of the aggregate duties of excise (excluding education cess) leviable on such goods.
Laws Relating to Central Excise
a) Central Excise Act, 1944(CEA): The basic Act which provides the constitutional power
for charging of duty, valuation, powers of officers, provisions of arrests, penalty, etc.
b) Central Excise Tariff Act, 1985 (CETA): This classifies the goods under 96 chapters
with specific codes assigned.
c) Central Excise Rules, 2002: The procedural aspects are laid herein. The rules are
implemented after issue of notification.
d) Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:
The provisions regarding the valuation of excisable goods are laid down in this rule.
e) Cenvat Credit Rules, 2004: The provisions relating to Cenvat Credit available and its
utilisation is mentioned.
Sources of Central Excise Law
Extent and scope of Central Excise

Law: The Central Excise Law extends to
the whole of India including the state of
Jammu and Kashmir, the territorial
waters of India and ‘Designated areas” in
the Continental Shelf and Exclusive
Economic Zone of India Excluding SEZ.
Note: Government goods are also
liable to excise duty.
Central Excise Act, 1944 The duty of Central Excise is levied if the following conditions are
satisfied:
(i) The duty is on goods.
(ii) The goods must be excisable.
(iii) The goods must be manufactured or produced
(iv) Such manufacture or production must be in India.
Excise duty is a duty on production or manufacture of excisable goods in India

LEVY OF DUTY
1.) Application of The Central Excise Law: The Central Excise Act applies to the whole of
India. Though originally the Act did not apply to the State of Jammu and Kashmir, its
application was extended to the same vide the enactment of Taxation Laws (Extension to
Jammu & Kashmir) Act, 1954. It also extends to designated areas in the Continental Shelf
and Exclusive Economic Zone of India (EEZ). The EEZ extends upto 200 nautical miles inside
the sea from base line. Therefore, goods manufactured in Indian landmass as also in the
designated areas in EEZ will be liable to excise duty. The Central Excise Tariff Act also
applies to whole of India and extends to the designated areas in the Continental Shelf and
Exclusive Economic Zone of India (EEZ).
2.) Taxable Event: Taxable event is an event or transaction that results in a tax consequence
for the party who executes the event. Taxable event is the event which triggers the levy of tax.
The taxable event for levy of excise duty is manufacture – only when manufacture takes
place, excise duty liability arises. However, all manufacturing processes do not attract levy of
excise duty unless some basic conditions are met. Excise duty is not concerned with ownership
or sale. Liability under excise law is event based (based on manufacture) and does not depend
upon whether the goods are sold or captively consumed.
3.) Charge of Excise Duty: Section 3 of the Act is the charging section which provides for
levy of excise duty. The provisions of section 3 are discussed below:
(i) Basic conditions for levy of duty: Excise duty is leviable when the following four are
satisfied cumulatively:
There is a Such Such Such goods are

manufacture manufacture manufacture “excisable Product Liable
is done in results in goods”. to Excise Duty
India “goods”; and
(excluding
SEZ*);
*A Special Economic Zone (SEZ) is a geographically bound zone where the economic laws
relating to export and import are more liberal as compared to other parts of the country. Goods
manufactured in Special Economic Zones are not leviable to excise duty. SEZ is considered
to be a place outside India for all tax purpose.
(ii) Government goods also liable to excise duty: There is no distinction between excisable
goods produced by the Government and those produced by others, with regard to payment of
excise duty. Excise duty is payable on all excisable goods, other than salt, manufactured in
India by or on behalf of the Government (both Central and State) also.
(iii) Goods manufactured by 100% EOU and brought to DTA liable to excise duty equal
to customs duty: Hundred percent Export Oriented Undertakings are set up to promote
exports. They generally export whole of the goods manufactured by them and such exports are
exempt from duty. However, sometimes they may sell their goods in India also (known as
Domestic Tariff Area). When EOU’s sell their goods in DTA, the goods become liable to
excise duty.

GOODS AND EXCISABLE GOODS
(1) Goods: Explanation to section 2(d) of the Act provides that “goods includes any article,
material or substance which is being capable of brought and sold for a consideration and such
goods shall be deemed to be marketable”.
Section 2(d) defines excisable goods. Though the explanation to section 2(d) of the Act sets
out as to what are included within the meaning of goods, the concept of goods has been more
elaborately defined/explained in other laws/case laws as under:
(i) Article 366(12) of the Constitution of India: “Goods include all materials,
commodities and articles”.
(ii) Sale of Goods Act, 1930: Section 2(7) defines goods to mean “every kind of movable
property other than actionable claims and money; and includes stocks and shares,
growing crops, grass and things attached to and forming part of the land which are agreed
to be severed before sale or under the contract of sale”.
Thus, immovable property cannot be goods but any movable property whether visible,
tangible, corporeal or not will constitute goods. Goods can be tangible like computer,
machinery, pen, pencil etc. as also intangible like drawings, designs, software stored on
a media. Similarly, electricity is also goods.
(iii) Judicial View: The Supreme Court in the case of U.O.I. v. DCM 1997(1) E.L.T.
J199 has held that in order to be goods the articles must be capable of coming to the
market to be bought and sold. Therefore, to be called goods, the items must be
moveable and marketable.
From the above, two fundamental aspects of the term “goods” arise that they should be
(a) MOVEABLE (b) MARKETABLE.
(a) Goods must be moveable: In order to be movable, an article must fulfil two conditions:
(i) It should come into existence (as a result of manufacture); and
(ii) It should be capable of being moved to market to be bought and sold.
Thus, goods must exist. Where goods have not come into existence, they cannot be moved as
well. So long as the goods have not come into existence, no question of levy of excise duty
would arise.
In Municipal Corporation of Greater Mumbai v. Union of India, a petrol pump of huge
storage capacity which was not embedded to earth but which could not be removed without
dismantling was held to be immovable in nature.
In Sirpur Papers Mills Ltd. V. CCE the machinery embedded to a concrete base to ensure its
wobble free operation was held to be a movable property.
CBIC has clarified that whatever is attached to earth, unless it is like a tree/building/similar
thing, shall not necessarily be regarded as immovable property if the whole purpose behind
such attaching to the concrete base is to secure maximum operational efficiency and safety.
(b) Marketability of Article: Marketability denotes the capability of a product, of being put
into the market for sale. Where goods are not marketable, excise duty cannot be charged on

them. Marketability is the decisive test for durability. The article must be capable of being sold
to consumer without any additional thing. The test of marketability will depend on the facts
and circumstances of each case. It is a question of fact.
The vendibility or marketability test includes the following three essential components:
(a) the goods should be capable of being sold in the market,
(b) the goods should be capable of being sold ordinarily, and
(c) the goods should be capable of being sold as such.
In UOI v Indian Aluminium Co. Ltd. v CCE, the Supreme Court held that marketability of a
product must be for its dutiability. Mere manufacture or specification of an article in Tarrif is
not enough.
The marketability test requires that the goods as such should be in a position to be taken to
market and sold. If they have to be separated, the test is not satisfied. Thus, if machinery has
to be dismantled before removal it will not be goods -Triveni Engineering v. CCE AIR 2000
SC 2896
In Bhor Industries Ltd. v CCE, the Supreme Court held that the mere inclusion of a particular
article in the Tariff Schedule will not render it liable to excise duty. The marketability of that
article is of primary importance. The decision given in this case was a turning point because
prior to this decision, it was normal to treat all goods in the Tariff Schedule, as chargeable to
duty regardless of the test of marketability.
In 1989, the criteria for determining, whether waste generated would be excisable or not
was laid down in the case of Asiatic Oxygen Limited v CCE. The Tribunal held that the
question as to whether waste would be charged to duty or not would depend on: (a) whether a
process of manufacture has taken place, and (b) whether the waste generated is marketable.
In Union Carbide India Ltd. v UOI & Geep Industrial Syndicate Ltd. v Central Government,
the Supreme Court held that intermediate products, which were in a crude form, would not
constitute goods. In this case, aluminium cans produced by the extrusion process were not to
be goods, as they were neither capable of being sold nor were marketable.
Excisable Goods: Section 2(d) of the Act defines ‘excisable goods. The definition can be
divided into three parts:
Excisable goods means-
❖ goods which are specified in the First Schedule and the Second Schedule to the
Central Excise Tariff Act, 1985
❖ as being subject to a duty of excise and
❖ includes salt.
Explanation: Goods includes any article, material or substance which is being capable of
brought and sold for a consideration and such goods shall be deemed to be marketable
By analysing the definition, the following two important ingredients of excisable goods are
found:
(a) Goods must be specified in the Schedule to the Central Excise Tariff Act, 1985;
(b) The goods so specified must be subject to duty.

Non-dutiable goods: Non-dutiable goods are excisable goods but are not liable to duty either
on account of rate of duty being ‘NIL’ in the Tariff or on account of 100% exemption granted
by any exemption notification.
Exempted goods: Exempted goods are goods which have been exempted from payment of
duty by way of an exemption notification. Exempted goods are excisable goods but no duty is
payable on them in view of 100% exemption granted by way of notification.
MANUFACTURE
Manufacture implies a change, but

every change is not manufacture and yet
Manufacture change of an article is the result of
treatment, labour and manipulation.
But something is necessary and there
must be transformation; a new and
Concept different article must emerge having a
distinctive name and character or
use. (Delhi Cloth and General Mills 1977 (1) ELT (J 199))
Clause I
Any process Ancillary (or) Incidental to
the completion of a Manufactured
Product.
Includes
Definition u/s 2(f) Manufacture is not complete unless all
Ancillary and Incidental Process are
complete
Section 2(f) defines the term ‘Manufacture’ to
include any process :(i) incidental or ancillary to
the completion of a manufactured product; and Clause II & III: Deemed
(ii) which is specified in relation to any goods in Manufacture
the Section or Chapter Notes of the Schedule to II. Any process specified under section
the Central Excise Tariff Act, 1985, as amounting / chapter notes of I schedule to CETA as
to manufacture or, (iii) which, in relation to the amounting to manufacture.
goods specified in the Third Schedule, involves
packing or repacking of such goods in a unit III. Goods covered under schedule III
container or labelling or re-labelling of containers of CEA any process such as packing;
including the declaration or alteration of retail Repacking; Labelling, Relabelling on
sale price on it or adoption of any other treatment the Goods to render the product
on the goods to render the product marketable to Marketable
the consumer. And the word “manufacturer” shall
be construed accordingly and shall include not
only a person who employs hired labour in the
production or manufacture of excisable goods,
but also any person who engages in their
production or manufacture on his own account.

In Ujagar Prints v UOI, the Supreme Court held Case Law

that the generally accepted test to ascertain
whether there was a manufacture, is whether the In South Bihar Sugar Mills Ltd. v UOI the
change or the series of changes brought about by Supreme Court held that there must be such a
the application of processes should take the transformation that a new and different article must
emerge having a distinctive name.
commodity to the point, where commercially
can no longer be regarded as the original
commodity, but instead is recognized as a distinct and new article that has emerged out of and
because of the result of processes.
It was decided in the case of “Union of India v Delhi Cloth & General Mills Ltd” that., the
manufacturer of Vanaspati used to purchase oil from market and Vanaspati was manufactured
after subjecting the oil with various processes. The excise was paid on Vanaspati. The Excise
Department contended that during the process of manufacture of Vanaspati, vegetable non-
essential oil was produced, which is a separate dutiable product.
The court decided that: Manufacture implies a change, but every change is not manufacture
and yet every change of an article is the result of treatment, labour and manipulations. But
something more is necessary and there must be transformation; a new and different article
must emerge having a distinctive name and character or use.”
Based on the above definition, the Court held that mere processing of basic oils did not amount
to manufacture, because it is not marketable product. The refined oil requires deodorization
before marketing.
Assembly or repair or production- whether the same is manufacture
Assembly involves use of certain duty paid components to bring into existence an operational
or functional product. As per the cardinal list laid down by the Supreme Court in Emperor
Industries case, “any process would amount to manufacture if as a result of the said process
the object has been transferred into a commercially known new and different product”.
Thus, where assembly brings into existence of a new commercially known different
product, however minor the consequent change be, it would amount to manufacture.
However, in Enfield India Ltd. case the tribunal held that an assembly, repair or reconditioning
only improves the quality of performance of something which is not otherwise useful or fit to
use, it would be manufacture.
Explanation as to what is not Manufacture
Any activity shall not be deemed to be manufacture, only because it has been so written in the
licence granted. The following are not manufacture: (a) Natural activity, even if carried
otherwise, e.g. drying yarn in natural sun; (b) Processing of duty paid goods; (c) Purchasing
various item and putting into a container and selling them; (d) Obtaining of natural products;
(e) Testing/quality control of items manufactured by others; (f) Cutting and polishing of
diamond; (g) Upgradation of computer system; (h) Printing on glass bottles; (i) Affixing brand
name; (j) Crushing of boulders into smaller stones.
Explanation about incidental & Ancillary Process

‘Incidental’ means anything that occurs incidentally. It refers to occasional or casual process.
‘Ancillary’ means auxiliary process, which unless pursued, shall not result into manufacture
of the product. The definition of ‘manufacture’ under section 2(f), includes the processes which
are ‘incidental or ancillary to the completion of a manufactured product’. A process can be
regarded as incidental or ancillary to the completion of the manufactured product, if it comes
in relation to the finished product. It is immaterial whether the process is significant or
inessential. On the other hand, where a process is not connected to the manufacture of the final
product, it cannot be termed as incidental or ancillary.
Intermediate Products & Captive Consumption: The definition of manufacture under
section 2(f) implies that manufacture would take place even at an intermediate stage, so long
as the intermediate product is commercially and distinctly identifiable. Intermediate products
are such products, which are produced in a process naturally in the course of manufacture of a
finished product, which involves more than one process. Thus, such products are output of one
process and input for the subsequent process. Captive consumption means consumption of
such output of one process in the subsequent process. Generally, the intermediate products do
not have any marketable identity and can hardly be sold in the market. In the case of JK
Spinning & Weaving Mills v UOI the Supreme Court held that the captive consumption would
amount to removal, hence would amount to removal, hence chargeable to duty. However, in
Union Carbide v UOI, the Supreme Court held that an intermediate product would be
chargeable to excise duty, only if it is a complete product and can be sold in the market to a
consumer. This decision was affirmed in Bhor Industries v UOI.
MANUFACTURER
Manufacturer is the person who actually brings new and identifiable product into existence.
• Duty liability is on manufacturer in most of the cases.
• Mere supplier of raw material or brand name owner is not ‘manufacturer’.
• Loan licensee is not ‘manufacturer’.

• Loan licensee can be treated as manufacturer only if the manufacture is carried out by
use of his own raw material under his own supervision by hiring the premises and
DEFINITION: Section 2(f) defines the term

‘manufacture’ and contains the meaning for
Manufacturer. The word “manufacturer” shall be
construed accordingly and shall include not only
a person who employs hired labour in the
production or manufacture of excisable goods,
but also any person who engages in their
production or manufacture on his own account. equipment shift-wise or otherwise.
Who is a Manufacturer as per statute? Who is not a Manufacturer The following have
The following are held to be manufacturer: been held as not to be a manufacturer:
(a) Person manufacturing for own (a) Where an activity is not a manufacture;
consumption, (b) Brand Owners, where goods are
(b) Person hiring labour or employees manufacture under his control;
for manufacturing, (c) Labour Contractors, who supply labor;
(c) A job-order worker, (d) Loan licensee.
(d) A contractor. (e) Raw material supplier
Some special aspects:

(i) Raw material supplier vis a vis manufacturer: The person carrying out the actual
manufacturing process is the manufacturer even if the raw material is supplied by someone else
and the goods have been manufactured as per his specifications. Merely by supplying the raw
material, the supplier thereof cannot be construed as the manufacturer. Therefore, it is not
relevant as to whether the raw material belongs to the manufacturer or not.
Example: M/s. Papadwala supplies raw material to several household ladies to make papads.
These ladies make papads at their homes and supply the same to M/s. Papadwala. M/s.
Papadwala does not supervise the ladies. M/s. Papadwala is only the raw material supplier and

not the manufacturer as it does not exercise control and supervision over the ladies making
papads. The ladies making papads are the manufacturers in this case.
(ii) Brand name owner vis a vis manufacturer: Many a times, large manufacturers do not
manufacture goods on their own but get their goods manufactured from others under their brand
name. They usually exercise quality control and may also supply the design. In such cases,
these large manufacturers will not be the manufacturer but the units actually manufacturing the
product will be the manufacturer.
Example: If Usha Fans gets its fans made from other fan making units under its brand name
‘USHA’, Usha Fans will not be the manufacturer in this case. The other fan making units who
actually make the fans will be the manufacturer under central excise.
Ownership of raw material is not relevant to determine who the manufacturer is. In both the
above cases, the contracts are on a principal to principal basis. However, if the relationship
between the raw material supplier/brand name owner and the job-worker is that of a principal
and agent, the raw material supplier/brand name owner will be the manufacturer. It may be
noted that a person supplying the raw material/brand name owner cannot be considered as
hiring the job worker if he does not supervise and control the activities of the job worker.
However, if the manufacturer is a dummy or fake unit, then the raw material supplier or the
brand name owner will be deemed to be the actual manufacturer.
In CCE v Prabhat Packging Ltd., the Tribunal has Labelling on packaged products is also not
held that repacking of an already manufactured manufacture, since in the common market
product would not amount to manufacture in parlance a labelled and unlabelled product is
excise law, since repacking does not result into a treated as the same product and the distinction
new commercially distinct product as such is made. The principle was affirmed in
the case of Pioneer Tools and Appliances Ltd.
v UOI by Bombay HC
COLLECTION OF DUTY
(1). When is duty liable to be paid? As learned before, the taxable event for the levy of
excise duty is manufacture, but the collection thereof is postponed to the stage of removal.
Therefore, excisable goods cannot leave the factory of production unless excise duty thereon
has been paid. However, excisable goods can be removed from the factory and stored in a
warehouse without payment of duty. Excise duty, in such a case, becomes payable when the
excisable goods are removed from the warehouse.
(2) On which type of removals is the duty liable to be paid? As per rule 4 of the Central
Excise Rules, 2002, excisable goods cannot be removed from the place of manufacture or from
warehouse - when the goods are stored in warehouse - without payment of duty whether for
➢ consumption, or
➢ export, or
➢ manufacture of any other commodity in or outside the place of manufacture until the
excise duty leviable thereon has been paid in the prescribe manner.
(3) Who is liable to pay duty? The liability to pay excise duty has been casted on every
person-

a) who produces or manufactures any excisable goods, or

b) who stores such goods in a warehouse
Exception: Procurer of molasses liable to pay excise duty on molasses: Where molasses
are produced in a Khandsari sugar factory, the person who procures such molasses (not the
person who produces the same) for use in the manufacture of any commodity has to pay the
duty leviable on such molasses as if the molasses had been produced by the procurer. [Note:
Khandsari is a type of unrefined raw white sugar made from thickened sugar cane syrup.]
(4) What is the relevant date for determining the rate of duty? Rule 5 of the Central Excise
Rules, 2002 contains the provisions for determining the relevant date. The rate of duty and the
tariff value prescribed under section 3(2) of the Act prevalent on the relevant date are used for
the purpose of computing the amount of excise duty payable. Provisions of rule 4 and 5 have
been tabulated as under:
Particulars Person liable to pay Event for duty Relevant Date

excise duty payment
1. Excisable goods Manufacturer Removal of goods Date of removal of
(other than from the factory. such goods from the
Khandsari molasses) factory
produced and stored
in the factory of the
manufacturer
2. Khandsari Procurer of the Receipt of such Date of receipt of
molasses produced Khandsari molasses molasses by the such molasses in the
and stored in the procurer. factory of the
factory of the procurer of such
manufacturer molasses
3. Excisable goods Manufacturer Issuance of goods for Date on which the
produced and cleared further production. goods are issued for
for captive such use
consumption in the
factory of production
4. Excisable goods Person who stores Removal of goods Date of removal of
produced in the such goods in the from the warehouse goods from the
factory and stored in warehouse warehouse
a warehouse without
payment of duty
Some special aspects:
(i) Change in rate of duty between the date of manufacture and the date of removal:
Sometimes it may happen that the rate of duty which was prevalent when the goods were
manufactured undergoes a change when the goods are removed from the factory. This
generally happens when the rate of duty is increased / decreased in the annual Union Budget.
Example: Excise duty rate was increased from 10% to 12% with effect from 17.03.2012.
Thus, in case of excisable goods manufactured during the month of February and cleared on
20.03.2012, the rate of duty was 10% when the same were manufactured but was increased to
12% when the same were removed from the factory.

