IMPORTS - Reading Material

INDEX

PAGE No
Sl.NO. DESCRIPTION
From To
1 Organizational Set up & Functions
2 Meaning of Import
3 Meaning of Export
4 Place of Import & Export
5 Clearances of Imported Goods
i Main Documents required
ii Different kinds of Bills of Entry:
a. Home consumption Bill of Entry
b. Warehousing Bill of Entry
6 Customs Bonded Warehouses
i Public Bonded Warehouse
ii Private Bonded Warehouse
Special Bonded Warehouse
7 Ex-bond Bill of Entry
8 Conversion of Foreign Exchange into Indian Rupees
9 Relevant date to apply the Rate of duty.
10 Import General Manifest(IGM)
11 Granting Entry Inwards
12 Noting of Bills of Entry and its significance
13 Prior Entry Bill of Entry
14 Authority to change and collect duty on Imported Goods and Export
Goods.
15 Requirement in Become an Importer or an Exporter
16 Custody of Imported Goods till they are all owned clearance by
Customs.
17 Valuation of Imported Goods and Exported Goods
18 FOB Value
19 C&F Value (Cost and Freight)
20 CIF Value (Cost, Insurance and Freight)
21 Assessable Value
22 Different kinds of duty leviable on Imported Goods.
i. Basic Customs Duty:
ii. Additional Duty of Customs: (CVD)
iii. Education Cess
iv Special Additional Duty
v Ad valorem and specific rates of duty.
23 Examination of Goods
24 First Check/First Appraisement:

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 25 Second Check/Second Appraisement
26 Classification of Imported Goods for the purpose of charging duty
and arrangement in the Customs Tariff
27 Assessment and Clearance of Imported Goods.
28 Payment of Duty and Interest Liability:
29 Provisional Assessment
30 Show Cause Notices
31 Adjudication
32 Demanded Notices
33 Appellate Procedure:
Appeals before Commissioner(Appeals):
34 Appeal before a Customs, Central Excise and Service Tax Appellate
Tribunal(CESTAT)
35 Refunds
1 Refund of Import Duty
2 Refund of Export Duty
36 Remission of Duty
a). Remission under Section 13
b). Remission under Section 23
37 Abatement of duty on damaged or deteriorated goods under Section
22
38 Short Landed Goods Duty Liability and penalty
39 Import General Manifest
40 Concessional Rate of Duty for the goods imported to manufacture
excisable goods - procedure
41 Import and manufacture of goods on job work basis - procedure
42 Project Imports
43 Survey of Damaged Goods and its significance

ORGANISATIONAL SET UP & FUNCTIONS

The Customs Department functions under the Ministry of Finance, Government

of India. It mainly deals with Imports and Exports and prevention of smuggling. The
Customs Officers perform their duties as per the provisions of the Customs Act, 1962,
various Rules made there under, notifications issued by the Government of India form
time to time and the Customs Tariff Act, 1975. The Department collects duty on the
goods Imported and Exported. It also prevents illegal imports and exports, which is
known as smuggling.

In addition to the above functions, Customs Department implements various

other Acts which regulate the Imports and Exports in order to safeguard the national
interest in the matters relating to Economy, Health, and Culture etc.

In order to effective implementation of the Customs Act and other related Acts,
the Government of India has set up an organization known as Central Board of
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Indirect Taxes and Customs(CBIC) in New Delhi. This organization is headed by a
Chairman supported by some Members. These officers are from the Customs and
Central Excise Service only. The CBEC functions with the support of a number of
officers appointed by the Government of India. The hierarchy of the department is a
follows:

1. Department of Revenue, Ministry of Finance, Government of India.

2. Revenue Secretary to the Government of India.
3. Chairman of the CBIC.
4. Members of CBIC.
5. Chief Commissioners of Customs.
6. Commissioners of Customs. Additional, Joint , Deputy, Assistant
Commissioners
7. Subordinate Staff in various cadres.

Introduction to Customs

The purpose of conducting the course on the subject “Customs” is to make

familiar the functions of the Customs Department, the various procedures relating to
imports and exports, the responsibilities and obligations of the Importers, Exporters and
Customs House Agents and the various documents required. All these aspects are
discussed/will be discussed in different classes during the period specified to complete
the course.
As an introduction to the subject, it is desirable to know something about the role
of the Customs Department in collecting revenue to the Central Government.
The major revenue earning to the Central Government is collected by the GST
Department, Customs Department and Income Tax Department. Customs duty, GST
fall under the category of Indirect Taxes while the tax collected by the Income Tax
Department falls under the category of Direct Taxes. All the three major revenue
earning Departments ie., Customs, GST and Income Tax function under the Ministry of
Finance, Government of India.
The Customs Department deals with the imports from other countries and
exports from India to other countries. The main function of the Customs Department is
to collect the duties on imports and exports and also to ensure that no duty on imports
and exports due to the Government is evaded, in terms of the Customs Act, 1962,
Customs Tariff Act, 1975 and the rules and regulations framed there under.
The GST Department collects the duty on the goods manufactured within India.
This introduction is only to explain the basic difference between the Customs
Department and GST Department, though functioning under the same Ministry of
Finance, Government of India.

