Questions and answers on customs act from the different chapters
Applied Indirect Taxation Customs Act Questions and Answers for June 2011 Examination1. What are goods under Customs Act, 1962?Ans. Goods [Sec.2(22)]: Goods includes —(a)vessels, aircrafts and vehicles; (b)stores; (c)baggage; (d)currency and negotiableinstruments; and(e) any other kind of movable propertyImported Goods [Sec.2(25)] - It means any goods brought into India from a place outsideIndia but does not include goods which have been cleared for home consumption.Dutiable goods [Sec.2(14)] - It means any goods which are chargeable to duty and onwhich duty has not been paid. Where no customs duty is chargeable either by reason oftariff not providing for it or because of the exemption notification, those goods will not beregarded as dutiable goods.Coastal goods [Sec.2(7)]- It means goods, other than imported goods, transported in avessel from one port in India to anotherProhibited goods [Sec.2(33)] - It means any goods the import or export of which is subject-to any prohibition under this Act or any other law for the time being in force but does notinclude any such goods in respect of which the conditions subject to which the goods arepermitted to be imported or exported have been complied with.2. Define "Indian Customs Waters", What is its significance in terms of Customs Act,1962?Ans. Indian Customs Waters [Sec.2(28) of Customs Act, 1962] - "Indian Customs Waters"means, the waters extending into the sea upto the limit of contiguous zone of India underthe Maritimes Zones Act and includes any bay, gulf, harbour, creek, or tidal river. It is tobe noted that India extends to only 12 nautical miles, Indian Customs Waters extends to24 nautical miles.Significance of various maritime zones for customs purposes - The significance ofterritorial water, Indian Customs waters and Indian Exclusive Economic Zone for CustomsLaw are as under -12 nautical miles from base In case of importation, import of goods will commenceline i.e. the Territorial waters when the goods cross territorial waters and exportation isof India completed when the goods cross the territorial borders.24 nautical miles from base Any person engaged in the smuggling of goods can beline i.e. the Indian customs arrested if he is found in Indian Custom Waters. Similarly,waters conveyances found in Indian Customs Waters constructed and fitted in such a manner so as to conceal smuggled goods is liable to be confiscated.200 nautical miles from base Economic Exploitation in the sea and sea bed can be doneline i.e. the Indian Exclusive by India upto only 200 nautical miles from the base line.Economic Zones3. What is the purpose of safeguard duty? What are the restrictions of WTO in respect ofsafeguard duty? Can it be imposed on provisional basis?Ans. Safeguard Duty [Sec.8B of Customs Tariff Act]: Where the Central Government issatisfied that - An article is imported into India in increased quantities; and Such article is imported in such manner which shall cause or is threatening to cause serious injury to the domestic market, - then it may impose safeguard duty on such imported articles.Notes: Provisional Safeguard Duty - The Central Government may, pending the enquiry, impose a provisional safeguard duty on the basis of preliminary determination that increased imports have caused or is threatened to cause serious injury to a domestic industry. However, such provisional safeguard duty shall not remain in force for more than 200 days from the date on which it was imposed. Unless and until specifically mentioned in the notification, safeguard duty or
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -2- M: 98301 65501 Web: www.pksal.com provisional safeguard duty shall not apply on articles imported by a 100% export oriented undertaking or a unit in free trade zone or in special economic zone. The condition under WTO for imposing safeguard duty is that it should not discriminate between imports from different countries having Most Favoured Nation.4. How is value determined for purposes of special CVD under the Customs Tariff Act?Ans. As per Sec.3(6) of the Customs Tariff Act, the value of the imported article for thepurpose of additional duty on any imported article, shall, be the aggregate of: (i) the valueof the imported article determined u/s 14 or the tariff value of sucharticle, as the case may be; and (ii) any duty of customs chargeable on that article u/s 12of the Customs Act,1962, and (iii) CVD payable u/s 3(1) and Additional Duty u/s 3(3); but does not include:(a) Additional duty levied u/s 3(5);(b) the safeguard duty referred to in Sec.8B and 8C;(c) the countervailing duty referred to in Sec.9; and(d) the anti-dumping duty referred to in Sec.9A5. In the context of valuation of goods for determining the price paid or payable in thecourse of arriving at the assessable value under the Customs Act, discuss about theinclusion of the following item:(a) Cost of durable and reusable containers used for transportation;(b) Technical know-how drawings supplied by importer;(c) Air freight charges incurred for importing items urgently required, which are normally imported by sea;(d) Cost of insurance not readily ascertainable.Ans.(a) Cost of durable and reusable container used for transportation shall not be considered for customs valuation provided if importer agrees to execute a bond to re-export the container within 6 months.(b) Cost of engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods shall be added while computing assessable value.(c) While computing assessable value, 20% of FOB of the goods shall be added for freight.(d) While computing assessable value, 1.125% of FOB shall be added for cost of insurance, if such cost is not ascertainable.6. Customs Valuation Rules provide that if valuation is not possible on the basis oftransaction value of identical goods, valuation can be done on basis of transaction valueof similar goods. What are the distinctions and similarities between identical goods andsimilar goods?Ans. Identical goods means imported goods -(a) which are same in all respects, including physical characteristics, quality and reputation as the goods being valued except for minor differences in appearance that do not affect the value of goods;(b) produced in the country in which the goods being valued were produced; and(c) produced by the same person who produced the goods or where no such goods areavailable, then goods produced by a different manufacturer.However, identical goods do not include goods imported goods where engineering,development work, art work, design work, plan or sketch under taken in India werecompleted directly or indirectly by the buyer on these imported goods free of charge or ata reduced cost for use in connection with the production and sale for export of theseimported goods.Similar goods means imported goods -(a) which although not alike in all respect, have like characteristics and like component materials which enable them to perform the same function. Such goods shall be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade-mark.