Customsdutybasics-150924180945-lva1-app6892.pdf

Customs Duty • Ajay Babu Bandi  Practising Chartered Accountant  M.Com, FCMA,ACA,IFRS(Certified)

Customs duty  is a duty or tax, which is levied by the

Central Government on import of goods into, and export of goods from India  Also referred to in Kautilya’s Arthasastra as “Shulka”

Sources of Customs law  Customs Act ,1962  Customs Tariff Act, 1975

 Rules and Regulations  (Customs valuation Rules 2007)  (Baggage Rules 1998)

 (Export Manifest Regulations 1976)

Application of the Act (scope)  The customs Act 1962 applies to whole of India  India includes territorial waters (12 nautical miles or

22 km) of India  Notified designated areas in Continental Shelf of India (CSI) and Exclusive Economic Zone of India (EEZI)  EEZI  200 nautical miles from baseline

Other important terms  Indian Customs Waters Sec 2(28)  waters

extending into the sea up to the limit of contiguous zone of India

 Contiguous zone of India -> 12 nautical miles beyond the Indian territorial waters  24 nautical miles from baseline

Chargeability of Customs Duty (Sec.12)  Import and Export : Duties of customs should be levied on all Imported and Exported Goods

 Persons Liable : Importer and Exporter, including Government

Significance of Customs Waters  Arrest of the suspected persons u/s 104  Stop and search of vessels u/s 106 ..AND  Confiscation of vessels u/s 115

Rates of Duty

Taxable Event  The taxable event in customs is

Importation of goods into India, or  Exportation of goods from India

Taxable Event in case of Imports  In case of goods cleared for home

consumption --- the taxable event being reached at the time when the goods reach the customs barriers and bill of entry for home consumption is filed

Taxable Event in case of Exports  Export of goods when the goods

cross the territorial waters of India.  If ship sinks within the territorial waters, export is NOT complete

Goods..

Drawings, Designs & Manuals  Goods includes “any other kind of Movable

Property”  So..all tangible and Movable articles brought to India as Baggage /Postal Price /Cargo are Goods  Accordingly.. Drawings ,Designs ,Manuals & Technical Matter are “Goods”  Case : Associated Cement Companies Ltd

Conveyance Sec. 2(9)  includes…  A vessel

 An aircraft and  A vehicle

Vehicle Sec. 2(42)  means…  Conveyance of any kind used on

land and includes a Railway Vehicle

Duty to be paid on goods derelict, Jetsam, Flotsam, wreck etc  All goods derelict, jetsam, flotsam and wreck brought to India , shall be dealt with as if they were imported in India

 Thus , even though such goods had not been actually imported, they would be liable to import duty  However, if such goods are entitled to be admitted duty-free under this act, duty would not be levied

 Derelict – This refers to any cargo ,vessel etc

abandoned in the sea with no hope of recovery  Jetsam – This refers to goods jettisoned from the vessel to save her from sinking  Flotsam- Jettisoned goods which continue floating in the sea are called flotsam  Wreck -This refers to cargo or vessel or any property which are Cast ashore by tides after ship wreck

Illustration A fishing trawler operating in high seas, beyond the territorial waters of India, finds a

ship wrecked in mid sea and brings Jetsam and Flotsam into India, along with fish caught by it. Fish which are intentionally brought into India would be liable to Customs Duty Jetsam and Flotsam brought into India would also be liable to Customs Duty in the same manner as Fish

Reduction in customs liability in certain cases Pilferage of Goods u/s 13 Damage and deterioration of goods u/s 22

Remission of duty of goods lost, destroyed or abandoned u/s 23 Denaturing or Mutilation of Goods u/s 24 Exemption granted by notification or by special order u/s 25

Pilferage of Goods u/s 13 Pilferage refers to “Petty theft” i.e., to steal the

goods ,especially in small quantities Importer not liable if..pilferage takes place.. After the imported goods were unloaded and.. Before the proper officer has made an order for clearance for :Home consumption or deposit in a warehouse Importer is liable , if such goods are restored to the importer after pilferage

Approved Custodian : Liability u/s 45(3) If any imported goods are Pilfered, after unloading thereof in a customs area, while in the custody of a person approved by the commissioner u/s 45(1), such Custodian shall be liable to pay Duty on such goods

Damaged and Deteriorated Goods u/s 22 Effect.. The duty will be reduced proportionately to the reduction in value Valuation.. Owner has the option (a) value may be ascertained by the proper officer ..or… (b) Damaged goods may be sold by  (i) Public auction or

 (ii) tender or  (iii) any manner with the consent of the owner

Lost, Destroyed or Abandoned Goods u/s 23 Lost means.. Lost otherwise than as a

result of pilferage or destroyed Time – any time before clearance for Home consumption Effect.. If goods are proven lost or destroyed to the satisfaction of AC or DC , he shall remit the duty on such goods

Lost, Destroyed or Abandoned Goods u/s 23 Abandoned Goods meaning.. Owner may relinquish his title to the Goods Time – any time Before making of order for clearance for :-

Home consumption or deposit in a warehouse Effect.. Owner shall be liable to pay the duty on such goods

Exception .. Owner cannot abandon duty goods if an offence appears to have been committed

Denaturing or Mutilation of Goods u/s 24 Meaning.. Rendering of such goods unfit for its use or purpose Effect.. Such goods carry less duty because of the reduction in their end use purpose Chargeable to duty ..if .. Such goods had been imported in denatured or mutilated form

Damaged or Lost, Destroyed Deteriorated or Abandoned Goods (Sec.22) Goods (Sec.23)

Point of Distinction

Pilfered Goods (Sec.13)

1.Physical Availability 2. Qty Lost

Goods lost by Lost/destroyedtheft, not Physically Not available physically available but in a Abandoned available damaged form available Small Quantities Any quantity Any quantity

3. Duty liability

NOT leviable

Lost/destroyedleviable but leviable but AC/DC may grant amount reduced remission proportionately Abandoned i.e. abatement Owner not liable

Point of Distinction

Pilfered Goods (Sec.13)

Damaged or Lost, Destroyed or Deteriorated Abandoned Goods Goods (Sec.22) (Sec.23)

4. Nature of benefit

Statutory benefit . Benefit is given by Statutory benefit . But damage is statute, but Cannot be denied by estimated by discretion is Proper Officer Proper Officer available to AC/DC

5. Burden of Proof

Importer should prove that it is not Due to natural due to his wilful causes, should be Importer need not act/negligence/def proved by prove ault improter

If pilfered Goods are restored , duty is 6.Restoration payable

No question of restoration, as they are not missing

not possible since goods are physically lost/destroyed

Point of Distinction

7. Abandonment

8. Time point

9. Warehoused goods

Pilfered Goods (Sec.13)

Damaged or Lost, Destroyed or Deteriorated Goods Abandoned Goods (Sec.22) (Sec.23)

No question of where goods are abandonment, as sold by public they are not auction, they are available at all deemed abandoned

Sec. 23 covers situations of abandonment/ surrender also

After unloading and All imported and before clearance warehoused goods

Any time before clearance

Not applicable

Applicable

Applicable