Chapter 14 Arrival or Departure and Clearance of Goods, Warehousing, Duty Drawback, Baggage and Miscellaneous Provisions – CS Professional Advance Tax Law Notes is designed strictly as per the latest syllabus and exam pattern.
Arrival or Departure and Clearance of Goods, Warehousing, Duty Drawback, Baggage and Miscellaneous Provisions – CS Professional Advance Tax Law Study Material
Question 1.
Briefly mention the provisions about temporary detention of baggage in the Customs Act, 1962. (Dec 2012, 3 marks)
Answer:
As per Section 80 of the Customs Act, where:
(a) The baggage of a passenger contains any article which is dutiable or import of which is prohibited; and
(b) 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 leaving India, the article may be returned to him through any other passenger authorized by him leaving India. The Article may be sent as cargo consigned in the name of the passenger.
Question 2.
(a) Mention the situation when the imported goods are warehoused but are not deemed to be warehoused. (Dec 2014, 3 marks)
(b) Mention the maximum period for which goods are allowed to be warehoused but not deemed to be warehoused. (Dec 2014, 2 marks)
Answer:
(a) Under section 49 of the Customs Act, 1962, in case of any imported goods, whether dutiable or not, entered for home consumption, where 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 pending clearance, may be permitted to be stored for a period not exceeding 30 days in a public warehouse, or in a private warehouse if facilities for deposit in a public warehouse are not available; Such goods shall not be deemed to be warehoused goods for the purposes of the Customers Act and accordingly the provisions of Chapter IX shall not apply to such goods.
(b) Under section 49, Assistant Commissioner of Customs or Deputy Commissioner of Customs may permit the imported goods to be stored for a period not exceeding 30 days in a public warehouse, or in a private warehouse if facilities for deposit in a public warehouse are not available; The Commissioner may further extend by a period of 30 days at a time.
Question 3.
Quoting the relevant provisions of the law, state the relevant dates for determining:
(a) Rate of duty, when warehoused goods are removed for home consumption.
(b) Rate of duty, if the warehoused goods are not removed from the warehouse within the permissible period. (Dec 2015, 5 marks)
Answer:
| Goods warehoused under Bond | Relevant date | Remarks |
| (a) Rate of duty | As on the date of submission of sub-bill of entry. | When goods are removed for home consumption. |
| (b) Rate of duty | The rate of duty prevails on the date on which the goods should have been removed is to be considered. | When the goods are not removed from the warehouse within the permissible period. |
Question 4.
When is duty drawback prohibited under the Customs Act, 1962? (Dec 2015, 2 marks)
Answer:
Prohibition and Regulation of Drawback in Certain Cases (Section 76): Notwithstanding anything herein before contained, no drawback shall be allowed –
(a) in respect of any goods the market-price of which is less than the amount of drawback due thereon;
(b) where the drawback due in respect of any goods is less than 50. Without prejudice to the provisions of sub-section (1), if the Central Government is of opinion that goods of any specified description in respect of which drawback may be claimed under this Chapter are likely to be smuggled back into India, it may, by notification in the Official Gazette, direct that drawback shall not be allowed in respect of such goods or may be allowed subject to such restrictions and conditions as may be specified in the notification.
Question 5.
Explain briefly how the terms ‘warehouse’, ‘warehoused goods’ and ‘warehousing station’ are defined in the Customs Act, 1962. (Dec 2016, 3 marks)
Answer:
“Warehouse” means a public warehouse appointed under section 57 or a private warehouse licensed under section 58 [Section 2(43)]. “Warehoused goods” means goods deposited in a warehouse [Section 2(44)].
“Warehousing station” means a place declared as a warehousing station under Section 9 [Customs Act, 1962 (52 of 1962), Section 2(45)]
Question 6.
What do you understand by the expressions “India”and “Indian Customs Waters”under the Customs Law? Are there any differences between “Indian territorial waters”and “Indian customs waters’? Explain the significance of Indian customs waters under Customs Law. (June 2017, 5 marks)
Answer:
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 when goods cross territorial waters.