(b) produced in the country in which the goods being valued were produced; and(c) produced by the same person who produced the goods or where no such goods are available, then goods produced by a different manufacturer.However, similar goods do not include imported goods where engineering, developmentwork, art work, design work, plan or sketch undertaken in India were completed directlyor indirectly by the buyer on these imported goods free of charge or at a reduced cost foruse in connection with the production and sale for export of these imported goods.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -3- M: 98301 65501 Web: www.pksal.com7. An India company imported certain consumer goods from abroad with MRP printed inpacking cartons. In respect of similar goods manufactured in India, excise duty is payableon basis of MRP. The importer will be using the goods for further processing. Customsauthorities contend that CVD will be calculated based on MRP printed in the goods, to thisproper? Will your answer be different, if the goods are imported for retail sales?Ans. Where excise duty is payable on the basis of MRP, CVD on import of that goods isalso computed on the basis of MRP. However, DGFT vide Circular No. 38 (RE-2000)/1997-2002, dated 22-1-2001 clarifies that this is applicable only to imports of thoseprepackaged commodities which are intended for retail sale. Where imported rawmaterials, components, bulk imports, etc. would invariably undergo further processing orassembly before they are sold to consumers, these imports shall not be covered underMRP based duty computation.8. Briefly discuss about the Deductive value method for customs valuation.Ans. Deductive Value [Rule 7] - Where the goods being valued or identical or similarimported goods are sold in India at or about the time of determination of value, then thevalue of imported goods shall be based on the unit price at which such goods are sold inthe greatest aggregate quantity to the unrelated person in India as reduced by —(a) the commission usually paid or payable or the additions usually made for profits and general expenses for sales in India;(b) the cost of transport and insurance and other cost incurred within India;(c) the customs duty and other taxes payable in India by reason of importation or sale of the goods.Notes: Where such goods are not sold at or about the same time of importation of the goods being valued, then the value of imported goods shall be based on the unit price at which the imported goods or identical or similar imported goods are sold in India at the earliest date after importation but before the expiry of 90 days after such importation. Where such goods are sold in India after further processing, then the value shall be based on the unit price at which the imported goods after processing are sold in the greatest aggregate quantity to unrelated person in India as reduced by processing and other cost (as referred above) incurred in India.9. What are the methods of valuation of customs duty? Is it mandatory that they should beapplied sequentially?Ans. Methods to be followed (in hierarchal order) for determination of price of importedgoods —a. Primary Method: Transaction value [Rule 3]b. Secondary Method: Transaction value of identical goods [Rule 4] Transaction value of similar goods [Rule 5] Deductive value [Rule 7] Computed value [Rule 8] Residual method [Rule 9]However, at the request of the importer, and with the approval of the proper officer, theorder of application of Rules 7 and 8 shall be reversed.10. Mr. Ram, the assessee, has purchased goods from Mr. Rahim, on high sea Sales basis.Mr. Rahim has imported the same from Mr. Antony of Malaysia for an invoice value of10,000 USD. Mr. Rahim has charged the assessee for 11,000 USD. The assessee contendsthat while arriving at the assessable value of customs, the price charged by the foreignsupplier to Mr. Rahim should be taken as the basis. Is the same correct?Ans. Customs duty is payable as a percentage of value. Primarily, Transaction value shallbe considered as assessable vale. Hence, contention of the Mr. Ram is incorrect. Further,in this regard, it is to be noted that in Godavari Fertilizers -vs.- CC, it was held that in caseof high sea sale, price charged by the importer to assessee would form the assessablevalue and invoice issued by the foreign supplier is not relevant.11. Discuss the includibility or otherwise to the assessable value the Customs Act, 1962of the following payments made by an importer to the overseas supplier of a second handPlant in India: (i) Dismantling charges for removing the second hand Plant at the suppliersplace and shipping to the Indian importer. (ii) Fees for supervision of erection andcommissioning of plant in India. For this purpose the Foreign Supplier deputed theirtechnicians in India.Ans.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -4- M: 98301 65501 Web: www.pksal.com(i) A payments actually made or payable by the importer in connection with the import of goods, to the extent not included in the price of the goods are to be included. In the give case payment of dismantling charges is certainly incidental and essential for import of machine. Therefore, it is to be included in the assessable value. The same view has been held by the Apex Court in Bombay Dyeing & Manufacturing Co. Ltd.(ii) The activity of erection an commissioning is post import activity and thus, any amount of supervision for the same are not includible in the assessable value. It is also to be noted that such cost is not included in price of the plant at the time of importation into India.12. Discuss the importance of noting of bill of entry vis-à-vis rate of customs dutyapplicable for import of goods, under the Customs Act; (ii) An Indian resident visitingGermany brought following goods while returning to India (a) his personal effects likecloth etc. valued at X 25,000; (b) one litre of liquor of Rs. 1,600; (c) new camera of122,800. What is the customs duty payable?Ans.(i) Noting of bill of entry - When a bill of entry is presented by the importer or CHA, then itis cross-checked by the noter with the Import Manifest submitted by the person-in-charge of the carrier. Noter compare the details in the manifest with that declared in thebill of entry and documents attached with it. If description tallied, then- noter shall recordthe name of importer/CHA by noting and give a number (known as Thoka number). On theother hand, if there are any differences, then the bill of entry is returned for clarification.In case of computerised system, noter will allot the serial number and date as generatedby the computer.