indlaw.com

AN INTRODUCTION TO THE LAW AND PRACTICE OF CUSTOMS

- Mrinal satish - Sonali mohapatra

- Juhi mehta - Divya bharati sharma

The Customs Act was passed with the objective of curbing large-scale smuggling. The Land Customs Act and the Sea Customs Act had become too obsolete to deal with such problems and many other aspects related to customs. It was also necessary to regulate air customs specifically, as opposed to the old approach of governance of air customs by way of rules made under the Indian Aircraft Act, 1911.

IMPORTANT DEFINITIONS

1. Assessment [Section 2(2)]: the definition of assessment is an inclusive one. In the context of Income Tax, the Supreme Court has opined that assessment could mean all proceedings for raising money by the exercise of the power of taxationi. In the context of customs, the word assessment would mean the computation and fixation of the duty payable on a particular good, in accordance with the procedures laid down under the Act.

2. Baggage [Section 2(3)]: the term baggage has been inclusively defined under the Act to include unaccompanied baggage. The provisions of Chapter IX of the Baggage Rules, 1978, as framed under Section 79 by Notification No. 101-Cus., dated 16.5.78, further state that articles imported by a passenger with her/him on person or in their accompanied baggage fall under the category of baggage.

3. Goods [Section 2(22)] are defined as inclusive of vessels, aircrafts, vehicles, stores, baggage, currency, negotiable instruments, and other kinds of movable property.

4. Dutiable goods [Section 2(14)] are defined to mean any goods on which duty is payable under the Act and the same has not been paid.

5. Export [Section 2(18): simply speaking export means the act of taking goods from India to a place outside India. The question that then arises is what is meant by taking the goods outside India. It is a well-settled principle now that goods are said to be exported when they are actually taken out beyond the territorial limits of India. However for the goods to have been lawfully exported outside India, the procedure laid down under the Customs Act must have been followed. Unlawful taking out of the goods amounts to smuggling under the Act.

artTitle AN INTRODUCTION TO THE LAW AND PRACTICE OF CUSTOMS artAuthor SATISH artAuthor SONALI artAuthorJUHI MEHTA artAuthorDIVYA BHARATI SHARMA:1artLaws Customs artSubmissionDate 19/08/2000

Final Year, B.A. LL.B. (Hons), National Law School of India University.

indlaw.com

6. Import [Section 2(23) : Import means the act of bringing into India from a place outside India. Since under Section 2(27), India is said to include the territorial waters of India, the act of import can be said to have been completed only when the goods are brought within the territorial waters of India. Here also import is said to have taken place when the goods have been imported in accordance with the provisions of the Customs Act.

CHAPTER II

Chapter II (Sections 3-6) of the Act deals with officers of Customs. The Chapter specifies the classes of officers concerned, manner of their appointment and their powers.

CHAPTER III

APPOINTMENT OF CUSTOMS PORTS, AIRPORTS, WAREHOUSING STATIONS, ETC.

S.7: APPOINTMENT OF CUSTOMS PORTS, AIRPORTS, ETC.:

This section gives the power of appointment of customs ports and airports to the central government for the unloading of imported goods and the loading of export goods or any class of such goods. Further specific powers have been given to notify coastal ports for the carrying on of trade in coastal goods. A distinction therefore has been made between coastal and customs ports and the latter phrase no longer apply to ports, which handle coastal goods only.

S.8 POWER TO APPROVE LANDING SPACE AND SPECIFY LIMITS OF CUSTOMS AREA:

The Board under the previous Act exercised this power. The revised section however provides that the Collector of Customs shall exercise this power.

CHAPTER IV

SECTION 11

Under S.11, the central Government is given the power to prohibit or restrict, the importation and/or the export of the goods which are specified by it. Prohibition/restriction, and the goods to which the same applies have to be notified in the official gazette by the central government , and such restriction/prohibition has to be for the purposes within those specified in sub-section 2.There is a voluminous list of prohibitory/regulatory orders under this section both for export and import

OTHER STATUTES

This section has to be read with certain other statutes:

indlaw.com

1) Imports and Exports (Control) Act,1947, and the orders made thereunder, as these are deemed to be prohibitory orders under S.11.(This Act has now been repealed.The orders under it are now deemed the orders under S.4 of the Foreign Trade (Development and Regulation )Act,1992.Though an order made under S.3(1) of the Imports and Exports (Control ) Act is deemed to be an order under S.11, this does not mean that such an order is restricted to the purposes mentioned in Section 11(2) of the Customs Act.( Hoare Miller & Co. Ltd v. Asst Collector of Customs AIR 1935 Cal 440, at pp.443,444)

2) Foreign Trade (Development and Regulation )Act,1992- Scetions 3(2) and 3(3), and the orders made thereunder, which are deemed to be orders under S.11.

3) Rule 55 of the Aircraft Rules, 1937, which states that no person in any aircraft entering or departing from India shall carry or allow to be carried in the aircraft any goods of which the import or export by sea or by land is prohibited by or under any law

4) Livestock Importation Act, 1898- Under S.3, the central Government may , by notification in the official gazette regulate, restrict or prohibit the importation of any livestock which may be liable to be affected by infectious or contagious disorders, and also the import of any material appertaining to/in contact with such livestock.(The list of such infectious and contagious disorders has been notified by the Government by notification dated 29 July 1950).This section has be read with notification dated 19 December, 1951and Notification dated 10th December , 1959( as amended on 31st July, 1961 and 5th September, 1962) by which the central Government has prohibited the import of certain livestock to places other than a few places and also from certain places.

CONSEQUENCES:

Violation of prohibition/restriction under this section makes the goods liable to confiscation under under S.111 and the offender subject to penalties under S.112.Where the charge had been unlawful import and the unlawful importers were not detected, the penalty of confiscation was held imposable in whosoevers possession the goods were found. ( Kanungo and Co. v. Collector of Customs AIR 1965 Cal 248)Penalties for contravention are applicable even where the customs authorities permitted clearance by mistake. It is the importers duty to obey the law.(Collector of Customs and Central Excise v. Hindustan Motors AIR 1975 Cal 368, Best and Co. v.Additional Collector of Customs AIR 1965 Cal 478) SCOPE:

The Government is empowered only to prohibit or restrict import/export of specified articles or things and it is not sufficient to describe the different commodities ejudsem generis under a vague description ( see Karl Ettlinger and Co v Chagandas and Co AIR 1915 Bom 232.)

WHAT AMOUNTS TO CONTRAVENTION:

Contravention of S.3(1)( of the Imports and Exports Control Act , 1947 , S.3 of the Import Control Order, 1955 and S.11 of the Customs Act, 1962 would have arisen only if the importers had presented the Bill of Entry and made all the arrangements for the clearance of the goods with

indlaw.com

the willful intention of importing wrong goods .which is not the case here.(Uma Textiles v. Collector of Customs 1990(480 E.L.T 433 ( Tribunal)). Mere possession of prohibited goods does not attract the conclusion of unlawful import; the customs authorities must prove the breach of the prohibition.

ASSEMBLED PARTS:

Whereas particular part is capable of being a component of more than one item, and only one of such items is banned from being imported, import of the part is legal.(Wire Melting Stores v. Union of India 1964 Punj L.R.(Supp)132)But where a part has no other use than as a component of an article whose import is prohibited, import of the part is illegal since the importers cannot be permitted to do indirectly what they cannot do directly.(Giridhar Lal Bansidhar.v. Union of India AIR 1964 SC 1519 at p.1521)

FERA:

All restrictions with regard to the articled dealt by the FERA , howsoever imported, shall be deemed to be under S.11.Notification under S.8(1) , FERA, is deemed to be a notification under S.11.Though currency is not a good, export of currency in violation of S.8 is a violation of S.11 and invokes consequent penalties under the Customs Act.(Aggarwal Trading Corporation v. Asst Collector of Customs, Calcutta AIR 1972 SC 648) INDIAN MERCHANDISE MARKS ACT,1889

The Customs Act and this Act have to be ead together in certain instances and action may be taken under S.11 to prevent import of goods bearing fraudulent trademark.(Imperial Tobaco Co v. Albert Bonann AIR 1928 Cal 1)

