UNIT 5 - Customs Law

Legislative Background of the levy

Introduction:
Customs is an authority or tax collection wing appointed by the Government in every country for
controlling and for collecting of tax on the flow of goods into and out of a country.

Central Board of Indirect Taxes and Customs is a part of the Department of Revenue under
the Ministry of Finance, Government of India. The Board is the administrative authority for its
subordinate organizations, including Custom Houses.

‘Customs Duty’ refers to the tax imposed on the goods when they are transported across
the international borders. Custom Duty is an indirect tax, imposed under the Customs
Act formulated in 1962.

Definition: Customs Duty is a tax imposed on imports and exports of goods.

Section 2
(15) "duty" means a duty of customs leviable under this Act;
(18) "export", with its grammatical variations and cognate expressions, means taking out of
India to a place outside India;
(19) "export goods" means any goods which are to be taken out of India to a place outside
India;
(20) "exporter", in relation to any goods at any time between their entry for export and the time
when they are exported, includes 18[any owner, beneficial owner] or any person holding himself
out to be the exporter;

22) "goods" includes -

(a) vessels, aircrafts and vehicles;
(b) stores;
(c) baggage;
(d) currency and negotiable instruments; and
(e) any other kind of movable property;

There is distinction between vessel/aircraft as mere goods and when they come to India as
conveyance carrying imported goods. In the former case, customs duty is payable and not in the
latter case – CCE v. Aban Lloyd Chiles Offshore (2017) 3 SCC 211 2017 (346) ELT 513
(SC).

Thus, ships or aircrafts brought for use in India or for carrying cargo for ports out of
India, would be dutiable. Definition of goods has been kept quite wide as Customs Act is used
not only to collect duty on ‘goods’ but also to restrict/prohibit import or export of ‘goods’ of any
description. Main two tests for ‘goods’ are
(a] they must be movable and

(b) they must be marketable.

The very fact that goods are transported by sea/air/road means that they are ‘movable’. Since
most of imports are on payment basis, test of ‘marketability’ is obviously satisfied.

● Dutiable Goods – Section 2(14) defines ‘dutiable goods’ as any goods which are
chargeable to duty and on which duty has not been paid.
● As per section 2(15), ‘duty’ means a duty of customs leviable under Customs Act.
Thus, goods continue to be ‘dutiable’ till they are not cleared from the port. However,
once goods are assessed at ‘Nil’ rate of duty, they no longer remain ‘dutiable goods’.
Once duty is paid, the goods cease to be dutiable goods – CCE v. Aban Lloyd Chiles
Offshore (2017) 3 SCC 211 = 2017 (346) ELT 513 (SC).

● Section 2 (23) - "import", with its grammatical variations and cognate expressions,
means bringing into India from a place outside India;
● Section 2 (24) "arrival manifest or import manifest" or "import report" means the
manifest or report required to be delivered under section 30;
● Section 2(25) "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(26) "importer", in relation to any goods at any time between their importation
and the time when they are cleared for home consumption, includes [any owner,
beneficial owner] or any person holding himself out to be the importer;

Chapter II - Officers of Customs

Section 3. Classes of officers of customs. -

There shall be the following classes of officers of customs, namely:-

2[(a) Principal Chief Commissioners of Customs;

(b) Chief Commissioners of Customs;

(c) Principal Commissioners of Customs;

(d) Commissioners of Customs;

(e) Commissioners of Customs (Appeals);

(f) Joint Commissioners of Customs;

(g) Deputy Commissioners of Customs;

(h) Assistant Commissioner of Customs;

(i) such other class of officers of customs as may be appointed for the purposes of this Act.

Brief Legal History:

● Taxes on goods were levied on various goods right from the Veda period. Customs Duty
as we understand it today has its origin in the British period.
● British established its first Board of Revenue in 1786 at Calcutta.
● New Board of Trade was established in 1808.
● A uniform Tariff Act was introduced in 1859 all over India. General rate of import duty
was 10%, which was reduced to 7.5% in 1864.
● Customs duty in India is linked with the history of the textile industry. British
manufacturers wanted to export their products to India and due to their pressure, duty on
varieties of cotton goods was abolished in 1877.
● Meanwhile, the Sea Customs Act was passed in 1878. In 1882, all import duties were
abolished, but re-introduced in 1894 at a general rate of 5%.
● Indian Tariff Act was passed in 1894. Import duty on cotton goods @ 5% was
introduced in 1894. At the same time, excise duty on Indian cotton goods was imposed,
which was bitterly resented in India and it was finally abolished in 1925.
● General rate of customs duty was later increased to 7.5%. The Land Customs Act was
passed in 1924. Air Customs was covered by making some rules under Indian Aircraft
Act, 1911.
● After independence, the manufacturing industry grew and trade expanded. Customs
Act, 1962 was passed to consolidate Sea Customs Act, Land Customs Act and
provisions for air customs.
● On the basis of the world customs organization guidelines and principles, the
Customs Act, 1962 and the Customs Tariff, 1975 has been framed to regulate the
movement of imported goods into India and exported goods out of India.

Constitutional Provision
● 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.
Customs Act 1962 - Objectives

● The primary objective behind levying customs duty is to safeguard each nation’s
economy, jobs, environment, residents, etc., by regulating the movement of goods in and
out of any country.
● It is also to minimize the smuggling of demerit goods such as cigarettes and
alcoholic beverages across borders since these items are usually highly taxed and their
tax rates may also vary significantly across borders.
 Overview of customs laws in India:

● The Quantum of Customs duty in India depends upon the provisions of Customs Act,
1962 and Customs Tariff Act, 1975 and related Customs Rules, Notifications, Circulars,
case Laws and Annual Union Finance Acts.
● The Customs Act, 1962 is the Principal Act which governs entry or exit of different
categories of vessels, aircrafts, goods, passengers etc., into or outside the
country. The Act extends to the whole of India.
● The Customs Act is used to (a) regulate imports and exports (b) protect Indian industry
from dumping (c) collect revenue of customs duty.
● In addition, provisions of Customs Act are used for other Acts like Foreign Trade
(Development and Regulation) Act, Foreign Exchange Management Act (FEMA) etc.
Customs Law is covered under various Acts, rules, regulations and notifications, as
follows :

Customs Act, 1962:

This is the main Act, which provides for levy and collection of duty, import/export
procedures, prohibitions on importation and exportation of goods, penalties, offences
etc.

Customs Tariff Act, 1975:

The Act contains two schedules – Schedule 1 gives classification and rate of duties for imports,
while Schedule 2 gives classification and rates of duties for exports. In addition, the CTA
(Customs Tariff Act) makes provisions for duties like additional duty (CVD), preferential duty,
anti-dumping duty, protective duties etc.

Tariffs, however, are only used for imported and exported goods. Tariffs protect the local
economy by making imported goods more expensive compared to domestic production.

Rules under Customs Act –

Under section 156 of Customs Act, 1962, the Central Government has been empowered to
make rules, consistent with provisions of the Act, to carry out the purposes of the Act. Various
rules have been framed under these powers.

Regulations under Customs Act–

Under section 157 of Customs Act, 1962, the Board has been empowered to make regulations,
consistent with provisions of the Act, to carry out the purposes of the Act. Various regulations
have been framed under these powers. In Sukhdev Singh v. Bhagatram Sardar Singh, it was
held that regulations framed under statutory provisions would have the force of law.
Notifications under Customs Act–

Various sections authorize the Central Government to issue notifications. The main are section
25(1) to grant partial or full exemption from duty and section 11 to prohibit import or export of
goods.

Board circulars –

The Board is empowered u/s 151A of Customs Act to issue, for the purpose of uniformity in
classification of goods or with respect to the levy of duty thereon, issue such instructions and
directions to officers of customs and they are required to observe and follow such orders,
instructions and directions of Board. CBI&C issues circulars giving various
instructions/prescribing various procedures etc. Normally, these instructions should be followed.

