BANGALORE UNIVERSITY – MBA 3 Semester

Chapter – 5 CUSTOMS ACT 1962

Customs Duties - Introduction

Customs Duty

Customs duty is a kind of indirect tax which is levied on goods of international trade. Duties
levied in relation to imported goods are referred to as import duty and duties levied on the export
goods are called export duty.

Background Concept

The ancient "custom" of gifting a part of his merchandise by a merchant to the King while
entering a kingdom came to be formalized by the modern States into customs duty. Customs duty
is imposed on the goods imported into or exported out of the country. Developing economies
including India use customs duties as an important source of revenue and also a method to
regulate the flow of goods.

Customs Administration

The Central Board of Indirect Taxes and Customs (CBIC) is the apex body for customs
administration. Central Board of Indirect Taxes and Customs (CBIC) is a part of the Department
of Revenue under the Ministry of Finance, Government of India. CBIC deals with the task of
formulation of policy concerning levy and collection of customs duties. The Board discharges
the various tasks assigned to it, with the help of its field formations namely the Customs,
Customs (Preventive) and Central Goods and Services Tax Zones, Commissionerates of
Customs, Commissionerates of Customs (Preventive), Commissionerates of Central Goods and
Services Taxes, Central Revenues Control Laboratory and Directorates. There are 11 zones of
Customs and Customs (Preventive) and 21 Central Goods and Services Tax Zones spread across
the country. These zones are headed by the Principal Chief Commissioners/ Chief
Commissioners. There are 57 Commissionerates exclusively of Customs, Customs (Preventive)
and Customs (Appeals), 205 Commissionerates of Central Goods and Services Tax, Central
Goods and Services Tax (Audit) and  Central Goods and Services Tax (Appeals) headed by
Principal Commissioners/ Commissioners.

Calculation of Customs Duty

Calculation of Customs duty depends on the determination of assessable value in case of

items for which the duty is levied ad valorem. The assessable value is often the transaction value
or the value assessed in accordance with Brussels definition. India is an active member of the
World Customs Organisation and has adopted various international customs conventions and
procedures, including the Harmonised Classification System and the General Agreement on
Tariffs and Trade (GATT) based Valuation System.

Harmonized System Code

 Products are given an identification code known as the Harmonized System Code for the
purpose of assessment of Customs duty. This code has been evolved and assigned by the World
Customs Organization based in Brussels. Introduction of HS Code in 1990s has largely replaced
the earlier Standard International Trade Classification (SITC), though SITC still remains in use
for statistical purposes. In drawing up the national tariff, the revenue departments often specify
the rate of Customs duty with reference to the HS Code of the product. In some countries and
customs unions, 6-digit HS codes are locally extended to 8 digits or 10 digits for further tariff
classification. Thus the European Union uses an 8-digit CN (Combined Nomenclature) and 10-
digit TARIC codes.

Customs Tariff of India

In India, the Customs Tariff was incorporated as Schedules to the Indian Tariff Act, 1934.
The First Schedule to this Act was the Import Tariff and the Second Schedule was the Export
Tariff. The Customs Tariff Act, 1975, with the above Schedules, came into effect on 2nd August,
1976. The Import Schedule was based on the Customs Co-operation Council Nomenclature,
which was also known as "Brussels Tariff Nomenclature" (BTN). Further, with effect from 28th
February, 1986, the above Tariff was revised based on the Harmonised System of Nomenclature
(HSN) adopted by the World Customs Organisation (WCO). The Harmonised System
Nomenclature (HSN) which is otherwise known as "Harmonised Commodity Description and
Coding System" was evolved by the World Customs Organisation and came into effect in the
Harmonised System Convention from 01.01.1988, i.e. almost two years later. During the period
and until 31st January, 2003, the Tariff consisted of 6 Digit code.

The Eight Digit Code

The Customs Tariff in India remained a 6 Digit Code aligned with the HSN during the period
from 28th February, 1986 to 31st January, 2003. However, the Directorate General of
Commercial Intelligence and Statistics (DGCIS) had evolved a 8 Digit Code for compilation of
imports/exports data and the Directorate General of Foreign Trade had adopted HSN based 8
Digit Code for the Foreign Trade Policy. Therefore, there had been a demand from the trade and
industry for the adoption of a common classification code for all trade related transactions.
Accordingly, on the 20th January, 2003 the Government of India promulgated the "Customs
Tariff (Amendment) Ordinance, 2003" making changes in the Customs Tariff Act with effect
from 1st February, 2003. Thus, the 6 digit code was replaced by the 8 digit classification code.
The Ordinance empowered the Government to bring changes in the First Schedule by
subordinate legislation and also to specify standard units of measurements against each Tariff
item. The Finance Act, 2006 brought further changes in the First Schedule. The New Schedule is
in force with effect from 1st January, 2007.