CLASSIFICATION OF GOODS

It is the import control authority, i.e the Government which, primarily is to determine the head or the entry under which a particular commodity falls, but the court has the competence to interfere in cases of perverse classification. The court cannot, however, set aside a classification only because another classification which was more favourable to the importer was possible (Collector of Customs v. Ganga Setty AIR 1963 SC 1319, K.Ganga Setty v. Collector of Customs AIR 1957 Mad 19). Classification under Import Trade Control Policy and the Tarriff Act should be the same ,each being complementary to the other. It is good fiscal policy not to put the people in doubt over their liability to duty , and thus when a particular product known to trade and commerce in this country as well as abroad is imported, it would have been better if the article had been properly classified to avoid controversy.(Dunlop India v. Union of India AIR 1977 SC 597).While in a case where the notification is clear, the interpretation put upon it y a customs Officer of the rank of Assistant Collector can estop the Government from claiming afterwards that the interpretation was wrong, in other circumstances, interpretation by such officer can be used as an indication of what the notification means , and can in certain cases be binding upon the Government (Collector of Customs , Madras v. Lala GopiKissen Gokuldas AIR1955 Mad 187)

indlaw.com

POWERS OF CUSTOMS AUTHORITIES

The Act confers wide discretionary powers of confiscation and fine on the Customs Authorities. The fact that proceedings with respect to smuggling have been instituted before the magistrate does not mean that acquittal by the magistrate entitles the claimant to recovery of the property- it can be held by he customs authorities until duty and discretionary penalty consequent to their own adjudication under the Act have been paid. Authorities can even proceed independently without instituting proceedings before the magistrate.(Asst Collector of Customs and Excise v. Krishna Pillai AIR 1956 Mad 42 at p.43) .The offending goods may be confiscated b without proceeding personally against any person and without coming to a finding as to who was the smuggler.(Sherrnal Jain v. Collector of Central Excise AIR 1956 Cal 621)But the confiscation was held to be unjustified where the appellant had purchased the goods from a third party without knowing that they were smuggled. Kamrup Industries v. Collector of Customs and Central Excise 1990 (48) ELT 271(Tribunal))

NATURAL JUSTICE

Though procedure of courts need not be followed, principles of natural justice must be observed. A notice must be served to the person against whom [proceedings for confiscation are sought to be initiated, whether or not the statute provides for the same, disclosing the circumstances of initiation of proceedings(East India Commercial Company. v. Collector of Customs AIR 1962 SC 1893).But a person not interested in the importation of goods is not entitled to a notice about the confiscation of goods.(Collector of Customs v. Calcutta Cycle Syndicate AIR 1964 Cal 225).The customs authority (in this case the collector of customs) passing an order of confiscation is a quasi- judicial authority against whom a writ of certiorari could be issued by the High Court.( Satyendra Kumar Pal v. Collector of Customs and Excise AIR 1960 Assam 150)

CHAPTER IV-A

DETECTION OF ILLEGALLY IMPORTED GOODS AND PREVENTION OF THE DISPOSAL THEREOF

The President issued a Customs (Amendment) Ordinance in January 1969 to deal with the increase in the smuggling of silver out of the country and various consumer articles into the country. Chapters IV-A, IV-B and IV-C later replaced by the provisions of this ordinance as introduced by Act 12 of 1969.

S.11-A: DEFINITIONS

This section defines the following expressions used in this chapter: a) Illegal import b) Intimated place c) Notified date d) Notified goods

indlaw.com

Illegal import has been defined as import of any goods in contravention of the provisions of this act or any other law in force for the time being. A false denial or the credibility of a particular story [Isardas Daulat Ram v. Union of India, (1962) Supp. 1 SCR 358.] of a story can be treated as a relevant piece of evidence.

S.11-B: POWER OF CENTRAL GOVERNMENT TO NOTIFY GOODS

This section empowers the Central Government to notify goods to which these provisions will apply (see S.11-A(d) for definition of notified goods) if it is satisfied that the magnitude of smuggling in the such goods is such that it is expedient to take special measures. Where any goods have been so notified under this section, the onus to prove the illicit character is upon the Department. Mere foreign origin of goods does not indicate that the goods have been smuggled [Premji Electronics v. Collector of Customs, New Delhi, 1988 (16) ECR 534 at 535 (CEGAT)].

S. 11-C: PERSONS POSSESSING NOTIFIED GOODS TO INTIMATE THE PLACE OF STORAGE, ETC.

This section primarily provides for the following: All persons possessing notified goods on the notified date have to deliver a statement within

seven days to the proper officer of customs indicating the place of storage and such particulars of the goods as may be specified under the rules.

Those acquiring such goods afterwards for the first time also have to furnish similar information, the intimation in respect of the place of storage being delivered to the customs officer in advance and the particulars of the goods being furnished immediately on acquisition.

The transport of such goods from one place to another shall either be under cover of a voucher referred to in S.11-F, or by a transport voucher.

S.11-D: PRECAUTIONS TO BE TAKEN BY PERSONS ACQUIRING NOTIFIED GOODS

This section provides that no person shall acquire, except by gift or succession, any notified goods unless a sale voucher or evidence of clearance through customs accompanies them. Where the purchase is made from a person not having a fixed place of business the purchaser is also required to take such steps as specified by the rules so as to ensure that the goods acquired are not smuggled goods.

S.11-E: PERSONS POSSESSING NOTIFIED GOODS TO MAINTAIN ACCOUNTS

Where notified goods are found within the premises of a shop, accounts for the same have to be maintained immaterial of the fact whether they are for sale or not. The Act categorically provides that person owning, possession or having control of the notified goods in the shop premises have to maintain accounts in the prescribed manner [Abedali Rehmatali Mulwalla v. Collector of Customs and Central Excise, 1988 (37) E.L.T. 597 (Tribunal)].

This section, however, does not apply to repairers of notified goods. The repairers are, however, required to issue maintain a booklet showing the articles received for repairs. They are further

indlaw.com

required to issue receipts in duplicate, the original to be given to the person who gives the goods for repairs and the duplicate to be maintained [Ratan Ahuja v. Collector of Customs (Appeals), Bombay, 1988 (33) E.L.T. 622 (Tribunal)].

S.11-F: SALE, ETC. OF NOTIFIED GOODS TO BE EVIDENCED BY VOUCHERS.

S.11-G SECTIONS 11-C, 11-E AND 11-F: NOT TO APPLY TO GOODS IN PERSONAL USE.

The regulatory provisions of Sections 11-C, 11-E and 11-F do not apply to goods in personal use or goods kept in residential premises for personal use. But if such goods are sold, a sale memo has to be issued. Where the memorandum of transfer of goods is not issued the goods are liable to confiscation [Mani Ram Gupta v. Collector of Customs, 1989 (40) E.L.T. 161 (Tribunal)].

CHAPTER IV-B

PREVENTION OR DETENTION OF ILLEGAL EXPORT OF GOODS

S. 11-H: DEFINITIONS

Sub-clause (c) defines specified area as such area as may be identified by the Central Government but such area shall not exceed one hundred kilometers from any coast or other border of India. However, if any part of village, town or city falls within a specified area, the whole of such village, town or city shall be deemed to be included in the specified area, not withstanding that the whole of it is not within the abovementioned limit of one hundred kilometers.

S. 11-I: POWER OF CENTRAL GOVERNMENT TO SPECIFY GOODS.

S.11-J: PERSONS POSSESSING SPECIFIED GOODS TO INTIMATE THE PLACE OF STORAGE, ETC.

This section applies only to goods the market price of which exceeds Rs. 15,000/-

S.11-K: TRANSPORT OF SPECIFIED GOODS TO BE COVERED BY VOUCHERS

This section has been introduced to ensure that where the time, place, mode, etc. of transport is suspicious the customs officer should know beforehand about such transport. The section provides that whenever any specified goods are transported from, into and within any specified area, they shall be accompanied by a transfer voucher prepared by the person owning, possessing, controlling or selling such goods. This voucher however is not necessary where the market price of the goods does not exceed Rs. 1000/-. In certain circumstances the Central government has been empowered to specify that in certain circumstances it may specify that transport vouchers of goods of a market price exceeding a specified sum shall have to be countersigned by the proper officer of the customs.

indlaw.com

S.11-L: PERSON POSSESSING SPECIFIED GOODS TO MAINTAIN ACCOUNT

This section provides that any person possessing notified goods of market pricing Rs. 15,000/- shall maintain accounts in the prescribed manner. There is also a rebuttable presumption that when the stock of goods is less than the balance shown in the books the shortfall is due to goods having being smuggled out.

A firm is required to enter every transaction in the notified goods into his books. Where however the proprietor was not present at the time the consignment was received and within 15 minutes of the receipt of the goods (in this case, silver) the customs officer visited the premises of the shop for verification but no other transaction had taken place between the receipt of the goods and the arrival of the customs officer, it cannot be said that there has been a violation of S.11-L [Shah Champaklal Balubhai v. Additional Collector of Customs, Ahmedabad, 1988 (16) E.C.R. 1.]

NATURE OF SS. 11-J, 11-K AND 11-L

These provisions are in the nature of prohibitions and not mere regulations, which will entail confiscation of goods under S.113 (1). This becomes clear when one considers that the object behind introduction of Chapter IV-B is the prevention and detection of illegal export of goods. However, the prohibitions under this chapter cannot be considered to be prohibitions with regard to acts, which are preparatory to export. In such cases even the contravention of such prohibitions will only entail confiscation under the Act. Although the definition of smuggled goods has been extended to goods which are not properly the subject matter of exportation, the prosecution has to prove that the person charged with the commission of an offence under S.135 of the Act knowingly concerned himself in any fraudulent evasion or attempt at evasion of any prohibition. Whether or not there is in fact any such fraudulent evasion or attempt at evasion of any prohibition will have to be determined in a given case in the light of the facts and circumstances and the nature of the accusation contained in the complaint [State of Maharastra v. Union of India (1974) 76 Bom.L.R 738].

