MODULE- 05

• Customs law is a duty or tax which is levied by the Central Government on import of goods into
and export of goods from India. The Quantum of Customs duty depends upon the provisions of
Customs Act 1962 and Customs Tariff Act 1975 and related Customs Rules, Notifications,
Circulars, case Laws and Annual Union Finance Acts. Customs Act 1962 is the main Act governing
custom duty. Customs Tariff Act 1975 contains two Schedules. Schedule 1 gives classification and
rates of duties for imports of goods into India. Schedule 2 gives classification and rates of duties
for export of goods from India. Section 156 of Customs Act empowers the Central Government
to make rules in this regard consistent with provisions of the Act.

Territorial water of India - Territorial waters mean that portion of sea, which is adjacent to the shores of
a country. Territorial waters of India extend up to 12 nautical miles from the baseline on the coast of
India and include any gulf, harbour, creek or tidal river. Earlier, the territorial waters of India extended up
to the 6 nautical miles from the baseline, but it was extended up to 12 nautical miles (1 NM 1.83 kms) in
1967. This definition is well in accordance with the Article 3 of the UN Convention on the Law of Sea,
which defines territorial sea. The determination of territorial waters is important for determination of
the Chargeability of the Customs duty, as the entry of goods into the territorial waters is a taxable
event.
• High Sea: Beyond 200 nautical miles, the area is known as high sea. All counties have equal rights to
high sea.

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indirect-tax-laws-1/unit-4-basic-concepts-of-custom-law

LEVY OF CUSTOM DUTY:

There are four stages in any tax structure, viz., levy, assessment, collection and postponement. The basis
of levy of tax is specified in Section 12, charging section of the Customs Act. It identifies the person or
properties in respect of which tax or duty is to be levied or charged. Under assessment, the liability for
payment of duty is quantified and the last stage is the collection of duty which is may be postponed for
administrative convenience.
As per Section 12, customs duty is imposed on goods imported into or exported out of India as per the
rates specified under the Customs Tariff Act, 1975 or any other law.
On analysis of Section 12, we derive the following points:
• Customs duty is imposed on goods when such goods are imported into or exported out of India
• The levy is subject to other provisions of this Act or any other law
 • The rates of Basic Custom Duty are as specified under the Tariff Act, 1975 or any other law
• Even goods belonging to Government are subject to levy, though they may be exempted by
notification(s) under Section 25.
• Custom Tariff Act, 1975 has two schedules.
• Schedule I prescribes tariff rates for imported goods, known as ―Import Tariff‖
• Schedule II contains tariff for export goods known as ―Export Tariff‖.

• TAXABLE EVENT
The basic condition for levy of customs duty is import/export of goods i.e., goods become liable to duty
when there is import into or export from India.
— Import means bringing into India from a place outside India [Section 2(23)].
— Export means taking out of India to a place outside India [Section 2(18)].
— "India" includes the territorial waters of India [Section 2(27)]. The limit of the territorial waters is the
line every point of which is at a distance of twelve nautical miles from the nearest point of the
appropriate baseline.

• VALUATION OF CUSTOM DUTY

LEVY OF CUSTOM DUTY

Section 12 of the Customs Act makes it clear that import or export of goods into or out of India is the
taxable event for payment of the duty of customs. Lot of problems were faced in determining the point
at which the importation or exportation takes place. The root cause of the problem was the definition of
India. The Supreme Court of India has given the landmark judgments in cases of Union of India v Apar
Industries Ltd (1999) and further in the case of Garden Silk Mills Ltd v Union of India (1999). The import
of goods will commence when they cross the territorial waters but continues and is completed when
they become part of the mass of goods within the country, and the taxable event being reached at the
time when goods reach the customs barriers and bill of entry for home consumption is filed.
 • Taxable event for imported goods:
The taxable event occurs in the course of imports under the customs law with reference to the
principles laid down by the Supreme Court of India; and taxable event in case of imported goods can
be summed up in the following lines:
• Unloading of imported goods at the customs port – is not a taxable event
• Date of entry into Indian territorial waters – is not a taxable event
• Date of presentation of bill of entry – is not a taxable event
• Date on which the goods cross the customs barrier - is a taxable event

(2) Taxable event for warehoused goods:

As per Section 15(1)(b) of the Customs Act, 1962, when goods have been deposited into a warehouse,
and they are removed there from for home consumption, the relevant date for determination of rate of
duty is the date of presentation of ex-bond bill of entry (i.e., Sub-bill of Entry) for home consumption.
w.e.f. 6-8-2014, Section 15(1) of the Customs Act, 1962 has been amended to provide for determination
of rate of duty and tariff valuation for imports through a vehicle in cases where the bill of entry is filed
prior to the delivery of import report. The proviso to section 15(1) has been amended to lay down that if
a bill of entry has been presented before the date of arrival of the vehicle (out of box) by which the
goods are imported, the bill of entry shall be deemed to have been presented on the date of such arrival.

