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3. Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023 (CAVR,
2023) notified

 Section 14(1) of the Customs Act lists out certain matters which may be provided for in the rules.
The said sub-section was amended vide the Finance Act, 2022 to insert the following text –

“(iv) the additional obligations of the importer in respect of any class of imported goods and the
checks to be exercised, including the circumstances and manner of exercising thereof, as the
Board may specify, where, the Board has reason to believe that the value of such goods may not
be declared truthfully or accurately, having regard to the trend of declared value of such goods
or any other relevant criteria:”

 The said amendment is a measure to address the issue of undervaluation in imports and it provides
for rules to be framed by the Central Government whereby the Board can be enabled to specify
the additional obligations of the importer in respect of a class of imported goods whose value is
not being declared correctly, the criteria of selection of such goods, and the checks in respect of
such goods.

 The CAVR, 2023 can be applied only by following the processes referred in the rules. The written
reference must have been made to the Board which, if found suitable by Screening Committee
for detailed examination, must have been comprehensively examined by Evaluation Committee
which should have concluded the likelihood that the value of the relevant class of goods may not be
declared truthfully. Thereafter, the Screening Committee’s recommendation confirming the
completeness of such report must have been made to the Board. If satisfied that the recommended
report should be accepted, the Board may specify the identified goods.

 Exceptions.- These rules shall not be applied to, –

 (a) imports not involving duty;

 (b) goods for which tariff value has been fixed by the Board
 (c) goods which attract import duty on specific rate basis;
 (d) imports made in terms of authorization or license issued under duty exemption scheme of the
Foreign Trade (Development and Regulation) Act, 1992 in which the inputs imported prior to
export are physically contained in the export product;
 (e) imports where buyer and seller are related and an investigation on relationship has already
been contemplated or finalized;
 (f) Project imports;
 (g) imports by Government, Public Sector Undertakings;
 (h) imports made in non-commercial quantities;
 (i) goods imported for the purpose of re-export; or
 (j) imports specified by the Board.

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4. Calculation of customs duty

a) Illustration 1:

Particulars Amount
Assessable value 1,00,000
+ Basic Custom Duty @ 10% 10000
1,10,000
+ IGST u/s 3(7) of CTA @ 12% 13,200
123,200
+Cess @ 3% (10,000+13200) 696
Total value including custom duty 1,23,896
Customs Duty 23,896

b) Points to be noted

 Basic custom duty is levied u/s 12 of Customs Act, 1962 at the rates specified in Customs Tariff
Act, 1975.

 Integrated tax under section 3(7) is equal to IGST as leviable under section 5 of IGST Act,
2017 on a like article on its supply in India. It is applicable on any imported article with a
maximum rate of 40%.

 GST Compensation Cess51 u/s 3(9) is a compensation cess levied u/s 8 of the GST
(Compensation to State) Act, 2017. It is levied to provide compensation to the States for loss
of revenue due to implementation of GST in India.

Illustration 2:

Now, the custom duty would be as follows:

Particulars Amount
Assessable value 1,00,000
+ Basic Custom Duty @ 10% 10000
1,10,000
+ IGST 13,200
GST Compensation Cess 123,200
Total
+Cess @ 3% (10,000+13200) 696
Total value including custom duty 1,28,852
Customs Duty 28,852

51
As of now, GST compensation cess is levied on luxury and sin goods like pan masala, tobacco etc.

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 Additional Duty u/s 3(1) [CVD u/s 3(1)] - Any article which is imported into India is also liable to a
duty equal to the excise duty for the time being leviable on a like article if produced or manufactured
in India. In addition to the above, the Central Government has the power to notify additional
duty u/s 3(1) for alcoholic liquor for human consumption.

 Additional duty u/s 3(5) is levied to compensate for VAT/ Sales tax payable on purchase and sale
of goods. It is also known as Special Additional Duty (SAD). The rate of SAD is fixed at 4%.

 Note: Due to introduction of GST, the applicability of additional duty of customs is very limited. Both
are still applicable on supply of alcoholic liquor for human consumption, petroleum crude,
high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine
fuel.

5. Determination of relevant date for Rate of Duty, Rate of exchange and tariff valuation

a) Rate of exchange

 Rate of exchange will be the rate applicable on the date on which 1st bill of entry is filed (The 1st
bill of entry may be for home consumption or into bond bill of entry for warehousing).

 The rate of exchange will be the rate notified by CBIC. Not RBI.

b) Rate of duty/ valuation- Key is intention to clear the goods for home consumption- section 15

Summary

Note: In case of substitution of bill of entry for warehousing to bill of entry for home
consumption, the relevant date would be the date of substitution. However, in case of
amendment of bill of entry, the Original date of filing of bill of entry.

6. Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

I. Where Transaction Value of imported goods is considered

 Section 14 provides that the value of imported goods shall be transaction value or tariff value subject
to adjustments specified in rule 10 of the valuation rules.