The following points need to be considered in this regard:

• Duty will not be leviable if the goods were not excisable at the time of manufacture.
• Where the goods were excisable at the time of manufacture, duty will be leviable at the
rate prevalent on the date of removal. Thus, in the above example, excise duty will be
paid @ 12%.
(ii) Goods becoming excisable/dutiable post manufacture but before removal: There can
be situations when goods which are manufactured at the period in time when they were either
not chargeable to duty or were exempted from duty get included in Tariff or become dutiable
on account of withdrawal of the exemption subsequent to manufacture but before removal of
such goods.
The following points need to be considered in this regard:
• Non-excisable goods (goods not covered in the Central Excise Tariff or goods with blank rate
column) will not be chargeable to duty even though subsequent to manufacture but before
removal such goods are bought within the purview of the Tariff or are made chargeable to a
specified rate of duty under the Tariff.
The rationale behind such a treatment is that since the goods were not excisable goods as per
the provisions of section 2(d) at the time of manufacture, they would not be liable to duty even
though they are brought within the purview of the aforesaid section prior to removal from the
factory.
• Exempted goods (excisable goods exempted from payment of duty vide an exemption
notification) will be chargeable to duty at the time of removal if, subsequent to manufacture
but before removal, the exemption from duty is withdrawn. In this case, since the goods were
excisable at the time of manufacture, the rate of duty prevalent on the date of removal will be
applicable. The following table summarises the position:
CLASSIFICATION OF GOODS
Central Excise Duty is chargeable at the rates, which are manufactured in India and are subject
to excise duty. However, all goods cannot be charged with the same rate of duty. Therefore,
the goods need to be grouped into separate categories and sub-categories, for which the rate of

excise duty may be determined. This identification of goods through groups and sub-groups is
called classification of goods.
In other words, the classification of excisable goods consists of determining the headings or
subheadings of the Central Excise Tariff Act, 1985 (CETA) under which the said goods would
be covered.
The Central Excise Tariff Act, 1985 (CETA) came into force w.e.f. 28th February, 1986.
The main features of the Excise Tariff are:
(a) The Central Excise Tariff has been made very detailed and comprehensive as all the
technical and legal aspects in relation to goods have been incorporated in it.
(b) The Excise Tariff is based on the Harmonised System of Nomenclature, which is an
internationally accepted product coding system formulated under the GATT.
(c) The goods of the same class have been grouped together to bring about parity in
treatment and restrict the dispute in classification matter.
(d) The Central Excise Tariff provided detailed clarificatory notes under each
section/chapter.
(e) The interpretation of the Tariff has been provided for at the beginning of the Schedule.
All the section notes, chapter notes and rules for interpretation are legal notes
and/therefore serve as statutory guidelines in classification of goods.
(f) The Tariff is designed to group all the goods relating to one industry under one chapter
from one raw material in a progressive manner.
What is the scheme of classification? The Central Excise Tariff Act, 1985 (CETA) classifies
all the goods under 96 chapters and specific code is assigned to each item. CETA is based on
International convention of Harmonised System of Nomenclature (HSN), which is
developed by World Customs Organisation (WCO) (That time called as Customs Cooperation
Council).
Harmonised System of Nomenclature: HSN is an internationally accepted product coding
system formulated under the auspices of the General Agreement on Tariffs & Trade (GATT).
The Central Excise Tariff Act is modelled along with international practices. The international
practice of adopting a uniform classification internationally facilitates a common
understanding of products across countries. In other words, the classification of a product
under this code would be the same across the countries.
Structure: HSN is a multipurpose 8-digit nomenclature classifying goods in various groups.
Central Excise Tariff is divided in 20 broad sections. Section Notes are given at the beginning
of each Section, which govern entries in that Section. Each of the sections is divided into
various Chapters and each Chapter contains goods of one class. Chapter Notes are given at
the beginning of each Chapter, which govern entries in that Chapter. There are 96 chapters in
Central Excise Tariff. Each chapter and sub-chapter is further divided into various headings
and subheadings depending on different types of goods belonging to same class of products.
The two Schedules to CETA: The classification of goods in the CETA is comprised in two
Schedules; the First Schedule specifies the rate of basic excise duty (CENVAT) and the
Second Schedule specifies the rate of special excise duty.

Sections and Chapters: The First Schedule has Sections and Chapters. Each Section has
various Chapters. A Section represents a broad class of goods. For example, Section I relates
to Live animals and Animal products while Section V relates to Mineral products. A Chapter
contains goods of one class e.g., Section – V of Mineral Products has Chapter 25 relating to
Salt; sulphur; earths and stone; plastering materials; lime and cement and Chapter 26 relating
to Ores, slag and ash.
The Chapter is further divided into headings and subheadings depending on different types of
goods belonging to same class of products. Section Notes and Chapter Notes are given at the
beginning of each Section and Chapter which govern the entries in that Section and Chapter
respectively. The First Schedule to the CETA contains 96 Chapters grouped into 20 sections
and specific code is assigned to each item. All of the items listed in the second schedule have
been exempted from special excise duty with effect from 01.03.2006.
Central Excise Tariff has 4 Columns:
Tariff Item Description of goods Unit Rate of duty

21 06 90 20 Pan masala kg 16%
Eight-digit classification system: (21 06 90 20)

a) First two digits (21): refer to the Chapter Number of the Tariff
b) Next two digits (06): refer to heading of the goods in that Chapter
c) Next two digits (90): indicate Chapter sub-heading
d) Last two digits (20): refer to the Chapter sub-sub- heading.
Interpretative Rules for classification: The Central Excise Tariff Act, 1985 incorporates six
general rules of interpretation, which together provide necessary guidelines for classification
of various products. By and large, these rules for interpretation are identical to those contained
in the HSN.
Interpretative Rules of CETA: Following are the steps of classification of a product.
1) Refer the heading and sub-heading. Read corresponding Section Notes and Chapter
Notes. If there is no ambiguity or confusion, the classification is final (Rule 1 of GIR). You
do not have to look to classification rules or trade practice or dictionary meaning. If
classification is not possible, then only to GIR. The rules are to be applied sequentially.
2) If meaning of word is not clear, refer to trade practice. If trade understanding of a

product cannot be established, find technical or dictionary meaning of the term used in the
tariff. You may also refer to BIS or other standards, but trade parlance is most important.
3) If goods are incomplete or un-finished, but classification of finished product is known, find
if the unfinished item has essential characteristics of finished goods. If so, classify in same
heading - Rule 2(a).
4) If ambiguity persists, find out which heading is specific and which heading is more general.
Prefer specific heading. - Rule 3(a).

5) If problem is not resolved by Rule 3(a), find which material or component is giving
‘essential character’ to the goods in question - Rule 3(b).
6) If both are equally specific, find which comes last in the Tariff and take it - Rule 3(c).
7) If you are unable to find any entry which matches the goods in question, find goods which
are most akin Rule 4.
8) Packing material is to be classified in the heading in which the goods packed are classified
– Rule 5.
9) In case of mixtures or sets too, the procedure is more or less same, except that each
ingredient of the mixture or set has to be seen in above sequence. As per rule 2(b), any
reference to a material or substance includes a reference to mixtures or combinations of that
material or substance with other material or substance
What is trade parlance theory? According to the trade parlance theory, if a product is not
adequately classified in the Central Excise Tariff Act, 1985, it should be classified according
to its popular meaning or meaning attached to it by those dealing with it, i.e., in commercial
sense. However, where the tariff heading itself uses highly scientific or technical terms, goods
should be classified in scientific or technical sense.
Rate of duty: CETA specifies the rate of duty in respect of each tariff entry given in the
Chapters there under. The rate of duty may either be a specific rate, i.e., quantified in terms of
money or may be ad valorem, i.e., a percentage of the value of the goods. If the rate of duty is
specific (a certain quantum of money), the assessee is required to pay that amount. However,
if the rate of duty is ad valorem, the assessee has to determine the assessable value of the
particular product and thereafter, apply the rate of duty to such derived assessable value. The
process of determining the assessable value of a product is known as 'valuation'

VALUATION OF GOODS
Specific Duty
Compunded Levy Scheme

Basis of
Computing
Duty Payable
Duty Based on Capacity of Duty Based on Retail Sale
Production Price (Section 4A of the Act)
Duty Based on the Tarrif

Duty Based on Value (Ad
value (Section 3(2) of the
Valorem)
Act.)
Duty Based on Value Arrived

at on the basis of valuation
made under Section 4
(a) Specific Duty - It is the duty payable on the basis of certain unit like weight, length, volume,
thickness etc. Specific duties don’t keep pace with inflation i.e. even if selling price of product
rises, revenue earned by Government doesn’t increase correspondingly. For example, duty on
Cigarette is payable on the basis of length of the Cigarette, duty on sugar is based on per Kg
basis etc.
(b) Compounded Levy Scheme - Normal excise procedures and controls are not practicable
when there are numerous small manufacturers. Rule 15 of Central Excise Rules provides that
Central Government may, by notification, specify the goods in respect of which an assessee
shall have option to pay duty of excise on the basis of specified factors relevant to production
of such goods and at specified rates. The prescribed duty has to be paid by the assessee for the
specified period. The advantage of this scheme is that it frees the manufacturer from observing
day to day central excise formalities and maintenance of detailed accounts after making the
lump sum periodic payment. The scheme is presently applicable only to stainless steel
pattas/pattis and Aluminium circles. These articles are not eligible for SSI exemption
(c) Duty based on capacity of production: This duty is payable on the basis of production
capacity, without any reference to the actual production. The production capacity is determined
as per the rules made in this regard. The Government may notify the goods which will be
assessed to such duty having regard to the nature of the process of manufacture or production
of excisable goods of any specified description, the extent of evasion of duty in regard to such
goods or such other factors as may be relevant. This duty is mandatory i.e., duty cannot be
paid in any other manner in respect of the goods notified under this scheme. Example: Pan
masala, gutkha, tobacco etc. are notified under this scheme.
(d) Duty based on value: In (a), (b) and (c) above, valuation of excisable goods is not required
as duty is not based on the value of the goods. However, if the rate of duty is ad valorem, i.e.,
duty is expressed as a percentage of the value of goods; valuation of the excisable goods

becomes essential. Significance of valuation increases as majority of the excisable goods are
charged to ad valorem duty. Thus, in case of goods chargeable to ad valorem duty, for
calculating the amount of duty payable, first the assessable value of the goods has to be
determined.
Value under the Central Excise Act, 1944
Value of the excisable goods has to be necessarily determined when the rate of duty is on ad-
valorem basis. Accordingly, under the Central Excise Act, 1944. the following values are
relevant for assessment of duty. Transaction value is the most commonly adopted method.
(i) Tariff value under Section 3, if applicable.
(ii) Value determined on basis of maximum Retail Sale Price as per Section 4A of the
Act, if applicable to a given commodity.
(iii) Transaction value under Section 4 of the Central Excise Act
(i) Tariff value: The Central Government is empowered to notify the values of goods which
will be chargeable to ad valorem duty. In such a case, the task is easy since the value is already
fixed. The Central Government has also got the power to alter the tariff value once fixed.
However, in recent years tariff values have rarely been fixed by the Government. The duty in
such cases is the percentage of such tariff value and not the assessable value.
The Central Government may fix different tariff values for different classes or descriptions of
the same excisable goods. The Central Government can also fix different tariff values for same
class or description of the goods but produced or manufactured by different classes of
producers or manufacturers or sold to different classes of buyers. Such tariff values may be
fixed on the basis of wholesale price or average price of various manufacturers as the
Government may consider appropriate.
(ii) Valuation with reference to retail sale price (RSP): Section 4A of the Act provides for
valuation of excisable goods based on the retail sale price.
Meaning of Retail Sale Price: Retail sale price has been defined to mean the maximum price
at which the excisable goods in packaged form may be sold to the ultimate consumer and
includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers,
and all charges towards advertisement, delivery, packing, forwarding and the like, as the case
may be, and the price is the sole consideration for such sale.

• All goods bearing RSP not covered under section 4A: It is important to note that all goods
on which RSP has been declared will not be covered under the provisions of section 4A.
Only when the declaration of RSP on the goods is mandatory under the Legal Metrology
Act, 2009 or under any other law and such goods have been notified the Central Government
for the purpose of section 4A, will the goods be valued under section 4A. The provisions
do not apply in cases where manufacturers voluntarily affix RSP on the products.
• Value = RSP printed on the package – Abatement, if any, notified by the Government
• Where more than one RSP is declared on the package of excisable goods, the maximum of
such price will be deemed to be the RSP.
• RSP declaration not mandatory on wholesale packages
(iii) Transaction value:
(1) Concept: In cases where neither tariff value has been fixed by the Central Government nor
the valuation is based on the retail sale price, the assessable value of the goods is required to
be computed in terms of 'transaction value' of the goods as provided under section 4 of the Act.
Section 4(3)(d) of the Central Excise Act, as substituted by section 94 of the Finance Act, 2000
(No. 10 of 2000), came into force from the 1st day of July, 2000. This section contains the
provision for determining the Transaction value of the goods for purpose of assessment of duty.
Assessable value to be the transaction value: Applicability of Transaction Value -
Conditions to be satisfied: As per Section 4(1)(a) of the Central Excise Act, 1944, where duties
of excise is leviable with reference to value, then on each removal of such goods, the value
shall be the “Transaction Value’ if the following conditions are satisfied –
In case any of the above condition is not satisfied then value will be determined in accordance
with the Central Excise Valuation (Determination of Price of Excisable Goods) Rules,
2000.

Transaction value means the price actually paid or payable for the goods, when sold, and
includes in addition to the amount charged as price, any amount that the buyer is liable to pay
to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable
at the time of the sale or at any other time, including, but not limited to, any amount charged
for, or to make provision for, advertising or publicity, marketing and selling organization
expenses, storage, outward handling, servicing, warranty, commission or any other matter; but
does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or
actually payable on such goods.
As per the new Sec.4, transaction value shall include the following receipts/recoveries or
charges, incurred or provided for in connection with the manufacturing, marketing, selling of
the excisable goods: (a) Advertising or publicity; (b) Marketing and selling organization
expenses; (c) Storage; (d) Outward handling; (e) Servicing, warranty; (f) Commission or (g)
Any other matter. The above list is not exhaustive and whatever elements which enrich the
value of the goods before their marketing and were held by Hon’ble Supreme Court to be
includible in “value” under the erstwhile section 4 would continue to form part of section 4
value even under new section 4 definition.
Inclusions/Exclusions In/From Transaction Value
S. Items of Cost Includability in Transaction Value or Otherwise

No.
1 Outward handling Includible only up to place of removal
2 Packing » Costs of all forms of packing are includible.
» However, cost of durable/reusable packing is not
included
3 Dharmada or charity Includible.
4 Design, development and Includible if they are specific to goods
engineering charge
5 Bought out parts and » Parts: Includible as product cannot function without the
accessories part. However, the part should be fitted to the main
article at the time of removal » Accessories: Includible
only if it makes value-addition and is sold as a package
(Accessories provide ease of use of a product).
6 Consultancy charges Includible if it relates to design, layout, etc. of final
product; and such activity is done up to place of removal.
7 Testing & inspection Includible (But independent testing done by the buyer
Charges himself or through a third party is not includable).
8 Erection, installation and Includible only if it results in moveable property.
commissioning charges
9 Pre-delivery inspection Includible only if it is collected by the manufacturer.
charges and after sales
services
10 Discounts (Trade and Not includable, However it should actually passed to
Cash) buyer

11 Notional interest on Not includible unless it can be proved that price has been
deposits, advances lowered on account of receipt of such advance from the
buyer.
12 Interest on delayed Not includible
payment of receivables
13 Bank charges for Not includible
collection of sale
proceeds
14 Delayed payment Not includible
Charges
15 Freight Not includible. However, if, sale is from depot, freight
from factory to depot will be includible
16 Transit insurance Not includible as it is a part of transportation cost.
However, it should be shown separately in the invoice.

