Types of Duty – CA Final IDT Study Material is designed strictly as per the latest syllabus and exam pattern.
Types of Duty – CA Final IDT Study Material
Question 1.
Explain briefly about “Preferential Rate of Duty” for customs purpose. [May 2011, 3 Marks]
Answer:
Preferential Rate of Duty [Section 4]
The Central Government has the power to declare certain areas as preferential areas, the imports wherefrom are chargeable to preferential rate of duty.
Duty leviable at standard rate unless conditions for charge of duty at preferential rate fulfilled.
The following are the conditions:
(a) at the time of importation, the importer/owner of the article must claim that the article
is chargeable with a preferential rate of duty;
(b) the importer/ owner must also claim that such article has been produced or manufactured in a preferential area;
(c) such preferential area, being a country or territory, must be notified as a preferential area by the Central Government; and
(d) the origin of such article (i.e. identification whether such article is a produce or manufacture of notified preferential area) must be determined in accordance with rules made in this behalf.
Question 2.
Explain Protective Duty as per Customs Tariff Act, 1975?
Answer:
Protective Duty [Section 6]
(a) On recommendation of Tariff Commission of India, this duty can be imposed by CG with immediate effect by issuing a notification.
(b) For every purpose, this duty is treated at par with the Basic customs duty u/s 2 of the CTA.
(c) The Central Government has the power to reduce or to increase such duty by issuing a notification in Official Gazette and get the permission in the Parliament.
Question 3.
Mention whether Education Cess and Secondary and Higher Education Cess leviable on the imported goods has been substituted by “Social Welfare Surcharge”. [Nov. 2012 Modified, 3 Marks]
Answer:
Yes, “Education Cess and Secondary and Higher Education Cess” has been replaced with a “Social Welfare Surcharge”
A social welfare surcharge has been imposed on imported goods @ 10% of total customs duties (excluding certain duties) w.e.f. 02-02-2018. Hence, effective rate of BCD = 10% general rate of basic customs duty (BCD) + SWS @ 10% of BCD =11%
NO EC & SHEC W.E.F. 02-02-2018
Education Cess @ 2% and Secondary & Higher Education Cess @1% was levied at total 3% on total import duties (excluding certain duties). Now, no EC and SHEC is leviable on imports from 02-02-2018 and Section 94 of Finance (No. 2) Act, 2004 and Section 139 of Finance Act, 2007 providing for levy of EC/SHEC have been omitted.
Question 4.
Explain the impact of introduction of GST under Customs Act.
[This question is modified as per current scenario] [Nov. 2011, 3 Marks]
Answer:
Following are the important impact of GST under Customs Act.
Integrated Tax:
[Section 3(7) of CTA, 1975]
- Any article which is imported into India
- shall, in addition, be liable to integrated tax rate such rate
- not exceeding 40%
- as is leviable under section 5 of IGST Act, 2017 on a like article on its supply in india.
GST compensation cess: (Sec. 3(9) of CTA, 1975]
GST Compensation cess is a compensation cess levied u/s 8 of the Goods and Services Tax (Compensation to State) Act, 2017.
GST compensation cess is levied on intra-State supply of goods or services and inter-State supply of goods and services to provide compensation to the States for loss of revenue due to implementation of GST in India.
It may be noted that GST compensation cess would be applicable to only those supply of goods or services that have been notified by the Central Government. As of now, GST Compensation cess is levied on luxury and sin goods like pan masala, tobacco, etc.
Question 5.
Determine the total duties (duty, tax and cess) payable under Customs Act, if Mr. Rao imported Rubber from Malaysia at landed price of 125 lakhs. It has been notified by Central Govt, that share of imports of Rubber from the developing county against total imports to India exceeds 5% and safeguard duty is notified to this product @ 30% and rate of integrated tax u/s 3(7) is 12%, and rate of Basic customs duty was 10% [May 2019, 5 Marks]
Answer:
Computation of total duties payable under the Customs Act
| Particulars | (₹) | |
| Landed price [we presume that landed price is exclusive of customs duties] | 25,00,000 | |
| Add: Basic customs duty @10% | (A) | 2,50,000 |
| Add: Safeguard duty @ 30% on ₹ 25,00,000 | (B) | 7,50,000 |
| Add: Social welfare surcharge (SWS) @ 10% on ₹ 2,50,000 [Note 1] | (C) | 25,000 |
| Add: Integrated tax 12% of ₹ 35,25,000 [Note 2] | (D) | 4,23,000 |
| Total customs duties and tax payable [A+B+C+D] | 14,48,000 | |
Notes:
- While calculating SWS, safeguard duty is excluded.
- Integrated tax is levied on the sum total of the assessable value of the imported goods, customs duties and applicable SWS. i.e. (₹ 25,00,000 + ₹ 2,50,000 + ₹ 7,50,000 + ₹ 25,000)
Question 6.
