Chapter 12 Basic Concepts of Customs Law – CS Professional Advance Tax Law Notes is designed strictly as per the latest syllabus and exam pattern.
Basic Concepts of Customs Law – CS Professional Advance Tax Law Study Material
Question 1.
Distinguish between the following:
‘Rules under the Customs Act, 1962′ and ‘Regulations under the Customs Act, 1962’. (Dec 2013, 3 marks)
Answer:
Difference between Rule and Regulations
(1) The Central Government is authorized to make the rules and the CBIC is authorized to make the regulations in consistent with this Act.
(2) The powers to make the rules is contained in Section 156 whereas the power to make regulations are prescribed under section 157.
(3) Rules may provide for all or any of the following matters, namely:
(a) The manner of determining the transaction value of the imported goods and export goods under sub-section (1) of Section 14;
(b) The conditions subject to which accessories of and spare parts and maintenance and repairing implements for, any article shall be chargeable at the same rate of duty as that article;
(c) The detention and confiscation of goods the importation of which is prohibited and the conditions, if any, to be fulfilled before such detention and confiscation and the information, notices and security to be given and the evidence requisite for the purposes of such detention or confiscation and the mode of verification of such evidence;
(d) The reimbursement by an informant to any public officer of all expenses and damages incurred in respect of any detention of any goods made on his information and of any proceedings consequent on such detention;
(e) The information required in respect of any goods mentioned in a shipping bill or bill of export which are not exported or which are exported and are afterwards re-landed;
(f) The publication, subject to such conditions as may be specified therein, of names and their particulars of persons who have been found guilty of contravention of any of the provisions of this Act or the rules.
(g) The amount to be paid for compounding and the manner of compounding under sub-section (3) of Section 137. Whereas regulations may provide for all or any of the following matters, namely:
(a) The form of a bill of entry, shipping bill, bill of export, arrival manifest or import manifest, import report, export manifest, export report, bill of transhipment, declaration for transhipment boat note and bill of coastal goods;
(b) The manner of export of goods, relinquishment of title to the goods and abandoning them to customs and destruction or rendering of goods commercially valueless in the presence of the proper officer under clause (d) of sub-section (1) of Section 26A;
(c) The form and manner of making application for refund of duty under sub-section (2) of Section 26A;
(d) The form and manner in which an application for refund shall be made under section 27;
(e) The conditions subject to which the transhipment of all or any goods under sub-section (3) of Section 54, the transportation of all or any goods under section 56 and the removal of warehoused goods from one warehouse to another under section 67, may be allowed without payment of duty;
(f) The conditions subject to which any manufacturing process or other operations may be carried on in a warehouse under section 65.
(g) The manner of conducting audit of the assessment of duty of the imported or export goods at the office of the proper officer or the premises of the importer or exporter, as the case may be.
Question 2.
Bring out the distinction between ‘rules’ and ‘regulations’ under the Customs Act, 1962. (June 2014, 3 marks)
Question 3.
Distinguish between Protective Duty and Safeguard Duty under Custom Tariff Act, 1975. (Aug 2021, 5 marks)
Answer:
Distinction between Protective Duty & Safeguard Duty
- Protective duties are levied by the Central Government on being satisfied that circumstances exist which render it necessary to protect industries established in India. On the other hand The Central Government may impose safeguard duty on specified imported goods, if it is satisfied that the goods are being imported in large quantities and they are causing serious injury to domestic industry.
- Protective Duties are industry specific while safeguard Duties are product specific.
- Protective Duties shall be effective only up to and inclusive of the date if any specified in the first schedule but on the other side total period of levy of the safeguard duty is 10 years.
- Section 7(2) of the Customs Tariff Act, 1975 provides that the Central Government may reduce or increase the duty as might be deemed fit in the case of protective duty and similarly the central government when it feels that increased imports have not caused serious injury to the domestic industry it shall refund the safeguard duty collected.
Question 4.
With reference to recent amendments made (Vide Finance Act, 2017) in the Customs Act, 1962, examine the validity of the following statements:
(a) A beneficial owner of imported goods is a person on whose behalf the goods are being imported but cannot be exported.
