Levy of and Exemptions from Customs Duty – CA Final IDT Study Material is designed strictly as per the latest syllabus and exam pattern.
Levy of and Exemptions from Customs Duty – CA Final IDT Study Material
Explain briefly the significance of ‘Indian Customs Waters’ under the Customs Act, 1962. [Nov. 2008/May 2011, 2 Marks]
Meaning of Indian Customs Water [Sec. 2(28)]:
Indian customs waters cover both the Indian territorial waters, exclusive economic zone, Continental Shelf and includes any bay, gulf, harbour, creek or tidal river. Indian territorial waters extend up to 12 nautical miles (nm) from the base line Where as, exclusive economic zone of India is an area beyond the Indian territorial waters. The limit of exclusive economic zone is 200 nautical miles from the nearest point of the baseline. Therefore, Indian customs waters extend to a total of 200 nm from base line.
Significance of Indian Customs Water :
Following actions can be taken by Custom Officer, which show the significance of Indian-Cus- toms Waters.
(a) Search of any person, who has landed from or about to board/is on board any vessel within Indian custom waters and who has secreted about his person, any goods etc. (Sec. 100)
(b) Arrest of the suspected persons (Sec. 104)
(c) Stop and Search of vessel (Sec. 106)
(d) Confiscation of Conveyance (Sec. 115)
Define Customs Area. [May 2009, 2 Marks]
i. Customs Area as per Section 2(11) of Customs Act, 1962: Customs Area means the area of a customs station or warehouses, and include any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities.
ii. Appointment of Customs Area as per Section 8 of Customs Act, 1962 :
Commissioner of customs empowered to appoint the customs Area within the customs port or Airport.
Explain briefly the expression ‘Person-in-Charge’ under the Customs Act, 1962. [Nov. 2009, 2 Marks]
Person-in-Charge [Section 2(31) of Customs Act, 1962]
In relation to:
- a vessel – the master of the vessel;
- an aircraft – the commander or pilot-in-charge of the aircraft;
- a railway train – the conductor, guard, or other person having the chief direction of train;
- any other conveyance – the driver or other person-in-charge of the conveyance;
Mention the new nomenclature of Customs House Agent and the need for such change. [Nov. 2014, 2 Marks]
- The new nomenclature of “Custom House Agent” is “Custom Broker”. Accordingly, there is also amendment in Section 146 of the Customs Act, 1962, by the Finance Act, 2013.
- The term “Broker” is wider than the “Agent”, so this new nomenclature was brought. Again, the changes has been done to be in line with the global practice and internationally accepted nomenclature.
Explain briefly the following with reference to the provisions of the Customs Act, 1962:
(2) India [Nov. 2014, 2 × 2 = 4 Marks]
Definition: As per Sec. 2(9) of Customs Act, 1962, conveyance is defined into inclusive manner and includes a vessel, an aircraft and a vehicle.
- It defines the type of transport or vehicle for transportation of imported goods or export goods.
- It helps to fix the liability of controller of conveyance i.e. person-in-charge.
India includes the Territorial Waters of India [Section 2(27)]
As per Sec. 2(27) of Customs Act, 1962: “India” includes the territorial waters of India, ie. upto 12 nautical miles into the sea from the baseline or land-mass.
Write short notes on the followings with reference to the Customs Act, 1962 ?
(ii) Imported Goods
(iii) Prohibited Goods
(iv) Export Goods
(i) Goods [Section 2(22)]
- Vessels, aircraft and vehicles
- Currency and negotiable instruments, and
- Any other kind of movable property
(ii) Imported Goods [Section 2(25)]
The goods brought to India from a place outside India are referred to as imported goods only as long as import duty has not been paid thereon.
(iii) Prohibited Goods [Section 11]
The CG has empowered to prohibit import or export of certain goods and they are referred as prohibited goods.
- By issuing a notification, the CG may prohibit import/export of customs goods. The prohibition may be absolute or conditional.
- Such prohibition may be based on any of the following
- Protcction to Domestic industry
- Any international agreement
- Protection of patent, copyrights and Trade marks
- Establishment of any industry
- Preventing of smuggling
- Prevention of dcccptive practices etc.