(i) As per Section 2(28) of Customs Act, “Indian Customs Waters” means the waters extending into the sea up to the limit of Exclusive Economic Zone under section 7 Of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, (80 of 1976)] and includes any bay, gulf, harbour, creek or tidal river.
(ii) territorial waters means that portion of sea which is adjacent to the shares of a country, Section 3 of the ‘Territorial waters, continental shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 specifies that territorial water extend upto 12 nautical miles from the base line of the coast of India and includes any bay, gulf, harbour, creek or tidal river.
Significance of ‘Indian Customs Waters’ under custom law is as follows:
(a) Customs officer has power to arrest a person in India or within Indian Customs Waters. (Sec. 104)
(b) Customs officer has Power to stop and search any vessel in India or within the Indian Customs waters (Sec. 106). If such vessel does not stop it can be fired upon. If a vessel does not stop, it can be confiscated. [Sec. 115(1)(c)]
(c) A vessel which is within Indian Customs Waters or which has been in Indian Customs Waters can be confiscated which is constructed or fitted in any manner for purpose of concealing goods. [(Sec.115(1)(a)l
(d) Customs officer has power to search any person who is on board any vessel within customs waters, if he has reason to believe that goods liable to confiscation are secreted about his person. [(Sec.100(2)(a)]
(e) Any goods brought within customs waters contrary to any prohibition for import are liable to confiscation [(Sec. 111 (d)] Thus, powers of customs officers extend upto 12 nautical miles beyond territorial waters.
Question 7.
What do you mean by the following specific terms used within the meaning of the Customs Act, 1962:
(ii) Bill of entry
(iii) Bill of export
(iv) Smuggling
(v) Proper officer. (June 2017, 4 marks)
Answer:
(ii) Bill of Entry:
Bill of entry is a very vital and important document which every importer has to submit to customs officer in respect of imported goods other than goods intended for transit or transhipment.
(iii) Bill of Export:
A bill of export to be presented by an exporter of goods in the form specified in Annexure I, Annexure II, Annexure III or Annexure IV, as the case may be.
(iv) Smuggling:
Smuggling, in relation to any goods, means any act or omission which will render such goods liable for confiscation under Sections 111 or 113 [Sec. 2(39)]
(v) Proper Officer:
“Proper Officer”, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Principal Commissioner of Customs or Commissioner of Customs.
Question 8.
What do you mean by the following specific terms used within the meaning of the Customs Act, 1962:
(ii) Baggage
(iii) Coastal goods
(iv) Beneficial Owner
(v) Customs Area (Dec 2017, 1 mark each)
Answer:
(ii) “Baggage” includes unaccompanied baggage but does not include motor vehicles [Section 2(3)];
(iii) “Coastal Goods” means goods, other than imported goods, transported in a vessel from one port in India to another [Section 2(7)];
(iv) “Beneficial Owner” means any person on whose behalf the goods are being imported or exported or who exercises effective control over the goods being imported or exported [Section 2(3A)]
(v) “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;
Question 9.
What do you understand with the term “Container” used under Customs Act, 1962? (Dec 2017, 3 marks)
Answer:
A container is simply a box. It is no more complex than a truck body, a railway freight van or a ship’s hold. Containers are made of aluminium, steel, fibre glass or plywood for lightness with steel frames to give strength. Standard sizes for containers are 40, 20, or 10 feet long, 8ft. wide and 8ft. in height. Some have open tops or sides for loading special cargo. Liquids are carried in boiler shaped tanks surrounded by rectangular frame work. Other containers are insulated or refrigerated and are constructed according to International standards and inspected by Insurance companies.
Question 10.
