Customs Law.

General Concept and Definitions

Definitions:
“Import” with its grammatical variations and cognate
expressions, means bringing into India from a place
outside India - 2(23)
“imported goods” means any goods brought into India
from a place outside India but does not include goods
which have been cleared for home consumption– 2(25)
“India” includes the territorial waters of India - 2(27)
“Indian Customs Waters” means the waters extending
into the sea upto 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 and includes any bay, gulf, harbour,
creek or tidal river –2(28) jurisdiction of the Act

“Goods” includes-
(a) vessels, aircrafts and vehicles;
(b) stores;
(c) baggage;
(d) currency and negotiable instruments; and
 (e) any other kind of movable property 2(22)

“Bill of Entry” means a Bill of Entry referred to in

Section 46 -2(4)

Levy of duty
Section 12. Dutiable goods
(1) Except as otherwise provided in this Act, or any
law for the time being in force, 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
India is presently following the provisions of the WTO
Agreement on Customs Valuation (ACV) for
determination of value on imported goods where
Customs duty is levied with reference to value (ad-
valorem rates).

India is a founding Member of the GATT (presently

WTO) and was actively involved in the GATT
negotiations (Tokyo Round, 1973-79), which developed
the Agreement on Customs Valuation (ACV). India
implemented the ACV in August 1988.
A common valuation law at international level applies
only to imported goods and its basic principles are laid
down in Article VII of General Agreement on Tariffs
and Trade (GATT), 1948, currently known as GATT
1994 (administered by the World Trade organization,
WTO).

The Indian valuation law under Section 14(1) of the

Indian Customs Act is based on the principles of Article
VII of the GATT.
The Agreement on Customs Valuation (ACV), which
came into force on 1st January 1981, lays down well
defined methods of valuation to be strictly followed so
as to ensure uniformity and certainty in valuation
approach and to avoid arbitrariness.
Section 2(41) of the Customs Act, 1962 defines ‘Value’
in relation to any goods to mean the value thereof
determined in accordance with the provisions of sub-
section (1) of Section 14 thereof.
Section 14
- (1) For the purposes of the Customs Tariff Act,
1975 , or any other law for the time being in force,
the value of the imported goods and export goods shall
be the transaction value of such goods, that is to say, the
price actually paid or payable for the goods when sold
for export to India for delivery at the time and place of
importation
or as the case may be , for export from India for
delivery at the time and place of exportation,where the
buyer and seller of goods are not related and price is the
sole consideration for the sale subject to conditions as
may be specified in the rules made in this behalf
Provided that such transaction value shall include, in
addition to the price, any amount paid or payable for
costs and services, including commissions and
brokerage, engineering, design work, royalties and
licence fees, costs of transportation to the place of
importation, insurance, loading, unloading and handling
charges to the extent and in the manner specified in the
rules in this behalf
Provided further that the rules in this behalf may
provide for:
The circumstances in which the buyer and seller are
deemed to be related
The manner of determination of value when there is no
sale or the buyer and seller are related or price is not the
sole consideration for sale or in any other case, the
manner and acceptance or rejection of value declared by
the importer or exporter , where the proper officer has
reason to doubt the truth and accuracy of of such value,
and determination of value for the purpose of this
section.
Provided also that such price shall be calculated with
reference to the rate of exchanges as in force on the date
on which a bill of entry is presented under section 46, or
a shipping bill or bill of export, as the case may be, is
presented under section 50;
(2) Notwithstanding anything contained in sub-section
(1), if the Board is satisfied that it is necessary or
expedient so to do it may, by notification in the Official
Gazette,
fix tariff values for any class of imported goods or
export goods, having regard to the trend of value of
such or like goods, and where any such tariff values are
fixed, the duty shall be chargeable with reference to
such tariff value.
Explanation - For the purposes of this section-
(a) "rate of exchange" means the rate of exchange-
(i) determined by the Board , or
(ii) ascertained in such manner as the Board may
direct, for the
conversion of Indian currency into foreign currency of
foreign currency into Indian currency;
(b) foreign currency" and "Indian currency" have the
meanings respectively assigned to them in the Foreign
Exchange Management Act, 1999 .

Taxable Event in Customs.