• Taxable event for exported goods:

As per section 16(1) of the Customs Act, 1962, taxable event arises only when proper officer makes
an order permitting clearance (i.e. entry outwards) granted and loading of the goods for exportation
took place under Section 51 of the Customs Act, 1962.
Rate of foreign exchange in case of exports: In case of exports, rate of exchange of the CBIC as
in force on the date on which a shipping bill or bill of export, as the case may be, is presented
under Sec. 50 of the Customs Act, 1962 is applicable.
Assessable Value for exported goods: For the purposes of calculation of export duty, the
transaction value, that is to say the price actually paid or payable for the goods for delivery at
the time and place of exportation under section 14 of Customs Act 1962, shall be the FOB price
of such goods at the time and place of exportation.
Assessable value (for Exported Goods) = free on board (i.e. FOB)
Free on Board (FOB): FOB means all expenditure incurred by exporter upto the point of loading
goods into the vessel or aircraft or vehicle is incurred by the exporter and hence, from importer
point of view it is Free on Board.
Cost Insurance and Freight (CIF): CIF means once the goods are reached to the importer country
port or air port importer has to pay Cost (i.e. FOB value) along with Insurance and Freight from
exporter country to importer country.
Important point: As per our Foreign Trade Policy (2015-2020) all imports into India are measured
in terms of CIF value whereas exports from India are measured in terms of FOB value.
Baggage Rules, 2016. https://cacult.com/what-is-baggage-under-the-customs-act-
1962/amp/

In exercise of the powers conferred by section 79 of the Customs Act, 1962 (52 of
1962), and in supersession of the Baggage Rules, 1998, except as respects things
done or omitted to be done before such supersession, the Central Government
hereby makes the following rules, namely:-

• Short title and commencement. –

(1) These rules may be called the Baggage Rules, 2016.
(2) They shall come into force on the 1st day of April, 2016.

• Definitions. –

(1) In these rules, unless the context otherwise requires, –

(i) “Annexure” means Annexure appended to these rules;
(ii) “family” includes all persons who are residing in the same house and
form part of the same domestic establishment;
(iii) “infant” means a child not more than two years of age;
(iv) “resident” means a person holding a valid passport issued under the
Passports Act, 1967 (15 of 1967) and normally residing in India;
(v) “tourist” means a person not normally resident in India, who enters
India for a stay of not more than six months in the course of any twelve
months period for legitimate non-immigrant purposes;
(vi) “personal effects” means things required for satisfying daily
necessities but does not include jewellery.

(2) Words and expression used and not defined in these rules but defined
in the Customs Act, 1962 (52 of 1962) shall have the same meaning
respectively assigned to them in the said Act.

• Passenger arriving from countries other than Nepal, Bhutan or

Myanmar.-
An Indian resident or a foreigner residing in India or a tourist of Indian
origin, not being an infant arriving from any country other than Nepal,
Bhutan or Myanmar, shall be allowed clearance free of duty articles in his
bona fide baggage, that is to say, –
(a) used personal effects and travel souvenirs; and
(b) articles other than those mentioned in Annexure-I, upto the value of
fifty thousand rupees if these are carried on the person or in the
accompanied baggage of the passenger:
Provided that a tourist of foreign origin, not being an infant, shall be
allowed clearance free of duty articles in his bona fide baggage, that is to
say,
(a) used personal effects and travel souvenirs; and
(b) articles other than those mentioned in Annexure- I, upto the value of
fifteen thousand rupees if these are carried on the person or in the
accompanied baggage of the passenger:
Provided further that where the passenger is an infant, only used personal
effects shall be allowed duty free.
 Explanation.- The free allowance of a passenger under this rule shall not
be allowed to pool with the free allowance of any other passenger.

• Passenger arriving from Nepal, Bhutan or Myanmar.-

An Indian resident or a foreigner residing in India or a tourist, not being
an infant arriving from Nepal, Bhutan or Myanmar, shall be allowed
clearance free of duty articles in his bona fide baggage, that is to say,
(a) used personal effects and travel souvenirs; and
(b) articles other than those mentioned in Annexure -I up to the value of
fifteen thousand rupees if these are carried on the person or in the
accompanied baggage of the passenger:
Provided that where the passenger is an infant, only used personal effects
shall be allowed duty free:
Provided further that where the passenger is arriving by land, only used
personal effects shall be allowed duty free.

Explanation.- The free allowance of a passenger under this rule shall not
be allowed to pool with the free allowance of any other passenger.

• Jewellery.-
A passenger residing abroad for more than one year, on return to India,
shall be allowed clearance free of duty in his bona fide baggage of
jewellery upto a weight, of twenty grams with a value cap of fifty thousand
rupees if brought by a gentleman passenger, or forty grams with a value
cap of one lakh rupees if brought by a lady passenger.

• Transfer of residence.-

(1) A person, who is engaged in a profession abroad, or is transferring his

residence to India, shall, on return, be allowed clearance free of duty in
addition to what he is allowed under rule 3 or, as the case may be, under
rule 4, articles in his bonafide baggage to the extent mentioned in column
(2) of the Appendix below, subject to the conditions, if any, mentioned in
the corresponding entry in column (3) of the said Appendix.

