: Customs duty is a tax which the State collects on goods imported into or exported out of the boundaries of a country. In India, customs duties are levied on the goods and at the rates specified in the Schedules to the Customs Tariff Act, 1975. This article provides a detailed account of the Custom procedures and law in India.
Mon Jul 11 2022 | Govt. Agencies and Taxation | Comments (0)
Customs duty is a tax which the State collects on goods imported into or exported out of the boundaries of a country. Customs duties now form a significant source of revenue for all countries, more so in the case of developing countries like India. In India, customs duties are levied on the goods and at the rates specified in the Schedules to the Customs Tariff Act, 1975. The taxable event is import into export from India. Export duties are practically non-existent at present. They are levied occasionally to mop up excess profitability in international price of goods in respect of which domestic prices may be low at the given time. But sweep of import duties is wide, almost universal, barring a few goods like food grains, fertilizer, lifesaving drugs and equipment etc. Import duties generally consist of the following:
In order to regulate the import and export of light weight goods into and out of the country, the Government of India had framed Courier Imports (Clearance) Regulation in 1995 which were revised by framing an up to date Courier Imports and Exports (Clearance) Regulations in 1998. Private companies have been registered as authorised couriers in the International Airports at Mumbai, Delhi, Chennai, Calcutta, Bangalore, Hyderabad, Ahmedabad, and Jaipur by the Customs Commissioner of the respective places.
All types of goods can be sent through the courier mode into India and out of India except few articles. The goods which are prohibited for import through courier are:
Similarly, the export of the following goods is also restricted:
Whether the value of Rs. 5,000/- for the gift or the commercial samples means the value of the goods in India or the country of sender?
The value of Rs. 5,000/- is the export value of the goods excluding locally refundable taxes like VAT in the country from where the goods have been dispatched. In case of gifts and samples up to Rs. 5000/-, it does not include freight or courier charges and insurance. However, in case of goods valued above Rs. 5000/-, it freights, and insurance would be added to calculate the duty payable. The sender may not necessarily be residing in the country from where the goods have been dispatched. A sender in U.K. can send goods from South Korea to India. The value in South Korea would be taken into consideration.
What type of goods cannot be sent as gift or commercial samples through courier?
All types of goods which are banned for importing under the Foreign Trade (Development and Regulation) Act, 1992 are banned for importing into India even as gifts or as commercial samples. The example of such goods are wild animals, wild birds or parts of wild animals and birds, narcotic drugs like opium, marijuana, ivory, arms like revolvers or pistols or other handguns and ammunitions
Can a person send jewellery to any manufacturer in India as sample?
Gold jewellery or studded jewellery including samples thereof is not allowed to be imported by or sent to ordinary persons in India through courier route. However, the units in export processing zones or Export Oriented Units are allowed to import gems and jewellery, including samples thereof, through an authorised courier. However, the jewellery and its samples can be exported by all units through the courier.
Why there is a prohibition for the import of chemicals and perishable goods even of low value?
It is not convenient to handle perishable goods through normal courier mode. The system of import or export of goods through courier is designed for fast movement through the Customs. The chemicals imported may require testing of the same to ascertain its identity which would need some time and would also delay the processing of other consignments through courier. Therefore, the import of chemicals has been prohibited through courier route.
Chemicals can be sent through the same courier company who would submit it separately at the Air Cargo Complex for clearance. The Air Cargo Complex is invariably situated beside the Courier Terminal. However, the clearance is likely to take more time.
Is there any limit of weight and size of the package that can be sent through the courier?
Packages up to 70 Kgs. of weight can be imported to India through courier mode. However, there is no such weight limit for the export of goods through courier from India.
Why there is a restriction on goods to be exported with claim for Draw Back or any duty entitlement pass-book scheme of Export Promotion Capital Goods Scheme?
Under these schemes, additional paperwork is involved and, therefore, it delays clearance of this packet and in addition, clearance of other packages is also delayed. However, these consignments can be cleared through the air-cargo complex by the same courier company. Invariably the air cargo complex and the courier terminal are situated side by side and, therefore, there is no inconvenience to the exporters.
How duty is paid, if leviable?