Compute the duty payable under the Customs Act, 1962 for an imported equipment based on the following information:
(i) Assessable value of the imported equipment US $ 10,100.
(ii) Date of Bill of Entry 21.4.2018 basic customs duty on this date 20% and exchange rate notified by the Central Board of Excise and Customs US $ 1 = ₹ 65.
(iii) Date of Entry inwards 21.4.2018 basic customs duty on this date 16% and exchange rate notified by the Central Board of Excise and Customs US $ 1 = ₹ 50.
(iv) Integrated Tax payable under section 3(7) of the Customs Tariff Act, 1975: 15%.
(v) GST compensation cess is Nil.
(vi) Social Welfare Surcharge @ 10%
Make suitable assumptions where required and show the relevant workings and round off your answer to the nearest Rupee. [Nov. 2009, 5 Marks]
Answer:
Computation of imported cost and customs duty (Amount in ₹)
| Particulars | Amount | |
| Assessable Value (Note) | 6,56,500 | |
| Add: Basic Customs duty @ 20% of Assessable Value (20% of 6,56,500) | (A) | 1,31,300 |
| Add: Social Welfare Surcharge @ 10% of A (10% of 1,31,300) | (B) | 13,130 |
| Total value for levy of Integrated Tax u/s 3(7) of CTA, 1975 | (C) | 8,00,930 |
| Add: Integrated tax under Section 3(7) @ 15% of C (15% of 8,00,930) | (D) | 1,20,139.5 |
| Total cost of imported goods | 2,64,569.5 | |
| Total Customs Duty [A+B+D] (Rounded off) | 2,64,570 | |
Working Note: Determination of Assessable Value in INR.
= Value in $ × Rate Notified by CBIC & prevailing on the date of filing of Bill of Entry)
= $ 10,100 × ₹ 65 = ₹ 6,56,500
Question 7.
Write a note on “Emergency power to impose or enhance import duties under Sec. 8A of the Customs Tariff Act”. [Nov. 2015, 2 Marks]
Answer:
Central Government Empowered to Impose/Enhance the Export Duties: The Central Government may impose or enhance export duties by making amendment to the Second Schedule by issue of a notification in the Official Gazette.
Conditions to be satisfied:
(a) The goods may or may not be specified in the Second Schedule;
(b) The Central Government is satisfied that circumstances exist, which render it necessary for the imposition or enhancement of export duties.
If the above conditions are satisfied, the Central Government may impose or enhance export duties.
Question 8.
Write a short note on the applicability of safeguard duty under the Customs Tariff Act, 1975 on articles imported by EOU/SEZ unit and cleared as such into domestic tariff area (DTA). [May 2015, 2 Marks]
Answer:
Safeguard duty is imposed as per Section 8B of the Customs Tariff Act, 1975.
Safeguard duty shall not apply to articles imported by a 100% EOU /unit in a SEZ unless-
(i) specifically made applicable; or
(ii) the article imported is either cleared as such into DTA or used in the manufacture of any goods that are cleared into DTA and in such cases safeguard duty shall be levied on that portion of the article so cleared or so used as was leviable when it was imported into India.
Question 9.
When shall the safeguard duty under Sec. 8B of the Customs Tariff Act, 1975, not be imposed? Discuss briefly. [Nov. 2013, 3 Marks]
Answer:
The safeguards duty under Sec. 8B of the Customs Tariff Act, 1975 is not imposed on the import of the following types of articles.
(a) EXEMPTIONS FROM SAFEGUARD DUTY:
Articles from developing country: Articles originating from developing country, so long as the share of imports of that article from that country does not exceed 3% of the total imports of that article into India.
Articles originating from more than one developing country: Articles originating from more than one developing country, so long as the aggregate of imports from developing countries each with less than 3% import share taken together does not exceed 9% of the total imports of that article into India.
Article imported by 100% EOU/SEZ: Articles imported by a 100% EOU or units in a Free Trade Zone or Special Economic Zone unless the duty is specifically made applicable on them.
Question 10.
