INDIRECT TAXES (PART - 14) (UNIT - II) CUSTOMS LAW - 1

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Arthur Dominic Rose
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1 INDIRECT TAXES (PART - 14) (UNIT - II) CUSTOMS LAW INTRODUCTION Hello friends in this part of the program we are going to initiate the discussion of provisions as contained in custom act 1962, at the same time we discuss the provisions which are given under custom tariff act 1975, now in this part of the program we will discuss first of all what is the custom, what is the chargeability of the custom under section 12 subsection 1, at the same time we will discuss the custom in respect of significance towards international business, after that we will be discussing some important terms as defined under custom act 1962 and custom tariff act MEANING OF CUSTOMS LAW AND CHARGEABILITY OF CUSTOMS UNDER SEC. 12(1) Now custom act 1962 was accorded consent by the President of India on 31 st December 1962, and it came into force as on 1 st February 1962, the custom act 1962 imposes duty on import of any goods into India or export of any goods out of India, or we can say custom act 1962 is applicable only when there is event of goods which are imported from other countries into India, at the same time it also applies in respect of goods which are exported from India to other countries, while the custom act 1962 imposes duty on import or export of goods, such duty is charged at the rate specified in custom tariff act 1975 or we can say how much tax will be calculated that is to be discussed under custom act 1962, but 1

2 what is the rate of applicable that is we can say taken from custom tariff act Now first of all we should know what is the meaning of the custom, custom is a form of indirect tax as we have discussed that indirect tax is also excise duty and custom is also is an indirect tax, the term custom is defined as duties imposed on imported goods or less commonly exported goods, means whenever we talk of custom it is always with reference to import and export activities, this term is applied to those taxes which are payable on goods which are imported and exported, it means the meaning of export is restricted to export and import activities. Now what is the chargeability of custom under section 12 (1) custom duty is imposed on goods imported into or exported out of India as per the rates specified under the custom tariff act 1975, means question of chargeability of custom will arise only when there is some goods which are imported from other countries, at the same time when goods are exported from country to other countries, but so far as the custom duty is concerned, this is always in accordance with rates which are prescribed under custom tariff act TREATMENT OF GOVERNMENT GOODS AND ROLE OF CUSTOMS DUTY IN INTERNATIONAL TRADE Now what is the treatment of Government goods, that is covered under section 12 (2), government goods shall be treated at par with the nongovernment goods for the purpose of levy of custom duty, it means charging section equally applies to the goods imported by the state or Indian Government, it means whenever there is import and export of the goods by the Government, we do not make any discrimination whether goods are imported and exported by the Government, rate of duty are equally applicable in respect of goods imported by the Government, at the same time goods are imported by the non-government agencies. Now we discuss what is the role of the custom in relation to International Trade and Business, now custom duty is imposed with an apparent of motive of earning revenue by the Government, now so far as indirect tax 2

3 and that is imposed in respect of import and in respect of the export of the goods so in this way Government can increase the revenue by imposing more custom on the goods to be imported at the same time custom can be charged in respect of the goods which are exported from our country to outside other countries, now it is imposed so as to regulate control promote international trade with reference to duty imposing country. Now so far as the custom is concerned this is imposed so as to regulate the international business or we can say this is imposed so as to bring about the equilibrium between the duty that we have received and duty which has paid in foreign currencies, at the same time with the help of custom duty we can control the import of the goods or at the same time we can encourage the exports of the articles from India to other countries, now custom duty is imposed on goods imported so as to promote domestic product, it is also imposed on goods exported out of India so as to meet domestic requirement, sometimes custom duty is relaxed regarding exported from India so as to earn more foreign exchange, now so far as the custom duty is concerned it is very vital it is very significant so as to control the import of the goods, at the same time custom duty is also very much helpful to encourage the exports of the various commodities and articles. 4. IMPORTANCE AND DEMERITS OF CUSTOMS DUTY Now we discuss the importance of custom duty in relation to economy, first is important source of revenue definitely custom constitutes the part of revenue of the government, in case of custom on import government gets lot of revenue at the same time if less we can say duty of custom is leveled in respect of export of the articles definitely in this case the amount of duty will be less but at the same time government will be getting lot of foreign exchange, now second is protection to domestic industry now sometimes what happens that any goods which are imported from other countries which are relatively cheaper and they are relatively less costlier but that is going to affect our domestic industry or household product, in that situation the government takes decision to increase the 3