If the duty is small, the Courier Company makes the payment and collects it from the receiver at the time of delivery of the goods. If the duty assessed is high, they advise the party of the arrival of the goods and the party clears the goods directly from the Customs. The courier can get the goods detained, inform the client and with their consent, make the payment of duty.
Machinery parts are sent abroad through couriers for repairs and reconditioning etc. what procedure is to be adopted during export of the said goods.
While sending the goods abroad, proper documents should accompany the package. The invoice may be attested by the Customs and a copy retained to enable Customs to identify the goods at the time of re-import of the said goods. The repairer may be advised to enclose a copy of sender invoice along with their own invoice. The repairer may be advised to clearly mention their repair charges for similar goods in the invoice, even if they have done it free. Along with invoice or on its body list of jobs carried out (fault list) may be given.
If part of the machinery cannot be repaired or replaced, then during re-import, such machinery has to bear duty as if it is being imported. The invoice should show separately the cost of such parts/raw materials to enable proper valuation.
Refer to Notification No. 87/98-Cus (NT) dt. 9.11.98
All goods imported into India from abroad is liable to duties of Customs under Section 12 of the Customs Act and also is liable to all the restrictions under the Foreign Trade (Development & Regulations) Act 1992. However, the Government has exempted gifts received from abroad by persons residing in India from the whole of duties of Customs and from restriction under FT (D&R) Act. At present, import of goods upto the value of Rs. 5,000/- is allowed as gift, duty free. This exemption is allowed only for bona fide gifts imported by air or post. For the purpose of calculation of this value of Rs. 5,000/-, the air freight or postal charges paid are not added.
In November 1952, a convention to facilitate the Importation of Commercial Samples and Advertising Materials was concluded in Geneva. India was party to it and has accepted its recommendation and implemented its provisions through Notifications.
The Commercial samples are basically the specimens of the goods which are imported by the traders in India to know its characteristics and usage and assess its marketability in India. These samples are also brought by the representatives of Manufacturers abroad to show prospective customers in India, and to persuade and convince them of the need, efficacy and suitability of these goods for the Indian market.
Samples can be imported by the trade, industry, individuals, Companies, Associations, Research Institutes or Laboratories. These can also be brought by the representatives of manufacturers abroad either as a part of their personal baggage or through post or courier. They can also be sent by manufacturers/ traders abroad to above parties in India.
Samples of all types of goods namely consumer goods, consumer durables or prototypes of engineering goods or goods used in connection with securing export orders can be imported. Similarly, high equipment, machinery, including agricultural machinery and their accessories can also be imported.
For duty free clearance, the value of individual sample should not exceed Rs. 5,000/- and aggregate value should not exceed Rs. 60,000/- per year or 15 units in a year. The prototypes of engineering goods can also be imported even if the value is more than Rs. 5,000/-. Such goods upto Rs. 10,000/- can be imported without the payment of duty if the said goods are rendered useless as merchandise by a suitable process. Where the value exceeds Rs. 10,000/-, the said goods are to be re-exported within a period of 9 months or such extended period as Asstt. Commissioner of Customs may allow. High value goods are to be imported by depositing duty with the Customs and giving an undertaking for their re-export within 9 months. The deposited duty is refunded when the machinery is exported back. The following clarification may be necessary on the above guidelines
The value of any item imported during a year should not exceed 15 units of the said item or Rs. 60,000/-. However, if more than one product is being imported into India, the value limit will be increased proportionately. Similarly, in case samples are consigned to many consignees by one foreign company, but they are being sent at the same time through some Port/ Airport, it shall not be changed to duty if the limit of Rs. 5,000/- per unit each adhered to. The consignments meant for distribution to different parties in India can also be imported together for convenience of transport if the packets are clearly marked and addressed to different persons in India. The value of Rs. 5,000/- is the export value of the goods excluding locally refundable taxes like VAT in the country of despatch. In case of free samples of Rs. 5000/-, it does not include freight or courier charges. If it is above Rs. 5000/-, freight and insurance charges would be added to calculate the duty payable in India.