Determine the customs duty payable under Customs Tariff Act, 1975 including the safeguard duty of 30% under Section 8B of the said Act with the following details available on hand:
| Import of Sodium Nitrite from a developing country from 26th February, 2018 to 25th February, 2019 (both days inclusive) | 30,00,000 |
| Share of imports of Sodium Nitrite from the developing country against total imports of Sodium Nitrite of India | 4% |
| Basic Customs Duty | 10% |
| Integrated tax under Sec. 3(7) of Customs Tarrif Act, 1975 | 12% |
| GST Compensation cess | Nil |
| Social Welfare Surcharge | 10% |
[May 2016, 4 Marks]
Answer:
Calculation of custom duty including safeguard duty payable:
| Particulars | Amount (₹) |
| Value of importation of Sodium Nitrite from a developing country | 30,00,000 |
| Basic custom duty @10% | 3,00,000 |
| SWS @ 10% of 3,00,000 | 30,000 |
| Safeguard duty @ 30% of 30,00,000 [Note-1] | 9,00,000 |
| Total for IGST | 42,30,000 |
| Integrated tax leviable under Section 3(7) of Customs Tariff Act (42,30,000 X12%) | 5,07,600 |
| Total customs duty payable [3,00,000 + 30,000 + 9,00,000 + 5,07,600] | 17,37,600 |
Note:
Safeguard duty is imposable in the given case since share of imports of sodium nitrite from the developing country is more than 3% of the total imports of sodium nitrite into india.
Question 11.
What are the ways that would constitute circumvention of anti-dumping duty imposed on an article that may warrant action by the Central Government based on inquiry as it may consider necessary for purpose of Section 9A(1A) of the Customs Tariff Act, 1975. [May 2012, 3 Marks]
Answer:
As per Sec. 9A(1A) of the Customs Tariff Act, 1975, Anti-circumvention measure in respect of countervailing duty:
Where the Central Government, on such inquiry as it considers necessary, is of the opinion that circumvention of countervailing duty has taken place, by either of the following ways:-
- by altering the description or name or composition of the article on which such duty has been imposed;
- by import of such article in an unassembled or disassembled form;
- by changing the country of its origin or export; or
- in any other manner, whereby the countervailing duty so imposed is rendered ineffective; it may extend the countervailing duty to such other article also.
Question 12.
During the year 2018, the Customs Authorities have noticed that there is an increased quantity of Product XYZ being imported into the Country. Determine whether the Central Government should consider levying Safeguard duty or anti-dumping duty with appropriate reasons. Also enumerate any exemptions/reliefs available from such duty. [Nov 2019, 5 Marks]
Answer:
As per section 8B of Customs Tariff Act, 1975
If the Central Government, after conducting such enquiry as it deems fit, is satisfied that:
- Any article is imported into India
- In such increased quantities and under such conditions
- So as to cause or threatening to cause serious injury to domestic industry, then, it may, by notification, impose a safeguard duty on that article.
As per section 9A of Customs Tariff Act, 1975
If the Goods are offered in India at a price below the normal price because of excess production overseas, this is called as dumping and when the domestic industry brings it to the notice of CG, immediately this duty is imposed by issue of notification.
As per the above discussion we can say that the Central Government should consider levying safeguard duty.
Exemption/relief available from safeguard duty
(a) Articles from developing country: Articles originating from developing country, so long as the share of imports of that article from that country does not exceed 3% of the total imports of that article into India.
(b) Articles originating from more than one developing country: Articles originating from more than one developing country, so long as the aggregate of imports from developing countries each with less than 3% import share taken together does not. exceed 9% of the total imports of that article into India.
(c) Safeguard duty shall not be applicable on articles imported by a 100% EOU/SEZ unit unless specifically made applicable;
(d) Safeguard duty shall not be applicable on articles imported by a 100% EOU/SEZ unit unless the article imported is either cleared as such/used in the manufacture of any goods that are cleared, into DTA.
(e) Central Government may exempt notified quantity of any article, when imported from any country into India, from whole/part of the safeguard duty.
Question 13.
Ganga Ltd., an Indian company located at Jaipur, imported into India certain commodities in July, 2018 from a country which is covered by a Notification issued under Section 9A of the Customs Tariff Act, 1975.
The relevant particulars relating to import are as follows:
(1) CIF value of the consignment-US $ 35,000
(2) Quantity imported-700 Kgs.
(3) Exchange rate applicable – US $ 1 = ₹ 62
(4) Basic Customs Duty (BCD) – 20%
(5) As per the Notification, the anti-dumping duty leviable will be 75% of the difference between the cost of the commodity calculated @ US $ 80 per kg. and the landed value of the commodity as imported.
You are required to calculate the amount of total Customs duty (including anti-dumping duty) payable by Ganga Ltd.
Note: Assume there is no integrated tax u/s 3(7) or compensation cess u/s 3(9) of CTA, 1975, but Social Welfare Surcharge may be adopted, wherever applicable. Working Notes with brief reasons should form part of the answer. [May 2017, 4 Marks]
Answer:
Computation of Total Customs Duty (including anti-dumping duty)
| Particulars | Amount ₹ |
| CIF value of commodities in INA (US$ 35,000 × 62) (Working Note 1) | 21,70,000 |
| Assessable value under Customs Laws | 21,70,000 |
| Add: BCD @ 20% | 4,34,000 |
| Add: SWS @ 10% on BCD | 43,400 |
| Landed value cost of Goods [A] (Working Note 2) | 26,47,400 |
| Cost of commodity for anti-dumping duty (700 kg × US $ 80 × 62] [B] | 34,72,000 |
| Anti-Dumping Duty = 75% [B-A] i.e. 75% of [34,72,000-26,47,400] | 6,18,450 |
Total custom duty = 10,95,850 [4,34,000 + 43,400 + 6,18,450].