State with brief reasons, whether the following statements are true or false in the light of the provisions contained in the Customs Act, 1962:
(i) Customs area includes a warehouse; (June 2018, 3 marks)
(ii) A beneficial owner of imported goods is a person on whose behalf the goods are being imported. (June 2018, 2 marks)
Answer:
(i) The given statement is True
The definition of customs area as provided under Section 2(11) of the Customs Act, 1962 has been amended vide the Taxation Laws (Amendment) Act, 2017 to include within its ambit a warehouse also. Consequent to the above, the customs area is now defined to mean 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.
(ii) The given statement is True.
Subsequent to the insertion of new Section 2(3A) in the Customs Act, 1962 vide the Finance Act, 2017, the beneficial owner has been defined to mean any person on whose behalf the goods are being imported or exported or who exercises effective control over the goods being imported or exported.
Question 11.
State the due dates for payment of deferred customs duty under ‘Clear first, Pay later’ system evolved under the Customs Act, 1962. (June 2018, 3 marks)
Answer:
The due dates for payment of deferred Customs duty are:
| Goods corresponding to bill of entry returned for payment from | Due date of payment of No. returned for payment from duty, inclusive of the period (excluding holidays) as mentioned in Section 47 (2) |
| 1. 1st day to 15th day of any month | 16th day of that month |
| 2. 16th day till the last day of any month other than March | 1st day of the following month |
| 3. 16th day till the 31st day of March | 31st March |
Question 12.
Explain the validity of the following statements with reference to Chapter IX of the Customs Act, 1962 containing the provisions relating to the warehousing:
(a) The proper officer is not authorized to lock any warehouse with the lock of the Customs Department. (Dec 2018, 2 marks)
(b) The Commissioner of Customs (Appeals) may appoint public warehouses wherein dutiable goods may be deposited. (Dec 2018, 1 mark)
(c) The Commissioner of Customs or Principal Commissioner of Customs is not required to give a notice to the licensee for cancellation of the license of a private warehouse, if he has contravened any provision of the Customs Act, 1962. (Dec 2018, 2 marks)
Answer:
(a) The given statement is invalid: As per Section 58A(1) of the Customs Act, 1962 the Principal Commissioner of Customs or Commissioner of Customs may subject to such conditions as may be prescribed, license a special warehouse wherein dutiable goods may be deposited and such warehouse shall be caused to be locked by the proper officer and no person shall enter the warehouse or remove any goods there from without the permission of the proper officer.
(b) The given statement is invalid: The Commissioner of Customs or the Principal Commissioner of Customs can appoint public warehouse, wherein dutiable goods can be deposited under Section 57 of the Customs Act, 1962.
(c) The given statement is valid: The Commissioner of Customs or the Principal Commissioner of Customs is not required to give a notice to the licensee while cancelling the license of a private warehouse if he has contravened any provision of the said Act, as per Section 58(2) (b) of Customs Act, 1962.
Question 13.
Calculate the amount of drawback available under section 74 of the Customs Act, 1962 in the following three separate cases –
(i) X imported computers for office use and paid ₹ 5,00,000 as import duty. The computers are re-exported after 13 months. (June 2013, 2 marks)
(ii) Y imported goods for his personal use and paid ₹ 1,00,000 as import duty. Such goods are re-exported after 3 months 10 days. (June 2013, 2 marks)
(iii) Z imported wearing apparel and paid ₹ 20,000 as import duty. These are re-exported after 6 months. (June 2013, 1 mark)
Answer:
Computation of drawback available under section 74
(i) Drawback rate for goods used for more than 12 months but not more than 15 months, as notified by the Central Government is 65%. Hence, amount of drawback = ₹ 5,00,000 × 65% = ₹ 3,25,000.
(ii) In respect of goods imported for personal use, drawback of duty shall be calculated by reducing the import duty paid in respect of such goods by 4% for use for each quarter or part thereof during first year. Hence, amount of drawback = ₹ 1,00,000 – ₹ 8,000 (8% of ₹ 1,00,000) = ₹ 92,000.