4 duties of the goods which are to be imported so as to safeguard, protect the domestic product and domestic industries and third is reduced deficit the balance of trade and the balance of payment. Now so far as the balance of trade is concerned if export is more than the import of the articles then definitely the balance of trade is favorable but at the same time if foreign exchange and government receives on account of export of the goods is much more than the fund exchange that utilize for import of the goods then definitely this is also considered as favorable balance of payment, so what happens whenever there is more import of the goods as compared to the export of the goods, in that situation there is always crisis of the foreign exchange because in that situation government is receiving less foreign exchange as compared to the foreign exchange that is utilized for importing of various commodities, now in this connection the government is required to encourage the export by curtailing the rate of duties in respect of commodities to be exported so as to increase the foreign currencies and in this way the unfavorable balance of payment can be minimized. Next is controlling the speculating activities, now whenever the goods are imported from other countries if they are costlier rate of import duty is much more than the duty which is charged by the other countries in that situation any person would like to acquire the goods from other countries without payment of custom and this is considered as a speculating activities and this is considered as unethical activities but this can be controlled if import duty is relatively curtailed by the government, next is reducing export, now normally government gives incentives to increase the export but in some cases if the supply of the community in the country is much less than the demand of the commodity, in that situation if goods are exported to other countries definitely that will aggravate the situation. Now in this case how to discourage the exports of those goods which are in short in supplying our country, for that purpose the approved duties can be increased by the government and last is saving foreign exchange, now whenever any person who purchases who imports we can say luxurious goods from other countries is required to pay more import duties because these goods are subject to savvy import duties, now in this way people will be 4

5 discouraged to import that goods from the other countries and in this way there will be less use of the foreign exchange for these luxurious items. But at the same time it is suffering from some demerits or limitations, first is causing inflation, inflation takes place only when goods are considered relatively costlier as compared to goods are produced in our country, whenever we increase the import duties then definitely goods which are imported from other countries are must costlier than we have in our countries, definitely that lead to inflation in our country and second is increased black money, now whenever there is more import duties leveled in respect of goods to be imported then definitely people would like to acquire the goods from other countries without payment of the import duties. In this way the recreation of black money and that is very harmful to the economy of the nation and next is absence of better quality goods, now sometimes in order to discourage the import of the articles government may increase the import duties but in this case people will not be in a position to have the consumption of the goods which are relatively better than the goods which are produced in our country. 5. FUNDAMENTAL FEATURES OF CUSTOMS DUTY ACT, 1962 Now we discuss what are the fundamental features of custom duty act 1962, now it is an indirect tax leveled on import and export, now it is restricted to import and export activities and second is this duty is imposed only on goods and not on service, means whenever services are acquired from other countries, this is not subject to custom, this is applicable only when either we export the goods or we import the goods from other countries, and third is sale or purchase is not the criteria for levy of custom duty, the duty is connected with movement of goods means in case of excise duty that place whenever there is sale and purchase of the goods or we can say value added tax is applicable whenever there is purchase and sale of the goods, but this is not so in case of custom duty, whenever there is movement of the goods from other countries to India or goods that goes from our country to other 5

6 countries, in that situation this is subject to custom duty, now it is also subject to education cess, however education cess is not applicable on export duty, now whenever we calculate custom duty it is always subject to education cess means education cess will become the part of the custom duty but that is not so in case of export duty. Now this note is very important if the agent in India gets goods from his overseas principals and even in the case of baggage brought into India by the passenger duties are attracted, as I told you that sales and purchase are not the criteria for imposing the custom duty, if goods are issued by agent in our India from the principal this is also subject to custom duty, at the same time any passenger who comes to India along with some baggage that may be subject to custom duty, whereas there is no question of purchase and sales have taken place. 6. RELEVANT LAWS OF CUSTOMS ACT Now in order to regulate customs in India there are some relevant laws which are in application, first is custom act 1962 now it provides levy of import and export duties of customs on goods imported into or exported from India, now it contains provisions which are in relation to levy and collection of duty importation and exportation, warehousing, duty drawback, appeals, offences and penalties etc., or we can say that custom act 1962 contains provisions by which these are governed, now second is custom tariff act 1975 that contains rate of tariff which are applicable in respect of different items to be exported and different items to be imported, it contains various variety of customs duties to be leveled on the import and export. Now it has got two schedules, the schedule first is in relation to a specific import duty and second is in relation to a specified export tariff, now it has got 21 sections and 98 chapters, now schedules are based on harmonized system of nomenclature, it is a six digit system now we discuss in case of excise duty we have already discussed that harmonized system or nomenclature has been formulated by the general agreement of tariff and trade and that has been taken into consideration for development the sections for 6

7 the development of chapters which are applicable in respect of determination of different tariff. Now next is rules, section 156 of custom act 1962 empowers the Central government to make rules for matters relating to determining the price of imported goods, duty drawback, backed detention and configuration of goods, means rules are made by the central comment and government is empowered by the section 156 of custom act 1962, next is regulations section 157 empowers the Central board of Excise and Customs to make regulation consistent with the act and the rules, now so far as section 157 is concerned it has given immense powers to the Central board of Excise and Customs to make regulation but regulation must be made in the light of what are provisions as contained under custom act 1962 and what are the rules made by the Central government under section 156. Now regulations so far framed by the government, first is import manifest vessel regulations, second is Port note regulations, export manifest vessels regulations, so these are in we can say four and they have been made applicable by the Central excise, now notification under custom act, the Central government is empowered to issued notifications under various sections of the custom act 1962, so in order to regulate the custom duties the government has got immense powers to issue notices from time to time under various sections of the custom act VARIOUS DEFINITION UNDER CUSTOMS ACT, 1962 Now we discuss different terms which are defined under custom act 1962, first is adjucating authority that is well defined under section 2 (1), it means any authority competent to pass any order or decision under this act but it excludes commissioner appeals and appellate tribunal, means adjucating authority refers to those authorities who are competent to take decision and passed the order but it does not include the Commissioner appeals and appellate tribunal, now secondary assessment that is covered by the section 2(2), it includes provisional assessment, reassessment, order of assessment, self-assessment, and other 7