(b) Customs area does not include a warehouse.
(c) Customs station includes international courier terminal but does not include the foreign post office. (Dec 2018, 5 marks)
Answer:
(a) The statement is invalid: A new Section 2(3A) has been inserted in the Customs Act, 1962 vide the Finance Act, 2017 to define beneficial owner means any person on whose behalf the goods are imported or exported or who exercise effective control over the goods being imported or exported.
(b) The statement is invalid: Section 2(11) of Customs Act, 1962 has been amended to include a warehouse within the customs area.
(c) The statement is invalid: The Finance Act, 2017 has included international courier terminal and foreign post office within the scope of customs station as defined under Section 2(13) of Custom Act, 1962.
Question 5.
Specify all those conditions which are required to be satisfied for imposing countervailing duty on the subsidized articles as specified in section 9 of the Customs Tariff Act, 1962. (Dec 2020, 4 marks)
Answer:
The countervailing duty on subsidized articles as specified in section 9 of the Customs Tariff Act, 1962 is to be imposed, if the following conditions are satisfied.
(a) Any country or territory, directly or indirectly, pays or bestows subsidy upon the manufacture or production or exportation of any article. Such subsidy includes subsidy on transportation of such article;
(b) Such articles are imported into India;
(c) Importation of such goods may/may not directly be from the country of manufacture/production;
(d) The article, may be in the same condition as when exported from country of manufacture or production or may be changed in condition by manufacture, production or otherwise;
(e) The subsidy provided by the exporting country relates to export performance;
(f) The subsidy relates to the use of domestic goods over imported goods in the export article; or the subsidy has been conferred on a limited number of persons engaged in the manufacture, production or export of articles.
Question 6.
What will be the dates of commencement of the definitive anti-dumping duty in the following cases under Section 9A of the Customs Tariff Act, 1975 and the rules made thereunder:
(i) Where anti-dumping duty is imposed retrospectively from a date prior to the date of imposition of provisional duty.
(ii) Where no provisional duty is imposed
(iii) Where provisional duty is Imposed. (Dec 2022, 5 marks)
Question 7.
Unlucky Ltd. imported certain equipments and goods which were substantially damaged due to heavy rains. The assessee relinquished its title and applied for remission under section 23 of the Customs Act, 1962. The Department denied remission stating that the case falls under section 22, i.e., abatement of duty on damaged or deteriorated goods. Examine with reference to decided case law, if any, whether the Department’s contention is bad in law? (Dec 2013, 5 marks)
Answer:
As per Section 22, Importer is entitled to Abatement and Remission of Duty when damage or deterioration occurs to imported goods. As per Section 23, importer is entitled to remission of duty if goods are lost or destroyed or abandoned.
In the case of CC vs. Symphony Services Corporation India Pvt. Ltd., assessee’s goods are there but are of no use because of natural causes, and importer wants to abandon them and makes request to relinquish title. Assessee demanded that on relinquishment of title, goods become property of Department, as consequence of which no duty is payable. Department pleaded since the goods were damage/deteriorated it allowed abatement and demanded proportionate duty.
It was held that though goods were neither lost nor destroyed still they are totally useless to the importer, hence it is valid for importer to relinquish his title u/s 23. Hence no duty is payable.
In the given case, Unlucky Ltd. imported certain equipments and goods which were substantially damaged due to heavy rains, though above said goods were neither lost nor destroyed still they are totally useless to the importer hence it is valid for importer to relinquish his title u/s 23. Hence, Department’s contention is bad in law.
Question 8.
Shandaar Scraps Ltd., imported during October, 2019 by sea a consignment of metal scrap weighing 7,000 M.T. (metric tonnes) from U.S.A. They filed a bill of entry for home consumption. The Assistant Commissioner passed an order for clearance of goods and applicable duty was paid by them.
Shandaar Scraps Ltd. thereafter found, on taking delivery from the Port Trust Authorities (i.e., before the clearance for home consumption), that only 6,400 M.T. of scrap were available at the docks although they had paid duty for the entire 7,000 M.T., since there was no short-landing of cargo.