(ii) No duty is payable on his personal effects.If the person returns after staying abroad for more than 3 days, General Free Allowance ofRs. 25000 is available. In the instant case, his baggage does not include excess baggage.Thus, no customs duty is payable by him.13. State purpose of B-2 and B-4 bond.Ans.. B-2 - Bond B-2 is a surety/security bond for provisional assessment. B-4 - A securitybond for provisional release of seized goods.14. State purpose and use of Yellow Bill of Entry".Ans. Yellow Bill of Entry is for warehousing. It is also termed as into bond Bill of Entry asbond is executed. This has to be filed when the importer does not want to pay dutyimmediately but prefers to keep the goods in a warehouse and pay the duty subsequentlyand clear the goods for home consumption. Green Bill of Entry is required to be filed forclearance "from warehouse on payment of customs duty.15. Briefly discuss about EDI system of assessment under the Customs Act.Ans. In the EDI System, the Bill of Entry is to be filed through the Service Center by theImporter/CHA, who has to submit the signed declaration in a prescribed format along withcopy of Invoice and Packing List if filed through Service Centre. The document can alsobe filed through the Remote EDI System. After the data entry at the service center, a"Check List" is generated which is to be verified by the Importer/CHA and corrected incase any error is detected and the signed "Check List" is to be submitted in the ServiceCenter. In case of RES, the system validates the data and if errors are found, a message issent back to the party. If the data passes the check, system accepts the data and an ac-knowledgment is sent to the Importer/CHA.The Bill of Entry then appears in the screen of the respective Group Appraiser. The GroupAppraiser then assesses the Bill of Entry on the system and marks it to the AuditAppraiser. After the Audit is complete, the Bill of Entry appears in the screen of theconcerned Group Assistant Commissioner. After the assessment is approved by the Asstt.Commissioner concerned, TR-6 is printed at the Service Center for payment of duty. TheExamination Order is also printed along with the TR-6 Challan.If the Appraiser does not agree with the importer regarding tariff classifica-tion/notification/declared value etc., he can raise a query in this regard. The Importer/CHAhas to enquire at the Service Center whether there is any query in respect of their Bill ofEntry and should reply to the same through the Service Center if there is any.The duty is to be paid through the designated bank.After payment of the Duty, the Bank enters the same into the system at a terminal at theirend. Then the Bill of Entry appears on the screen of the Appraiser (Docks). TheImporter/CHA should present a copy of the B/E alongwith duty paid challan and otherdocuments including invoice, packing list etc. at the time of examination of the goods.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -5- M: 98301 65501 Web: www.pksal.comThe Shed Appraiser shall examine the goods and enter the examination report in thesystem. After the examination of the goods is complete, the Appraiser (Docks) would givethe "Out of Charge" order on the system. Thereafter, the system will print two copies ofBill of Entry for the importer and the Exchange Control Copies. In case of any discrepancyfound in the docks with respect to the goods, the same is reported to the respectiveGroup through the system with the comments of the Dock Officers. On the basis of theexamination report and the comments of the dock officers, the Group may revise theassessment or may raise a query.16. Briefly explain the procedure for assessment and clearance of imported goods througha customs sea port under the Customs Act, 1962.Ans.. Procedure for import ClearanceArrival of vessel and aircrafts in India [Sec. 29] - The person-in-charge of a vessel or anaircraft entering India from any, place outside India shall call or land only at customs portor a customs airport.However, vessel or aircraft compelled by accident, stress of weather or other unavoidablecause shall call or land at a place other, than a customs port or a customs airport, in suchcase, person-in-charge of such vessel or aircraft shall immediately report to the nearestcustoms officer or the officer-in-charge of a police station. The person-in-charge shouldnot allow any unloading of goods and passengers to leave the vicinity of vessels unlessdue to health, safety or preservation of life or property.Delivery of Import Manifest or Import Report [Sec. 30] - Person in charge of a vessel or anaircraft or a vehicle or agent thereof shall deliver -In case of Document required to be delivered to Time limit for such delivery proper officerVessel Import manifest in duplicate in the form Prior to arrival of such vessel prescribed under Import Manifest (Vessels) Regulation, 1971Aircraft Import manifest in duplicate in the form Prior to arrival of such aircraft prescribed under Import Manifest (Aircraft) Regulation, 1976Vehicle Import report in duplicate in the form Within 12 hours after arrival in prescribed under Import Report (Form) the customs station Regulation, 1976Notes:1. Manifest [also known as Import General Manifest (IGM)] means list of all cargo carried on by such conveyance. Such list contains information about - The goods are required to be unloaded at the port; Unaccompanied baggage; Stores; Goods to be transshipped; Goods to be transshipped.2. Further, it should separately mention about - Arms and ammunition; Explosives; Narcotics; Dangerous drugs; Gold and silver.3. The person delivering the import manifest or the import report shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.4. If there was no fraudulent intention, then the proper officer may permit to amend the import manifest or report;5. If the import manifest or the import report is not delivered without any sufficient cause for delay, then the person-in-charge or such agent shall be liable to a penalty not exceeding Rs. 50,000.Imported goods not to be unloaded from vessel until entry inwards granted [Sec. 31];1. When-(a) All documents relating to entry like arrival report, import manifest, have been received and proper officer found them appropriate; and(b) Berth is available at wharf; then proper officer shall allot Rotation Number (known as IGM No.) and grant entry inward.