notes on customs

8/3/2019 Notes on Customs

1/37

w w w . i c w a p o r t a l . b l o g s p o t . c o m Page 1

qwertyuiopasdfghjklzxcvbnmqwerty

opasdfghjklzxcvbnmqwertyuiopasdfg

klzxcvbnmqwertyuiopasdfghjklzxcvb

nmqwertyuiopasdfghjklzxcvbnmqwe

yuiopasdfghjklzxcvbnmqwertyuiopa

dfghjklzxcvbnmqwertyuiopasdfghjklz

vbnmqwertyuiopasdfghjklzxcvbnmq

wertyuiopasdfghjklzxcvbnmqwertyu

pasdfghjklzxcvbnmqwertyuiopasdfgh

klzxcvbnmqwertyuiopasdfghjklzxcvbmqwertyuiopasdfghjklzxcvbnmqwer

uiopasdfghjklzxcvbnmqwertyuiopasd

ghjklzxcvbnmqwertyuiopasdfghjklzxvbnmqwertyuiopasdfghjklzxcvbnmrt

uiopasdfghjklzxcvbnmqwertyuiopasd

ghjklzxcvbnmqwertyuiopasdfghjklzx

Notes on CUSTOMS


2/37


CUSTOMS DUTY

CHAPTER 1 - BASIC CONCEPTS.

1) Features of Customs Duty

a) Customs Duty levied as per rates specified in Custom Tarrif CTA 1975

b) ExportTaking goods to a place outside India

c) ImportBringing goods from place outside India

d) Out of India means beyond 12 Nm

e) Indian customs waters12 Nm to 24 Nm.

f) Customs duty is on goods

g) Goods include

- Vessels, Aircrafts & Vehicles

- Stores

- Baggage

- Currency

- Negotiable Instruments

- Any other movable property

h) Customs Duty is for Import & Exports


3/37


i) Dutiable goods are those which are chargeable to duty & on which duty

has not been paid

j) Imported goods

- Brought in India

- From place outside India

- Not cleared for home consumption

k) Export goods

- Taken out of India

- To place outside India

l) Customs is payable on Re-import, free replacements and free supplies.

2) Important Definitions

A) Goods

Customs duty is on goods as per section 12 of Customs Act.

The duty is payable on goods belonging to Government as well as goods

not belonging to Government

Goods included

(a) Vessels, Aircrafts and Vehicles

(b) Stores

(c) Baggage

(d) Currency and negotiable instruments and

(e) Any other kind of movableproperty.


4/37


B) Dutiable Goods

Dutiable goods as any goods which are chargeable to duty and on whichduty has not been paid.

Thus, goods continue to be dutiable till they are not cleared from the port. However once goods are assessed even at Nil rate of duty, they no

more remain dutiable goods

Export goods as well as imported goods can be dutiable goods ifimported goods or export goods are not chargeable to duty, they will not be

dutiable goods

C) Imported Goods

Any goods brought in India from a place outside India, but does not

include goods which have been cleared for home consumption.

Thus, once goods are cleared by customs authorities from customs area,

they are no longer imported goods

D) Export Goods

Export Goods means any goods which are to be taken out of India to aplace outside India.

Goods brought near customs area for export purpose will be Export

Goods

E) Indian Customs Waters

Indian Customs Waters means the waters extending into the sea up to the limit

of contiguous zone of India.

Contiguous zone of India comes immediately after territorial waters. The outerlimit of contiguous zone is 24 nautical miles from the nearest point of basic line .


5/37


Thus, area beyond 12 nautical miles and upto 24 nautical miles is contiguous

zone of India. The Central Government has powers to take measures in this areafor security of India and immigration, sanitation, customs and other fiscal matters.

Thus, Indian Customs Waters extend up to 12 nautical miles beyond territorial

waters.

Significance of definition of Indian Custom Waters is as follows

Customs officers has powers to arrest a person in India or within Indiancustoms waters (section 104)

Customs officer has powers to stop and search any vessel in India or

within the Indian Customs waters, (section 106). If such vessel does not stop,it can be fired upon .If a vessel does not stop, it can be confiscated (section

115 (1) (c) )

A vessel which is within Indian customs waters or which has been in

Indian Customers Waters can be confiscated which is constructed or fitted in

any manner for purpose of concealing goods. (section115(1) (a) )

Thus powers of customs officers extend up to 12 nautical miles beyond territorialwaters.

F) Territorial Waters

Territorial water extend up to 12 nautical miles from the base line on the coast of

India and include any bay, gulf, harbour, creek or tidal river. (1 nautical mile= 1.1515 miles = 1.853 Kms) Sovereignty of India extends to the territorial

waters and to the seabed and subsoil underlying and the air space over the waters.