(iii) No drawback is available on wearing apparent on export after their use.
Question 14.
Loveena imported certain goods in March, 2021. An ‘into bond’ bill of entry was presented on 14th March, 2021 and goods were cleared from the port for warehousing. The order permitting the deposit of goods in warehouse for 6 months was issued on 2151 March, 2021.
Loveena did not clear the imported goods even after the warehousing period got over on 20th September, 2021. She did not obtain any extension of time as well. A notice was issued under section 72 of the Customs Act, 1962 demanding duty and other charges. Loveena cleared the goods on 10th December, 2021. Advise her about the applicability of rate of exchange and rate of duty and other charges payable with the help of a decided case law. (June 2013, 5 marks)
Answer:
It was held in Kesoram Rayon v. CC (1986) 86 ELT 464 (SC) that goods which are not removed within the permissible period, are deemed to be improperly removed on the day it should have been removed. Thus, duty applicable on such date (i.e. last date on which the goods should have been removed) is applicable and not the date on which goods were actually removed.
Therefore, in this case, the date of expiry of warehousing period, i.e.; 20th September, 2021 will be the date of deemed removal and rate of duty prevalent on that date shall be applicable on removal of goods.
Further, as per Section 14, the assessable value is to be computed as the Exchange Rate in force on the date on which into- bond bill of entry for warehousing is filed under Section 46 of the Act, hence, the rate of exchange in force on 14th March, 2021 will be taken.
Answer:
Yes, the company will succeed. The facts of the given situation are similar to the case of CCus vs. Biecco Lawrie Ltd. 2008(223) ELT3 (SC) wherein the Supreme Court has held that where duty on the warehoused goods is paid and out of charge order for home consumption is made by the proper officer in compliance of the provisions of Section 68, the goods removed in smaller lots have to be treated as cleared for home consumption and improper would not be required to pay anything more.
Further, Section 49 of the Customs Act, 1962 inter alia also provides that imported goods entered for home consumption if stored in a public warehouse, or in a private warehouse on the application of the importer and if the same cannot be cleared within a reasonable time, 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.
Question 15.
State the allowability or otherwise of the following with respect to the provisions of the Customs Act, 1962:
(i) Goods up to ₹ 10,000 per passenger per visit can be purchased against rupee payment in duty free shop at an International Airport.
(ii) Bona fide baggage is exempt from duty.
(iii) Total customs duty on baggage is 30%.
(iv) Gifts through courier from abroad, not being prohibited goods, up to ₹ 5,000 can be imported duty free. (Dec 2016, 1 mark each)
Answer:
(i) False: Goods up to ₹ 5,000 per passenger per visit can be purchased against rupee payments in duty free shops at international airport.
(ii) True; Bona fide baggage accompanying passenger is exempt from duty. It includes wearing apparel, toilet requisites and other personal effects.
(iii) False: Total customs duty on baggage is 38.05%.
(iv) False: Gift from abroad up to ₹ 10,000 of goods which are not prohibited goods for import are duty free if sent by post or through courier. The postal charges or airfreight will not be taken into account for determining value limit of ₹ 10,000. [Notification No. 171/93-Cus dated 16-9-1993 amended on 6-7-1999].
Question 16.
From the following informations you are required to determine the Export Duty and explain your assumptions:
(i) FOB Price of goods US $ 120000
(ii) Shipping Bill presented electronically on 26.04.2020
(iii) Proper officer passed the order permitting clearance and loading of goods for export on 05.05.2020
(iv) Rate of exchange and rate of export duty are as under:
| Date | Rate of exchange | Rate of Export Duty |
| 26.04.2020 | 1 US $ = ₹ 60 | 9% |
| 05.05.2020 | 1 US $ = ₹ 61 | 10% |
(v) Rate of exchange is notified for export by Central Board of Excise and Customs. (Dec 2017, 5 marks)
Answer:
Computation of Export Duty
| Particulars | Amount |
| Transaction Value of exports = FOB price of Goods. No further, addition of landing charges is to be made. | US$ 1,20,000 |
| Rate of exchange [The rate of exchange notified by CBEC on the date of presentation of shipping bill as per section 14 of the customs act.] | ₹ 60per$ |
| Value in Indian Currency (US$ 1,20,000 × ₹ 60) | ₹ 72,00,000 |
| Rate of Duty [The rate of duty on which the proper officer makes an order permitting clearance and loading of the goods for exportation, is considered] | 10% |
| Export Duty @ 10% (No education cess is levied on exports) | ₹ 7,20,000 |
Question 17.
