CUSTOMS

By Monica Pradyot
Assistant Professor
SOL, UPES
INTRODUCTION:
• It was customary for a trader who brings the goods to a particular kingdom to
offer gifts to the king for allowing him to sell his goods in that kingdom.
• The gifts given by the dealer to the king was nothing but a customary practice in
those days. In the modern days, these gifts are collected by the Government of
India in the form of Customs Duty from the importer who imports the goods from
a country outside India and from an exporter who exports the goods to a country
outside India.
CONSTITUTIONAL PROVISIONS:
• Entry 83 of the Union List of the Seventh Schedule to the Constitution of India is
empowered to levy the customs duty by the Central Government of India.
• The Customs Act, was enacted by the Parliament in the year 1962, as per the List I
of the Union List Parliament has an exclusive right to make laws.
• As per section 157 of the Custom Act, 1962, the Central Board of Excise and
Customs (CBE&C), now renamed to Central Board of Indirect Tax and Customs
(CBIC), has been empowered to make regulations, consistent with provisions of
the Act. The Commissioner of Customs has the power to issue the Public notices
which are also called trade notices.
 DEFINTIONS under CUSTOMS ACT, 1962:
• Sec 2(1): “adjudicating authority” means any authority competent to pass any order or
decision under this Act, but does not include:
 The Central Board of Excise and Customs (CBE&C),
 Commissioner of Customs (Appeals) or
 Customs, Excise and Service Tax Appellate Tribunal (CESTAT)

• Sec 2(2): “assessment” means process of determining the tax liability in accordance with
the provisions of the Act, which includes
 provisional assessment,
 self-assessment,
 reassessment and
 any assessment in which the duty assessed is nil.
DEFINTIONS under CUSTOMS ACT, 1962:
• Sec 2(4): “bill of entry” means a bill of entry referred to in section 46;
• Sec 2(6): “board” means the Central Board of Indirect Taxes and Customs
constituted under the Central Boards of Revenue Act, 1963;
• Sec 2(7): “Coastal Goods” means goods, other than imported goods, transported
in a vessel from one port in India to another.
DEFINTIONS under CUSTOMS ACT, 1962:
• Sec 2(9): “Conveyance” includes a Vessel, an Aircraft and a Vehicle’. The specific
terms are vessel (by sea), aircraft (by air) and vehicle (by land).
• Sec 2(11): “customs area” means the area of a customs station or a warehouse
and includes any area in which imported goods or export goods are ordinarily kept
before clearance by Customs Authorities;
• Sec 2(12): “customs port” means any port appointed under clause (a) of section 7
to be a customs port, and includes a place appointed under clause (aa) of that
section to be an inland container depot;
• Sec 2(13): “customs station” means any customs port, customs airport,
international courier terminal, foreign post office or land customs station;
DEFINTIONS under CUSTOMS ACT, 1962:
• Sec 2(14): “Dutiable Goods” mean any goods which are chargeable to duty and on
which duty has not been paid. It means to say that the name of the product or
goods should find a mention in the Customs Tariff Act.
• Sec 2(18): “export”, with its grammatical variations and cognate expressions,
means taking out of India to a place outside India;
• Sec 2(22): “goods” includes
a) vessels, aircrafts and vehicles;
b) stores;
c) baggage;
d) currency and negotiable instruments; and
e) any other kind of movable property;
 ASSOCIATED CEMENT COMPANIES LTD. V. CC
2001 (128) ELT 21 (SC).
• Facts of the Case:
• RST Ltd. imported drawings and designs in paper form through professional courier and post
parcels. However, the Assistant Commissioner of Customs valued these drawings and designs
and levied duty on them.
• RST Ltd. Contended that customs duty cannot be levied on drawings and designs as they do not
fall in the definition of goods under the Customs Act, 1962.
• Decision:
• The Apex Court observed that though technical advice or information technology are intangible
assets, but the moment they are put on a media, whether paper or cassettes or diskettes or any
other thing, they become movable and are thus, goods. Therefore, the Supreme Court held that
drawings, designs, manuals and technical material are goods liable to customs duty.
• Therefore, the stand taken by the RST Ltd. is not correct in law.
DEFINTIONS under CUSTOMS ACT, 1962:
• Sec 2(23): "import", with its grammatical variations and cognate expressions,
means bringing into India from a place outside India;
• Sec 2(27): "India" includes the territorial waters of India;
• Sec 2(28): "Indian Customs Waters" means the waters extending into the sea up
to the limit of Exclusive Economic Zone under section 7 of the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976,
and includes any bay, gulf, harbour, creek or tidal river;
• Sec 2(33): "prohibited goods" 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.
DEFINTIONS under CUSTOMS ACT, 1962:
• Sec 2(31): “person-in-charge” means
(a)Vessel - Master
(b)Aircraft - Commander or Pilot in Charge
(c)Train - Conductor or Guard
(d)Vehicle - Driver
(e)Other Conveyance - Person in Charge
 Section 11- Power to prohibit importation or
exportation of goods
• If the Central Government is satisfied that it is necessary so to do for any of the purposes
specified in this section, it may, by notification in the Official Gazette, prohibit either
absolutely or subject to such conditions, import or export of any goods.
• The purposes are the following :-
(a) the maintenance of the security of India;
(b) the maintenance of public order and standards of decency or morality;
(c) the prevention of smuggling;
(d) the prevention of shortage of goods of any description;
(e) the conservation of foreign exchange and the safeguarding of balance of payments;
(f) the prevention of injury to the economy of the country by the uncontrolled import or export
of gold or silver or any other goods;
(g) the prevention of surplus of any agricultural product or the product of fisheries;
(h) the maintenance of standards for the classification, grading or marketing of goods in
international trade;
(i) the establishment of any industry;
(j) the prevention of serious injury to domestic production of goods of any description;
(k) the protection of human, animal or plant life or health;
(l) the protection of national treasures of artistic, historic or archaeological value;
(m) the conservation of exhaustible natural resources;
(n) the protection of patents, trademarks, 2 [copyrights, designs and geographical indications];
(o) the prevention of deceptive practices;
(p) the carrying on of foreign trade in any goods by the State, or by a Corporation owned or
controlled by the State to the exclusion, complete or partial, of citizens of India;
(q) the fulfilment of obligations under the Charter of the United Nations for the maintenance of
international peace and security;
(r) the implementation of any treaty, agreement or convention; with any country;
(s) the compliance of imported goods with any laws which are applicable to similar goods
produced or manufactured in India;
(t) the prevention of dissemination of documents containing any matter which is likely to
prejudicially affect friendly relations with any foreign State or is derogatory to national prestige;
(u) the prevention of the contravention of any law for the time being in force; and
(v) any other purpose conducive to the interests of the general public.
Section 12- Dutiable goods
• Duties of customs shall be levied at such rates as may be specified under the
Customs Tariff Act, 1975, or any other law for the time being in force, on goods
imported into, or exported from, India.
• The Supreme Court of India has given the landmark judgments in cases of Union
of India v Apar Industries Ltd (1999) and further in the case of Garden Silk Mills
Ltd v Union of India (1999). The import of goods will commence when they cross
the territorial waters but continues and is completed when they become part of
the mass of goods within the country, and the taxable event being reached at the
time when goods reach the customs barriers and bill of entry for home
consumption is filed.
Taxable events:
• In case of Importation:
Import of goods will commerce when they cross the territorial waters of India but is
completed when it becomes part of the mass of the goods within the country.
Taxable event is reached when the goods reach the customs barrier and the bill of
entry for home consumption is filed.
• In case of Exportation:
Exportation commences when the shipping bill in respect of such goods is filed but
the taxable event is completed when the goods cross the territorial waters of India.
Types of Customs Duties:
• Basic Customs:
Goods imported into India are chargeable to basic customs duty (BCD) under Customs Act,
1962. The rates of BCD are indicated in Schedule I (for Imports) & Schedule II (For Exports)
of Customs Tariff Act, 1975. Generally, BCD is levied at standard rate of duty but if certain
conditions are satisfied (below), the importer can avail the benefit of preferential rate of
duty on imported goods.
• Countervailing Duty (CVD):
This levy has use when goods manufactured indigenously are exempt from excise duty
• Anti-dumping Duty on Dumped Articles
Where any article is exported from any country into India at less than its normal value,
then, upon the importation of such article in India, the Central Government may impose an
antidumping duty not exceeding the margin of dumping in relation to such article. This
duty shall be in addition to other custom duties.
Types of Customs Duties:

• National Calamity Contingent Duty of Customs

On the following goods this duty is levied:
1. Pan Masala – Not containing tobacco @ 23%
2. Pan Masala – Containing tobacco @ 10%
3. Cigarettes Rs. 20 to Rs. 235 per thousand
4. Bidis Rs. 1 to Rs. 2 per thousand
5. Crude petroleum oils Rs.50 per ton
6. Motor cars and two-wheelers @ 1%
Prohibited items:
1. Fire arms.
2. Cartridges of fire arms exceeding 50.
3. Cigarettes exceeding 200 or cigars exceeding 50 or tobacco exceeding 250 gms.
4. Alcoholic liquor or wines in excess of two litres.
5. Gold or silver, in any form, other than ornaments.
6. Narcotic Drugs and Psychotropic Substances;
7. Pornographic and obscene materials
8. Counterfeit goods and goods violating any of the legally enforceable intellectual property right
9. Chemicals mentioned in Schedule 1 to the Chemical Weapons Convention of U.N. 1993.
10. Wild life including its products and endangered species of plants and animals whether live or dead
Prohibited items:
11. Specified Live birds and animals
12. Wild animals, their parts and products
13. Exotic birds except a few specified one
14. shells
15. Human skeleton
16. Reptiles skin
17. Import of mobile handsets without IMEI number or with all zeros IMEI and CDMA mobile
phones without electronic serial number (ESN)/Mobile equipment Identifier (MEID) or with
all zeros as ESN/MEID.