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a) Adjustments provided in Rule 10(1)- additions to be made

No. Nature of adjustment Condition, if any

1 Commission or brokerage, except buying Incurred by the buyer but not included in the
commission52 price actually paid or payable.
2 Value of any part of the proceeds of any That accrues, directly or indirectly, to the seller.
subsequent resale, disposal or use of the Such proceeds will have to be added.
imported goods;
3 Cost of container which are treated as being one Incurred by the buyer but not included in the
for customs purposes with the goods in price actually paid or payable
question53
4 Cost of packing whether for labour or material;
5 Materials, components, parts and similar items Such goods and services should have been
incorporated in the imported goods; supplied directly or indirectly by the buyer
6 Tools, dies, moulds and similar items used in the
production of the Imported goods; free of charge or at reduced cost for use
7 Materials consumed in the production of the
imported goods; in connection with the production and sale for
8 Engineering, development, art work, design export of imported goods, to the extent that
work, and plans and sketches undertaken such value has not been included in the
elsewhere than in India and necessary for the price actually paid or payable.
production of the imported goods;
Note: In case of use over a period of time, only
proportionate value would be considered.
9 Royalties and licence fees related to the Such amount is paid as a condition of the sale
imported goods that the buyer is required to of the goods being valued, to the extent that
pay, directly or indirectly; such royalties and fees are not included in the
price actually paid or payable.
10 All other payments actually made or to be Such payment is made as a condition of sale
made by the buyer to the seller or to a third of the imported goods. It is to be included to
party to satisfy the obligation of the seller; the extent that such payments are not included
in the price.
11 Ship demurrage, barge and lighterage These are incurred for bringing the goods to
charges to be included in the value; port and hence form part of value.

Note: Any expense after the importation shall not form part of Assessable value. Certain cost
incurred after importation are as follows:

 Charges for construction, erection, assembly, maintenance, or technical assistance, undertaken

after importation on imported goods such as industrial plant, machinery or equipment;

 The cost of transportation after importation; Duties and taxes in India

52
Buying commissions means fees paid by an importer to his agent for service of representing him abroad in the purchase of
the goods being valued.
53However, cost of durable and returnable containers are not to be added, provided the importer agrees to execute a
bond to re-export the container within 6 months.

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b) Other additions with respect to freight, insurance and landing charges

No. Particulars Computation

1 Sea Freight including  Actual amount given – Take the actual amount.
loading, unloading, light
house or forklift charges,  Actual amount not given – Take 20% of Free on Board (FOB)
ship demurrage TO THE value
PORT
2 Air Freight including  Actual amount given – Take the actual amount or 20% of FOB,
loading, unloading, light WHICHEVER IS LOWER.
house or forklift charges TO
THE AIRPORT  Actual amount not given – Take 20% of FOB.

3 Insurance  Actual amount given – Take the actual amount.

 Actual amount not given – Take 1.125% of FOB.

4 Loading, unloading and  Not includible.

other charges AT the port/
airport
5 If the breakup of certain  Refer Notes.
charges is not available

II. Where Transaction value of imported goods is not considered

 Further, the rules also provide for valuation in case any of the conditions of TV are not satisfied and
the manner of acceptance or rejection of value declared by importer if the PO has reason to doubt
the truth of accuracy of such value.

a) Rule 3 – States additional conditions for application of Transaction value

 There should be no restriction by the seller on the buyer as regards to the sale, use and
assignment of the goods. However, geographical conditions which does not affect the value of
the goods shall be considered to be reasonable.

 The buyer of the goods may re-sale the goods in India. The seller should not receive any resale
proceeds. If the seller receives any resale proceeds, then TV will be accepted only after making
adjustments for such resale proceeds.

 In case buyer & seller are related, TV shall be accepted provided they are able to establish
that the relationship did not influence the price.

 If the value cannot be determined subject to the above, then the value shall be determined
sequentially from Rule 4 to Rule 9.

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b) Rule 4- Transaction value of Identical goods

 Identical goods means imported goods –

 Which are same in all respects, including physical characteristics, quality and reputation
as the goods being valued except for minor differences in appearance that do not affect
the value of the goods;

 Produced in the country in which the goods being valued were produced; and

 Produced by the same person who produced the goods, or where no such goods are
available, goods produced by a different person, but shall not include imported goods
where engineering, development work, art work, design work, plan or sketch undertaken in
India were completed directly or indirectly by the buyer on these imported goods free
of charge or at a reduced cost for use in connection with the production and sale for export
of these imported goods.

 The value of imported goods shall be the transaction value of identical goods sold for export to India
and imported at or about the same time as the goods being valued.

 The transaction value of identical goods in a sale at the same commercial level and in
substantially the same quantity as the goods being valued shall be used.