The short-delivery of 600 M.T. was also substantiated by the Port-Trust Authorities, who gave a “weighment certificate” to Shandaar Scraps Ltd. On filing a representation to the Customs Department, Shandaar Scraps Ltd. has been directed in writing to justify as to which provision of the Customs Act, 1962 governs their claim for remission of duty on the 600 M.T. not delivered by the Port-Trust. You are approached by Shandaar Scraps Ltd. as “Counsel” for an opinion/advice. Examine the issues and tender your opinion as per Customs Act, 1962, giving reasons in brief and the provisions of the Customs Act, 1962. (June 2019, 5 marks)
Answer:
As per the provisions of Section 23 of the Customs Act, 1962 where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods have been lost (otherwise than as a result of pilferage) or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall remit the duty on such goods.
Therefore the duty shall be remitted only, if loss has occurred before clearances for home consumption.
In the given case, it is apparent from the facts that quantity of scrap received in India was 7000 metric tonnes and 600 metric tonnes thereof was lost when it was in custody of Port Authorities i.e. before clearance for home consumption was made. The loss of 600 MT of scrap cannot be construed to be pilferage, as loss of such huge quantity cannot be treated as “Petty Theft”.
Hence, company is being advised to take shelter under Section 23 justifying his claim for remis&on of duty on the goods short supplied by the Port Trust Authorities as per certificate issued.
Question 9.
From the following information determine the value of taxable supply as per the provision of section 15 of the CGST Act, 2017.
| Contracted value of supply excluding GST (inclusive of cost of primary packaging of Rupees 25,000 and protective packing at the request of customer of Rupees 15,000) | ₹ 12,50,000 |
| Weighment charges shown separately in the invoice | ₹ 9,500 |
| Commission paid to local Agent on instruction of supplier | ₹ 5,000 |
| Freight and insurance charges paid by recipient on behalf of supplier | ₹ 8,000 |
Prompt payment discount, indicated in invoice 1%, if payment made within one month. The buyer availed the discount. (Aug 2021, 5 marks)
Answer:
Calculation of Taxable Supply
| Particulars | ₹ |
| Contracted Value of Supply | 12,50,000 |
| (Cost of Primary and Protective Packaging at the request of the Customer) [Note 1 ] | |
| Weighment Charges | 9,500 |
| Commission paid Local Agent on instruction of Supplier | 5,000 |
| Freight and Insurance Charges paid by recipient on behalf of supplier | 8,000 |
| Total | 12,72,500 |
| Less : Discount @ 1 % | 12,500 |
| Taxable value | 12,60,000 |
Note: As per Section 15(2)(c) of Central Goods and Services Tax Act, 2017, incidental expenses, including commission and packing charged by the supplier to the recipient of a supply should be included in the value.
Question 10.
Distinguish between:
(a) Jetsam and Flotsam
(b) Pilfered goods and Lost/destroyed goods
Answer:
(a) Jetsam and Flotsam are goods which are jettisoned (i.e. thrown with speed) from the vessel into the sea to reduce weight of vessel to prevent it from sinking. They are not abandoned goods. Jetsam gets sunk whereas Flotsam does not sink but floats. Duty is payable on both unless they are entitled to be admitted free of duty.
(b)
| Pilfered goods | Lost /Destroyed goods |
| 1. Covered by Section 13 | Covered by Section 23(1) |
| 2. No duty payable on such goods | Duty paid on such goods to be remitted |
| 3. Department gets compensation from the custodian [Section 45(3)] | No such compensation |
| 4. Petty theft by human being | Loss / Destruction by fire, flood etc (Act of God) |
| 5. Restoration possible | Restoration is not possible |
| 6. Occurrence is after unloading and before Customs clearance order for home consumption or warehousing | Occurrence may be at any time before clearance for home consumption |
| 7. Occurrence in warehouse not recognized | Occurrence in warehouse is recognized |
| 8. Duty need not be calculated | Duty should be calculated for determining the remission amount |
| 9. No need to prove pilferage. It is quite obvious. | Should be proved and remission sought for. |
Question 11.
