CA NOTES ON BASICS OF CUSTOMES

Basic Concepts of Customs
Vishal Jain Page 1 Praveen Jain
Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal

BASIC CONCEPTS OF CUSTOMS
BIRD’S EYE VIEW
Product, Process and Place Transportation, Control & Storage of Goods
Section 2(22)
Section 2(7)
Section 2(33)
Section 2(14)
Section 2(44)
Goods
 Coastal Goods
 Prohibited Goods
 Dutiable Goods
 Warehoused Goods
Section 2(23)
Section 2(25)
Section 2(26)
Section 2(18)
Section 2(19)
Section 2(20)
Import
 Imported Goods
 Importer
Export
 Export Goods
 Exporter
Section 2(27)
Section 2(28)
India
 Indian Customs Water
Section 2(9)
Section 2(42)
Conveyance
 Vehicle
Section 2(31) Person In-Charge
Section 2(11)
Section 2(13)
Section 2(12)
Section 2(10)
Section 2(29)
Section 2(43)
Section 57
Section 58
Section 58A
Customs Area
 Customs Station
 Customs Port
 Customs Airport
 Land Customs Station
 Warehouse
 Public Warehouse
 Private Warehouse
 Special Warehouse
Other Concepts
Section 2(21) Foreign Going Vessel & Aircraft

PRODUCT, PROCESS & PLACE
As per Section 1, Customs Act, 1962 extends to whole of India and save as otherwise provided in this Act, it applies also to any offence or
contravention thereunder committed outside India by any person.
Note: Foreign Supplier, Foreign Customs Broker and Other Persons (including Indian Person) violating CA, 1962 would be subject to penalty
and prosecution in India.
(1) PRODUCT – GOODS
Section 2(22) of Customs Act, 1962
Goods
INCLUDES
Vessels, Aircrafts &
Vehicles
Stores Baggage
Currency & Negotiable
Instruments
Any other kind of
Movable Property
Levy of Import Duty on
Conveyance which is NOT
used for Import & Export
of Goods
Duty Drawback on
Stores supplied to
Foreign Going Vessel /
Aircraft & Indian Navy
Monitoring of Baggage
and Levy of Import Duty
on Baggage in excess of
General Free Allowance
Monitoring Foreign
Currency in terms of
Foreign Exchange
Management Act
General Meaning
of Goods
Related Definitions:
1. Dutiable Goods
– Section 2(14)
Means  Goods chargeable to Duty and
 Duty is NOT yet paid
2. Warehoused
Goods – Section
2(44)
Means  Goods deposited in Warehouse (Public Warehouse + Private Warehouse + Special Warehouse)
Note: Warehoused Goods under Section 59 are Imported Goods until they are cleared for Home Consumption from
Warehouse.
3. Coastal Goods –
Section 2(7)
Means  Goods other than Imported Goods
 which are transported in Vessel from One Port in India to Another Port in India
4. Prohibited
Goods – Section
2(33)
Means  Absolute Prohibition on Import / Export of Goods
But Does Not
Include
 Import / Export of Goods with Conditions AND Condition is complied with

(2) PROCESS – IMPORT OR EXPORT
Import
Import MEANS Bringing goods into India from a Place outside India
Goods cleared for Home Consumption from Customs Station
(Customs Station  Home Consumption)
Goods cleared for Warehousing from Customs Station
(Customs Station  Customs Warehouse  Home Consumption)
Import of goods commences when they cross the TWI, but it
continues and it is completed when they are cleared for Home
Consumption from the Customs Station by filing Bill of Entry for
Home Consumption.
(GARDEN SILK MILLS V. UOI – 1999 – SC)
Import of goods commences when they cross the TWI, but it
continues and it is completed when they are cleared for Home
Consumption from the Customs Warehouse by filing Ex-Bond Bill
of Entry for Home Consumption.
(KIRAN SPINNING MILLS – 1999 – SC)
1. Imported
Goods – Section
2(25)
Means  Goods brought into India from a Place outside India
But Does Not
Include
 Goods cleared for Home Consumption
2. Importer –
Section 2(26)
in relation to any goods at any time between their importation and the time when they are cleared for home
consumption,
Includes  Owner or
 Beneficial Owner or
 Person holding himself to be the Importer
Note: As per 2(3A), Beneficial Owner MEANS any person
 on whose behalf the goods are being imported or exported or
 who exercises effective control over the goods being imported or exported

Clearance for Home Consumption from Customs Station Clearance for Home Consumption from Customs Warehouse
Bill of Entry for Home Consumption is filed by Importer and goods
are cleared for Home Consumption on payment of Import Duty
First, Into-Bond Bill of Entry for Warehousing is filed by Importer
and goods are taken to Customs Warehouse without payment of
Import Duty by executing Bond (3 times Import Duty).
Later, Ex-Bond Bill of Entry for Home Consumption is filed by
Importer and goods are cleared for Home Consumption on payment
of Import Duty
No Deferment of Import Duty
No Execution of Bond
No Payment of Rent and Charges for Storage in Warehouse
No Deferment of Import Duty
No Execution of Bond
No Payment of Rent and Charges for Storage in Warehouse