Types of Customs Duties

In India, customs duties are levied on the goods at the rates specified in the Schedules to the
Customs Tariff Act, 1975. The taxable event is import of goods into India or its export out of
India. Export duties as specified in the Second Schedule are levied on a very few items only. But
import duties are levied universally, barring a few items such as food grains, fertilizers, life
saving drugs and equipments, etc.

Basic Customs Duty (BCD)

This duty is levied on imported goods in terms of section 12 of the Customs Act, 1962, at the
rates prescribed under the First Schedule to the Customs Tariff Act, 1975 in terms of section 2 of
the Customs Tariff Act. The rates are either standard rates or in the case of imports from certain
specified countries at preferential rates.

Additional Customs Duty (CVD)

This duty, commonly referred to as countervailing duty (CVD), is levied on imported goods
in terms of section 3 of the Customs Tariff Act, 1975 and is equal to the Central Excise duty
leviable on the like goods if produced or manufactured in India. In cases where like article is not
so produced or manufactured in India, this duty will be at such rate which is leviable on the class
or description of articles to which the imported article belongs. If there is more than one rate of
excise duty, then the rate to be applied will be the highest. This duty is calculated on a value base
of aggregate of value of the goods including landing charges and basic customs duty. Other
duties such as anti-dumping duty, safeguard duty, additional customs duty of 4% etc. are not
taken into account. Except tobacco; manufactured tobacco substitutes; mineral fuels,
mineral oils and products of their distillation; bituminous substances; mineral waxes, this
duty has been subsumed in the IGST after the introduction of GST w.e.f. 01-07-2017.

In the case of goods covered by provisions of the Standards of Weights and Measures Act,
1976, the value base would be the retail sale price declared on the package of the goods less the
rebate as notified under section 4A of the Central Excise Act, 1944 for such goods. From
01.03.2001, packaged consumer goods are being charged to this duty on the basis of their
Maximum Retail Price (MRP) in India and are also required to conform to Bureau of Indian
Standards (BIS) quality standards and MRP labeling. This practice has been discontinued
after the introduction of GST w.e.f. 01-07-2017.

In the case of alcoholic liquors, the additional duty at present is chargeable at a uniform rate
as specified by the Central Government irrespective of varying rates in force in the States.

Special Additional Duty (SAD)

A 4% Special Additional Duty (SAD) under section 3(5) of the Customs Tariff Act, 1975 was
first imposed in the Union Budget 2005-2006 to counter balance various internal taxes like Sales
Tax and Value Added Tax (VAT) and to provide a level playing field to indigenous goods which
have to bear these taxes. This was extended in general to all goods in the Budget 2006-2007.
Manufacturers will be able to take credit of this additional duty for payment of excise duty on
their finished products. In the case of most of the items, this duty has been subsumed in
IGST after the introduction of GST w.e.f. 01-07-2017.

Preferential Rate of Duty (PRD)

 In the case of imports from certain specified countries at prescribed preferential rates.

National Calamity Contingent Duty (NCCD)

It is imposed at present @ Rs. 50/- per MT, on imported crude oil and @ 1% on polyester
filament yarn, two-wheelers, motor cars and multi-utility vehicles.

Anti-dumping duty / Safeguard Duty (ADD/ SD)

Anti-dumping duty or Safeguard duty is imposed on import of specified goods with a view to
protecting domestic industry from unfair injury. It would not apply to goods imported by a 100%
Export Oriented Units (EOU) and units in Free Trade Zone (FTZ) and Special Economic Zone
(SEZ). On export of goods, anti-dumping duty is rebatable only by way of a special brand rate of
drawback. Safeguard duties do not require the finding of unfair trade practice such as dumping or
subsidy on the part of exporting countries but they must not violate the most favoured nation
provision, that is, they should not discriminate between imports from different countries.
Provisional safeguard duty shall remain in force for a period not exceeding 200 days. Safeguard
action is resorted to only if it has been established that a sudden increase in imports has caused or
threatens to cause serious injury to the domestic industry. Safeguard action can restrict import of
a product for a temporary period by raising the tariffs.