 If there is difference in commercial level, then the value should be adjusted to take into account
variation due to difference in commercial level. If there is more than one price at similar
commercial levels, then the lowest amongst them will be adopted.

c) Rule 5- Transaction value of Similar goods

 Similar goods means imported goods –

 Which although not alike in all respects, have like characteristics and like component
materials which enable them to perform the same functions and to be commercially
interchangeable with the goods being valued having regard to the quality, reputation and the
existence of trade mark;

 Produced in the country in which the goods being valued were produced; and

 Produced by the same person who produced the goods, or where no such goods are
available, goods produced by a different person, but shall not include imported goods
where engineering, development work, art work, design work, plan or sketch undertaken in
India were completed directly or indirectly by the buyer on these imported goods free
of charge or at a reduced cost for use in connection with the production and sale for export
of these imported goods.

 Other points same as Rule 4.

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d) Rule 6- Directive Rule

 If the value of the goods cannot be determined by using rule 3,4 or 5, then the value shall be
determined as per rule 7 and then rule 8.

 However, at the request of the importer the PO may allow to apply Rule 8 before Rule 7.

e) Rule 7- Deductive value

 If imported goods or identical or similar goods are further sold in India, in the condition as imported
goods at or about the same time, then the value of imported goods shall be based on the unit price
at which greatest aggregate quantity of such goods is sold to persons who are not related to the
sellers in India, subject to the following deductions:

 Either the commission usually paid or agreed to be paid or the additions usually made for profit
and general expenses in connection with sales in India of imported goods of the same class
or kind.

 The usual costs of transport and insurance and associated costs incurred within India;

 The customs duties and other taxes payable in India by reason of importation or sale.

 The term “unit/price at which goods are sold in the greatest aggregate quantity” means the
price at which the greatest number of units is sold in sales to persons who are not related to the
persons from whom they buy such goods at the first commercial level after importation at which
such sales take place.

Illustration:

Sale Quantity Unit Price Number of sales Total quantity sold

1-10 units 100 10 sales of 5 units, 5 sales of 3 units 65
11-25 95 5 sales of 11 units 55
Over 25 units 90 1 sale of 30 units, 1 sale of 50 units 80
The greatest number of units sold at a price is 80, therefore, the unit price in the greatest
aggregate quantity is 90.

 If neither the imported goods nor identical or similar imported goods are sold at or about the same
time of importation of the goods being valued, the value of imported goods shall, subject to
deductions, be based on the unit price at which the imported goods or identical or similar imported
goods are sold in India, at the earliest date after importation but before the expiry of 90 days
after such importation.

 If such goods are not sold in the condition as imported, then, the value shall be based on the unit
price at which the imported goods after further processing, are sold in the greatest aggregate
quantity to persons who are not related to the seller in India. Deduction of processing will be
available.

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f) Rule 8- Computed Value

 The value of imported goods shall be based on a computed value, which shall be the sum of:

 The cost or value of materials and fabrication or other processing employed in producing the
imported goods;

 An amount for profit and general expenses equal to that usually reflected in sales of goods of
the same class or kind as the goods being valued which are made by producers in the
country of exportation for export to India.

g) Rule 9- Residual Rule or Fall Back Method

 Where the value of imported goods cannot be determined under the provisions of any of the
preceding rules, the value shall be determined using reasonable means consistent with the
principles and general provisions of these rules and on the basis of data available in India.

 The value so determined shall not exceed the price at which such or like goods are ordinarily sold
or offered for delivery at the time and place of importation in the course of international trade.

 No value shall be determined under the provisions of these Rules on basis of:

 The selling price in India of the goods produced in India;

 The price of the goods in the domestic market of the country of exportation;
 The price of the goods for the export to a country other than India;
 Minimum customs value or Arbitrary or fictitious values.

h) Rule 11- Declaration by the importer

 The importer or his agent shall furnish –

 A declaration disclosing full and accurate details relating to the value of the imported goods;

 Any other statement, information or document including an invoice of the manufacturer or

producer of the imported goods to the PO for determination of the value of imported goods
under these Rules.

i) Rule 12- Rejection of declared value

 When the proper officer has reason to doubt the truth or accuracy of the value declared in relation
to any imported goods, he may ask the importer of such goods to furnish further information
including documents or other evidence.

 After receiving such further information, or in the absence of a response of such importer, the proper
officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be
deemed that the transaction value of such imported goods cannot be determined under the
provisions of Rule 3(1).

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 At the request of an importer, the PO, shall intimate the importer in writing the grounds for
doubting the truth or accuracy of the value declared in relation to goods imported by such importer
and provide a reasonable opportunity of being heard.

