KG College of Arts and Science

Affiliated to Bharathiar University and Accredited by

NAAC
ISO 9001:2015 Certified Institution
KGiSL Campus, Saravanampatti, Coimbatore, Tamilnadu,
India.
Department of Commerce with Professional Accounting
Subject Name :Indirect taxes
Subject Code : 63C
Class : III B.Com.PA “A & B”
Semester : VI
Prepared by : V.Suganya
Assistant Professor
Department of Commerce with professional
Accounting
KG College of Arts and Science
 Unit – V
CUSTOMS LAWS IN INDIA
UNIT-V
Introduction to Customs Laws in India – The
Customs Act 1962-The Customs Tariff Act 1975-
Levy and Exemption from Custom duty-Taxable
event-Charge of Custom duty- Exemptions
from duty-Meaning of Classification of goods-
Methods of valuation of imported goods-
Abatement of duty in damaged or deteriorated
goods-Remission on duty on lost, destroyed or
abandoned goods-Customs duty draw back.
INTRODUCTION
Custom Duty is an indirect tax, imposed under the
Customs Act formulated in 1962. The power to
enact the law is provided under the Constitution of
India under the Article 265, which states that ―no
tax shall be levied or collected except by authority
of law‖. Entry No. 83 of List I to Schedule VII of the
Constitution empowers the Union Government to
legislate and collect duties on import and exports.
The Customs Act, 1962 is the basic statute which
governs entry or exit of different categories of
vessels, aircrafts, goods, passengers etc., into or
outside the country. The Act extends to the whole
of the India.
CUSTOMS DUTY
• Duties of custom are levied under section 12
of the Act on goods imported into or
exported from India. The rates of duty are
specified under the Customs Tariff Act, 1975
(hereinafter Tariff Act) or under any other law
for the time being in force.
Objectives of Customs Act:
1.Safeguarding domestic trade:
2.Reducing Imports
3.Revenue resources
4.Protection of Indian industry
5.Prevention smuggling activities
6.To prevent dumping of goods
Scope of Customs Law:
The rules under the Customs Act are as under:
1. The customs valuation Rules, 1988
2. Duty Drawback Rules, 1995.
3. Re-export of imported goods drawback of
customs rules, 1995
4. The Baggage rules,1998
 Definition
• Adjudicating Authority Sec. 2(1)
Adjudicating Authority means any authority
competent to pass any order or decision under
this Act, but does not include the board or the
collector (Appeal)
• Assessment (sec 2(2))
– Assessment includes provisional assessment,
reassessment and any order of assessement in
which duty is “nil”
Baggage sec 2(3)
The term baggage means luggage of the
passengers and it refers to all dutiable goods
imported by a passenger or a member of a crew
in his baggage As per section 2 (3) of Customs
Act 1962, Baggage includes unaccompanied
baggage but does not include motor vehicle.
Customs Area sec 2(11)
"customs area" means the area of
a customs station and includes any area in
which imported goods or export goods are
ordinarily kept before clearance
by Customs Authorities.
Foreign- going vessel
Foreign-going vessel or aircraft" means any
vessel or aircraft for the time being engaged in the
carriage of goods or passengers between any port
or airport in India and any port or airport outside
India, whether touching any intermediate port or
airport in India or not, and includes –
(i) any naval vessel of a foreign Government
taking part in any naval exercises;
(ii) any vessel engaged in fishing or any other
operations outside the territorial waters of India;
(iii) any vessel or aircraft proceeding to a
place outside India for any purpose whatsoever;
Goods
“Goods" includes -
(a) vessels, aircrafts and vehicles;
(b) stores;
(c) baggage;
(d) currency and negotiable instruments; and
(e) any other kind of movable property;
Indian Customs Waters
"Indian Customs Waters" means the [waters
extending into the sea up to the limit of contiguous zone
of India under section 5 of the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976, (80 of 1976)] and includes
any bay, gulf, harbour, creek or tidal river;
 Officers of customs – Appointment, Functions
and powers:
(a) Chief commissioners of customs
(b) Commissioners of customs
(c) Commissioners of customs(appeals)
(d) Joint Commissioners of customs
(e) Deputy Commissioners of customs
(f) Assistant Commissioners of customs
(g) Such other class of officers of customs as
may be appointed for the purpose of the
customs act.
Functions of customs officers
1. Collection of duty
2. Enforcement of various provisions
3. Discharge of various agency functions
4. Prevention of smuggling
5. International passenger processing
Powers of Customs authorities
I. Appointment of customs ports, airports etc.
a. Customs ports and customs airports:
b. Inland container depots
c. Land customs stations
d. Routes
e. Coastal ports
II. Approval of Landing places and specifying limits
of customs area:
III. Powers to declare places to be warehousing
stations
IV. Appointment of boarding stations
 Levy and collection of customs duty
• Under Articles 246 of the constitution of India,
parliament has the exclusive power to enact laws
relating to customs duties. The levy of duties of
customs is regulated by the customs Act 1962 while
the rates of duties are fixed by the customs Tariff
Act,1975
• Taxable Event
– Goods become liable to import duty or export duty when
there is “ import into or export from India”
– Taxable event for Import duty
– Taxable event for export duty
– Levy of duty on imports and exports
 Different types of customs duties
• Basic customs duty- The rates range from 5% to 20% .
Is reduced to 10% by the Finance Act 2007.
• National Calamity contingent duty – it is imposed on
Pan masala, chewing tobacco and cigarettes. The rate
varies from 10% to 45% and 1% was imposed on
motor cars, Multiutility vehicles and two
• Special additional duty of customs
• Additional customs duty
• Protective duties
• Countervailing duty on subsidised goods
• Antidumping duty on dumped articles
 Classifications of goods
• Classification of imported/export goods is governed
by the Customs Tariff Act, 1975 which contains two
Schedules. The First Schedule specifies the
nomenclature that is based on the Harmonized
Commodity Description and Coding System generally
referred to as “Harmonized System” or simply “HS”,
developed by the World Customs Organization (WCO)
which is applied uniformly by more than 137
countries the world over. The Second Schedule
contains description of goods chargeable to export
duty. As the nomenclature also specifies the Customs
duty rates (Tariff), it is called the ‘Indian Customs
Tariff’ or ‘Tariff Schedule’.
 HSN Schedule of classification
• The new schedule is based on “Harmonised
Commodity description” which came into
effect of Feb 28th 1986. This HSN schedule
was developed by customs co-operation
council. HSN system is an internationally
adopted “ Nomenclature standard” used by
all the countries to ensure uniformity in
classification in International trade.
Feature of HSN Classification
• 1. Content of HSN
• 2. Multi-purpose Nomenclature
• 3. Pattern of HSN
• 4. Special Needs
Method of classification
• The principle of classification
• Principle for classification of parts
• Classification of goods in the sub-heading of a
heading
Date of Determination of rate of duty
1. For imported goods: sec 15(1)
The rate depends on the following factors
• Goods imported for home consumption
• Goods cleared from warehouse
• Any other goods
2. For Exported goods
Goods entered for export
In the case of other goods
 • Assessment of Duty
Section 17 of the customs Act deals with assessment of Duty.
1. Examining and Testing of goods:
2. Submission of documents
3. Methods of assessment of duty
First appraisement system
Second appraisement system or reassessment of duty
4. Assessment of duty where goods consist of articles liable to
different rates of duty
(a) Quantity based duty
(b) In the case of articles liable to duty with reference to value
(c) Value of any articles liable to different rates
(d) Accessories and spare parts
5. Reimportation of goods manufactured in India
METHODS OF CALCULATION OF CUSTOMS DUTY
• Transaction Value of Identical goods (Rule 5).: based on the
previously determined transaction value of identical goods, as
defined in the Valuation Rules (see Sub-Rule 2.1), imported at or
about the same time.
• Transaction Value of Similar goods (Rule 6).
• Deductive Value Method (Rule 7): based on the selling price of
imported goods or identical/similar goods in India after deducting
selling expenses, margin of profit, duties and taxes
• Computed Value Method (Rule 7 A):value is arrived at from the
cost of materials used in production of imported goods, cost of
fabrication or other processing charges at the country of
production, profit and general expenses, and other dutiable
factors as may be applicable under Rule 9
• Fallback Method (Rule 8):application of previous valuation
methods in a manner consistent with the provisions of Section
14(1)
ABATEMENT OF DESTORYED GOODS
• Before or during unloading
• By accident after unloading but before examination
for assessment by customs authorities
• By accident in warehouse before their actual
clearance from such warehouse
• Accident is not due to willful act, negligence or default
of the importer/his employee/agent.

