CHAPTER FIVE:

CUSTOMS DUTY

Import Procedures

The procedure for importation of goods by air, by sea or by land has been outlined below:

1. Landing / Calling of Vessel / Aircraft:

In case goods are imported by sea / air, the goods shall be loaded in the vessel / aircraft in the
exporting country and sent to India. In case of import by land, the goods shall be sent in a vehicle.
When the vessel / aircraft carrying imported goods arrives in India, the person-in-charge of such
vessel / aircraft [master in case of vessel and pilot in case of aircraft], entering into India from
outside India shall allow calling / landing of the vessel / aircraft only at the customs port / customs
airport unless otherwise permitted by Central Board of Excise and Customs (CBEC).

2. Delivery of import manifest / report:

The person-in-charge of a vessel / aircraft shall deliver to the proper officer an import manifest (a
detailed information about goods in vessel / aircraft) by presenting the same electronically before
the arrival of the vessel / aircraft at the customs port / customs airport. In case of import by land,
the person-in-charge of the vehicle shall deliver to the proper officer an import report (a detailed
report about the goods in the vehicle) within 12 hours of the arrival of vehicle at the customs
station.

3. Grant of entry inwards to the master of the vessel / permission to unload the goods.

On receiving the import manifest from the master of a vessel, the proper officer shall grant
Entry Inwards to the master. The master of the vessel shall not permit the goods to be
unloaded until the order of Entry Inwards has been granted by the proper officer to such
vessel. Date of Entry Inwards is the date on which the vessel finds a berth place for discharge
of cargo.

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4. Unloading of goods.

Imported goods shall be unloaded:

(a) only if mentioned in the import manifest / import report.
(b) only at the approved places in any customs port / customs airport.
(c) under the supervision of the proper officer.
(d) during working hours and shall not be unloaded on Sunday or any other holiday.

5. Unloaded goods to be in the custody of the Custodian till the clearance.

Once the imported goods have entered the customs area, they shall remain in the custody of the
Custodian (a person approved by the Commissioner of Customs for this purpose). If the imported
goods are pilfered after unloading in a customs area, while in the custody of the Custodian, then
the Custodian shall be liable to pay duty on such goods.

6. Filing of entry for import i.e., Bill of Entry.

The importer of any goods, other than the goods intended for transit or transhipment, shall file a
Bill of Entry electronically for clearance of goods from the custom station port / airport.

In case the goods are to be cleared for home consumption, importer would file Bill of Entry for
home consumption. However, if the importer does not need the goods immediately, he may
request the goods to be warehoused. In that case, an Into-Bond Bill of Entry (for warehousing)
would be filed. When subsequently, the goods are cleared from warehouse for home
consumption, an Ex-Bond Bill of Entry is to be filed.

7. Timing of filing of Bill of Entry.

A Bill of Entry may be presented at any time after the delivery of the Import Manifest / Import
Report. However, in case of import by a vessel / aircraft, a bill of entry may be presented even
before the delivery of such import manifest if the vessel or the aircraft by which the goods have
been shipped for importation into India is expected to arrive within 30 days from the date of such
presentation.

8. Assessment of duty on the imported goods.

Assessment is the procedure of quantifying the amount of liability. The importer will self-assess
the duty considering the applicable rate of exchange and rate of import duty. This self-assessment
is subject to verification by the proper officer of the Customs and may lead to reassessment by
such officer if the assessment made by the importer is found to be incorrect. The proper officer
shall return the Bill of Entry to the importer after determination of the duty amount.
9. Payment of duty.

If the goods are cleared to be stored in a warehouse, payment of duty is deferred till the time of
clearance from such warehouse. However, in case the goods are cleared for home consumption,
customs duty has to be paid.

10. Clearance of imported goods from the custom station.

The goods lying under the custody of the custodian have to be cleared either for home
consumption or for warehousing or for transhipment within 30 days (or such extended time as
the proper officer may allow) from the date of unloading of goods at the customs station. The
importer may exercise any of the following options:

(a) Clearance for home consumption: In case the importer files the Bill of Entry for home
consumption and the proper officer is satisfied that the imported goods are not prohibited
goods and duty on the same has been paid, he may make an order permitting clearance of
the goods for home consumption.

(b) Warehousing of imported goods: The importer may not clear the goods for home
consumption and request the goods to be warehoused. In such a case, he shall file a Into-
Bond Bill of Entry for warehousing and is assessed to duty. Thereafter, he shall execute a
bond binding himself in a sum equal to thrice the amount of the duty assessed on such goods.
The proper officer after satisfying himself that all the requirements have been fulfilled shall
make an order permitting the deposit of the goods in a warehouse.