Gira Enterprises v. Ccus. 2014 (307) ELT 209 (SC)

Question: Can the value of imported goods be increased if Department fails to provide to the
importer, evidence of import of identical goods at higher prices?
Facts: The appellant imported some goods from China. On the basis of certain information
obtained through a computer printout from the Customs House, Department alleged that during
the period in question, large number of such goods were imported at a much higher price than the
price declared by the appellant. Therefore, Department valued such goods on the basis of
transaction value of identical goods as per erstwhile rule 5 [now rule 4 of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007] and demanded the differential duty
alongwith penalty and interest from the appellant. However, Department did not provide these
printouts to the appellant.
Judgement: The Supreme Court held that mere existence of alleged computer printout was not
proof of existence of comparable imports. Even if assumed that such print out did exist and content
thereof were true, such printout must have been supplied to the appellant and it should have been
given reasonable opportunity to establish that the import transactions were not comparable. Thus,
in the given case, the value of imported goods could not be enhanced on the basis of value of
identical goods as Department was not able to provide evidence of import of identical goods at
higher prices

j) Miscellaneous Provisions- Valuation of Old Machinery and motor cars

 Department values cars on basis of price catalogue of new cars and depreciation is allowed at
standard rates. The value is arrived at on the basis of world car catalogue price less 15% (being
trade discount).

 In case of purchase of old machinery, all expenses connected with the dismantling of the old
machinery, and making it ready for being transported including inspection charges of old
machinery are includible. Moreover inspection charges paid abroad in connection with the contract
of the old machinery are also includible.

 Depreciation will be allowed on value of old machinery/car including other goods for personal use,
as below:

Particulars Percentage
For every quarter of 1st year 4%
For every quarter of 2nd year 3%
For every quarter of 3rd year 2.5%
For every quarter of 4th and subsequent year 2%
Total depreciation limited to 70%

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Manner of Computing Value in case of Warehoused Goods – Section 3(8A) of CTA, 1975

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Computation in case of Exports

1. Taxable Event

 Export can be said to be complete once the goods cross the Indian Territorial waters. Export benefits
will not be available if the ship is destroyed within the Indian waters.

2. Determination of relevant date for Rate of Duty, Rate of exchange and tariff valuation

a) Rate of exchange shall be the rate when the shipping bill or bill of export is filed.

b) Rate of duty and valuation- Section 16

3. Customs Valuation (Determination of Value of Export Goods) Rules, 2007

 Valuation shall be done under the provisions of Section 14(1). Normally, FOB value of goods will be
the basis. If export sale contract is a CIF contract, post exportation element, will have to be deducted.

 Where the declared value is rejected, the value shall be determined by proceeding sequentially in
accordance with rules 4 to 6.

 The declared value shall be accepted where the proper officer is satisfied about the truth or
accuracy of the declared value after the said enquiry in consultation with the exporter.

a) Certain reasons for non-acceptance of declared value

 Significant variation in value at which goods of like kind and quality exported at or about the same
time in comparable quantities.

 Significantly higher value compared to the market value of goods of like kind and quality at the time
of export.

 Misdeclaration of goods in parameters such as description, quality, quantity, year of manufacture or

production.

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b) Rule 3- Determination of the method of valuation

 Subject to rule 8, the value of export goods shall be transaction value. If the buyer and seller are
related, then the TV will be accepted if it is shown that the relationship has not influenced price.

c) Rule 4- Determination of export value by Comparison

 The value of the export goods shall be based on the TV of goods of like kind and quality exported
at or about the same time to other buyers in the same destination country of importation or in
its absence another destination country of importation adjusted taking into account the relevant
factors such as:

 Difference in the dates of exportation.

 Difference in commercial levels and quantity levels.

 Difference in composition, quality and design between the goods to be assessed and the goods
with which they are being compared.

 Difference in domestic freight and insurance charges depending on the place of exportation.

d) Rule 5- Computed value method

 If the value cannot be determined under rule 4, it shall be based on a computed value, which shall
include the following:

 Cost of production, manufacture or processing of export goods;

 Charges, if any, for the design or brand and an amount towards profit.

e) Rule 6- Residual method

 Where the value of the export goods cannot be determined under the provisions of rules 4 and 5,
the value shall be determined using reasonable means consistent with the principles and general
provisions of these rules.

 However, the local market price of the export goods may not be the only basis for determining the
value of export goods.

f) Rule 7- Declaration by the exporter

 The exporter shall furnish a declaration relating to the value of export goods in the manner specified.

g) Rule 8- Rejection of declared value- Same as Rule 12 of Import valuation value

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Other types of duties

1. Protective duty

 The two types of custom duties are revenue duties and protective duties. Revenue duties are
those which are levied for the purpose of raising customs revenue, whereas protective duties are
intended to give protection to indigenous industries.

 If resort to protective duties is not made there could be a glut of cheap imported articles in the
market making the indigenous goods unattractive. The protection through protective duties is given
considering the following factors:

 The protective duties should not be very stiff so as to discourage imports.

 It should be sufficiently attractive to encourage imports to bridge the gap between demand and
supply of those articles in the market.