Miss Priya imported certain goods weighing 1000 kgs having CIF value of US $40,000. Exchange rate of USO was ₹ 65 on the date of presentation of bill of entry. Basic customs duty chargeable is @ 10% SWS as applicable. There is no excise duty payable on these goods, if are being manufactured in India. However, vide Notification issued by the Government of India, anti-dumping duty has been imposed on these goods. The anti-dumping duty will be equal to the difference between amount calculated @ USD 60 per kg and the landed value’ of goods. You are required to compute the amount of custom duty and of the antidumping duty payable by Miss Priya. (Dec 2017, 5 marks)
Answer:
| Part 1 | (₹) |
| Total CIF Price US $ 40,000 x ₹ 65 | 26,00,000 |
| Assessable Value | 26,00,000 |
| Basic duty @ 10% | 2,60,000 |
| Add: SWS @ 10% on BCD | 26,000 |
| Total (AV + BCD + SWS) | 28,86,000 |
| Add: IGST @ 18% of 28,86,000 | 5,19,480 |
| Value of imported goods | 34,05,480 |
| Total Duty payable | 8,05,480 |
| Part 2 | |
| Rate as per Anti Dumping Notification [US $ 60 per kg × 1000 kgs × ₹ 65] | 39,00,000 |
| Part 3 | |
| Computation of anti-dumping duty | |
| Rate as per Anti Dumping Notification | 39,00,000 |
| Less: Value of imported goods as computed above | 34,05,480 |
| Anti Dumping Duty payable | 4,94,520 |
Question 18.
Calculate the amount of duty drawback allowable under the Customs Act, 1962 in the following independent cases:
(a) Jaggi Mehta imported a car from U.K. for his personal use and paid ₹ 4,50,000 as import duty on the car. However, the car was being re-exported immediately without bringing it into use by Mr. Mehta.
(b) Meenakshi imported a music player from Dubai and paid ₹ 12,000 as import duty. She used it for four months and there after re-exported the same after four months. (Dec 2017, 5 marks)
Answer:
Computation of duty drawback is as follows:
(a) Drawback at 98% [4,41,000]
As per Section 74 of the customs Act, 1962 when any identifiable imported goods are re-exported, 98% of the import duty is re-paid as drawback provided:
- the goods are identified to the satisfaction of the Assistant/Deputy Commissioner of Customs as the goods which were imported and
- the same are entered for export within two years from the date of payment of the import duty. Thus, Jaggi Mehta can claim duty drawback of ₹ 4,41,000/- (98% of ₹ 4,50,000) on the presumption that aforesaid conditions are fulfilled.
(b) As per section 74 of the Customs Act, 1962, in respect of a motor car or goods imported by a person for his personal and private use, drawback of duty = Import duty paid in respect of such motor car or goods as reduced by 4%, 3% 2.5% and 2% for use for each quarter or part there of duty the period of first year, second year, third year and fourth year respectively.
Since goods have been used for 4 months i.e. 2 quarters, hence, Meenakshi can claim duty drawback = 100% — 4% × 2 quarters = 92% of 12,000 = ₹ 11,040. It is assumed that all other conditions are fulfilled.
Question 19.