The purpose of these beneficial notifications is to allow duty free import of genuine Commercial samples into the country. It is not to be used as a means to avoid paying Customs Duty through repeated imports in smaller lost. The bonafide commercial travellers of India or abroad are advised to travel with authorisation from their companies and carry normal trade literature as evidence of the genuineness of their baggage. The said goods should also be clearly marked as samples. Normally, their passport shows the nature of their repeated travel. The invoices of samples sent from abroad should indicate that these goods are samples. The goods may bear inscription, markings or tags showing them as samples.
All types of goods including Industrial and Agricultural machinery, consumer goods and Consumer durables, white goods are eligible to be imported as samples. However, goods which are prohibited under Foreign Trade (Development and Regulations) Act, 1992, are not allowed to be imported even as samples. These includes wild animals, wild birds and parts of wild animals and birds, ivory, arms like revolvers and pistols and handguns and ammunitions and narcotic drugs.
With reference to which place the value of the goods will be calculated i.e., whether the value is its value in India or abroad?
The value is reckoned to be the value of the place of despatch even in case of third Country goods, the value would be that of the country of despatch. For example, if the goods are manufactured in Tiwan and is being sent from UK as a sample to India, the value in UK is to be taken. However, the cost of freight, postal charges and courier charges are not to be added.
How the machineries which are costing more than Rs. 5,000/- but below Rs. 10,000/- are defaced to enable them to be brought without payment of duty?
Machinery, which are prototypes of engineering goods, imported either for further manufacturing of the said goods or to be used as capital goods for export production or in connection of securing further export orders can also be imported duty free if the value does not exceed Rs. 10,000/-. The said goods are normally defaced or made unsalable by punching, cracking or marking with indelible.
The term drawback is applied to a certain number of Customs/central excise duties, sometimes the whole and sometimes only a part remitted or paid by Government on the exportation of the commodities on which they were levied.
There is no need to file separate application or claim for payment of drawback. The drawback shipping bill (green coloured) is automatically treated as a claim. It should be accompanied and inter-alia by the following documents:-
Copy of export contract or letter of credit, as the case may be
In respect of claims filed on or after 8/1/1999, Customs should pay the drawback within two months of export of pay interest thereon for delay period.
Interest on delayed payment of duty or on delayed refund/drawback of duty:
Section 27A, 28AA and 75A of Customs Act, 1962 introduced in 1995, Budget provide for changing of interest on delayed payment of customs duty and payment of interest on delayed refunds/drawback of duty.
There are two types of drawback.
In this category, two types of cases are covered viz.,
The Central government notifies the Drawback rates for various products either on a general basis (all industry rates) or for individual exporters (brand rates) as the case may be.
Drawback sanctioned under section 75 has a two-tier system involving
Except where specifically authorised industry rates of drawback are not applicable where an export product has been-
The restrictions, as mentioned in the above clauses, are not applicable where payment of drawback at a particular rate/amount has been specifically authorised, thereunder any sub serial number in the All-industry table subject to such terms and conditions as may be specified thereunder.
The elements necessary to claim drawback are:
Drawback claims under Section 74 of the Customs Act are now being processed manually. To claim drawback under Section 74, the exporter should file the shipping bill under claim for drawback in the prescribed form and after assessment, the goods are to be examined by the Customs officers for purposes of physical identification. After shipment, the claim is filed in the department, for sanction of drawback. The pre-receipted drawback payment order has to be forwarded to the drawback department on which the cheque is issued. If the information submitted by the exporter is insufficient to process the claim, a deficiency memo will be issued to the exporter seeking further information or documents to process the claim. On compliance, the claims will be processed in the usual manner.
In order to claim drawback under Section 74, the goods should be entered for export within two years from the date of payment of duty on the importation thereof. Provided that in any particular case the period of two years may on sufficient cause shown be extended by the Central Board of Customs and Central Excise by such period as it may deem fit.
The time limit has to be computed from the date of payment of duty up to the date of goods entry for export under Sec 50 of the Customs Act for export by air or sea, under Section 77 for baggage items and Under Section 83 of the Customs Act for export by post
The claims should be filed in the manner prescribed under Rule 5 of Re-export of Imported Goods (Drawback of Customs Duties) Rules,1995, read with Public Notices Issued by the Custom Houses. The time limit for filing the claim is three months from the date of let export order. If the exporter was prevented by sufficient cause from filing the claims within three months, the Asst. Commissioner of Customs can relax the time limit by three months.