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -6- M: 98301 65501 Web: www.pksal.com2. On granting entry inward, the master of the vessel shall be permitted to unload (i.e.break-bulk) any imported goods.3. However, entry inwards shall not be granted until - An import manifest has been delivered or The proper officer is satisfied that there was sufficient cause for not delivering import manifest.Notes:a) The date of entry inwards is relevant for determining rate of duty.b) The requirement of entry inwards does not apply on unloading of (i) baggage accompanying a passenger; (ii) baggage accompanying the member of the crew; (iii) mail bags; (iv) animals; (v) perishable goods; and (vi) hazardous goods.Imported goods not to be unloaded unless mentioned in Import Manifest or Import Report[Sec.32] - Imported goods shall not be permitted to be unloaded unless such goods arementioned in the import manifest or report. However, proper officer may grant permissionfor unloading such goods.Unloading and loading of goods at approved places only [Sec. 33] - Imported goods shallbe unloaded or export goods shall be loaded at landing places specified u/s 8(a). However,proper officer may allow loading and unloading of cargo at any other place.Goods not to be unloaded or loaded except under supervision of customs officer [Sec. 34]- Imported goods shall be unloaded or export goods shall be loaded under the supervisionof proper officer. However, in the following circumstances, goods may be loaded orunloaded without the supervision of proper officer -a) When the Board has granted general permission regarding such goods or any class ofgoods;b) When the proper officer has granted special permission in any particular case.Restriction on unloading and loading of goods on holidays [Sec. 36] - Imported goods shallnot be unloaded or export goods shall not be loaded on any conveyance -a) on any Sunday or on any holiday observed by the customs department; orb) on any day after the working hours.However, loading or unloading is possible on that day or at that time after giving theprescribed notice and on payment of the prescribed fees.Note - Fees shall not be levied for the unloading or loading of baggage accompanying apassenger or the member of the crew and mail bags. Power to board conveyances [Sec.37] - The proper officer may board any conveyance carrying imported goods or exportgoods at any time. He may remain on such conveyance for such period as he considernecessary. Bill of entry [Sec. 46]:1. The importer of any goods (other than goods intended for transit or transshipment) shall present a bill of entry for home consumption or warehousing in the prescribed form to the proper officer.2. Where the importer makes and subscribes to a declaration before the proper officer that he is unable for want of full information to furnish all the particulars in the bill of entry, then the proper officer may permit him - (a) To examine the goods in the presence of an officer of the customs; (b) To deposit the goods in a public warehouse without warehousing the same,3. A bill of entry shall include all the goods mentioned in the bill of lading or airway bill or railway receipt or roadway bill, giving by the carrier to the consignor.4. The importer shall, at the foot of bill of entry, make and subscribe to a declaration as to the truth of the contents of such bill of entry. He shall (in support of such declaration) produce to the proper officer the invoice relating to the imported goods.5. Types of bill of entry - Bill of entry may be of following types - a) Bill of entry for home consumption or White bill of entry - This type of bill of entry is, filed when importer intended to remove the goods from customs area for consumption or use in India. b) Bill of entry for warehouse or Into-bond bill of entry or Yellow bill of entry - This type of bill of entry is filed when importer intended to warehouse the goods.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -7- M: 98301 65501 Web: www.pksal.com c) Bill of entry for ex-bond clearance or Green bill of entry - This type of bill of entry is filed when importer intended to remove the goods from warehouse for consumption or use in India.6. Copy of bill of entry required to be submitted - Bill of entry shall be submitted inquadruplicate - Original for custom department for assessment and collection of duty; Duplicate for custodian of the cargo for release of cargo to the importer; Triplicate for record of importer; and Quadruplicate for bank for making remittance.7. Contents of bill of entry - Filling of bill of entry requires information about following - Importers Name, Address and BIN (Business Identification Number); CHA (Customs House Agent) Name, Address, Licence No. and Code No. Vessels name; Port of shipment; Country of origin; Country of consignment; Bill of lading No. and date; Rotation No. and Date; Line No.; Number and description of package; Quantity of goods; Description of goods; Customs tariff heading; Exemption notification no. and date (if any); Nature of duty; Assessable value; Rate of duty (Basic, Auxiliary, etc.); Amount of duty.Rotation number is a number allotted by the customs department to the person in chargeof the conveyance after examining and recoding the manifest. "Line number is the serialnumber of the goods in the manifest.8. Documents to be attached with bill of entry - Following documents are required to be submitted along with bill of entry - Invoice; Packing list; Bill of lading or Delivery order/Airway Bill; GATT declaration form duly filled in; Importers/CHAs declaration; License (wherever necessary) Letter of credit/Bank draft (wherever necessary); Insurance documents; Import license; Industrial license (if required); Test report in case of chemicals; - Adhoc exemption order; Certificate of country of origin, if preferential rate of duty is claimed; Catalogue or Technical literature; Separately split up value of spares, components machineries; No commission declaration; Indent.9. Time for presenting bill of entry - A bill of entry shall be presented at any time after thedelivery of the import manifest or import report.A bill of entry may be presented even before the delivery of manifest if the vessel oraircraft by which the goods have been shipped for importation into India is expected toarrive within 30 days from the date of such presentation.Duty on such goods shall be determined at the rate in force on the date of presenting billof entry, hence the date of presenting bill of entry is very important. Further, it is to benoted that if bill of entry has been presented before the date of — entry inwards of the vessel; or arrival of the aircraft,