Following are the types of customs duty in India,

1. Basic Customs Duty (BCD)

2. Countervailing Duty (CVD)
3. Additional Customs Duty or Special CVD
4. Protective Duty,
5. Anti-dumping Duty
6. National Calamity Contingent Duty
7. Education Cess on Customs Duty

1. Basic Customs Duty

Basic custom duty is the duty imposed on the value of the goods at a specific rate. The duty
is fixed at a specified rate of ad-valorem basis. This duty has been imposed from 1962 and was
amended from time to time and today is regulated by the Customs Tariff Act of 1975. The
Central Government has the right to exempt any goods from the tax.

2. Countervailing Duty (CVD)

This duty is imposed by the Central Government when a country is paying the subsidy to the
exporters who are exporting goods to India. This amount of duty is equivalent to the subsidy
paid by them. This duty is applicable under Sec 9 of the Customs Tariff Act.

3. Additional Customs Duty or Special CVD

In order to equalize imports with locals taxes like service tax, VAT and other domestic taxes
which are imposed from time to time, a special countervailing duty is imposed on imported
goods. Hence, is imposed to bring imports on an equal track with the goods produced or
manufactured in India. This is to promote fair trade & competition practices in our country.
 4. Protective Duty
In order to make sure that no harm is caused to the domestic industries of India, a
safeguard duty is imposed to safeguard the interest of our local domestic industries. It is
calculated on the basis of loss suffered by our local industries.

5. Anti Dumping Duty

Often, large manufacturers from abroad may export goods at very low prices compared to prices
in the domestic market. Such dumping may be with intention to cripple domestic industry or to
dispose of their excess stock. This is called ‘dumping’. In order to avoid such dumping, the
Central Government can impose, under section 9A of Customs Tariff Act, anti-dumping duty up
to margin of dumping on such articles, if the goods are being sold at less than its normal value.
Levy of such anti dumping duty is permissible as per WTO agreement. Anti dumping action
can be taken only when there is an Indian industry producing ‘like articles’.

6. National Calamity Contingent Duty

This duty is imposed by Sec 129 of the Finance Act. The duty is levied on goods like tobacco,
pan masala or any items that are harmful for health. The rate of the tax varies from 10% to 45%
and different rates are applied for different reasons.

7. Education Cess on Customs Duty

At the prescribed rate is levied as a percentage of aggregate duties of customs. If goods are
fully exempted from duty or are chargeable to nil duty or are cleared without payment of duty
under prescribed procedure such as clearance under bond, no cess would be levied.

Important judgements:

● Goods become liable to import duty or export duty when there is ‘import into, or export
from India’.
● As per section 2(18), ‘export’ means taking out of India to a place outside India.
● As per section 2(23) of Customs Act, ‘import’ means bringing into India from a place
outside India. In Gramophone Company of India v. Birendra Bahadur Pandey, it was
held that ‘import’ included goods imported for transit across to Nepal.
● In Indian Airlines v. CC, Indian Airlines had international flights. After returning from an
international flight, the fuel was used for domestic run. It was held that fuel left in the fuel
tank after termination of international run is ‘import’ and liable to customs duty.
● Section 2(27) of Customs Act defines ‘India’ as inclusive of territorial waters. Hence, it
was thought that ‘import’ is complete as soon as goods enter territorial water. Similarly,
export is complete only when goods cross territorial waters. There were conflicting
judgments of the High Courts. Finally, in Kiran Spinning Mills v. CC , it has been held
that import is completed only when goods cross the customs barrier. The taxable
event is the day of crossing of customs barriers and not on the date when goods landed
in India or had entered territorial waters. In the case of goods which are in the
 warehouse the customs barrier would be crossed when they are sought to be taken out
of the customs and brought to the mass of goods in the country. In Garden Silk Mills
Ltd. v. UOI, the same 3 member bench passed judgment in Kiran Spinning Mills, it was
held that import of goods in India commences when they enter into territorial
waters but continues and is completed when the goods become part of the mass
of goods within the country. The taxable event is reached at the time when the goods
reach the customs barrier and a bill of entry for home consumption is filed.
● Though there is slight contradiction between the SC judgments, it can be said that
‘mixing up with mass of goods in the country’ after crossing customs barriers is
the ‘taxable event’ for customs duty on imports.
● In case of warehoused goods, the goods continue to be in customs bond. Hence,
‘import’ takes place only when goods are cleared from the warehouse which has been
confirmed in the case of UOI v. Apar P Ltd. and in Kiran Spinning Mills v. CC , where
it was held that taxable events occur when goods cross customs barriers and not when
goods land in India or enter territorial waters.

- PORTS -
Section 2

(10) "customs airport" means any airport appointed under clause (a) of section 7 to be a
customs airport and includes a place appointed under clause (aa) of that section to be an air
freight station;
(11) "customs area" means the area of a customs station [or a warehouse] and includes any
area in which imported goods or export goods are ordinarily kept before clearance by Customs
Authorities;
(12) "customs port" means any port appointed under clause (a) of section 7 to be a customs
port [, and includes a place appointed under clause (aa) of that section to be an inland container
depot];
(13) "customs station" means any customs port, 16[customs airport, international courier
terminal, foreign post office] or land customs station;

Chapter III -[Appointment of Customs ports, airports, etc.]

Section 7. Appointment of customs ports, airports, etc.-

[(1)] The [Board] may, by notification in the Official Gazette, appoint -

(a) the ports and airports which alone shall be customs ports or customs airports for the
unloading of imported goods and the loading of export goods or any class of such goods;
[(aa) the places which alone shall be 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) the places which alone shall be 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 ports which alone shall be 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 post offices which alone shall be foreign post offices for the clearance of imported
goods or export goods or any class of such goods;

(f) the places which alone shall be international courier terminals for the clearance of
imported goods or export goods or any class of such goods.]

Section 8. Power to approve landing places and specify limits of customs area. -

The [Principal Commissioner of Customs or Commissioner of Customs] may, -

(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. ****]
Omitted

Section 10. Appointment of boarding stations. -

The [Principal Commissioner of Customs or Commissioner of Customs] may, by notification

in the Official Gazette, appoint, in or near any customs port, a boarding station for the
purpose of boarding of, or disembarkation from, vessels by officers of customs.
Warehouses- Sections 57 to 73 of Customs Act, 1962
● The provisions for warehousing have been mentioned under Chapter IX of the
Customs Act, 1962 and other subsequent rules and regulations. The process of
warehousing and its related provisions have been elaborated below.
● What is Warehousing? Warehousing is the process of storing physical goods
before they are sold further or distributed.

● Warehouses safely and securely store products in an organized way to track where
items are located, when they arrived, how long they have been there, and the quantity
on hand.
● The legal provisions relating to Warehousing are contained under Sections 57 to 73 of
Customs Act, 1962 & Rule 2(18).Thereafter by The Manufacture and other operations in
Warehouse Regulations, 1966 & The Warehoused Goods (Renewal) Regulations, 1963.

● The law also lays down the time period up to which the goods may remain in a
warehouse without incurring any interest liability and with interest liability.