KRY Logistics Ltd., a steamer agent authored Import General Manifest and acted on behalf of the master of the vessel (the person-in-charge) before Customs Authorities to conduct all affairs in compliance with the Customs Act, 1962. The Steamer agent filed Import General Manifest, affixed the seal on the containers and took charge of the sealed containers.
It also dealt with the Customs Department for appropriate orders that had to be passed in terms of Section 42 of the Customs Act, 1962. Penalty under section 116 of the Customs Act, 1962 was imposed by the Department on the steamer agent for short landing of goods. Examine with the help of a decided case law, if any, whether the Department is justified in imposing a penalty on the steamer agent? (Dec 2017, 3 marks)
Answer:
In the case of Caravel Logistics Pvt. Ltd. V Joint Secretary (RA) 2013 (293) ELT 342 (Mad), High Court held that conjoint reading of sections 2(31), 116, and 148 of Customs Act, 1962 makes it clear that in case of short-landing of goods, if penalty is to be imposed on person-in-charge of conveyance/vessel, it can also be imposed on the agent appointed by him. Hence, in this case, imposing a penalty on the steamer agent by the department is justifiable.
Question 20.
AB Ltd. imported Super Kerosene Oil (SKO) and stored it in a warehouse. An ex-bond bill of entry for home consumption was filed and duty was paid as per the rate prevalent on the date of presentation of such bill of entry and the order for clearance for home consumption was passed. On account of highly combustible nature of SKO, the importer made an application to permit the storage of such kerosene oil in the same warehouse until actual clearance for sale/use. The application was allowed.
However, the rate of duty increased when the goods were actually removed from the warehouse. The department demanded the differential duty. The company challenged the demand. Whether it will succeed? Discuss briefly, taking support of decided case(s), if any. (June 2018, 5 marks)
Answer:
Yes, the Company will succeed.
The facts of the given situation are similar to the case of CCus vs. Biecco Lawrie Ltd. 2008 (223) ELT 3 (SC) wherein the Supreme Court has held that where duty on the warehoused goods is paid and out of charge order for home consumption is made by the proper officer in compliance of the provisions of Section 68, the goods allowed to be retained for storage in the warehouse as permitted under Section 49 of the Customs Act are not treated as warehoused goods and importer would not be required to pay anything more.
Section 49 of the Customs Act, 1962 inter alia provides that imported goods entered for home consumption if stored in a public warehouse, or in a private warehouse on the application of the importer and if the same cannot be cleared within a reasonable time, 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.
Question 21.
Ratan exported 2,000 pairs of leather shoes @ ₹ 750 per pair. All industry rate of duty drawback is fixed on average basis i.e. @11 % of F.O.B. subject to maximum of ₹ 80 per pair. The exporter found that actual duty paid on input was ₹ 1,95,000. He has approached you as a consultant to apply under Rule 7 of the drawback rules for fixation of ‘Special Brand Rate’. Advise him suitably. (Dec 2018, 5 marks)
Answer:
Drawback amount = ₹ 1,65,000 (i.e. 2,000 × 750 × 11%) or ₹ 1,60,000 (i.e. ₹ 80 × 2,000) whichever is less, Therefore duty drawback allowed ₹ 1,60,000,
- All industry duty drawback rate = 82.05% [(1,60,000/1,95,000) × 100%]
- Exporter is not eligible to apply for Special Brand rate.
- Therefore, exporter is eligible for claiming All Industry Duty Drawback.
Note: Special brand rate of duty is applicable only when all industry rates do not cover 80% of the duties paid by the exporter.
Question 22.