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -8- M: 98301 65501 Web: www.pksal.comthe bill of entry shall be deemed to be presented on the date of such entry inwards or thearrival, as the case may be.10. If the proper officer is satisfied that -a) the interests of revenue are not prejudicially affected; andb) there was no fraudulent intention,He may permit substitution of a bill of entry for home consumption for a bill of entry forwarehousing or vice versa.Noting of bill of entry - When a bill of entry is presented by the importer or CHA, then it iscross-checked by the noter with the Import Manifest submitted by the person-in-chargeof the carrier. Noter compare the details in the manifest with that declared in the bill ofentry and documents attached with it. If description tallied, then noter shall record thename of importer/CHA by noting and give a number (known as Thoka number). On theother hand, if there are any differences, then the bill of entry is returned for clarification.In case of computerised system, the presentation shall be done at TOG and noter will allotthe serial number and date as generated by the computer.Assessment - After noting, the bill of entry shall be sent to the Appraising department forassessment. While assessment, appraising department has to -a) Classify the goods;b) Value the goods;c) Decide applicable rate of duty; andd) Verify that goods are not imported in violation of any law.There are two procedure of assessment - First-check procedure i.e. Assessment after examination. Second-check procedure i.e. Assessment on the basis of documents.Assessment after examination (First Check Appraisement) [Sec.17(2)]: Imported goods shall be examined and tested by the proper officer. Where the proper officer requires any contract, brokers note, policy of insurance, catalogue or other documents and information, then importer shall produce such documents and information. After such examination and testing, the duty on such goods shall be assessed.Assessment on the basis of documents (Second Check Appraisement) [Sec.17(4)] -Proper officer makes an assessment on the basis of statement made in the bill of entryand other documents and information i.e. more rely is given on importer. However, properofficer may examine and test the goods after assessment. Re-assessment - Onexamination or testing of goods, when it is found that any statement in such entry ordocument or information is not true, then the goods may be re-assessed to duty.Approval of assessment - When appraiser finishes the assessment, then AssistantCommissioner approves such value. After such approval, the duty payable is typed by apin-point typewriter1 so that it cannot be tempered with. Further, the Assessing Officershould sign in full in bill of entry followed by his name. Note - There is no time limit forcompletion of assessment. Payment of Customs Duty - After assessment, bill of entry isreturned to the importer for payment of duty. Importer is required to pay duty within aperiod of 5 days (excluding holidays) from the date on which the bill of entry is returned tohim. It can be paid in cash/DD through TR-6 challans or through Provisional Duty (PD)Account. If the goods are assessed under first check method, then collection departmentgives out of charge order and return 3 copies of bill of entry interest on late payment -Where importer fails to pay duty within 5 days then he shall be liable to pay interest @ 13%on such duty till the date of payment. However, the Board may waive the whole or part ofsuch interest.Clearance of goods [Sec. 47] - After payment of duty, if goods are already examined,delivery of goods shall be taken from port trust (i.e. custodian) after paying their dues. Onthe other hand, if goods are not examined, bill of entry shall be submitted to theexamination staff. After examination, shed appraiser gives out of charge order and thendelivery shall be taken from custodian.Procedure in case of goods not cleared within 30 days after unloading [Sec. 48] - If anyimported goods are not cleared for home consumption or warehoused or transshippedwithin 30 days from the date of unloading thereof at a customs station (or within timeextended by the proper officer), then such goods may be sold by the custodian. However,custodian shall sell such goods after -1. giving notice to the importer; and2. getting permission from the proper officer.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 -9- M: 98301 65501 Web: www.pksal.comNote:a) With the permission of the proper officer, animals, perishable goods and hazardous goods may be sold at any time.b) Arms and ammunition may be sold at such time and place and in such manner as the Central Government may direct.17. What do you understand by transit and transhipment of goods? Under what conditionsdo they enjoy exemptions from duty under the Customs Act, 1962?Ans. Goods in transit and transshipment of goods - All goods carried on by a conveyancemay not have same destination. Such goods have different destination at different ports ofIndia or any foreign port(s). In this case there are two possibilities -Transit - The goods will continue to be carried by that conveyance and delivered atdifferent port.Transshipment- Such conveyance shall unload the goods at the particular port andthereafter the goods shall be loaded on and carried on by different conveyance for itsdestination.Special provisions regarding goods in transit and transhipment of goods Non-applicabilityof special provision [Sec. 52] - Special provision regarding transit and transhipment ofgoods shall not be applicable to -(a) Baggage;(b)Goods imported by post and (c) Stores.Transit of certain goods without payment of duty [Sec. 53] - Any goods imported in aconveyance and mentioned in the import manifest or the import report as for transit in thesame conveyance to any place outside India or any custom station may be allowed to beso transited without payment of duty.Transshipment of certain goods without payment of duty [Sec. 54] –(a) Where any goods imported into a custom station are intended for transshipment, a billof transshipment shall be presented to the proper officer in the prescribed form.Note: Where the goods are being transshipped under an international treaty or bilateralagreement between the Government of India and Government of a foreign country, adeclaration for transshipment (instead of a bill of transshipment) shall be presented to theproper officer in the prescribed form,(b) Where any goods imported into a customs station are mentioned in the import manifestor the import report as for transshipment to any place outside India or any custom stationin India, then such goods may be allowed to be so transshipped (subject to suchconditions as may be prescribed for the due arrival of such goods at the customs stationto which transshipment is allowed) without payment of duty.Liability of duty on goods transited or transshipped [Sec. 55] -Where any goods areallowed to be transited or transshipped to any custom station, then on their arrival atsuch station, they shall be liable to duty. Such goods shall be entered in like manner asgoods are entered on the