REGISTRATION PROCEDURE UNDER CENTRAL EXCISE ACT.1944
As per section 6 of the Central Excise Act, prescribed person who is engaged in –
(a) The production or manufacturer of any specified goods included in the First Schedule
and the Second Schedule to the Central Excise Tariff Act,
(b) The wholesale purchase or sale (whether on its own account or broker or commission
agent) or the storage of any specified goods included in the First Schedule and the
Second Schedule to the Central Excise Tariff Act,
shall get himself registered with the appropriate authority.
1. Every manufacturer of excisable goods. (Other than specifically exempted goods), is
required to get his premises registered under the central excise law.
2. Exemption from registration:
a) The goods manufactured by him attract Nil rate of duty or remain exempt from the
whole of the duty of excise leviable thereon.
b) Small Scale Units availing the benefit of SSI exemption notification.
Note: However, such units are required to give a declaration in a specified form once the value
of their clearances touches Rs.90 lakhs.
After the assessee applies for the registration in the prescribed manner, he is issued a 15-digit
PAN based alphanumeric registration number and a registration certificate on completion of
the registration procedure.
Every person who manufactures or deals in excisable goods is required to obtain Central Excise
Registration as per Rule 9 of the Central Excise Rules, 2002. The following categories of
persons require registration:
• Every manufacturer of dutiable excisable goods;
• First and second stage dealers desiring to issue cenvatable invoices;
• Persons holding warehouses for storing non-duty paid goods;
• Persons who obtain excisable goods for availing end use-based exemption;
• Exporter - manufacturer under rebate/bond procedure;
• Export Oriented Units which have interaction with the domestic economy either
through DTA sales or procurement of duty-free inputs.
Rule 9 of Central Excise Rule and the relevant circulars of CBE & C lay down the
procedure of registration. The procedures are discussed below in brief:
(a) The registration will be made in respect of premises and not in respect of person.
Separate registration is required for each separate premises, if the person has more than
one premises.
(b) Application of Form A-1 shall be submitted in office of the Assistant Commissioner or
Deputy Commissioner of Central Excise having jurisdiction over the premises. In case of
EOU located in port towns, application should be submitted to the concerned Deputy
Commissioner or Assistant Commissioner, Custom.

(c) Application shall be accompanied by self-attested copy of PAN, if not available copy
can be accepted.
(d) Registration Certificate in Form ‘RC’ shall be issued within 7 days of the receipt of the
application form, if it is found in order.
(e) If there is any change in the constitution of the firm or company, the same shall be
intimated within 30 days of change.
(f) Each registered person will be allotted a 15 digit-code known as Excise Control Code.
Assessee is required to mention the ECC code in all invoices.
(g) If the registered person ceases to carry on the operation for which he is registered, he
is required to apply for de-registration. However, if he closes his business, he can
voluntarily surrender his registration certificate to registering authority. If no demand is
pending, the registering authority will cancel the registration.
(h) Registration certificate can be revoked or suspended for breach of any of the conditions
of the Act and Rules and if the holder or person in his employment has been convicted of
an offence under section 161 of Indian Penal Code.
Penalty for failure to get registered If the manufacturer or producer who is required to
take registration fails to apply for registration, a penalty upto duty of contravening goods
or Rs 10,000, whichever is higher, can be imposed and contravening goods can be
confiscated. Moreover, imprisonment up to 7 years (minimum 6 months) can be imposed
as per section 9 of the Central Excise Act.
EXEMPTION FROM REGISTRATION: Persons manufacturing goods, fully exempted or
chargeable to NIL rate of duty are not required to seek registration. However, they should file
the prescribed declaration in the beginning of every financial year.
The following categories of persons are exempt from registration:
• Manufacturers of goods which are goods on the basis of value of clearance made in a
financial year and remain under the exemption limit (SSI). In cases where the value of
clearances in the current financial year exceeds Rs.90 lakhs the assessee has to file a
declaration prescribed under Notification No. 36/2001-CE (NT), dated 26.6.2001 for
getting exemption from the Central Excise registration;
• Persons who get their goods manufactured by others, except the persons who get certain
textile items manufactured on job work;
• Persons manufacturing excisable goods under the customs warehousing procedures
subject to certain conditions;
• Wholesale traders or dealers of excisable goods (except first stage dealers, second stage
dealer and depot);
• Job works of goods under Ch. 61 & 62 and 100% EOU. Deeming EOUs/EPZ units as
registered is not applicable if such units are having clearances in or procurement from
Domestic Tariff Area (DTA).

PAYMENT OF EXCISE DUTY
The due dates and other provisions relating to payment of duty have been tabulated below:
Interest @ 18% on delayed payment of duty: Failure to pay the amount of duty by due date
attracts interest at the rate @ 18% per annum on the outstanding amount.
Invoice: An invoice is the document under cover of which the excisable goods are to be cleared
by the manufacturer. Therefore, excisable goods cannot be removed from a factory or a
warehouse except under an invoice signed by the owner of the factory or his authorized agent.
Serially numbered: The invoice should be serially numbered. The serial number shall
commence from 1st April every year (beginning of a financial year). Such serial numbers need
to be intimated to the Superintendent of Central Excise having jurisdiction over the factory of
the assessee, before issuing the invoices.
Contents: The invoice should contain the registration number, address of the jurisdictional
Central Excise Division, name of consignee, description, classification, time and date of
removal, rate of duty, quantity, mode of transport, vehicle registration number and value of
goods and the duty payable thereon.
Number of copies: The invoice has to be prepared in triplicate in the following manner,
namely: -
i. the original copy being marked as ORIGINAL FOR BUYER;
ii. the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;
iii. the triplicate copy being marked as TRIPLICATE FOR ASSESSEE
SETTLEMENT COMMISSION
Chapter V was inserted in the Central Excise Act, 1944 by Finance (No. 2) Act, 1998 to evolve
a mechanism for speedy settlement of cases involving high revenue stakes. This Chapter
contains sections 31 to 32P.

This is similar to what is constituted under the Income Tax law. This is a beneficial piece of
legislation to settle the case and pay the dues without going through adjudication stages having
legal challenges, recoveries and harassments. It may also be referred as “out of court”
settlement. The proceedings before the settlement commission shall be deemed to be judicial
proceedings for the purpose of Indian Penal Code.
Settlement Commission is constituted by Central Government and shall consist of
• one Chairman,
• Vice-Chairmen and
• other members as the Central Government may think fit.
This Commission is a part of Ministry of Finance and is constituted by the people of integrity
and outstanding ability having special knowledge and experience in respect of administration
of Customs and Central Excise laws.
Settlement Commission started settling service tax cases since 28.05.2012 consequent to the
enactment of the Finance Bill, 2012. [Section 83 of Finance Act, 1994 was amended to give
effect to this change]. Resultantly, name of Settlement Commission has been changed from
“Customs and Central Excise Settlement Commission” to “Customs, Central Excise and
Service Tax Settlement Commission”
Who can make an application for settlement? Can it be withdrawn? Section 32E states
that an assessee may make a case for settlement. An assessee is defined in Section 31(a) as any
person who is liable to pay excise duty assessed and includes any manufacturer/producer or a
registered person of a private warehouse. An application once made cannot be withdrawn
[Section 32E(4)]
Can Settlement Commission grant immunity from prosecution and penalty/ interest/
fine? The Commission can grant immunity under section 32K from prosecution only for any
offence under the Central Excise Act and either wholly or in part from the imposition of penalty
and fine if it is satisfied that the applicant has made full and true disclosure and co-operated
with the Commission. It may be noted that if prosecution is launched before receipt of
application, immunity against such prosecution cannot be granted.
Can such immunity be withdrawn? Immunity can be withdrawn under section 32K only if
the person fails to pay the sums due within the time specified in the settlement order or where
the applicant has concealed any material to the settlement or given false evidence relating to
the settlement
Can the case be sent back by the Settlement Commission to the Central Excise officer?
Under Section 32L, this can be done only where the Commission is satisfied that the person
has not cooperated. The consequences of this are that it would be deemed that no application
has been made before the Commission
Is the order of settlement final? As per section 32M, except as provided in Chapter V, the
order is final and conclusive and shall not be re-opened in any proceeding under this Act or
under any other law. For example, section 32F(8) provides that if the order was obtained by
fraud or misrepresentation, it would become void.
What is the time limit for payment of amounts ordered by Settlement Commission? Under
section 32F(9), the duty, interest, fine and penalty payable in pursuance of the order under sub-

section (5) shall be paid by the assessee within 30 days of receipt of a copy of the order by him.
If the assessee fails to do so the amount which remains unpaid shall be recovered along with
interest due thereon as the sums due to the Central Government by the Central Excise Officer
having jurisdiction over the assessee in accordance with the provisions of section 11.
Where are the Benches of the Settlement Commission located? The principal Bench is at
New Delhi with other Benches at Chennai, Calcutta and Mumbai. The jurisdiction of the Bench
is decided not by the place of business of the applicant but by the location of the headquarters
of the Commissionerate passing the order.
Can the property of the applicant be attached? Provisional attachment by Settlement
Commission is possible under section 32G.
Categories of cases that can be settled
The following categories of cases can be settled as per section 32E:
(a) Where the assessee has filed the application for settlement in respect of a case relating to
him before the adjudication thereof;
(b) If the applicant has filed returns showing production, clearance and central excise duty paid.
However, if Settlement Commission is satisfied that circumstances exist for not filing the
returns, it may allow the applicant to make an application for settlement after recording
reasons for the same. Thus, Settlement Commission has the discretion to allow such
applications after recording reasons therefor.
(c) Where the applicant has received a show cause notice;
(d) Where the case is not pending before the Appellate Tribunal or any Court;
(e) Where the dispute does not relate to interpretation of classification;
(f) Where the additional amount of duty accepted by the applicant in his application exceeds `
3,00,000;
(g) Where the applicant, while filing the application, has not deposited the additional amount
of excise duty accepted by him along with interest due under section 11AA;
(h) Where the assessee admits short levy in respect of excisable goods on account of
misclassification, undervaluation, inapplicability of exemption notification or CENVAT
credit or otherwise.
In Re: Sadik Sadruddin Chunara (Sett.Comm) 2006 (203) E.L.T. 324. The Person who is
absconding and never appeared before the investigating agency cannot be prevented from
making an application before Settlement Commission.
Commr of Customs v. Mahesh Raj 2006 (195) E.L.T. 261 (Kar.) Smugglers, habitual
offenders & unscrupulous elements cannot be offered protection under the settlement scheme.
It covers cases only where there is no deliberate/intended desire on part of the importer to
evade/avoid payment of duty
OFFENCES AND PENALTIES
Section 9. Offences and penalties. —

(1) Whoever commits any of the following offences, namely: -
(a) contravenes any of the provisions of section 8 or of a rule made under clause (iii) or clause
(xxvii) of sub-section (2) of section 37;

(b) evades the payment of any duty payable under this Act;
(bb) removes any excisable goods in contravention of any of the provisions of this Act or any
rules made thereunder or in any way concerns himself with such removal;
(bbb) acquires possession of, or in any way concerns himself in transporting, depositing,
keeping, concealing, selling or purchasing, or in any other manner deals with any excisable
goods which he knows or has reason to believe are liable to confiscation under this Act or any
rule made thereunder;
(bbbb) contravenes any of the provisions of this Act or the rules made thereunder in relation
to credit of any duty allowed to be utilised towards payment of excise duty on final products;
c. fails to supply any information which he is required by rules made under this Act to supply,
or (unless with a reasonable belief, the burden of proving which shall be upon him, that the
information supplied by him is true) supplies false information; d. attempts to commit, or abets
the commission of, any of the offences mentioned in clauses (a) and (b) of this section;
shall be punishable, -
(i) in the case of an offence relating to any excisable goods, the duty leviable thereon
under this Act exceeds fifty lakhs of rupees, with imprisonment for a term which may
extend to seven years and with fine:
Provided that in the absence of special and adequate reasons to the contrary to be
recorded in the judgment of the Court such imprisonment shall not be for a term of
less than six months;
(ii) in any other case, with imprisonment for a term which may extend to three years or
with fine or with both.
(2) If any person convicted of an offence under this section is again convicted of an offence
under this section, then, he shall be punishable for the second and for every subsequent offence
with imprisonment for a term which may extend to seven years and with fine:
Provided that in the absence of special and adequate reasons to the contrary to be recorded in
the judgment of the Court such imprisonment shall not be for a term of less than six months.
(3) For the purposes of sub-sections (1) and (2), the following shall not be considered as
special and adequate reasons for awarding a sentence of imprisonment for a term of less than
six months, namely: -
(i) the fact that the accused has been convicted for the first time for an offence under this
Act;
(ii) the fact that in any proceeding under this Act, other than a prosecution, the accused
has been ordered to pay a penalty or the goods in relation to such proceedings have
been ordered to be confiscated or any other action has been taken against him for the
same act which constitutes the offence;
(iii) the fact that the accused was not the principal offender and was acting merely as a
carrier of goods or otherwise was a secondary party in the commission of the offence;
(iv) the age of the accused.
Section 9AA. Offences by companies. —
(1) Where an offence under this Act has been committed by a company, every person who, at
the time the offence was committed was in charge of, and was responsible to, the company for
the conduct of the business of the company, as well as the company, shall be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any
punishment provided in this Act, if he proves that the offence was committed without his
knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act
has been committed by a company and it is proved that the offence has been committed with
the consent or connivance of, or is attributable to any neglect on the part of, any director,
manager, secretary or other officer of the company, such director, manager, secretary or other
officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded
against and punished accordingly.
Explanation. — For the purposes of this section, -
a. “company” means any body corporate and includes a firm or other association of
individuals; and
b. “director” in relation to a firm means a partner in the firm.
Section 11AC. Penalty for short-levy or non-levy of duty in certain cases -
(1) The amount of penalty for non-levy or short-levy or non-payment or short-payment or
erroneous refund shall be as follows: -
(a) where any duty of excise has not been levied or paid or has been short-levied or shortpaid
or erroneously refunded, for any reason other than the reason of fraud or collusion or any wilful
mis-statement or suppression of facts or contravention of any of the provisions of this Act or
of the rules made thereunder with intent to evade payment of duty, the person who is liable to
pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a
penalty not exceeding ten per cent. of the duty so determined or rupees five thousand,
whichever is higher: Provided that where such duty and interest payable under section 11AA
is paid either before the issue of show cause notice or within thirty days of issue of show cause
notice, no penalty shall be payable by the person liable to pay duty or the person who has paid
the duty and all proceedings in respect of said duty and interest shall be deemed to be
concluded;
(b) where any duty as determined under sub-section (10) of section 11A and the interest payable
thereon under section 11AA in respect of transactions referred to in clause (a) is paid within
thirty days of the date of communication of the order of the Central Excise Officer who has
determined such duty, the amount of penalty liable to be paid by such person shall be twenty-
five per cent. of the penalty imposed, subject to the condition that such reduced penalty is also
paid within the period so specified;
(c) where any duty of excise has not been levied or paid or has been short-levied or shortpaid
or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or
suppression of facts, or contravention of any of the provisions of this Act or of the rules made
thereunder with intent to evade payment of duty, the person who is liable to pay duty as
determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to
the duty so determined: Provided that in respect of the cases where the details relating to such
transactions are recorded in the specified record for the period beginning with 8th April, 2011
up to the date on which the Finance Bill, 2015 receives the assent of the President (both days

inclusive), the penalty shall be fifty per cent. of the duty so determined;
(d) where any duty demanded in a show cause notice and the interest payable thereon under
section 11AA, issued in respect of transactions referred to in clause (c), is paid within thirty
days of the communication of show cause notice, the amount of penalty liable to be paid by
such person shall be fifteen per cent. of the duty demanded, subject to the condition that such
reduced penalty is also paid within the period so specified and all proceedings in respect of the
said duty, interest and penalty shall be deemed to be concluded;
(e) where any duty as determined under sub-section (10) of section 11A and the interest payable
thereon under section 11AA in respect of transactions referred to in clause (c) is paid within
thirty days of the date of communication of the order of the Central Excise Officer who has
determined such duty, the amount of penalty liable to be paid by such person shall be twenty-
five per cent. of the duty so determined, subject to the condition that such reduced penalty is
also paid within the period so specified.
(2) Where the appellate authority or tribunal or court modifies the amount of duty of excise
determined by the Central Excise Officer under sub-section (10) of section 11A, then, the
amount of penalty payable under clause (c) of sub-section (1) and the interest payable under
section 11AA shall stand modified accordingly and after taking into account the amount of
duty of excise so modified, the person who is liable to pay duty as determined under sub-section
(10) of section 11A shall also be liable to pay such amount of penalty and interest so modified.
(3) Where the amount of duty or penalty is increased by the appellate authority or tribunal or
court over the amount determined under sub-section (10) of section 11A by the Central Excise
Officer, the time within which the interest and the reduced penalty is payable under clause (b)
or clause (e) of sub-section (1) in relation to such increased amount of duty shall be counted
from the date of the order of the appellate authority or tribunal or court.
Section 11DDA. Provisional attachment to protect revenue in certain cases -
(1) Where, during the pendency of any proceedings under section 11A or section 11D, the
Central Excise Officer is of the opinion that for the purpose of protecting the interest of
revenue, it is necessary so to do, he may, with the previous approval of the Principal
Commissioner of Central Excise or Commissioner of Central Excise, by order in writing, attach
provisionally any property belonging to the person on whom notice is served under section
11A or sub-section (2) of section 11D, as the case may be, in accordance with the rules made
in this behalf under section 142 of the Customs Act, 1962 (52 of 1962).
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of
six months from the date of the order made under sub-section (1):
Provided that the Principal Chief Commissioner of Central Excise or Chief Commissioner of
Central Excise may, for reasons to be recorded in writing, extend the aforesaid period by such
further period or periods as he thinks fit, so, however, that the total period of extension shall
not in any case exceed two years:
Provided further that where an application for settlement of case under section 32E is made to
the Settlement Commission, the period commencing from the date on which such application

is made and ending with the date on which an order under sub-section (1) of section 32F is
made shall be excluded from the period specified in the preceding proviso.
ADJUDICATION OF CONFISCATIONS & PENALTIES
Demands of Excise Duty

• If duty is short paid or not paid or erroneously refunded, show cause notice can be
issued u/s 11A (1) of CEA within one year from ‘relevant date’.
• In case of allegation of suppression of facts, wilful misstatement, fraud or collusion,
the show cause notice can be issued within five years.
• Show cause notice is to be issued by authority who is empowered to adjudicate the
case.
• Adjudicating authority is required to follow principles of natural justice. He has to
pass orders with reasons
• In case of delay in payment of duty, interest @ 13% is payable u/s 11AB(1) of CEA.
• Property of person to whom show cause notice has been issued can be attached
provisionally during adjudication, to protect interest of revenue.
Section 33. Power of adjudication. -
Where under this Act or by the rules made thereunder anything is liable to confiscation or any
person is liable to a penalty, such confiscation or penalty may be adjudged -(a) without limit,
by a Principal Commissioner of Central Excise or Commissioner of Central Excise;
(b) up to confiscation of goods not exceeding five hundred rupees in value and imposition of
penalty not exceeding two hundred and fifty rupees, by an Assistant Commissioner of Central
Excise or Deputy Commissioner of Central Excise:
Provided that the Central Board of Excise and Customs constituted under the Central Boards
of Revenue Act, 1963 (54 of 1963), may, in the case of any officer performing the duties of an
Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, reduce
the limits indicated in Clause (b) of this section and may confer on any officer the powers
indicated in Clause (a) or (b) of this section.
Section 33A. Adjudication procedure. -
(1) The Adjudicating authority shall, in any proceeding under this Chapter or any other
provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party
so desires.
(2) The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding
referred to in sub-section (1), grant time, from time to time, to the parties or any of them and
adjourn the hearing for reasons to be recorded in writing:
Provided that no such adjournment shall be granted more than three times to a party during the
proceeding.
Section 34. Option to pay fine in lieu of confiscation. -
Whenever confiscation is adjudged under this Act or the rules made thereunder, the officer
adjudging it, shall give the owner of the goods an option to pay in lieu of confiscation such fine
as the officer thinks fit.