● The warehouses are to be appointed/licensed at particular places only which have

been so declared by the Central Board of Indirect Taxes and Customs. The Board
has delegated its power for declaring places to be Warehousing Stations to the Chief
Commissioners of Customs.
● In respect of 100% EOUs, the powers to declare places to be Warehousing Stations
have been delegated to the Commissioners of Customs.
Relevant Provisions for Warehousing under Indian Customs Law Appointment of Public
Warehouses

(Section 57):( 1)

● The section prescribes that the Principal Commissioner of Customs or the Commissioner
of Customs may subject to certain conditions prescribe; appoint a public warehouse
wherein dutiable goods may be deposited.
● These warehouses are managed by the warehousing corporations. The goods can
be deposited by any person and there can be no cancellation of license.
● In this respect, other than the Central Warehousing Corporation and the State
Warehousing Corporations private operators can also be appointed as custodians
and for this purpose all applications of custodianship are to be carefully scrutinized and
due consideration given to factors such as feasibility and financial viability of warehouse
operator, his credibility, his financial status, his past record to comply with Customs &
Excise laws, expertise in warehousing field, etc.
● The applicant should accept to pay cost-recovery charges on payments of Merchant
Overtime/Supervision Charges for obtaining services of Customs officers. Licensing of
Private Warehouses.
 (Section 58): (1)
● This section provides that a license may be provided to any private warehouse under
fulfillment of certain conditions by the Principal Commissioner of Customs or the
Commissioner of Customs wherein dutiable goods may be imported on behalf of the
licensee.
● The goods of the owners can only be deposited and the license can be cancelled for
violation of the warehousing provisions.

The following guidelines in case of storage of sensitive goods have been provided:
1. Applicants should produce a Solvency Certificate from a Scheduled Bank of repute for a
value not less than Rs. 50 lakhs;
2. Such warehouses may not be located in residential areas; The premises should be secure,
possess fire-fighting provisions and easily accessible to the Customs Officers;
3. Goods deposited should be fully insured for a value at least equal to the customs duty;
4. applicants may be asked to furnish a bank guarantee.

(2) The Assistant Commissioner of Customs may cancel a licence granted under
sub-section (1) –

(a) by giving one month's notice in writing to the licensee; or

(b) if the licensee has contravened any provision of this Act or the rules or regulations or
committed breach of any of the conditions of the licence:

Provided that before any licence is cancelled under clause (b), the licensee shall be given a
reasonable opportunity of being heard.

(3) Pending an inquiry whether a license granted under sub-section (1) should be canceled
under clause (b) of sub-section (2), the Assistant Commissioner of Customs may suspend the
license.

● Warehousing Bond (Section 59): The importer or his representative is required to

present to the Customs a Bill of Entry for warehousing under Section 46 and
assessed under Section 17 or Section 18 of the Customs Act shall execute a bond
for sum equal to thrice the amount of the duty assessed for such goods and to pay all
duties and interest payable under sub-section (2) of Section 61 and to pay all fines and
penalties incurred for the contravention of any provisions under this Act.
● The Assistant Commissioner of Customs or Deputy Commissioner of Customs may
permit an importer to execute a general bond for such an amount as approved by them
within a specified period. Additionally, a security has to be furnished by the importer
 and the bond executed by the importer in respect of any goods shall continue to remain
in force even in the case of transfer of goods to another warehouse.
● The transferee shall execute a bond in the manner specified in sub-section (1) or
sub-section (2) and furnish security as specified under sub-section (3) on transfer of
goods wholly or partly.

Permission of deposit of goods in a Warehouse (Section 60):

This is applicable when the provisions of Section 59 have been complied with respect of
any goods whereby the proper officer may make an order permitting the deposit of the
goods in a warehouse.

Period for which goods may remain warehoused (Section 61): The goods
deposited in a bonded warehouse may be stored for a period of one year. However,
in case of capital goods intended for any 100% export-oriented undertaking, then such
goods can be stored for a period of 5 years. The period of warehousing can be
extended by the Commissioner of Customs for a period of 6 months and by the
Chief Commissioner of Customs for such further period. In case of granting an
extension the following categories of cases are considered if the interests of revenue are
not jeopardized:
1. Goods supplied as ship stores/aircraft stores.
2. Goods supplied to diplomats.
3. Goods used in the units operating under manufacture-in-bond scheme.
4. Goods imported by 100% EOUs. 5. Goods warehoused and sold through duty free
shops.
6. Machinery, equipment and raw material imported for building and fitment to ships.

These extensions however are not meant to be granted regularly but only under
circumstances where the goods have to be kept in the warehouse beyond the control
of the importer. In case the warehoused goods are likely to deteriorate, the
Commissioner of Customs may reduce the one year’s period of warehousing to such a
shorter period as he may deem fit.
Control over warehoused goods (Section 62):

● The goods deposited in the warehouse shall be subject to control of the proper
officer.
● No person can enter the warehouse without the permission of the proper
officer or remove any goods there from.
● The proper officer may cause the warehouse to be locked with the lock of the
Customs Department and no person shall remove or break such lock and the
officer shall have access to every part of the warehouse and have the power to
examine the goods.
Payment of rent and warehouse charges (Section 63):
 ● The rent has to be paid by the owner of the warehoused goods to the
warehouse-keeper at the rates fixed under any law for the time being in
force or where no rates are so fixed, at such rates as may be fixed by the
Commissioner of Customs.
● If the rent is unpaid within ten days from the date the warehouse-keeper
may after notice to the owner of the warehoused goods and with
permission of the proper officer sell a sufficient portion of the goods as
the warehouse-keeper may select.
Owner’s right to deal with warehoused goods (Section 64):
● The owner of goods may with the sanction of the proper officer and after the payment
of prescribed fees inspect the goods, separate damaged or deteriorated goods from
the rest, sort the goods and change their containers for the purpose of preservation,
sale, export or disposal of goods, deal with goods and their containers in such a
manner as may be necessary to prevent loss or deterioration or damage to the goods,
show the goods for sale, or take samples of goods without entry for home consumption,
and if the proper officer so permits, without payment of duty on such samples.

Manufacture and other operations in relation to goods in a warehouse (Section 65):

● The owner of any warehoused goods may carry on any manufacturing process or
other operations in the warehouse with the sanction of the Assistant Commissioner of
Customs or Deputy Commissioner of Customs and on payment of fees.
● Where there is any such waste the whole or any part of the goods resulting from such
operations are exported, import duty shall be remitted on the quantity of the
warehoused goods and if any part of goods resulting from such operation are for home
consumption, then import duty shall be charged on the quantity of the warehoused
goods.
Power to exempt imported materials used in the manufacture of goods in warehouse
(Section 66):

The Central Government by notification in the Official Gazette can exempt duty for the
manufacture of goods and the rate of duty leviable on the imported materials exceeds the rate
of duty leviable on such goods, if the Central Government is satisfied that in the interests of the
establishment or development or development of domestic industry it is necessary to do so.

Removal of goods from one warehouse to another (Section 67):

The owner of goods can remove the goods from one warehouse with the permission from the
proper officer subject to conditions as may be prescribed.

Clearance of warehoused goods for home consumption (Section 68):

Goods which are subject for home consumption may be cleared by the importer subject to a
bill of entry for home consumption in respect of such goods, goods on which import duty,
penalties, rent, interest and other charges have been paid and an order for clearance of such
goods for home consumption which has been made by the proper officer.
Clearance of warehoused goods for exportation (Section 69):

Goods can be exported to any place outside India without payment of import duty if a
shipping bill or a bill of export has been presented in respect of such goods, the export duty,
penalties, rent and other charges payable in respect of such goods have been paid and an
order for clearance of such goods has been made by the proper officer.
Further, if the Central Government is of the opinion that warehoused goods of any specified
description is likely to be smuggled back into India, and then it shall through the Official
Gazette direct that such goods shall not be exported to any place outside India without the
payment of duty or may be allowed to be exported subject to restrictions.

Allowance in case of volatile goods (Section 70):

The section applies to goods which have high regards to volatility and the manner of their
storage and such volatility shall be mentioned by the Central Government by notification in the
Official Gazette. Thus, when any warehoused goods at the time of delivery is found to be
deficient in quantity on account of such deficiency then the Assistant Commissioner of Customs
or Deputy Commissioner of Customs may remit the duty on such deficiency.

Goods not to be taken out of a warehouse except as provided by the Act (Section 71):
Warehoused goods shall not be taken out of the warehouse except on clearance for home
consumption or re-exportation or for removal to another warehouse as provided by the Act.