Subsequently, the importer of any warehoused goods may clear them for home consumption
provided:
(i) an ex-Bond Bill has been presented to the proper officer and duty is assessed and paid
by him.
(ii) rent and warehousing charges along with any penalty on warehoused goods, if any,
have been paid by importer, and
(iii) an order for clearance of such goods for home consumption has been made by the proper
officer.

11. Imported goods in transit for transhipment.

(A) Transit of Goods: Where any goods (not being prohibited goods) which are imported in a
conveyance are mentioned, in the import manifest / import report, as for the transit in the
same conveyance to any place outside India or any customs station, they may be allowed to
be so transited without payment of duty.
 (B) Transhipment of Goods: Where any goods (not being prohibited goods) which are
imported in a conveyance are mentioned, in the import manifest / import report, as for
transhipment to any place outside India or to any major port / other port as notified / any
other Customs Station, they may be allowed to be so transhipped without payment of
duty. The imported shall present the Bill of Entry for transhipment to the proper officer.
Unlike transit, under transhipment, goods are transferred from one conveyance to
another.

Export Procedures

The procedure for exportation of goods by air, by sea or by land has been outlined below:

1. Filing of Shipping Bill / Bill of Export.

The exporter is required to present electronically to a proper officer of customs a Shipping Bill (in
case of export by a vessel or by air) or a Bill of Export (in case of export by a vehicle). An
exporter entering any export goods self-assesses and pays the duty, if any, leviable on such goods
subject to verification by the proper officer.

2. Order permitting clearance and loading of goods for exportation.

Where the proper officer is satisfied that:

 goods entered for export are not prohibited goods, and
 exporter has paid duty, if any, on them,
He passes an order permitting clearance and loading of goods for exportation called Let Export
Order.

3. Grant of Entry Outward.

A vessel intending to start loading of export goods must be first granted an ‘Entry Outwards’
by the proper officer. The master of a vessel shall not permit the loading of any export goods,
until the proper officer grants entry-outwards to such vessel.

‘Entry Outwards’ is the permission granted by the Customs authorities to a vessel to go on a

foreign voyage to the port of consignment.

4. Loading of goods on conveyance for exportation.

The export goods shall be loaded on the conveyance for exportation with the permission of person-
in-charge. He shall not permit the loading at a customs station unless, a shipping bill / bill of
export / bill of transhipment, as the case may be, duly passed by the proper officer, has been
handed over to him by the exporter. In case of export of goods by vessel, grant of entry outwards
is also mandatory requirement before loading of goods.
5. Delivery of export manifest / report.

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 –
 an export manifesto - in the case of a vessel or aircraft,
 an export report -in case of a vehicle.

6. No conveyance to leave without written order.

The person-in-charge of a conveyance which 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.
PROBLEMS ON CUSTOMS DUTY

Problem Number One (Problem on identification of exchange rate for valuation of imported
goods)

Robo Enterprises imported some goods from USA for being used in manufacture of its final product.
Determine the exchange rate for computation of import duty from the following information-

Rate of Exchange notified

Date Particulars
by CBEC
Import general manifest was submitted by master
21.10.17 1 US $ = Rs. 64.20
of vessel
25.10.17 Entry inwards was granted by the customs officer 1 US $ = Rs. 64.30
27.10.17 Robo Enterprises filed the Bill of Entry 1 US $ = Rs. 64.50
Goods were allowed to be cleared from the customs
31.10.17 1 US $ = Rs. 64.60
port

Problem Number Two (Problem on identification of exchange rate for valuation of exported goods)

Genuine Industries exported some goods to UK in a vessel. You are required to determine the rate of
exchange for the purposes of computation of export duty from the following additional information:

Exchange rate Exchange rate

Particulars Date
notified by CBEC notified by RBI
Date of presentation
18.12.2017 Rs. 89 per UK Pound Rs. 90 per UK Pound
of shipping bill
Date of entry
20.12.2017 Rs. 85 per UK Pound Rs. 87 per UK Pound
outwards

Problem Number Three (Problem on identification of rate of duty for computing customs duty on
imported goods)

Rajeshwari Industries imported a machinery from Germany in an aircraft. The bill of entry was
presented on 12.07.2017 and the aircraft arrived in India on 25.07.2017. The rate of import duty on the
respective dates was as follows:

Particulars Date Rate of Customs duty

Date of bill of entry 12.07.2017 12%
Date of arrival of aircraft 25.07.2017 15%

Determine the rate of import duty applicable in the given case.

