UNIT – V

CUSTOM DUTIES

MEANING

Customs duty means the tax which is imposed on goods when they are transported, either import or export, across
international borders.
In simple words it refers to the tax that is levied on import and export of goods from another country.
The government uses this duty to raise its revenues, safeguard domestic industries, and regulate movement of
goods into and outside the country.

Customs duty is subject to the provisions of Customs Act, 1962 and Customs Tariff Act, 1975, along with Rules
and Regulations under Customs Act which are framed by the Central Government and Central Board of Indirect
Taxes (CBIC) {Earlier known as CBEC} to carry out the purposes of the Act + Circulars and Notifications by
CBIC.

FUNCTIONS OF CUSTOMS DEPARTMENT

1. Collection of customs duties on imports and exports as per the Customs Act and the Customs Tariff Act.
2. Enforcement of various provisions of the Customs Act governing imports and exports of cargo, baggage postal
articles and arrival and departure of vessels, aircrafts etc.
3. Discharge of agency functions and enforcing prohibitions and restrictions on imports and exports under various
legal enactments.
4. Prevention of smuggling including interdiction of narcotic drugs trafficking
5. International passenger clearance

CONCEPT AND SCOPE OF IMPORTS AND EXPORTS

Goods become liable for levying import duty when they are imported into India and Goods are liable for levying
export duty when they are exported from India.

Taxable event in the case of Import – Import is said to be completed only when goods cross the customs barrier. In
the case of import, taxable event is the day of crossing of customs barrier and bill of entry for home consumption
is filed.
Taxable event in the case of Export – Export is completed when goods cross territorial waters of India. Therefore,
even if the export duty is collected before ship leaves the port it does not mean that taxable event has taken place.
Thus, one can say that export duty is collected in advance.
Illustration - If goods are exported and the ship sinks within territorial waters, it does not amount to export and
export duty is not applicable.
IGST on Importation of Goods and Services { https://taxguru.in/goods-and-service-tax/import-goods-gst-
brief-analysis.html }

{ https://www.cbic.gov.in/resources//htdocs-cbec/gst/Imports_in_GST_Regime.pdf }
OFFENCES UNDER THE CUSTOMS ACT

Chapter XVI (16) of the Customs Act provides the provisions which deal with offences under the Customs Act.

1) Section 132 of the Act lays that false declaration and false documentation is an offence under the Customs law.
The section provides that anyone who makes, signs or uses (or causes) any declaration, statement or document in
the transaction of any business relating to the customs when is has the knowledge or has a reason to believe that
that such declaration, statement or document is false in any material particular, such person would be liable for
committing the said offence.
An offender shall be punishable with imprisonment for a term which may extend to two years, or with fine, or
with both.

2) Section 133 of the Act lays that causing obstruction to officer of customs is an offence under the Customs law.
The section provides that if any person is found to be intentionally obstructing any officer of customs in the
exercise of any of his powers conferred under the Act, such person would be liable for committing the said
offence.
An offender shall be punishable with imprisonment for a term which may extend to two years, or with fine, or
with both.

3) Section 134 of the Act lays that the refusal to be x-rayed by suspected persons for detecting secreted goods is an
offence under the Customs law.
The section provides that if any person is found to be resisting or refusing to allow a radiologist to take a x-ray
picture of his body in accordance with an order made by a Magistrate under section 103, or is resisting or refusing
to allow suitable action being taken on the advice and under the supervision of a registered medical practitioner for
bringing out goods liable to confiscation secreted inside his body (provided in section 103), would be liable for
committing the said offence.
An offender shall be punishable with imprisonment for a term which may extend to six months, or with fine, or
with both.

4) Section 135 of the Act makes evasion of customs duty or prohibitions by a person an offence under the Custom
law.
An offender under this section shall be punishable with imprisonment for a term which may extend to –
(I) seven years and with fine, when the case is of an offence relating to –

(a) any goods the market price of which exceeds one crore of rupees, or
(b) the evasion or attempted evasion of duty exceeding fifty lakh of rupees, or
(c) such categories of prohibited goods as the Central Government may, by notification in the Official
Gazette, specify, or
 (d) fraudulently availing of or attempting to avail of drawback or any exemption from duty, if it exceeds
fifty lakh rupees,

However, if there is the absence of special and adequate reasons to the contrary which is to be recorded in
the judgment of the court, such imprisonment shall not be for less than one year.

(II) three years, or with fine, or with both, in any other case.

Moreover, if there is someone who has been convicted more than once for an offence under this section, then he
shall be punishable for the second and for every subsequent offence with imprisonment for a term which may
extend to seven years and with fine.
However, if there is the absence of special and adequate reasons to the contrary which is to be recorded in the
judgment of the court, such imprisonment shall not be for less than one year

What would not be considered as special and adequate reasons?