Goods improperly removed from the warehouse, etc. (Section 72)]:

The owner of goods shall pay the full amount of duty chargeable on account of goods which
have been removed in contravention with Section 71, 61, 64 and 59 together with all penalties,
rent, interest and other charges payable in respect of such goods when a proper officer
demands for it.

Cancellation and return of warehousing bonds (Section 73):

● The proper officer shall cancel the bond as discharged in full and shall on demand
deliver it so that the person who has executed as per Section 59 and has been cleared
for home consumption or export is entitled to receive it.

● General power to make regulations Section 157 of the customs Act, 1962 empowers
the Central Government of Board to make regulations consistent with this Act and
rules to carry out the purpose of this Act.
● Accordingly, the Central Government / Board made the following regulations for the
smooth operation of warehouses to facilitate imported goods and goods meant for
export: 1. Private Warehouse licensing regulations, 2016, 2. Public Warehouse
licensing regulations, 2016, 3. Special Warehouse licensing regulations, 2016, 4.
 Warehoused Goods (Removal) regulations, 2016, 5. Special warehouse (Custody
and Handling of Goods) Regulations, 2016, 6. Warehouse (Custody and handling
of Goods) Regulations, 2016.

Nature and restrictions on exports and imports -

● Under sub-section (d) of section 111 and sub-section (d) of Section 113, any goods
which are imported or attempted to be imported and exported or attempted to be
exported, contrary to any prohibition imposed by or under the Customs Act or any
other law for the time being in force shall be liable to confiscation.
● Section 112 of the Customs Act provides for penalty for improper importation and
Section 114 of the Customs Act provides for penalty for attempt to export goods
improperly. In respect of prohibited goods the Adjudicating Officer may impose a
penalty upto five times the value of the goods. It is, therefore, absolutely necessary
for the trade to know what are the prohibitions or restrictions in force before they
contemplate importing or exporting any goods.
● The terms "Prohibited Goods" have been defined in sub-section 33 of Section 2 of
the Customs Act as meaning "any goods the import or export of which is subject to any
prohibition under the Customs Act or any other law for the time being in force"
● Under section 11 of the Customs Act, the Central Government has the power to
issue Notification under which export or import of any goods can be declared as
prohibited. The prohibition can either be absolute or conditional. The specified
purposes for which a notification under section 11 can be issued are maintenance of
the security of India, prevention and shortage of goods in the country,
conservation of Foreign Exchange, safeguarding balance of payments etc.
● The Central Govt. has issued many notifications to prohibit import of sensitive
goods such as coins, obscene books, printed waste paper containing pages of
any holy books, armored guard, fictitious stamps, explosives, narcotic drugs, rock
salt, saccharine, etc.
● Under Export and Import Policy, laid down by the DGFT, in the Ministry of Commerce,
certain goods are placed under restricted categories for import and export. Under
section 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992, the
Central Government can make provisions for prohibiting, restricting or otherwise
regulating the import of export of the goods. As for example, import of second hand
goods and second hand capital goods is restricted.
● Some of the goods are absolutely prohibited for import and export whereas some
goods can be imported or exported against a licence. For example export of human
skeleton is absolutely prohibited whereas export of cattle is allowed against an export
licence. Another example is provided by Notification No.44(RE-2000) 1997 dated
24.11.2000 in terms of which all packaged products which are subject to provisions of
the Standards of Weights and Measures (Packaged Commodities) Rules, 1997, when
produced/packed/sold in domestic market, shall be subject to compliance of all the
provisions of the said Rules, when imported into India.
 ● All packaged commodities imported into India shall carry the name and address of
the importer, net quantity in terms of standard unit of weights measures, month
and year of packing and maximum retail sale price including other taxes, local or
otherwise. In case any of the conditions is not fulfilled, the import of packaged
products shall be held as prohibited, rendering such goods liable to confiscation.
● Another restriction under the aforesaid Notification issued by the Ministry of Commerce
is that the import of a large number of products, presently numbering 133, are required
to comply with the mandatory Indian Quality Standards (IQS) and for this purpose
exporters of these products to India are required to register themselves with Bureau
of Indian Standards (BIS). Non-fulfillment of the above requirement shall render such
goods prohibited for import.
● Import and export of some specified goods may be restricted/prohibited under other
laws such as Environment Protection Act, WildLife Act, Indian Trade and
Merchandise Marks Act, Arms Act, etc. Prohibition under those acts will also apply to
the penal provisions of the Customs Act, rendering such goods liable to confiscation
under section 111(d) of the Customs Act (for import) and 113 (d) of the Customs Act (for
export).
● Any Importer or Exporter for being knowingly concerned in any fraudulent evasion or
attempted evasion of any prohibition under the Customs Act or any other law for
the time being in force in respect to any import or export of goods, shall be liable to
punishment with imprisonment for a maximum term of three years (seven years in
respect of notified goods) under section 135 of the Customs Act. Any person who is
reasonably believed to be guilty of an offense, punishable under section 135, may be
arrested under the provisions of section 104 of the Customs Act.
● Keeping in view the above penal provisions in the Customs Act to deal with any
deliberate evasion of prohibition/restriction of import or export of specified goods, it is
advisable for the Trade to be well conversant with the provisions of EXIM Policy, the
Customs Act, as also other allied Acts. They must make sure that before any imports are
effected or export planned, they are aware of any prohibition/restrictions and
requirements subject to which alone goods can be imported/exported, so that they do
not get penalized and goods do not get involved in confiscation etc. proceedings at the
hands of Customs authorities.

Levy ,exemption and collection of customs

duties and overview of law and procedure

Levy - Section 12(1) in the Customs Act, 1962

(1) Except as otherwise provided in this Act, or any other law for the time being in force, duties
of customs shall be levied at such rates as may be specified under 1[the Customs Tariff Act,
1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or
exported from, India. 2[(2) The provisions of sub-section (1) shall apply in respect of all goods
belonging to Government as they apply in respect of goods not belonging to Government.]

Judicial decisions
1. Associated Cement Companies Ltd. V/S Cc 2001(128) Elt 21 (Sc)

Legal Background
Goods, whether imported or the ones to be exported, are the subject matter of Customs law.

Section 2 Sub-section 22 of the Customs Act, 1962 defines goods as-

1. Vessels, aircraft, and vehicles

2. stores
3. baggage
4. currency and negotiable instruments and;
5. any other kind of movable property

Facts
The Petitioners, who aggrieved with the order of the Customs, Excise, and Gold (Control)
Appellate Tribunal had approached the Supreme Court, were the importers of designs and
drawings in the form of hard copies that were transported through courier or parcel
system. In the instant case, the Assistant Commissioner of Customs, classifying them as
imported goods, levied customs duty on these design and drawing papers.

The appellants argued that drawings and designs do not fall within the ambit of the definition
of “goods” provided under Section 2(22) of the Customs Act and therefore the Assistant
Commissioner of Customs did not have the authority to levy customs duty on their imported
designs and drawings.

Decision
The Highest Court of the Land noted that while a design or a drawing in a digital format are
intangible in nature and does not fall within the definition of goods, the instance they are
converted or transformed into any tangible format in the form of paper or CDs or DVDs,
they become movable goods and thus start falling within the definition given under
Customs Act.
Therefore, the Apex Court held that the Assistant Commissioner of Customs had the authority
under the Customs Act, 1962 to levy duties on the items imported by the petitioners.

2. Aidek Tourism Services Pvt. Ltd. V/S. Commissioner Of Customs 2015 (318) Elt 3 (Sc)
Legal Background
Section 3 (1) of the Customs Tariff Act, 1975 mandates for the subjection of imported goods
to an additional duty equal to the excise duty levied under Central Excise Act, 1944 on the
domestic goods of like nature. This is done to bring the domestic producers/ manufacturers at
par with their foreign counterparts

Question of law
Whether an imported good be exempted from an additional duty under Section 3(1) of the
CTA if a good of like goods being produced/ manufactured in India has been exempted or is
exempt from Excise duty?