first importation thereof and the provisions of this Act and rulesand regulations shall apply in relation to such goods.Transport of goods [Sec. 56] - Imported goods may be transported without payment ofduty from one land customs station to another. Goods may also be transported from onepart of India to another part through any foreign territory subject to such conditions asmay be prescribed for the due arrival of such goods at the place of destination.18. Briefly discuss the aspects relating to self assessment by an importer on the basis ofRisk Management System. State the categories of eligible and ineligible persons who canmake use of this scheme.Ans. The ever increasing volumes and complexity of international trade and thedeteriorating global security scenario present formidable challenges to Customs. Theexponential growth in trade volumes means that the traditional approach of scrutinizingevery document and examining every consignment will simply not work, as it wouldneither be desirable nor possible to constantly increase the resources with the increasingworkload. Also, there is a need to reduce the dwell-time of cargo at the ports and airportsand to reduce the transaction costs in order to enhance the competitiveness of Indianbusinesses, by expediting release of cargo where compliance is high. This necessitatesthat the department should be selective in its approach to deployment of its resources.The advances in Information Technology offer an opportunity to address these challengesfaced by the department by putting in place an effective risk management system. Theprimary objective of the Risk Management System, therefore, is to strike an optimal
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 - 10 - M: 98301 65501 Web: www.pksal.combalance between facilitation and enforcement and to promote a culture of compliance. Itis intended to improve the management of the resources of the department to enhancethe efficiency and effectiveness in meeting stake-holder expectations and to bring theCustoms processes at par with the bills international practices.With the introduction of the RMS, the present practice of routine assessment concurrentaudit and examination of almost all Bills of Entry will be discontinue and the focus will beon quality assessment, examination and Post Clearance Audit of Bills of Entry selected bythe Risk Management System. Bills of Entry and IGMs filed electronically into ICESthrough the Service Centre or the ICEGATE will be transmitted by ICES to the RMS. TheRMS will process the data through a series of steps and produce an electronic output forthe ICES. This output will determine whether the Bill of Entry will be taken-up for action(appraisement or examination or both) or be cleared, after payment of duty and Out ofCharge directly, without any assessment and examination. Also when necessary, RMS willprovide instructions for Appraising Officer, Examining Officer or the Out-of-Charge Officer.It needs to be noted that the decisions communicated by the RMS on the need forassessment and/or examination and the appraising and examination instructionscommunicated by the RMS have be followed by the field formations. It is possible that in afew cases, the field formations might decide to apply a particular treatment to the BEwhich is at variance with the decision received from the RMS owing to risks which are notfactored in the RMS. Such a course of action shall however be taken only with the priorapproval of the jurisdictional Commissioner of Customs or an officer authorized by him forthis purpose, who shall not be below the rank of Addl./Joint Commissioner of Customs,and after recording the reasons for the same. A brief remark on the reasons and theparticulars of Commissioners authorization should be made by the officer examining thegoods in the departmental comments in the EDI system.The existing system of concurrent audit shall be abolished and replaced by a Post-Clearance Compliance Verification (Audit) function. The objective of the Post ClearanceVerification Programme is to monitor, maintain and enhance compliance levels, whilereducing the dwell time of cargo. The RMS will select the bills of entry for audit, afterclearance of the goods, and these selected bills of entry will be directed to the auditofficers for scrutiny by the EDI system. In case any possible short levies are noticed, theofficers will issue a Consultative Letter setting out the grounds for their view to theImporters/CHAs. This is intended to give the importers an opportunity to voluntarilycomply and pay the duty difference if they agree with the departments point of view. Incase there is no agreement, the formal processes of demand notices, adjudication etc.would follow. It may also be noted that the auditors are specifically being instructed toscrutinize declarations with reference to data quality and advise the importers/CHAssuitably where the quality of their declarations is found deficient. Such advice is expectedto be followed and will be monitored by the local risk managers. It hardly needs emphasisthat compliance in all its dimensions is in the mutual interest of the Government and theTrade and Industry and it will enable the government of give increasing levels offacilitation. The Importers/CHAs are urged to co-operate in the departments efforts in thisdirection.The national management of the Risk Management System shall be the responsibility ofthe Risk Management Division, being established under the Directorate General ofSystems. There will be a local Risk Management System catering to the needs of theCustom Houses. The local Risk Management System will carry out the live processing ofthe Bills of Entry, and Import General Manifests etc. The Commissioners of Customs arerequired to appoint the administrator for the Local Risk Management System at the levelof the Joint/Additional Commissioner for assigning user privileges on the Local RiskManagement System. The implementation of RMS will necessitate reorganization of staff.Custom Houses are required to undertake a comprehensive re-organization of the officersdeployed for processing Bills of Entry. The present appraising facilities should be right-sized in tune with the reduced quantum of Bills of entry coming for assessment. Such staffshould be diverted to the Post Clearance Audit. The strength of the staff for examinationof cargo would also be required to be readjusted.The existing facilitation schemes viz., the Self-assessment scheme, Fast track/greenchannel scheme. Accelerated customs clearance schemes etc., would be phased out withthe implementation of the RMS and the Accredited Clients Programme. As the deploymentof the RMS is likely to take place in phased manner across the ICES locations, the