Rise India Ltd. has exported goods to Germany out of its imports from Japan. Calculate the Duty Drawback admissible to Rise India Ltd. under section 75 of Customs Act, 1962 in each of the following cases giving reasons for the same:
| Product | FOB Value of Exported Goods ₹ | Market Price Of Goods ₹ | Duty Draw Back Rate ₹ |
| A | 3,00,000 | 2,10,000 | 30% of FOB |
| B | 4,00,000 | 4,60,000 | 35% of FOB |
| C | 2,00,000 | 2,50,000 | 20% of FOB |
Note:
1. Value of imported material of product B is ₹ 5 lakh.
2. Product C is manufactured out of the imported input for which no duty has been paid. (Aug 2021, 5 marks)
Answer:
Computat on of Duty Drawback o Rise Ltd.
| Product | FOB Value of Exported Goods | Market Value of Goods | Rate of Duty Drawback | Amount of Duty Drawback | Eligible Amount of Duty Drawback |
| A | 3,00,000 | 2,10,000 | 30% of FOB | 90,000 | 70,000 |
| B | 4,00,000 | 4,60,000 | 35% of FOB | NIL | NIL |
| C | 2,00,000 | 2,50,000 | 20% of FOB | NIL | NIL |
Working Notes:
- Product A: Maximum Duty Drawback is 1/3 of Market prize (₹ 2,10,000 × 1/3).
- Product B: FOB Value of exported goods is less than value of imported goods.
- Product C: Where no Custom Duty paid no Duty Drawback can be allowed.
Question 23.
Balu Ram Ltd. imported White Kerosene Oil (WKO) and stored it in a warehouse. An ex-bond bill of entry for home consumption was filed and duty was paid as per the rate prevalent on the date of presentation of such bill of entry and the order for clearance for home consumption was passed.
On account of highly combustible nature of WKO, the importer made an application to permit the storage of such kerosene oil in the same warehouse until actual clearance for sale/use. The application was allowed. However, the rate of duty increased when the goods were actually removed from the warehouse.
The department demanded the differential duty. The company challenged the demand. Whether it will succeed? Discuss briefly taking support of decided case(s), if any. (June 2022, 4 marks)
Answer:
Yes, the company will succeed.
The facts of the given situation are similar to the case of CCus vs. Biecco Lawrie Ltd. 2008 (223) ELT3 (SC) where in Supreme Court has held that where duty on the warehouse goods is paid and out of charge order for home consumption is made by the proper officer in compliance of the provisions of section 68, the goods allowed to be retained for storage in the warehouse as permitted under section 49 of the Customs Act, 1962 are not treated as warehouse goods and importer would not be required to pay anything more.
Section 49 of the Customs Act, 1962 inter alia also proves that imported goods entered for home consumption if stored in a public
warehouse, or in a private warehouse on the application of the importer and if the same cannot be cleared within a reasonable time, shall not be deemed to be warehouse goods for the purposes of this Act, and accordingly the
provisions of chapter IX shall not apply to such goods.
Question 24.
Mrs. Nandini, an Indian resident who was on a visit to London, returned after 45 days. She was carrying with her the following items:
| Particulars | Amount (₹) |
| Personal effects | 80,000 |
| Laptop computer | 75,000 |
| Jewellery – 30 grams (Purchased in London) | 1,30,000 |
| Music System | 60,000 |
Compute the customs duty payable by Mrs. Nandini with reference to the Baggage Rules, 2016. (Dec 2022, 5 marks)
Question 25.
Explain briefly the following with reference to the provisions of the Customs Act, 1962:
“Clearance for home consumption” and “Clearance for warehousing”.
Answer:
Clearance for home consumption implies that the customs duty on the imported goods has been discharged and goods are cleared for utilization within India. Clearance for warehousing implies that the goods may, instead of being cleared for home consumption, be deposited in a warehouse and cleared later. Section 47 of Customs Act, 1962 contains the provisions for clearance for home consumption while Section 60 contains the provisions for clearance for warehousing from port without payment of customs duty.
Goods can be kept in warehouse when the same are not required immediately and the Importer does not want to block his funds by clearing the goods. Goods may also be kept in warehouse awaiting import authorization. When the goods are deposited in a warehouse the collection of duty is deferred till the time such goods are cleared for home consumption. However, the importer has to execute a bond up to a sum equal to twice the amount of duty assessed on the goods at the time of import.