Decision
The Supreme Court while hearing this appeal held that the language used in Section 3(1) of the
CTA warrants for the imposition of such additional duty on the imported goods that is
equivalent to the excise duty being levied on a like domestic good. Meaning thereby that if the
excise duty has been reduced or exempted by notification, the additional duty on the imported
good will have a direct impact of such modification in the excise duty. Therefore, the additional
duty under Section 3(1) will be reduced, increased or be even made nil depending upon the
change in the excise duty.

The Apex Court, thus, gave an affirmative answer to the aforementioned question of law.

3. Rishiroop Polymers Pvt. Ltd. V/S Designated Authority And Additional Secretary 2006
(196) Elt 385 (Sc)

Legal Background
Section 9A (5) of the CTA provides that the time-period for the imposition of an
anti-dumping duty cannot exceed five years. However, the proviso to the said sub-section
authorises the Central Government to extend the aforementioned time-period for another five
years, if after conducting a review, it is of the notion that a lapse in the duty will lead to a relapse
of the practice of dumping or the injury caused therefrom.

Facts
The appellant was an importer of rubber goods from Korea. Upon the complaint made by
certain domestic industries that the import of the rubber goods from Korea is in the nature of
dumping and is therefore seriously harming them, an enquiry was conducted by the Designated
Authority which then recommended the Central Government to levy anti-dumping duty on
the goods in question. After the passage of five years, upon a review enquiry, the Authority
found that the cessation of anti-dumping duty may lead to a recurrence of the dumping or the
damage caused to the domestic industry. The Central Government, working on the
recommendation of the said authority, extended the period of duty imposition for another five
years. The appellants challenged the same-

Decision
The Supreme Court, upholding the decision of the Designated Authority and the Tribunal that
had upheld the decision of the former, stated that the primary objective for the setting up of a
review enquiry is not to ascertain whether there was a need for the extension of the duty or not,
rather it is to see if the non-extension of the duty would lead to the recurrence of dumping and
cause serious injury to the domestic industry with a causal link present between the two.

Clearance of goods from the port ,including baggage

CHAPTER VII - CLEARANCE OF IMPORTED GOODS AND EXPORT GOODS

( Section 44 - Section 51)

S. 44 Chapter not to apply to baggage and postal articles. - The provisions of this Chapter
shall not apply to (a) baggage, and (b) goods imported or to be exported by post.
Clearance of imported goods

S.45. Restrictions on custody and removal of imported goods. -

1. Save as otherwise provided in any law for the time being in force, all imported goods
unloaded in a customs area shall remain in the custody of such person as may be
approved by the Commissioner of Customs until they are cleared for home consumption
or are warehoused or are transshipped in accordance with the provisions of Chapter VIII.
2. The person having custody of any imported goods in a customs area, whether under
the provisions of sub-section (1) or under any law for the time being in force, -
(a) Shall keep a record of such goods and send a copy thereof to the proper officer;
(b) Shall not permit such goods to be removed from the customs area or otherwise dealt
with, except under and in accordance with the permission in writing of the proper officer.
3. Notwithstanding anything contained in any law for the time being in force, if any imported
goods are pilfered after unloading thereof in a customs area while in the custody of a person
referred to in sub-section (1), that person shall be liable to pay duty on such goods at the
rate prevailing on the date of delivery of an 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 the said
goods were carried.
S.46.Entry of goods on importation. -
1. The importer of any goods, other than goods intended for transit or transshipment, shall
make entry thereof by presenting to the proper officer a bill of entry for home
consumption or warehousing in the prescribed form:
Provided that if the importer makes and subscribes to a declaration before the proper officer, to
the effect that he is unable for want of full information to furnish all the particulars of the goods
required under this sub-section, the proper officer may, pending the production of such
information, permit him, previous to the entry thereof (a) to examine the goods in the
presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed
under section 57 without warehousing the same.
2. Save as otherwise permitted by the proper officer, a bill of entry shall include all the
goods mentioned in the bill of lading or other receipt given by the carrier to the
consignor.

3. A bill of entry under sub-section (1) may be presented at any time after the delivery of
the import manifest or import report as the case may be: Provided that the
Commissioner of Customs may in any special circumstances permit a bill of entry to be
presented before the delivery of such report:

Provided further that a bill of entry may be presented even before the delivery of such
manifest if the vessel or the aircraft by which the goods have been shipped for importation into
India is expected to arrive within thirty days from the date of such presentation.
4. The importer while presenting a bill of entry shall at the foot thereof make and subscribe
to a declaration as to the truth of the contents of such bill of entry and shall, in support
of such declaration, produce to the proper officer the invoice, if any, relating to the
imported goods.
5. If the proper officer is satisfied that the interests of revenue are not prejudicially affected
and that there was no fraudulent intention, he may permit substitution of a bill of entry for
home consumption for a bill of entry for warehousing or vice versa.

S.47. Clearance of goods for home consumption. -

1. Where the proper officer is satisfied that any goods entered for home consumption are
not prohibited goods and the importer has paid the import duty, if any, assessed
thereon and any charges payable under this Act in respect of the same, the proper
officer may make an order permitting clearance of the goods for home consumption.
2. Where the importer fails to pay the import duty under sub-section (1) within Five days
excluding holidays from the date on which the bill of entry is returned to him for payment
of duty, he shall pay interest at such rate, not below ten per cent. and not exceeding
thirty-six per cent. per annum, as is for the time being fixed by the Central
Government, by notification in the Official Gazette, on such duty till the date of payment
of the said duty:

Provided that where the bill of entry is returned for payment of duty before the commencement
of the Customs (Amendment) Act, 1991 and the importer has not paid such duty before such
commencement, the date of return of such bill of entry to him shall be deemed to be the date of
such commencement for the purpose of this section.
Provided further that if the Board is satisfied that it is necessary in the public interest so to do, it
may, by order for reasons to be recorded, waive the whole or part of any interest payable under
this section

S. 48.Procedure in case of goods not cleared, warehoused, or transhipped within thirty days
after unloading. - If any goods brought into India from a place outside India are not cleared for
home consumption or warehoused or transhipped within thirty days from the date of the
unloading thereof at a customs station or within such further time as the proper officer may allow
or if the title to any imported goods is relinquished, such goods may, after notice to the importer
and with the permission of the proper officer be sold by the person having the custody thereof:

Provided that -
(a) animals, perishable goods and hazardous goods, may, with the permission of the
proper officer, be sold at any time;
(b) arms and ammunition may be sold at such time and place and in such manner as the
Central Government may direct.

Explanation. - In this section, "arms" and "ammunition" have the meanings respectively
assigned to them in the Arms Act, 1959 (54 of 1959).

S.49. Storage of imported goods in warehouse pending clearance. - Where in the case of
any imported goods, whether dutiable or not, entered for home consumption, the Assistant
Commissioner of Customs or Deputy Commissioner of Customs is satisfied on the
application of the importer that the goods cannot be cleared within a reasonable time, the
goods may, pending clearance, be permitted to be stored in a public warehouse, or in a
private warehouse if facilities for deposit in a public warehouse are not available; but such
goods shall not be deemed to be warehoused goods for the purposes of this Act, and
accordingly the provisions of Chapter IX shall not apply to such goods.