Section 34A. Confiscation or penalty not to interfere with other punishments. -

No confiscation made or penalty imposed under the provisions of the Act or of any rule made
thereunder shall prevent the infliction of any other punishment to which the person affected
thereby is liable under the provisions of this Act or under any other law.
APPEALS/ REMEDIES
Appeal is a remedy available to the aggrieved by the decision or order passed by the authority,
wherein the higher authority decides about the correctness of the said decision or order. It is
important to understand that if appeal is not preferred, the order passed even if it were incorrect
/ questionable would become final. The provisions for appeal are contained in Chapter VI A
of the Central Excise Act, 1944 and Central Excise (Appeals) Rules, 2001 (hereinafter be
referred to as ‘Appeal Rules’).
“The right to appeal is neither an absolute right nor an ingredient of natural justice the
principles of which must be followed in all judicial and quasi-judicial adjudications. The right
to appeal is a statutory right and it can be circumscribed by the conditions in the grant.” [Vijay
Prakash D. Mehta v. Collector of Customs 1989 (39) E.L.T. 178 (S.C.)]
Under Chapter VIA of the Central Excise Act, 1944 both assessee and department have been
conferred with a right of three stage remedies against the orders passed under Central Excise
Act and Rules. Briefly, it consists of three stages of appeal, two stages of revision and further
appeal to Supreme Court.
The three stages of Appellate Authorities are
(i) The Commissioner (Appeals),
(ii) The Customs Excise and Service Tax Appellate Tribunal (CESTAT) and
(iii) The High Court.
In case of orders passed by officers lower than the rank of Commissioner of Central Excise,
the first appeal lies to the Commissioner (Appeals) and there from to the Appellate Tribunal
and then to High Court and finally to the Supreme Court.
Where the order of the Tribunal does not relate to determination of rate of duty or value of
goods, an appeal is made to the High Court under sections 35G, instead of appeal to Supreme
Court.
In cases where the order-in-original is passed by a Commissioner of Central Excise, appeal lies
directly to the Appellate Tribunal. As per the provisions of section 35 read with sections 35B,
35G, 35H and 35L of the Central Excise Act, any person aggrieved by the order passed by the
Central Excise Officer, can file an appeal to the following authorities
1.) Appeals to Commissioner (Appeals) [Section 35]
All decisions and orders passed under the Central Excise Act or the rules made thereunder are
subject to two departmental appeals except in the case where the order-in-original is passed by
the Commissioner as an adjudicating authority when only one right of appeal to the Tribunal
is conferred. The First Appeal as per the provisions of section 35 of the Central Excise Act lies
to the Commissioner (Appeals) if the order or decision is of an officer lower in rank than the
Commissioner of Central Excise. Such an appeal can be filed within sixty days from the date

of the communication of decision/ order. This period can be extended by a further period of
thirty days by Commissioner (Appeals) on sufficient cause being shown.
Procedure in appeal [Section 35A]: The Commissioner (Appeals) shall give an opportunity
to the appellant to be heard, if he so desires. At the hearing of an appeal, Commissioner
(Appeals) may allow an appellant to go into any ground of appeal not specified in the grounds
of appeal, if he is satisfied that the omission of that ground from the grounds of appeal was not
wilful or unreasonable.
The Commissioner (Appeals) shall, after making such further inquiry as may be necessary,
pass such order, as he thinks just and proper, confirming, modifying or annulling the decision
or order appealed against. However, an order enhancing any penalty or fine in lieu of
confiscation or confiscating goods of greater value or reducing the amount of refund shall not
be passed unless the appellant has been given a reasonable opportunity of showing cause
against the proposed order. Further, where the Commissioner (Appeals) is of opinion that any
duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously
refunded, no order requiring the appellant to pay any duty not levied or paid, short-levied or
short-paid or erroneously refunded shall be passed unless the appellant is given notice within
the time-limit specified in section 11A to show cause against the proposed order.
The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall
state the points for determination, the decision thereon and the reasons for the decision. The
Commissioner (Appeals) shall, where it is possible to do so, hear and decide every appeal
within a period of six months from the date on which it is filed. On the disposal of the
appeal, the Commissioner (Appeals) shall communicate the order passed by him to the
appellant, the adjudicating authority, the Chief Commissioner of Central Excise and the
Commissioner of Central Excise.
2.) Appeals to Appellate Tribunal CESTAT:
In response to the long outstanding demand of trade and industry for establishing an
independent machinery to redress the grievances of the Excise and Customs assesses, the
Central Government set up the Customs, Excise and Gold Control Appellate Tribunal
(CEGAT) in the year 1982 to hear and dispose of appeals in Central Excise, Customs and Gold
Control matters. However, after scraping of Gold (Control) Act, 1962 and introduction of
service tax by the Finance Act, 1994, a need arose to enhance the Tribunal’s jurisdiction to
include/entertain appeals of cases relating to service tax, hence; it was renamed as Central
Excise Customs and Service Tax Appellate Tribunal (CESTAT). Now known by the name
The Customs Excise and Service Tax Appellate Tribunal (CESTAT)
The Benches of the Tribunal are composed of Judicial and Technical Members. Single member
Bench has the jurisdiction to hear appeals involving an amount of duty, fine or penalty not
exceeding Rs.50,00,000/-
Appeal to Appellate Tribunal [Section 35B]: The provisions in respect of appeals to the
Appellate Tribunal are summarized as under:
(1) Orders appealable to Appellate Tribunal: Any person aggrieved by any of the following
orders may appeal to the Appellate Tribunal against such order

(a) a decision or order passed by the Commissioner of Central Excise as an adjudicating

authority;
(b) an order passed by the Commissioner (Appeals) under section 35A;
Time limit for filing appeal: Every appeal under this section shall be filed within three
months from the date on which the order sought to be appealed against is communicated to the
Commissioner of Central Excise, or, as the case may be, the other party preferring the appeal.
Orders of Appellate Tribunal [Section 35C]: The Appellate Tribunal may, after giving the
parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit,
confirming, modifying or annulling the decision or order appealed against. The Tribunal may
even refer the case back to adjudicating authority for fresh adjudication
Time period for deciding the appeal and grant of stay: Every appeal shall be decided by
the Appellate Tribunal within a period of three years from the date on which such appeal is
filed, if it is possible to do so.
Monetary limits for filing of appeals by the Department: As per the National Litigation
Policy, in Revenue matters, appeal shall not be filed if the amount involved is less than the
monetary limit fixed by the Revenue authorities for the said purpose.
1. CESTAT Rs.5,00,000/-
2. High Courts Rs.10,00,000/-
3. Supreme Court Rs.25,00,000/-
Review by Committee of Chief Commissioners and Commissioner [Section 35E] Sections
35E of the Central Excise Act provides for review of orders of - (i) Commissioners of Central
Excise by Committee of Chief Commissioners of Central Excise (ii) adjudicating officers
below the rank of Commissioner by Commissioner of Central Excise. Section 35E gives
powers to Committee of Chief Commissioners of Central Excise or Commissioner of Central
Excise to pass certain orders
3.) Appeal to High Court [Section 35G]
Order appealable to High Court: An appeal shall lie to the High Court from every order
passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an
order relating, among other things, to the determination of any question having a relation to the
rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is
satisfied that the case involves a substantial question of law [Sub-section (1)].
Time period and fee for filing the appeal: The Commissioner of Central Excise or the other
party aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High
Court and such appeal shall be-
(a) filed within one hundred and eighty days from the date on which the order appealed against
is received by the Commissioner of Central Excise or the other party;
(b) accompanied by a fee of two hundred rupees where such appeal is filed by the other party;
(c) in the form of a memorandum of appeal precisely stating therein the substantial question
of law involved [Sub-section (2)].

Hearing of appeal: The appeal shall be heard only on the question so formulated, and the
respondents shall, at the hearing of the appeal, be allowed to argue that the case does not
involve such question. However, the Court has the power to hear, for reasons to be recorded,
the appeal on any other substantial question of law not formulated by it, if it is satisfied that
the case involves such question [Sub-section (4)].
Order of the High Court: The High Court shall decide the question of law so formulated and
deliver such judgment thereon containing the grounds on which such decision is founded and
may award such cost as it deems fit [Sub-section (5)]. The High Court may determine any issue
which has not been determined by the Appellate Tribunal or has been wrongly determined by
the Appellate Tribunal, by reason of a decision on a question of law [Sub-section (6)].
Decision by majority of the Judges: When an appeal has been filed before the High Court, it
shall be heard by a bench of not less than two Judges of the High Court, and shall be decided
in accordance with the opinion of such Judges or of the majority, if any, of such Judges
[Subsection (7)].
Appeal to Supreme Court [Section 35L]
The Central Excise Act, 1944, provides a two-tier machinery for redressal of grievances against
the decision of the Appellate Tribunal. In cases where the decision of the Appellate Tribunal
relates to any question having relation with the determination of ‘rate of duty’ or ‘value of
goods’ amongst other things, the same is directly appealable to the Supreme Court under
section 35L of the Central Excise Act. However, where the order of the Appellate Tribunal
does not relate to ‘rate of duty’ or ‘value of goods’, first an appeal is made to the High Court
and thereafter an appeal against the judgment of the High Court can be made to the Supreme
Court provided the High Court certifies it to be a fit case for appeal to the Supreme Court.
Orders appealable to Supreme Court: Section 35L provides that an appeal shall lie to the
Supreme Court from
(a) any judgment of the High Court delivered in an appeal made under section 35G if the High
Court certifies the case to be fit for appeal to the Supreme Court. The High Court can certify
any case on its own motion or on an oral application made by or on behalf of the aggrieved
party, immediately after passing of the judgement.
(b) any order of the Appellate Tribunal passed before the establishment of National Tax
Tribunal (NTT) having relation to the determination of rate of duty or value of goods, among
other things. After the establishment of the NTT, the appeal from any order of the Appellate
Tribunal having relation to the determination of rate of duty or value of goods, among other
things shall first lie to NTT.
POWERS AND DUTIES OF OFFICERS AND LANDHOLDERS
SECTION 12E. Powers of Central Excise Officers.
(1) A Central Excise Officer may exercise the powers and discharge the duties conferred or
imposed under this Act on any other Central Excise Officer who is subordinate to him.

(2) Notwithstanding anything contained in sub-section (1), the [Commissioner of Central

Excise (Appeals)] shall not exercise the powers and discharge the duties conferred or imposed
on a Central Excise Officer other than those specified in section 14 or Chapter VIA.]
SECTION 13. Power to arrest.
(1) Any Central Excise Officer not below the rank of Inspector of Central Excise may, with
prior approval of the Commissioner of Central Excise, arrest any person whom he has reason
to believe to be liable to punishment under this Act or the rules made thereunder.
SECTION 14. Power to summon persons to give evidence and produce documents in
inquiries under this Act.
(1) Any Central Excise Officer duly empowered by the Central Government in this behalf, shall
have power to summon any person whose attendance he considers necessary either to give
evidence or to produce a document or any other thing in any inquiry which such officer is
making for any of the purposes of this Act. A summons to produce documents or other things
may be for the production of certain specified documents or things or for the production of all
documents or things of a certain description in the possession or under the control of the person
summoned.
(2) All persons so summoned shall be bound to attend, either in person or by an authorised
agent, as such officer may direct; and all persons so summoned shall be bound to state the truth
upon any subject respecting which they are examined or make statements and to produce such
documents and other things as may be required :
Provided that the exemptions under Sections 132 and 133 of the Code of Civil Procedure, 1908
(5 of 1908) shall be applicable to requisitions for attendance under this section.
(3) Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the
meaning of Section 193 and Section 228 of the Indian Penal Code, 1860 (45 of 1860).
SECTION [14A. Special audit in certain cases.
(1) If at any stage of enquiry, investigation or any other proceedings before him, any Central
Excise Officer not below the rank of an [Assistant Commissioner of Central Excise, or Deputy
Commissioner of Central Excise] having regard to the nature and complexity of the case and
the interest of revenue, is of the opinion that the value has not been correctly declared or
determined by a manufacturer or any person, he may, with the previous approval of the Chief
Commissioner of Central Excise, direct such manufacturer or such person to get the accounts
of his factory, office, depots, distributors or any other place, as may be specified by the said
Central Excise Officer, audited by a cost accountant, nominated by the Chief Commissioner of
Central Excise in this behalf.
(2) The cost accountant, so nominated shall, within the period specified by the Central Excise
Officer, submit a report of such audit duly signed and certified by him to the said Central Excise
Officer mentioning therein such other particulars as may be specified :
Provided that the Central Excise Officer may, on an application made to him in this behalf by
the manufacturer or the person and for any material and sufficient reason, extend the said period

by such further period or periods as he thinks fit; so, however, that the aggregate of the period
originally fixed and the period or periods so extended shall not, in any case, exceed one hundred
and eighty days from the date on which the direction under sub-section (1) is received by the
manufacturer or the person.
(3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of
the manufacturer or person aforesaid have been audited under any other law for the time being
in force or otherwise.
[(4) * * * * ]
(5) The manufacturer or the person shall be given an opportunity of being heard in respect of
any material gathered on the basis of audit under sub-section (1) and proposed to be utilised in
any proceedings under this Act or rules made thereunder.
Explanation. - For the purpose of this section, cost accountant shall have the meaning assigned
to it in clause (b) of sub-section (1) of Section 2 of the Cost and Works Accountants Act, 1959
(23 of 1959).]
SECTION 15. Officers required to assist Central Excise Officers.