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 - 11 - M: 98301 65501 Web: www.pksal.comexisting facilitation schemes will continue to be operative in each Customs station untilthe operationalisation of the RMS at that station.19. Can an importer, exporter or person in charge amend the documents submitted tocustoms authorities? If yes, from what date is the amendment effective?Ans. As per Sec.149 of the Customs Act, the proper officer may, in his discretion,authorise any document, after it has been presented in the custom house to be amended.However, amendment of a bill of entry or a shipping bill or bill of export shall not beauthorised after the imported goods have been cleared for home consumption ordeposited in a warehouse, or the export goods have been exported, except on the basis ofdocumentary evidence which was in existence at the time the goods were cleared,deposited or exported, as the case may be.20. What is the "taxable event" in the case of export of goods under customs law? Isexport duty payable in case of applicable goods where ship travels 40 nautical miles fromIndian port and the title passes to the buyer, but the ship returns to India because ofengine trouble? What is the relevant date for export duty?Ans. In case of exports, taxable event occurs when goods cross territorial waters of India– UOI vs. Rajindra Dyeing and Printing Mills 2005 (180) ELT 433 (SC). In Sun Industries -vs.-Collector of Customs, Kolkata 1988(35) ELI 241 (SC), wherein the Supreme Court has heldthat export is complete on loading after clearance. It is further held that off-loading ofgoods at foreign port is not art essential requirement for export to take place.Date for determination of rate of duty and tariff valuation of export goods [Sec. 16]: Therate of duty and tariff valuation (if any) applicable to any export goods (other thanbaggage and goods exported by post), shall be rate and valuation in force –Case Rate and Value in force onWhen goods entered for Date on which the proper officer makes an order permittingexport u/s 50 clearance and loading of the goods for exportation u/s 51in any other case Date on which duty is paid21. What is "Interest-free period" in respect of warehoused goods under the Customs Act,1962? Is interest payable when warehoused goods are exempt from duty on the date ofclearance?Ans. Any warehoused goods may be left in the warehouse without paying interest uptofollowing time period, -(a) in the case of capital goods intended for use in any 100% export oriented undertaking,till the expiry of 5 years;(b) in the case of goods other than capital goods intended for use in any 100% export-oriented undertaking, till the expiry of 3 years; and(c) in the case of any other goods, till the expiry of 90 days, Interest @ 15% is payable on duty liability at the time of clearance. However, nointerest is payable when warehoused goods are exempt from duty on the date ofclearance.22. Explain how DEPB scheme helps in making exported products tax free.Ans. The objective of Duty Entitlement Pass Book (DEPB) Scheme is to neutralise theincidence of Customs duty on the import content of the export product. The neutralisationshall be provided by way of grant of duty credit against the export product.Under the Duty Entitlement Pass Book (DEPB) scheme, an exporter may apply for credit,as a specified percentage of FOB value of exports, made in freely convertible currency orthe payment made from the Foreign Currency Account of the SEZ unit in case of supply byDTA to SEZ unit. The credit shall be available against such export products and at suchrates as may be specified by the Director General of Foreign Trade by way of public noticeissued in this behalf, for import of raw materials, intermediates, components, plans,packaging material etc. The credit may also be utilized for payment of Customs Duty onany item which is freely importable. The holder of Duty Entitlement Pass Book (DEPB)Scheme shall have the option to pay additional customs duty, if any, in cash as well. TheDuty Entitlement Pass Book (DEPB) Scheme and/or the items imported against it are freelytransferable. The transfer of Duty Entitlement Pass Book (DEPB) Scheme shall however befor import at the port specified in the Duty Entitlement Pass Book (DEPB) Scheme, whichshall be the port from where exports have been made. Imports from a port other than theport of export shall be allowed under TRA facility as per the terms and conditions of thenotification issued by Department of Revenue.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 - 12 - M: 98301 65501 Web: www.pksal.com23. Mention briefly any five illustrative cases under the Customs, Central Excise Dutiesand Serviced Tax Drawback Rules, 1995, where all the industry Drawback rates will notapply.Ans. In the following cases All Industry Drawback Rules are not applicable:a. Goods manufactured in customs bonded warehouse;b. Goods manufactured against Advance Licence;c. Goods manufactured or exported under DEPB Scheme;d. Exports by 100% EOU or a unit located in SEZe. Goods exported against excise rebate as per Rule 18 of the Central Excise Rules.24. Briefly explain the provisions under the Customs Act relating to import throughcourier.Ans. Special provisions regarding goods imported or exported by post Label ordeclaration accompanying goods to be treated as entry [Sec. 82] -Any label or declaration(containing description, quantity and value thereof) accompanying the goods shall bedeemed to be an entry for import or export.Rate of duty and tariff valuation [Sec. 83]In case of import - The rate of duty and tariff value (if any) applicable to any goodsimported by post shall be the rate and valuation in force on the date on which the postalauthorities present to the proper officer a list containing the particulars of such goods forthe purpose of assessing the duty thereon.Note - Where such goods are imported by a vessel and the list of the goods was presentedbefore the date of the arrival of such vessel, then it shall be deemed to have beenpresented on the date of such arrival.In case of export - The rate of duty and tariff value (if any) applicable to goods exported bypost shall be the rate and valuation in force on the date on which the exporter deliverssuch goods to the postal authorities for exportation.Regulation regarding goods imported or exported by post [Sec. 84] - The Board may makeregulations providing for -a) Where goods are not accompanied by a label or declaration, the form and manner in which an entry may be made;b) The examination, assessment to duty & clearance of goods imported or exported by post;c) The transit or transshipment of goods imported by post from one customs station to another or to a place outside India.25. Mr. A., a person holding Indian passport, brings 1 kg gold, out of which Rs. 3,60,000are in form of biscuits