Question 26.
M/s. XYZ, a 100% export oriented undertaking (100% E.O.U in short) imported DG sets and furnace oil duty free for setting up captive power plant for its power requirements for export production. This benefit was available vide an exemptions notification. They used the power so generated for export production but sold surplus power in domestic tariff area.
Customs Department has demanded duty on DG sets and furnace oil as surplus power has been sold in domestic tariff area. The notification does not specifically restrict the use of imported goods for manufacture of export goods. Do you think the demand of the Customs Department is valid in law.
Answer:
The facts of the case are similar to the case of Commissioner v. Hanil Era Textile Ltd. 2005 (180) ELTA044 (SC) wherein the Supreme Court agreed to the view taken by the Tribunal that in the absence of a restrictive clause in the notifications that imported goods are to be solely or exclusively used for manufacture of goods for export, there is no violation of any condition of notification, if surplus power generated due to unforeseen exigencies is sold in domestic tariff area.
Therefore, no duty can be demanded from M/s. XYZ for selling the surplus power in domestic tariff area for the following reasons:
- They have used the DG sets and furnace oil imported duty free for generation of power, and
- such power generated has been used for manufacturing goods for export, and
- only the surplus power has been sold, as power cannot be stored.
Question 27.
M/s. Pipli Imports Ltd. imported certain goods, which were unloaded in the customs area on 01.10.2021. When order for clearance was passed by proper officer on 05.10.2021, it was found that there was some pilferage of such goods. As the imported goods were in the custody of Port Trust, the Department demanded duty from the custodian under section 45(3) of the Customs Act, 1962, on such pilferage.
The Port Trust denied such demand contending that it was not an approved custodian falling under section 45 and possession of goods by it was by virtue of powers conferred under the Major Port Trust Act, 1963. Hence, it is not liable for customs duty on pilfered goods. M/s. Pipli Imports Ltd. has also asked the Port Trust to make good the loss of goods. Examine, whether the demands made by the Department and M/s. Pipli Imports Ltd. are justified in law, referring to decided case law.
Answer:
The facts of the case are similar to the case of Board of Trustees v. UOI (2009) 241 ELT 513 (Bom HC DB), wherein the High Court held that considering the language of Section 45(3), the liability to pay duty is of the person, in whose custody the goods remain as an approved person under section 45 of the Act.
Therefore, Section 45(3) applies only to the private custodians who are required to be approved by Principal Commissioner/Commissioner of Customs under section 45(1). Accordingly, the major ports and airports covered under Major Port Trust Act, 1963 who do not require any approval under section 45(1), are not covered by Section 45(3). Thus, the Department cannot demand duty from Port Trust on the pilferage under section 45(3) of the Customs Act, 1962.
Section 45(3) of the Customs Act, 1962 holds the custodian responsible only in respect of the customs duty in respect of pilfered goods. It does not extend to the value of goods lost. However, the Port Trust, as bailee of the goods, is liable for value of the goods to the importer.
Arrival or Departure and Clearance of Goods, Warehousing, Duty Drawback, Baggage and Miscellaneous Provisions Notes
Proper Officer
“proper officer”, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Principal Commissioner of Customs or Commissioner of Customs
“Customs airport”
“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
“Customs port”
“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
Goods
“Goods” includes
- vessels aircraft and vehicles;
- stores, baggage.
- currency and negotiable instruments and
- any other kind of movable property.
Dutiable Goods
“dutiable goods” means any goods which are chargeable to duty and on which duty has not been paid
Conveyance
“conveyance” includes a vessel, an aircraft and a vehicle
Kinds of Bills of Entry
There are three kinds of Bills of Entry viz.,
- Bill of Entry for Home-consumption (White Colour)
- Warehousing (into-Bond) Bill of Entry (Yellow Colour)
- Bill of Entry for Clearance ‘Ex-Bond’ (Green Colour)