All officers of Police and Customs and all officers of Government engaged in the collection of
land revenue, and all village officers are hereby empowered and required to assist the Central
Excise Officers in the execution of this Act.
SECTION 18. Searches and arrests how to be made. All searches made under this Act or
any rules made thereunder and all arrests made under this Act shall be carried out in accordance
with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating respectively
to searches and arrests made under that Code.
SECTION 19. Disposal of persons arrested. Every person arrested under this Act shall be
forwarded without delay to the nearest Central Excise Officer empowered to send persons so
arrested to a Magistrate, or, if there is no such Central Excise Officer within a reasonable
distance, to the officer-in-charge of the nearest police station.
SECTION 20. Procedure to be followed by officer-in-charge of police station. The

officer-in-charge of a police station to whom any person is forwarded under section 19 shall
either admit him to bail to appear before the Magistrate having jurisdiction, or in default of bail
forward him in custody to such Magistrate.
SECTION 21. Inquiry how to be made by Central Excise Officers against arrested
persons forwarded to them under section 19. (1) When any person is forwarded under
section 19 to a Central Excise Officer empowered to send persons so arrested to a Magistrate,
the Central Excise Officer shall proceed to enquire into the charge against him.
(2) For this purpose the Central Excise Officer may exercise the same powers and shall be
subject to the same provisions as the officer-in-charge of a police station may exercise and is
subject to under the Code of Criminal Procedure, 1898 (5 of 1898), when investigating a
cognizable case :

Provided that
(a) if the Central Excise Officer is of opinion that there is sufficient evidence or reasonable
ground of suspicion against the accused person, he shall either admit him to bail to appear
before a Magistrate having jurisdiction in the case, or forward him in custody to such
Magistrate;
(b) if it appears to the Central Excise Officer that there is not sufficient evidence or
reasonable ground of suspicion against the accused person, he shall release the accused person
on his executing a bond, with or without sureties as the Central Excise Officer may direct, to
appear, if and when so required, before the Magistrate having jurisdiction, and shall make a
full report of all the particulars of the case to his official superior.
SECTION 22. Vexatious search, seizure, etc., by Central Excise Officer.
Any Central Excise or other officer exercising powers under this Act or under the rules made
thereunder who
(a) without reasonable ground of suspicion searches or causes to be searched any house, boat
or place;
(b) vexatiously and unnecessarily detains, searches or arrests any person;
(c) vexatiously and unnecessarily seizes the movable property of any person, on pretence of
seizing or searching for any article liable to confiscation under this Act;
(d) commits, as such officer, any other act to the injury of any person, without having reason
to believe that such act is required for the execution of his duty;
shall, for every such offence, be punishable with fine which may extend to two thousand rupees.
Any person wilfully and maliciously giving false information and so causing an arrest or a
search to be made under this Act shall be punishable with fine which may extend to two
thousand rupees or with imprisonment for a term which may extend to two years or with both.
SECTION 23. Failure of Central Excise Officer in duty. Any Central Excise Officer who
ceases or refuses to perform or withdraws himself from the duties of his office, unless he has
obtained the express written permission of the [Commissioner of Central Excise], or has given
to his superior officer two months’ notice in writing of his intention or has other lawful excuse,
shall on conviction before a Magistrate be punishable with imprisonment for a term which may
extend to three months, or with fine which may extend to three months’ pay, or with both.
PRESUMPTION AS TO DOCUMENTS [CHAPTER VIB]
SECTION 36A. Presumption as to documents in certain cases.
Where any document is produced by any person or has been seized from the custody or control
of any person, in either case, under this Act or under any other law and such document is
tendered by the prosecution in evidence against him or against him and any other person who
is tried jointly with him, the Court shall,

(a) unless the contrary is proved by such person, presume
(i) the truth of the contents of such document;

(ii) that the signature and every other part of such document which purports to be in the
handwriting of any particular person or which the Court may reasonably assume to have
been signed by, or to be in the handwriting of, any particular person, is in that persons
handwriting, and in the case of a document executed or attested, that it was executed or
attested by the person by whom it purports to have been so executed or attested;
(b) admit the document in evidence, notwithstanding that it is not duly stamped, if such
document is otherwise admissible in evidence.
SECTION 36B. Admissibility of micro films, facsimile copies of documents and

computer print outs as documents and as evidence.
(1) Notwithstanding anything contained in any other law for the time being in force,
a) a micro film of a document or the reproduction of the image or images embodied in

such micro film (whether enlarged or not); or
b) a facsimile copy of a document; or
c) a statement contained in a document and included in a printed material produced by a
computer (hereinafter referred to as a computer print out), if the conditions mentioned
in sub-section (2) and the other provisions contained in this section are satisfied in
relation to the statement and the computer in question,
shall be deemed to be also a document for the purposes of this Act and the rules made
thereunder and shall be admissible in any proceedings thereunder, without further proof or
production of the original, as evidence of any contents of the original or of any fact stated
therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the
following, namely:
a) the computer printout containing the statement was produced by the computer during
the period over which the computer was used regularly to store or process information
for the purposes of any activities regularly carried on over that period by the person
having lawful control over the use of the computer;
b) during the said period, there was regularly supplied to the computer in the ordinary
course of the said activities, information of the kind contained in the statement or of the
kind from which the information so contained is derived;
c) throughout the material part of the said period, the computer was operating properly or,
if not, then any respect in which it was not operating properly or was out of operation
during that part of that period was not such as to affect the production of the document
or the accuracy of the contents; and
d) the information contained in the statement reproduced or is derived from information
supplied to the computer in the ordinary course of the said activities.
(3) Where over any period, the function of storing or processing information for the purposes
of any activities regularly carried on over that period as mentioned in clause(a) of sub-section
(2) was regularly performed by computers, whether

a) by a combination of computers operating over that period; or

b) by different computers operating in succession over that period; or
c) by different combinations of computers operating in succession over that period; or
d) in any other manner involving the successive operation over that period, in whatever
order, of one or more computers and one or more combinations of computers,
all the computers used for that purpose during that period shall be treated for the purposes of
this section as constituting a single computer; and references in this section to a computer shall
be construed accordingly.
(4) In any proceedings under this Act and the rules made thereunder where it is desired to
give a statement in evidence by virtue of this section, a certificate doing any of the following
things, that is to say,
a) identifying the document containing the statement and describing the manner in which
it was produced;
b) giving such particulars of any device involved in the production of that document as
may be appropriate for the purpose of showing that the document was produced by a
computer;
c) dealing with any of the matters to which the conditions mentioned in sub-section (2)
relate,
and purporting to be signed by a person occupying a responsible official position in relation to

the operation of the relevant device or the management of the relevant activities (whichever is
appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of
this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and
belief of the person stating it.
(5) For the purposes of this section,
a) information shall be taken to be supplied to a computer if it is supplied thereto in any

appropriate form and whether it is so supplied directly or (with or without human
intervention) by means of any appropriate equipment;
b) whether in the course of activities carried on by any official, information is supplied
with a view to its being stored or processed for the purposes of those activities by a
computer operated otherwise than in the course of those activities, that information, if
duly supplied to that computer, shall be taken to be supplied to it in the course of those
activities;
c) a document shall be taken to have been produced by a computer whether it was
produced by it directly or (with or without human intervention) by means of any
appropriate equipment.
Explanation. For the purposes of this section, (a) computer means any device that receives,
stores and processes data, applying stipulated processes to the information and supplying
results of these processes; and (b) any reference to information being derived from other
information shall be a reference to its being derived therefrom by calculation, comparison or
any other process.

MODULE 3
Goods and Services Tax Law- Origin of The Concept – Constitutional Provisions- Federal
Structure and Attendant Issues. Justification For GST- Central GST- State GST- IGST Model
and Interstate Transactions GST: Substantive and Procedural Provisions, Special Reference to
Legislation For KERALA- Subsumation Of Central and State Taxes- Exemptions- Rate
Structure
GOODS AND SERVICES TAX LAW
GST is a comprehensive value added tax on goods and services. It is collected on value added
at each stage of sale and purchase in the supply chain without State boundaries. Goods and
Service Tax (GST) as the name suggest is a one single tax on the supply of goods and services,
right from the Manufacturing to the ultimate delivery to customer. Credits of input tax paid at
each stage will be available in the subsequent stage of value addition, which makes GST
essentially a tax only on value addition at each stage and thus avoiding cascading effect. The
final consumer will thus bear only the GST charged by the last dealer in the supply chain, with
set-off benefits at all the previous stages.
ORIGIN OF THE CONCEPT
Goods and Services Tax also known as the Value Added Tax (VAT) or Harmonized Sales Tax
(HST) was first devised by a German economist during the 18th century. He envisioned a sales
tax on goods that did not affect the cost of manufacture or distribution but was collected on the
final price charged to the consumer. The numbers of transactions are immaterial and the tax is
at a fixed percentage of the final price. The tax was finally adopted by France in 1954.
CONCEPT OF GST
(1) GST is a value added tax levied on manufacture, sale and consumption of goods and
services.
(2) GST offers comprehensive and continuous chain of tax credits from the producer's
point/service provider's point upto the retailer's level/consumer’s level thereby taxing only
the value added at each stage of supply chain.
(3) The supplier at each stage is permitted to avail credit of GST paid on the purchase of goods
and/or services and can set off this credit against the GST payable on the supply of goods
and services to be made by him. Thus, only the final consumer bears the GST charged
by the last supplier in the supply chain, with set-off benefits at all the previous stages.
(4) Since, only the value added at each stage is taxed under GST, there is no tax on tax or
cascading of taxes under GST system. GST does not differentiate between goods and
services and thus, the two are taxed at a single rate.

HISTORY OF GST IN INDIA
The origin of Goods and Services could be traced back to July 17, 2000, when the Government
of India set up the Empowered Committee of State Finance Ministers with the Hon’ble State
Finance Ministers of West Bengal, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Uttar
Pradesh, Gujarat, Delhi and Meghalaya as members with the following objectives:
(i) to monitor the implementation of uniform floor rates of sales tax by States and Union
Territories;
(ii) to monitor the phasing out of the sales-tax based incentive schemes; to decide
milestones and methods of States to switch over to VAT; and
(iii)to monitor reforms in the Central Sales Tax system existing in the country.
Subsequently, Hon’ble State Finance Ministers of Assam, Tamil Nadu, Jammu & Kashmir,
Jharkhand and Rajasthan were also notified as the members of the Empowered Committee. On
August 12, 2004, the Government of India decided to reconstitute the Empowered Committee

with all the Hon’ble State Finance/Taxation Ministers as its members. Later on, it was decided
to register the body as a Society under the Societies Registration Act, 1860. GST has been in
the pipeline for a long time, for its passage and implementation.
Here is a brief flash back mentioning the key milestones of the journey of GST in India:
1.) Amaresh Baghchi Report, 1994 suggests that the introduction of “Value Added Tax
(VAT) ‘will act as root for implementation of Goods and Services Tax in India
2.) Ashim Dasgupta, 2000 empowered committee, which introduces VAT System in 2005,
which has replaced old age taxation system in India.
3.) Vijay Kelkar Task Force 2004, it strongly recommended that the integration of indirect
taxes into the form of GST in India.
4.) February, 2007: An announcement was made by the then Hon’ble Union Finance Minister
in the Central Budget (2007- 08) to the effect that GST to be implemented by 1st April,
2010 after successfully implementation of VAT system in India and suggestion of various
committees and task forces on GST, the Union Government first time in Union Budget 2006-
07 announced that the GST would be applicable from 1st April, 2010.
5.) September, 2009: The government has formed various Joint Working Groups of state
finance ministers to study the impact of GST on the revenue of various States.
6.) The empowered committees of State Finance Ministers after various meetings reached
on amicable formula for implementation of GST in India.
7.) Task force of Finance Ministers has submitted their report in December, 2009 on structure
of GST in India.
8.) November, 2009: Government of India has issued first discussion paper in November,
2009.
9.) March, 2011: Constitution (115th Amendment) Bill introduced on 22nd March, 2011 and
same was referred to Parliamentary Standing Committee on Finance for discussion.
The Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 to give concurrent taxing
powers to the Union and States was introduced in Lok Sabha. The Bill suggested the creation
of Goods and Services Tax Council and a Goods and Services Tax Dispute Settlement
Authority. The Bill was lapsed in 2014 and was replaced with the Constitution (122nd
Amendment) Bill, 2014.
10.) November, 2012: A “Committee on GST Design”, consisting of the officials of the
Government of India, State Governments and Empowered Committee (EC) was constituted.
11.) March, 2013: A not for profit, non-Government, private limited company was
incorporated in the name of Goods and Services Tax Network (GSTN) as special purpose
vehicle setup by the Government primarily to provide IT infrastructure and services to the
Central and State Government(s), tax payers and other stakeholders for implementation of the
Goods and Services Tax (GST).
12.) August, 2013: The Parliamentary Standing Committee submitted its Report to the Lok
Sabha. The recommendations of the Empowered Committee (EC) and the recommendations of

the Parliamentary Standing Committee were examined by the Ministry in consultation with the
Legislative Department. Most of the recommendations made by the Empowered Committee
and the Parliamentary Standing Committee were accepted and the Draft Amendment Bill was
suitably revised.
13.) June, 2014: The draft Constitution Amendment Bill in March, 2014 was sent to the
Empowered Committee after approval of the new Government.
14.) December, 2014: The Constitution (One Hundred and Twenty-Second Amendment) Bill,
2014 seeking to amend the Constitution to introduce the Goods and Services Tax (GST) and
subsume state Value Added Tax, octroi and entry tax, luxury tax, etc. was introduced in the
Lok Sabha on December 19, 2014 by the Hon’ble Minister of Finance, Mr. Arun Jaitley.
15.) May, 2015: Constitution Amendment (122nd) Bill was passed by Lok Sabha on May 06,
2015. In Rajya Sabha, Bill was referred to a 21-member Select Committee of Rajya Sabha.
16.) July, 2015: Select Committee submitted its report to Rajya Sabha on July 22, 2015.
17.) June, 2016: On June 14, 2016, the Ministry of Finance released draft model law on GST
in public domain for views and suggestion.
18.) August, 2016: On August 03, 2016, the Constitution (122ndAmendment) Bill, 2014 was
passed by Rajya Sabha with certain amendments.The changes made by Rajya Sabha were
unanimously passed by Lok Sabha, on August 08, 2016.
19.) September, 2016: The Bill was adopted by majority of State Legislatures wherein
approval of at least 50%of the State Assemblies was required. Final assent of Hon’ble President
of India was given on 8th September,2016
20.) In March 2017: GST Council finalizing the GST Rules and GST Rates
21.) April, 2017: Parliament passed the following four bills:
➢ Central Goods and Services Tax (CGST)Bill
➢ Integrated Goods and Services Tax (IGST) Bill
➢ Union Territory Goods and Services Tax (UTGST)Bill
➢ Goods and Services Tax (Compensation to States) Bill
President’s assent was given to four key legislations on Goods and Services tax.
22.) May 2017: GST Council recommends all the rules
23.) 30th June 2017 – All States except J&K passed their SGST ACT
24.) 1st July 2017 – GST Launched
25.) 8th July 2017 – SGST Act passed by J&K; CGST and IGST Ordinances
promulgated to extend GST to J&K
26.) 29th August 2018 – Amendments to CGST, IGST, UTGST and Compensation
to State Acts enacted.
27.) Journey Continues.

NEED FOR GST IN INDIA
(1) In the earlier indirect tax regime, a manufacturer of excisable goods charged excise duty
and value added tax (VAT) on intra-State sale of goods. However, the VAT dealer on his
subsequent intra-State sale of goods charged VAT (as per prevalent VAT rate as applicable in
the respective State) on value comprising of (basic value + excise duty charged by
manufacturer + profit by dealer). Further, in respect of tax on services, service tax was payable
on all ‘services’ other than the Negative list of services or otherwise exempted.
(2) The earlier indirect tax framework in India suffered from various shortcomings. Under the
earlier indirect tax structure, the various indirect taxes being levied were not necessarily
mutually exclusive. To illustrate, when the goods were manufactured and sold, both central
excise duty (CENVAT) and State-Level VAT were levied. Though CENVAT and State-Level
VAT were essentially value added taxes, set off of one against the credit of another was not
possible as CENVAT was a central levy and State-Level VAT was a State levy.
(3) Moreover, CENVAT was applicable only at manufacturing level and not at distribution
levels. The erstwhile sales tax regime in India was a combination of origin based (Central Sales
Tax) and destination based multipoint system of taxation (State-Level VAT). Service tax was
also a value added tax and credit across the service tax and the central excise duty was
integrated at the central level.
(4) Despite the introduction of the principle of taxation of value added in India - at the Central
level in the form of CENVAT and at the State level in the form of State VAT - its application
remained piecemeal and fragmented on account of the following reasons:
a) Non-inclusion of several local levies in State VAT such as luxury tax, entertainment
tax, etc.
b) Cascading of taxes on account of (i) levy of Non-VATable CST and (ii) inclusion of
CENVAT in the value for imposing VAT
c) No CENVAT after manufacturing stage
d) Non-integration of VAT & service tax
e) Double taxation of a transaction as both goods and services
(5) A comprehensive tax structure covering both goods and services viz. Goods and Service
Tax (GST) addresses these problems. Simultaneous introduction of GST at both Centre and
State levels has integrated taxes on goods and services for the purpose of set-off relief and
ensures that both the cascading effects of CENVAT and service tax are removed and a
continuous chain of set-off from the original producer’s point/ service provider’s point upto
the retailer’s level/ consumer’s level is established.
(6) In the GST regime, the major indirect taxes have been subsumed in the ambit of GST. The
erstwhile concepts of manufacture or sale of goods or rendering of services are no longer
applicable since the tax is now levied on “Supply of Goods and/or services.
BENEFITS OF GST
GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of
industry, Government and the consumer. It will lower the cost of goods and services, give a
boost to the economy and make the products and services globally competitive. The significant
benefits of GST are discussed hereunder:

1. Creation of unified national market: GST aims to make India a common market with
common tax rates and procedures and remove the economic barriers thus paving the way
for an integrated economy at the national level.
2. Mitigation of ill effects of cascading: By subsuming most of the Central and State taxes
into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the
entire value chain, it would mitigate the ill effects of cascading, improve competitiveness
and improve liquidity of the businesses.
3. Elimination of multiple taxes and double taxation: GST has subsumed majority of
existing indirect tax levies both at Central and State level into one tax i.e., GST which is
leviable uniformly on goods and services. This will make doing business easier and will also
tackle the highly disputed issues relating to double taxation of a transaction as both goods
and services.
4. Boost to ‘Make in India' initiative: GST will give a major boost to the ‘Make in India'
initiative of the Government of India by making goods and services produced in India
competitive in the national as well as international market.
5. Buoyancy to the Government Revenue: GST is expected to bring buoyancy to the
Government Revenue by widening the tax base and improving the taxpayer compliance.
CONSTITUTIONAL PROVISIONS
India has a three-tier federal structure, comprising the Union Government, the State
Governments and the Local Government. The power to levy taxes and duties is distributed
among the three tiers of Governments, in accordance with the provisions of the Indian
Constitution. Power to levy and collect taxes whether, direct or indirect emerges from the
Constitution of India. The significant provisions of the Constitution relating to taxation are:
I. Article 265: Article 265 of the Constitution of India prohibits arbitrary collection of tax. It
states that “no tax shall be levied or collected except by authority of law”. The term “authority
of law” means that tax proposed to be levied must be within the legislative competence of the
Legislature imposing the tax.
II. Article 245: Part XI of the Constitution deals with relationship between the Union and
States. The power for enacting the laws is conferred on the Parliament and on the Legislature
of a State by Article 245 of the Constitution. The said Article provides as under:
➢ Subject to the provisions of this Constitution, Parliament may make laws for the whole
or any part of the territory of India, and the legislature of a State may make laws for the
whole or any part of the State.
➢ No law made by the Parliament shall be deemed to be invalid on the ground that it
would have extra-territorial operation.
III. Article 246: It gives the respective authority to Union and State Governments for levying
tax. Whereas Parliament may make laws for the whole of India or any part of the territory of
India, the State Legislature may make laws for whole or part of the State.
IV. Seventh Schedule to Article 246: It contains three lists which enumerate the matters under
which the Union and the State Governments have the authority to make laws.
Entries 82 to 91 of List I enumerate the subjects where the Central Government has power to
levy taxes. Entries 45 to 63 of List II enumerate the subjects where the State Governments have

the power to levy taxes. Parliament has a further power to make any law for any part of India
not comprised in a State even if such matter is included in the State List.
Income tax is levied by virtue of Entry 82 - Taxes on income other than agricultural income
and customs duty vide Entry 83 - Duties of customs including export duties of the Union List.
Power to levy Goods and Services Tax (GST) has been conferred by Article 246A of the
Constitution which was introduced by the Constitution (101st Amendment) Act, 2016. Before
discussing the significant provisions of the Constitution (101st Amendment) Act, 2016, let us
first understand why there arose a need for such constitutional amendment.
Need for constitutional amendment
The Constitutional provisions hitherto had delineated separate powers for the Centre and the
States to impose various taxes. Whereas the Centre levied excise duty on all goods produced
or manufactured in India, the States levied Value Added Tax once the goods entered the stream
of trade upon completion of manufacture.
In the case of inter-State sales, the Centre had the power to levy a tax (the Central Sales Tax),
but the tax was collected and retained entirely by the States. Services were exclusively taxed
by the Centre together with applicable cesses, if any. Besides, there were State specific levies
like entry tax, Octroi, luxury tax, entertainment tax, lottery and betting tax, local taxes levied
by Panchayats etc.
With respect to goods imported from outside the country into India, Centre levied basic
customs duty and additional duties of customs together with applicable cesses, if any.
Introduction of the GST required amendment in the Constitution so as to enable integration of
the central excise duty including additional duties of customs, State VAT and certain State
specific taxes and service tax levied by the Centre into a comprehensive Goods and Services
Tax and to empower both Centre and the States to levy and collect it.
Consequently, Constitution (101st Amendment Act), 2016 (hereinafter referred to as CAA)
was passed. It has 20 sections. Newly inserted Article 279A empowering President to constitute
GST Council was notified on 12.09.2016. Remaining provisions were notified with effect from
16.09.2016.
CAA also provides for compensation to States for loss of revenue on account of introduction
of goods and services tax. Parliament shall, by law, on the recommendation of the Goods and
Services Tax Council, provide for compensation to the States for loss of revenue arising on
account of implementation of the goods and services tax for a period of five years.
The concept of ‘declared goods of special importance’ under the Constitution is done away
with. Presently, certain restrictions are placed on the powers of States in regard to tax on such
goods.  Transitional provisions to take care of any inconsistency with respect to any law
relating to tax on goods or services or both, in force in any State. Such tax to continue to be in
force until amended or repealed or until expiration of one year from commencement of GST,
whichever is earlier.