(iv) Export Goods [Section 2(18)]
“Export”: with its grammatical variations and cognate expressions,
- means taking out of India to a place outside India
Write short notes on the followings with reference to the Customs Act, 1962?
(i) Transit Goods
(ii) Transshipment Goods
(iii) Coastal Goods
(i) Transit Goods [Sections 52 to 54]
Transit goods are those goods which are brought to India through any vessels or aircraft but those are not unloaded in India. These are also referred to as same bottom goods.
(ii) Transshipment Goods [Sections 52 to 54]
Transshipment goods are unloaded in India but those are to be sent to some other place whether in India or abroad.
(iii) Coastal Goods [Sections 91 to 99]
Coastal goods are domestic goods which are transported within India through sea route. If duty has been paid on Imported goods and those goods are transported through sea route within India, those are also treated as coastal goods.
Explain briefly legal provisions relating to pilfered goods under Customs Act, 1962. [May 2009, 2 Marks]
The meaning of “Pilfer” is petty theft or to steal in small quantities. To establish small pilferage, during physical examination by customs, there should be evidence of tampering with the package.
As per Section 13 of customs act, 1962: If any of the goods are pilfered alter being unloaded in India and before their removal for home consumption or for warehouse from the customs Area, then the importer shall not be liable to pay duty on pilfered goods unless the goods are restored to him. [Section 45 of Customs Act, 1962 is referred]
Briefly explain with reference to the provisions of the Customs Act the relevant date for determination of rate of duty and tariff valuation for imports through a vehicle where bill of entry filed prior to the arrival of the vehicle. [May 2015, 2 Marks]
|15(1)||Goods Entered for Home Consumption [Section 46]||(i)The date of presentation of Bill of Entry
(ii)The date of entry inwards of the vessel or the arrival of the aircraft or the vehicle by which goods are imported, whichever is later.
M/s Impex imported some consignment of goods on 1-6-2018. A bill of entry for warehousing of goods was presented on 5-6-2018 and the materials were duly warehoused. The goods were subject to duty @ 50% ad valorem. In the meanwhile, on 1-7-2018 an exemption notification was issued reducing the effective customs duty @ 30%, ad valorem. M/s Impex filed their bill of entry for home consumption on 1-8-2018 claiming duty @ 30% ad valorem. However, customs department charged duty @ 50% ad valorem being the rate on the date of clearance into the warehouse.
Explain with reference to the provisions of the Customs Act, 1962:
(i) The rate of duty applicable for clearance for home consumption in this case.
(ii) Whether the rate of exchange on 1-8-2018 could be adopted for purpose of conversion of foreign currency into local currency. [Nov. 2016, 4 Marks]
|15(1)(b)||Goods Cleared for Home Consumption from the Warehouse||Date on which a bill of entry for home consumption in respect of such goods is presented|
The rate of duty will be 30% i.e. rate of duty on filing of bill of entry for home consumption. [Sec. 15(1)(b) of the Customs Act, 1962]
(ii) As per Sec. 14 of the Customs Act, 1962 : The rate of exchange will be the rate of the duty of filing of bill of entry for warehousing.
With reference to Customs Act, 1962, explain briefly the “relevant date” for determination of rate of duty leviable on the imported material content in the waste or refuse. [May 2017, 4 Marks]
Rate of Import Duty [Section 15 of the customs Act, 1962]
|15(1)||Goods Entered for Home Consumption [Section 46]||(i) The date of presentation of Bill of Entry
(ii) The date of entry inwards of the vessel or the arrival of the aircraft or the vehicle by which goods are imported, whichever is later.
|15(1)(b)||Goods Cleared for Home Consumption from the Warehouse||Date on which a bill of entry for home consumption in respect of such goods is presented|
|15(1 )(c)||Any other Goods||Date of Payment Duty|
Write a brief note on self-assessment in customs under the Customs Act, 1962. [May 2012, 3 Marks]
(i) Self-assessment of duty has been introduced in the Customs Act, 1962 vide the Finance Act, 2011 by recasting Sec. 17 of the Customs Act, 1962.
(ii) The importer or the exporter has to self-assess the duty leviable on goods imported or exported.
(iii) The proper officer may verify the self-assessment of such goods by examining/testing the goods, if necessary. He may also ask the importer or the exporter to furnish any document or information for ascertaining the duty.