Clearance of export goods

S. 50.Entry of goods for exportation. -

1. The exporter of any goods shall make entry thereof by presenting to the proper officer in
the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the
case of goods to be exported by land, a bill of export in the prescribed form.
2. The exporter of any goods, while presenting a shipping bill or bill of export, shall at the
foot thereof make and subscribe to a declaration as to the truth of its contents.
S.51. Clearance of goods for exportation. - Where the proper officer is satisfied that any
goods entered for export are not prohibited goods and the exporter has paid the duty, if any,
assessed thereon and any charges payable under this Act in respect of the same, the proper
officer may make an order permitting clearance and loading of the goods for exportation.
Goods imported or exported by post and
stores and goods in transit -
CHAPTER VIII - GOODS IN TRANSIT

S. 52. Chapter not to apply to baggage, postal articles and stores. - The provisions of this
Chapter shall not apply to (a) baggage, (b) goods imported by post, and (c) stores.

S. 53. Transit of certain goods without payment of duty. - Subject to the provisions of
section 11, 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 same conveyance to any place
outside India or any customs station may be allowed to be so transited without payment of
duty.

S. 54. Transhipment of certain goods without payment of duty. -

1. Where any goods imported into a customs station are intended for transhipment, a bill of
transhipment shall be presented to the proper officer in the prescribed form.

Provided that where the goods are being transhipped under an international treaty or bilateral
agreement between the Government of India and Government of a foreign country, a
declaration for transhipment instead of a bill of transhipment shall be presented to the
proper officer in the prescribed form .
Subject to the provisions of section 11,
2. where any goods imported into a customs station are mentioned in the import manifest
or the import report, as the case may be, as for transhipment to any place outside India,
such goods may be allowed to be so transhipped without payment of duty.
3. Where any goods imported into a customs station are mentioned in the import manifest
or the import report, as the case may be, as for transhipment -
a. to any major port as defined in the Indian Ports Act, 1908 (15 of 1908), or the customs
airport at Mumbai, Calcutta, Delhi or Chennai or any other customs port or customs
airport which the Board may, by notification in the Official Gazette, specify in this behalf,
or
b. to any other customs station and the proper officer is satisfied that the goods are
bonafide intended for transhipment to such customs station,

the proper officer may allow the goods to be transhipped, without payment of duty, subject to
such conditions as may be prescribed for the due arrival of such goods at the customs station to
which transhipment is allowed.
S.55. Liability of duty on goods transited under section 53 or transhipped under section
54. - Where any goods are allowed to be transited under section 53 or transhipped under
sub-section (3) of section 54 to any customs station, they shall, on their arrival at such station,
be liable to duty and shall be entered in like manner as goods are entered on the first
importation thereof and the provisions of this Act and any rules and regulations shall, so far as
may be, apply in relation to such goods.
S.56. Transport of certain classes of goods subject to prescribed conditions. - Imported
goods may be transported without payment of duty from one land customs station to another,
and any goods may be transported from one part of India to another part through any foreign
territory, subject to such conditions as may be prescribed for the due arrival of such goods at the
place of destination.

Clearance of Baggage
Baggage under the Customs Act, 1962 ( Section 77- Section 81)

What is meant by Baggage?

a. It is the luggage of the passenger traveling by air or sea from one country to another.
b. It also means all dutiable goods imported by a passenger or a member of crew in
his/her baggage .
Baggage INCLUDES unaccompanied baggage (except where they are specifically excluded)
but DOES NOT include motor vehicles

What is Unaccompanied Baggage?

a. It is the baggage which is not carried by the passenger at the time of her/his travel but
sent before or after arrival.
b. Time limit if the baggage is received before arrival: up to 2 months before arrival, or
within such period (not exceeding 1 year) as allowed by Asst/Dy Commissioner of
Customs (due to unavoidable circumstances).
c. Time limit if the baggage is received after arrival: 1 month of her/his arrival or such other
period as may be allowed by Asst/Dy Commissioner of Customs.

Section 77. Declaration by owner of baggage. –

The owner of any baggage shall, for the purpose of clearing it, make a declaration of its
contents to the proper officer.

What are Green & Red Channels?

a. Green channel means if a person does not have any dutiable goods, he can go through
it without undergoing any check, along with baggage. Hence no duty is applicable.
b. Red channel means if a person is carrying dutiable goods, he should pass through it
and submit declaration under section 77 mentioning the contents of the baggage to the
proper officer for clearance and his baggage can be inspected by customs authorities

Section 78. Determination of rate of duty and tariff valuation in respect of baggage. –
The rate of duty and tariff valuation, if any, applicable to baggage shall be the rate and valuation
in force on the date on which a declaration is made in respect of such baggage under section
77.

Determination of rate of duty & tariff valuation when dutiable goods are carried

a. Rate of duty & tariff valuation, if any, applicable to baggage shall be the rate & valuation
in force on the date on which declaration is made u/s 77.
b. Rate of duty on baggage is 35% + 2% EC + 1% SHEC = 36.05%
c. No additional customs duty u/s 3(1) or special CVD u/s 3(5)

Exemption: 1 laptop computer imported into India by a passenger of age of 18 years or

above (other than member of crew) is exempted from whole of basic customs duty

Section 79. Bonafide baggage exempted from duty. –

(1) 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 said officer is satisfied
that it is for the use of the passenger or his family or is a bona fide gift or souvenir; provided
that the value of each such article and the total value of all such articles does not exceed such
limits as may be specified in the rules.

(2) the Central Government may make rules for the purpose of carrying out the provisions of
this section and, in particular, such rules may specify –
(a) the minimum period for which any article has been used by a passenger or a member of
the crew for the purpose of clause (a) of sub-section (1);
(b) the maximum value of any individual article and the maximum total value of all the articles
which may be passed free of duty under clause (b) of sub-section (1);
(c) the conditions (to be fulfilled before or after clearance) subject to which any baggage may
be passed free of duty.

(3) Different rules may be made under sub-section (2) for different classes of persons.

Section 80. Temporary detention of baggage. –

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 [and if for any reason, the passenger is
not able to collect the article at the time of his leaving India, the article may be returned to him
through any other passenger authorized by him and leaving India or as cargo consigned in his
name].

Section 81. Regulations in respect of baggage. –

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.

Goods imported or exported by post

S. 82. Label or Declaration Accompanying Goods to be Treated as Entry. –

In the case of goods imported or exported by post, any label or declaration accompanying the
goods, which contains the description, quantity and value thereof, shall be deemed to be an
entry for import or export, as the case may be, for the purposes of this Act.

S. 83. Rate of Duty and Tariff Valuation in Respect of Goods Imported or Exported by
Post. –

(1) The rate of duty and tariff value, if any, applicable to any goods imported by, post shall be the
rate and valuation in force on the date on which the postal authorities present to the proper
officer a list containing the particulars of such goods for the purpose of assessing the duty
thereon :

Provided that if such goods are imported by a vessel and the list of the goods containing the
particulars was presented before the date of the arrival of the vessel, it shall be deemed to have
been presented on the date of such arrival.

(2) The rate of duty and tariff value, if any, applicable to any goods exported by post shall be the
rate and valuation in force on the date on which the exporter delivers such goods to the postal
authorities for exportation.

S. 84. Regulations Regarding Goods Imported or to be Exported by Post. –

The Board may make regulations providing for –

(a) the form and manner in which an entry may be made in respect of any specified class of
goods imported or to be exported by post, other than goods which are accompanied by a label
or declaration containing the description, quantity and value thereof;

(b) the examination, assessment to duty, and clearance of goods imported or to be exported by
post;

(c) the transit or transhipment of goods imported by post, from one customs station to another or
to a place outside India.

Goods imported or exported as Stores

S. 85. Stores may be Allowed to be Warehoused without Assessment to Duty:

Where any imported goods are entered for warehousing and the importer makes and
subscribes to a declaration that the goods are to be supplied as stores to vessels or aircrafts
without payment of import duty under this Chapter, the proper officer may permit the goods to be
warehoused without the goods being assessed to duty.

S. 86. Transit and Transshipment of Stores. –

(1) Any stores imported in a vessel or aircraft may, without payment of duty, remain on board
such vessel or aircraft while it is in India.