Export
Export MEANS Taking goods out of India to a Place outside India
Vessel is sunk before crossing TWI Vessel is sunk after crossing TWI but before reaching Destination
Export of goods is complete when the goods cross the TWI. Thus,
when vessel is sunk before crossing TWI, the goods are NOT said to
be exported.
Export of goods is complete when the goods cross the TWI. Thus,
when vessel is sunk after crossing TWI, the goods are said to be
exported. Reaching of Destination (say USA) is not necessary.
Notes:
 TWI to be read as EEZ as per SC Judgment ABON LYOD CHILES OFFSHORE LTD – 2008 – SC.
 For GST Act and Customs Act, receipt of Foreign Currency is NOT relevant for export of goods generally. However, for Duty Drawback as
per Section 75 of CA, 1962 and Foreign Trade Policy, receipt of Foreign Currency is relevant for claiming most of the export incentives /
benefits.
1. Export Goods –
Section 2(19)
Means  Goods to be taken out of India to a Place outside India
2. Exporter –
Section 2(20)
in relation to any goods at any time between their entry for export and the time when they are exported
Includes  Owner or
 Beneficial Owner or
 Person holding himself to be the Exporter
Note: As per 2(3A), Beneficial Owner MEANS any person
 on whose behalf the goods are being imported or exported or
 who exercises effective control over the goods being imported or exported

(3) PLACE – INDIA
India
India INCLUDES Territorial Waters of India
Land Area Sea Area
Land Mass + Jammu & Kashmir Upto Territorial Waters of India (TWI i.e. 12 Nautical Miles)
1. Indian Customs Water
– Section 2(28)
Means  Exclusive Economic Zone [i.e. Upto 200 Nautical Miles]
Includes  Bay, Gulf, Harbour, Creek or Tidal River
Note: If a person has committed any offence punishable under customs law within Indian Customs Water, he may
be arrested. Also, vessel be stopped in Indian Customs Water and goods may be confiscated if the same is found
to be used in smuggling. Further, prohibited goods can also be confiscated if brought within Indian Customs
Water.
2. Special Economic Zone For Levy of Export Duty
under Section 12
 SEZ is part of India and thus, NO Export Duty will be levied for goods
taken to SEZ
For Duty Drawback under
Section 74 & Section 75
 SEZ is outside India and thus, Duty Drawback will be allowed for goods
taken to SEZ
GST VS. CUSTOMS DUTY
Particulars Goods and Service Tax Customs Duty
Consideration Consideration is generally relevant (except in Schedule I
where supply can be there without consideration)
Consideration is NOT relevant (Customs Duty is
levied even if there is no Consideration)
Concept of Mutuality Concept of Mutuality is NOT relevant if Branches are
registered under same GSTIN
Concept of Mutuality is NOT relevant (Customs Duty
is levied even if transaction is between Branches)

TRANSPORTATION, CONTROL & STORAGE OF GOODS
TRANSPORTATION OF GOODS & CONTROL OF GOODS
Conveyance
Person In Charge
INCLUDES
 Vessel
 Aircraft
 Vehicle [Section 2(42)]
 MEANS Conveyance of any kind used on Land
 INCLUDES Railway Vehicle
MEANS
 Master of Vessel
 Commander or Pilot-in-charge of Aircraft

 Driver or Other Person-in-charge of the Conveyance
 Conductor, Guard or Other Person having the chief
direction of the Train.

STORAGE OF GOODS
Customs Area
(MEANS & INCLUDES)
Customs Station
Customs Warehouse
MEANS
Customs
Port
Customs Airport /
International Courier
Terminal or Foreign Post
Office
Land Customs
Station
Inland Container
Depot
Air Freight Station
Note: Not all Ports / Airports are Customs Port i.e. Only a Port
appointed by CBIC is Customs Port / Customs Airports. Also, a
place which is not Port / Airport can be Customs Port (ICD) /
Customs Airports (AFS) if appointed by CBIC.
MEANS
Public
Warehouse
Private Warehouse Special
Warehouse
Note: Public Warehouse and Private Warehouse are NOT under
Customs Control whereas Special Warehouse is under Customs
Control.
Customs Stations are appointed by CBIC whereas Customs Warehouse are licensed.
Inland Container Depot (ICD) / Air Freight Station (AFS) Container Freight Station (CFS)
ICD / AFS is opened up to have speedy clearance of goods. CFS is opened up to avoid congestion at Customs Station.
ICD / AFS is a Stand-Alone Customs Station. CFS is not a Stand-Alone Customs Station.
All the activities related to filing of Bill of Entry, Shipping Bill,
Clearance of Goods etc., can take place at ICD / AFS
Activities related to filing of Bill of Entry, Shipping Bill, Clearance of
Goods etc., cannot take place at CFS
An ICD may also have a number of CFSs attached to it
[Cost of Transportation from Entry Customs Station TO ICD / AFS / CFS is NOT included for Import Valuation (Rule 10(2), IVR, 2007]