Case Laws

1. Bharat Surfactants (Pvt.) Ltd., v. Union of

India“ AIR 1989 SC 2054

Customs Act
S.15(1), Proviso - CUSTOMS - Import duty - Rate of -
Determination - Relevant date - Import for home
consumption –
It is date on which Bill of Entry is presented - Bill of
entry, however, presented before date of entry inwards
of vessel - Bill of Entry is deemed to have been
presented on date of entry inwards.
15. Date for determination of rate of duty and tariff
valuation of imported goods:
(1) The rate of duty and tariff valuation, if any,
applicable to any imported goods, shall be the rate and
valuation in force,-
(a) in the case of goods entered for home consumption ,
on the date on which a bill of entry in respect of such is
presented under that section;

(b) in the case of goods cleared from a warehouse , on

the date on which the goods are actually removed from
the warehouse;

(c) in the case of any other goods, on the date of

payment of duty:
Provided that if a bill of entry has been presented before
the date of entry inwards of the vessel or
the arrival of the aircraft by which the goods are
imported, the bill of entry shall be deemed to have been
presented on the date of such entry inwards or the
arrival, as the case may be.

(2) The provisions of this section shall not apply to

baggage and goods imported by post

The petitioners entered into a contract with foreign

sellers for the supply of edible oils. The consignment of
edible oils was sent by the ocean going vessel which
arrived and registered in the Port of Bombay on 11 July,
1981.
Port Authorities at Bombay were unable to allot a berth
to the vessel, and as she was under heavy pressure from
the parties whose goods she was carrying she left
Bombay for Karachi for unloading other cargo intended
for that port.

The vessel set out on its return journey from Karachi

and arrived in Bombay port on 23 July 1981 and
waited for a berth.
On 4 August, 1981 she was allowed to berth and the
Customs Authorities made the" final entry" on that date.
The petitioners point out that when the vessel made its
original journey to Bombay and was waiting in the
waters of the Port , the petitioners presented the Bill of
Entry to the Customs Authorities on 9 July 1981, that
the Bill of Entry was accepted by the Import
Department and an order was passed by the Customs
Officer on the Bill of Entry on 18 July 1981 directing
the examination of the consignment.

It is stated that the Customs Authorities have imposed

customs duty on the import of the edible oils at the he
rate of 150 per cent on the footing that the import was
made on 31 July 1981, the date of "'Inward Entry".

The case of the petitioners is that the rate of duty

leviable on the import should be that ruling on 11 July
1981, when the vessel actually arrived and registered in
the Port of Bombay, and that but for the fact that a berth
was not available the vessel would have discharged its
cargo at Bombay and would not have left that Port and
proceeded to Karachi to return to Bombay towards the
end of July 1981.

The rate of duty and tariff valuation applicable to the

imported goods is governed by Cl. (a) of S. 15(l). In the
case of good,, entered for home consumption under S.
46. it is the date on which the Bill of Entry in respect of
such goods is presented under that section. S. 46
provides that the importer of any goods shall make
entry thereof by presenting to the proper officer a Bill
of Entry for home consumption in the prescribed form,
and it is further provided that a Bill of Entry may be
presented at any time after delivery of the Import
Manifest or an Import Report.

The Bill of Entry may be presented even before the

delivery of such Manifest if the vessel by which the
goods have been shipped for importation into India is
expected to arrive within a week from the date of such
presentation.

S. 47 empowers the proper officer, on being satisfied

that the goods entered for home consumption are not
prohibited goods and that the importers had paid the
import duty assessed thereon as well as charges in
respect of the same, to make an order permitting
clearance of the goods for home consumption.

According to the petitioners, the cargo of edible oil

could not be unloaded in Bombay during the original
entry of the ship into the Port for want of an available
berth, and it is for no fault of the petitioners that the
vessel had to proceed to Karachi for unloading other
cargo.
S. 15, the petitioners contend, is arbitrary and vague and
therefore unconstitutional because it provides no
definite standard or norm for determining the rate of
duty and tariff valuation and does not take into account
situations which are uncertain and beyond the control of
an importer.
The petitioners contend that the rate of customs duty
chargeable on the import of goods in India is the rate in
force on the date when the vessel carrying the goods
enters the territorial waters of India.

The petitioners point out that S. 12(l) declares that

customs duty will be levied at the rates in force on
goods imported into India, and the expression 'India',
they urge, is defined by S. 2(27) as including the
territorial waters of India. In other words, the petitioners
contend that when the vessel entered the territorial
waters on 11 July, 1981 the rate of customs duty at 12.5
percent ruling on that date was is the rate which was
attracted to the import.

In any event, the petitioners contend, the rate should not

have been more than 42.5 per cent because that, was the
rate of customs duty ruling on 23 July, 1981 when the
vessel entered the port of Bombay.