S.11-M: STEPS TO BE TAKEN BY PERSON SELLING OR TRANSFERRING ANY SPECIFIED GOODS

This section has been introduced to ensure that people do not account for smuggled goods by drawing up factitious sales accounts. Thus, unless a seller/transferor receives payment by cheque drawn by the purchaser, he shall obtain on his copy of the sales voucher, the signature and full postal address of the purchaser/transferee and shall also take such reasonable steps as specified by the rules. If on investigation the purchaser/transferee is either discovered to be fictitious or is not easily traceable, there is a presumption that such goods have been illegally exported. This presumption, however, is rebuttable and fair and adequate opportunity has to be given to the accused to rebut the same [Manilal Bhanabhai Patel v. Union of India, (1992) 38 E.C.C. 113].

CHAPTER IV-C

Chapter IV C of the Customs Act contains only one section, S.11 N. The section empowers the Central Government to exempt certain goods from the provisions of Chapters IV A and IV B

indlaw.com

CHAPTER V

SECTION 12: DUTIABLE GOODS

Customs duties are levied at rates specified under The Customs and Tariff Act, 1975. Duties are levied on both import and export of goods. Amendments to the rates are made every year by the Annual Finance Act. In order to decide the quantum of duty payable the present Section has to be read along with the Customs and Tariff Act and the amendments thereto.

Section 12 is the charging section of the Act. Judicial decisions under the Section have tried to distinguish between chargeability and assessment. It has been observed by the courts of law that chargeability is an issue that has to be decided under the section, since this section lays down the rates of duty that are to be levied on the goods. Thus once the goods are charged under the Section the question of assessment of the amount of the duty payable would ariseii The time of occurrence of the taxable event is crucial to the issue of chargeability. A taxable event is said to have occurred when the goods enter into the territorial waters of India. This is evident from a joint reading of the definition of import contained in Section 2(23) and Section 12(1). The liability to pay import duty, however, attaches the moment the good are brought into the territory of India, irrespective of whether they have been unloaded from the ship or no. Case law has also reiterated such a position.

In the case of export duty, duty becomes chargeable when goods are to be exported from the landmass of India. Since it would be an impossibility to collect duty when the goods are actually taken out of the territorial waters of India, for the sake of administrative convenience the export duty is to be collected before the goods leave the landmass of India.

SECTION 13: DUTY ON PILFERED GOODS

The purpose of the Section is to ensure that an importer is not made to pay duty on the goods that have been pilfered. The Section clearly states that imported goods pilfered after an order for clearance for home consumption/deposit in a warehouse of the same has been made, shall be liable to payment of duty by the importer unless the goods are restored to the importer.

SECTION 14:VALUATION OF GOODS FOR PURPOSES OF ASSESSMENT

This Section lays down the following parameters on whose basis goods are to be valued for the purpose of assessment-:

1. The price at which the imported/exported goods are offered for sale; 2. The price offered for delivery at the time and place of importation or exportation; 3. Price quoted in the ordinary course of international trade, where the seller and the buyer

have no interest in the business of each other and where the price is the sole consideration for the sale or the offer for sale.

As such the value of the goods to be ascertained above, is a deemed value of the goods. It would thus follow that even if the prices of the goods have been commercially negotiated the value of the goods can be ascertained in accordance with the price of the goods concerned in the ordinary course of business. Case law has recognized this principle.

indlaw.com

The section clearly lays down that the price of the goods is to be ascertained in accordance with the rates of exchange in force at the time the bill of entry is presented under Section 46, or the rates prevailing at the time of the presentment of the shipping bill or bill of export, as under Section 50.

The Customs authorities are usually supposed to go by the invoice price of the good in ascertaining their value. However, if the price quoted in the invoice is too low, or if the authorities are satisfied that the invoice itself is a false document, the contract in question is not a genuine one, the authorities may go against the invoice price and ascertain the price of the goods in accordance with the prevailing price at which goods of similar quality, characteristic, origin etc are offered for sale. The onus of proving under invoicing, low pricing or misdeclaration is upon the Department.

The following are included as part of the price of the goods for the purpose of valuation-:

1. Expenses such as landing charges can be included as part of the price of the goods. This is because, goods cannot be sold without payment of these charges and because they are paid prior to the unloading of the goods. This principle was laid down in a number of cases.

2. It has further been laid down that all payments made in due course up to the stage of unloading are to be treated as part of the price of the goods. In cases where machinery is sold on the assurance that the seller would install the same also, the costs of installation shall also form part of the cost/price of the machinery. This was laid down in Aarkeyees Imports Corporation, New Delhi v. Collector of Customs, New Delhiiii. As a corollary to this principle it has further been observed that dismantling charges, if they form part of the contract of sale are also to be included while computing the price of the goods in question.

The following reductions are permitted-: 1. Depreciation in case old goods are being traded in are also permitted while arriving at the

price of the goods for the purpose of valuation. 2. Discounts made by the seller to the buyer are also deducted. Special discounts made to a

buyer are however not permitted to be excluded from the price of the goods.

The relevant date for the levy of duty under this Section is the date the goods entered the territorial waters of India. Thus duty would be levied on goods even if at the date of levy the goods are exempt from payment of duty, in case duty was leviable on the goods on the date they entered the territorial waters of India.

SECTION 15: DATE FOR DETERMINATION OF RATE OF DUTY AND TARIFF VALUATION OF IMPORTED GOODS

Rate of duty and tariff valuation on imported goods is to be paid at the following rate and valuation-:

1. In respect of goods entered for home consumption under Section 46 on the date of the bill of entry in respect of the goods in question. Thus the date at which the goods entered into the territorial waters of India has no relevance to the rate of duty to be levied on the goods, except the fact that as sated under Section 12, such a date is relevant to ascertain the time of occurrence of the taxable event. Furthermore the delivery of the bill of entry is deemed to

indlaw.com

have been delivered on the date on which an order is given under Section 57 for the entry of the vessel inwards.

2. In case of goods cleared from a warehouse under Section 68, on the date on which the goods are removed form the warehouse. Thus if the between the time the goods were put into the warehouse and the time that they were taken out from the warehouse, the duty is increased, the duty leviable on the goods would on the basis on the rates prevailing at the time the goods were taken out from the warehouse.

3. In case of any other goods, on the date of payment of duty.

The decisive date as far as chargeability of duty is concerned is the date of filing of the bill if entry. Therefore duty is leviable as per the rates prevailing on the date of entry inwards of the vessel. This principle was laid down in M/S Shah Devchand and Company v. Union of Indiaiv, Northern Corporation v. Union of India.v.

SECTION 16: DATE FOR DETERMINATION OF RATE OF DUTY AND TARIFF VALUATION OF EXPORT GOODS

Rate of duty and tariff valuation on export goods is to be paid at the following rate and valuation-:

1. In case of goods entered for export under Section 50, on the date on which an order permitting clearance and loafing of the goods is made (Such orders are made under Section 37 of the Act). This basically means that the relevant date in case of export goods as far as valuation of rate of duty payable would be the date of entry outwards of the vessel, irrespective of the date of filing of the shipping bill, as the shipping bill may have been filed prior to the date of entry outwards. On such date of entry the shipping bill must have been duly passed by a proper officer and obligations such as examination and testing of the goods intended for export must have also been complied with. ;

2. In any other case on the date of the payment of the duty.

As far as exports by land are concerned the relevant rate is the rate and valuation prevalent at the time the application for permit to export is filed. This was laid down in Anant Atmaram Wara Wadekar v. Land Customs Officer-in-Chargevi.

SECTION 17:ASSESSMENT OF DUTY

This Section lays down the procedure to be followed as regards assessment of duty.

SECTION 18: PROVISIONAL ASSESSMENT OF DUTY

Section 18(1) (a), (b) and (c) clearly spell out the conditions under which provisional assessments can be made, manner of adjustment of provisional assessments against final assessments etc.

SECTION 19: DETERMINATION OF DUTY WHERE GOODS CONSIST OF ARTICLES LIABLE TO DIFFERENT RATES OF DUTY

indlaw.com

SECTION 20: RE-IMPORTATION OF GOODS PRODUCED OR MANUFACTURED IN INDIA

The exemptions listed under the Section are available only if the goods re-imported are essentially the same as the goods that had been exported initially.

SECTION 21: GOODS DERELICT, WRECK, ETC

SECTION 22: ABATEMENT OF DUTY ON DAMAGED OR DETERIORATED GOODS

This Section lays down the manner and proportion in which duty is to be payable on damaged or deteriorated goods.

SECTION 23: REMISSION OF DUTY ON LOST, DESTROYED OR ABANDONED GOODS

Under this Section, if it is proved that the goods had been damaged/lost/destroyed before they were cleared but subsequent to the passing of an order for clearance, the duty payable on such goods shall be remitted. It has been held by way of judicial decisions that lost in the context of Section 23 means loss by way of natural causes and it does not include loss of goods by theft, since theft is not a natural cause.

SECTION 24: POWER TO MAKE RULES FOR DENATURING OR MUTILATION OF GOODS

SECTION 25: POWER TO GRANT EXEMPTION FROM DUTY

Section 25(1) empowers the Central Government to exempt either absolutely or conditionally any category of goods from the levy of duty, in whole or in part.