 The protective duties are levied by the Central Government upon the recommendation made to it by
the Tariff Commission and upon it being satisfied that circumstances exist which render it
necessary to take immediate action to provide protection to any industry established in India.

 Other than protective duty the Central Government can also impose quantitative restrictions on
import of goods in the following manner:

 Restriction on the quantity that can be imported during the whole year.
 Restriction on the quantity that can be imported by an individual;
 The organisations that will be permitted to import the protected commodities;

 As per section 7, the notification for imposition of protective duty should be placed in the
Parliament by way of bill. If the Bill is not passed within 6 months of introduction in the parliament,
the notification ceases to have force, but action already taken remains valid.

2. Countervailing duty on subsidised goods- Section 9 of Custom Tariff Act

 Where any country pays any subsidy (directly or indirectly) for manufacture or production therein
or for its exportation therefrom including any subsidy on transportation of such article to India,
Central Government can impose CVD upto the amount of such subsidy.

 It is not relevant whether the same is imported directly from the country of manufacture,
production or otherwise.

a) Provisional CVD

 The Central Government is empowered to impose provisional CVD equal to the amount of subsidy
provisionally estimated, where issue as to amount of subsidy is pending determination. If on final
determination, the Central Government is of the opinion that the CVD exceeds the subsidy so
determined, it shall reduce such CVD and shall refund the excess duty so collected.

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b) Retrospective CVD

 If the Central Government is of the opinion that the injury to the domestic industry which is difficult
to repair, is caused by massive imports in a relatively short period of the article benefiting from the
subsidies paid, the Central Government is empowered to levy such duty retrospectively but not
beyond 90 days from the date of notification.

 The duty once imposed shall continue for a period of 5 years unless revoked earlier. However, the
Central Government is empowered to extend the period by another 5 years.

c) Conditions

 The injury to domestic industry, which is difficult to repair, is caused by massive imports in a relatively
short period, of the articles benefiting from subsidies.

 In order to preclude recurrence of such injury, it is necessary to levy countervailing duty

retrospectively.

 This duty shall be recovered in the same manner, as other duties under the provisions of the
Customs Act.

3. Anti-Dumping Duty- Section 9A of Custom Tariff Act, 1975

 Where article is exported by an exporter or producer into India at very low prices compared to the
prices in the international/domestic market either with intention to cripple domestic industry or
to dispose of their excess stock, Central Government can impose anti-dumping duty upto margin
of dumping on such articles.

 The anti-dumping duty will be dumping margin or injury margin whichever is lower. However,
such anti-dumping action can be taken only when there is an Indian Industry producing like
articles.

 Unless specifically provided, the provisions will not be applicable to SEZ and 100% EOU’s. However,
if such products are supplied to DTA, then duty will apply.

 Margin of dumping = Normal value (-) Export Price

 Injury Margin = Fair Selling Price (-) Landed Cost (Assessable Value + BCD + SWS)

a) Retrospective Duty

 The Central Government is empowered to levy such duty retrospectively but not beyond 90 days
from the date of notification. The duty once imposed shall continue for a period of 5 years unless
revoked earlier. However, the Central Government is empowered to extend the period of application
of such duty for another 5 years.

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b) Provisional Duty

 If the margin of dumping cannot be ascertained provisional duty shall be collected. Provisional
duty can continue upto 6 months, extendable to 9 months.

c) Conditions

 There is a history of dumping which caused injury or that the importer was, or should have been,
aware that the exporter practises dumping and that such dumping would cause injury.

 The injury is caused by massive dumping of an article imported in a relatively short time which in
the light of the timing and the volume of the imported article dumped and other circumstances is
likely to seriously undermine the remedial effect of the antidumping duty liable to be levied.

4. Additional points/ Common Points for both Anti Dumping and Countervailing Duty

 Anti-circumvention measure – If the CG is of the opinion that the importers are circumventing
these two duties by any of the following means, then it may extend these duties to such other
articles from a date not later than the date of initiation of the inquiry, as the CG may, by notification
in the Official Gazette, specify.

 Altering the description or name or composition of the article on which such duty has been
imposed or
 Import of such article in an unassembled or disassembled form or
 Changing the country of its origin or export or
 In any other manner, whereby these duties so imposed is rendered ineffective.

 Absorption of Countervailing duty and Anti-Dumping Duty – If the CG in any inquiry is of the
opinion that absorption of these duties has taken place in the following cases, then it may modify
these duties to counter the effect of such absorption from a date not later than the date of
initiation of the inquiry, as the CG may, by notification in the Official Gazette, specify.

 There is a decrease in the export price of an article without any change in the resale price
in India of such article imported from the exporting country or territory; or
 Under such other circumstances as may be provided by rules.