Problem Number Four (Problem on identification of exchange rate for valuation and rate of duty
for computing customs duty on imported goods)

An importer imported some goods from Brazil for subsequent sale in India at $3,500 on CIF
basis. Determine rate of exchange and rate of duty payable for the purpose of computation of
custom duty payable.

Exchange rate as Exchange rate as

Particulars Date Rate of Basic custom duty
notified by CBEC notified by RBI

Date of bill of entry 25/12/2017 Rs.52 Rs. 53 15%

Date of entry
18/12/2017 Rs.50 Rs. 52 10%
inward

Problem Number Five (Problem on computing customs duty liability)

Calculate the customs duty payable from the following information available:-
Assessable value Rs.1,00,000
Rate of basic customs duty 10%
Rate of Integrated Tax 12%
Education cess at applicable rate.

Problem Number Six (Problem on computing customs duty liability)

Kala Enterprises imported some goods from UK. The assessable value of the imported goods is Rs.
20,00,000.
Compute the customs duty payable from the following additional information:
Date of Bill of Entry 24.10.2015 (Rate of Basic Customs Duty is 10%)
Date of entry inward 20.10.2015 (Rate of Basic Customs Duty is 8%)
Integrated Tax is payable @ 12 %.

Problem Number Seven (Problem on computing customs duty liability)

An importer has imported a machinery to be used for providing the service of construction of
commercial buildings. The assessable value of imported machinery as approved by customs is Rs.
5,00,000. Customs duty payable is 10%. If the machinery is manufactured in India, Integrated Tax @
12% is leviable on such machinery. Education cess and secondary and higher education cess are as
applicable. Special CVD is payable on said machinery. You are required to-
(i) Calculate the customs duty payable.
(ii) Examine whether the importer can avail any CENVAT credit? If yes, how much?
Problem Number Eight (Problem on computing customs duty liability)

The following data relating to an importer for the previous year 2017-18 is available:
(i) Customs Value (Assessable Value of imported goods) is Rs. 4,00,000.
(ii) Basic Customs Duty payable 10%.
(iii) If the goods were produced in India, GST would have been 18%.
Education Cess and Secondary Higher Education Cess are as applicable. How much Input Tax Credit
can be availed by imported if the importer is a manufacturer?

Problem Number Nine (Problem on computing customs duty liability for export goods)

Kumar Export House exported some goods to Slovenia. Compute the export duty payable by it from
the following information available:
(i) Assessable value – Rs. 55,00,000.
(ii) Shipping bill presented electronically on 26.12.2017.
(iii) Proper officer passed order permitting clearance and loading of goods for export on 04.03.2016.
(iv) Rate of export duty are as under:
On 26.12.2017 10%
On 04.01.2018 8%

Problem Number Ten (Problem on calculation of Assessable Value when CIF, freight and
insurance value given)

A consignment is imported by air. CIF Price 5,000 US Dollars. Freight is 900 US $. Insurance Cost
was 50 $. Exchange rate is Rs. 40. Find value for customs Purpose.

Problem Number Eleven (Problem on Calculating Assessable Value)

An importer imports some Goods @ 85,000 $ on CIF Basis. Following Dollar rates are available on
the date of presentation of bill entry: Calculate assessable value.
a) RBI Floor rate Rs. 62.58
b) Interbank closing rate Rs. 62.57
c) Rate notified by CBEC Rs. 62.59
d) Rate at which bank has realized the payment from the importer Rs. 62.56

Problem Number Twelve (Problem on Calculating Assessable Value and Customs Duty Payable)

Compute the duty payable under the Customs Act, 1962 for imported equipment based on the
following information:
(a) Assessable value of the imported equipment US $10,100.
(b) Date of Bill of Entry 25.7.2017. Basic customs duty on this date 10% and exchange rate notified by
the Central Board of Excise and Customs US $ 1 = Rs. 65.
(c) Date of Entry inwards 21.7.2017. Basic customs duty on this date 12% and exchange rate notified
by the Central Board of Excise and Customs US $ 1 =Rs. 50.
(d) Integrated Tax is leviable @ 12%.
(e) Educational cess @2% And Secondary and higher educational Cess @ 1%.
Make suitable assumptions where required and show the relevant workings and round off your
answer to the nearest Rupee.