Referring to Section 25 of the Customs Act, 1962, discuss the following:
(i) Special exemption
(ii) General exemption
Answer:
(i) Special Exemption: As per Section 25(2) of the Customs Act, 1962, if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty, any goods on which duty is leviable only under circumstances of an exceptional nature to be stated in such order. Further, no duty shall be collected if the amount of duty leviable is equal to or less than, ₹ 100. This type of exemption is called as ad hoc exemption. Order under section 25(2) is not required to be published in the Official Gazette.
(ii) General Exemption: As per Section 25(1) of the Customs Act, 1962, if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification, goods of any specified description from the whole or any part of duty of customs leviable thereon. Further, this exemption applies to all importers while exemption under section 25(2) is for specific importer and specific goods under import.
Question 12.
Write a brief note on the following with reference to the Customs Act, 1962:
(i) Remission of duty on imported goods lost
(ii) Pilfered goods
Answer:
(i) Remission of duty on imported goods lost: Section 23(1) of the Customs, Act, 1962 provides for remission of duty on imported goods lost (otherwise than as a result of pilferage) or destroyed, if such loss or destruction is at any time before clearance for home consumption. Such loss or destruction covers loss by leakage. Duty is payable under this section but it is remitted by Assistant/ Deputy Commissioner of Customs if the importer is able to prove the loss or destruction. Thus, unless remitted, duty has to be paid and burden of proof is on the importer. The provisions of this section are applicable for warehoused goods also.
(ii) Pilfered goods: Section 13 provides that if imported goods are pilfered after unloading thereof but before the proper officer has made an order for clearance for home consumption or deposit in a warehouse, no duty is payable on the goods, unless the pilfered goods are restored to importer. In such a case, duty on pilfered goods is payable by the Port authorities. Also, the importer does not have to prove pilferage. However, the loss must be only due to pilferage. Section 13 is not applicable for warehoused goods.
Basic Concepts of Customs Law Notes
Objectives of Custom Duty
- Restricting Imports for conserving foreign exchange.
- Protecting Indian Industry from undue competition.
- Prohibiting imports and exports of goods for achieving the policy objectives of the Government.
- Regulating exports.
- Prevent Smuggling.
- Facilitate implementation of laws relating to Foreign Trade Act, Foreign Exchange, Conservation of Foreign Exchange, Prevention of Smuggling Act, etc.
“Adjudicating authority”
“Adjudicating authority” means any authority competent to pass any order or decision under this Act, but does not include the Board, Commissioner (Appeals) or Appellate Tribunal.
“Coastal goods”
“Coastal goods” means goods, other than imported goods, transported in a vessel from one port in India to another [Section 2(7)];
“Customs area”
“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;
“Foreign-going vessel or aircraft”
“Foreign-going vessel or aircraft” means any vessel or aircraft for the time being engaged in the carriage of goods or passengers between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not, and includes –
- any naval vessel of a foreign Government taking part in any naval exercises;
- any vessel engaged in fishing or any other operations outside the territorial waters of India;
- any vessel or aircraft proceeding to a place outside India for any purpose whatsoever.
“Indian Customs Waters”
“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;
Duty on Pilfered goods [Section 13]
Duty on Pilfered goods [Section 13] – If any imported goods are pilfered after the unloading thereof and before the proper officer has made an order for clearance for home consumption or deposit in a warehouse, the importer shall not be liable to pay the duty leviable on such goods except where such goods are restored to the importer after pilferage.
The term ‘pilfer’ means “to steal, especially in small quantities; petty theft”. Therefore, the term does not include loss of total package.
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 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.
Remission of duty
Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods have been lost (otherwise than as a result of pilferage) or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall remit the duty on such goods. [Sub- section (1)].
“Relinquish”
“Relinquish” means to give over the possession or control of, to leave off. The aforementioned right can be exercised at any time before the passing of the order for clearance for home consumption. Before that date, it is open to the importer to relinquish the title to the goods.