 Non-applicability of these duties: These duties shall not apply to article imported by a 100% EOU
or a unit in SEZ , unless,-

(i) It is specifically made applicable in such notification or to such undertaking or unit; or

(ii) such article is either cleared as such into the Domestic Tariff Area (DTA) or used in the
manufacture of any goods that are cleared into the DTA, in which case, these duties shall be imposed
on that portion of the article so cleared or used, as was applicable when it was imported into India.

 Extension of Period: These duties can be extended for a period upto 5 years. If the review is not
completed before the expiry of the period of imposition (Initial 5 years) then the duty may continue

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to remain in force pending the outcome of such review for a further period not exceeding 1 year.
However, if the said duty is revoked temporarily, the period of such revocation shall not
exceed one year at a time.

 No article shall be subjected to both countervailing and anti-dumping duties to compensate for the
same situation of dumping or export subsidization. (Section 9B)

 Countervailing and anti-dumping duties shall not be levied just because such articles are exempt
from duties or taxes borne by like articles when meant for consumption in the country of origin or
exportation or by reasons of refund of such duties or taxes.

 These duties shall not be levied on imports from member country of WTO or from a country with
whom the GOI has a most favoured nation agreement unless a determination has been made that
import of such article into India causes or threatens material injury to any established industry in
India or materially retards the establishment of any industry in India.

 Section 9C enumerates the orders against which an appeal can be preferred to CESTAT. Further
all the provisions relating to appeal will apply to Anti-dumping duty as well.

Case Law: Rishiroop Polymers (P) Ltd v Designated Authority 2013 (294) E.L.T. 547 (Bom)
Question: Can a writ petition be filed against an order passed by the CESTAT under section 9C
(Anti-dumping duty) of the Customs Tariff Act, 1975?
Judgement: The High Court observed that section 9A(8) of the Customs Tariff Act, 1975
specifically incorporates all the provisions of the Customs Act, 1962 relating to appeal as far as
may be, in their application to the anti-dumping duty chargeable under section 9A. The order of
the CESTAT passed in appeal would, therefore, clearly be subject to appeal, either to this Court
under section 130 or to the Supreme Court under section 130E of the Customs Act, 1962 if the
appeal relates to the rate of duty or to valuation of goods for the purposes of assessment.

The High Court, therefore, held that it would not be appropriate for it to exercise the jurisdiction
under Article 226 of the Constitution, since an alternate remedy by way of an appeal was available
in accordance with law.

5. Agriculture Infrastructure and Development Cess (AIDC)

 An Agriculture Infrastructure and Development Cess (AIDC) has been levied on import of specified
goods at the notified rate. This cess is used to finance the improvement of agriculture infrastructure
and other development expenditure. AIDC would be applicable on the value determined under
section 14 of Customs Act, 1962 i.e. Assessable Value.

 The AIDC on imported goods is in addition to any other duties of customs chargeable on such goods,
under the Customs Act, 1962 or any other law for the time being in force.

Comments: Though specific rate notifications are not for CA Final syllabus but if it is given in the
exam, then consider it on Assessable value. Don’t forget that social welfare surcharge would not be
applicable on AIDC. However, IGST would be applicable on all the taxes and duties including AIDC.

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6. Safeguard Duty- Section 8B of Custom Tariff Act

 The CG is empowered to impose safeguard duty on specified imported goods if the Central
Government is satisfied that the goods are being imported in large quantities and under such
conditions that they are causing or threatening to cause serious injury to domestic industry.

 The duty, once imposed is valid for 4 consecutive years, unless revoked earlier. This period can
be extended by Government, but total period of safeguard duty cannot be more than 10 years.

 The following imports are exempted from the levy of safeguard duty:

 Articles originating from developing country so long as the share of imports of that article
from that country does not exceed 3% of the total imports of that article into India;

 Articles originating from more than one developing country so long as the aggregate of
imports from developing countries each with less than 3% import share taken together
does not exceed 9% of the total imports of that article into India;

 Unless specifically made applicable in the notification the articles imported by a 100% EOU or
units in a Free Trade Zone or Special Economic Zone shall not be liable to safeguard
duty. If the article or the goods manufactured from such article is supplied to DTA, then
safeguard duty will apply.

a) Provisional Duty

 The Central Government is empowered to impose provisional safeguard duty, where issue as to
whether the import would cause injury is pending determination. Such provisional duty shall not
remain in force for more than 200 days from the date on which duty was imposed.

 If on final determination, the Central Government is of the opinion that increased imports have not
caused or threatened to cause serious injury to a domestic industry, it shall refund the duty so
collected.

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7. Rate of duty in case of goods consisting of articles liable to different rates of duty – Sec 19

 Where goods are imported in sets, being classifiable under different Chapters and Headings, if the
importer is able to provide breakup of the total price in respect of different goods, the goods will
be charged to the rates of duty as applicable.

 If the importer is unable to give breakup, the duty will be charged at the highest rate, even
articles exempt will be chargeable to highest rate of duty.