(iv) After verification, if it is found that the self-assessment has not been done correctly, the proper officer may re-assess the duty leviable on such goods.
(v) If the order of the re-assessment is contrary to the self-assessment, the proper officer should pass a speaking order on the re-assessment within 15-days from the date of reassessment.
Write short notes on the following?
Jetsam, Flotsam, Derelict and Wreckage [Section 21]
All goods, derelict, jetsam, flotsam and wreck brought or coming into India, shall be dealt with as if they were imported into India, unless it be shown to the satisfaction of the proper officer that they are entitled to be admitted duty-free under this Act.
- 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.
- Derelict – This refers to any cargo, vessel, etc. abandoned in the sea with no hope of recovery.
- Wreck – If any boat or steamer or a vessel gets destroyed in any accident, the broken parts thereof are referred as wreckage.
If any of these goods arrive or are brought to India then the person claiming title to such goods is liable to pay duty as if these are imported goods.
ABC imported a vessel ‘Waterloo’ for the purpose of breaking from XYZ Ltd. of U.K. A mem-orandum of understanding was signed between the buyer and seller on 2.6.2020 and ABC took delivery of the vessel on 4.6.2020, Vessel drifted and landed in the yard of B in a damaged condition on 9.6.2020. On 24.6.2020, ABC filed application to concerned Assistant Commissioner for extension of time to file bill of entry, which was granted on 12.8.2020. ABC paid 24 crores to XYZ Ltd. towards the purchase price of the vessel. Thereafter ABC sold the vessel to B for 12 crores and B filed bill of entry on 12.9.2020.
Assessing authority assessed the ship taking the value as 24 crores and ship was taken over by B after assessment order was passed. ‘B’ argues that assessable value should be taken as 12 crores since the vessel was damaged because of the storm which made the vessel drift during appellate proceedings. No application for abatement of duty was made before the assessing authority by ABC or B. Examine whether benefit of relief under Sec. 22 of Customs Act, 1962 to reduce the value and thereby duty can be extended to B under the above circumstances. The assessment order in respect of bill of entry was passed on 23.12.2020. [May 2009, 5 Marks]
Decided Case Law
Supreme Court held that in order to claim the benefit of the abatement under Sec. 22, the party claiming the abatement has to satisfy the Assessing Authority that a case has been made out under Sec. 22 for abatement of duty on damaged or deteriorated goods.
In the absence of any claim made under Sec. 22 in writing to the Assessing Authority, the appellant (B) could not claim the abatement under Sec. 22 and the Assessing Authority did not record rightly to its satisfaction that the appellant was entitled to the abatement of duty.
In this case, damage occurred in Indian shore. Importer sought extension of time to file bill of entry. But thereafter remitted the purchase price and sold the vessel to B in turn filed the bill of entry and the vessel was assessed. No application was made by the buyers i.e. importer (ABC) to the Assistant Commissioner for any abatement of duty on damaged goods.
The transaction between the importer (ABC) and the respondent (C) cannot be described as the transaction of purchase and sale during the course of international trade. Any sale of goods carried out, after the act of ‘import’ within the meaning of the Act is over, can only be described as a sale in the course of domestic trade and not a sale in the course of international Trade. Therefore, the appellant i.e. buyer (B) who had purchased the vessel in the course of domestic trade was not entitled to seek any abatement of duty under Sec. 22 of the Customs Act, 1962 on the ground on which it claimed before the Appellate Authority.
Hence, in the light of above discussion, it can be inferred that the assessable value of the ship shall be the transaction value at which the importer (ABC) has paid at the time of importation i.e. 24 crores.
In January, 2019, Rock & Rock India Ltd. imported a consignment from U.S.A. (by sea). The value of consignment was ₹ 7,50,000 and total duty payable was ₹ 1,50,000.
Company filed bill of entry for home consumption but before inspection and clearance for home consumption it found that the goods were damaged. On filing a representation to the Customs Department, proper officer refused the claim for abatement because goods were already unload-ed. The proper officer is in agreement with the claim that the value of goods has come down to only ₹ 1,50,000.
Examine the issue with reference to the relevant statutory provisions and calculate the amount of total duty payable:
Would your answer be different in the above case if the goods get deteriorated after unloading and examination but before clearance for home consumption, and value comes down to ₹ 7,00,000? [2018-Nov. 5 Marks]
If the goods are damaged at any time:
- Before unloading in India
- During the course of unloading in India
- When the goods are under custody of the custodian?