CUSTOMS DUTY DRAWBACK

• The Duty Drawback Scheme seeks to rebate duty or
tax chargeable on any imported / excisable materials
and input services used in the manufacture of export
goods.
 Meaning of Duty Draw back
“ Draw back is relation to any goods manufactured in India
and exported means:
Rebate of duty chargeable: The rebate of duty chargeable on
any imported material or excisable material used in the
manufacture of such goods in India.
Rebate of duty of excise: The rebate of duty of excise
chargeable under the central excise Act
Drawback is equal to: Draw back implies duty relief or
repayment of duty paid in respect of any goods when they are
exported out of India or used in the manufacture of goods
that are exported out of India. Drawback is equal to-
Customs duty paid in imported inputs and:
Excise duty paid in indigenous inputs.
 Provisions relating to draw back
1. Drawback allowable on re-export of duty paid
goods (Sect 74)
Conditions for claiming duty drawback
(A) Entered for export
(B) Exported as baggage
(C) Exported by post

Amount of drawback of duty

98 % of the duty paid on the goods is repaid as
drawback.
2. Drawback in imported material used in the
manufacture of goods which are exported. (Sect
75)
Conditions for claiming duty drawback:
1. Manufactured or processed in India
2. Entered for export
3. Imported material
4. Export value to be not less than value of
imported materials
5. Sale proceeds to be received

Interest on drawback:
• Prohibition and regulation of draw back in
certain cases (sec 76)
Drawback shall not be allowed in respect of:
a) Goods the Market price of which is less than
the amount of drawback.
b) Goods where the drawback is less than fifty
rupees.
c) Goods which are likely to be smuggled back
to India.
• Procedure for claiming duty drawback
1. Filing of shipping bill
2. Declaration
3. Bill of Export
4. Passing of bill by Assistant Commissioner
5. Submission of “let Export order be given”
copy to the drawback department
6. Drawback claim
7. Crediting of exporter ‘s account.