MEANING OF IMPORT: Import means bringing any goods into India from other
countries. ‘Import’ is defined under Section 2(23) of the Customs Act, 1962.

MEANING OF EXPORT: Export means taking any goods out of India to any other
country. ‘Export’ is defined under Section 2(18) of the Customs Act, 1962.

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PLACES OF IMPORT & EXPORT: Goods can be Imported or Exported only through
Sea Ports, Air Ports appointed as Customs Ports and through Land Customs Stations
and Inland Container Depots (ICD) appointed for the purpose of Import and Export.

If any import or export takes place in any other place, the goods imported, the
export goods and the conveyance used for carrying such goods are liable to
confiscation. The importer and the exporter are also liable to penal action.

REQUIREMENT TO BECOME AN IMPORTER OR AN EXPORTER: Any person

intending to Import or Export any goods, he should make an application in the
prescribed format to the Director General of Foreign Trade, New Delhi or to the
Regional Offices and obtain Importer - Exporter Code (IEC) Number. Imports or
Exports shall not be allowed without this number.

CLEARANCE OF IMPORTED GOODS

(i). Main Documents required :The goods imported either through Customs
Sea Port, Air Port , Land Customs Station and ICD shall be under the custody of a
custodian appointed by the Customs till they are allowed to be cleared from the
Customs control. In order to clear the imported goods from the customs control, the
importer has to file with the customs authorities certain documents. The main
documents to be submitted are: a Bill of Entry, Invoice, Contract Purchase Order and
any other documents the Customs Officers may require as per Section 46 of the
Customs Act, 1962. The various columns in the Bill of Entry should be properly filled in
indicating the name of the importer, description, quantity and value of the goods
imported. The importer should make a declaration in the bill of entry as to the
correctness of the details furnished in the bill of entry.

(ii).Different kinds of Bills of Entry: There are different kinds of Bills of Entry to
be filed to clear the imported goods from the Customs control. They are:

(a). Home consumption Bill of Entry: This Bill of Entry is required to be

filed with the Customs authorities when the importer wants to pay the
duty payable on such goods and remove them to his premises.

(b). Warehousing Bill of Entry: Some times, the importer may not be
prepared to pay the duty on imported goods immediately and take
them to his premises. In such cases, the importer has got the option
to keep the goods in a Customs Bonded Warehouse without payment
of duty. For the purpose of removing the goods from the port to the
Customs Bonded Warehouse, it is required to file a Bill of Entry for
warehousing along with all other documents. The Customs
authorities assess the warehousing bill of entry and permit the goods

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 to be removed from the port to the Customs Bonded Warehouse
without payment of duty.

Customs Bonded Warehouses

There are different kinds of Customs Bonded Warehouses. They are:

Public Bonded Warehouse: Public Bonded Warehouse is run by a State Government
or Central Government or their undertakings or a Private Agency approved by the
Commissioner of Customs. Any number of importers may keep their imported goods in
the Public Bonded Warehouse subject to availability of space. (Sec 57)

Private Bonded Warehouse: Private Bonded Warehouse is meant for keeping the
goods imported by a particular importer and it cannot be used by others. The imported
goods which have been removed from the port to a Public Bonded Warehouse or
Private Bonded Warehouse may remain in the warehouse till the expiry one year from
the date of warehousing. However, if the goods are of perishable nature or having a
shelf life, the period of one year may be reduced, depending upon the nature and
condition of the goods. The period of one year may be extended by the proper officer
of Customs subject to certain conditions. The significant factor to be noted is that the
goods kept in the Customs Bonded Warehouse are liable to pay interest beyond the
period of ninety days. (Sec 58)

Special Bonded Warehouse: Locked by Customs (Sec 58A)

EX-BOND BILL OF ENTRY: This bill of entry is required to be filed when the importer
wants to pay the duty and clear the goods from the Customs Bonded Warehouse and
take them to his premises. The entire quantity of goods warehoused need not be
cleared on payment of duty in one lot. The importer has got the option to clear the
goods from the warehouse on payment of duty in piece meal.

CONVERSION OF FOREIGN EXCHANGE INTO INDIAN RUPEES

When the goods are imported, the foreign suppliers invariably indicate the value of the
goods in foreign currency in the Invoices raised on the importers. All the goods
imported are allowed clearance by the Customs authorities only on payment of duty
unless such goods are specifically exempted from payment of duty. The duty is charged
on the imported goods on the basis of value of the goods ( Advelaram), except in a few
cases where the specific rate of duty is fixed i.e; on the basis of weight or volume. When
the rate of duty is chargeable on the bases of value, it is charged on rupee value of the
goods imported. The value shown in the invoices in foreign currency is therefore,
required to be converted in to Indian Rupees. For this purpose, the Government
notifies the exchange rates from time to time.
The exchange rate applicable is the date on which the home consumption Bill of
Entry or Bill of Entry for warehousing is presented to the Customs authorities.