Example

 Treatment of accessories

Case Treatment
An accessory compulsorily supplied with main Same rate of duty as the main product.
product (+) No separate charge is made for
such accessory.
In any other case Rate applicable to the accessory

State of Punjab v. Nokia India Private Limited 2015 (315) ELT 162 (SC)
Question: Whether the mobile battery charger is classifiable as an accessory of the cell phone or
as an integral part of the same?
Facts: In this case, the assessee classified the mobile battery charger as an integral part of the
main product i.e. Nokia mobile phone. It contended that cell phone could not be operated without
the charger. Further, mobile battery chargers were provided free with the cell phone in a composite
package. Therefore, it applied the concessional rate of tax on the mobile battery charger also, as
applicable on the mobile phone. However, it also admitted that whenever it sold the chargers
separately, tax was not charged at the concessional rate
Judgement: The Apex Court held that mobile battery charger is an accessory to mobile phone and
not an integral part of it. Further, battery charger cannot be held to be a composite part of the cell
phone, but is an independent product which can be sold separately without selling the cell phone.

Note: Though the above judgement has been rendered in context of VAT laws, the principle of
classification of mobile charger may hold good in case of customs classification matter as well.

May 19 – Exam Question - Determine the total duties (duty, tax and cess) payable under Customs Act if
Mr. Rao imported rubber from Malaysia at landed price of ₹ 25 lakh. It has been notified by the Central
Government that share of imports of rubber from the developing country against total imports to India
exceeds 5%. Safeguard duty notified on this product is 30%, rate of integrated tax u/s 3(7) is 12% and rate
of basic customs duty is 10% and Social Welfare Surcharge @ 10%.

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Goods Imported/ Exported as Baggage

1. Introduction

 As per Section 2(3) Baggage includes unaccompanied baggage but does not include motor
vehicles.

 Baggage means all dutiable articles, imported by passenger or a member of a crew in his baggage.
Baggage does not include motor vehicles and goods imported through courier.

2. Declaration by Owner Determination of duty rate and classification- Section 77 and 78

 The owner of any baggage shall make a declaration of its contents to the PO for the purpose of
clearance. Such declaration shall be made in the Baggage Declaration Form.

 The rate of duty and tariff valuation, where applicable, shall be the rate and valuation in force on the
date on which a declaration is made.

3. Duty exemption to baggage- Section 79

 Articles in use by passenger/crew for the minimum period prescribed by the Baggage Rules, 2016.
These Rules, as on date, do not prescribe any minimum period for use of articles by the passenger/
crew. However, totally unused articles may not be held as bona fide baggage.

 Articles for use by passenger or his family or bona fide gifts or souvenirs within the limits
prescribed in the aforesaid Baggage rules.

4. Temporary detention of baggage- Section 80

 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, the PO may, at the request of
the passenger, detain such article for the purpose of being returned to him on his leaving India.

 In case if for any reason, the passenger is unable to collect the article at the time of his leaving India,
the article may be returned to him through any other passenger authorised by him and leaving India
or as Cargo consigned in his name.

5. Rate of duty and exemption for laptop computer

 The effective duty rate on notification comes down to 35% and Social Welfare Surcharge at 10%.
Hence, effective rate is 38.5%. The duty shall be levied after deducting allowances as discussed
above. No IGST is payable. This rate is not applicable for fire arm, cartridge, cigar, cigarette or
tobacco in excess of the quantity prescribed or goods imported through courier.

 Central Government has exempted one laptop computer when imported into India by a passenger
of the age of 18 years or above (other than member of a crew) from customs duty

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6. Baggage Rules, 2016

a) Free Allowance

Country Person Free Allowance

Any country Indian Resident or Used personal effect56 or travel souvenirs. Articles upto a value of
54

other than foreigner residing in ₹ 50,00057 if these are carried on the person or in the accompanied
Nepal, India or tourist55 of baggage of the passenger Except Annexure I.
Bhutan and Indian origin
Myanmar Annexure I of baggage rules – Fire Arm, Cartridges of fire arms
exceeding 50, Cigarettes exceeding 100 or cigars exceeding 25 or
tobacco exceeding 125 gms, alcoholic liquor and wines in excess
of two litres, gold or silver, in any form other than ornaments, Flat
Panel (LCD/LED/Plasma) Television.
Tourist of foreign Same as above but free allowance ₹ 15,000.
origin
Infants below 2 Only personal effect.
years

Nepal, Any person other Same as tourist of foreign origin above.

Bhutan & than infant, by air
Myanmar Any other case Only personal effect.

b) Additional allowance for professional or person transferring residence – Only on return to India

Criteria Exemption
Returning after 3 months but upto 6  Used personal and household articles, other than
months; those mentioned in Annexure I and Annexure II but
including articles mentioned in Annexure III upto an
aggregate value of ₹ 60,000.