Section 25(2) empowers the government to issue exemption orders with respect to goods selected from a category. The reasons for such exemption are to be exceptional, required in public interest. The reasons have to be mentioned in the exemption order passed by the Government.

The difference between Section 25(1) and (2), is that while no duty is leviable on goods falling under categories mentioned in clause (1), goods covered under Clause (2) are such that normally duty is liable to be paid on them, but not in the cases falling under the said clause due to specific exemptions being granted to the importer in question. This power can be exercised at any point of time. The exemption may be granted before the levy of the duty, after the levy of the duty but before its collection, and even after the collection since an order for refund of the same can be made. This was laid down in M.R.F. Ltd. v. Union of Indiaviiand M.S Shawhney v .M/S Sylvania Laxman Ltdviii.

In this context a lot of judicial controversy has focused on whether the plea of promissory Estelle is available against the government. Generally speaking the plea of promissory estoppel is not available against a statute. The government has the power to levy duties and the alter the rates fixed as and when it is thought fit. Thus the mere fact that the duties have been altered to the

indlaw.com

disadvantage of a party does not mean that the power under Section 25 has been exercised arbitrarily. This principle is accepted by majority of cases, though there are some contrary decisions also.

It has also been held that in case of ambiguities in the exemption notifications, the matter \should be resolved in favour of the taxpayer. This principle is a well settled one in the context of interpretation of fiscal legislations. Moreover the exemptions granted must be given effect to by the authorities. These principles were laid down Tamil Nadu Newsprint and Papers Ltd., Madras v. Appraiser, Madras Customsix and Haryana Plywood Industries v. Collector of Customsx.

SECTION 26: REFUND OF EXPORT DUTY IN CERTAIN CASES

The section clearly lays down the conditions under which refund of export duty paid may be asked for.

SECTION 27: CLAIM FOR REFUND OF DUTY

An application for refund can be made only within six months of the date of payment of the duty. The effect of this provision like any other provision relating to limitation is that it bars a persons remedy to claim refund of duty after a certain point of time, but does not extinguish such a right.

The right to refund arises only when duty has been paid under a legal obligation. It has been observed by way of case law that when duty is paid in pursuance of orders of authorities that lack jurisdiction, the provisions of Section 27 are not. This was laid down in Atul Products v. Union of Indiaxi and East Angila Plastics (I) Ltd. v. Asst. Collector Of Customsxii.

The application for refund can be made only within 6 months of the from the date of payment of the duty in normal circumstances, or within 1 year in case the duty had been paid under protest. It has been held that the limitation period so prescribed is not liable to be extended or condoned. In other words the Customs authorities are said to be devoid of the power to condone delays in filing applications for refund of duty. This was laid down in Andhra Pradesh State Electricity Board Vidyut Soudha v. Government of India, Ministry of Finance (Department of Revenue Insurance)xiii, (1989) 30 E.l.T. 641(1) (SC), Randip Shipping and Transport Company Limited. v. Collector of Customsxiv.

SECTION 28: NOTICE FOR PAYMENT OF DUTIES NOT LEVIED, SHORT-LEVIED OR ERRONEOUSLY REFUNDED

Under this Section, Customs authorities may issue notice for payment of duties not levied, short levied or erroneously refunded. The person is required to show cause why they should not pay such duty back to the Customs authorities. The notice under this Section is to be issued within 6 months of the date of non-levy, short levy or erroneous refund. In G.F. Industries v. Union of Indiaxv, it was observed that a notice for reclaiming refunds which were erroneously made must be made within 6 months of the making of such a refund.

indlaw.com

The applicability of this Section is said to be limited only to final assessments. The Section therefore does not apply to provisional assessments.xvi The notice of refund is to be made to the owner of the concerned business. Notice to agents can also be made if the Customs authorities are satisfied that the same can be recovered from the owner, importer or exporter.xvii This principle is in line with the normal principles of agency which lay down that the agent cannot have more powers that those of her/his principal.

It has been observed in a number of cases that the requirement of giving notice under this Section is a principle of natural justice and in the event of non-observance of the same liability for repayment cannot be imposed upon an individual.

SECTION 28-A: POWER NOT TO RECOVER DUTIES NOT LEVIED OR SHORT LEVIED AS A RESULT OF GENERAL PRACTICE

This Section empowers the Central Government to recover duties lower than what would normally be levied on goods or not to recover duties on such goods, in case the normal practice is that no duties to duties lower than normal duties are recovered in respect of such goods. Furthermore, duties if any paid may be refunded to the person concerned under Section 27(2), in case they have been paid in respect of goods for which no duty is leviable or lower duties are leviable by virtue of a notification under this Section.

SECTION 28-B: DUTIES COLLECTED FROM THE BUYER TO BE DEPOSITED WITH THE CENTRAL GOVERNMENT

Any duties collected from buyers, by any person, are required to be deposited with the Central Government. This amount is later liable to be adjusted against the duty to be paid by the person under a final assessment order. Excess amounts can either be credited to the fund or can be refunded to the person concerned.

CHAPTER V-A INDICATING AMOUNT OF DUTY IN THE PRICE OF GOODS, ETC., FOR

PURPOSE OR REFUND

S.28-C AND S. 28-D

These sections provide that where a person who is liable to pay duty in goods shall at the time of clearance of goods prominently indicate in all documents relating to assessment, sales invoice, etc, the amount of such duty which will form part of the price at which such goods are t o be sold. They also raise a presumption that every person who has paid a duty under this act, unless the contrary is proved, has passed on the full incidence of such duty to the buyer of such goods.

SECTION 29

Section 29 provides that any vessel or aircraft entering India for the first time has to land only at a customs airport or Customs port. Customs Airport and Customs Port refer to ports and airports duly notified under S.7

indlaw.com

SECTION 30

This section requires the submission of an Import manifest or an Import report within 24 hours of a vessel, aircraft or vehicle arriving at a customs station. Customs station refers to Customs ports, Customs Airports and Land Customs stations which have been notified under S.7 Imported Goods have been defined in S.2(25) as any goods brought into India from a place outside India, but does not include goods which have been cleared for house consumption. The definition of import and imported goods does not imply requirement of intention of knowledge or intention on part of the person in-charge of the conveyance. Thus, although the prohibited goods may have been carried in the vessel without the knowledge of the person in charge of the vessel, the fact that the goods arrived in India from a place outside India makes them imported goods . The responsibility to submit a correct return or suffer the consequences of an incorrect return is a strict liability of the master of the vessel. The safeguard provided is that he would be given a chance to amend the manifest a discovery.(B-218, James David Crighton v. S.K.Srivastava AIR 1969 Cal 260). However, only legitimate goods and not contraband are to be included in the manifest; penalty is not imposable for non-amendment of the manifest by inclusion of contraband after its seizure in absence of fraudulent intention. The import manifest s amendable in case of accidental slip or omission to include

IMPORT MANIFEST

In case if a vessel, it is open to submit the manifest before the arrival of the vessel at the port. Submission does not necessarily or inevitably add up to the probability that the ship ha entered into the territorial waters of India.( National Textile Corporation Ltd. v. Collector of Customs , Madras 1986(26) E.L.T 275 (Tribunal))

S.30 has to be read with the Import Manifest (Vessels) Regulations,1971, the Import Manifest (Aircraft) Regulations, 1976 and the Import Report (Form) Regulations, 1976. Goods are liable for confiscation of the import manifest id found to be forged. (J.B. Trading Corporation v. Union of India 1990 (45) E.L.T 9 (Mad)).This is under S.111(f). Penalty is prescribed in S.112(a).

PENALTY

Where incorrect declaration was made by the Chief Purser on behalf of the master, it is the master who is liable for penalty under S.112 and the chief Purser is liable for abetment under S.112(be). It is the person in charge of the conveyance and not his agent who is made responsible.(Ramesh Amritlal Shah v. Collector of Customs , Bombay 1986(26) E.L.T 795(Tribunal)). Where there is a shortage in goods as per import manifest under S.30, imposition of penalty for short-loading of goods under S.116, Customs Act is justified. (Savitri & Company. v. Government of India 1983 E.L.T 900 (A.P).Since the Customs Act provides for the extension of the 24 hour tie limit for submission of the import manifest/report in certain cases, S.10 of the General Clauses Act cannot be invoked.( National Textile Corporation v. Collector of Customs , Bombay 1987(14) E.C.C.T-449 at pp.T-450,451(A.T))

indlaw.com

SECTION 31

This section provides that unloading of goods from a vessel can commence only upon entry inwards order being made by he proper officer which order is to be made only after the submission of import manifest. Grant of entry inwards depends upon the availability of berthing accommodation and there is no duty upon the proper officer to grant the entry inwards forthwith upon the submission of manifest. (Devpal Dhir v.B.V.Kumar, Collector of Customs 1987 (32) E.L.T 459 (Bom))

Though the importer may present the Bill of Entry (see S.46) before the entry inwards is granted, the Bill of Entry shall be deemed to have been presented only on the date of such grant. Therefore, the rate of duty has to be ascertained and assessed with respect to the date of entry inwards.( Anantpur Textile Ltd. v. Collector of Customs 1988 (33) E.L.T 12 (Cal)) The customs officer has no jurisdiction to assess the Bill of Entry prior to this date, and even if this is done, it cannot be treated as completed assessment. (Devpal Dhir v.B.V.Kumar, Collector of Customs 1987 (32) E.L.T 459 (Bom))

Change of berthing of the vessel within the same port does not make a higher rate of duty prevailing on date of such change applicable.( Kailash Chander Kapur v. Collector of Customs 1990 (45) E.L.T 586 , at p.589 (Tribunal))

SECTION 32

This Section prevents the unauthorized landing of goods. Imported goods not specified in the import manifest cannot be unloaded at a customs station unless specific permission of the proper officer is taken.

