CUSTOMS ACT,1962

Customs is a form of indirect tax. Standard English dictionary defines the term ‘customs’ as duties
imposed on imported goods/less commonly exported goods. This term is usually applied to those
taxes which are payable upon goods or merchandise imported or exported.

The Customs Act was passed and promulgated in India by the Parliament in the year 1962.

Customs Tariff Act was passed in the year 1975 to replace the Indian Tariff Act, 1934. The Customs
Tariff Act was amended in the year 1985 to move in times with and to deal with the complexities
resulting from the rapid development in science and technology and consequent industrial
development and expansion of manufacturing and trading activities.

The Customs Act, as it stands now, consolidates the entire law on the subject of import and export
duties, which were earlier contained in various enactments like the Sea Customs Act, 1878, Inland
Bonded Warehouses Act, 1896 and the Land Customs Act, 1924. Thus, now the Customs Act and
Customs Tariff Act stands as a complete code in itself as to the levy and collection of duties on
import and export of goods.

TYPES OF DUTIES

The following are the various types of customs duties levied with the authority of law:

1. Basic Custom Duty [Section 12]

2. Integrated Goods and Services tax [Section 3(7)]

3. GST compensation cess [Section 3(9)]

4. Countervailing duty in lieu of excise [section 3(1)]

5. Additional duty [section 3(3)]

6. Additional duty [Section 3(5)]

7. Protective Duties

8. Anti-dumping Duty

9. Safeguard duty [Section 8B]

10. Countervailing Duty on subsidized goods [Section 9]

11. Education Cess & Secondary and Higher Education Cess [Prior to 2 February, 2018]

12. Social Welfare Surcharge [w.e.f. 2 February, 2018]

Additional duty of custom

1. Road and Infrastructure Cess [w.e.f. 2 February, 2018]

2. National Calamity Contingent Duty (NCCD)

3. Health Cess on Import of Medical Devices [w.e.f. 27-3-2020]

India includes the territorial waters of India [Section 2(27)].

Territorial Water- Territorial Waters means that portion of sea which is adjacent to the shores of a
country.

The territorial waters extend to 12 nautical miles into the sea from the base line and include any bay,
gulf, harbour, creek, or tidal water.. Therefore, a vessel not intended to deliver goods should not
enter these waters. [1 Nautical mile – 1.852 km or 1852 m]

India includes not only the surface of sea in the territorial waters, but also the air space above and
the ground at the bottom of the sea. Sovereignty of India extends to the territorial waters and to the
seabed and subsoil underlying and the airspace over the waters. All the provisions of Customs Act
are applicable. This determines the taxable event.

Thus in case of importation, import will commence when they cross territorial waters and
exportation is completed when the goods cross the territorial waters.

Contiguous zone is the zone beyond territorial waters over which a nation has exclusive rights.(for
India it is the area beyond 12 nautical miles and upto 24 NM).The Central Government has powers to
take measures in this area for security of India and immigration, sanitation ,customs and other fiscal
matters.

Importance

Customs officer has powers to arrest a person in India or within Indian customs waters.

Indian customs waters [Section 2(28)]

• Indian customs waters means the waters extending into the sea up to the limit of Exclusive
Economic Zone under section 7 of the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act, 1976 and includes any bay, gulf, harbour,
creek or tidal river.

If a person has committed any offence punishable under customs law within the Indian customs
waters, he may be arrested. Also, goods may be confiscated and vessel be stopped in the Indian
customs waters if the same is found to be used in the smuggling. Further, prohibited goods can also
be confiscated if brought within the Indian customs waters.
Exclusive Economic Zone:

• Exclusive Economic Zone extends to 200 nautical miles from the base line. In this zone the
country has exclusive rights to exploit it for economic purposes like constructing artificial
islands (oil exploration, power generation etc.), fishing, mineral resources and scientific
research. Other countries have right of navigation and over flight rights.

High Seas:

• An area beyond 200 nautical miles from the base line is called High Seas. All countries have
equal rights in this area.