G) Exclusive Economic Zones

Exclusive Economic Zone extends to 200 nautical miles from the base -line. Inthis zone, the coastal state has exclusive right to exploit if for economic purposes

like constructing artificial is lands (for oil exploration, power generation etc.)Fishing, mineral resources and scientific research . However, other countries

have right of navigation and over flight rights. Other countries can lay

submarine cables and pipelines with consent of Indian Government. Such consentmay be declined for protecting interest of India.


6/37


3) Types of Custom Duties.

i) Basic Customs Duty

Basic customs duty is levied under section 12 of customs Act. Normally, it is

levied as a percentage of value of goods imported. The rates vary for different

items, but general rate on non-agricultural goods at present is 10% [ w .e. f. 1-3-

2007]

ii) Additional Customs Duty U/S 3(1) (CVD)

Additional customs duty is often called Countervailing Duty (CVD).

This duty is equal to excise duty levied on a like productmanufactured or produced in India. If like article is not produced or manufacturedin India, the excise duty that would be livable on that article had it been produced

in Indian is the base. If the product is livable with different rates, then highest rate

among those rates is to be considered. The duty is livable on value of goods plus

customs duty payable.

iii) Education Cess On Customs Duty

An education cess of customs has been imposed on imported goods w.e.f. 9-7-2004. The cess is 2% of the aggregate duty of customs. However, education cess

will not be payable on Special CVD (SAD). Safeguard duty under countervailing

duty, anti dumping duty, SAH education cess, Education cess itself on importedgoods.


7/37


iv) Secondary & Higher Education Cess.[S.A.H.]

In addition to existing education cess, an education cess of 1% of the total duties

of customs has been imposed on imported goods.

SAH education cess will not be payable on

(a) Special CVD or SAD

(b) Safeguard duty

(c) Countervailing duty

(d) Anti dumping duty

(e) Education cess

(f) SAH education cess itself

v) Additional duty under section 3(3)

In addition to CVD further additional duty can be levied by Central

Government to counter balance excise duty livable on raw materials, componentsetc. similar to those used in production of such article

This levy has use when goods manufactured indigenously is exempt fromexcise duty. In such case, the indigenous manufacture will be loser to the extent ofduty paid on inputs. This duty paid on his inputs is lost as final product is exempt

from duty . This becomes additional cost to indigenous manufacturer. On the

other hand, the imported goods do not have to pay CVD as the product is exemptfrom duty. The foreign supplier has not paid any excise duty on his inputs. He

gets cost advantage to that extent. Section 3(3) is intended to offset such cost

advantage to foreign supplier.

vi) Additional Duty Under Section 3(5) (Special CVDSAD)

This duty is in addition to any other duty imposed under Customs Act orany other law


8/37


The Additional Duty U/S 3(5) can be imposed by issuing a notification.

Such tax cannot exceed 4% of value of that article.

Purpose of the additional duty is to counter balance sales tax, VAT, local

tax or other charges leviable on articles on its sale, purchase or transaction in

India. The obvious intention is to provide level field to manufacturers in Indiawho are manufacturing similar goods. Hence, it is termed as special CVD or

SAD(Special Additional Duty)

Value of article for purpose of levy of this additional duty is

(i) Assessable Value determined

(ii) + (ii) Basic customs duty payable. CVD payable u/s

3(1) + (iii) Additional duty payable u/s 3(3)

However, value will not include following :

(a) Additional Duty payable u/s 3(5)

(b) Safe guard duty payable u/s 8(B) and 8 (C)

(c) Countervailing duty payable u/s 9

(d) Anti dumping duty u/s 9(A)

SAD has been imposed on all imported goods w.e.f. 1-3-2006 @ 4%,

vii) Protective Duties

Tariff Commission has been established under Tariff Commission

Act, 1951. If the Tariff Commission recommends and Central Government is

satisfied that immediate action is necessary to protect interest of Indian Industry.

Protective customs duty at the rate recommended may be imposed under section 6of Customs Tariff Act.

viii) Countervailing Duty on Subsidized Goods


9/37


If a country or territory pays any subsidy (directly or indirectly) to its

exporters for exporting goods to India, Central Government can imposeCountervailing duty up to the amount of such subsidv.

ix) Anti Dumping Duty on Dumped Articles

Often, large manufacture from abroad may export goods at very low prices

compared to prices in his domestic market. Such dumping may be with intention

to cripple domestic industry or to dispose of their excess stock. This is called

dumping and is an unfair trade practice. In order toavoid such dumping and toprotect domestic industry, Central Government can impose, under section 9A of

Customs Tariff Act, anti-dumping duty, if the goods are being sold at less than its

normal value. Levy of such anti-dumping duty is permissible as per WTOagreement. Anti dumping action can be taken only when there is an Indian

Industry producing Like Articles

x) Safeguard Duty

Central Government is empowered to impose

safeguard duty on specified imported goods if Central Government is satisfied

that the goods are being imported in large quantities and under such condition thatthey are causing or threatening to cause serious injury to domestic industry. Such

duty is permissible under WTO agreement. The only condition under WTO is thatit should not discriminate between imports from different countries having MostFavored Nation (MFN) status.