Working Notes :
- We presume Exchange Rate is notified by CBIC.
- Landed Value = Assessable Value + Basic Customs Duty + Social Welfare Surcharges
Question 14.
Chaintop Industries has challenged the imposition of anti-dumping duty retrospectively from the date prior to the date of imposition of anti-dumping duty on the grounds that it is unconstitutional. Explain whether it would succeed in its contention. [May 2018(Old), 4 Marks]
Answer:
Section 9A(3) of the Customs Tariff Act, 1975 provides that the anti-dumping duty can be imposed with retrospective effect, (Duty can be imposed retrospectively from a date prior to date of imposition of provisional anti-dumping duty but not beyond 90 days from the date of notification of provisional duty) provided the Government is of the opinion that:-
(a) There is a history of dumping which caused injury or that the importer was, or should have been, aware that the exporter practices dumping and that such dumping would cause injury, and
(b) the injury is caused by massive dumping of an article imported in a relatively short time, which in the light of timing and volume of the imported article dumped and other circumstances is likely to seriously undermine the remedial effect of the anti-dumping duty liable to be levied.
Thus, Chaintop Industries would succeed in its contention if all of the above conditions are not satisfied.
Question 15.
Miss Priya imported certain goods weighting 1,000 kgs. with CIF value US $ 40,000. Exchange rate was 1 US $ = ₹ 45 on the date of presentation of bill of entry. Basic customs duty is chargeable @10% and social welfare surcharge as applicable.
As per Notification issued by the Government of India. Anti-dumping duty has been imposed on these goods. The anti-dumping duty will be equal to difference between amount calculated @ US $ 60 per kg. and ‘landed value’ of goods. You are required to compute custom duty and anti-dumping duty payable by Miss Priya. Ignore IGST and GST compensation cess. [May 2010, 5 Marks]
Answer:
Computation of customs duty payable:
| Particulars | ₹ | |
| Assessable value (AV) [Note] | 18,00,000 | |
| Add: Basic Customs duty @ 10% of Assessable Value | (A) | 1,80,000 |
| Social welfare surcharge of BCD @10% | (B) | 18,000 |
| Landed value of imported goods | 19,98,000 | |
| Total customs duty payable (A + B) | 1,98,000 | |
Note: CIF Value in India Rupees US $ 40,000 × ₹ 45 = ₹ 18,00,000 loading and handling charges incurred at the place of importation will not be included in assessable value. Therefore, CIF value will be treated as assessable value.
Computation of Anti-dúmping Duty:
Amount of Anti-dumping Duty = Value of Goods in Indian Rupees – Landed value of Goods
| Particulars | Amount (₹) |
| Value of goods in INR as per Notification [1,000 Kgs × US $ 60 × ₹ 45] | 27,00,000 |
| Less: Landed value of goods | 19,98,000 |
| Amount of Anti-dumping Duty | 7,02,000 |
Question 16.
Is it correct that “Goods exempted from basic customs duty would automatically be exempt from additional duty of customs”? Explain with reasons. [Nov. 2015, 2 Marks]
Answer:
No, it is not correct to say that “Goods exempted from basic custom duty would automatically be exempted from additional duty of customs. The reason is this duty is equal to excise duty levied on a like product manufactured or produced in India.
Question 17.
State the salient features of “Deferred duty payment facility” with reference to Customs Act, 1962 and rules thereunder. [May 2018, 5 Marks]
Answer:
Deferred payment of duty for class of importers:
The Central Government may, by notification in the Official Gazette, permit certain class of importers to make deferred payment of empower Central Government to frame rules to provide for the due date and the manner of making deferred payment of duties, taxes, cesses or any other charges under section 47.
Following are the provisions of “Deferred Payment of Import Duty Rules, 2016”:
1. Eligible Person for deferred Payment of Import Duty:
Only importers certified under Authorized Economic Operator (AEO) programme as AEO (Tier-2) and AEO (Tier-3) are eligible to make deferred payment.
2. Process of availing the benefits of deferred payment of import duty :
(a) An eligible importer who wants to avail this deferred benefits shall intimate to the Principal Commissioner or Commissioner of Customs having jurisdiction over the port of clearance, his intention to avail the said benefits.
(b) Principal Commissioner or Commissioner of Customs, if satisfied will allow the eligible importer to pay the duty by due dates specified.