(2) The conditions mentioned in column (3) of the said Appendix may be
relaxed to the extent mentioned in column (4) of the said Appendix.
APPENDIX

Duration of stay
Articles allowed free of duty Conditions Relaxation
abroad
(1) (2) (3) (4)
Personal and household articles, other
than those mentioned in Annexure I or
From three months Annexure II but including articles
Indian passenger –
upto six months mentioned in Annexure III upto an
aggregate value of sixty thousand
rupees.
From six months Personal and household articles, other Indian passenger –
upto one year than those mentioned in Annexure I or
Annexure II but including articles
mentioned in Annexure III, upto an
 aggregate value of one lakh rupees.
Personal and household articles, other
The Indian passenger
Minimum stay of one than those mentioned in Annexure I or
should not have availed
year during the Annexure II but including articles –
this concession in the
preceding two years. mentioned in Annexure III upto an
preceding three years.
aggregate value of two lakh rupees.
(a) For condition (i), shortfall
of upto two months in stay
(i) Minimum stay of two abroad can be condoned by
years abroad, Deputy Commissioner of
immediately preceding Customs or Assistant
the date of his arrival on Commissioner of Customs if
transfer of residence; the early return is on account
of :-
1. terminal leave or vacation
being availed of by the
passenger; or
2. any other special
circumstances for reasons to
Personal and house household articles,
be recorded in writing.
other than those listed at Annexure I or
Minimum stay of two
Annexure II but including articles
years or more. (ii)Total stay in India on (b) For condition (ii), the
mentioned in Annexure III upto an
short visit during the two Principal Commissioner of
aggregate value of five lakh rupees.
preceding years should Customs or Commissioner of
not exceed six months; Customs may condone short
and visits in excess of six months
in special circumstances for
reasons to be recorded in
writing.

(iii) Passenger has not

availed this concession in
the preceding three years.

No relaxation.
• Currency. –
The import and export of currency under these rules shall be governed in
accordance with the provisions of the Foreign Exchange Management
(Export and Import of Currency) Regulations, 2015, and the notifications
issued thereunder.

• Provisions regarding unaccompanied baggage. –

(1) These rules shall apply to unaccompanied baggage except where they
have been specifically excluded:
Provided that the said unaccompanied baggage had been in the
possession, abroad, of the passenger and is dispatched within one month
of his arrival in India or within such further period as the Deputy
Commissioner of Customs or Assistant Commissioner of Customs may
allow:
Provided further that the said unaccompanied baggage may land in India
upto two months before the arrival of the passenger or within such period,
not exceeding one year, as the Deputy Commissioner of Customs or
 Assistant Commissioner of Customs may allow, for reasons to be recorded,
if he is satisfied that the passenger was prevented from arriving in India
within the period of two months due to circumstances beyond his control,
such as sudden illness of the passenger or a member of his family, or
natural calamities or disturbed conditions or disruption of the transport or
travel arrangements in the country or countries concerned or any other
reasons, which necessitated a change in the travel schedule of the
passenger.

• Application of these rules to members of the crew. –

(1)These rules shall also apply to the members of the crew engaged in a
foreign going conveyance for importation of their baggage at the time of
final pay off on termination of their engagement.
(2) Notwithstanding anything contained in sub-rule (1), a member of crew
of a vessel or an aircraft other than those referred to in sub-rule(1), shall
be allowed to bring articles like chocolates, cheese, cosmetics and other
petty gift items for their personal or family use which shall not exceed the
value of one thousand and five hundred rupees.
ANNEXURE–I
(See rule 3, 4 and 6)

• Fire arms.

• Cartridges of fire arms exceeding 50.

• Cigarettes exceeding 100 sticks or cigars exceeding 25 or tobacco

exceeding 125 gms.

• Alcoholic liquor or wines in excess of two litres.

• Gold or silver in any form other than ornaments.

• Flat Panel (Liquid Crystal Display/Light-Emitting Diode/ Plasma)

television.
ANNEXURE II
(See rule 6)

• Colour Television.

• Video Home Theatre System.

• Dish Washer.

• Domestic Refrigerators of capacity above 300 litres or its equivalent.

• Deep Freezer.

• Video camera or the combination of any such Video camera with one or
more of the following goods, namely:-
(a) television receiver;
(b) sound recording or reproducing apparatus;
(c) video reproducing apparatus.

• Cinematographic films of 35mm and above.

• Gold or Silver, in any form, other than ornaments.
ANNEXURE III
(See rule 6)

• Video Cassette Recorder or Video Cassette Player or Video Television

Receiver or Video Cassette

• Disk Player.

• Digital Video Disc player.

• Music System.

• Air-Conditioner.

• Microwave Oven.

• Word Processing Machine.

• Fax Machine.

• Portable Photocopying Machine.

• Washing Machine.

• Electrical or Liquefied Petroleum Gas Cooking Range

• Personal Computer (Desktop Computer)

• Laptop Computer (Note book Computer)