8 assessment in which the duty is assess nil, so assessment refers to different types of assessment that will take place under relevant sections of the act. What is the definition of the conveyance? conveyance is defined under section 2 (9), now so far as the conveyance is concerned that includes a vessel by sea, an aircraft by air, vehicle by land, it means the definition covers only all modes of transport, what is the definition of goods which is given under section 2 (2) so far as goods are concerned that comprises vessels, aircraft and vehicles stores baggage, currency and negotiable instruments and any other kind of movable property, means definition as given of good under this act is well restricted and it has we can say contain only those items which are considered as a goods for the purpose of levy of custom, now this note in this connection is very important anything to be called as goods it must contain attributes of movability and marketability, means everything is not considered as good anything that becomes goods only when it has got two important attributes and qualities, first is movability and second is marketability. If we do not find these two qualities in particular thing that cannot be regarded as goods, when anything is not regarded as good that it is not subject to cost of duty, now we discuss the definition of dutiable goods that is given under section 2 (14) dutiable goods means any goods which are chargeable to duty and on which duty has not been paid, now in both of the situation goods are considered as dutiable goods but there are some goods which are not considered as dutiable goods which are goods on which duty is paid. Means any goods on which duty has already been paid they cannot be considered as dutiable goods and second is goods which are not subject to levy of custom, may be exempted from custom duty that will not be considered as dutiable goods, now in this connection this note is very important the articles should fall within the ambit of the definition of the goods means anything which does not fall within definition of the goods cannot be regarded as dutiable goods under section 2 (14). Now we discuss the definition of export goods and that is given under section 2 (19) export goods means any goods which are to be taken out of India to a place outside India, export goods means those goods which are taken out of India to other places than they are 8

9 considered as export of goods or we can say if goods are removed from one place to another place with the same country than this is not considered as the export goods and second is imported goods and that is defined under section 2 (19) imported goods means any goods brought into India from a place outside India imported goods those goods which have been imported from other countries and they have been brought into India on account of the import than they are considered as imported goods. Now in this connection this note has got significance, goods which have been cleared for home consumption are not considered as imported goods means goods which are purchased for home consumption in India from other countries they cannot be considered as imported goods, now we discuss the definition of postal goods and that is defined under section 2 (7) coastal goods means goods other than imported goods transported in a vessel from one port in India to another, or we can say coastal goods does not mean the imported goods whenever goods are removed from one port to another port in the same country with the help of the vessels than they are considered as coastal goods, for example if goods are removed from Madras Port to the Calcutta Port than they are considered as a coastal goods. Now we discuss the definition of custom area and that is enumerated under section 2 (11), custom area means the area of a custom station includes any area in which imported goods or exported are ordinary kept before presence by custom authority means the place where goods are to be exported and goods are to be imported are kept that place is considered as the custom area, now we discuss who is considered as person in charge person in charge is defined under section 2 (31), it means in case of vessels the master of the vessel is considered a person in charge and in case of aircraft the commander and pilot in charge of the aircraft is regarded as person in charge, and in case of railway the conductor, guard or other persons having the chief directions of the train is regarded as person in charge. And in case of any other conveyance the driver or other persons in charge of the conveyance is considered as person in charge, now why should we discuss the person in charge because this is very important if we discuss this note person in charge is to ensure that conveyance coming through approved route and 9

10 land at approved places, it means person in charge is at all responsible to ensure that conveyance through approved route and that should be at approved places, means pickup of the goods from approved place and that should be landed at approved places and this is the responsibility of the person in charge. 8. SUMMARY In this part of the program we have initiated the discussion of provision which are contained in custom act 1962, at the same time we have discussed in brief some provisions of custom tariff act 1975, in this part of the program we also discussed the provisions of section 12 (1) that in relation to chargeability of custom duty, now this session also covered the significance of custom in relation to international business, and finally we have discussed some important terms which are defined in relevant sections of custom act 1962, thank you. 10

FAQs Q1. Write a note on importance and demerits of custom duty. Ans. Importance of Customs duty Demerits of customs duty

FAQs Q1. Write a note on importance and demerits of custom duty. Ans. Importance of Customs duty a. Important source of revenue. b. Protection to domestic industry. c. Reduce deficit in the balance of