Education Cess (EC)

In the Budget 2004-2005, an education cess on the customs duties had been levied on items
imported into India. It is chargeable @ 2%, on the aggregate of duties of customs (except
safeguard duty and anti-dumping duty) leviable on such goods. This came into effect on 9th July,
2004. No credit of this cess will be available. In addition to this, in the Budget 2007-2008, the
Central Government again imposed a Secondary and Higher Education Cess on goods specified
in the First Schedule to the Customs Tariff Act, 1975, being goods imported into India. The rate
of this cess is one per cent, calculated on the aggregate of duties of customs. If the goods are
fully exempted from duty or are chargeable to nil rate of duty or are cleared without payment of
duty under bond, no cess will be leviable. Imported goods are exempted from these cesses
w.e.f. 02-02-2018 as the Finance Bill, 2018 proposed to abolish the same.

Integrated Goods and Services Tax (IGST)

With effect from 01-07-2018, under the GST regime, Article 269A constitutionally mandates
that the supply of goods, or of services, or both in the course of import into the territory of India
shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or
commerce for levy of integrated tax. So import of goods or services are treated as deemed inter-
State supplies and subjected to Integrated tax. While IGST on import of services would be
leviable under the IGST Act, the levy of the IGST on import of goods would be levied under the
Customs Act, 1962 read with the Custom Tariff Act, 1975. The importer of services will have to
pay tax on reverse charge basis. However, in respect of import of online information and
database access or retrieval services (OIDAR) by unregistered, non-taxable recipients, the
supplier located outside India shall be responsible for payment of taxes. Either the supplier will
have to take registration or will have to appoint a person in India for payment of taxes. Supply of
goods or services or both to a Special Economic Zone (SEZ) developer or a unit shall be treated
as inter-State supply and shall be subject to levy of integrated tax.

Import of goods has been defined in the IGST Act, 2017 as bringing goods into India from a
place outside India. All imports shall be deemed as inter-State supplies and accordingly
Integrated tax shall be levied in addition to the applicable Custom duties. The IGST Act, 2017
provides that the integrated tax on goods imported into India shall be levied and collected in
accordance with the provisions of the Customs Tariff Act, 1975 on the value as determined under
the said Act at the point when duties of customs are levied on the said goods under the Customs
Act, 1962. The integrated tax on goods shall be in addition to the applicable Basic Customs Duty
(BCD) which is levied as per the Customs Tariff Act.

The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated
tax and the compensation cess on imported goods. Accordingly, goods which are imported into
India shall, in addition to the Basic Customs duty, be liable to integrated tax at such rate as is
leviable under the IGST Act, 2017 on a similar article on its supply in India. Further, the value of
the goods for the purpose of levying integrated tax shall be, assessable value plus Customs Duty
levied under the Act, and any other duty chargeable on the said goods under any law for the time
being in force as an addition to, and in the same manner as, a duty of customs.

GST Compensation Cess (GCC)

Under the GST regime, i.e. w.e.f. 01-07-2018, in addition to IGST, a GST compensation cess,
is also levied on certain luxury and demerit goods under the Goods and Services Tax
(Compensation to States) Cess Act, 2017.

The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated
tax and the compensation cess on imported goods. Accordingly, goods which are imported into
India shall, in addition to the Basic Customs duty, be liable to integrated tax at such rate as is
leviable under the IGST Act, 2017 on a similar article on its supply in India. Further, the value of
the goods for the purpose of levying integrated tax shall be, assessable value plus Customs Duty
levied under the Act, and any other duty chargeable on the said goods under any law for the time
being in force as an addition to, and in the same manner as, a duty of customs.

The value of the imported article for the purpose of levying cess shall be, assessable value
plus Basic Customs Duty levied under the Act, and any sum chargeable on the goods under any
law for the time being, in force as an addition to, and in the same manner as, a duty of customs.
The integrated tax paid shall not be added to the value for the purpose of calculating cess.