IMPORT GENERAL MANIFEST (IGM)

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 Import General Manifest (IGM) is a document to be filed in a prescribed format
with the Customs by the carriers of the goods i.e., the person in charge of a vessel
(Ship)/ Air Craft / Vehicle. In the case of Ship and Aircraft, IGM must be filed before their
arrival and in the case of other vehicles within from their arrival. This document
indicates the details of all the goods to be unloaded at a particular port. Particulars of
goods to be transshipped/ private property of the crew, arms and ammunition, gold and
silver on board the Ship or Aircraft should also be declared separately. A Bill of Entry
can be noted by the Customs only after filing the IGI. However, in certain cases, the
manifest may be filed later, explaining the reasons for such delay. (Sec 30 of CA 1962)

ENTRY INWARDS: The person in charge of the vessel (Ship) shall not permit the
unloading of any imported goods until an order is given by the proper officer of
Customs. Such an order is known as Granting Entry Inwards. (Sec 31)

NOTING OF BILLS OF ENTRY AND ITS SIGNIFICENCE: When all the columns of the
Bill of Entry are properly filled in by the importer or his agent and submitted along with
other documents to the proper officer of Customs, the proper office of Customs shall
verify whether the goods declared in the Bill of Entry are figuring in the IGM and verify
the other declarations. If everything is in order, a number is assigned to the Bill of Entry
and signed by the proper of Customs. This process is known as Noting the Bill of
Entry. As per recent amendment in Sec 46 & 47 of CA 62, all Bs/E have to be filed in
Customs within arrival day of the flight/vessel or very next working day. Any shipment
not filed within stipulated timeline will be subject to payment of penalty at the rate of
Rs.5000/- per day for initial 3 days; then Rs.10000/- per day from 4 th day onwards.

The significance of Noting the Bill of Entry is, it becomes a Customs document
and the importer or his agent cannot alter any of the declarations made in the Bill of
Entry. The date of noting the Bill of Entry is relevant to apply the Rate of Exchange and
the Rate of Duty.

PRIOR ENTRY BILL OF ENTY:

The proper officer of Customs may permit to file the Bill of Entry before filing the
IGM and before the arrival of the Vessel or Aircraft. In such cases, the Rate of Duty
applicable is the date on which Entry Inwards is granted by the proper officer of
Customs.

CUSTODY OF IMPORTED GOODS TILL THEY ARE ALLOWED CLEARANCE BY

CUSTOMS: When the imported goods are unloaded from a ship or an aircraft, they
cannot be allowed clearance immediately. Clearance can be allowed only after the
importer files the Bills of Entry and other documents for clearance of the goods for home
consumption or warehousing. As this process takes sometime, the goods are kept
under the custody of a custodian appointed by the Commissioner of Customs. The

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Commissioner of Customs may appoint a Government body or a private agency as the
custodian, subject to fulfillment of certain conditions. (Sec 45 of CA 1962)

VALUATION OF IMPORTED GOODS AND EXPORT GOODS

Value of the imported goods and export goods is determined under section 14 of
the Customs Act, 1962 read with the Valuation Rules. For the purpose of charging duty
on advalorem basis (on the basis of value). As per the understanding between the
importer and the foreign supplier, the goods may be supplied on FOB basis/C&F
basis/CIF basis.
FOB VALUE: (Free on Board) FOB Value includes the cost of the material, transport
charges incurred by the supplier with in his country, his profit and the charges incurred
to load the goods into a ship or a aircraft. In other words, all the expenditure incurred by
the supplier up to the point of placing the goods on board the ship or aircraft are to the
account of the supplier.

C&F VALUE: (Cost and Freight) This value includes the FOB value and the freight
payable from the port of loading to the port of unloading in India.

CIF VALUE: (Cost, Insurance and Freight) This value includes all the expenses
incurred by the suppliers including his profit. This value is the basis for the purpose of
charging duty. (ASSESSABLE VALUE)

DIFFERENT KINDS OF DUTIES LEVIABLE ON IMPORTED GOODS

AUTHORITY TO CHARGE AND COLLECT DUTY ON IMPORTED GOODS AND

EXPORT GOODS: Section 12 of the Customs Act, 1962 authorizes to levy and collect
duty on imported goods or export goods.

At present, the duties leviable on imported goods are as follows:

(i) Basic Customs Duty: The rates of Basic Customs Duty are indicated in the
First Schedule to the Customs Tariff Act, 1975.

(ii) IGST: These rates are indicated in the GST Tariff Act, 2017.

(iii) Education Cess: 2% and Secondary and higher education cess 1%,
wherever applicable

(iv) Anti Dumping Duty/Safe Guard Duty/National Calamity: wherever

applicable.

Ad valorem and specific rates of duty:

(a) Ad valorem rate means the duty leviable at certain percentage on the
assessable value (CIF) For example – 10%, 15%, 20% etc.,

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 (b) Specific rate of duty. This rate of duty is fixed on the basis of the
quantity in terms of weight or volume or number. For example – rate of
duty fixed per Metric Ton, per liter/kilo liter, per square metre, etc.