The claim for drawback is processed under the following systems:
For the purpose of claiming drawback, the exporter is required to file a drawback-shipping bill in the prescribed Format as required under Rule 13 along with the necessary declaration. The goods after assessment are examined by the officers posted in the Examination Shed as required for each individual case. The examination report will indicate the nature of goods in terms of drawback schedule for classification and application of correct rate. Samples may have to be drawn for testing by lab in respect of chemicals, synthetic fabrics etc as specified from time to time to confirm the declarations in the export documents. The triplicate Copy, if the drawback shipping bill which contain the examination report, is the claim copy
SUPPORTING DOCUMENTS REQUIRED FOR PROCESSING THE CLAIM.
The claims are settled and passed by the appraiser if the amount sanctioned is below Rs 1,00,000/- and by the Assistant Commissioner if the amount of drawback exceeds Rs1.00.000/-. After pre-audit, the cheques are issued to the designated banks for credit to the exporters account or handed over to the authorized representative of the exporter. For further details, refer to the Public Notices issued by the concerned Custom Houses/ Central Excise Commissionerate.
For claiming drawback on goods exported by post, exporter is required to file their claim at the time of booking parcel with the postal authorities in the form prescribed in the Rules. The date of receipt of this form from the postal authorities by the Customs Authorities shall be treated as date of filing claim by the exporter for the purpose of Section 75 A of the Customs Act. Thus, drawback is paid to the exporter within three months from the date of claim receipt from the postal authorities. On receipt of the claim form, intimation is to be given to the exporter. Where claim form is incomplete, a deficiency memo is issued within fifteen days of its receipt form the postal authorities. The exporter can resubmit this form after compliance with deficiencies within a period of 30 days. If such a claim is found to be in order, the same is acknowledged and the period of three months for payment of drawback in terms of Section 75 in such cases shall commence from the date of such acknowledgement.
TIME LIMIT UNDER SECTION 75
The claims should be filed in the manner prescribed under Rule 13, read with Public Notice issued by the Custom Houses. The time limit for filing the claim is three months from the date of export order. If the exporter was prevented by sufficient cause, FORM filing the claims within three months, the Asst. Commissioner of Customs can relax the time limit by three months and the Commissioner of Customs can relax the time limit for a period of nine months.
Under the drawback scheme, the relief is given from the burden of duty incidence of Customs and Central Excise on basic inputs like raw materials. Components, Intermediates and packing materials used at various stages of production/manufacture. No relief of drawback is extended to duties suffered on capital goods, fuels and consumables used in relation to the manufacture of the export goods. It may also be noted that no relief of Sales Tax or Octroi or any other indirect tax is given by the way of drawback. The finished stage of excise duties on the export product is also not reimbursed under this scheme and there are separate provisions for rebate of such finished stage duties under the Central Excises and Salt Act 1944 and the Rules framed thereunder.
A new Section 75 A has been incorporated in the Customs Act to provide for payment of interest on delayed payment of drawback. Interest at the rate of 15% P.A. is payable to the exporters if the claim is not settled within three months from the issued date of acknowledgement by the department. Acknowledgement under Rule 13(I) is issued only if the claim is complete in all respect. If the claim is deficient, the department within 15 days from the date of filing the claim will issue a deficiency memo. The exporter is required to comply with the deficiency memo within 30 days from the date of receipt of deficiency memo. The time limit in these cases will be completed after receipt of compliance and issue of acknowledgement card.
Similarly, where an exporter has been paid erroneous or excess drawback and fails to repay the same within three months from the demand date, they will be liable to pay interest at the rate of 20% P.A.
If the exporter finds that the paid amount of drawback is less than what he is entitled to, there is a provision for claiming supplementary drawback claims in the prescribed Format Under Rule 15 of the Drawback Rules, 1995. The time limit filing supplementary claim is three months from the date of original settlement.
Certain limitation has been laid by law in the matter of admissibility if drawback even though the commodity might have been notified and covered in the Drawback Table. These are:
Rule 16 of the Drawback Rules empowers the department to recover any erroneous payment of drawback without any time limit and can initiate recovery proceedings under Sec 142 of the Customs Act 1962
This scheme envisages reimbursement of Customs and Central Excise duties suffered on inputs used in the manufacture and packing of finished exports product. The brand rates are determined for specific export products exported by specific exporters.