KEY CHANGES IN DETAIL
Significant amendments made by Constitution Amendment Act are discussed below in detail:
(1) Article 246A: Power to make laws with respect to Goods and Services Tax:
This article grants power to Centre and State Governments to make laws with respect to GST
imposed by Centre or such State. Centre has the exclusive power to make laws with respect to
GST in case of inter-State supply of goods and/or services.
However, in respect to the following goods, the aforesaid provisions shall apply from the date
recommended by the GST Council:
The provisions of Article 246A are notwithstanding anything contained in Articles 246 and
254. Article 254 deals with the supremacy of the laws made by Parliament.
(2) Article 248 amended: Residuary powers of legislation amended
Article 248 grants the residuary powers to Parliament to make laws with respect to any matter
not enumerated in the Concurrent List or State List. Such power shall include the power of
making any law imposing a tax not mentioned in either of those Lists.
This article has been amended. Now, this power has been subjected to Article 246A, namely
the power to make laws with respect to goods and service tax to be imposed by the Centre and
States.
(3) Power of Parliament to legislate with respect to a matter in the State List, in the
national interest/in case of emergency, extended to GST provided under Article 246A
Article 249 grants the Parliament the power to make laws with respect to a matter in the State
list in national interest in a case where the Council of States has declared by resolution
supported by not less than two-thirds of the members present and voting on any matter
enumerated in the State List.
Similarly, Article 250 grants the Parliament the power to make laws with respect to any of the
matters enumerated in the State List if a proclamation of Emergency is in operation.
Articles 249 and 250 have been amended to grant power to Parliament to make laws with
respect to the Goods and Services Tax provided under Article 246A also along with the matters
in the State list, in the national interest/in case of emergency.
(4) Article 268: Duties levied by the Centre but collected and appropriated by the States
Article 268 pertains to the duties levied by the Centre but collected and appropriated by the
States. It stipulates that such stamp duties and such duties of excise on medicinal and toilet
preparations as are mentioned in the Union List shall be levied by the Government of India but
shall be collected in the case where such duties are leviable within any Union territory, by the

Government of India, and in other cases, by the States within which such duties are respectively
leviable.
The CAA omits “and such duties of excise on medicinal and toilet preparations” from Article
268.
Duties of excise on medicinal and toilet preparations have been subsumed into the goods and
service tax to be levied by the Centre and States.
(5) Article 268A: Article 268A empowering Union to levy service tax omitted
Service tax was levied in 1994 under the residual Entry 97 of the Union list. Article 268A was
inserted by the Constitution (88th) Amendment Act, 2003 to usher in service tax under a
separate entry 92C in the Union List. However, it was not notified ever since. This article has
been omitted by the CAA.
(6) Article 269A: Levy and collection of GST on inter-State supply
Article 269A stipulates that GST on supplies in the course of inter-State trade or commerce
shall be levied and collected by the Government of India and such tax shall be apportioned
between the Union and the States in the manner as may be provided by Parliament by law on
the recommendations of the Goods and Services Tax Council.
Further, import of goods or services or both into India will also be deemed to be supply of
goods and/ or services in the course of Inter-State trade or Commerce. This will give power to
Central Government to levy IGST on the import transactions which were earlier subject to
Countervailing duties under the Customs Tariff Act, 1975.
Where an amount collected as IGST has been used for payment of SGST or vice versa, such
amount shall not form part of the Consolidated Fund of India. This is to facilitate transfer of
funds between the Centre and the States.
Parliament is empowered to formulate the principles regarding place of supply and when
supply of goods, or of services, or both occurs in Inter-State trade or commerce.
(7) Article 270: Distribution of the goods and services tax (GST) between the Centre and
the States
Article 270 is amended to provide for distribution of the goods and services tax between the
Centre and the States, by order of the President after considering recommendations of the
Finance Commission.
This applies for those tax amounts apportioned or payable to the Central Government for taxes
levied by it under articles 246A(1) and (2) and Clause (1) of 269A.
(8) Article 271 amended
Article 271 empowers Parliament to increase any of the duties, or taxes referred to in articles
269 or 270. It further provides that such surcharge is not shareable and remains with the Centre.
Now this article is amended to exclude GST from its purview.
(9) Definitions of ‘Goods and Services Tax’, ‘Services’ and ‘State’ incorporated under
Article 366

The terms Goods and Services Tax, services and State have been defined under respective
clauses of Article 366 as follows:
Goods and services tax (Article 366(12A)) means any tax on supply of goods, or services or
both except taxes on the supply of the alcoholic liquor for human consumption. Consequently,
GST can be levied on supply of all goods and services except alcoholic liquor for human
consumption.
Services (Article 366(26A)) means anything other than goods.
State (Article 366(26B)), with reference to articles 246A, 268, 269, 269A and article 279A,
includes a Union territory with Legislature. Definition of “goods”:
The term goods has already been defined under clause (12) of Article 366 in an inclusive
manner to provide that “goods includes all materials, commodities, and articles”
(10) Article 286: Article 286 imposing restrictions as to imposition of tax on the sale or
purchase of goods amended
Article 286 which restrains the States from framing laws for imposition of any tax on the sale
or purchase of goods where such sale or purchase takes place outside the State or in course of
the import of the goods into, or export of the goods out of, the territory of India.
This article has been amended to incorporate the changes arising out of GST by substituting
the words “sale or purchase” with “supply” and words “goods” with “goods or services or
both”.
Consequently, States have no right to impose GST on inter-State supply of goods or services
or both. It will be levied by Union Government under Article 269A as mentioned earlier.
Further, clause (3) of Article 286 which stipulates that any law of a State shall, in so far as it
imposes, or authorises the imposition, of a tax on the sale or purchase of goods declared by
Parliament by law to be of special importance in inter-State trade or commerce, be subjected
to such restrictions and conditions in regard to the system of levy, rates and other incidents of
the tax, as Parliament may, by law, specify, has been omitted.
(11) GST Council: Article 279A
Article 279A of the Constitution empowers the President to constitute a joint forum of the
Centre and States namely, Goods & Services Tax Council (GST Council).
The provisions relating to GST Council came into force on 12th September, 2016. President
constituted the GST Council on 15th September, 2016.
The GST Council shall consist of the following members, namely: —
(a) the Union Finance Minister is the Chairperson;
(b) the Union Minister of State in charge of Revenue or Finance is the Member;
(c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State
Government are the Members.

The Members of the GST Council referred to clause (c) above shall, as soon as may be, choose
one amongst themselves to be the Vice Chairperson of the Council for such period as they may
decide.
The Union Cabinet in its meeting held on 12th September, 2016 approved setting-up of GST
Council and setting up its Secretariat. The Cabinet inter alia took decisions for the following:
➢ Creation of the GST Council as per Article 279A of the amended Constitution;
➢ Creation of the GST Council Secretariat, with its office at New Delhi;
➢ Appointment of the Secretary (Revenue) as the Ex-Officio Secretary to the GST
Council;
➢ Inclusion of the Chairperson, Central Board of Indirect Taxes and Customs (CBIC), as
a permanent invitee (non-voting) to all proceedings of the GST Council;
➢ Create one post of Additional Secretary to the GST Council in the GST Council
Secretariat (at the level of Additional Secretary to the Government of India), and four
posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary
to the Government of India).
The GST Council shall make recommendations to the Union and the States on—
(a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies
which may be subsumed in the goods and services tax;
(b) the goods and services that may be subjected to, or exempted from the goods and
services tax;
(c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and
Services Tax levied on supplies in the course of inter-State trade or commerce under
article 269A and the principles that govern the place of supply;
(d) the threshold limit of turnover below which goods and services may be exempted from
goods and services tax;
(e) the rates including floor rates with bands of goods and services tax;
(f) any special rate or rates for a specified period, to raise additional resources during any
natural calamity or disaster;
(g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand [Such States are referred as Special Category States]; and
(h) any other matter relating to the goods and services tax, as the Council may decide.
The GST Council shall recommend the date on which the goods and services tax be levied on
petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and
aviation turbine fuel.
While discharging the functions conferred by this article, the GST Council shall be guided by
the need for a harmonised structure of goods and services tax and for the development of a
harmonised national market for goods and services.
One-half of the total number of Members of the GST Council shall constitute the quorum at its
meetings.
The GST Council shall determine the procedure in the performance of its functions.

Every decision of the GST Council shall be taken at a meeting, by a majority of not less than
three-fourths of the weighted votes of the members present and voting, in accordance with
the following principles, namely:
a) the vote of the Central Government shall have a weightage of one-third of the total
votes cast, and
(a) (b) the votes of all the State Governments taken together shall have a weightage of two-
thirds of the total votes cast, in that meeting.
No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason
of—
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a Member of the Council; or
(c) any procedural irregularity of the Council not affecting the merits of the case.
The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute
(a) between the Government of India and one or more States; or
(b) between the Government of India and any State or States on one side and one or more
other States on the other side; or
(c) (c) between two or more States, arising out of the recommendations of the Council or
implementation thereof.
(12) Article 368 amended
Article 368 has been amended to include Article 279A also within its purview. Consequently,
at least two-thirds of the majority in each House of the Parliament and ratification by at least
half of the States is specifically required to make any amendment in Article 279A relating to
GST Council.
GST & CENTRE-STATE FINANCIAL RELATIONS
Currently, fiscal powers between the Centre and the States are clearly demarcated in the
Constitution with almost no overlap between the respective domains. The Centre has the
powers to levy tax on the manufacture of goods (except alcoholic liquor for human
consumption, opium, narcotics etc.) while the States have the powers to levy tax on sale of
goods. In case of inter-states sales, the Centre has the powers to levy a tax (the Central Sales
Tax) but, the tax is collected and retained entirely by the originating States. As for services, it
is the Centre alone that is empowered to levy Service Tax. Since the States are not empowered
to levy any tax on the sale or purchase of goods in the course of their importation into or
exportations from India, the Centre levies and collects this tax in addition to the Basic Customs
Duty. This additional duty of customs (commonly known as CVD and SAD) counterbalance
excise duty, sales tax, State VAT and other taxes levied on the like domestic product.
Introduction of GST required amendments in the Constitution so as to empower the Centre and
the States concurrently to levy and collect GST.
The assignment of concurrent jurisdiction to the Centre and the States for the levy of GST
required a unique institutional mechanism that would ensure that decisions about the structure,
design and operation of GST are taken jointly by the two. To address all these and other issues,
the Constitution (122nd Amendment) Bill was introduced in the 16th Lok Sabha on

19.12.2014. The Bill provides for a levy of GST on supply of all goods or services except
alcohol for human consumption. The tax shall be levied as Dual GST separately, but
concurrently the Union (CGST) and the States (SGST). The Parliament would have exclusive
power to levy GST (IGST) on interstate trade or commerce (including imports) in goods and
services. The Central Government will have the power to levy excise duty in addition to GST,
on tobacco and tobacco products.
The constitution Amendment Bill was passed by the Lok Sabha in May, 2015. The Bill with
certain amendments was finally passed in the Rajya Sabha and thereafter by the Lok Sabha in
August, 2016. Further, the Bill has been ratified by the required number of States and has since
received the assent of the President on 8th September,2016 and has been enacted as the 101st
Constitution Amendment Act, 2016. The GST Council has also been notified w.e.f. 12th
September,2016. GST Council is being assisted by a Secretariat.
The Goods and Service Tax Council (hereinafter referred to as, “GSTC”) comprises of the
Union Finance Minister, the Minister of State (Revenue) and the State Finance Ministers to
recommend on the GST rate, exemption and thresholds, taxes to be subsumed and other
matters. One-half of the total number of members of GSTC form quorum in meetings of GSTC.
Decision in GSTC are taken by a majority of not less than three-fourth of weighted votes cast.
Centre has one-third weightage of the total votes cast and all the states taken together have two-
third of weightage of the total votes cast.
All decisions taken by the GST Council has been arrived at through consensus. The option of
exercising a vote has not been resorted to till date.
To ensure smooth roll-out of the GST, various Committees and Sectoral groups has been
formed comprising of members from both Centre and States.
FEDERAL STRUCTURE AND ATTENDANT ISSUES
Federalism in its simplest and most basic form means the setting up of government at multiple
tiers and primarily at two tiers in most federal states. Thus, it envisages an idea of
decentralisation of government. Compared to a unitary form of government where the
government is at a single level and where there is centralisation of power, in a federal state
there is a clear demarcation of powers between the federal national unit and the sub-national
state units.
Division of powers between the federation and the units where they are given ordinate and
equal status within their respective fields is known as co-ordinate federalism. The next where
the units and the federation do not compete for power but co-operate through various
instrumentalities to promote the common purpose is known as “co-operative federalism.” The
present stage in India can be described as “organic federalism” where the federation and the
units function as a part of one organism to achieve the common governmental purposes. What
is, therefore discernible is that the Indian federalism in its working has moved away from the
theoretical framework of co-operative federalism towards an organic federalism to be placed
towards unitary end of the federal spectrum.
A challenge before most federal states including India is to ensure that the financial relations
between the Centre and the state units should not result is a fiscal imbalance. Fiscal imbalances
in India result due to the mismatching of revenue and expenditure of the State units. Due to a

strong unitary control the Centre is able to command greater share in the public funds and hence
it leads to a vertical fiscal imbalance Usually the states lack funds in proportion to the
responsibilities entrusted to them to discharge the same. Thus the states have to rely heavily
upon the Centre for aids, grants and revenue sharing.
The key note of the Indian constitution is to secure an almost complete demarcation and
dichotomy between the taxing powers of the Centre and the states so that a tax leviable by the
Centre is not leviable by the state. The inter-governmental tax immunities are provided for in
articles 285,287,288 and 289 of the Indian Constitution.
The Goods and Services Tax (GST) is the most significant reform since liberalisation
commenced in 1991, and envisages, " a one Economic India" which is expected to lead to a
more efficient and productive economy. It might lead to several macroeconomic gains also.
The passing of the Hundred and One Constitutional Amendment Act, 2016 which has paved
the way for GST regime in India, has been a spectacular example of parliamentary democracy
in India. Ruling or opposition, both political parties have contributed to it. GST council is also
a good example of mutual cooperation among Centre and States irrespective of party
affiliations. Till now, it does not appear that with the advent of GST Act in India, the concept
of cooperative federalism has been dented even to a minimum. Hopefully, it will be
implemented in the same spirit. Moreover, GST roll out could be a template for the future of
cooperative federalism. It can also serve as a template for reforming other such institutions of
cooperative federalism, starting with the interstate council. Like political integration, the GST
regime may well prove to be a harbinger of "One Economic Nation" that is a cherished goad
of our Country.
GST MODELS
Australian Model: In Australia, GST is a federal tax collected by the Centre and distributed
to the states. But India is a heterogeneous country and there is no chance that states may allow
the Centre to collect all the taxes while they become just spending institutions.
Canadian Model: The GST in Canada is dual between the Centre and the states and has three
varieties:  Federal GST and provincial retail sales taxes (PST) administered separately
followed by the largest majority;  Joint federal and provincial VATs administered federally
(Harmonious Sales Tax-HST); and  Separate federal and provincial VAT administered
provincially (QST) - only for Quebec as it is a breakaway province.
Kelkar-Shah Model: This model of a unified GST model which is based on a grand bargain
to merge central excise, service tax and state VAT into one common base. Two different rates
of tax are to be levied by the Centre and the states. The collection may be by the Centre. This
is like the HST model in Canada.
Bagchi-Poddar Model: This model, just like Kelker-Shahs, envisages a combination of
central excise, service tax and VAT to make it a common base of GST to be levied both by the
Centre and the states separately. This means that the Central Excise Act 1944 may be abolished
and the goods tax may be only on the sale of goods. It may merge in the service tax.
In India, a dual GST is being proposed wherein a Central Goods and Services Tax (CGST) and
a State Goods and Services Tax (SGST) will be levied on the taxable value of a transaction.