.
RELEVANT DATE TO APPLY THE RATE OF DUTY : In case of home consumption Bill
of Entry, the rate of duty applicable is the rate in force on the date of presenting the
bill of entry to the customs authorities. However, if the bill of entry is filed before
granting the ‘Entry inwards’ to a vessel (Ship or an Aircraft), the rate of duty
applicable is the rate in force on the date of entry inwards.
In the case of clearance of the goods for home consumption from the Bonded
Warehouse, the date of presenting the Ex-bond Bill of Entry with the customs
authorities is the relevant date. (Section 15 of the Customs Act, 1962)

EXAMINATION OF GOODS
Any goods imported are examined by the Customs Officers with reference to
declarations in the Bill of Entry and invoice to ensure that the goods imported are as
per the declarations made in respect of the description of the goods, quantity and
value. The goods are examined under two systems. They are –

First Check/First Appraisement: Under this system, after the Bill of Entries is
noted, it is submitted to the Assessing Officer. On Scrutiny of the documents, if the
Assessing Officer feels that more details are required than the information available
in the documents to make the assessment in the Bill of Entry, he may order to
examine the goods and furnish examination report before the assessment is made.
Assessment is made only after the goods are examined and report is furnished by
the Customs Officers posted for this purpose. This system is known as First
Check/First Appraisement.

Second Check/Second Appraisement: Under this system, the Assessing Officer

completes the Assessment in the Bill of Entry and order for examination of the goods
after payment of the duty. The importer/his agent presents the Bill of Entry to the
examining officer after payment of the duty. The examining officer examines the
goods with reference to the documents and the assessment made. If the goods are
found to tally with the declarations and assessment made in the Bill of Entry, the
examining officer allows clearance of the goods. This system is known as Second
Check/Second Appraisement.

Classification of Imported Goods for the purpose of charging duty and

arrangement in the Customs Tariff

The duty on Imported Goods is charged as per the rates indicated in the
Customs Tariff Act 1975. The Customs Tariff Act is divided in to two parts. They are -
First Schedule and Second Schedule. The rates of duty for Imported Goods are
specified in the First Schedule. The Second Schedule contains the rates of duty for

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export goods. The First Schedule is divided into twenty two sections. Each section
contains the goods of the same category and characteristics. Each Section is divided
into different chapters. Again; each chapter is divided into different Headings and Sub-
Headings, depending upon identical and similar characteristics of the goods.

For the purpose of charging duty correctly, it is essential to determine the correct
classification of the goods. When the goods imported are not specifically described in
the tariff under any Heading, the classification has to be determined as per the
guidelines given in the Section Notes given under each section and GENERAL
RULES FOR THE INTERPRETATION OF THE SCHEDULE given in the Customs Tariff
itself.

Assessment and Clearance of Imported Goods

“Passed out of Customs Charge”: When the Bill of Entry is filed with Customs with all
the required documents, a number is assigned and the Bill of Entry is submitted to the
Assessing Officer. The Assessing Officer completes the assessment in the Bill of Entry
as per section 17 of the Customs Act, 1962. Assessment includes examination of the
goods, verification of the correctness of the declared value, classification of the goods,
application of the correct rate of duty and determination of the amount of duty. Once the
assessment is completed, the importer will have to pay the duty to clear the goods from
Customs.

After the importer pays the duty as determined by the Assessing Officer, the
proper officer of customs will pass an order allowing clearance for home consumption
as per section 47 of Customs Act, 1962. This order is generally known as “passed out
of “Customs Charge”.

Payment of Duty and Interest Liability: After completing assessment in the Bill of
Entry, it is given to the importer for payment of duty. On payment of duty, the passed
out Custom Charge shall be given allowing clearance from Customs. The duty as
determined by the Assessing Officer has to be paid within five days, excluding holidays
from the date on which the Bill of Entry is returned to the importer for payment of duty.
If the duty is not paid within the stipulated time, interest is payable on the amount of
duty payable as per section 47 of the Customs Act, 1962.
As per amendment in Sec 47, duty have to be paid within the day of assessment of B/E
or B/E generated, else 15% (per annum) interest will be charged.

Provisional Assessment
When the importer or exporter is not able to produce all the documents required by the
proper officer of the Customs OR when the proper officer of Customs deems it
necessary to subject the goods for chemical test or for verification of value, the Bill of
Entry or Shipping Bill may be assessed provisionally and allow clearance of the goods
on execution of a bond by the importer or exporter, pending submission of the required

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documents or completion of chemical test, verification of value etc., as the case may be.
Provisional Assessment is made and clearance of the goods is allowed to avoid delay.
Section 18 of the Customs Act 1962 is the authority to make Provisional Assessment.

After the required documents are received or the chemical test and verification of
value are completed, the final assessment shall be made in the Bill of Entry or Shipping
Bill. The duty difference, if any shall be recovered/refunded, subject to certain
conditions.

Show Cause Notices, Adjudication and Demanded Notices

When there is any contravention of any of the provisions of the Customs Act or the
Rules made there under or violation of the provisions of other Acts relating to Imports
and Exports, the Customs authorities may initiate action against Importer or Exporter.
Before, any action is taken by the department, a Show Cause Notice has to be issued
under Section 124 of the Customs Act, 1962 indicating the nature of offence, the
provisions of the law violated and the action proposed to be taken by the department.
The person to whom the notice is issued must be given an opportunity to explain in
writing and also in person before any order is passed against the noticee. No action
like confiscation of goods, imposition of penalty etc., can be taken without issue of a
Show Cause Notice.