OTHER CONCEPTS
Foreign Going Vessel / Aircraft
(MEANS & INCLUDES)
Vessel / Aircraft carrying Goods /
Passengers
Vessel / Aircraft NOT carrying
Goods / Passengers
Vessel engaged in Fishing or
Any Operations
Naval Vessel of Foreign
Govt.
From India  To Outside India
From Outside India  To India
Note: It may also touch Intermediary
Ports or Airports.
From India  To Outside India
From Outside India  To India
Note: Only outward movement
is covered here.
Outside TWI
Note: TWI to be read as EEZ
as per SC Judgment ABON
LYOD CHILES OFFSHORE
LTD – 2008 – SC
Naval Exercises
Note: Duty Drawback is given for Stores supplied to Foreign Going Vessel / Aircraft under Section 74 or Section 75. For stores supplied to
Indian Navy (which is NOT Foreign Going Vessel / Aircraft) for Naval Exercises, Duty Drawback is given under Section 90.
Example 1: Stores to Vessel/Aircraft carrying Goods & Passengers
Particulars FGVA DDB
From Mumbai (via Chennai) to London
From London to Mumbai
Example 2: Stores to Vessel/Aircraft not carrying Goods & Passengers
From Mumbai to London
From London to Mumbai
Example 3: Stores to Vessel going for Mining Operations
176 NM (As per SC Judgment)
214 NM
Example 4: Stores to Naval Vessel for Naval Exercises
Sri Lankan Navy
Indian Navy

IMPORT VS. EXPORT
Particulars Import Export
Meaning
Section 2(23)
Bringing [goods] into India from a place outside India
Section 2(18)
Taking [goods] out of India to a place outside India
Duty Liability
Section 12 – Import Duties
BCD CA, 1962 [Section 12]
SWS FA, 2018
IGST & CC IGST Act, 2017 [Section 5]
Note: Other Import Duties are also leviable in certain
situations
Section 12 – Export Duties
BCD CA, 1962 [Section 12]
Note: Only BCD is leviable, and that too it is exempt in
most of the cases. IGST is also leviable but not as part of
Export Duty; IGST is separately leviable as per IGST Act,
2017 but however it is zero-rated under GST.
Objective
Collection of Duty [Revenue] Controlling over-encashment of Export Incentives under
various Export Promotion Schemes under CA, 1962 and
FTP
General Issue
Involved
Under-Invoicing
Price declared at Customs is less than what is actually
paid for the goods for evasion of duty liability. This way
Lesser Customs Duty are paid to Customs Department
Over-Invoicing
Price declared at Customs is much more than what is
actually received for the goods. This way Black Money is
converted into White and also Higher Export Incentives are
en-cashed under FTP.
Valuation Aspect
Section 14 read with Import Valuation Rules, 2007
AV = CIF
Section 14 read with Export Valuation Rules, 2007
AV = FOB
Classification Aspect
I Schedule
 Preferential Rate – Import from Most Favored
Nations
 Standard Rate – Import from Other Countries
II Schedule
 Generally, no export duty is there on export of most of
the goods.
 Exceptionally, if export duty is there, only one rate is
there prescribed in II Schedule
Assessment of Duty
Section 17
Self-Assessment [Customs Officer empowered to verify
such assessment and make re-assessment, if required]
Section 17
Self-Assessment [Customs Officer empowered to verify
such assessment and make re-assessment, if required]
Payment of Duty  Importers under Accredited Clients Programme (i.e. Generally, question of payment of duty doesn’t arise in this

Tier-1 Authorized Economic Operator) – Electronic
Payment
 Importers paying ID >= Rs.10,000 / BE – Electronic
Payment
 Other Importers – Manual or Electronic Payment
case
Clearance
On
Transaction Basis Transaction Basis
Clearance
By
Importer Himself or
Engage Customs Broker [CB]
Exporter Himself or
Engage Customs Broker [CB]
Customs Document
Section 46
Bill of Entry [Import by Sea / Air / Land] to be filed
electronically
Section 50
Shipping Bill [Export by Sea / Air] / Bill of Export [Export
by Land] to be filed electronically
Release Order
Section 47
PO gives Out-of-Charge Order
Section 51
PO gives Let Export Order
Section 2 – Proper Officer [PO]: Customs Officer whosoever is authorized to do a particular function is PO for that
function

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CA NOTES ON BASICS OF CUSTOMES

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CA NOTES ON BASICS OF CUSTOMES