Proper officer under this section and the previous sections means ( as defined in Section 2(34) ) the officer of customs who is assigned to the functions in question by the Central Board of Excise and Customs or the Collector of customs.

SECTION 33

Under this Section, loading and unloading of goods is to take place only at places approved under S.8(a). S.8(a) gives the Collector of Customs the power to approve proper places in any Customs port, airport or coastal port for the unloading and loading of goods or class of goods. However, loading/unloading may be at any other place provided the proper officer had permitted the same.

SECTION 34

It is required that unloading/loading must be only under the supervision of the proper officer unless permitted by the board ( by way of general permission) or the proper officer (In specific cases) to load/unload without supervision. Where the port trust has been given the authority to give direct delivery of bulk cargo to the importers , weightment certificate given by the authority has to be respected by the Customs authorities to ascertain shortage in terms of the proviso to this section.

indlaw.com

SECTION 35

The section lays own the requirement that goods must be accompanied by a boat- note when they are water- borne for being landed/shipped. In case of goods for export, this is required only when no shipping Bill accompanies the goods. This provision must be read with Boat note Regulations, 1976, (issued by notification dated 23-10-1976, as amended by notification dated 22-10-1977) which specifies the form and other details of the boat- note.

SECTION 39

There is no difference between the words entry outwards of the vessel used in S.16, and the words entry outwards to the vessel used in this section.(Gangadhar Narsingdas v. Asst. Collector of Customs AIR 1968 Goa 105). Baggage includes any unaccompanied baggage, but does not include motor- vehicles (S.2(23))

SECTION 40

No action can be taken under this section where provisional assessment has been made and the assessee has consented to pay the balance amount after the final assessment has been completed.(B.W. Maltazan v. Collector of Customs AIR 1958 A.P.122)

SECTION 41

The section requires delivery of export- manifest/export-report before a vessel, aircraft or other vehicle leaves a customs port , airport oor land- customs station. This has to be read with the Export Manifest (Vessels) Regulations, 1976 and the Export Report (Form ) Regulations, 1976.

SECTION 42

This section delays the departing of a conveyance from a Customs station until all the requirements under the Act have been satisfied. Deposit of amount or execution of bond under this section is independent of deposit under S.129-E. The two are mutually exclusive.(Shaw Wallace & Company. Ltd. v. Collector of Customs, Bombay 1987 (27) E.L.T 489, at pp.491-92 (Tribunal))

CHAPTER VII

Chapter VII of the Act deals with clearance of imported and exported goodS. It consists of 8 sections, 44-51.

The Chapter does not apply to baggage and postal articlesxviii. S.45 of the act deals with restriction on custody and removal of improved goodS. It mandates that goods unloaded in a customs area, shall remain in the custody of such person as may be approved by the Collector of Customs, until they are cleared for home consumption or are warehoused or are transhipped. The person having custody of any imported goods in a customs area is expected firstly, to keep a record of such goods and a copy of thereof to the proper officer and secondly, he is under an obligation not to permit

indlaw.com

such goods to be removed from the customs area or otherwise deal with, except under and in accordance with the permission in writing of the proper officer.

S.46 of the Act deals with the entry of goods on importation. It says that the importer of any goods, other than goods intended for transit or transshipment shall make entry thereof, by presenting to the proper officer, a bill of entry for home consumption or warehousing in the prescribed form. However, if the importer makes and subscribes to a declaration before the proper officer, to the effect that the he / she is unable to furnish all the particulars of goods required under the subsection for want of full information, the proper officer, has been empowered, pending the production of such information, to permit the importer, previous to the entry thereof, to examine the goods in the presence of an officer of customs or deposit the goods in a public warehouse, appointed under S.57, without warehousing the same.

With respect to the contents of the bill of entry, the section says that it shall include all the goods mentioned in the bill of lading or any other receipt given by the carrier to the consignor.

The bill of entry may be present at any time after the delivery of the import manifest or import report, as the case may be. However, the collector of customs is empowered, under special circumstances, to permit a bill of entry to be presented before the delivery of such report. Further, 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 to India is expected to arrive within a week from the date of such presentation.

The importer, while presenting the bill of entry has to declare on the Bill of Entry (BoE) that the contents of the BoE are true ands support this declaration has to produce to the proper officer, the invoice if any, relating to the imported goodS.

If the proper officer, is satisfied that the interests of revenue are not prejudicially affected and there was no fraudulent intention, he may permit substitution of a bill of entry for home consumption for a bill of entry for warehousing and vice versa.

S. 46 along with S.15 quantify the liability for payment of duty on imported goodS. The crucial date for this purpose is the date on which the BoE is presented. The Bill of Entry, thus given the value of the goods and the importer has to declare this value in the BoE. If the real value of the goods is higher than the value declared in the BoE, it amounts to evading payment of the proper customs duty. In such a case, the importer would be liable for punishmentxix

The issue here is whetherS.46 is mandatory or directory. This arose in the case of Chowgule and Co. v. Union of India xx. The Court in this case ruled that the use of the word shall in S.46 makes it appear mandatory. However, this does not appear to be correct when it is read with S. 48 of the Act. The essence of the provision is the making of the entry of the imported goods, the manner in which the entry is made being only an issue of procedure. The presentation of the Bill of Entry is a pure procedural aspect of the making of the entry of imported goodS. The legislature did not wish to make Section 4 mandatory and the section is merely directory as regards the requirement of presentation of the Bill of Entry in the prescribed form.

indlaw.com

Filing of the BoE is merely to facilate assesment of duty and by itself does not create liability. This is by virtue of S.12. It has been held in S.P.A and A.R Chockalingam Chettar Firm v. National Steamship Co., Bombayxxi that declarations made under S.29, Sea customs Act, which corresponds to this section cannot be said to be conclusive.

CLEARENCE OF GOODS FOR HOME CONSUMPTION [S. 47]

If the proper officer is satisfied that any goods entered for home consumption are nor prohibited goods and their importer has paid the import duty, if any assessed thereon and any charges payable under the Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption.

Where the importer fails to pay import duty under S. 57 (1) within seven days from the date on which the BoE is returned to him for payment of duty, he has to pay interest at the rate fixed by the board, which will not be less than 20% and not greater than 30%, on the duty till date of payment of such duty.

The section contains a provision which states that where the bill of entry is returned for payment of duty before the commencement of the Customs (Amendment) Act, 1991 ands the importer has not paid such duty before such commencement, the date of return of such bill of entry to him shall be deemed to be the date of such commencement for the purpose of the section.

Once the goods have been cleared after verification and check under S. 47, there is no scope for issuing a show-cause notice. The section attracts finality to the decision of the officer and this cannot be disturbed unless the department is able to prove that there was fraud or deliberate suppression.

The role of the officer, as per this section, is to examine whether the goods are prohibitted or not and whether the import duty and other charges under the Act have been paid. If he / she is satisfied that the above conditions are met, he / she is empowered to clear the goodS. Once cleared, the only option available to the Department is Revision under S. 130.

S. 48 lays down the procedure in case of goods that are not cleared, warehoused or transhipped within 30 days or such time as the power officer may allow after unloading or if the title to any such imported goods is relinquished, such goods may be sold by the person having the custody thereof. Prior to such sale, the permission of the proper officer has to be taken and notice of the same has to be given to the importer.

The section contains a proviso to the effect that animals, perishable goods and hazardous goods may be sold at any time, with the permission of the proper officer and in case the goods are arms and ammunition, as defined in the Arms Act, 1959, they can be sold at such time, place and manner as the central government may direct.

S. 49 provides for storage of imported goods in a public or private warehouse pending clearance. The section states that in case of any imported goods, whether dutiable or not, entered for home consumption, the Assistant Collector of Customs is satisfied on the application of the importer, that the goods cannot be cleared within a reasonable time, the goods may pending clearance be

indlaw.com

permitted to be stored in a public warehouse or in a private warehouse. If facilities for deposit in a public warehouse are not available. But, such goods for the purposes of this Act, and accordingly, the provisions of chapter IX shall not apply to such goods.

CLEARANCE OF EXPORT GOODS

Sections 50 and 51 deal with the clearance of export goodS.

S. 50 states that the exporter of any goods shall make entry thereof presenting to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export in the prescribed form. The exporter, while presenting such a shipping bill or bill of export has to make and subscribe to a declaration as to the truth of its contents.