Safeguard duty is a step in providing a need basedprotection to domestic industry for a limited period, with ultimate objective of

restoring free and fair competition. Safeguard duty is targeted at remedying or

preventing serious injury to domestic industry with a view to making itcompetitive and to enable it to stand on its own.

Government has to conduct an enquiry and then

issue a notification. (Section 8 B (1) of Customs Tariff Act.)The duty, onceimposed, is valid for four years, unless revoked earlier. This can be extended by

Central Government, but total period of safeguard duty cannot be more then ten

years. (section 8B (4)). The duty is in addition to any other customs duty beingimposed on the goods. (section 8 B (3)).

In case of imports from any developing country,

safeguard duty can be imposed if import from that country exceeds 3%. If the


10/37


Article originates from more than one developing countries and if imports from

each developing country is less than 3%, safeguard duty can be imposed ifimports from all such developing countries taken together exceeds 9% of total

imports of that Article in India [proviso to section 8 B(1) of Customs Tariff Act as

amended w.e.f. 13-7-2006]

xi) NCCD of Customs Duty

A National Calamity Contingent Duty (NCCD) of customs hasbeen imposed vide section 134 of Finance Act, 2003, On pan masala, chewing

tobacco and cigarettes. Further, NCCD of customs of 1% has been imposed on

PFY, motor cars, multi utility vehicles and two wheelers. NCCD of Rs 50 per ton

is imposes on domestic crude oil. For purpose of calculation of NCCD, value willbe same as calculated for purpose of CVD u/s 3(2) of Customs Tariff Act.

xii) Export Duty

Since Government activity encourages export, there is export dutyon very few products. Articles on which export duty is leviable are given in

second schedule to customs Tariff. At present, 25% export duty is imposed on

luggage leather, 15% Export Duty is levied only on hides, skins and leather, and

duty of 10% is levied on snake skins and lamb skins.

Export duty has been imposed on the following w.e.f. 1-3-2007

(1) Iron ores (whether in form of lumps or fines ) and concentrates, all sorts @ Rs.300 per metric tonne. (2) Chromium ores (whether in form of lumps or fines) and

concentrates, of all sorts @ Rs. 2,000 per metric tone

There is no export duty on any other product.


11/37


xiii) Cess on Imports

Cess is levied on indigenous manufactured goods like sugar, Tea,

Jute, Beedis, automobiles, Tobacco, Coffee, Rubber , Paper and paper board, ironore, limestone and dolomite, manganese ore, chrome ore and coking and non-

coking coal. This is recoverable as excise duty. If these are imported,

corresponding cess will be payable


12/37


CHAPTER 2 - IMPORTS PROCEDURE

1) To be followed by person

in charge of conveyance

- Arrive at customs port / air port only

- Submit import manifest to customs authorities within 12 hours of arrival


13/37


- Furnish list of stores on ship to be landed

- Keep excess stock under customs seal

- Start unloading only after customs authorities grant Entry Inwards

2) To be followed by Importer

- Submit following documents

Bill of entry

Invoice

Packing list

GATT declaration form

Importers / Chas Declaration

Import license

Certificate of country of origin

L/C & bank draft

Insurance documents

Technology literature

Test report

DEPB (Original)

Split up of value of spares, components & machinery


14/37


- Documents submitted by importer are checked & assessed by customs

officials & then goods are cleared

- Date of presenting B.E. is relevant & rate of duty as applicable on this

date is considered for calculating duty

- Heavy demurrage is payable of goods are not cleared from port within 3

days.


15/37


CHAPTER 3 - EXPORT PROCEDURE

1) To be followed by person - in charge of conveyance

- Vessel is granted Entry Outward

Loading can start only after this permission

- Shipping bill duly passed by customs

Officer is handed over to him

- Export Manifest / Export report in the prescribed form should be

submitted before departure.

- Report should be declared as true by him.

2) To be followed by Exporter

- Obtain business identification no. (bin)


16/37


From director general of foreign trade (DGFT)

- Open current A/C with designated bank for crediting duty drawback

claims.

- If export is under DEPB, advance license etc. same should be registeredat custom station.

- Submit shipping bill / Airway bill /Bill of export

- Assess goods for duty even if no duty payable

- Make appropriate declarations in prescribed Forms for :

(a) Drawback claim (b) DEEC Scheme (c) Adv. License

(d) DEPB Scheme (e) ARE1 Declaration

- Complete excise formalities for export

- Follow prescribed procedures & submit necessary papers for claiming

duty drawback

- Prepare & submit prescribed forms by RBI to enable RBI to ensure that

export proceeds are received in India through proper banking channel only

- Prepare / Submit following documents

(a) Commercial invoice (b) Packing list

(c) Certificate of Origin (d) Pre-shipment Insp. Report

(e) Insurance Policy (f) L / C

(g) Declaration of value (h) Excise are1 form

(i) GR / SDF form for RBI (J) Letter showing Bin No.