Customs Area 2(11)-

• Means all area of customs station and includes any area where imported goods or export
goods are ordinarily kept pending clearance by Custom Authorities.

• It could also include some area even outside the customs station

Customs Station 2(13)-

• Customs station means

• a) customs port {Customs Port [Section 2(12)]: Customs port means any port appointed
under section 7(a) of the Customs Act, to be a customs port and includes a place appointed
under section 7(aa) of the Customs Act, to be an inland container depot (ICD)}.

• b) customs airport {Customs Airport [Section 2(10)]: Customs airport means,- • Any airport
appointed under section 7(a) to be a customs airport, and • Includes a place appointed u/s
7(aa) to be an air freight station}.

• c) land customs station.

• Export with its grammatical variations and cognate expressions, means taking out of India to
a place outside India [Section 2(18)].

• Import with its grammatical variations and cognate expressions means bringing into India
from a place outside India [Section 2(23)].

Warehouse
Warehoused [Section 2(43)]: “Warehouse” means a public warehouse appointed under
section 57 or a private warehouse licensed under section 58.
Warehouse Goods [Section 2(44)]: “Warehouse Goods” means goods deposited in a
warehouse.
Warehouse Station [Section 2(45)]: “Warehouse Station” means a place declared as a
warehousing station under section 9.
Warehousing Bond : Since imported goods are kept in warehouse without payment of customs
duty, importer has to execute a bond binding himself to (A) observe all provisions of Customs
Act and rules/regulations in respect of the goods (B) pay on demand the (i) duties, interest (ii)
warehousing rent and charges with interest (C) pay all penalties leviable for violations of
provisions of Customs Act, rules and regulations. The bond amount is equal to twice the amount
of duty assessed. Generally, part of bond amount is secured by way of a bank guarantee. Bond
will continue to be valid even if goods are transferred to another person or removed to another
warehouse [section 59]. Bond is cancelled and returned only when duty and all other dues are
paid on goods cleared and goods are duly accounted for (section 73).

Bonded warehouse - Since goods are kept in warehouse under a ‘bond’, the warehouse is
termed as ‘bonded warehouse’. It does not necessarily mean that the warehouse is physically
bonded. For example, in case of manufacture in warehouse, the manufacture is in ‘bonded
warehouse’ but there is no physical supervision of customs officer. However, in case of goods
stored in warehouse and cleared from warehouse on payment of duty, the warehouse is under
physical control of customs officer and clearance can be only with his permission.

Public/Private Bonded warehouses As per section 2(43) of Customs Act, ‘warehouse’ means a
public warehouse appointed u/s 57 or a private warehouse licensed under section 58 of Customs
Act. As per section 2(44), ‘warehoused goods’ means goods deposited in a warehouse. Sections
57 and 58 of Customs Act provide that ‘warehouse’ can be appointed or licensed only at a
‘warehousing station’. As per section 2(45) of Customs Act, ‘warehousing station’ means a place
declared as a warehousing station u/s 9 of Customs Act.

Public or Private Warehouses - Warehouses are of two types (A) Public warehouses appointed
by Assistant Commissioner of Customs under section 57 of Customs Act. (B) Private warehouses
licensed by Assistant/Deputy Commissioner of Customs. The licence can be cancelled by giving
one month notice. Licence can be cancelled if licensee contravenes any provisions of Customs
Act. In such cases, show cause notice has to be issued and pending enquiry, licence can be
suspended. As the name suggests, goods can be stored in Public Warehouse by any importer,
while goods can be stored in private warehouse only by person who has been licensed. Private
warehouses are permitted quite liberally. Even private operators can be appointed as custodian
for public warehouse. CBE&C has clarified that permission for public or private warehouse can
be given by Principal Commissioner or Commissioner without making any reference to Board.
Permission for storage of any category of goods can be given if the applicant is financially sound,
has good credibility and has not been involved in customs or excise duty evasion in last five
years. Premises of storage should be suitable and adequately secured.