CUSTOMS ACT
Custom Duty is an indirect tax, imposed under the Customs Act formulated in 1962.
The power to enact the law is provided under the Constitution of India under the
Article 265, which states that ―no tax shall be levied or collected except by authority
of law‖. Entry No. 83 of List I to Schedule VII of the Constitution empowers the
Union Government to legislate and collect duties on import and exports. The
Customs Act, 1962 is the basic statute which governs entry or exit of different
categories of vessels, aircrafts, goods, passengers etc., into or outside the country.
The Act extends to the whole of the India
Customs Act, 1962 just like any other tax law is primarily for the levy and collection
of duties but at the same time it has the other and equally important purposes such as:
(i) regulation of imports and exports;
(ii) protection of domestic industry;
(iii) prevention of smuggling;
(iv) conservation and augmentation of foreign exchange and so on.
Section 12 of the Custom Act provides that duties of customs shall be levied at such
rates as may be specified under the Customs Tariff Act, 1975 or other applicable Acts
on goods imported into or exported from India. Customs Act, 1962 and Customs
Tariff Act, 1975 are the two limbs of Customs Law in India which must be read with
rules and regulations.
Section 2 of the Customs Act, 1962 contains the definitions of various terms used at
several places in the Act. It extends to the whole of India
CUSTOM DUTY
Customs Duty is a type of indirect tax levied on goods imported into India as
well as on goods exported from India. Taxable event is import into or export from
India. India includes the territorial waters of India which extend upto 12 nautical
miles into the sea to the coast of India. In India, the basic law for levy and collection
of customs duty is Customs Act, 1962. It provides for levy and collection of duty on
imports and exports, import/export procedures, prohibitions on imports and exports
of goods, penalties, offences, etc. The Central Board of Excise & Customs (CBEC) is
the apex body for customs matte₹
Custom duty besides raising revenue for the Central Government also helps the
government to prevent the illegal imports and illegal exports of goods from India.
The Central government has emergency powers to increase import or export duties
whenever necessary after a notification in the session of Parliament.
Custom Duty - Objectives
The customs duty is levied, primarily, for the following purpose:
1. Restricting Imports for conserving foreign exchange.
2. Protecting Indian Industry from undue competition.
3. Prohibiting imports and exports of goods for achieving the policy objectives of the
Government.
4. Regulating exports.
5. Prevent Smuggling.
6. Facilitate implementation of laws relating to Foreign Trade Act, Foreign Exchange
Regulation Act, Conservation of Foreign Exchange, Prevention of Smuggling Act,
etc.
LEVY OF CUSTOM DUTY
There are four stages in any tax structure, viz., levy, assessment, collection and
postponement. The basis of levy of tax is specified in Section 12, charging section of
the Customs Act. It identifies the person or properties in respect of which tax or duty
is to be levied or charged. Under assessment, the liability for payment of duty is
quantified and the last stage is the collection of duty which is may be postponed for
administrative convenience. As per Section 12, customs duty is imposed on goods
imported into or exported out of India as per the rates specified under the Customs
Tariff Act, 1975 or any other law.
On analysis of Section 12, we derive the following points:
(i) Customs duty is imposed on goods when such goods are imported into or exported
out of India;
(ii) The levy is subject to other provisions of this Act or any other law;
(iii) The rates of Basic Custom Duty are as specified under the Tariff Act, 1975 or
any other law;
(iv) Even goods belonging to Government are subject to levy, though they may be
exempted by notification(s) under Section 25.
TAXABLE EVENT
The basic condition for levy of customs duty is import/export of goods i.e. goods
become liable to duty when there is import into or export from India.
— Import means bringing into India from a place outside India [Section 2(23)].
— Export means taking out of India to a place outside India [Section 2(18)].
— "India" includes the territorial waters of India [Section 2(27)].
The limit of the territorial waters is the line every point of which is at a distance of
twelve nautical miles from the nearest point of the appropriate baseline. Though the
taxable event is import/export yet it is difficult to determine the exact time of levy.
The provision of assessment and collection of duty will be discussed in other parts.‖.