17/37


CHAPTER 4 - COURIER , POST & BAGGAGE

1) IMPORT & EXPORT THROUGH COURIER

A) Import

i) Permitted by air from specified air ports & land custom Station. by land

ii) Maxm. Wt. allowed is 70 Kg. / Package

iii) Goods covered by any other Acts are not permitted

iv) Animals & its parts, Plants, Perishables, Stones, Gold, Silver,

Chemicals, Publications containing incorrect Indian boundaries are not allowed


18/37


v) Life savings drugs are allowed

vi) Courier must be Registered with commissioner of customs

vii) Free gifts & samples up to Rs. 10,000 per consignment allowed

viii) Gem / Jwellery up to Rs. 25 lakhs per consignment allowed.

ix) Courier bags are kept separately & dealt with as per directions ofcommissioner of customs

x) He has to submit specified declaration & Courier Bill of Entry inprescribed form

xi) Goods must be cleared by courier within 30 days of import otherwisethey are disposed of by customs authorities.

B) Export

i) Permitted from specified air ports & land customs station

ii) Courier must file a statement before departure of any flight in prescribed

form along with Courier Shipping Bill

iii) Free gifts Rs. 25,000 & samples Rs. 50,000 can be exported

iv) Export by EOU / SEZ / EHTP / STP units through authorized courier is

permitted

v) Export of Gem / Jwellery Rs. 25 lakhs per consignment is allowed

vi) Goods must be exported within 7 days from customs area otherwise they

are disposed of by customs authorities.

2) IMPORT & EXPORT BY POST

A) Import


19/37


i) Post parcels are allowed to pass from port / Air Port to foreign parcel

Deptt. Without payment of custom duty.

ii) Post master hands over to principal appraiser customs

a) Memo of parcels from each country of origin

b) Parcel bill or senders declaration

c) Customs declaration & dispatch notes

d) Any other information required

iii) Post bags opened under supervision & control of principal appraiser

customs

iv) Packets containing dutiable goods are presented to customs appraiser

v) Parcels opened by him are distinctly sealed & after assessment handed

over to post master

vi) Post master hands over the parcels to the addressee on receipt of custom

duty from him

vii) Gifts up to Rs. 10,000 can be imported without payment of custom duty

viii) Post parcels with customs duty less than Rs. 100 are exempted from

custom duty.

B) Export

i) Goods must be covered by a declaration in a prescribed form

ii) Export of Indian / Foreign currency is not allowed unless accompanied by

permit issued by RBI

iii) Goods up to Rs. 25,000 can be exported as a gift

iv) Export of purchases by foreign tourists allowed on submitting proof that

payment was received in foreign exchange.

3) BAGGAGE RULES


20/37


A) Baggage includes

i) Dutiable goods imported by

- Passengers

- Member of a crew

In his baggage

ii) Unaccompanied baggage if dispatched previously or subsequently within

prescribed period.

Baggage does not include

- Motor vehicles, alcoholic drinks & goods imported their courier

- Articles imported under imported license for himself or for others

B) Following are general prohibitions

i) Indian / Foreign currency (above RBI limits )

ii) Narcotic drugs

iii) Domestic pets (If not as per health regulations )

iv) Exoctic Birds, wind orchids, wild life

v) Endangered species

vi) Ivory

vii) Reptile skins

viii) Antiques

C) There are 2 Channels

i) Green Channel Person not having any dutiable goods can pass through

this. However if found carrying dutiable goods. Goods are confiscated & he is

prosecuted.


21/37


ii) Red channel Person having dutiable goods pass their this & submit

declaration. Baggage checked by customs officer & appropriate duty is charged at35% + 2% E.C. & 1% SAH. Education Cess. There is no SAD & CVD

D) Exemptions allowed for import through Baggage

Person transferring his residence to India is eligible to bring his personal &

household articles to India without duty

Bona fide baggage accompanying passenger is exempted from customs duty

This includes personal effects, wearing apparel & toilet requisites

Laptop computer brought as baggage by person over 18 years of age (other thanmember of crew is fully exempt from customs duty

Gold brought as baggage by a passenger of Indian origin or a person holding

Indian passport. The duty is only Rs. 100 per 10 gms. For import of gold bars bearing

manufacturers or refiners engraved serial number and weight expressed in metric

units and gold coins. In case of other gold, including tola bars and ornaments (butexcluding ornaments studded with stones or pearls), the duty is Rs. 250 per 10 10

gms. Up to 10 kg. gold can be brought by each eligible passenger

Silver brought as baggage by a passenger of Indian origin holding Indian

passport up to 100 kg. is chargeable to duty of Rs. 500 per kg. (plus education cess

@ 2% and SAH education cess of 1% of duty), if the person was staying abroad for

over six months. Duty has to be paid only in convertible foreign currency. No CVD ispayable. Silver can be brought in any form, including medallions, coins and

jewellary, except foreign currency coins and jewellery studded with stones or pearls.