(2) Any stores imported in a vessel or aircraft may, with the permission of the proper officer, be
transferred to any vessel or aircraft as stores for consumption therein as provided in section 87
or section 90.

S. 87. Imported Stores May be Consumed on Board a Foreign-going Vessel or Aircraft. –

Any imported stores on board a vessel or aircraft (other than stores to which section 90 applies)
may, without payment of duty, be consumed thereon as stores during the period such vessel or
aircraft is a foreign-going vessel or aircraft.

S. 88. Application of Section 69 and Chapter X to Stores. –

The provisions of section 69 and Chapter X shall apply to stores (other than those to which
section 90 applies) as they apply to other goods, subject to the modifications that –

(a) for the words "exported to any place outside India" or the word "exported", wherever they
occur, the words "taken on board any foreign-going vessel or aircraft as stores" shall be
substituted;

(b) in the case of drawback on fuel and lubricating oil taken on board any foreign-going aircraft
as stores, sub-section (1) of section 74 shall have effect as if for the words "ninety-eight per
cent", the words "the whole" were substituted.

S. 89. Stores to be Free of Export Duty. –

Goods produced or manufactured in India and required as stores on any foreign-going vessel or
aircraft may be exported free of duty in such quantities as the proper officer may determine,
having regard to the size of the vessel or aircraft, the number of passengers and crew and the
length of the voyage or journey on which the vessel or aircraft is about to depart.

S. 90. Concessions in Respect of Imported Stores for the Navy. –

(1) Imported stores specified in sub-section (3) may without payment of duty be consumed on
board a ship of the Indian Navy.

(2) The provisions of section 69 and Chapter X shall apply to stores specified in sub-section (3)
as they apply to other goods, subject to the modifications that –

(a) for the words "exported to any place outside India" or the word "exported" wherever they
occur, the words "taken on board a ship of the Indian Navy" shall be substituted;

(b) for the words "ninety-eight per cent" in sub-section (1) of section 74, the words "the whole"
shall be substituted.

(3) The stores referred to in sub-sections (1) and (2) are the following :-

(a) stores for the use of a ship of the Indian Navy;

(b) stores supplied free by the Government for the use of the crew of a ship of the Indian Navy
in accordance with their conditions of service.

Duty drawbacks provisions

MEANING & DEFINITION OF DUTY DRAWBACK:
Duty Drawback is defined as the refund of duty on that part of the imported raw material
used in the production of the goods and manufactured goods are exported.

‘Drawback’ in relation to any goods manufactured in India and exported, means the rebate
of duty or tax, as the case may be, chargeable on any imported materials or excisable
materials used or taxable services used as input services in the manufacture of such goods;
According to Gruen, “Duty Drawbacks can be used to specify a flexible liberalization path and
speed up the opening of protected economics.”

CONCEPT OF DUTY DRAWBACK:

● Duty drawback scheme was introduced by the Ministry of Finance as a rebate for
duty chargeable on any imported materials or excisable materials used in manufacture
or processing of goods, manufactured in India and exported.
● The scheme promotes exports and to ensure that exported products are revenue
neutral.The Central Government is empowered to grant duty drawback under section
74 and 75 of the Customs Act, 1962.
● Under section 74 of the Customs Act, duty drawback to the extent of 98 percent of the
duty paid on imported goods can be claimed for re-export, provided the goods are
re-exported within 2 years of payment of import duty.
● Section 75 of the Act, empowers drawback on export of manufactured articles.

CATEGORIES OF DUTY DRAWBACK:

Drawback is basically divided into two categories as per provisions of Section 74 and 75 of the
Customs Act, 1962.
1. Drawback allowable on re-export of duty-paid goods: Section 74 of Customs Act allows
drawback on re-export of duty paid imported goods. Where any goods have been imported into
India and those same goods entered for re-export or to be exported as a baggage or entered for
export by post under section 82, the 98% of such duty shall be repaid as drawback. But
such goods must be identifiable as original imported goods and the goods must be entered for
export within two years from the date of payment of duty on the importation.
2. Drawback on imported materials used in the manufacture of goods which are
exported: Section 75 of customs Act allows drawback on physical exports (other than
re-exports) of finished products wherein duty has been paid, a drawback should be allowed on
any imported materials of a class or description used in the manufacture or processing of such
goods on which any operation has been carried out in India which have been entered for export
and in respect of which an order permitting the clearance and loading thereof for exportation
has been made under section 51 by the proper officer.

GOODS ELIGIBLE FOR DRAWBACK:

This scheme applies:
● To export goods imported into India
● To export goods imported into India after having been taken for use.
● To export goods manufactured/produced out of imported materials.
● To export goods manufactured/produced out of indigenous materials.
 ● To export goods manufactured/produced out of imported or indigenous materials.

NECESSARY ELEMENTS FOR DRAWBACK:

The necessary elements to claim drawback are:
1. The goods on which drawback is claimed must have been previously imported;
2. Import duty must have been paid on these goods when they were imported;
3. The goods should be entered for export within two years from the date of payment of
duty on their importation. The period can be further extended to three years by the
Commissioner of Customs on sufficient cause being shown.
4. The goods must be capable of being identified as imported goods.
5. The goods must actually be re-exported to any place outside India.
Here export is defined as taking out to a place outside India to a place of India. And India
includes Indian territorial waters. In case of Union of India v. Rajendra Dyeing & Printing
Mills, it was held that export is complete when goods leave territorial waters of India.
Drawback is available once ‘export’ is complete i.e. the goods cross the territorial waters even if
they do not reach the destination or they are destroyed. However, if the goods are destroyed in
territorial waters of India, drawback will not be available as the export is not complete.
In the case of Custom Collector, Calcutta v. Sun Industries the Supreme Court held that the
expression “taking out to a place outside India” would also mean a place in high seas, if that
place is beyond territorial waters of India. Therefore, the goods taken out to the high seas
outside territorial waters of India would come within the ambit of expression “taking out to a
place outside India”.
The market price of such goods must not be less than the amount of drawback claimed.
The amount of drawback should not be less than Rs. 50/- as per section 76 (1)(c) of the
Customs Act.

DRAWBACK CLAIM PROCEDURE:

At the time of the export, the exporter shall endorse the ‘shipping bill’ with description,
quantity and other details to the proper officer of Customs to decide whether goods are
eligible for duty drawback. Customs officer makes an order permitting clearance and loading of
goods for exportation under section 51 of Customs Act and said claim for drawback shall be
retained by the proper officer making such orderIf the shipping bill under drawback is submitted
electronically, that itself will be treated as claim for drawback.

RATE OF DUTY DRAWBACK:

In determining the amount or rate of drawback under this rule, the Central Government shall
have regard to:
· the average quantity or value of each class or description of the materials from
which a particular class of goods is ordinarily produced or manufactured in India;
· the average quantity or value of the imported materials or excisable materials
used for production or manufacture in India of a particular class of goods;
· the average amount of duties paid on imported materials or excisable materials
used in the manufacture of semis, components and intermediate products which are used in the
manufacture of goods;
 · the average amount of duties paid on materials wasted in the process of
manufacture and catalytic agents:
· the average amount of duties paid on imported materials or excisable
materials used for containing or, packing the export goods;
· any other information which the Central Government may consider relevant
or useful for the purpose.
Under Duty Drawback Scheme, an exporter can opt for either All Industry Rate (AIR) of Duty
Drawback Scheme or Brand Rate of Duty Drawback. The Duty Drawback Rate shall not exceed
33% of market price of export goods in any case.[16] The Central Government may revise
amount or rates determined under rule 3.