Social Welfare Surcharge (SWS)

Finance Bill, 2018 while abolishing the Education Cess and Secondary and Higher Education
Cess on imported goods w.e.f. 02-02-2018, imposed a Social Welfare Surcharge, at the rate of
10% of the aggregate duties of Customs, on imported goods, to provide for social welfare
schemes of the Government. Goods which were hitherto exempted from Education Cesses are
exempted from this Surcharge also. In addition, certain specified goods, attract the Surcharge at
the rate of 3% of the aggregate duties of customs only.

Road and Infrastructure Cess

An additional duty of customs, called the Road and Infrastructure Cess, on the specified
imported goods for the purpose of financing infrastructure projects has been introduced w.e.f.
02-02-2018. This additional duty of customs is in addition to other duties of customs chargeable
on scheduled goods under the Customs Act, 1962 or any other law for the time being in force.

Sample Duty Calculation

How to calculate customs duty payable on the imported goods?

Case 1. Where product attracts IGST Case 2. Where product does not attract CVD but
but not CVD attract IGST as well as compensation cess
Assessable
A. Rs. 1,00,000 A. Assessable Value: Rs. 1,00,000
Value:
BCD @10% of
B. Rs. 10,000 B. BCD @10% of A Rs. 10,000
A
SWS @ 10% of
C. Rs. 1,000 C. SWS @10% of B Rs. 1,000
B
IGST @12% of IGST @ 12% of
D. Rs. 13,320 D. Rs. 13,320
A+B+C A+B+C
Total Duty Compensation Cess
E. Rs. 24,320 E. Rs. 11,100
(B+C+D) @10% of A+B+C
Effective Rate of
F. 24.32% F. Total Duty (B+C+D+E) Rs. 35,420
Duty
      H. Effective Rate of Duty 35.42%
Case 3. Where product attract both Case 4. Where product attract CVD, IGST&
CVD & IGST Compensation cess
Assessable
A. Rs. 1,00,000 A. Assessable Value: Rs. 1,00,000
Value:
BCD @10% of
B. Rs. 10,000 B. BCD @10% of A Rs. 10,000
A
CVD @12% of
C. Rs. 13,200 C. CVD @12% of A+B Rs. 13,200
A+B
SWS @ 10% of
D. Rs. 2,320 D. SWS @10% of B+C Rs. 2,320
B+C
IGST @12% of IGST @ 12% of
E. Rs. 15,062 E. Rs. 15,062
A+B+C+D A+B+C+D
Total Duty Compensation Cess
F. Rs. 40,582 F. Rs. 14,058
(B+C+D+E) @10% of A+B+C+D+E
G. Effective Rate of 40.58% G. Total Duty Rs. 54,640
 Duty (B+C+D+E+F)
      H. Effective Rate of Duty 54.64%
Source: Guidance Note for Importers and Exporters issued by the CBIC.
    Old Method Before GST
A. Assessable Value: Rs.1,00,000 Rs.1,00,000
B. BCD @7.5% of A Rs. 7,500 Rs. 7,500
C. Total of A+B Rs.1,07,500 Rs.1,07,500
D. CVD @ 16% of C Rs. 17,200 Rs. 17,200
E. E/Cess @2% of D Rs. 344 Rs. 0
F. HSE/Cess @1% of D Rs. 172 Rs. 0
G. Total of B+D+E+F Rs. 25,216 Rs. 24,700
H. E/Cess @2% of G Rs. 504 Rs. 494
I. HSE/CESS @1% of G Rs. 252 Rs. 247
J. Total of G+H+I Rs. 25,972 Rs. 25,441
K. SAD @4% of A+J Rs. 5,039 Rs. 5,018
L. Total Duty (J+K) Rs. 31,011 Rs. 30,459
M. Effective Rate of Duty 31.011% 30.459%

Customs Clearance Procedure in India

Import and export of goods into and outside a country should undergo a customs clearance
process. The importer and exporter of the goods should submit valid documents to clear this
process. In this article, we look at some of the major steps and processes in clearing customs in
India.

Calling of Vessels

Once the vessels carrying the goods reaches the country, the person who carried the vessels
should make sure that the calling of vessels is done at the customs port. For instance, if goods are
imported via aircraft, the pilot is responsible for call of the vessels at the customs airport. There
is no requirement for the importer to get involved in this process and will be done by the airline
or shipping line.

Filing Import General Manifest (IGM)

The person-in-charge of the vehicle should file an Import General Manifest electronically before
the goods arrive. This file would include the details of all the goods imported by the vessel. 