Out of the period of 6 months. Short visits up to 30 days are permitted, if the

concession was not availed in such short visit.

Customs duty is not payable if amount of duty is equal to or less than Rs. 100


22/37


A passenger of 10 or more year of age is allowed general free allowance of Rs.

25,000, if the Indian Resident is returning from country other than Nepal, Bhutan,Myanmar or China . This allowance is also available to foreign citizens residing inIndia, after stay of more than three days. This allowance cannot be pooled with

General Free Allowance of other passengers e.g. husband and wife bringing one item

of Rs. 50,000 will not be permitted duty free. This General Free Allowance is notapplicable to un-accompanied baggage.

The limit of Rs. 25,000 is reduced as follows (a) Rs. 12,000 for passengers afterstay abroad of three days or less(b) If the passenger is up to 10 years of age and is

returning from country other than Nepal, Bhutan, Myanmar or China, the allowance

is Rs. 6,000 if a person is returning after stay of more than 3 days & Rs. 3,000 it hasstay was 3 days or less, (c) If the passenger is returning from Pakistan by land route,

as specified in Annexure IV of baggage Rules, the general free allowances is Rs.

6,000 for passengers above 10 years and Rs. 1,500 for passengers up to 10 years. Of

age.

An Indian Resident or foreigner residing in Indian of Age 10 or more is entitledto lower rate of General free allowance of Rs. 6,000 if he is returning form Nepal,Bhutan, Myanmar or China after stay of more than 3 days, by route other than land

route. Passenger up to 10 years returning from these countries after stay of more than

3 days is entitled to General Free Allowance of Rs. 1,500. There is no duty onpersonal effects.

There is no general free allowance if a person is returning from these countries

after stay of three days or less. There is no free allowance if passenger returns by landroute from these countries, even if his stay abroad was more than 3 days. If the

passenger is returning from Pakistan by land route the general free allowance is Rs.

6,000 for passengers above 10 years and Rs. 1,500 for passengers up to 10 years of

age.

An Indian passenger who was engaged in his profession abroad for over three

months is allowed to import following duty free goods as additional allowance (a)

Used household articles up to Rs. 12,000 ( e.g. linen, utensils, tableware,

kitchen appliances, an iron etc. )

(b) Professional equipment like portable equipments, apparatus and appliances

required in such profession, up to Rs. 20,000. The limit will be increased

to Rs. 40,000 if he was abroad for over 6 months. [The allowance is in


23/37


addition to General Free Allowance ]

This exemption of professional equipment is only for carpenters, plumbers

welders, masons and the like and not for items of common use like

cameras, type writer, cassetterecorder, computers, word processor etc.

If the passenger was residing abroad for over one year, jewellery can be imported

duty free up to Rs. 10,000 in case of gentleman passenger and Rs. 20,000 in case oflady passenger.

A person who was working abroad and is returning to India on termination orwork and who was staying abroad for at leas 365 days out of previous two years, is

eligible to certain concessions. This is termed as mini TR i.e. Mini Transfer of

Residence. He is entitled to bring personal effects and household articles up to Rs.75,000 duty free [ The limit was Rs. 30,000 upto 28-2-2002]. This allowance is in

addition to General Free Allowance. The conditions are (a) These should be inpossession of himself or his family and used for at least

six months,

(b) He shall be allowed to avail himself of this exemption only once in three

years,

(c) Items in Annex I, Annex II or Annex III to Baggage Rules are not allowed

under this rule,

(d) Goods should be contained in his bona fide baggage.

Exemption to Baggage of TouristsFollowing are the exemptions

(a) Used personal effects of tourist and travel souvenirs are allowed duty free.

Personal effects should be for personal use of the tourist and these goods, other


24/37


than consumed should be re-exported when tourist leaves India for foreign

destination.

(b) Tourists of Indian Origin (even if holding foreign passport ) other thanthose coming from Pakistan by land route as specified in Annexure IV of

Baggage Rules, are entitled to General Free Allowance in addition to personal

effects .

(c) Foreign Tourists are permitted to bring articles up to Rs. 8,000 for makinggifts. This can include up to 200 cigarettes or 50 cigars or 250 gms of tobacco and

up to two liters of alcoholic liquor or wine. Duty will have to be paid for gifts

over the value of Rs. 8,000 (Rs. 6,000 if they are coming from Pakistan)

(d) Tourists of Pakistani origin or foreign tourists coming from

Pakistan or tourists of Indian origin coming from Pakistan, by land route as

specified in Annexure IV of Baggage Rules, are entitled to bring used personaleffects and travel souvenirs are allowed duty free. Personal effect should be for

personal use of the tourist and these goods, other than consumed, should be re-

exported when tourist leaves India for foreign destination. In addition, articles up

to value of Rs. 6,000 for making gifts are permitted duty free.