Sub section (3) of Section 135 provides that reasons which are NOT considered to be “special and adequate”
include –
(i) the fact that the accused has been convicted for the first time for an offence under this Act,
(ii) the fact that in any proceeding under this Act, other than a prosecution, the accused has been ordered to pay a
penalty or the goods which are the subject matter of such proceedings have been ordered to be confiscated or any
other action has been taken against him for the same act which constitutes the offence,
(iii) the fact that the accused was not the principal offender and was acting merely as a carrier of goods or
otherwise was a secondary party to the commission of the offence,
(iv) the age of the accused.

5) Section 135A of the Act provides that any person who makes preparation to export any goods in contravention
of the Act would have committed an offence under the Customs law.
The condition to be fulfilled for the successful application of this section is that it should be reasonably inferred
from the circumstances of the case that the person was determined to carry out his intention had he not been
prevented by circumstances which were independent of his will.
An offender shall be punishable with imprisonment for a term which may extend to three years, or with fine, or
with both.

6) Section 140 of the Act deals with offences by companies.

(1) If the person committing an offence under this Chapter is a company, every person who, at the time the offence
was committed was in charge of, and was responsible to, the company for the conduct of business of the company,
as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and
punished accordingly.
Provided that nothing contained in this sub-section shall render any such person liable to such punishment
provided in this Chapter if he proves that the offence was committed without his knowledge or that he exercised
all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Chapter has been
committed by a company and it is proved that the offence has been committed with the consent or connivance of,
or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company,
such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.

{ https://dvsca.com/offences-prosecution-and-penalties-under-customs/ }
APPEALS UNDER CUSTOMS LAW

1) Appeals to Commissioner (Appeals)

As per section 128 of the Customs Act, any person who is aggrieved by a decision or an order passed under the
Act by an officer of customs lower in rank than a Principal Commissioner of Customs or Commissioner of
Customs may appeal to the Commissioner (Appeals) within sixty days from the date of the communication to him
of such decision or order.
If the Commissioner (Appeals) is satisfied that the person was prevented by sufficient cause from presenting the
appeal, additional thirty days can be given to such person for presenting the appeal.

2) Appeals to Appellate Tribunal

Establishment – Section 129 provides for the establishment of an Appellate Tribunal by the Central Government.
Such Appellate Tribunal is to be called the Customs, Excise and Service Tax Appellate Tribunal.
Constitute – It should consist of as many judicial and technical members as the Central Government thinks fit to
exercise the powers and discharge the functions conferred on the Appellate Tribunal by the Act.

Herein, ‘judicial member’ means a person who has for at least ten years held a judicial office in the territory of
India or who has been a member of the Indian Legal Service and has held a post in Grade I of that service or any
equivalent or higher post for at least three years, or who has been an advocate for at least ten years.
While a ‘technical member’ means a person who has been a member of the Indian Customs and Central Excise
Service, Group A, and has held the post of Principal Commissioner of Customs or Commissioner of Customs or
Central Excise or any equivalent or higher post for at least three years.

Section 129 (3) provides for the appointment of a President of the Appellate Tribunal. Such person must be
someone who is or has been a Judge of a HC or one of the members of the Appellate Tribunal.
Section 129 (4) provides for the appointment of one or more members as the Vice President/s of the Appellate
Tribunal.
The Vice President shall exercise the powers and perform such functions of the President as may be delegated to
him by the President by a general or special order in writing. [129 (5)]

Appeals to the Appellate Tribunal –

Section 129A of the Customs Act lays that a person who is aggrieved by any of the following orders may appeal
to the Appellate Tribunal against such order –
(a) a decision or order passed by the Principal Commissioner of Customs or Commissioner of Customs as an
adjudicating authority,
(b) an order passed by the Commissioner (Appeals) under section 128A,
(c) an order passed by the Board or the Appellate Commissioner of Customs under Section 128, as it stood
immediately before the appointed day,
(d) an order passed by the Board or the Principal Commissioner of Customs or Commissioner of Customs, either
before or after the appointed day, under section 130, as it stood immediately before that day.

However, no appeal shall lie under (b) if such order relates to –

(i) any goods imported or exported as baggage,
(ii) any goods loaded in a conveyance for importation into India, but was unloaded irregularly,
(iii) payment of drawback.

Moreover, the Appellate Tribunal has the discretion to admit or refuse admit to appeals under (b), or (c), or (d),
where the value of the goods confiscated, or the rate of duty of customs / difference in duty involved / duty
involved, or the amount of fine or penalty determined by such order does not exceed two lakh rupees.