Post Verification Operations

On review of the Import General Manifest and post verification of documents, the customs
authorities will grant entry inwards to the vessel, assign an IGM number to the manifest and
permit the master of the vessel to land and unload the cargo.

Custody of Custodian

On arrival of the vessel, the goods would remain in the custody of the Custodian until it clears
the customs process. A custodian may be a person approved by Principal Commissioner or
Commissioner of Customs for this purpose. Imported goods can be unloaded subject to the
following conditions:

 A note to unload the goods should be mentioned on the manifest report.

 Could be unloaded only at the approved places in the customs port.
 Under the supervision of the approved authorities.
 Should be unloaded only during working hours.

Filing Bill of Entry

The importer of the goods should file a bill of entry (customs copy) electronically for the
clearance of the goods, before or on arrival of the goods. In the bill of entry, the duty and taxes to
be paid is assessed by the importer himself and this is called self- assessment.  The importer will
self-assess the duty after considering the applicable rate of exchange and the rate of import duty.
On approval of the Bill of Entry, the importer has to pay the GST and duty which will be entered
in the Indian Customs Electronic Date Interchange System (ICEDIS). Once it is entered in
ICEDIS, a bill of entry number will be generated.
The importer should then submit the bill of entry (customs copy), the duty-paid challan and other
supporting documents to the port authorities for making an order permitting clearance. After
making an order permitting clearance, the port officer would generate duplicate bill of entry
(importer’s copy)  and triplicate bill of entry (exchange control copy). Both the copies will be
handed over to the authorized person later.

Know more about GST on Imports and GST Bill of Entry.

Delivery of Goods

On showing the customs clearances to the port authorities, the importer can take the delivery of
his goods. In case of cargo deposited in a warehouse, the importer would another bill of entry
called the ex-bond bill of entry to clear the whole or part of the warehoused cargo.

LEVY AND COLLECTION OF DUTY

What is Customs duty?

What are the different types of rates of duties of Customs ?
What are the different kinds of duties of Customs levied on imported goods? What
is the authority to levy and collect duties of Customs on imported goods?
What is meant by special duty of customs?
What is Surcharge?
What is the additional duty of customs? What is the authority to levy it on
imported goods?
What is the Foreign Exchange Rate applied to the value of Invoice?
How to compute the duty amount in respect of imported goods?
What is the rate of duty applicable to a home consumption Bill of entry?
How do you compute the value for the purpose of charging duty on imported
goods?
What are Stevedoring Charges? Are these charges to be added to the assessable
value for the purpose of charging duty?
In case the Importer is aggrieved can he pay the duty under protest? If so what are
the advantages?
What is meant by effective rate of duty?

Q.1 What is Customs duty?

 
A Customs duty is the duty charged on goods on their importation into India or exportation
out of India.
 

  Q.2 What are the different types of rates of duties of Customs ?

 
A There are two types of rates of duty of Customs:
 
1.                    Ad valorem rate i.e., the duty is charged on the basis of value.
2.                    Specific rate i.e., on the basis of quantity/number/ volume/ weight.
 

  Q.3 What are the different kinds of duties of Customs levied on imported goods? What is the
authority to levy and collect duties of Customs on imported goods?
 
A.                  Different kinds of duties of customs levied on imported goods are
 
(i)                  Basic Customs Duty
(ii)                Surcharge
(iii)               Additional duty of customs
(iv)              Special additional duties
(v)                Additional levies like Countervailing duty, Anti
dumping duty,
Safe guard duty etc.,
In addition, cess duty is leviable on certain goods.
 
Section 12 of the Customs Act, 1962 authorises the Customs Officers to levy and collect
these duties
 

 Q.4 What is meant by special additional duty of customs?

 
A Special additional duty is specified under Section 3A of the Customs Tariff Act, 1975.
The amount of Special Additional duty is computed by applying this rate on value, which
is equal to the total of the assessable value, the basic customs duty and the additional duty
of customs described above.
 
  Q.5 What is the additional duty of customs? What is the authority to levy it on imported
goods?
 