(e) Tourists of Nepalese origin coming from Nepal or of Bhutanese

origin coming from Bhutan are not entitled to any exemption.

Import by foreign expertsForeign experts assigned to India under various UN

schemes etc. are permitted to bring various articles, including VCR, video camera and

Airconditioners. These are exempt from customs duty on obtaining certificate of

undertaking from the expert. Duty will be paid by concerned ministry / department.


25/37



26/37


CHAPTER 5 - EXEMPTION & REMISSION OF DUTY

1) EXEMPTION :

Exemption in duty is granted in following ways

a) Government issues notification in the public interest and exemption isgranted on items specified in notification after condition are fulfilled as per

notification & W.E.F. date mentioned thereto

b) Imports for Exports by

FTZ, 100% EOU, Advance license, Job Work etc.

c) Specified imports for projects

d) Preferential rates for imports from specified countries

e) Lower rate in case of agreement by Govt. with some country


27/37


2) REMISSION :

a) Remission means waiver of duty

b) In following cases duty is remitted

i) Goods lost, Destroyed or Pilfered after unloading

but before clearance for home consumption

ii) If importer abandon goods because

- Goods are deteriorated

- Duty is very high.


28/37


CHAPTER 6 - OTHER PROVISIONS IN CUSTOMS

1) WAREHOUSING

a) Imported goods can be kept without payment of duty

b) Pay customs duty & take goods out of warehouse


29/37


c) Available toTraders & Direct Importers

d) Opened at warehousing Stn. Approved by customs

e) Public & private warehouses

f) Bond is required from importer for movement of goods from customersport to warehousing Stn.

g) Period of warehousing1 year & further 6 months by permission of

commissioner & with permission of chief commissioner & unlimited period

h) Capital goods by E.O.U.5 Yrs. Warehousing

Other goods by E.O.U. - 3 Yrs. Warehousing

i) Warehouse is under physical control of customs officer & clearance canbe only with his permission

j) If goods are damaged during warehousing no duty is payable

k) Goods can be cleared from warehouse only after paying custom duty

l) Importer must pay rent & other charges if not paid warehouse keeper can

sell goods after giving notice to importer & with permission of customs officer

m) Owner of warehoused goods can relinquish title of goods any time beforehome clearance. He has to pay rent & other charges. He does not have to pay duty

n) With permission of customs officer warehoused goods can be dealt in anyof the following wary :

- Mfg. & other operation for export or for home consumption

- Inspect goods

- Separate damaged / deteriorated goods

- Sort goods

- Change containers

- Show goods for sale

- Take sample of goods.


30/37


2) CUSTOMS HOUSE AGENT (C.H.A.)

a) Appointed by company to complete customs formalities and obtain

clearance from port

b) He must have license

c) C.H.A. is responsible for all Acts. Of his employee

d) To become customs house agent prescribed examination must be passed

e) Employee of customs house agent is given I. card

f) License fee is Rs. 5,000

g) License cannot be transferred

h) Customs house agent must obtain authorization from cos. For which he isworking .

i) Customs house agent has to execute bond in prescribed form

j) If rules & regulations are not followed (Frameed by customs ) his licenseis cancelled or suspended.

3) EXPORT ORIENTED UNDERTAKINGS ( E.O.U. )

EOU can import inputs and capital goods without payment of customs duty.

They can procure indigenous inputs and capital goods without payment of excise

duty.

Their final product should be normally exported, but they are allowed to sale part

of their production within India, which is termed as DTA sales i.e. sale in Domestic

Tariff Area.

EOU units have to follow provisions of

- Customers Act.

- Excise Act

- Income Tax Act.

- Foreign Exchange Management Act.


31/37


EOU can be set up at various places in India declared as warehousing stations.

There are over 300 such places.

Only project having an investment of not less than 100 lakhs and above in

building and plant and machinery shall be considered for establishment under EOU

scheme.

One crore investment criteria does not apply to units engaged in service sector,

Software Technology Park(S.T.P.), Electronics Hardware Technology Park(E.H.T.P.), I.T. sector handicrafts etc.

The EOU unit may be engaged in manufacture of goods, including repair, re-

engineering, and rendering of services. However, trading units are not permitted.

Special provisions have been made for EOU units for gold/ silver / platinumjewellery, agriculture, aquaculture, floriculture, horticulture, poultry, granites etc.

EOU / SEZ / STP / EHTP / BTP unit can be set up with 100% foreigninvestment, except in few sectors where compulsory licensing is required. 100%foreign investment is sectors like arms and ammunition, explosives, atomic

substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic

drinks and cigarettes, cigars and manufactured tobacco substitutes is not permitted. Insome sectors, there is sectoral cap.

