CUSTOMS TARIFF ACT, 1975

Classification of Goods
 Import and Export Duties: Import and export of goods are subject to duties, which
may include nil (zero) duty. To determine the duty, it's essential to classify goods into
specific categories or headings in the Customs Tariff Act, 1975.
 Customs Tariff Act, 1975: The classification of imported and exported goods is
governed by the Customs Tariff Act, 1975, which consists of two Schedules. The First
Schedule is based on the Harmonized Commodity Description and Coding System
(Harmonized System or HS) developed by the World Customs Organization and
applied by many countries worldwide. The Second Schedule contains descriptions of
goods subject to export duty. Together, these schedules are referred to as the "Indian
Customs Tariff" or "Tariff Schedule."
 Methodology of Classification: Goods in the Tariff Schedule are organized in a
specific pattern based on the degree of manufacture, from natural products and raw
materials to fully finished goods and machinery. The Indian Customs Tariff has 21
Sections and 98 Chapters. Sections group related chapters, and chapters contain
descriptions of goods at various levels, such as four-digit "headings," six-digit
"subheadings," and eight-digit "Tariff Items."
 HS and Amendments: The Harmonized System (HS) provides codes and descriptions
up to the six-digit level. India extends it to the eight-digit level for statistical and trade
monitoring purposes. The HS undergoes periodic amendments to reflect changes in
trade, technology, etc., and member countries, including India, must align their Tariff
Schedules with these updates.
 Explanatory Notes: The World Customs Organization provides detailed Explanatory
Notes for various headings and subheadings in the HS, which serve as guidelines for
classification. These notes help in interpreting the HS.
 Rules for Classification: The Tariff Schedule follows a set of six rules for classifying
goods, with each rule applied sequentially. These rules include considering section
and chapter notes, the degree of manufacture, and other factors to determine the
classification of an item.
 Common Parlance: When classifying goods, common parlance and trade meanings
are essential, unless the Tariff specifically requires a technical interpretation.
  Tariff Rates and Duties: The Tariff Schedule specifies tariff rates of duty. Goods not
eligible for concessional rates or exemptions are subject to the Tariff rate of duty.
Export tariff applies to specific commodities. The Central Excise Tariff is relevant for
calculating additional customs duties.
 Uniformity and Guidance: To ensure uniform classification, the Customs Board
issues Tariff Advice in the form of circulars and instructions. Advance Ruling
Authorities provide binding tariff advice. The Directorate General of Foreign Trade
(DGFT) also regulates import and export goods using a nomenclature similar to the
HS.

Section 3
 Additional Duty: Any article imported into India is subject to an additional duty equal
to the excise duty applicable to a similar article produced or manufactured in India. If
the excise duty in India is a percentage of the value of the article, the additional duty
is calculated at that same percentage of the imported article's value.
 Definition of Excise Duty: The term "excise duty for the time being leviable on a like
article if produced or manufactured in India" refers to the current excise duty
applicable to a similar Indian-produced article. If no identical article is produced in
India, the duty is determined based on the class or description of articles to which the
imported article belongs, with the highest applicable duty rate used.
 Value Calculation: To calculate the additional duty, the value of the imported article
is determined as follows:
- The value of the imported article determined under Section 14(1) of the Customs
Act, 1962, or the tariff value set under Section 14(2) of that Act.
- Any customs duty charged on the article under Section 12 of the Customs Act,
1962.
- Any sum charged on the article under any other prevailing law as an addition to
customs duty, excluding the duty mentioned in sub-section (1).
 Counterbalancing Duty: If the Central Government deems it necessary in the public
interest to counterbalance the excise duty on raw materials, components, and
ingredients used in the production of an imported article, it can notify the imposition
of additional duty on the imported article. The portion of the excise duty to be
 imposed on the imported article is determined based on rules established by the
Central Government.
 Rules for Counterbalancing Duty: The Central Government, when making rules for
counterbalancing duty under sub-section (3), takes into account the average amount of
excise duty payable on the raw materials, components, or ingredients used in the
production of similar articles.
 In Addition to Other Duties: The duty imposed under this section is in addition to any
other duties imposed under the Customs Act or any other prevailing law.
 Application of Customs Act: The provisions of the Customs Act, 1962, and its related
rules and regulations, including those pertaining to drawbacks, refunds, and
exemption duties, apply to the duty imposed under this section, to the extent
applicable.