- During transit between customs area and warehouse.
- During warehouse.
And such damage results into reduction in the value of goods then the duty liability of the importer will also be reduced in proportion of the devaluation of goods.
- In view of the abovementioned provisions the stand taken by the proper officer of refusing the claim for abatement is not valid in law.
- The duty to be charged on the damaged goods shall be reduced in proportion to the reduction in the value of goods on account of damage.
- Thus, in the case, the amount of total duty payable = [1,50,000/7,50,000] × 1,50,000 = ₹ 30,000
The abatement of duty is allowed where it is shown to the satisfaction of the Assistant/Deputy Commissioner of Customs that inter alia, warehouse goods had been damaged at any time before clearance for home consumption on account of any accident not due to any wilful act, negligence or default of the owner, his employee or agent
Since in this case, imported goods have deteriorated before clearance for home consumption, abatement of duty will not be allowed and full duty will have to be paid.
M/s. Decent Laminates imported resin impregnated paper a plywood for the purpose of manu-facture of furniture. The said goods were warehoused from the date of its import. M/s. Decent Laminates sought an extension of the warehousing period which was granted. However, even after the expiry of extended period, it did not remove the goods from the warehouse. Subse-quently it applied for remission of duty under Sec. 23 of the Customs Act, 1962 on the ground that the imported goods had become unfit for use on account of non-availability of orders for clearance and had lost their shelf life also.
Explain, with the help of a decided case law, if any, whether the application for remission of duty filed by M/s. Decent Laminates is valid in law? [Nov. 2013, 3 Marks]
The application for remission of duty filed by M/s Decent Laminates is not valid in law.
The facts of the given case are similar to the case of CCE v. Decorative Laminates (I) Pvt Ltd. 2010 (257) E.L.T. 61 (Kar.) wherein the High Court held that the circumstances made out under Sec. 23 were not applicable in the instant case as the destruction/loss of the goods had not occurred before the clearance for home consumption.
Remission can be granted under Sec. 23 only when the imported goods have been lost or destroyed at any time before the clearance for home consumption.
The High Court clarified that the expression “at any time before clearance for home consumption” as provided in Sec. 23 means the time period as per the initial order during which the goods are warehoused before the expiry of the extended date for clearance and not after of the lapse of such period. The said expression cannot extend to a period after the lapse of the extended period merely because the goods were not cleared within the stipulated time. Instead, it would be a case of goods improperly removed from the warehouse.
An importer imported a consignment weighing 10,000 tons. The importer filed a hill of entry for home consumption. The Assistant Commissioner passed an order for clearance of goods and applicable duty was by them. The importer thereafter found, on taking delivery from the only 9,000 tonnes of inputs were available at the docks although he had paid. The duty for the entire 10,000 tonnes. There was no short-landing of cargo. The short-delivery of 10,000 tonnes was also substantiated by the Port Trust Authorities, who gave a weighment certificate to the importer.
On filing a representation to the Customs Department, the importer has been directed in writing to justify as to which provision of the Customs Act, 1962 governs his claim for remission of duty on the 10,000 tonnes not delivered by the Port Trust. Examine the issue and tender your opinion as per law, giving reasons. [May 2018, 5 Marks]
In the given case, it is apparent from the fact that quality of inputs received in India was 10000 metric tons and 1 thousand metric ton was lost when it was in custody of port authority i.e., before clearance for home consumption was made.
- Also, the loss of 1000 tons of input cannot be construed to be Pilferage, as loss of such huge quantity cannot be constructed to be pilferage, as loss of such huge quantity cannot be treated as “petty theft”.
- Hence, peerless scraps may take shelter under Section 23 justifying his claim for remission of duty.
- The duty already paid may be claimed as refund.
Sun Synthetic Fibres was an importer. It had imported one unit of the equipment which was declared as “High Speed Draw Warping Machine with 1536 ends along with essential spares”. The importer claimed that these goods are covered under an exemption notification.