S. 51 deals with the clearance of goods for exportation. As per the Section, where the proper officer is satisfied that any goods entered for export are not prohibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under the Act in respect of the same, the proper officer may make an order permitting clearance and loading for the goods for exportation.

CHAPTER VIII

GOODS IN TRANSIT

Sections 52-56 deal with goods in transit. The basic principle underlying these Sections is that goods in transit are not liable to be subjected to any customs duty. This exemption is applicable to goods imported by vessels or aircrafts and which are mentioned in the import manifest as meant transit goods (Section 53). Under Section 54 a bill of transshipment is required to be presented in respect of goods which are meant to be transshipped.

Imported goods, under Section 56 may be transported without payment of any duty form one land customs station to another, either through any part of India or any other foreign territory, without the payment of any duty in respect of such goods.

CHAPTER IX

WAREHOUSING

S.57: APPOINTING OF PUBLIC WAREHOUSES

The power to appoint public warehouses now rests with the Asst. Collector of Customs.

S. 58: LICENSING OF PRIVATE WAREHOUSES

This section has introduced the following amendments: The asst. collector of customs has been granted the power to license private warehouses It has been specifically provided that in private warehouses, ordinarily only the goods

belonging to the licensee shall be kept

indlaw.com

There are comprehensive grounds on which the license can be cancelled There is also a provision for suspension of license pending enquiry.

Cancellation of license and refusal to renew the same: Licensees of private bonded warehouses cannot be refused a renewal of their licenses or their license cancelled on the simple ground that public warehouses have been constructed and the same shall be used. Every application for issuance or renewal of license for a private warehouse has to be considered on its merit [Pesticides Limited v. Assistant collector of Central Excise & Customs, Udaipur, 1987 (30) E.L.T. 651]. It has also, however been observed that it may be sound policy not to grant a license under this section in any warehousing station in case a public warehouse under the previous section has already been at that warehousing station [Bajaj Plastic Limited v. Collector of Central Excise, Nagpur, 1987 (32) E.L.T. 383].

S.59: WAREHOUSING BOND

This section introduces the following amendments: Goods imported by land are allowed to be warehoused. It enables an importer to enter into a general bond for the warehousing of goods to be

imported by him within a specified future period. It provides that even if the goods are transferred to another person, the bond executed by the

seller shall remain in force, but if the transferee executes a fresh bond in respect of the purchased goods, the bond executed by the transferor shall be deemed to be reduced to the extent of the amount for which the transferee executes the bond.

Where the Shipping Corporation of India corrected a freight bill, the customs authorities are under an obligation to proceed on the basis of the corrected freight. Where any assessment has already been made as per the incorrect freight, such assessment has to be redone on the basis of corrected freight. Where no assessment has been made, such assessment shall be made strictly in accordance with the corrected freight as shown by Shipping Corporation of India [Hindustan Products v. Collector of Customs, 1988 (34) E.L.T. 13]

With regard to interest, the words together with interest in S.59 (b) are sufficient to show that interest is linked with duty. The liability to pay interest cannot be delinked from the liability to pay duty. The importers liability to pay duty arises at the time of clearance of goods from the warehouse. There is no obligation to pay while the goods are in the warehouse. Thus, where the duty on the goods are lifted before clearance, there is no duty to pay interest [Thengubhandra Fibres Limited v. Union of India, 1990 (30) E.C.C. 388].

S. 59-A: CONDITIONS FOR WAREHOUSING OF CERTAIN GOODS

S.60: PERMISSION FOR DEPOSIT OF GOODS IN A WAREHOUSE

S. 61: PERIOD FOR WHICH GOODS MAY REMAIN WAREHOUSED

An application for the extension of warehousing period need not necessarily be made before the expiry of the original warehousing period. The authorities are bound to consider an application for extension, unless they have already initiated coercive steps to recover customs duty and

indlaw.com

warehousing and other charges [Sunil Jugalkishore Gupta v. Union of India, 1987 (14) E.C.C. 165]. Interpretation of non-consumable stores- non-consumable stores in S. 61 (1) (a) has been interpreted to mean only the non-consumable stores for use in a vessel or aircraft as the term stores has been defined in S. 2 (38) as goods for use in a vessel or aircraft [Collector of Central Excise, Jaipur v. Rajasthan Spinning and Weaving Mills 1987 (12) E.C.R. 1015].

S. 61(2)- this section contemplates collection of interest on amount of duty on the warehoused goods from the period of expiry of three months till the date of clearance of goods from warehouse [Hindustan Zinc Limited v. Collector of Customs, 1990 (49) E.L.T. 419]

Prospective effect of the Amendment- it is a well-accepted principle of law that fiscal legislation imposing liability is generally prospective in nature. In this amendment, there is nothing to show that it is meant to operate retrospectively and neither is there any implied inference in this regard. Keeping these considerations in mind, the tribunal has decided that the amendment is applicable prospectively [Collector of Customs and Central Excise v. J.K. Synthetics Ltd. 1991 (56) E.L.T. 236].

S.62: CONTROL OVER WAREHOUSED GOODS

S.63: PAYMENT OF RENT AND WAREHOUSE CHARGES

Charges for storage and upkeep of goods- where goods are seized from the premises of a person and kept in places other than a warehouse, the Customs department cannot claim the expenses incurred by it in storing the goods in different places from the petitioners, as it is up to the department to make arrangements for the upkeep of the confiscated goods. [Biramani Sahu v. Collector, Customs and Excise, Sambalpur, 1980 Cr. L. J. 54]

S.64: OWNERS RIGHT TO DEAL WITH WAREHOUSED GOODS

S. 65:MANUFACTURE AND OTHER OPERATIONS IN RELATION TO GOODS IN A WAREHOUSE

This section permits the destruction of any refuse or surplus goods from any operations and allows the remission of duty thereof only on such portion of the refuse as has resulted from an operation connected with goods, which are exported. Where the manufactured goods are cleared for home consumption, duty on the refuse which has resulted from the manufacture of such goods shall not be remitted. This is so because refuse in manufacture is not a loss to the manufacturer and the cost of wasted material is added to the cost of production. Thus, where the product is consumed in India, duty has to be paid on the waste material.

Notification No. 163/Cus., dated 16th Oct. 1965- this notification exempts any ocean going vessel manufactured in the warehouse from customs duty leviable thereon at the time of clearance. Imported parts or accessories are not exempted from customs duty under this notification [Cochin Shipyard Limited, Cochin v. Collector of Customs, Cochin, 1987 (27) E.L.T. 286].

indlaw.com

S.66: POWER TO EXEMPT IMPORTED MATERIALS USED IN THE MANUFACTURE OF GOODS IN WAREHOUSE

S.67: REMOVAL OF GOODS FROM ONE WAREHOUSE TO ANOTHER

S.68: CLEARANCE OF WAREHOUSE GOODS FOR HOME CONSUMPTION

Clearance of goods- warehoused goods can be cleared for home consumption only after assessment and payment of duty. Where the petitioners clear after filing proper bills of entry, unless it is positively shown that the clearance was allowed on provisional assessment, it stands to reason that clearance was made only on assessment [International Computes Indian Manufacturers Ltd. v. Union of India, 1981 E.C.R. 403].

Rate of duty on actual removal of goods- if a party discharges its liability by complying with the requirement of law, and presents papers for clearance of goods, the revenue authorities are obliged to pass the order immediately. If the authorities either refuse to pass the order on some erroneous or imaginary ground or due to misconception of law they cannot take advantage of their mistake and demand a higher rate of duty from the importer [Priyanka Overseas Pvt. Ltd. v. Union of India, 1991 (51) E.L.T. 185]. Where goods have been passed for delivery, they cannot be detained on the basis of internal instructions- the petitioners were refused to allow the goods from the warehouse even though the bills of entry had been endorsed as passed out of customs charge as they approached the warehouse superintendent at 4 p.m. on the grounds that he had been instructed by the Asst. Collector of Customs not to allow withdrawal after 4 p.m. the next day the petitioners were asked to pay increased duties which had come into effect that day. It was held that such internal instructions did not bind the citizens and therefore the department was unjustified in its demand [Harish Silk Mills Pvt. Ltd. v. Union of India, 1989 (43) E.L.T. 614].

S. 69: CLEARANCE OF WAREHOUSED GOODS FOR EXPORT

S. 70: ALLOWANCE IN CASE OF VOLATILE GOODS

This section amended the older provisions to the extent that the concessions that ere available to wine, spirit and beer in casks and salt have now been extended to other volatile goods. Duty is now remitted on the quantity genuinely deficient due to natural loss without fixing any statutory maximum limit.

The scope of the section is still limited in the sense that it covers only losses due to storage and not those due to transfer [Bharat Petroleum Corporation Ltd. v. Collector of Customs, 1988 (33) E.L.T. 563]. Whereas this section deals with loss due to natural causes, S.23 deals with loss due to other reasons (except pilferage).