Adjudication: Under the Customs Act, Customs officers are vested with some powers.
After issue of Show Cause notice and receiving the explanation from the noticee, the
case may be adjudicated by the Customs officers. The adjudication orders are issued
by the Assistant Commissioners, Deputy Commissioners, Joint Commissioners,
Additional Commissioners and Commissioner of Customs. These officers are quasi
judicial authorities. Each of these officers is delegated with the powers to adjudicate
the cases up to certain value / duty involved. However, the Commissioner of Customs
can adjudicate the case without any value / duty limits. The adjudication orders passed
by these officers are appealable before the Appellate authorities or the courts.

Demand Notices: When the assessment is made in the Bills of Entry the amount of
duty payable is determined. The importers may pay the duty and clear the goods from
Customs. However, some times, the department may find that there was some short
collection of duty due to wrong classification, incorrect Rate of Duty, under valuation,
incorrect calculation etc. In such cases, the department has to issue a demand notice
under Section 28(1) of the Customs Act, 1962. The notice should indicate the amount
payable and they reasons for the same. The noticee must be given an opportunity to
explain in writing and in person. Thereafter, the Assistant Commissioner of Customs/
Deputy Commissioner of Customs may issue order under Section 28(2) of the Customs
Act, 1962 confirming the amount of duty payable.

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 The demand notice must be issued within a period of six months from the date of
payment of duty or other relevant dates as indicated under Section 28. In case of
imports made by an individual for his persona use or by Government or by any
Educational, Research or Charitable Institutions, Hospital, the time limit to issue
demand notice is one year.

The period of six months or one year may be extended to five years to issue the
demand notice if the short collection or short levy of duty was on account of collusion or
any wilfull mis-statement or suppression of facts by the importer or the exporter or the
agent or employee of the importer or exporter.

Appellate Procedure
Appeals before Commissioner (Appeals): When any orders are passed by the quasi
judicial authorities, confiscation the goods, demanding duty, imposing penalty etc, the
effected party may file an appeal before the Appellate authority under Section 128 of the
Customs Act, 1962. In the case of orders passed by the Assistant Commissioner or
Deputy Commissioner or Joint Commissioner or Additional Commissioner, the appeal
has to be filed before the Commissioner of Customs (Appeals). The appeal has to be
filed before the Commissioner (Appeals) within a period of 60 days from the date of
communication of the order passed by the adjudicating authority. This period may be
extended by another 30 days if the Commissioner (Appeals) is satisfied that the
appellant was prevented by sufficient cause from presenting the appeal within 60 days.

The appeal has to be filed in the prescribed format with supporting documents.
The Commissioner (Appeals) may grant personal hearing to the appellant and pass an
order.
It may be mentioned that the appeals may be filed by the department also, if they
feel that the order passed by the lower authority is not correct.
Appeal before the Customs, Central Excise and Service Tax Appellate
Tribunal(CESTAT): When they orders are passed by the Executive Commissioner or
the Commissioner of Customs(Appeals) and if the importer or the exporter or the
department is aggrieved with such orders, they may file an appeal before the CESTAT
under Section 129A of the Customs Act,1962. The appeal has to be filed before the
CESTAT within a period of three months from the date of communication of the order
passed by the Commissioner or the Commissioner (Appeals). The appeal should be
filed in the prescribed format enclosing a demand draft for the amount of prescribed
fees. The amount of fees varies depending upon the amount involved in the appeal
filed, as indicated under Section 129A of the Customs Act, 1962.
Appeal before the High Court / Supreme Court: When the orders are passed by the
CESTAT, the aggrieved party may file an appeal before the Jurisdictional High Court or
the Supreme Court. If the issue involved is classification or valuation or interpretation of
a notification, the appeal lies with the Supreme Court. In other cases, the appeal may
be filed before the Jurisdictional High Court.

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 Refunds

(i) Refund of Import Duty: If any amount of excess duty is paid on the
imported goods due to wrong Classification, wrong Rate of Duty, Incorrect Calculation
etc., the importer may make an application to the Assistant Commissioner of Customs
or Deputy Commissioner of Customs, for refund of the excess duty paid.

The Application for Refund must be made in the prescribed format in duplicate
within a period of one year from the date of payment of duty, if the import is by an
individual for his personal use or by Government or by any Educational, Research or
Charitable Institutions or Hospital. In the case of import by others, the application must
be made before the expiry of 6 months from the date of payment of duty. However, the
limitation of 1 year or 6 months period is not applicable, if the duty was paid by the
importer under protest.

Even when the importer is eligible for refund on account of any judgment,
Decree, Order or Direction of the Appellate Tribunal or any court, the importer is
required to file the Application for Refund.

On filing the Application for Refund, the Assistant Commissioner of Customs or

the Deputy Commissioner of Customs shall process the claim and grant refund, if the
excess amount of duty paid is found refundable.

The Assistant Commissioner or Deputy Commissioner of Customs shall pay the

amount of refund sanctioned to the importer only after verification that the excess
amount of duty paid by the importer has not been passed on by the importer to
anybody. If the excess amount of duty paid has been realized by the importer from
others, the amount of refund sanctioned shall not be paid to the importer as it amounts
to un-just enrichment. In such cases, the amount of refund shall be credited to the
Welfare Fund. (Authority: Section 27 of the Customs Act, 1962.)