Problem Number Thirteen (Problem on Calculating Assessable Value and Customs Duty Payable)

A consignment is imported by air. CIF price is 2,000 Euro. Air freight is 550 Euro and insurance cost
is Euro 50. Exchange rate announced by CBE&C as per customs notification is 1 Euro = Rs. 55. Basic
customs duty payable is 10%. GST on similar goods produced in India is 12%. Education cess is as
applicable. Find value for customs purpose and total customs duty payable.

Problem Number Fourteen (Problem on Calculating Assessable Value and Customs Duty Payable)

CIF value of imported goods is $ 1, 00,000. Air freight $30,000, Insurance cost $1,000 and exchange
rate announced by CBEC is 1 $ = Rs.63. Basic Customs duty payable is 10%. If the goods were
produced in India, GST payable would have been 12%. Education Cess is 2% and Secondary and
Higher Education Cess is 1 %. Special CVD is payable at appropriate rates.
Find the Customs duty payable.

Problem Number Fifteen (Problem on Calculating Assessable Value and Customs Duty Payable)

FOB Price of imported goods is $ 50,000. Freight and Insurance charges are not ascertainable.
Exchange rate announced by CBEC is 1$ = Rs.64, RBI is 1$ = Rs.62 and Interbank offer rate is 1$ =
Rs.62.50. Basic Customs duty payable is 10%. If the goods were produced in India, GST payable
would have been 16%. Education Cess is 2% and Secondary and Higher Education Cess is 1%.
Find the Assessable value and Customs duty payable.

Problem Number Sixteen (Problem on calculating Assessable value)

Compute the Assessable value for customs duty purposes from the following data.
1. Machinery Imported from U.S.A by air FOB Price US $ 8,000
2. Packing charges US $ 1,000
3. AIR Freight US $ 1,200
4. Insurance charges – Actual not Available
5. Local Agents Commission to be paid in Indian Currency Rs. 10,000
6. Transportation from Indian Airport to factory Rs. 4,000
Exchange Rate US $ 1 = Rs. 60.
Problem Number Seventeen (Problem on Calculating Assessable Value)

Compute the assessable value from the following information:

1. FOB value of machine UK Pounds £ 20,000

2. Freight paid (AIR) UK Pounds £ 5,000
3. Design and Development charges paid in UK £ 8,000
4. Cost of Primary Packing £ 3,000
5. Commission payable to local agent @ 1% of FOB in Indian Rupees.
6. Insurance – Not known
7. The Exchange rate notified by the CBEC is Rs. 95 per UK pound

Problem Number Eighteen (Problem on Calculating Assessable Value and Customs Duty Payable)

Manaswi Ltd., an actual user imports certain goods from USA, at Chennai port, at cost of $ 1,00,000
FOB. The other details are as follows:
a) Packing charges: $22,000.
b) Sea freight to Indian port: $28,000.
c) Transit insurance: $10,000.
d) Design and development charges paid to a consultant in USA by importer: $9,000.
e) Selling commission to be paid by the Indian importer: Rs. 5,000.
f) Rate of exchange announced by RBI: Rs.60.60/$.
g) Rate of exchange notified by the Central Board of Excise and Customs:
Rs.62.70/$. Rate of basic custom duty: 10%, Integrated Tax: 12%
Compute the assessable value of the imported goods and the customs duty payable.

Problem Number Nineteen (Problem on Calculating Assessable value and Customs duty payable)

The following information is furnished by Mr. Ramesh on 7th December 2017, in respects of articles
imported from USA in the month of December 2015.
FOB value $40,000
Exchange rate $1 =Rs.62
Air freight $7000
Insurance charges Not known
Commission & Brokerage paid to Indian Agent $ 400
Returnable Container Charges included in FOB $ 150
Landing charges Rs.1,000
Basic customs duty 10%
Excise duty chargeable on similar goods in India as per tariff rate 12.5%
Additional duty of customs u/s 3(5) of the Customs Tariff Act, 1975 As
applicable. Calculate the total customs duty payable by Mr. Ramesh.
Problem Number Twenty (Problem on Calculating Assessable value and Customs duty payable)