The Centre and the State will each legislate, levy and administer the Centre and State GST
separately.
Since GST subsumed indirect taxes of both central government (excise duty, service tax,
custom duty, etc.) and state governments (VAT, Luxury tax, etc.), both the governments now
depend on GST for their indirect tax revenue. Therefore, the GST rate is composed of two
rates. Intra-state transactions will carry one of CGST and one of SGST (in case of state) or
CGST and UTGST (in case of union territory). Therefore, while making an intra-state sale (i.e.,
sale within the same state), the CGST collected will go to the central government and the SGST
collected will go the respective state government in which sale is made. Similarly, SGST or
UTGST are replaced with IGST when intra-state transactions are involved.
Hence, you can say that there are four types of GST:
• Central Goods and Services Tax
• State Goods and Services Tax
• Integrated Goods and Services Tax
• Union Territory Goods and Services Tax
What is CGST?
CGST full form is Central Goods and Services Tax.
CGST refers to the Central GST tax that is levied by the Central Government of India on any
transaction of goods and services tax taking place within a state. It is one of the two taxes
charged on every intrastate (within one state) transaction, the other one being SGST (or UTGST
for Union Territories). CGST replaces all the existing Central taxes including Service Tax,
Central Excise Duty, CST, Customs Duty, SAD, etc. The rate of CGST is usually equal to the
SGST rate. Both taxes are charged on the base price of the product. See the example below to
understand it better.
e.g. – In the example above, when Suresh sales a product to Pradeep in the same state
(Rajasthan), he has to pay two taxes. CGST is for the central government while SGST is for
the state. The rate of CGST is 9%, same as SGST. After the application of CGST (9% of Rs
10,000), the final cost of the product will become Rs 11,800.
As you can probably guess, all the taxes in all the conditions above are borne by the end
consumer in the final cost, not by the manufacturer or the dealer of the product or service. Since
GST is levied on consumption, the state where the product is originally manufactured is not
entitled to the tax collected. If the manufacturing state levies a tax, the same will be transferred
to the consuming state through the Central government.
What is SGST?
SGST full form is State Goods and Services Tax.
SGST (State GST) is one of the two taxes levied on every intrastate (within one state)
transaction of goods and services. The other one is CGST. SGST is levied by the state where
the goods are being sold/purchased. It will replace all the existing state taxes including VAT,
State Sales Tax, Entertainment Tax, Luxury Tax, Entry Tax, State Cesses and Surcharges on
any kind of transaction involving goods and services. The State Government is the sole claimer
of the revenue earned under SGST. Let’s understand this with an example.

e.g. – Suresh from Rajasthan wants to sell some goods to Pradeep in Rajasthan. The product,
originally priced at Rs 10,000, will attract GST at 18% rate comprising of 9% CGST rate and
9% SGST rate. The SGST tax amount here is Rs 900 (9% of Rs 10,000) which is fully claimed
by the Rajasthan State Government. The rate of the product after SGST will be Rs 10,900.
What is IGST?
IGST full form is Integrated Goods and Services Tax.
Integrated GST (IGST) is applicable on interstate (between two states) transactions of goods
and services, as well as on imports. This tax will be collected by the Central government and
will further be distributed among the respective states. IGST is charged when a product or
service is moved from one state to another. IGST is in place to ensure that a state has to deal
only with the Union government and not with every state separately to settle the interstate tax
amounts. Let’s try to understand IGST with an example.
e.g., – Ramesh is a manufacturer in Rajasthan who sold goods worth Rs 10,000 to Suresh in
Rajasthan. Since it is an interstate transaction, IGST will be applicable here. Let’s assume the
GST rate is 18% for the particular item. So, the IGST amount charged by the Central
Government will be Rs 1800 (18% of Rs 10,000), and the refined rate of the product will be
Rs 11,800.
Now, GST is a consumption tax that means only the state where the goods are actually
consumed will get the tax benefits, irrespective of the manufacturing state.
What is UTGST (or UGST)?
UTGST full form is Union Territory Goods and Services Tax.
The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the GST
applicable on the goods and services supply that takes place in any of the five Union Territories
of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh,
Lakshadweep and Daman and Diu. This UTGST will be charged in addition to the Central GST
(CGST) explained above. For any transaction of goods/services within a Union Territory:
CGST + UTGST
The reason why a separate GST was implemented for the Union Territories is that the common
State GST (SGST) cannot be applied in a Union Territory without legislature. Delhi and
Puducherry UTs already have their own legislatures, so SGST is applicable to them.
Types of CGST SGST IGST UGST/UTGST

Differences
Applicable Intrastate Intrastate Inter-state Within one
transactions (Within one (Within one (between two Union Territory
state) state) states or one (UT)
state and one
UT) and imports
Collected by Central Govt. State Govt. Central Govt. UT Govt.
Benefitting Central Govt. State Govt. Central Govt. & UT Govt.
Authority State Govt.

Tax Credit Use CGST SGST IGST UTGST

Priority IGST IGST CGST IGST
SGST
SUBSUMMATION OF CENTRAL & STATE TAXES

EXEMPTIONS UNDER GST
What is Exempt Supply?

Exempt supplies comprise the following three types of supplies:
(i) Supplies taxable at a ‘NIL’ rate of tax* (0% tax);
(ii) Supplies that are wholly or partially exempted from CGST or IGST, by way of a
notification amending Section 11 of CGST Act or Section 6 of IGST Act;
(iii)Non-taxable supplies as defined under Section 2(78) – supplies that are not taxable
under the Act (For Example Alcoholic liquor for human consumption.
Tax need not be paid on these supplies. Input tax credit attributable to exempt supplies will not
be available for utilization/setoff.
*Zero-rated supplies such as exports would not be treated as supplies taxable at ‘NIL’ rate of
tax;
Central or the State Governments are empowered to grant exemptions from GST. Conditions
are:
(i) Exemption should be in public interest
(ii) By way of issue of notification
(iii)Must be recommended by the GST Council
(iv) Absolute exemption or conditional exemption may be for any goods and / or services
of any specified description.
(v) Exemption by way of special order (not notification) may be granted exceptional
circumstances.
(vi) Registered person supplying the goods and / or services is not entitled to collect tax
higher than the effective rate, where the supply enjoys an absolute exemption.
Classification of Exemptions: Supplier may be exempt – Exemption to the person making

supplies-i.e. supplier, regardless of the nature of outward supply.

Ex: Services by Securities and Exchange Board of India, Services by Charitable entities.
Certain Supplies may be exempt –Certain supplies due to their nature and type are exempted
from GST. All supplies that are notified would be eligible for the exemption. Here, irrespective
of who the supplier is, exemption is allowed. not very much relevant.
Ex: Services by way of sponsorship of sporting events, Services by way of public conveniences
Types of Exemptions:
Absolute exemption: Exemption without any conditions.
Ex: Transmission or distribution of electricity by an electricity transmission or distribution
utility, Services by Reserve Bank of India.
Conditional Exemption: Exemption subject to certain conditions.
Ex: Services by a hotel, inn, guest house, club or campsite, by whatever name called, for
residential or lodging purposes, having declared tariff of a unit of accommodation less than Rs.
1000/- per day”.
Conditional or partial exemption:
Intra-State supplies of goods and/or services received from an unregistered person by a
registered person is exempted from payment of tax under reverse charge provided the aggregate
value of such supplies received by a registered person from all or any of the suppliers does not
exceed Rs.5000/- in a day.
What is a non-taxable supply?
“non-taxable supply” means a supply of goods or services or both which is not leviable to tax
under CGST Act or under the IGST Act.
A transaction must be a ‘supply’ as defined under the GST law to qualify as a non-taxable
supply under the GST.
Note: Only those supplies that are excluded from the scope of taxation under GST are covered
by this definition – i.e., alcoholic liquor for human consumption, articles listed in section 9(2)
or in schedule III.
It must also be noted that the following items are not out of scope of GST. That means GST
Rate has not yet been announced or notified for them.
(i) petroleum crude
(ii) high-speed diesel
(iii)motor spirit (commonly known as petrol)
(iv) natural gas and
(v) aviation turbine fuel

VALUATION OF SUPPLY UNDER GST
Goods and service tax or GST will be one tax to subsume all taxes. It will bring in “One nation
one tax” regime.
Being a completely new form of indirect taxation there are many questions in the minds of the
organizations. One of the most important questions is what is valuation of supply under GST?
What will be included in the value of taxable supply on which GST is calculated?
Valuation of supply under GST
Currently, GST will be charged on the ‘transaction value’. Transaction value is the price
actually paid (or payable) for the supply of goods/services between un-related parties (i.e., price
is the sole consideration)
The value of supply under GST shall include:
1. Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.
2. Any amount that the supplier is liable to pay which has been incurred by the recipient
and is not included in the price.
3. The value will include all incidental expenses in relation to sale such as packing,
commission etc.
4. Subsidies linked to supply, except Government subsidies will be included.
5. Interest/late fee/penalty for delayed payment of consideration will be included.
Example: Let us consider an example of ABC, a manufacturer, selling tools and hardware like
drills, polishers, spades etc. It sells a power drill to XYZ a wholesaler. The MRP is Rs. 5,500
but ABC sells it for Rs. 3,000.
The value of goods &/or services supplied is the transaction value, i.e. the price paid/payable,
which is Rs 3,000 in the example. Assuming CGST=9% and SGST= 9%
Power Drill 3,000
Add: CGST @9% 270
Add: SGST @9% 270

Total 3,540
TIME, PLACE AND VALUE OF SUPPLY
Under GST, 3 types of taxes can be charged in the invoice. SGST and CGST in case of an
intra-state transaction and IGST in case of an interstate transaction. But deciding whether a
particular transaction is inter or intrastate is not an easy task.
Think about an online training where customers are sitting in different parts of the world.
Say in case, hotel services, where the receiver may have an office in another state and may be
visiting the hotel only temporarily, or where goods are sold on a train journey passing through
different states.
To help address some of these situations, the IGST act lays down certain rules which define
whether a transaction is inter or intrastate. These rules are called the place of supply rules.
Why are time place and value of supply important?
Time of supply means the point in time when goods/services are considered supplied’. When
the seller knows the ‘time’, it helps him identify due date for payment of taxes.
Place of supply is required for determining the right tax to be charged on the invoice, whether
IGST or CGST/SGST will apply.
Value of supply is important because GST is calculated on the value of the sale. If the value
is calculated incorrectly, then the amount of GST charged is also incorrect.
1. Time of Supply
Time of supply means the point in time when goods/services are considered supplied’. When
the seller knows the ‘time’, it helps him identify due date for payment of taxes.
CGST/SGST or IGST must be paid at the time of supply. Goods and services have a separate
basis to identify their time of supply. Let’s understand them in detail.
A. Time of Supply of Goods
Time of supply of goods is earliest of:
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of advance/ payment*.
For example:
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th January. The
payment was received on 31st January. The goods were supplied on 20th January.
*Note: GST is not applicable to advances under GST. GST in Advance is payable at the time
of issue of the invoice. Notification No. 66/2017 – Central Tax issued on 15.11.2017
Let us analyze and arrive at the time of supply in this case.

Time of supply is earliest of –

1. Date of issue of invoice = 15th January
2. Last date on which invoice should have been issued = 20th January
Thus, the time of supply is 15th January.
What will happen if, in the same example an advance of Rs 50,000 is received by Mr. X on 1st
January?
The time of supply for the advance of Rs 50,000 will be 1st January(since the date of receipt
of advance is before the invoice is issued). For the balance Rs 50,000, the time of supply will
be 15th January.
B. Time of Supply for Services
Time of supply of services is earliest of:
1. Date of issue of invoice
2. Date of receipt of advance/ payment.
3. Date of provision of services (if invoice is not issued within prescribed period)
Let us understand this using an example:
Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was issued on
20th January and the payment for the same was received on 1st February.
In the present case, we need to 1st check if the invoice was issued within the prescribed time.
The prescribed time is 30 days from the date of supply i.e. 31st January. The invoice was issued
on 20th January. This means that the invoice was issued within a prescribed time limit.
The time of supply will be earliest of –
1. Date of issue of invoice = 20th January
2. Date of payment = 1st February
This means that the time of supply of services will be 20th January.
C. Time of Supply under Reverse Charge
In case of reverse charge the time of supply for service receiver is earliest of:
1. Date of payment*
2. 30 days from date of issue of invoice for goods (60 days for services)
(*w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only to
services. Notification No. 66/2017 – Central Tax )
For example:
M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th January.
The invoice was raised on 1st February. M/s ABC Pvt Ltd made the payment on 1st May.
The time of supply, in this case, will be earliest of –

1. Date of payment = 1st May

2. 60 days from date of date of invoice = 2nd April
Thus, the time of supply of services is 2nd April.
2. Place of supply
It is very important to understand the term ‘place of supply’ for determining the right tax to be
charged on the invoice.
Here is an example:
Location of Service Receiver Place of supply Nature of Supply GST Applicable
Maharashtra Maharashtra Intra-state CGST + SGST
Maharashtra Kerala Inter-state IGST
A. Place of Supply of Goods

Usually, in case of goods, the place of supply is where the goods are delivered.
So, the place of supply of goods is the place where the ownership of goods changes.
What if there is no movement of goods. In this case, the place of supply is the location of goods
at the time of delivery to the recipient.
For example: In case of sales in a supermarket, the place of supply is the supermarket itself.
Place of supply in cases where goods that are assembled and installed will be the location
where the installation is done.
For example, A supplier located in Kolkata supplies machinery to the recipient in Delhi. The
machinery is installed in the factory of the recipient in Kanpur. In this case, the place of supply
of machinery will be Kanpur.
B. Place of Supply for Services
Generally, the place of supply of services is the location of the service recipient.
In cases where the services are provided to an unregistered dealer and their location is not
available the location of service provider will be the place of provision of service.
Special provisions have been made to determine the place of supply for the following services:
• Services related to immovable property
• Restaurant services
• Admission to events
• Transportation of goods and passengers
• Telecom services
• Banking, Financial and Insurance services.

In case of services related to immovable property, the location of the property is the place of
provision of services.
Example 1:
Mr. Anil from Delhi provides interior designing services to Mr. Ajay (Mumbai). The property
is located in Ooty (Tamil Nadu).
In this case, place of supply will be the location of the immovable property i.e. Ooty, Tamil
Nadu.
Example 2:
A registered taxpayer offers passenger transport services from Bangalore to Hampi. The
passengers do not have GST registration. What will be the place of supply in this case?
The place of supply is the place from where the departure takes place i.e. Bangalore in this
case.
3. Value of Supply of Goods or Services
Value of supply means the money that a seller would want to collect the goods and services
supplied.
The amount collected by the seller from the buyer is the value of supply.
But where parties are related and a reasonable value may not be charged, or transaction may
take place as a barter or exchange; the GST law prescribes that the value on which GST is
charged must be its ‘transactional value’. This is the value at which unrelated parties would
transact in the normal course of business. It makes sure GST is charged and collected properly,
even though the full value may not have been paid.
TAX SLABS IN GST
The GST scheme consists of different slab structure under which the proposed goods and
services will be taxed accordingly. The five slabs currently available are 0%, 5%, 12%, 18%
and 28%.
ADVANTAGES & DISADVANTAGES OF GST
Advantages of GST
1. GST eliminates the cascading effect of tax
GST is a comprehensive indirect tax that was designed to bring the indirect taxation under one
umbrella. More importantly, it is going to eliminate the cascading effect of tax that was evident
earlier.
Cascading tax effect can be best described as ‘Tax on Tax’. Let us take this example to
understand what is Tax on Tax:
Before GST regime:
A consultant offering services for say, Rs 50,000 and charged a service tax of 15% (Rs 50,000
* 15% = Rs 7,500).

Then say, he would buy office supplies for Rs. 20,000 paying 5% as VAT (Rs 20,000 *5% =
Rs 1,000).
He had to pay Rs 7,500 output service tax without getting any deduction of Rs 1,000 VAT
already paid on stationery.
His total outflow is Rs 8,500.
Under GST
GST on service of Rs 50,000 @18% 9,000
Less: GST on office supplies (Rs 20,000*5%) 1,000
Net GST to pay 8,000
2. Higher threshold for registration

Earlier, in the VAT structure, any business with a turnover of more than Rs 5 lakh (in most
states) was liable to pay VAT. Please note that this limit differed state-wise. Also, service tax
was exempted for service providers with a turnover of less than Rs 10 lakh.
Under GST regime, however, this threshold has been increased to Rs 20 lakh, which exempts
many small traders and service providers.
Let us look at this table below:
Tax Threshold Limits
Excise 1.5 crores
VAT 5 lakhs in most states
Service Tax 10 lakhs
GST 20 lakhs (10 lakhs for NE states)
3. Composition scheme for small businesses

Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can benefit as it gives an
option to lower taxes by utilizing the Composition scheme. This move has brought down the
tax and compliance burden on many small businesses.
4. Simple and easy online procedure
The entire process of GST (from registration to filing returns) is made online, and it is super
simple. This has been beneficial for start-ups especially, as they do not have to run from pillar
to post to get different registrations such as VAT, excise, and service tax.