and balance of Rs. 40,000 in form of gold jewellery which he wasusing abroad (valued at international rates). What is the duty payable if (i) the person isreturning after 3 months stay; (ii) the person is returning after 9 months stay abroad andthe gold belongs to him; (iii) the person is returning after 8 months stay abroad and thegold belongs to his friend, who has given it only for carrying to India, (iv) He is returningafter 18 months stay abroad (ignore difference due to minor impurities in jewellery).Ans. Any passenger of Indian Origin or a passenger holding a valid passport, issued underthe Passport Act, 1967, who is coming to India after a period of not less than 6 months ofstay abroad; and short visits, if any, made by the passenger during the aforesaid period of6 months shall be ignored if the total duration of stay on such visits does not exceed 30days.Other Conditions to be satisfied: The duty shall be paid in convertible foreign currency. The weight of gold (including ornaments) should not exceed 10 kgs. per passenger. The passenger should not have brought gold or other ornaments during an of his visits (short visits) in the last 6 months i.e. he has not availed 0 the exemption under this scheme, at the time of short visits. Ornaments studded with stones and pearls are not allowed to be imported. The passenger can either bring the gold himself at the time of arrival or import the same within 15 days of his arrival in India as unaccompanied baggage. The passenger can also obtain the permitted quantity of gold from Customs bonded warehouse of State Bank of India and Metals and Mineral Trading Corporation subject to conditions (i) and (ii) above. He is required to file a declaration in the prescribed Form before the Customs Officer at the time of arrival in India stating his intention to obtain the gold from the Customs bonded warehouse and pay the duty before clearance.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 - 13 - M: 98301 65501 Web: www.pksal.comRate of Duty1. Gold bars, other than tola bars, bearing manufacturers or Rs.200 per10 gms. refiners engraved serial number and weight expressed in + 3% Edu. Cess metric units and gold coins2. Gold in any form other than at SI.No. 1 above including tola Rs. 500 per 10 bars and ornaments, but excluding ornaments studded with gms. + 3% Edu. stones or pearls Cess26. The Jewellery which is in addition to the jewellery otherwise allowed without paymentof duty, only is liable to payment of duty under the above mentioned scheme of import ofgold.What is the effective rate of customs duty on baggage?Ans. The effective rate of customs duty on baggage is 35%. However, such duty is furtherincreased by education cess and SHEC @ 2% and 1% of duty respectively. It is to be notedthat CVD is not applicable.27. Can gold be brought into India? What is the customs duty payable thereon? Can suchgold be subsequently sold in India?Ans. Gold can be brought into India after paying customs duty (+ education cess andSHEC) at the following rate:Gold bars, other titan tola bars, bearing Manufacturers or Rs.200 per 10gms.refiners engraved serial number and weight expressed in metricunits, and old coinsGold in any other form including liquid gold and tola bars Rs.500 per 10 gms.Notes:a. Gold in any form shall include medallions and coins, but shall not include jewellerymade of gold or silver, as the case may be, and foreign currency coins.b. Duty is required to be paid in convertible foreign exchange.c. The gold can be sold in India, provided that payment for the same is obtained by chequein Indian Rupees.28. Briefly explain the provision in respect of "burden of poof in respect of goods coveredunder Section 123 of Customs Act, 1962. List at least four articles which are coveredunder these provisions.Ans. As per Sec. 123, where any specified goods are seized in the reasonable belief thatthey are smuggled goods, the burden of proving that they are not smuggled goods shall be—(a) in a case where such seizure is made from the possession of any person,(i) on the person from whose possession the goods were seized; and(ii) if any person, other than the person from whose possession the goods were seized,claims to be the owner thereof, also on such other person;(b) in any other case, on the person, if any, who claims to be the owner of the goods soseized.This section shall apply to gold, and manufactures thereof, watches, synthetic yarn,metallic yarn, zip fasteners, silver bullion and any other specified goods by the CentralGovernment.29. Who can file refund claims under the Customs act?Ans. Generally, refund is claimed by the importer. However, if the incidence of the duty isborne by the buyer of the imported goods, the buyer can file claim for the refund.30. Ability to pay is one of the most important Cannons of Taxation.Ans. The noted 18th Century English economist, Adam Smith, had enunciated the Cannonsof Taxation in his celebrated work, An Inquiry into the Nature and Causes of the Wealth ofNations, which was popularly abbreviated to Wealth of Nations. According to Smith thereare four basic cannons of taxation, which are based on the concepts of equality,certainty, convenience and economy. The cannon of equality arises from the followingidea, The subjects of every state ought to contribute towards the support of thegovernment as nearly as possible in proportion to their respective abilities that is inproportion to the revenue which they respectively enjoy under the protection of the state.This canon embodies the principle of equity or justice and lays down the moral foundationof the tax system. It is not unreasonable that the rich should contribute to the publicexpense not only in proportion to their revenue but something more than that proportion.Smith had written in his Wealth of Nations. Thus, tax should in proportion to the ability topay.
P.K.SIKDAR’S ADVANCE LEARNING 23 C, EKDALIA PLACE KOLKATA – 700019 - 14 - M: 98301 65501 Web: www.pksal.comDirect Taxes are based on the principle of equity or ability to pay. The burden of a directtax is equitably distributed on different people & institutions as they are progressive innature. Which means as income increases the rate of income tax also increases.Indirect Taxes on necessities, which are. consumed by poor are regressive in nature. Therich & poor are required to pay the same amount of tax on such commodities likematchbox, soap, toothpaste, blades etc. but, the burden is heavy on poor than on the rich,thus they do not satisfy the canon of equity.31. Is it possible for a Trader to claim refund of special CVD from customs department?State your views.Ans. Yes. A dealer who imports goods and sales them in India after paying Vat/sales taxcan claim refund of special CVD [Notification No. 102/2007-Cus dated 14-9-2007].