As per section 12, Customs duties are levied on the goods imported into, or exported
from, India at the rates specified in the schedules to the Customs Tariff Act, 1975.
The first schedule prescribed the rates of duty on imports and Second schedule
prescribe the rates of duty on exports.
TYPES OF DUTIES UNDER CUSTOMS
IMPORT DUTY
There are various types of Customs import duties:
(1) BASIC CUSTOM DUTY It is levied under Section 12 of Customs Act, 1962, and
specified under Section 2 of the Customs Tariff Act, 1975. Normally, it is levied as a
percentage of Value as determined under section 14(1). There are different rates for
different goods. But the general basic rate is 10%. This basic duty may be exempted
by a notification under Section 25. The basic duty may have two rates under the First
Schedule to Customs Tariff Act, 1975; viz. standard rates and preferential rates.
(2) ADDITIONAL CUSTOM DUTY/COUNTERVAILING DUTY [Section 3(1)] -
This is levied under Section 3(1) of the Customs Tariff Act, 1975. The amount of this
duty is equivalent to the amount of excise duty payable on like goods manufactured
or produced in India. In S.K. Patnaik v. State of Orissa, 2000 S.C. it was held that
countervailing duty is imposed when excisable articles are imported in order to
counter balance the excise duty, which is leviable on similar goods if manufactured in
India:
— Countervailing Duty is payable at effective rates.
— When excise duty is exempt/nil rate is applicable on goods imported, no
Countervailing Duty is levied (Collector v. J. K. Synthetics 2000 (120) E.L.T. 54(SC)
— Countervailing Duty is leviable even if similar goods are not produced in India.
— Exemption of basic customs duty doesn‘t automatically mean exemption of
Countervailing Duty.
— Countervailing Duty is payable in case of goods leviable under State Excise also.
— When the imported goods are valued under Section 4A [valuation based on retail
price], or Tariff Values under section 3(2) the amount of Countervailing Duty is
calculated accordingly if the goods are sold in retail in India.
(3) ADDITIONAL DUTY/SPECIAL ADDITIONAL DUTY (SAD) UNDER
SECTION 3(5) - It is levied to offset the effect of sales tax, VAT, local tax or other
charges leviable on articles on its sale, purchase or transaction in India. It is leviable
on imported goods even if article was not sold in India. The Central Government may
levy additional duty to counter balance the sales tax, value added tax, local tax or any
other charges leviable in the like article on its sale, purchase or transportation in
India. The rate shall be notified by the Central Government which cannot exceed 4%.
(4) PROTECTIVE DUTY - SECTION 6 & 7 OF THE CUSTOMS TARIFF ACT,
1975
The protective duties should not be very stiff so as to discourage imports.
It should be sufficiently attractive to encourage imports to bridge the gap between
demand and supply of those articles in the market.
Section 6 provides that the protective duties are levied by the Central Government
upon the recommendation made to it by the Tariff Commission established under the
Tariff Commission Act, 1951, and upon it being satisfied that circumstances exist
which render it necessary to take immediate action to provide protection to any
industry established in India.
As per section 7(1), the protective duty shall be effective only upto and inclusive
of the date if any, specified in the First Schedule.
Section 7(2) provides that the Central Government may reduce or increase the duty
by notification in the Official Gazette
(5) SAFEGUARD DUTY - SECTION 8B OF CUSTOMS TARIFF ACT, 1975 - 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.. The safeguard duty is imposed for the purpose of
protecting the interests of any domestic industry in India aiming to make it more
competitive. However, the total period of levy of safeguard duty is restricted to 10
yearsUnder section 8B(2), the Central Government is also empowered to impose
provisional safeguard duty pending determination of the final duty. This provisional
duty may be imposed on the basis of preliminary determination that increased
imports have caused or threatened to cause serious injury to a domestic industry.
Safeguard duty is product specific i.e. the safeguard duty is applicable only for
certain articles in respect of which it is imposed.
FOREIGN TRADE LAW
TOPIC- CUSTOMS ACT, AN OVERVIEW
SIDHARTH O
25, B.COM LL.B
X SEM
SLS, CUSAT