The units should have positive Net Foreign Exchange Earning. (NFE). NetForeign Exchange Earning shall be calculated cumulatively in block of five years,starting from commencement of production

NFE = AB, where A = FOB value of exports, B is the sum total of CIF valueof all imported inputs and capital goods and all payments (like commission, royalty,

fees, dividend, interest of borrowings) made in foreign exchange

In case of EOU units, the whole factory is treated as a bonded warehouses. The

bonding period is three years for raw materials, consumable and spares. However, for

capital goods, the bonding period is 5 years. Bonding period of three years meansinputs / consumable should be consumed for manufacture of export product within

three years. If not, application for extension should be made. This period can be

reduced by commissioner if goods are likely to deteriorate.

The warehousing period can be up to five years in case of capital goods intended

for use in EOU unit.

The warehousing period can be up to five years in case of capital goods intendedfor use in EOU unit.


32/37


The EOU units have to execute a bond in form B 17 which is all purpose bond

covering liability both of Central Excise & Customs. The Superintendent of CentralExcise will give a certificate in prescribed form giving details of bond, name of inputan its chapter number etc. Goods will be permitted to be cleared from customs

without payment of duty on strength of this certificate. Re-warehousing certificate

from assistant / Deputy Commissioner, CE should be submitted to customs authoritieswithin 90 days. Otherwise, duty demand will be raised.

Goods manufactured in EOU should e normally exported. However, since exportmarket is often fluctuating and uncertain, these units are allowed to sell part of their

products in DTA (Domestic Tariff Area ) i.e. within Indian, in terms of Foreign

Trade Policy.

As per proviso to section 3(1) of Central Excise Act. in case of sale by EOU units,

duty payable in case of DTA sale shall be equal to aggregate duties of customs which

would be payable under Customs Act, if the goods are imported in to India.

4) SPECIAL ECONOMIC ZONES (S.E.Z.)

China has made spectacular economic progress in recent years. Exports from

China are growing at phenomenal speed. It was found that one major reason for

growth in exports was due to Special Economic Zones development by China.These are huge areas of thousands of hectares, where raw materials and capital goods

can be imported without any duty and final product is exported. Excellent

infrastructure is provided in these SEZs.

India has also decided to introduce concept of SEZ in India. SEZ are like a

separate island within country. These are treated as if they are outside India for

customs purposes. Goods can be brought in SEZ without payment of customs duty or

excise duty. Supplies to SEZ from other parts of India are treated as exports and areentitled to all export benefits. On the other hand, supplies from SEZ unit to any

person outside SEZ is treated as import by that person ad normal customs duty ispayable.

SEZ have full freedom of operations within SEZ and all facilities of import and

export are provided within the zone itself.

SEZ are grown engines that can boost manufacturing, augment exports andgenerate employment. private sector has been associated with the development ofSEZs.

More than 100 SEZs have been approved and are in various stages ofdevelopment .


33/37


SEZ and SEZ units will be exempt from all taxes like customs duty, excise duty,

Central sales Tax, State Vat, Incomes tax etc. Supplies to SEZ from DTA (Domestic

Tariff Area ) will be export by DTA. Supplies from SEZ to unit in DTA will beexport by SEZ and Import by DTA unit.

Goods manufactured in SEZ are excluded excisable goods and no excise dutyis payable on them

In order to encourage development and growth of SEZ, Special Economic ZonesAct, 2005 was passed by parliament in May 2005. Basic purpose of the Act is smooth

and hassle free operations in SEZ and a Single Window Clearance for setting up an

SEZ or a unit in SEZ .

Major provisions of the Act have been made effective w.e.f. 10-2-2006. SEZ rules

have also been notified on the same date.

Central Government has liberal policy for setting up such zones. SEZ can be

set up in public, private, joint sector or by Central Government or State

Government, Jointly or severally[section 3(1) of Act] Developer of such SEZ

can allocate fully develop plots to entrepreneurs on purely commercial basis.

Developer of SEZ can provide services like water, electricity, security,

restaurants, recreation etc. He can also develop township adjacent to SEZ.

Thus, integrated township plus manufacturing facilities will be provided in

SEZ. Proposal to establish a SEZ will be approved by Board of Approvals

(BOA).

The SEZ are expected to have world class infrastructure for efficient

manufacturing and service activities.

Multi-product SEZs should have an area of 1,000 hectares or more. Minimum

35% area shall be earmarked for processing. Remaining 65%/ 75% area will be

available for developing residential and commercial areas. Sector specific SEZ can beas small as 10 hectares, out of which 50% should be for processing and balance can

be for residential and commercial areas. SEZ for Free Trade and Warehousing

(FTW)shall have an area of 40 hectares or more with a built up area of not less thanone lakh square meters.


34/37


An entrepreneur can set up a manufacturing unit is SEZ. Normally, all his

production will be

exported. He should have positive NFE (Net Foreign Exchange Earnings].