A Additional duty of customs equal to the, excise duty leviable on like goods produced or
manufactured in India. This is levied under Section 3 of Customs Tariff Act, 1975. This
is usually referred to as "countervailing duty" (CVD). However, the correct description of
this duty is Additional Duty of Customs. In order to determine the applicable rate, you
have to obtain the correct classification of the goods under the Central Excise Tariff Act,
1986. The duties under the Central Excise Tariff are on ad valorem basis. However,
specific rates have been prescribed for some items. Importantly, the value for the purpose
 of computing additional duties of  Customs is the total of the assessable value (generally
the transaction value - roughly equal to the c.i.f. value) and the basic customs duty.
If you are a manufacturer, importing goods to be used as inputs for manufacture of other
goods, you would be generally eligible for obtaining credit (called CENVAT credit)
equal to the additional duty of customs paid on the imported goods. This duty amount is
eligible for credit under input duty Central Excise Rules, 1944. This credit can be used
for paying central excise duties on your manufacture.
 
Q.6 What is Surcharge?
A Surcharge  at the rate of 10% of the Basic Customs Duty is leviable on imported goods
under Section 90 of the Finance Act, 2000 ( unless exempted by a notification).

  Q.7 How to compute the duty amount in respect of imported goods?

A. Under the Custom Tariff Act, 1975 and other laws, there are various types of duties,
which are leviable. As a first step, the following three types of customs duties have to
computed:-
(i) Duty which is specified against each Heading or Sub-Heading in the First Schedule to
the Customs Tariff Act, 1975. This is usually referred to as Basic Customs Duty. There
are different rates of duty for different commodities. You may find these rates in column
no. 4 (labeled as "standard rates") of the tariff. There is also a 5 th column specifying the
"preferential rates". These are different rates of duty for goods imported from certain
countries in terms of bilateral or other agreements with such countries--which are called
preferential rates of duties. The duty may be a percentage of the value of the goods ( in
such cases it is called ad valorem duty) or at a specific rate, which is based on unit of
measurement which is specified in the tariff entry. The rate of duty in percentage (in the
case of advalorem duties) has to be applied on the Cost Insurance and Freight
(ii)  A Surcharge  at the rate of 10% of the Basic Customs Duty is leviable on imported
goods under Section 90 of the Finance Act, 2000 ( unless exempted by a notification).
(iii) Additional duty of customs equal to the, excise duty leviable on like goods
produced or manufactured in India. This is levied under Section 3 of Customs Tariff
Act, 1975. This is usually referred to as "countervailing duty" (CVD). However, the
correct description of this duty is Additional Duty of Customs. In order to determine the
applicable rate, you have to obtain the correct classification of the goods under the
Central Excise Tariff Act, 1986. The duties under the Central Excise Tariff are on ad
valorem basis. However, specific rates have been prescribed for some items. Importantly,
the value for the purpose of computing additional duties of  Customs is the total of the
assessable value (generally the transaction value - roughly equal to the c.i.f. value) and
the basic customs duty.
If you are a manufacturer, importing goods to be used as inputs for manufacture of other
goods, you would be generally eligible for obtaining credit (called CENVAT credit)
equal to the additional duty of customs paid on the imported goods. This duty amount is
eligible for credit under input duty Central Excise Rules, 1944. This credit can be used
for paying central excise duties on your manufacture.
(iv) Imported goods are also liable to a Special additional duty at a rate specified in
Section 3A of the Customs Tariff Act, 1975. The amount of Special Additional duty is
 computed by applying this rate on value which is equal to the total of the assessable
value, the basic customs duty and the additional duty of customs described above.
(3) Additional Levies
 
Having computed the above mentioned duties, you have to determine whether there are
any additional levies on the particular items you intend to import. Some of the levies are
commodity specific and would be applicable regardless of the time of import.  These
include cesses under various enactments as also Additional Duties on specified
commodities.
 
 There are certain other levies which are specific to the country of origin. Please consider
the following levies.
Countervailing Duty on bounty-fed articles is leviable under Section 9, of the Customs
Tariff Act 1975. No such duty is however, being levied at present.
Anti-dumping Duty (under Section 9A, Customs Tariff Act 1975) on specified goods
imported from specified countries to protect indigenous industry from injury resulting
from dumping of goods. This is notified and published from time to time.
Safeguard Duty (under Section 8B of the Customs Tariff Act, 1975) is applicable on
certain goods at the time of import for specified periods in order to check their excessive
imports, which may be injurious to the Indian industry.
4.  Exemptions:
These exemptions and concessions can be granted in a number of ways.
Some of these exemptions are briefly discussed below: -
Exemption by Notification: The Central Government may notify by publication in the
Official Gazette certain exemptions and concessions. Such exemptions or concessions
may be conditional or absolute. There are general exemptions given to a variety of items
imported under certain conditions These include exemption of imports for promotion of
exports, import by UN bodies, defence imports etc.,.. There are also exemptions which
are unconditional and are applicable across the board. There are other exemptions based
on conditions of end use.
Preferential Rates : Preferential rates of customs duty have been made applicable in
respect of imports from certain countries such as Sri Lanka, Mauritius, Seychelles and
Tonga provided certain conditions are satisfied. The goods in question must actually be
manufactured or produced in such preferential areas. Rules have been framed in order to
determine whether the goods have been manufactured or produced in such areas.
Determination of origin of the goods is very essential in order to avail of the benefits of
such concessional rates of duty.
 