(ii) Refund of Export Duty: On some of the export goods, Export Duty is
payable. In certain cases, the Export Duty paid on the exported goods shall be
refunded to the exporter. For example: if the goods are returned to the exporter, if the
goods are re-imported within one year from the date of exportation.

The Application for refund of export duty has to be made to the Assistant
Commissioner or Deputy Commissioner of Customs before the expiry of six months
from the date on which the proper officer of customs made an order permitting the
goods for export. This order is commonly known as ‘Let Export Order’.
(Authority: Section 26 of the Customs Act, 1962.)

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 Remission of Duty
There are two sections in the Customs Act, 1962 providing Remission of Duty on the
imported goods.

(a). Remission under Section 13 : If any imported goods are pilfered after
unloading and before the proper office of customs has made an order for clearance for
home consumption or deposit in a warehouse, the importer shall not be liable to pay the
duty on such pilfered goods, as they are not available for the importer. Such waiver of
payment of duty is commonly known as Remission of Duty. However, if the pilfered
goods are restored to the importer after pilferage, the importer has pay the duty on such
goods.

(b). Remission under Section 23: If any imported goods have been lost or
destroyed at any time before clearance for home consumption, the Assistant
Commissioner of Customs or the Deputy Commissioner of Customs shall remit the duty
on such goods. In other words, the importer need not pay duty on such goods lost or
destroyed. Here, the word ‘lost ‘means, the goods are lost forever either in fire or
otherwise, which cannot be recovered.

Abatement of Duty on damaged or deteriorated goods under Section 22: If any

imported goods are damaged or deteriorated at any time before unloading or during the
unloading in India or that any imported goods are damaged at any time after the
unloading in India but before they are examined by the proper officer of Customs and
the damage or deterioration is on account of any accident not due to any willful act,
negligence or default of the importer, his employee or agent OR that any warehoused
goods have been damaged at any time before the clearance for home consumption on
account of accident not due to any willful act, negligence or the default of the owner, his
employee or agent, such goods shall be charged to duty in accordance with the value
determined of such damaged or deteriorated goods.

The value of such damaged or deteriorated goods may be determined by the

proper officer of Customs or by getting the goods surveyed by the authorized surveyors
or on the basis of the amount realized, if such goods are sold in an auction.

Short Landed Goods

Duty Liability and Penalty: When any goods are loaded in a ship or an aircraft in a
foreign port for transporting and unloading in an Indian Port, the person in charge of the
Ship or Aircraft shall issue a Bill of Lading in the case of the ship and Airway Bill in the
case of Aircraft which is considered to be an acknowledgement to the affect that the
goods are received on board the ship or the Aircraft, as the case may be. This
document shows the number of packages, weight broad description of the goods, the
name of the consignee, the port of the destination etc. These particulars are also
indicated in the Import General Manifest. The person in charge of the ship or Aircraft
is responsible to unload the goods in the port of destination indicated in the Bill of
Lading or the Airway Bill. If any of the goods shown in the Bill of Lading or Airway Bill

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are not unloaded and not properly accounted for, the person in charge of the
conveyance is liable to pay penalty not exceeding twice the amount of duty that would
have been chargeable on the goods not unloaded. In such cases, the Importer is not
liable to pay duty on the goods not landed as they are not available for delivery to the
Importer (Authority: section 116 of the Customs Act, 1962)

Concessional Rate of duty for the goods imported to manufacture excisable

goods – procedure & conditions and manufacture: Goods Imported are liable to
pay duty unless such goods are exempted from payment of duty or reducing the rate of
duty by issue of notifications by the Central Government OR when the rate of duty is
shown as nil in the Customs Tariff. Central Government may issue notifications under
section 25 of the Customs Act, 1962 exempting certain goods from the whole of the duty
payable or granting Concessional Rate of duty. Some notifications are issued
exempting from duty or reducing it from the Standard Rate of duty fixed under the
Customs Tariff Act. However, some notifications are issued exempting the Imported
Goods from the whole of the duty leviable or reduce the rate of duty, subject to certain
conditions.

The Central Government made some rules known as CUSTOMS (IMPORT OF

GOODS AT CONCESSIONAL RATE OF DUTY FOR MANUFACTURE OF
EXCISABLE GOODS) RULES 1996. These rules facilitate to import the goods without
payment of any duty or on payment of duty at Concessional rate, if such imported goods
are meant for Manufacturing Excisable Goods. “Excisable Goods” as defined in the
Central Excise Act, 1944 means goods specified in the Central Excise Tariff Act, 1985
as being subject to duty of excise. In other words, if the goods imported are used to
manufacture certain goods, which are liable to Central Excise Duty are covered by
these rules. The procedure to avail the benefit of these rules is briefly as follows:

An importer who intends to avail of the benefit of an exemption notification under

these rules should obtain registration from the Assistant Commissioner/Deputy
Commissioner of Central Excise having jurisdiction over his factory. The importer is
required to furnish to the Assistant Commissioner/Deputy Commissioner of Central
Excise the details of the goods to be importer and manufactured, particulars of his
factory and also required to give an undertaking to the affect that the imported goods
shall be used for the purpose for which they are imported. When the goods are
imported, the importer should get a certificate from the Assistant Commissioner/Deputy
Commissioner of Central Excise to the affect that the imported is eligible to avail the
exemption under a particular notification. On submission of such certificate, the
Assistant Commissioner of Customs or Deputy Commissioner of Customs at the port of
import shall allow the clearance as per the relevant notification. A copy of the Bill of
Entry shall be sent to the Assistant/Deputy Commissioner of Central Excise who will
acknowledge the receipt of the goods in the importers factory. The Central Excise
authorities shall ensure that the goods imported with concession are utilized for the
purpose for which they have been imported. If the importer fails to comply with these
conditions, the importer will have to pay the duty on the imported goods at the normal

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rates applicable along with interest on the amount of duty from the date of clearance
from customs till the amount of duty is paid.

Import and manufacture of goods on job work basis – procedure: Goods may be
imported without payment of any duty, if they are required for execution of an export
order placed on the importer by the supplier of the goods for jobbing. In other words,
when a foreign company intends to get some goods manufactured on job work basis by
an Indian Manufacturer, the foreign company may supply free of cost the materials
required to manufacture the goods required by him. This facility is provided by
notification no. 32/97-Customs Dt. 1-04-1997, as amended from time to time.
To avail of the benefit of Notification No. 32/97-Customs Dt. 1-04-1997 as
amended, the importer is required to get himself registered with the jurisdictional Central
Excise authorities under THE CUSTOMS (IMPORT OF GOODS AT CONCESSIONAL
RATE OF DUTY FOR MANUFACTURE OF EXCISABLE GOODS) Rules, 1996. The
importer of goods under notification no. 32/97 – Customs, therefore, should function
following the procedure prescribed under the 1996 Rules referred to above.
The conditions laid down in the Notification No. 32/97 are –

(a) The goods imported must be used only to manufacture the goods as per the
purchase order of the foreign suppliers supplying the materials and they
cannot be sold or otherwise disposed off.

(b) The goods manufactured utilizing the materials supplied by the foreign
company and the remnants, if any, must be exported to the suppliers of the
materials or to any other person the supplier of the materials may specify.
The goods must be re-exported within a period of six months from the date of
clearance of the materials or within such extended period as the
Assistant/Deputy Commissioner of Customs may allow.

(c) When the goods manufactured using the materials supplied by the foreign
company are exported, the FOB value of such goods should be at least 10%
more than the CIF value of the goods imported.

(d) At the time of export, the invoice must be raised by the Indian Manufacturer
on the suppliers of the materials for the full FOB value of the goods showing
the job work charges and the value of additional item used, if any, in the
goods manufactured and exported. When the exports are made from India to
any other country, their full value has to be realized from the person to whom
the goods are exported. However, when the goods are manufactured in
terms of notification no. 32/97 Customs, the full value of the goods cannot be
realized from the foreign company as the materials supplied sent free of cost.
Only the job work charges and the value of the goods used, if any, only can
be realized. Since the full value of the exported goods cannot be realized
when the goods are manufactured as per the notification no. 32/97 Customs,
the Indian Manufacturer has to get G.R waiver from the Reserve Bank of
India/the authorized Bank , for the value other than the job work charges. In

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 the case of textiles and clothing, the 10% value addition is not required.
However, the FOB value of the exports must be more than the CIF value of
the materials imported.

The import and export under this notification must take place only through the
ports specified in the notification. This condition may be relaxed by the
Commissioner of Customs.

In a nut shell, the implications of the Notification No. 32/97 Customs Dt. 1-04-
1997 as amended are as follows:

 Materials can be imported without payment of duty and without paying the
cost of materials imported to the suppliers.
 The importer must obtain registration from the Central Excise authorities
and follow the procedure prescribed in the Customs (Import of Goods at
Concessional Rate of Duty for Manufacture of Excisable Goods) Rules,
1996.
 The FOB value of export items must be at least 10% more than the CIF
value of the imported materials.
 The export must take place within six months from the date of clearance of
the materials from customs or within such extended time.
 The Indian Manufacturer can realize only the job work charges and the
value of the materials used by him, in addition to the materials received from
foreign company.

Import and Clearance Of Second hand Goods Including Motor Vehicles

Imports of all second hand goods except second hand Capital goods are
restricted for import. They may be imported only under an Authorization/License issued
by the Licensing Authority i.e., the Director General of Foreign Trade or their Regional
Offices.
Second hand Capital Goods, including refurbished/reconditioned are allowed
clearance without any Authorization/License. However, second hand personal
computers/ laptops, photocopier machines, air-conditioners and diesel generating sets
will be allowed clearance only against a license issued by the Licensing Authority.
“Capital Goods” as defined in Foreign Trade Policy means “any plant, machinery,
equipment or accessories required for manufacture or production, either directly or
indirectly, of goods or for rendering services, including those required for replacement,
modernisation, technological upgradation or expansion. It also includes packaging
machinery and equipment, refractories for initial lining, refrigeration equipment, power
generating sets, machine tools, catalysts for initial charge, equipment and instruments
for testing, research and development, quality and pollution control. Capital goods may
be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use
in services sector.”

