Chapter 3: Customs Law in India

 3.1 Introduction to Customs Law

 

Customs law in India governs the import and export of goods, ensuring the protection of domestic industries, regulation of trade, and collection of revenue. The primary legislations are the Customs Act, 1962, and the Customs Tariff Act, 1975. This chapter provides a detailed overview of customs laws, including constitutional aspects, levy and exemption of duties, classification and valuation, import and export procedures, warehousing, drawback, demand and recovery, and other related provisions.

 

 3.1.1 Constitutional Aspects

 

The Constitution of India grants the central government the authority to levy and collect customs duties. Key constitutional provisions include:

- Article 265: No tax shall be levied or collected except by authority of law.

- Article 246: Empowers the Parliament to legislate on matters enumerated in the Union List, including customs duties.

 

 3.2 Levy of and Exemptions from Customs Duties

 

 3.2.1 Application of Customs Law

 

Taxable Event:

- The taxable event for customs duty is the import into or export out of India of goods. Import occurs when goods cross into the territorial waters of India, and export occurs when goods cross the territorial waters of India.

 

Charge of Customs Duty:

- Customs duty is levied on the value of goods imported into or exported out of India. The rate and amount of duty depend on the classification and valuation of the goods.

 

Exceptions to Levy of Customs Duty:

- Certain goods are exempt from customs duties under specific circumstances, such as goods imported for personal use, diplomatic goods, and goods imported for defense purposes.

 

Exemption from Customs Duty:

- The government can grant exemptions from customs duty either fully or partially under Section 25 of the Customs Act, 1962. Exemptions may be general (applicable to all importers/exporters) or specific (applicable to particular persons or goods).

 

 3.3 Types of Customs Duties

 

Basic Customs Duty (BCD):

- Levied under Section 12 of the Customs Act, 1962, on the value of imported goods.

 

Additional Customs Duty (Countervailing Duty or CVD):

- Equivalent to the excise duty on similar goods produced in India, levied under Section 3 of the Customs Tariff Act, 1975.

 

Special Additional Duty (SAD):

- Levied to counterbalance the sales tax, VAT, or other local taxes, imposed under Section 3A of the Customs Tariff Act, 1975.

 

Anti-Dumping Duty:

- Imposed to protect domestic industries from goods imported at a price lower than their normal value, under Section 9A of the Customs Tariff Act, 1975.

 

Safeguard Duty:

- Levied to protect domestic industry from a sudden surge in imports, under Section 8B of the Customs Tariff Act, 1975.

 

Protective Duty:

- Imposed to protect domestic industries on the recommendation of the Tariff Commission, under Section 6 of the Customs Tariff Act, 1975.

 

 3.4 Classification and Valuation of Imported and Exported Goods

 

Classification:

- Goods are classified based on the Harmonized System of Nomenclature (HSN) adopted by the World Customs Organization (WCO). The Customs Tariff Act, 1975, provides the legal framework for classification.

 

Valuation:

- The Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, govern the valuation process.

- The transaction value method is the primary method for valuation, based on the price actually paid or payable for the goods when sold for export to India.

 

 3.5 Officers of Customs; Appointment of Customs Ports, Airports, etc.

 

Officers of Customs:

- The Customs Act, 1962, provides for the appointment of various officers, including Customs Commissioners, Additional Commissioners, Deputy Commissioners, and other officials.

 

Appointment of Customs Ports, Airports, etc.:

- The central government designates customs ports, airports, and land customs stations where customs duties are levied and collected. Only at these designated places can goods be legally imported or exported.

 

 3.6 Import and Export Procedures

 

 3.6.1 General Import and Export Procedures

 

Import Procedures:

- Filing of Bill of Entry: Importers must file a bill of entry for the clearance of imported goods.

- Assessment and Payment of Duty: Customs authorities assess the duty, and the importer must pay the assessed duty.

- Examination and Clearance: Goods are examined and cleared by customs officials.

 

Export Procedures:

- Filing of Shipping Bill: Exporters must file a shipping bill for the clearance of export goods.

- Assessment and Payment of Duty: If applicable, customs authorities assess the duty.

- Examination and Clearance: Goods are examined and cleared for export.