S. 71: GOODS NOT TO BE TAKEN OUT OF WAREHOUSE EXCEPT AS PROVIDED BY THIS ACT.

S.72: GOODS IMPROPERLY REMOVED FROM WAREHOUSE, ETC.

indlaw.com

In case: Goods are removed in contravention of S. 71 They are not removed from the warehouse at the expiration of period prescribed under S.61 Warehoused goods have been taken under S. 64 as samples without payment of duty Goods in respect of which bond has been executed under S. 59 or S, 59-A and which have

not been cleared fir home consumption or exportation are not duly accounted for to the satisfaction of the proper officer

The owner of such goods is bound to pay the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable on such goods. If the owner fails to pay the abovementioned amount, the proper officer may, without prejudice to other remedies, cause to be detained and sold after giving notice to the owner, notwithstanding any transfer of the goods, such portion of his goods, if any, in the warehouse, as the officer may select.

S. 73: CANCELLATION AND RETURN OF WAREHOUSING BOND

CHAPTER X

SECTION 74

Drawback refers to refund of import duty. This section provides that in case of goods capable of being easily identified, where imported goods are exported within two years of being imported, a refund of import duty may be claimed. This has to be read along with the Re-export of Imported Goods (Drawback of Customs Duties ) Rules, 1995 , which prescribes the form and procedure for claiming drawback.

The words capable of being identified refer to the nature of the goods( H.S.Mehra v. Union of India AIR 1968 Del 142, at p.143)

The Section also has to be read with the notification which deems certain goods not easily identifiable,( dated 10-6-1881 (No. 1117) and the notification which prescribes drawback rates in respect of goods taken into use after importation.(dated 6-2-1965, as amended on 8-11-1969 and 2-5-1970)

SECTION 75

This Section relates to the drawback of export goods in the manufacture of which imported goods have been used. Such drawback would be allowed in respect of those classes or descriptions of goods in respect of which the central government has issued a notification in the official gazette.( see Notification dated 30-5-1997 , as amended on 10-9-97 and 17-10-97- this specifies all-industry drawback rates subject to the general notes mentioned therein.)

However, where the value of the export goods is less than the value of the imported goods, or less than a particular percentage of the value of the imported goods, if such percentage be specified by the Central Government, no drawback would be available.

indlaw.com

Drawback proceeds would be recovered as per the procedure in Rule 16A of the Customs and Central Excise Duty Drawback Rules, 1995 in case of export proceeds are not realised within the period allowed by FERA (and from 1-6-2000, under FEMA).These rules also lay down procedures for claiming and grant of drawback under S.75.Thse repeal the 1971 rules. Where the whole of the imported goods have not been used in the manufacture of the export goods, then the quantity of imported goods which has actually been used in the manufacture would be deemed to be the imported goods upon which the drawback upon the Central Government declaring the same.( The notification dated 30-5-1991, as amended on 1-6-1992 and 1-9-1998 gives a list of goods in respect of which the central government has made such declaration.)The requirement of export under this section is satisfied by the taking of goods outside the territorial waters of India, and the fct that the ship was brought back to India because of damages in the ship does not affect the position.( Collector of Customs, Calcutta v. Sun Industries 1988(17)E.C.C ,at p.73 (S.C))

SECTION 76

This section restricts the operation of Sections 4 and 75, and provdes that drawbak shall not be allowed in the following circumstances:

1) When the market price of the goods is lesser than the drawback due on them 2) When the drawback due is less than Rs.50 3) When the Central Government notifies that no drawback shall be allowed in respect of

particular goods due to the likelihood of those goods being smuggled back into India. The Government has notified such prohibitions in notification dated 1-2-1963, as amended on 29-10-1968 and notification dated 1-10-1977, as amended on 10-12-1987, 27-6-1988, 3-3-1994 and 4-1-1995)

CHAPTER XI

SPECIAL PROVISIONS REGARDING BAGAGE, GOODS IMPORTED OR EXPORTED BY POST AND STORES

Chapter XI of the customs Act provides for special provisions regarding baggage, goods imported or exported by post and stores. It is pertinent to note that these are excluded by the preceding chapters.

S. 77 states that the owner of any baggage shall, for the purpose of clearing it, make a declaration of its contents to the proper officer.

The definition of the term baggage is not provided in the act, but it is included in the definition of goods under S. 2(22) of the Act. The definition of goods is an inclusive definition and includes any other kind of morable property in addition to baggage. Hence, any item of movable property or any article which may be goods can be part of or contained in baggage.

What is required to be done by a passenger, by virtue of S. 77, is that he/she the owner of any baggage has to declare its contents to the proper officer, for the purpose of clearing it.

indlaw.com

S. 78 deals with the determination of rate of duty and tariff valuation in respect of baggage. It say s that such rate of duty or tariff valuation would be that which has in force when the declaration was made in respect of such baggage under S. 77.

S. 79 of the Act exempts bona fide baggage from duty. Under this section the proper officer is empowered, subject to rules made by the central government, to pass free of duty, any article in the baggage of a passenger or a member of the crew, in respect of which, the officer is satisfied that it has been in use for such minimum period as specified in the ruleS. He/she is also empowered to pass free of duty any article in the baggage of a passenger in respect of which, he/she is satisfied that it is for the use of the passenger or his/her family or is a bona fide gift or souvenier, provided that the value of each such article and the total value of all such articles does not exceed such limits as is specified

The central Government is empowered, under this section, to make rules for the purpose of carrying out the provisions of the section. The rules so made may specify the minimum period for which any article needs to be used by a passenger or crew for it to be exempted from duty, the maximum value of any individual article and the maximum total value of all articles which may be passed free of duty and the conditions subject to which any baggage may be passed free of duty. The Central Government is further empowered to make different rules for different classes of persons.

S. 80 provides for temporary detention of baggage. It states that where the baggage of a passenger contains any article which is dutiable or the import of which is prohibited and in respect of which a true declaration has been made under S. 77, the proper officer may, at the request of the passenger, detain such article for the purpose of being returned to him/her on his/her leaving India.

S. 81 of the Act empowers the board to make regulations providing for the manner of declaring the contents of any baggage; providing for the custody, examination, assessment to duty and clearance of the baggage; providing for the transit or transshipment of baggage from one customs station to another or to a place outside India.

S.113

This section provides for confiscation of goods attempted to be improperly exported. It states that goods shall be liable to confiscation if:

1. The goods are attempted to be exported by sea or by air from a place other than a customs port or customs airport appointed for the loading of such goodS.

2. The goods are attempted to be exported by land or inland water through any route other than a route specified in a notification issued under S. 7 (c) of the Act, for the export of such goods.

3. If any dutiable goods or prohibited goods are brought near the land frontier or the coast of India or near any bay, gulf, creek or tidal river for the purpose of being exported from a place other than a customs station or port, appointed for the loading of such goods.

indlaw.com

4. If any prohibited goods are attempted to be exported and for this purpose are brought within the limits of any customs area.

5. Any dutiable or prohibited goods are found concealed in a package, which is brought within the limits of a customs port for the purpose of exportation.

6. Any dutiable goods or prohibited goods are loaded or attempted to be loaded in contravention of the provision of sections 33 or 34 i.e. if loading takes place without customs supervision or at a place other than an approved loading place.

7. Dutiable or prohibited goods are loaded or attempted to be loaded on any conveyance, or water-borne or attempted to be water borne for being loaded on any vessel, the eventual destination of which is a place outside India, without the permission of the proper officer.

8. Any dutiable or prohibition goods are not included or are in excess of those included in the entry mode under the Act or in the case of baggage, in the declaration made under S. 77.

9. Any dutiable or prohibited goods or goods entered for exportation under claim for drawback do not correspond in any material particular with the entry made under the Act or in the case of baggage, with the declaration under S. 77 in respect thereof.

10. Any goods entered for exportation under claim for drawback do not correspond in any material particular with any information furnished by the exporter or manufacturer under the Act, in relation to the fixation of rate of drawback under S. 75.

11. The goods are those on which import duty has not been paid and which are entered for exportation under a claim for drawback under S. 74.

12. The goods are those, which are cleared for exportation under a claim for drawback, but are not loaded for exportation on account of any willful act, negligence order fault of the exporter, his agent or employee. The goods are liable to be confiscated even if they are unloaded after having been loaded for exportation, without the permission of the proper officer.

13. The goods are specified goods in relation to which any provisions of chapter IV-B or of any rule made under the Act for carrying out the purposes of that chapter are contravened.

CHAPTER XII PROVISIONS RELATING TO COASTAL GOODS AND VESSELS CARRYING

COASTAL GOODS

SECTION 91:CHAPTER NOT TO APPLY TO BAGGAGE AND STORES

indlaw.com

SECTION 92: ENTRY OF COASTAL GOODS

Consignors are required to make entries of coastal goods by presenting a bill of coastal goods to the proper officer, in the prescribed format. Such a bill is to contain a declaration by the consignor about the truth of the contents of the consignment.

SECTION 93: COASTAL GOODS NOT TO BE LOADED UNTIL BILL RELATING THERETO IS PASSES ETC.

This Section imposes an obligation on the master of the ship to disallow loading of the goods, unless a bill relating to such goods has been passed by the proper officer and has been delivered by the consignor to the master.