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Valuation of imported second hand goods: In the case of import of new goods,
normally Transaction Value i.e., value/price agreed upon by the foreign supplier and the
importer in India is accepted subject to addition of some specified charges in the
Customs Valuation Rules for the purpose of charging duty. However, in the case of
second hand goods imported, the Transaction Value may not be accepted. Valuation of
second hand imported goods is a complex issue as there are contradicting decisions by
Hon’ble Courts and Appellate Tribunal.
The different methods followed to determine the value of imported second hand
goods are:
(1) If the original purchase document of the new item is available, the prescribed
rates of depreciation are allowed on the original value. The period of usage
of the imported second hand goods is computed from the date of Bill of
Lading/Airway Bill till the date of filing the Bill of Entry with the Customs for
clearance. However, if any worn out parts are replaced with new items, the
depreciated value will be increased proportionately.
(2) The second method of valuation is to verify the certificate issued by an
independent Chartered Engineer in the country of export of the second hand
goods and also by an independent Chartered Engineer appointed by
Customs Authorities at the time of clearance of goods.
(3) As per Rule 12 of the Customs Valuation Rules, 2007, the proper officer of
Customs may reject the declared value and call for the required documents
from the importers to verify the accuracy of the value declared and determine
the value for the purpose of charging duty.
Rate of duty applicable: For the second hand goods imported, the rate of duty
applicable is the same as the rate applicable to the new goods.

Project Imports
In order to facilitate setting up of new projects, a separate Heading No. 9801 has
been inserted in the First Schedule to the Customs Tariff Act, 1975. Certain Regulations
known as Project Import Regulations, 1986 have also been framed by the Central
Board of Excise and Customs.
Under the Customs Tariff Heading No. 9801, all items of machinery and other
related equipment, appliances, materials, components etc., required for initial setting up
or for substantial expansion of an existing project of a specified industrial plant, irrigation
project, power project, mining project, project for exploration for oil or other minerals and
any other project that may be specified by the Central Government may be imported.
Substantial expansion means increasing the capacity of the existing plant
by 25% of its capacity.
All the goods imported for initial setting up of a project or for substantial
expansion of the existing plant are classifiable under Heading No. 9801 and they carry
the same rate of duty, except the projects specifically exempted from the duty payable
under heading no. 9801.

For the purpose of availing the benefit of classification of the imported goods
under Heading No. 9801 of the Customs Tariff, the importer has to follow the procedure

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prescribed under Project Import Regulations, 1986, which is explained below in
brief:-
Every importer intending to claim assessment of the imported goods under
Heading 9801 has to make an application to the proper officer of customs in the port
through which he proposes to import the goods. The importer has to furnish the details
such as the name, address of the importer, the location of the project, the description of
the goods to be imported, the description of the goods to be manufactured / produced /
mined / explored, the installed capacity etc., in the application made. The importer
should also get the contract or contracts under which the goods will be imported
registered with the Customs authorities under Project Import Regulations. The
amendments, if any, to such contracts must also be registered. The contract /contracts
must be registered under these regulations before the proper officer of customs permit
clearance of the goods for home consumption.

The import of any goods require an import license, it must be obtained and
produced to customs. If no such import license is required, a clearance certificate from
the specified sponsoring authority must be produced.

The importer is also required to produce a Bond in the prescribed format before
the proper office of customs. All the goods imported against the contracts registered
under Project Import Regulations shall be assessed provisionally i.e., the Bills of Entry
are assessed provisionally under Section 18(1) of the Customs Act, 1962.
After the imports against the contract/contracts registered under these
Regulations are completed, the importer has to prepare a Reconciliation Statement and
submit to the customs. This statement should indicate the details of the Bills of Entry
including the description of the goods, quantity, value etc. The importer should also
submit the installation certificate to the effect that all the goods imported under these
Regulations have been utilized for initial setting up of the project or substantial
expansion, as the case may be. This certificate may be issued by the Central Excise
Officers having jurisdiction over his factory.
On submissions the Reconciliation Statement, the Customs authorities shall
finally assess the bills of entry under Section 18 (2) of the Customs Act, 1962. On final
assessment, if any differential amount of duty is recoverable, it will be paid by the
importer. If any excess amount of duty was collected provisionally, the same will be
refunded to the importer subject to verification of the principal of unjust enrichment.
Finally the bond executed by the importer shall be redeemed and the contract is
treated as finalized.

Survey of Damaged Goods and its significance

When any imported goods are damaged or deteriorated or lost before the goods
are cleared from customs, the importer with the permission of the proper officer of
Customs gets such goods surveyed by the Authorized Surveyors in the presence of the
Customs Officers. The surveyors examine the goods and furnish in their report the
extent of damage or loss. The report furnished by the surveyor will help the importer to

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get Abatement of duty or Remission of duty as provided for under Sections 22 and 23,
respectively of the Customs Act, 1962.
The survey report also helps the importer to claim compensation from the
insurance company, if such goods have been insured.

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