 

 3.6.2 Special Procedures

 

Baggage:

- Import and export of personal baggage are subject to simplified procedures, with exemptions and allowances for personal effects.

 

Goods Imported or Exported by Post:

- Specific rules govern the import and export of goods by post, including the requirement for customs declarations.

 

Stores:

- Procedures for the import and export of stores (supplies for vessels and aircraft) are governed by special provisions to facilitate their movement.

 

 3.7 Provisions Relating to Coastal Goods and Vessels Carrying Coastal Goods

 

Coastal Goods:

- Coastal goods refer to goods transported from one port to another within India. They are not subject to customs duty but must comply with certain procedural requirements.

 

Vessels Carrying Coastal Goods:

- Vessels carrying coastal goods must follow specific reporting and documentation procedures to ensure that the goods are not diverted for unauthorized use.

 

 3.8 Warehousing

 

Warehousing Provisions:

- The Customs Act, 1962, allows the storage of imported goods in bonded warehouses without immediate payment of customs duty.

- Goods can be stored in a warehouse for a specified period, and customs duty is payable when the goods are removed for home consumption.

 

 3.9 Drawback

 

Drawback Provisions:

- The drawback scheme allows for the refund of customs duties paid on imported goods that are subsequently exported.

- Drawback is granted on the basis of specified rates or actual duty paid, subject to certain conditions and documentation requirements.

 

 3.10 Demand and Recovery; Refund

 

Demand and Recovery:

- Customs authorities can demand unpaid duties and recover them through various means, including attachment of property and bank accounts.

 

Refund:

- Importers and exporters can claim refunds of customs duties in cases of excess payment, goods returned, or goods not delivered. Refund claims must be filed within the prescribed time limit.

 

 3.11 Provisions Relating to Prohibited Goods, Notified Goods, Specified Goods, Illegal Importation/Exportation of Goods

 

Prohibited Goods:

- Certain goods are prohibited from being imported or exported, such as narcotics, arms, and ammunition.

 

Notified Goods:

- The government may notify specific goods for special treatment under customs law, such as restricted items requiring licenses.

 

Specified Goods:

- Goods specified under various notifications for special duty rates or treatment.

 

Illegal Importation/Exportation:

- Stringent provisions exist to prevent and penalize illegal importation or exportation of goods, including seizure, confiscation, and penalties.

 

 3.12 Searches, Seizure, and Arrest; Offences; Penalties; Confiscation and Prosecution

 

Searches, Seizure, and Arrest:

- Customs officers have the authority to search premises, seize goods, and arrest individuals involved in customs offences.

 

Offences and Penalties:

- Customs law prescribes various offences and corresponding penalties, including fines and imprisonment for violations.

 

Confiscation and Prosecution:

- Goods involved in customs offences can be confiscated, and individuals can be prosecuted for serious violations.

 

 3.13 Appeals and Revision; Advance Rulings; Settlement Commission

 

Appeals and Revision:

- Importers and exporters can appeal against customs decisions to higher authorities, including the Commissioner (Appeals), Customs Tribunal, and courts.

 

Advance Rulings:

- Advance rulings provide clarity on the classification, valuation, and applicability of customs duties for proposed transactions, helping importers/exporters plan their activities.

 

Settlement Commission:

- The Settlement Commission provides a mechanism for the settlement of customs duty disputes, allowing assessees to pay a settled amount and avoid litigation.

 

 3.14 Other Provisions

 

Miscellaneous Provisions:

- The Customs Act, 1962, contains various other provisions, including those related to coastal trade, goods in transit, and temporary importation/exportation.

 

 3.15 Conclusion

 

Customs law is a critical component of India’s regulatory framework, ensuring the smooth operation of international trade while protecting domestic interests. Understanding the provisions of the Customs Act, 1962, and the Customs Tariff Act, 1975, is essential for compliance and efficient management of import and export activities.

 

 References

 

- Government of India. (2021). Customs Act, 1962 and Customs Tariff Act, 1975.

- Ministry of Finance. (2021). Customs Manual and Guidelines.

- Central Board of Indirect Taxes and Customs (CBIC). (2021). Customs Notifications and Circulars.

- ICAI. (2021). Indirect Tax Laws and Practice.

- WTO. (2021). Harmonized System of Nomenclature.