To preserve the validity of S. 15 the petitioners urge, we

must read the expression "the date of entry inwards" in
the proviso to, S. 15(l) as the date on which the vessel
enters the territorial waters of India.

The rate of duty and tariff valuation has to be

determined in accordance with S. 15(l) of the Customs
Act.
Under S.15(l)(a), the rate and valuation is the rate and
valuation in force on the date on which the Bill of Entry
is presented under S. 46.
According to the proviso, however, if the Bill of Entry
has been presented before the entry inwards of the
vessel by which the goods are imported, the Bill of
Entry shall be deemed to have been presented on the
date of such entry inwards.
In the present case the Bill of Entry was presented on 9
July, 1981.
Question which arises for consideration is :
What is "the date of entry inwards" of the vessel?

In M/s. Omega Insulated Cable Co. (India) Limited v.

The Collector of Customs, the Madras High Court
addressed itself to the question whether the words in S.
15(l)(a) of the Act. viz. "date of entry inwards of the
vessel by which the goods are imported"' mean "the
actual entry of the vessel inwards or the date of entry in
the Register kept by the department permitting the entry
inwards of the vessel".
It was held that the date of entry inward for the purpose
of S.. 15(l)(a) and the proviso thereto is the date when
the entry is made in the Customs Register.

Held that
"the date of entry inwards of the vessel" is the date
recorded as such in the Customs register.
In the present case, "the date of inwards entry" is
mentioned as 31 July, 1981. In the absence of anything
else, it may be assumed that the entry was recorded on
that date itself.
Accordingly, the rate of import duty and the tariff
valuation shall be that in force on 31 July, 1981.

AIR 2000 SUPREME COURT 3448 "Kiran Spinning

Mills v. Collector of Customs"

The appellants had, between 4th of April, 1977 and

20th September, 1978 imported acrylic polyster fibre.
The imported articles were placed in the bonded
warehouse after they had landed in India.
3. On 3rd of October, 1978. The Additional Duty of
Excise (Textiles and Textile Articles) Ordinance, 1978
was promulgated which came into force w.e.f. 19th
October, 1978. In terms of the Ordinance articles were
charged with an additional duty of excise equal to 10
per cent of the basic excise duty payable on such
articles under the Central Excise and Salt Act, 1944

The articles which were imported by the appellants

were cleared from the bonded warehouse after 4th
October, 1978. The Customs Authorities demanded an
additional duty at the rate of 10 per cent 'under the
aforesaid Ordinance. The appellants paid the amount
demanded under the protest but thereafter filed an
application for refund of the amount so paid. After
being unsuccessful before the Authorities under the Act
and the Tribunal the appellants have come up in appeals
to the SC.

It is contended by the appellants

that at the time when the goods were imported into
India the Ordinance had not been promulgated and no
additional duty of excise was payable on like articles.
Thereafter, additional duty under Section 3 of the Tariff
Act could not be imposed.
The contention was that at the time when the goods had
landed in India additional duty of excise was not
payable on a similarly manufactured goods in India
even if they were placed in a bonded warehouse in India
and, therefore, no additional duty could be charged
under the Excise Act similarly under Section 3 of the
Tariff Act, no additional duty should be charged.

Held that
Section 15 of the Customs Act , provides that the rate
of duty which will be payable would be on the day
when the goods are removed from the bonded
warehouse.

That apart, the SC has held in Sea Customs Act,

(1964) 3 SCR 787
“that in the case of duty of customs the taxable event is
the import of goods within the customs barriers. In
other words, the taxable event occurs when the customs
barrier is crossed. In the case of goods which are in the
warehouse the customs barriers would be crossed when
they are sought to be taken out of the customs and
brought to the mass of goods in the country.
Admittedly this was done after 4th of October, 1978. As
on that day when the goods were so removed additional
duty of excise under the said Ordinance was payable on
goods manufactured after 4th October, 1978

It is not possible to accept the contention that what has

to be seen is whether additional duty of excise was
payable at the time when the goods landed in India or
they had crossed into the territorial waters.
Import being complete, when the goods entered the
territorial waters is the contention which has already
been rejected by the SC in Union of India v. Apar
Private Ltd. : AIR 1999 SC 2515.

The import would be completed only when the goods

are to cross the customs barriers and that is the time
when the import duty has to be paid and that is what has
been termed by this Court in In Re : The Bill to amend
Section 20 of the Sea Customs Act (1964) 3 SCR 787,
as being the taxable event.