SECTION 94: CLEARANCE OF COASTAL GOODS AT DESTINATION

The master of the vessel is to submit all bills relating to the goods at the port where the goods are intended to be unloaded.

SECTION 95: MASTER OF A COASTING VESSEL TO CARRY AN ADVICE BOOK

The advice book delivered by the Customs authorities to the master of the ship is to be carried by the master. At each port of call, a proper officer may make entries with respect to goods loaded. At each port of call the master is obliged to deliver the advice book to a proper officer for inspection.

SECTION 96: LOADING AND UNLOADING OF COASTAL GOODS AT CUSTOMS OR COASTAL PORT ONLY

Ports for the purpose of loading and unloading of coastal goods are notified under Section 7 of the Act. As such loading and unloading of coastal goods can be undertaken only at such prescribed ports.

SECTION 97: NO COASTING VESSEL TO LEAVE WITHOUT WRITTEN ORDER

This Section disallows the master from permitting departure of a ship from a loading/unloading port, unless a written order to that effect has been obtained. The order is to be made by the proper officer after compliance with Sub-section 2 has been ensured.

SECTION 98: APPLICATION OF CERTAIN PROVISIONS OF THIS ACT TO COASTAL GOODS, ETC.

SECTION 99: POWER TO MAKE RULES IN RESPECT OF COASTAL GOODS AND COASTING VESSEL

indlaw.com

CHAPTER XIII SEARCHES, SEIZURE AND ARREST

S.100: POWER TO SEARCH SUSPECTED PERSONS ENTERING OR LEAVING INDIA, ETC.

The power of search under this section can be exercised if a person is suspected to have secreted about his person any documents relating to goods liable to confiscation as such documents may provide clues and can also be tendered as evidence. Maintenance of diary not required- there is no provision in this Act which requires that diaries are to be maintained and neither have the provisions of the Code of Criminal Procedure been made applicable. The customs officers are not primarily concerned with the detection or punishment of crime. Their prime interest lies in smuggled goods and not the smugglers.

S. 101: POWER TO SEARCH SUSPECTED PERSONS IN CERTAIN OTHER CASES

This provision enabled the empowered officers to search suspected persons anywhere in India if they are suspected to have secreted about their persons gold, precious stones, watches and other notified articles liable to confiscation.

S. 102: PERSONS TO BE SEARCHED MAY REQUIRE TO BE TAKEN BEFORE GAZETTED OFFICER OF CUSTOMS OR MAGISTRATE

Witness of the search- signing of the search list is not an obligation imposed by the written order nor is the refusal to sign such a list made punishable under this section

Income Tax authorities cannot issue a warrant to seize the money in the possession of the Customs authorities- when the cash is in possession of the Customs authorities and not the petitioner no warrant can be issued by the Income Tax authorities to get hold of the money under S. 132 of the Income-Tax Act [Tarsem Kumar v. Commissioner, Income Tax, Haryana, Himachal Pradesh, Delhi, (1975) Cencus, Vol. III, 72].

S. 103: POWER TO SCREEN OR X-RAY BODIES OF SUSPECTED PERSONS FOR DETECTING SECRETED GOODS

This section has to be read with S. 134 which makes the refusal to co-operate in the process of screening and x-ray punishable.

S. 24 of the Indian Evidence Act- S. 24 of the Evidence Act will be applicable only if: It appears to the court to have been caused by any inducement, threat or promise The said inducement, threat or promise must have reference to the charge against the

accused person It shall proceed from a person in authority

indlaw.com

The court shall be of the opinion that the said inducement, threat or promise is sufficient to give the accused person grounds which would appear to him reasonable in supposing that he would gain an advantage or avoid an evil of a temporal nature in reference to the proceedings against him.

Thus, section 24 would be applicable where customs authorities can be taken to persons in authority.

S. 104: POWER TO ARREST

Unlike the old Act, this section provides that for the purpose of releasing a person arrested under Sub-section (1) on bail, the officer shall have the same powers and be subject to the same provisions as an officer in-charge of s police station as under the Code of Criminal Procedure. Also, Sub-section (4) specifically states that all offences under this Act are not cognizable and therefore automatically excludes the power of the police to investigate into any offence under this Act.

Scope- the officer before arresting a person under this section should have reason to believe that the person is guilty of an offence punishable under S. 135. However, by merely informing such person of the ground of his arrest, the officer does not formally accuse him of an offence. Until a complaint is filed in compliance with S.137, the person does not stand in the position of an accused. The customs officer, even under this Act continues to be a revenue officer. He is not a police officers and the information conveyed by him, when a person is guilty of contravening the law make the person an accused. It has been held in Soni Vallabhdas Liladhar v. Assistant Collector of Customs, Jamngar, AIR 1965 SC 481 that a customs officer is not a police officer and S. 25 of Code of Criminal Procedure is not applicable to statements made to them [See Also Raja Ram v. State of Bihar, AIR 1964 SC 828]. Also, he has no power to submit your charge sheet under S.173 Code of Criminal Procedure [Asst. Collector of Customs, New Delhi v. Tilak Raj Shiv Dayal, AIR 1969 Delhi 301].

Arrest and Custody- What amounts to arrest is laid down by the legislature in express terms in S.46 of the Code of Criminal Procedure, whereas the words in custody which are to be found in certain sections of the Evidence Act only denote surveillance or restriction on the movements of the person concerned, which may be complete or partial. The two cannot be equated [Harsbansingh Sardar Lenasingh v. State, AIR 1970 Bom. 79].

Power to remand-S 4(2) of the Code of Criminal Procedure provides that all offences under any law shall be investigated and tried as per the Code but where a particular enactment provides a particular procedure, that procedure would take precedence over the provisions of the Code. Chapter XXXIII of the code is applicable to offences under the Act because provisions with regard to bails and bonds have no place in the Act at all. Going by this logic, S. 437 of the code becomes applicable to the Act. Thus, where there is an express power to refuse bail, there is necessarily a power to retain or place a person in custody as a consequence of that refusal [Dalam Chand Baid v. Union of India, 1982 Cr. L. J. 747, Dave N. H. v. Mohmed Akhtar Hussain, (1982) 2 G.L.R. 792]. Furthermore it is a statutory obligation to record reasons while granting or refusing bail.

indlaw.com

Producing the person arrested before the Magistrate- Art. 22(2) of the Constitution of India mandates that arrestee has to be produced before the magistrate within 24 hours. This is applicable to the Customs Act, too [Roshan Beevi v. Joint Secretary to Government of Tamil Nadu, 1984 Cr. L. J. 134].

Jurisdiction of the High Court under Art. 226- all that the High Court could consider while dealing with a Habeas Corpus writ petition under Art. 226 was whether there was sufficient material on record to justify the detention. The Court is not to function as an appellate authority and cannot be called upon to decide the correctness of the allegations of the parties against each other [Rajendra Prasad v. State of Uttar Pradesh, 1984 A. Cr. R. 237].

S. 105: POWER TO SEARCH PREMISES

Constitutionality of the Code of Criminal Procedure provisions regarding search- searches under or pursuant to a warrant under S. 93 of the Code of Criminal Procedure did not involve any violation of protection against testimonial compulsion guaranteed by the Constitution under Art. 20 (3) or the fundamental right of acquiring, holding or disposing property under S. 19 (1) (f) as it is only a temporary restriction for the limited purpose of investigation [M.D. Sharma v. Satish Chandra, AIR 1954 SC 300].

Formalities to be observed while conducting a search- the following formalities have to be observed by a customs officer while conducting a search:

1. The person of the officials and search witnesses must be searched before they are allowed to enter premises so as to avoid any suspicion that any member of the search party had planted the thing recovered surreptitiously in the premises.

2. The customs officer shall call upon at least two respectable inhabitants of the locality to be search witnesses. A respectable person is one who is impartial and on whom the owner of the owner of the place can prima facie rely. Persons living more than a mile away cannot said to be persons of he locality [Mahtway, In re, 1925 (26) Cr.L.J.827]. The fact that the search witnesses are not respectable people does not vitiate the legality of the proceedings but affects the weightage of the evidence.

3. The search shall be made in the presence of the search witnesses and a list of all the things seized and the place in which they were found shall be prepared by the officer. The list need not contain details of how the things were found

4. The witnesses shall sign the said list. 5. The occupant of the place searched or some other person on his behalf shall be permitted to

attend the search. The absence of any such person would vitiate the legality of the search [Ramesh Chandra v. Emperor of India, I.L.R. 41Cal. 350].

6. The copy of the list prepared and signed by the witness shall be delivered to the occupant.

When there is a reasonable suspicion that somebody might be hiding something on his person, such person can be searched. In case a woman has to be searched, it shall be done by a woman with strict regard to decency.

indlaw.com

Under S. 47 (2) the customs officer is allowed to break open any outer or inner door or window of any place, of accused or any other person, if upon notification of his authority and purpose he is still denied access. If such place is occupied by a zanana, the police officer shall give her adequate opportunity to withdraw before entering the place.

In Gopi Kishen Agarwal v. R.N. Sen, AIR 1967 SC 1298, it was held that the procedure prescribed under S. 165 (1) of the Code of Criminal Proced