5. The number of compliances is lesser

Earlier, there was VAT and service tax, each of which had their own returns and compliances.
Below table shows the same:
Under GST, however, there is just one, unified return to be filed. Therefore, the number of
returns to be filed has come down. There are about 11 returns under GST, out of which 4 are
basic returns which apply to all taxable persons under GST. The main GSTR-1 is manually
populated and GSTR-2 and GSTR-3 will be auto-populated.
6. Defined treatment for E-commerce operators
Earlier to GST regime, supplying goods through e-commerce sector was not defined. It had
variable VAT laws. Let us look at this example:
Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had to file a VAT
declaration and mention the registration number of the delivery truck. Tax authorities could
sometimes seize goods if the documents were not produced.
Again, these e-commerce brands were treated as facilitators or mediators by states like Kerala,
Rajasthan, and West Bengal which did not require them to register for VAT.
All these differential treatments and confusing compliances have been removed under GST.
For the first time, GST has clearly mapped out the provisions applicable to the e-commerce
sector and since these are applicable all over India, there should be no complication regarding
the inter-state movement of goods anymore.
7. Improved efficiency of logistics
Earlier, the logistics industry in India had to maintain multiple warehouses across states to
avoid the current CST and state entry taxes on inter-state movement. These warehouses were
forced to operate below their capacity, giving room to increased operating costs.
Under GST, however, these restrictions on inter-state movement of goods have been lessened.
As an outcome of GST, warehouse operators and e-commerce aggregators players have shown
interest in setting up their warehouses at strategic locations such as Nagpur (which is the zero-
mile city of India), instead of every other city on their delivery route.
Reduction in unnecessary logistics costs is already increasing profits for businesses involved
in the supply of goods through transportation.
8. Unorganized sector is regulated under GST
In the pre-GST era, it was often seen that certain industries in India like construction and textile
were largely unregulated and unorganized.
Under GST, however, there are provisions for online compliances and payments, and for
availing of input credit only when the supplier has accepted the amount. This has brought in
accountability and regulation to these industries.
Disadvantages of GST
1. Increased costs due to software purchase

Businesses have to either update their existing accounting or ERP software to GST-compliant
one or buy a GST software so that they can keep their business going. But both the options lead
to increased cost of software purchase and training of employees for an efficient utilization of
the new billing software.
2. Being GST-compliant
Small and medium-sized enterprises (SME) who have not yet signed for GST have to quickly
grasp the nuances of the GST tax regime. They will have to issue GST-complaint invoices, be
compliant to digital record-keeping, and of course, file timely returns. This means that the GST-
complaint invoice issued must have mandatory details such as GSTIN, place of supply, HSN
codes, and others.
3. GST will mean an increase in operational costs
As we have already established that GST is changing the way how tax is paid, businesses will
now have to employ tax professionals to be GST-complaint. This will gradually increase costs
for small businesses as they will have to bear the additional cost of hiring experts.
Also, businesses will need to train their employees in GST compliance, further increasing their
overhead expenses.
4. GST came into effect in the middle of the financial year
As GST was implemented on the 1st of July 2017, businesses followed the old tax structure for
the first 3 months (April, May, and June), and GST for the rest of the financial year.
Businesses may find it hard to get adjusted to the new tax regime, and some of them are running
these tax systems parallelly, resulting in confusion and compliance issues.
5. GST is an online taxation system
Unlike earlier, businesses are now switching from pen and paper invoicing and filing to online
return filing and making payments. This might be tough for some smaller businesses to adapt
to.
6. SMEs will have a higher tax burden
Smaller businesses, especially in the manufacturing sector will face difficulties under GST.
Earlier, only businesses whose turnover exceeded Rs 1.5 crore had to pay excise duty. But now
any business whose turnover exceeds Rs 20 lakh will have to pay GST.
However, SMEs with a turnover upto Rs 75 lakh can opt for the composition scheme and pay
only 1% tax on turnover in lieu of GST and enjoy lesser compliances. The catch though is these
businesses will then not be able to claim any input tax credit. The decision to choose between
higher taxes or the composition scheme (and thereby no ITC) will be a tough one for many
SMEs.

MODULE 4
KERALA VAT
The Kerala Value Added Tax Act.2003 has been enacted to consolidate and amend the law
relating to the levy of tax on the sale or purchase of goods based on the concept of value added
tax in the State of Kerala The Kerala Value Added Tax Act.2003 has come into force with
effect from 01-04-2005.
The Kerala Value Added Tax Act. 2003 contains 98 sections and five Schedules. First Schedule
contains list of goods exempted from tax Second Schedule contains names of goods in respect
of which tax is leviable at ail points of sale at the rate of 1 per cent. Third Schedule contains
the names of goods in respect of which tax is leviable at the rate of 4 per cent Fourth Schedule
contains the names of goods which are outside the purview of the Value Added Tax. In the
case of such goods the Kerala General Sales Tax Act, 1963 is still applicable. Goods specified
in Fifth Schedule is taxable at the rate of 12.5 per cent. Goods which are not specified in
Schedules 1 to 4 would come within the Fifth Schedule.
By section 92 of the Act the Government of Kerala is empowered to make rues to carry out the
purpose of the Act. In exercise of the powers conferred by section 92 of the Act, the
Government of Kerala made the Kerala Value Added Tax Rules 2005.
Computation of VAT
Value Added Tax. popularly called VAT. is a tax levied on the goods or service at each point
of value addition. Under the VAT system, tax is levied on the value added to a commodity or
service as it passes through different Stages of production and distribution until it reaches the
final consumer. In this scheme of taxation, tax is payable by each link in the supply chain on
the value addition made by it on the product or service.
Section 2 (xlii) of the Value Added Tax Act.2003 defines the term "sale”
Sale means every transfer, whether in pursuance of a contract or not of the property in goods
by one person to another in the course of trade or businesses for cash or deferred payment or
for other valuable consideration. However, the term sale does not include a mortgage
hypothecation charge or pledge.
Zero Rate Sale: Section 2(vii) defines the expression ‘zero rate sale. It means the sale of any
goods on which no tax is chargeable but in relation to which Input tax credit or refund of input
tax paid is admissible.
As per section 13 (1) every sale in the course of export shall be a zero-rate sale. By section
13(2) of the Act, if input tax has been paid in respect of the purchase of any goods and such
goods are sold in the course of export, the input tax paid on such goods shall be refunded to the
person making such sales in the course of export. The refund is available only if the dealer has
not claimed input tax credit on such purchase for any return period.
Incidence and Levy of Tax or Liability to Pay Tax
Section 6 of the Act fixes the liability to pay tax by section 6(1) every dealer whose total
turnover for a year is not less than ten lakhs rupees and every importer or casual trader or agent
of a non-resident dealer, or dealer in jewellery of gold, silver and platinum group metals or

silver articles or contractor of any State Government. Central Government or Government of

any Union Territory or any department thereof or any local authority or any autonomous
whatever be his total turnover for the year, shall be liable to pay tax on his sales or purchases
of goods as provided in the Act.
The liability of a dealer to pay tax on the taxable turnover shall be as follows:
(i) Goods specified in the First Schedule shall be exempted from tax.
(ii) Goods specified in the Fourth Schedule shall* be outside the purview of the Act. In the
case of such goods the Kerala General Sales Tax Act. 1963 is still applicable
(iii) In the case of goods specified in the second and third schedules tax shall be payable at
the rates specified therein and at all points of sale of such goods within the State.
The second schedule contains a list of goods in respect of which tax is leviable at all points of
sale in the State at the rate of 1 per cent. Gold, silverice. paddy, rice, wheat are examples of
such goods
The third schedule contains a list of goods in respect of which tax is leviable at all points of
sale in the State at the rate of 4 per cent Aluminium utensils. bearings, beedi leaves, cotton and
cotton waste etc are examples of such goods.
(iv) The goods which are not specified in Schedules 1to 4 is taxable at the rate of 12.5 per
cent. As per Fifth Schedule.
(v) In the case of transfer of the right to use any goods for any purpose whether or not for
a specified period, at the rate of 4% at all points of such transfer.
(vi) In the case of transfer of goods involved in the execution of works contract, where the
transfer is in the form of goods, the tax is to be paid as per the rates fixed in second,
third and fifth Schedules.
(vii) In the case of transfer of goods involved in the execution of works contract, where the
transfer is not in the form of goods but in some other form, tax is payable at the rate of
12.5 percent at all points of sale.
Input Tax Credit
As per section 11 of the Act. a registered dealer who purchases taxable goods from a registered
dealer within the State shall be eligible for input tax credit under the following circumstances:
(i) If the purchase is for sale
(ii) If the purchase is for use by him in the manufacture of taxable goods for sale.
(iii)If the purchase is for use in the execution of works contract
(iv) If the purchase is for use as containers or as packing materials for the packing of
taxable goods in the State for sale.
The input tax credit shall be allowed to a registered dealer in respect of a return period against
the output tax payable by him for such period
A registered dealer of home appliances in the month of April he purchased 10 Sewing Machines
each for Rs 1000. He has paid 4 per cent tax on the total purchase price of Rs10,000. Thus, he
has paid 400 towards tax. The tax paid by him is called input tax in the month 0f April he has
sold all the sewing machines each for Rs. 1200 He has collected 4 per cent tax on the total sale
price. Thus, he has collected 480 towards tax. The tax collected by him is called output tax. He

has to remit Rs.80 to the Government. It is arrived at by deducting input tax j e Rs 400 from
the output tax i.e. Rs.480.
Input Tax Credit is available only if the dealer furnishes the original invoice (duly filled in and
signed and issued by the selling dealer) showing separately the input tax paid by him.
Carry forward and set-off of input tax
If a dealer has paid input tax of Rs.1000 for the month of May and he has collected only 750
as output tax, he need not pay tax for the month of May and he can carry forward Rs.250 for
setting off against the output tax of the subsequent month i.e. June.
Reverse Tax
If the goods purchased on which input tax credit was availed in a particular month are not re
sold, the credit availed in respect of those good will be reversed and added with the output tax
liability of the dealer called reverse tax credit.
REGISTRATION AND PERMIT
The Kerala Value Added Tax Act.2003

Section 15. Registration of dealers: -
(1) Every dealer whose total turnover in any year is not less than ten lakh rupees shall, and any
other dealer may, get himself registered under this Act.
(2) Notwithstanding anything contained in sub-section (1)
(i) every casual trader;
(ii) every dealer, registered under the Kerala General Sales Tax Act, 1963 (15 of 1963)
immediately before the date of commencement of this Act, whose total turnover under
the said Act for the year preceding such date was not less than the limit specified under
sub-section (1);
(iii) every dealer registered under sub-section (3) of section 7 of the Central Sales Tax
Act, 1956 (Central Act 74 of 1956);
(iv) every dealer who in the course of his business obtains or brings goods from outside
the State or effect export of goods out of the territory of India;
(v) every dealer in bullion or specie or in jewellery of gold, silver or platinum group of
metals, the State,
(vi) every dealer residing outside the State, but carrying on business in
(vii) every agent of a non-resident dealer
(viii) every commission agent, broker, delcredere agent, auctioneer or any other
mercantile agent, by whatever name called, who carries on the business of buying,
selling, supplying or distributing goods on behalf of any principal;
(ix) any contractor, and

(x) any State Government, Central Government, or Government of any Union Territory
or any department thereof or any local authority/autonomous body, shall get himself
registered under this Act, irrespective of the quantum of his total turnover.
(xi) any hallmarking unit.
(3) Notwithstanding anything contained in the foregoing sub- sections, an authorized retail or
wholesale distributor dealing exclusively in rationed articles under the Kerala Rationing Order,
1966 shall not be liable to get himself registered under this Act.
(4) The burden of proving that a dealer is not liable to be registered under this Act shall lie on
that dealer.
Section 15A. Compulsory Registration.- Where a dealer liable to be registered under this Act
has failed to inform the registering authority of his liability to be registered, the registering
authority, after conducting such survey, inspection or enquiry, as may be prescribed, proceed
to register such person as a dealer under this Act and thereupon all the provisions of this Act
and the Rules made there under, shall be binding on such person however, such dealer shall
not be entitled to any benefits accruing from such registration.
Section 16. Procedure for registration: - (1) An application for registration shall be made to
such authority, in such manner and within such period as may be prescribed and shall be
accompanied by a fee as specified below: -
(a) Where the total turnover is less [five lakh rupees]- Five hundred rupees
(b) Where the total turnover is [five Lakh rupees] and above but is less than ten lakh rupees-
Seven hundred and fifty rupees
(c) Where the total turnover is ten lakh rupees and above but is less than fifty lakh rupees- One
thousand rupees plus Twenty - five rupees for each lakh or part there of above ten lakhs
(d) Where the total turnover is fifty lakh rupees and above - Two thousand rupees plus fifty
rupees for each lakh or part thereof above fifty lakhs, so however that the total
registration fee shall not exceed twenty thousand rupees.
Provided that a dealer getting registered under clause (ii) of sub- section (2) of section 15 shall
not be required to pay the registration fee specified in this subsection; but only the fee for
renewal of registration specified under sub-section (7):
Cancellation of registration: The registration can be cancelled on: (i) discontinuance of
business; or (ii) disposal of business; or (iii) transfer of business to a new location; or (iv)
annual turnover of a manufacturer or a trader dealing in designated goods or services falling
below the specified amount.
Tax Payer’s Identification Number (TIN) TIN (Tax Payer's Identification Number) is a code
to identify a tax payer. It is the registration number of the dealer. The taxpayer’s identification
number will consist of 11-digit numerals throughout the country. First two characters will
represent the State code as used by the Union Ministry of Home Affairs. The set-up of the next
nine characters will be, however, different in different States. TIN will facilitate computer
applications, such as detecting stop filers and delinquent accounts. TIN will help cross-check

information on tax payer compliance, for example, the selective cross-checking of sales and
purchases among VAT taxpayers.
Section 20. Filing of returns: -
(1) Every registered dealer and every dealer liable to be registered under this Act shall submit
to the assessing authority such return or returns before such dates and in such manner and
accompanied by such documents as may be prescribed.
(2) In case of a dealer having more than one place of business, the aggregate turnover of all
such places of business shall, subject to the provisions of sub-section (3), be taken as the
turnover of the business for the purposes of this Act.
(2A). Every dealer registered under this Act and every others required to file their returns under
this Act shall file their returns as well as purchase and sale list through electronic filing in
addition to the hard copy to be filed along with the returns:
Provided that the Commissioner may, in the interest of tax administration, exempt such class
or classes of dealers or others as may be prescribed, from electronic filing of returns and the
stipulation regarding hard copy of returns prescribed under this sub-section.
(3) The Commissioner may, on application by the dealer, treat each of such places of business
as a separate unit for the purposes of levy, assessment and collection of tax, and thereupon all
the provisions of this Act regarding registration, filing of returns, assessment and collection of
tax shall apply, as if each of such places of business were a separate unit except for considering
the eligibility for payment of tax under sub- section (5) of section 6.
(4) Where any order is passed by the Commissioner under sub- section (3), the turnover of each
of such places of business shall be liable to tax irrespective of such turnover being below the
minimum turnover mentioned in section 6 provided that the total turnover in respect of all such
places of business together shall not be less than the minimum turnover mentioned in section
6.

Indirect Taxation in India An Analysis

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Indirect Taxation in India An Analysis

Uploaded by

Copyright:

Available Formats

NOTES ON

GOVERNMENT LAW COLLEGE, KOZHIKODE

MERITS OF INDIRECT TAXES

Prepared by Ajay Ratnan Page | 2

Prepared by Ajay Ratnan Page | 3

Customs Act – Preliminary, Officers, Customs Ports, Airports, Warehouses. – Prohibition on

PRELIMINARY - Extent & Commencement & Definitions

Prepared by Ajay Ratnan Page | 4

Prepared by Ajay Ratnan Page | 5

Prepared by Ajay Ratnan Page | 6

Prepared by Ajay Ratnan Page | 7

TYPES OF CUSTOM DUTY

(1) BASIC CUSTOM DUTY

Prepared by Ajay Ratnan Page | 8

Prepared by Ajay Ratnan Page | 9

Prepared by Ajay Ratnan Page | 10

Prepared by Ajay Ratnan Page | 11

(e) Secondary and higher education cess

CUSTOMS PORTS, AIRPORTS, WAREHOUSES

Prepared by Ajay Ratnan Page | 12

PROHIBITIONS ON IMPORTATION AND EXPORTATION OF GOODS

Provisions Sections Chapter

Prepared by Ajay Ratnan Page | 13

2) Special prohibition relating to detection of illegally 11A to 11G IV A

Prepared by Ajay Ratnan Page | 14

DETECTION OF ILLEGALLY IMPORTED GOODS AND PREVENTION OF THE

Prepared by Ajay Ratnan Page | 15

Prepared by Ajay Ratnan Page | 16

PREVENTION OR DETECTION OF ILLEGAL EXPORT OF GOODS [CHAPTER

Prepared by Ajay Ratnan Page | 17

EXEMPTIONS FROM THE OPERATION OF CHAPTERS IV A & IV B [CHAPTER-

LEVY & CUSTOMS CLEARANCE

LEVY OF CUSTOM DUTY

Prepared by Ajay Ratnan Page | 18

DISTINCTION BETWEEN CLEARANCE FOR HOME CONSUMPTION AND

Prepared by Ajay Ratnan Page | 19

ARRIVAL OR DEPARTURE AND CLEARANCE OF IMPORTED OR EXPORT

Prepared by Ajay Ratnan Page | 20

Prepared by Ajay Ratnan Page | 21

Prepared by Ajay Ratnan Page | 22

Prepared by Ajay Ratnan Page | 23

CLEARANCES OF IMPORTED GOODS AND EXPORT GOODS

FLOW PATTERN FOR IMPORT

Prepared by Ajay Ratnan Page | 24

PROCEDURE FOR CLEARANCE OF IMPORTED GOODS

Prepared by Ajay Ratnan Page | 25

Prepared by Ajay Ratnan Page | 26

Prepared by Ajay Ratnan Page | 27

PROCEDURE FOR CLEARANCE OF EXPORT GOODS

Prepared by Ajay Ratnan Page | 28

vehicle. However, the Principal Commissioner/Commissioner of Customs may, in cases

Prepared by Ajay Ratnan Page | 29

GOODS IN TRANSIT (SECTION 52 TO 56)

Prepared by Ajay Ratnan Page | 30

DISTINCTIONS BETWEEN TRANSIT AND TRANSHIPMENT GOODS

TRANSIT GOODS TRANSHIPMENT OF GOODS

WAREHOUSING (SECTION 57 TO 73)

Prepared by Ajay Ratnan Page | 31

*CCus- Commissioner of Customs; PO – Proper Officer

Prepared by Ajay Ratnan Page | 32

DUTY DRAWBACK (SECTION 74 TO 76)

Prepared by Ajay Ratnan Page | 33

Prepared by Ajay Ratnan Page | 34