The simplified Brand rate Fixation scheme will be available to all manufacturer exporters who have a regular production of the product for which brand rate is being sought and who are corporate bodies having a detailed accounting system which is normally subjected to statutory audit under the Company Law.
Under this procedure, the manufacturer exporter including those who have exported through the trading Houses or Star trading Houses has to simply file his brand rate application in the prescribed Performa along with an indemnity bond. The data will have to be supported by certificate from an independent Chartered Engineers, Chartered Accountant/Cost accountants in relation to the data furnished in Statements I, II and III submitted along with the application. Taking into account the data, the Directorate of Drawback will fix the brand rates without insisting upon the pre-verification. The data submitted will, however, be subjected to post verification by the department and the applicant should also take steps to assist and ensure quick post verification. If post-verification reveals that the data furnished was incorrect in any way, then the Brand rates will be suitably revised, and the applicant have to pay back any excess amount claimed. Furthermore, if the applicant fails to arrange for the post verification of data within three months, the facility under the scheme will be withdrawn for their subsequent application.
Request for extension time limit for filing an application for brand rate under Rules 6 and 7 of the Drawback Rules, inclusion of Subsequent shipments in the Brand rate letter, extension of validity period of the brand rate letter and or quantity enhancement can be considered Drawback Directorate under special circumstances. For details, see guidelines for fixation of Brand rates under simplified and Normal Procedure.
Contravention of the provisions of customs law and of the connected import/export and foreign exchange laws are punishable departmentally by the way of confiscation of goods and imposition of penalty. Such adjudication is done by the officers of and above the rank of and Assistant Commissioner, powers being delegated to them on the basis of duty involved.
If a person is aggrieved by the orders of customs authorities, they can file an appeal to the Commissioner of Customs (Appeals). A second appeal lies to the Appellate Tribunal (CEGAT).
In addition to departmental action, prosecution in court of law is often resorted to in cases of customs contraventions. In case of outright smuggling or for habitual offenders, it is launched as a matter of course. In appraising cases (such as those relating to mis-declaration of quantity, description of value of goods), it is resorted to the mensrea is involved and value of goods is sufficiently high. Punishments are quite severe , going upto imprisonment for seven years and fine.
The Customs and Central Excise Settlement Commission is designed to provide a balance, quick and final resolution of tax disputes with a view to avoid length litigation.
All settlement applications made under sub-section (1) section 32E of Central Excise Act or sub-section (1) of section 127B of the Customs Act, by the application falling within the jurisdiction of the Commissioners with headquarters located in the States specified in column 3, shall be processed and disposed of by the Benches specified in column 2.
| S.No. | Name of Bench | States |
| 1. | Principal Bench at Delhi | All States other than those mentioned against Sl. No. 2,3 7 4 below |
| 2. | Additional Bench at Mumbai | Gujarat, Maharashtra, Madhya Pradesh and Goa. |
| 3. | Additional Bench at Calcutta | Bihar, Meghalaya, Orissa, West Bengal, Assam & Manipur. |
| 4. | Additional Bench at Chennai | Andhra Pradesh, karnataka, Kerala and Tamil Nadu |
For this order, the ordinary jurisdiction of a Bench will be determined not by the place of business or residence of the applicant, but by the location of the headquarters of the Commissioner of Central Excise or Commissioner of Customs having jurisdiction over him.
An Additional Bench of the Customs and Central Excise Settlement Commission has been set up by the Government of Mumbai. The Additional Bench at Mumbai would be operational with immediate effect. The office of the Additional bench at Mumbai is located at the following address:
Office of Settlement Commission,
Customs & Central Excise
6th Floor, Utpad Shulk Bhavan,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051
Tel. No.: EPABX :6523010 / 6523011 / 6523012
Extn. Nos. :1600 to 1621
Enquiry Counter: 1661 (Extn.)
FAX: 6522425 / 6527675
The Finance Bill, 1999 proposes to set up an advance Ruling Authority to give rulings on classification and valuation issues in advance for the benefit of joint ventures with NRI's.
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