3) Appeal to High Court

As per Section 130 (1), an appeal lies to to the High Court from every order passed in appeal by the Appellate
Tribunal on or after the 1st day of July, 2003 if the High Court is satisfied that the case involves a substantial
question of law.
Therefore, there should not lie an appeal to HC against an order relating to the determination of any question
having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment.
Section 130 (3) provides that in cases where the High Court is satisfied that a substantial question of law is
involved, it shall formulate that question.

Section 130 (5) of the Act lays that the High Court shall decide the question of law so formulated and then deliver
such judgment which contains the grounds on which such decision is founded by the court and may award such
cost as it deems fit.

Sub section (2) of the Section 130 Provides that the Principal Commissioner of Customs or Commissioner of
Customs or the other party aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High
Court. On the condition that such appeal under this sub-section shall be –
(a) filed within 180 days from the date on which the order appealed against is received by the Principal
Commissioner of Customs or Commissioner of Customs or the other party,
(b) accompanied by a fee of two hundred rupees where such appeal is filed by the other party,
(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

As per Section 130 (2A), the HC has the power to admit an appeal after the 180 days have passed in cases where it
is satisfied that here was sufficient cause for not filing the same within that period.

An appeal to the HC shall be heard by no less than 2 Judges of the court. Moreover, an order must be passed by
majority and in cases where there is no majority, the differing Judges must state the point of law upon which they
differ so that the case can then be heard upon that point only by one or more of the other Judges of the High Court.
[Laid under Section 130 (7) & (8)]
4) Appeal to the Supreme Court
As per Section 130E of the Act an appeal lies to Supreme Court from –
(a) any judgment of the High Court delivered –

(i) in an appeal made under section 130, or

(ii) on a reference made under section 130 by the Appellate Tribunal before the 1st day of July, 2003,
(iii) on a reference made under section 130A, in any case which, on its own motion or on an oral application
made by or on behalf of the party aggrieved, immediately after passing of the judgment, the High Court
certifies to be a fit one for appeal to the Supreme Court; or

(b) any order passed before the establishment of the National Tax Tribunal by the Appellate Tribunal relating,
among other things, to the determination of any question having a relation to the rate of duty of customs or to the
value of goods for purposes of assessment.
AUTHORITIES FOR ADVANCE RULING

Section 28E sub section (e) defines ‘authority’ as the Customs Authority for Advance Rulings appointed under
Section 28EA of the Act.

Section 28EA of the Act lays for the concept of ‘Customs Authority for Advance Rulings’.
As per the Section, the Board, by notification, has the power to appoint an officer of the rank of Principal
Commissioner of Customs or Commissioner of Customs to function as a Customs Authority for Advance Rulings.
Such officer as the Customs Authority has the power to give advance ruling under the Customs Act.

The appointment of Customs Authority laid under Section 28EA sub section (1) is subject to one simple condition
that is till the date of appointment of the Customs Authority for Advance Rulings, the existing Authority for
Advance Rulings constituted under section 245-O of the Income-tax Act, 1961 (43 of 1961) shall continue to be
the Authority for giving advance rulings for the purposes of this Act.

Sub section (2) of Section 28EA lays that the offices of the Authority may be established in New Delhi and at such
other places, which the Board deems fit.

Sub section (3) of Section 28EA acknowledges the extent of power in the hands of the Authority. It lays –
Subject to the provisions of this Act, the Authority shall exercise the powers and authority conferred on it by or
under this Act.
Thereby, making the Customs Authority’s power and authority confined to the limits allowed by the Act itself.

JURISDICTION OF CUSTOMS AUTHORITY FOR ADVANCE RULING

Section 28H deals with the application for advance ruling.

Sub section (1) of Section 28 H lays that an applicant who desires to obtain an advance ruling under the Act shall
make an application in the prescribed form and manner, stating the question on which the advance ruling is sought
for.

The jurisdiction of the Customs Authorities can be understood by referring to sub section (2) of Section 28H of the
Act which lays the questions on which the advance ruling can sought for. It includes –

(a) classification of goods under the Customs Tariff Act, 1975,

(b) applicability of a notification issued under sub section (1) of section 25 (Power Central government to
grant exemption from duty if it is satisfied that it is necessary in the public interest) having a bearing on the
rate of duty,
(c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of
the Act.
(d) applicability of notifications issued in respect of tax or duties under the Customs Act, 1962 or the Customs
 Tariff Act, 1975 or any tax or duty chargeable under any other law for the time being in force in the same
manner as duty of customs leviable under this Customs Act or the Customs Tariff Act.
(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 and
matters relating thereto.
(f) any other matter as the Central Government may, by notification, specify.

As per sub section (3) of Section 28H, the application shall be made in quadruplicate (x4) and shall be
accompanied by a fee of ten thousand rupees.
While sub section (4) of 28H allows the applicant to withdraw his application within thirty days from the date of
making the said application.