  Q.8 What is the Foreign Exchange Rate applied to the value of Invoice?
 
A The rate of exchange applicable is the rate in force on the date on which a Bill of entry
(Whether it is home consumption Bill of entry or Bill of entry for warehousing) is
presented under Section 46 of the Customs Act 1962. The same exchange rates are
applicable to the Ex-bond bill of entry filed for clearing the goods for home consumption
form the bonded warehouse. The exchange rates are notified by the Central Government
by issue of notifications from time to time.
 
 
Q.9 What is the rate of duty applicable to a home consumption Bill of entry?
 
A The rate of duty applicable is the rate prevailing on the date of presenting the Bill of entry
in the Customhouse. However, in the case of Bills of entry filed before the date of entry inwards
of the vessel, the arrival of the aircraft the rate of duty applicable is the rate prevailing on the
date of entry inwards or arrival as the case may be (Section 15(1) (a) of the Customs Act 1962).
 
Note: Granting of entry inwards means permitting the unloading of goods from the vessel
by the proper officer of customs.
 

  .10 How do you compute the value for the purpose of charging duty on imported goods?
 
A. CIF value (Cost, insurance and freight) and landing charges s the normal basis. In
addition, any royalty or service charges etc. paid or payable by the importers are also to be
added. Value for the purpose of charging duty on imported goods determined under Section14
of the Customs Act 1962 read with Customs valuation (Determination of Prices of Imported
Goods) rules, 1988. The actual landing charges or at the prescribed rate are also to be added. If
the invoice shows the clue of FOB ( Free on Board) actual freight and insurance charges have to
be added if the import is by Sea. In the absence of actual charges, notional charges at 20% on
FOB value as fixed by the Government have to be added. However, in the case of certain bulk
cargos where freight is more than FOB value, the actual freight has to be added. In the case of
import by Air when the invoice value is FOB, actual freight and insurance or notional freight
(20% of FOB presently) and notional insurance (1,125 % of FOB presently), whichever is less
are added to the FOB value. This becomes CIF clue arrived at by adding all these elements is
known as “Assessable Value”. Basic customs duty is leviable on such assessable value.  
  
Q.11 What are Stevedoring Charges? Are these charges to be added to the assessable value for
the purpose of charging duty?
 
A. Stevedoring charges are the charges incurred for unloading the goods from ship hold to
wharf. These charges are treated as forming part of the freight and are to be added to the value
for the purpose of charging duty on imported goods. This contingency arises only when the
carrier does not include these charges in the Freight Bill.
 
Q.12 In case the Importer is aggrieved can he pay the duty under protest? If so what are the
advantages?
 
A When the importers do not agree with the assessment made in the Bill of entry respect of
classification/valuation/rate of duty etc., they may pay the duty ‘under protest’ as
provided for the Section 27 of the Customs Act 1962. In such cases the importers
should indicate the reasons in writing for such protest, which will be registered by the
customs officers and intimated to the Importers. The advantage of paying the duty under
 protest is that in such cases the time stipulated in Section 27 of customs Act, 1962 to
prefer refund claim shall not apply.
 
Q.13 What is meant by effective rate of duty?
 
The statutory or the highest rate of duty is specified in the Tariff Schedules for each of
the articles. The rate of duty so specified may be reduced by issue of exemption
notifications. For computing the amount of duty payable, the rate of duty indicated in the
exemption notification has to be taken. Such rate is commonly known as ‘Effective rate
of duty’. If the exemption notification imposes any conditions, the reduced rate of duty is
applied subject to fulfillment of the conditions laid down therein.