M/s. Yeshaswi Industries Ltd., has imported a machine from Japan at an F.O.B. cost of 1,00,000 yen
(Japanese). The other expenses incurred were as follows:
(a) Freight from Japan to Indian port 10,000 yen;
(b) Insurance charges. 5,000 Yen;
(c) Designing charges paid to consultancy firm in Japan 15,000 yen;
(d) M/s Yeshaswi Industries Ltd. spent Rs. 50,000 in India for development work connected with
the machine;
(e) Transportation cost from Indian port to factory Rs. 15,000;
(f) CBEC has announced exchange rate as 1 yen = Rs. 0.50. However the exchange rate prevailing in the
market was 1 yen = Rs. 0.5104
(g) M/s Yeshaswi Industries Ltd. made payment to the bank based on exchange rate of 1 yen = Rs.
0.5007.
(h) The commission payable to the agent in India was @ 5% of F.O.B. price in Indian rupees.
(i) The rate is Basic Customs Duty is 8%. Similar goods are subject to 18% GST in India. Education
cess is as applicable. Find the customs duty and other duties payable.

Problem Number Twenty –One (Problem on Calculating Assessable value and Customs duty
payable)

Compute the Customs duty from the following data:

(a) Machinery imported from USA by Air (FOB) 8,000 US $,
(b) Accessories were compulsorily supplied with Machine (Electric Motor & others) (FOB) 2,000 US $,
(c) Air freight 3,000 US$
(d) Insurance 100 US $,
(e) Local agents commission to be paid in Indian Rupees is Rs. 4,500
(f) The exchange rate is 1 US Dollars = Indian Rupees is Rs. 65
(g) Customs duty on Machinery –10% ad valorem,
(h) Education Cess is as applicable.
(i) Integrated Tax is exempt as per the notification.

Problem Number Twenty-two (Problem on Calculating Assessable value and Customs duty
payable)

Prakash. Ltd., an actual user imports certain goods from USA, at Mangalore port, at cost of $ 1, 00,000
FOB which includes:
a. Packing charges: $22,000.
b. Local Taxes in India $2000
c. Transit insurance after Import: $10,000.
d. Cost of durable & reusable container $3000.
Rate of exchange notified by the Central Board of Excise and Customs: Rs.62.50/$.
Sea freight to Indian port: $28,000 not included in FOB.
Rate of basic custom duty: 10%,
Integrated Tax: 12%.
Compute the assessable value of the imported goods and the customs duty payable.

Problem Number Twenty-three (Problem on Calculating Assessable value and Customs duty
payable)

VRK Ltd., an actual user imports certain goods from Mexico, at Mumbai port, at cost of $2, 00,000 FOB
which includes:
a. Demurrages Charges for late clearance of goods: $5,000.
b. Local Taxes in India $2000
c. Transit insurance after Import: $10,000.
d. Charges of purchasing agent abroad: $4,000.
e. Cost of durable & reusable container $3000.
Rate of exchange notified by the Central Board of Excise and Customs: Rs.60.56/$.
Sea freight to Indian port: $30,000 and Insurance of $2000 is not included in FOB.
Rate of basic custom duty: 10%, Integrated Tax: 12%.

Compute the assessable value of the imported goods and the customs duty payable.

Problem Number Twenty-four (Problem on Calculating Assessable value and Customs duty
payable)

Compute the Customs Duty Liability as per the provisions of the customs Act 1962 from the following
information. Make suitable assumption
a) The total FOB value of the goods US $ 70,000
b) Quantity Imported 200 metric tons
c) Ocean Freights US $ 10,000 And Insurance US $ 740
d) Landing charges @ 1% of CIF Value.
e) Exchange Rate US $ 1 = Rs 63
f) Date of presentation of Bill of Entry 25 th August 2017.
g) Date of Entry inwards of the vessels is 02 nd September 2017.
h) Customs Duty Rates are as follows.
Particulars As on 25/08/2017 As on 02/09/2017
Basic Customs Duty 15% 10%
Integrated Tax 10% 12%
 Problem Number Twenty-five (Problem on Calculating Assessable value and
Customs duty payable, including Anti-dumping Duty)

A commodity is imported into India from a country covered by a notification

issued by the Central Government under section 9A of the Customs Tariff Act,
1975. Following particulars are made available:

(a) CIF value of the consignment: US$30,000

(b) Quantity imported: 1000 Kgs.
(c) Exchange rate applicable: Rs. 65= US$1
(d) Basic customs duty: 10%
(e) Education and secondary and higher Education Cess as applicable.
(f) As per the notification, the anti-dumping duty will be equal to the difference
between the costs of commodity calculated @US$ 60 per kg and the landed value
of the commodity as imported.

Calculate the liability on account of normal duties, Cess and the anti-dumping duty.

Assume that only ‘Basic Customs Duty’ (BCD) and Education and Secondary and Higher
Education Cess are payable.