Under said notification, exemption was available in respect of the High Speed Warping Machine with yarn tensioning, pneumatic suction devices and accessories. Undisputedly, the assessee had imported High Speed Warping Machine, but it had drawing unit and not the pneumatic suction device. The textile commissioner, who was well conversant with these machines, had stated that the goods imported by the assessee were covered under the exemption notification. He further stated that drawing unit was just an essential accessory to the machines imported by assessee and, therefore, was covered under said notification.
The opinion so furnished is taken note of by the Tribunal while granting relief to the assessee. Revenue contended that the machine imported by the assessee was not in consonance with the exemption notification and, therefore, the benefit of exemption should not be available under the notification to the assessee.
Discuss whether the contention of the revenue is sustainable in law, with the help of decided case law, if any. [May 2013, 3 Marks]
No, the contention of the Revenue is not sustainable.
The facts of the given case are similar to the case of CCus. (Import), Mumbai v. Konkan Synthetic Fibres 2012 (278) E.L.T. 37 (S.C.) wherein the Supreme Court stated that it is a salted proposition in a fiscal or taxation law that while ascertaining the scope or expressions used in a particulars entry, the opinion of the expert in the field of trade, who deals in those goods, should not be ignored, rather it should be given due importance.
The Supreme Court further elaborated that when no statutory definition is provided in respect of an item in the Customs Act or the Central Excise Act, the trade understanding, i.e., the understanding in the opinion of those who deal with the goods in question would be the safest guide. Hence, the Supreme Court, relying on the opinion of the Textile Commissioner, concluded that the imported goods were covered under the exemption notification.
M/s Marwar Industries imported finishing agents, dye-carriers, printing paste etc. to be used for manufacture of textile articles. The importer claimed exemption for Additional duty of customs (CVD) leviable under Sec. 3 of the Customs Tariff Act, 1975, on the ground that there was an exemption for excise duty in respect of said goods used in the ‘same factory’ for manufacture of textile articles. The Department contended that CVD the ground that the goods which were to be used must also be manufactured in the ‘same factory’. You are requested to comment upon the contention of Department, with reference to a decided case law, if any. [May 2010, 5 Marks]
The contention of the Department is not valid in law.
The Supreme Court in a similar Court in a similar case of CCns. v. Malwa Industries Ltd. (2009) 235 E.L.T. 214 (S.C.) held that literal meaning should be avoided if it leads to absurdity. When the goods are imported, obviously, the same would not be manufactured in the same factory and therefore, it would become impossible to apply the provision of Sec. 3(1) of the Customs Tariff Act, 1975. It was observed that the object of countervailing duty (CVD) is that importer should not be placed at some more advantageous position vis-a-vis purchaser/manufacturer similar goods in India.
- Considering the purpose of exemption, it was held that ‘same factory’ means imported goods should be used in factory belonging to importer where manufacturing activity takes place.
- Hence, the exemption will be available to imported goods also and CVD is not applicable.
Answer the questions below.
(i) Briefly discuss the conditions to be satisfied for remission of duty in case of volatile goods under the provisions of the Customs Act, 1962 [Same Question asked in Nov. 2012, 3 Marks/Nov. 2017, 2 Marks]
(ii) Enumerate the goods specified as volatile for the purpose of remission of duty under the provisions of Customs Act, 1962 [Nov. 2017,2 Marks]
(i) As per Section 70 of the Customs Act, 1962 provides for the remission of duty in case of shortage of the volatile goods, which are warehouse. The Assistant or Deputy Commissioner of Customs is empowered to remit the duty leviable on such deficiency, if following conditions are satisfied:
i. The goods should be found deficient in quality at the time of removal from the warehouse;
ii The deficiency should be on account of natural loss, i.e., evaporation etc.
These provisions are applicable only to such warehouse goods as the Central Government, having regard to the volatility of the goods and the manner of their storage, any by notification in the Official Gazette, specify.
(ii) The goods specified as volatile for the purpose of remission of duty in terms of Notification No. 3/2016-Cus (N.T.) dated 11.01.2016 are:
(a) aviation fuel, motor spirit, mineral turpentine, acetone, methanol, raw naptha, vaporizing oil, kerosene, high speed diesel oil, batching oil, diesel oil, furnace oil and ethylene bichloride, kept in tanks;
(b) wine, spirit and beer, kept in casks
(c) liquid helium gas kept in containers
(d) crude stored in caverns.