INTEREST ON DUTY DRAWBACK:

● Duty drawback must be paid within one month. If not so paid, interest is payable to the
claimant at the rate fixed under section 27A from the date after the expiry of such period.
● The interest rate will be between 10% to 30% as may be fixed by Board from time to
time.
● If the drawback claim is deficient, the interest will commence only after all required
papers are submitted.
● Where any drawback has been paid to the claimant erroneously or it becomes otherwise
recoverable under this Act, the claimant shall, within a period of two months from the
date of demand, pay in addition to the said amount of drawback, interest at the rate fixed
under section 28AA and the amount of interest shall be calculated for the period
beginning from the date of payment of such drawback to the claimant till the date of
recovery of such drawback.

PROHIBITION OF DUTY DRAWBACK IN CERTAIN CASES:

As per Section 76 no drawback shall be allowed in respect of any goods the market-price of
the goods is less than the amount of drawback; or where the drawback due in respect of any
goods is less than fifty rupees.

In the case of Om Prakash Bhatia v. Commissioner of Customs, Delhi, the Division Bench of
the Court observed that for the purpose of getting drawback, the relevant consideration is the
market price of the goods. But here the market price is a price prevailing in the country and not
the price of the goods which the exporter expects to receive from the overseas purchaser.

Authorities- Powers and functions and SEZ ,Units

Section 3. Classes of officers of customs. -

There shall be the following classes of officers of customs, namely:-

2[(a) Principal Chief Commissioners of Customs;

(b) Chief Commissioners of Customs;

(c) Principal Commissioners of Customs;

(d) Commissioners of Customs;

(e) Commissioners of Customs (Appeals);

(f) Joint Commissioners of Customs;

(g) Deputy Commissioners of Customs;

(h) Assistant Commissioner of Customs;

(i) such other class of officers of customs as may be appointed for the purposes of this Act.

Introduction:

●
It is essential that officers working in various wings of Customs, Excise and Service tax
departments derive their powers and functions under three main tax laws dealing with
indirect taxes, namely, Customs Act, 1962; Central Excise Act, 1944 and the Finance
Act, 1994.
● In addition to exercising powers under three indirect tax statutes, they also derive
powers given to them under various other allied laws such as NDPS Act,1985, PITNDPS
Act, Chemical Weapons Convention Act, 2000 etc. in which certain powers for specific
purposes have been given to our departmental officers for implementation in the field.
● As the officers of customs department have been given powers under various allied
Acts, similarly the officers of various other departments have also been empowered
under Customs Act, 1962 to exercise power of Custom officers subject to such limitation
as have been specified in such empowering notification.
Powers and duties of Customs officers:

SECTION 5. Powers of officers of customs. – (1) Subject to such conditions and limitations as
the Board may impose, an officer of customs may exercise the powers and discharge the duties
conferred or imposed on him under this Act.

(2) 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.

(3) Notwithstanding anything contained in this section, 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.

Section 28L. Powers of Authority. –

(1) The Authority shall, for the purpose of exercising its powers regarding discovery and
inspection, enforcing the attendance of any person and examining him on oath, 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 (5 of 1908).

(2) 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 (2 of 1974), 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.

● The Customs Officers are entrusted with the powers specifically relating to the collection
of customs duties and prevention of smuggling. For this powers they are invested with
the powers to

1. Search any person on reasonable suspicion,

2. Summon parties .
3. X-ray the body of the person for detecting secreted goods
4. Arrest a person against whom a reasonable suspicion exists that he has been
guilty of an offence under the Act;
5. Obtain a search warrant from a Magistrate.
6. Collect information by summons persons to give evidence and
7. Produce documents and to adjudge confiscation.

1. Section 100. Power to Search Suspected Persons Entering or Leaving India, Etc. –

(1) 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.

(2) 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.

2. Section 103. Power to Screen or X-Ray Bodies of Suspected Persons for Detecting
Secreted Goods.

(1) 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.

(2) 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.

(3) 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.

(4) 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.

(5) 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.

(6) 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 :

Provided that 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.

(7) 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.

(8) Nothing in this section shall apply to any person referred to in sub-section (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.
 3. Section 104. Power to Arrest. –

(1) If an officer of customs empowered in this behalf by general or special order of the
Commissioner of Customs has reason to believe that any person in India or within the Indian
customs waters has been guilty of an offence punishable under section 135, he may arrest such
person and shall, as soon as may be, inform him of the grounds for such arrest.

(2) Every person arrested under sub-section (1) shall, without unnecessary delay, be taken to a
magistrate.

(3) 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
142 Code of Criminal Procedure, 1898 (5 of 1898).

(4) Notwithstanding anything contained in the 143 Code of Criminal Procedure, 1898 (5 of
1898), an offence under this Act shall not be cognizable.

4. Section 105. Power to Search Premises –

(1) If the Assistant 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.

(2) The provisions of the 145 Code of Criminal Procedure, 1898 (5 of 1898), relating to searches
shall, so far as may be, apply to searches under this section subject to the modification that
sub-section (5) of section 165 of the said Code shall have effect as if for the word "Magistrate",
wherever it occurs, the words Commissioner of Customs were substituted

5. Section 106. Power to Stop and Search Conveyances. –

(1) 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.

6. Section 106A. Power to Inspect. –

Any proper officer authorised in this behalf by the 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.

7. Section 107. Power to Examine Persons. –

Any officer of customs empowered in this behalf by general or special order of the
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.

8. Section 108. Power to Summon Persons to give Evidence and Produce

Documents. –

(1) 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 in connection with the smuggling of any goods.
(2) 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.

(3) 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 produce such
documents and other things as may be required.

9. Section 109 - to Require Production of Order Permitting Clearance of Goods

Imported by Land.

Any officer of customs appointed for any area adjoining the land frontier of India and
empowered in this behalf by general or special order of the Board, may require any person in
possession of any goods which such officer has reason to believe to have been imported, into
India by land, to produce the order made under section 47 permitting clearance of the goods :

Provided that nothing in this section shall apply to any imported goods passing from a land
frontier to a land customs station by a route appointed under clause (c) of section 7.

10. Section 110. Seizure of Goods, Documents and Things. –

If the proper officer has reason to believe that any goods are liable to confiscation under this
Act, he may seize such goods :

● Section 108 of the Customs Act, 1962 provides that the Customs officer is entitled to
serve summons to collect the evidence to produce a document or other thing or to give
evidence.
● The person so summoned in bound to attend either in person or by an authorized agent,
as such officer may direct, is bound to state the truth upon any subject respecting which
he is examined or makes a statement and to produce such documents and other things
a may be required.
● Further the power to arrest, the power to detain, the power to search or obtain a search
warrant and the power to collect evidence are vested in the Customs Act.
● He is empowered to investigate into the infringement of the provisions of the Act
primarily for the purpose of adjudicating forfeiture and penalty.

Indian judgments:

Sukhawani V. Union of India

The Statement collected by the Customs Officer from any person may be used as substantive
evidence. In Naresh J. Sukhawani V. Union of IndiaThe Supreme Court held that the statement
made before the Customs officials is not a statement recorded under Section 161 of the
Criminal Procedure Code, 1973. It is a material piece of evidence collected by Customs Officials
under Section 108 of the Customs Act.: The SC held that therefore the statement can be used
as substantive evidence connecting the petitioner with the contravention by exporting foreign
currency out of India.

In Collector of Customs V. D. Bhoormull.

The Supreme Court held that the Department is not required to prove the case with
mathematical precision. All that is required is that the occurrence and complicity of an individual
should be established to such a degree of probability that a prudent person may, on its basis,
believe in the existence of the fact of issue.

In Commissioner of Customs V. Ghanshyam Gupta, the Division Bench of Patna High Court
held that there is no doubt about the legal position that the statements in the scheme of the Act
are admissible evidence in terms of Section 108 of the Act.

Conclusion:
From the light of the above, the officers of customs are given various powers to exercise for the
smooth functioning of the system and also they have been vested with some duties that they
have to discharge.