The taxable event, therefore, being the day of crossing

of customs barrier, and not on the date when the goods
had landed in India or had entered the territorial waters,
we find that on the date of the taxable event the
additional duty of excise was leviable under the said
Ordinance and, therefore, additional duty under Section
3 of the Tariff Act was rightly demanded from the
appellants.

Ratio is
- that import would commence when the goods
cross into territorial waters but is completed only when
the goods become part of the mass of goods within the
country.
- Taxable event when goods reach customs barriers
and that is the time when bill of entry is filed – as per
section 15.

2. Kiran Spinning Mills v. Collector of Customs

AIR 2000 Supreme Court 3448
Taxable event is day of crossing of customs barrier, and
not on the date when the goods had landed in India or
had entered the territorial waters - Warehoused goods
imported between April 1977 and September, 1978 -
Customs barrier is crossed on date when they are sought
to be taken out of customs and brought to mass of
goods in the country - Goods crossed customs barrier
after 4th Oct, 1978 - On said date additional duty of
exercise was leviable under Additional Duty of Excise
(Textiles and Textile Articles) Ordinance which came
into force w.e.f. 19th Oct, 1978 - Levy of additional
duty in terms of ordinance,

The short question that arises for consideration relates

to the levy of additional duty under the Customs Tariff
Act, 1975.
The appellants had, between 4th of April, 1977 and
20th September, 1978 imported acrylic polyster fibre.
The imported articles were placed in the bonded
warehouse after they had landed in India.
On 3rd of October, 1978.
The Additional Duty of Excise (Textiles and Textile
Articles) Ordinance, 1978 was promulgated which
came into force w.e.f. 19th October, 1978. In terms of
the Ordinance articles were charged with an additional
duty of excise equal to 10 per cent of the basic excise
duty payable on such articles under the Central Excise
and Salt Act.
Correspondingly under the Customs Tariff Act, 1975
additional duty on such articles which were imported
became payable equivalent to the additional excise duty
levied under the said Ordinance.
The articles which were imported by the appellants
were cleared from the bonded warehouse after 4th
October, 1978.
The Customs Authorities demanded an additional duty
at the rate of 10 per cent 'under the aforesaid Ordinance.
The appellants paid the amount demanded under the
protest but thereafter filed an application for refund of
the amount so paid.
After being unsuccessful before the Authorities under
the Act and the Tribunal the appellants have come up in
appeals in this Court.
Contention of the appellants.

At the time when the goods were imported into India

the Ordinance had not been promulgated and no
additional duty of excise was payable on like articles.
Thereafter, additional duty under the Customs Tariff
Act could not be imposed.
The contention was that at the time when the goods had
landed in India additional duty of excise was not
payable on a similarly manufactured goods in India
even if they were placed in a bonded warehouse in India
and, therefore, no additional duty could be charged
under the Excise Act similarly under Section 3 of the
Tariff Act, no additional duty should be charged.
Reasoning of the Court.
In Hyderabad Industries Ltd. v. Union of India, (1999)
4 JT (SC) 95 : it was laid down that for the purpose of
levy of additional duty, Section 3 of the Tariff Act is a
charging section which makes the provisions of the
Customs Act applicable.
This would bring into play the provisions of Section 15
of the Customs Act which, inter alia, provides that the
rate of duty which will be payable would be on the day
when the goods are removed from the bonded
warehouse.
That apart, in Sea Customs Act, (1964) 3 SCR 787 it
was laid down that in the case of duty of customs the
taxable event is the import of goods within the customs
barriers. In other words, the taxable event occurs when
the customs barrier is crossed.
In the case of goods which are in the warehouse the
customs barriers would be crossed when they are sought
to be taken out of the customs and brought to the mass
of goods in the country.
This was done after 4th of October, 1978.
As on that day when the goods were so removed
additional duty of excise under the said Ordinance was
payable on goods manufactured after 4th October,
1978.
It is difficult to accept the contention that what has to
be seen is whether additional duty of excise was
payable at the time when the goods landed in India or
they had crossed into the territorial waters.
In Union of India v. Apar Private Ltd. AIR 1999 SC
2515 it was laid down that import is not complete,
when the goods entered the territorial waters of India.
The import would be completed only when the goods
are to cross the customs barriers and that is the time
when the import duty has to be paid and that is what has
been termed as being the taxable event.
The taxable event, therefore, will be the day of
crossing of customs barrier, and not on the date when
the goods had landed in India or had entered the
territorial waters.
On the date of the taxable event the additional duty of
excise was leviable under the said Ordinance and,
therefore, additional duty under Section 3 of the Tariff
Act was rightly demanded from the appellants.