5) DUTY DRAWBACK

Manufacturers or processors can avail duty drawback Here, the excise duty and

customs duty paid on inputs and service tax paid on input services is given back to the

exporter of finished product by way of duty drawback

Drawback, in relation to any goods manufactured in India and exported, meansthe rebate of duty or tax, as the case may be, chargeable on any imported materials or

excisable materials used or taxable services used as input services in manufacture of

such goods.

Incidence of un-rebated service tax and Fringe Benefit Tax (FBT) will be

factored in various duty neutralization and remission schemes. No drawback is

available on other taxes like sales tax and octroi.

DrawbackWhen not eligible

(i) If sale proceeds of export goods are not received within time stipulated byRBI [This provision does not apply to goods supplied from DTA unit to SEZ

unit.]

(ii) If no customs / excise duty is paid on the inputs or service tax is not paid

on input services

(iii) If imported inputs were obtained under Advance License (DEEC

scheme) without payment of duty

(iv) If importer avails DEPB or DFRC

(v) Goods manufactured under Customs Bond or Excise Bond where inputs

were obtained without payment of duty


35/37


(vi) Goods manufactured by EOU or a unit in Special Economic Zone (as

they obtain inputs without payment of duty )

(vii) If Cenvat was claimed on indigenous inputs. [In such case, excise portion

of duty drawback will not be available ]

(viii) In case of negative value additioni.e. selling price of exported goods is

less than value of imported goods i.e. foreign exchange spent on import of raw

material is more than FOB value of exports.

(ix) Jute batching oil used in manufacture of jute yarn, twist, twine etc.

(x) Packing materials used in manufacture of jute yarn, jute fabrics and jute

manufacture.

(xi) Where specific rates are provided, drawback will not be paid if it is lessthan 1% of FOB. Value of the product, unless drawback claim per shipment is

over Rs. 500

(xii) If wholesale market price of goods in India is less than the amount ofdrawback due.

(xiii) Exports to Nepal / Bhutan. However, exports to Nepal are eligible ifpayment is received under hard currency i.e. dollars, euro, Yen British pounds

etc.

(xiv) No drawback of sales tax, Octroi or other taxes drawback is of customsand Central Excise duties only.

(xv) Export of alcoholic liquor, cigarettes, cigar and pipe tobacco: as stores, to

foreign going vessel of less than 200 tons.

(xvi) If goods exported by vessel of less than 1,000 tons: unless certificate is

submitted that sale proceeds in foreign currency have been received and goods

have landed at destination within three months.

(xvii)If drawback is less than Rs. 50

6) DEEMED EXPORTS


36/37


India gets foreign aid from World Bank, Asia Development bank etc. for various

prestigious projects in India for which global tenders are invited and India gets aid inforeign currency. Indian manufacturers and suppliers of services from India have to quote

in competition with foreign suppliers. Evaluation of bids is done without considering

customs duty. Since the supply of goods and service are for projects financed with free

foreign exchange, these suppliers are treated as Deemed Exports. Similarly, supplies toEOU units and supplies against annual advance authorization are also deemed exports

These are so called because the goods and services do not leave the country.

Suppliers of goods and services get payment in Indian rupees and not in foreign currency.

Following are treated as Deemed exports

a) Supply of goods against Advance Authorization or Advance Authorization for

Annual Requirement / DFRC / DFIA.

b) Supply of goods to units located in EOU, STP, BTP or EHTP.

c) Scheme or supply of capital goods to holder of authorization under EPCG

scheme.

d) Supply of goods to projects or turnkey contracts financed by multilateral or

bilateral agencies against international competitive bidding.

e) Supply of capital goods to fertilizer plants.

f) Supply of goods to any project where import is permitted at zero customs duty

and supply is make against international competitive bidding.

g) Supply of goods to power projects and refineries.

h) Supply of marine freight containers by EOU if the containers are exported within

6 month.

i) Supply to goods funded by UN Agencies and

j) Supply of goods to nuclear projects through competitive bidding (need not beinternational competitive bidding )

Benefits of deemed exports are available to manufacturer exporter only for supply of

goods manufactured in India, and not to merchant exporters.


37/37

Benefits to Indian Supplier

The supplier are in India and supplier gets payment in Indian rupees. However, the

Indian supplier is entitled to get following benefits.

Refund of excise duty paid on final product.

No excise duty is payable while clearing goods from factory against CT 3form to EOU. The Indian manufacturer is not required to reverse Cenvat credit

availed on inputs.

No Excise Duty is payable if supply is made against InternationalCompetitive Bidding.

If Cenvat has been availed, only customs duty paid on inputs / componentswill be allowed as deemed duty drawback

In respect of supplies made against advance authorization / DFRC / DFIA

against deemed export the supplier is entitled to Advance Authorization /DFRC / DFIA for intermediate supplies

The DTA unit can import inputs duty free under this authorization. Advance

Authorization for intermediate supply / deemed export is issued to manufacturer

exporter for material required for manufacture of goods to be supplied underdeemed export. Materials can be imported for deemed exports under Advance

Authorization for Deemed Exports without payment of customs duty.