Returning after 6 months but upto 1 year;  Same as above upto ₹ 1,00,000.

Stay of minimum 1 year during preceding 2  Same as above upto ₹ 2,00,000.

years returning on termination of work & has
not availed this concession in preceding
3 years;

Minimum stay of 2 years or more (If certain  Same as above upto ₹ 5,00,000.
conditions mentioned below are satisfied);

54
“Resident” means a person holding a valid passport issued under the Passports Act, 1967 and normally residing in India.
55
“Tourist” means a person not normally resident in India, who enters India for a stay of not more than 6 months in the course
of any 12 months period for legitimate non-immigrant purposes.
56
“Personal effects” means things required for satisfying daily necessities but does not include jewellery.
57
Free allowance shall not be allowed to be pooled with the free allowance of any other passenger.

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 Additional Conditions with relaxations only for 2 years or more

Condition Relaxation that may be considered

Minimum stay of 2 years abroad, Shortfall upto 2 months can be condoned by AC/ DC if the
immediately preceding the date of his early return is due to Terminal leave or vacation availed
arrival on transfer of residence. by passenger or any other special circumstances.

Total stay in India on short visits Commissioner/ Principal Commission may condone this
during 2 preceding years should not requirement in deserving cases
exceed 6 months.

Passenger has not availed of this Nil

concession in the preceding 3 years.

Annexure II – Colour Television, Video Home Theatre System, Dish Washer, Domestic refrigerators
of capacity above 300 litres or its equivalent, Deep Freezer, Video camera (or the combination of
any such video camera with Television Receiver Sound recording or reproducing apparatus, Video
reproducing apparatus), Cinematographic films of 35 mm and above, Gold or Silver, in any form,
other than ornaments.

Annexure III – VCR or VCP or VTR or VCDP, Digital Video Disc Player, Music System, Air –
Conditioner, Microwave Oven, Word Processing Machine, Fax Machine, Portable Photocopying
Machine, Washing Machine, Electrical or Liquefied Petroleum Gas Cooking Range, Personal
Computer, Laptop Computer, Domestic Refrigerators of capacity up to 300 litres or its equivalent.

c) Jewellery – Additional Allowance

 A passenger returning to India, who has been residing abroad for over one year, shall be allowed
clearance free of duty, jewellery in his bonafide baggage, upto 20 grams of an aggregate value of
upto ₹ 50,000 in case of a gentleman passenger and 40 grams upto ₹ 1,00,000 in case of lady
passenger.

7. Application of rules to members of the crew

 The Baggage Rules shall apply in respect of members of the crew engaged in a foreign going
vessel for importation of their baggage at the time of final pay off on termination of their engagement.

 A crew member of a vessel/ aircraft shall be allowed to bring items like chocolates, cheese,
cosmetics and other petty gift items for their personal or family use which shall not exceed the value
of ₹ 1,500 at the time of returning of vessel/ aircraft from foreign journey.

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8. Unaccompanied baggage- One month/ Two month Rule

 The above Rules equally apply to unaccompanied baggage except the free allowance which is
not available for unaccompanied baggage.

 However, in order to claim exemption following conditions are required to be fulfilled :

 The unaccompanied baggage had been in possession abroad, of the passenger and is
dispatched within one month of his arrival in India or within such further period as the
A.C./D.C. may allow.

 The unaccompanied baggage may land in India upto 2 months before the arrival of the
passenger or within such period, not exceeding one year, as the AC/ DC may allow, if he
is satisfied that the passenger was prevented from arriving in India within the period of two
months due to circumstances beyond his control such as sudden illness of the passenger
or a member of his family, or natural calamities or disturbed conditions or disruption of the
transport or travel arrangements in the country or countries concerned or any other reasons,
which necessitated a change in the travel schedule of the passenger.

9. Question in May 2018

Gregory Peg of foreign origin has come on travel visa, to tour in India. He carries with him, as part
of baggage, the following:

Particulars Value (₹)

Travel Souvenir 85,000
Other articles carried on in person 1,50,000
120 sticks of cigarettes of ₹100 each 12,000
Fire arm with 100 cartridges (value includes the value of cartridges at @ ₹ 500 1,00,000
per cartridge).

Determine customs duty payable, if the effective rate of customs duty is 38.5% inclusive of social
welfare surcharge, with short explanations where required.

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Problems – Customs
1. Mary Hospital and Research Centre imported a machine from Delta Scientific Equipment’s, Chicago
for in house research. The price of the machine was settled at US $ 5000. The machine was shipped
on 10.01.2018. Meanwhile, the Hospital Authorities negotiated for a reduction in the price. As a
result, Delta Scientific Equipment’s agreed to reduce the price by $ 850 and sent the revised price
of $ 4150 under a telex dated 15.01.20XX. The machine arrived in India on 18.01.20XX.

The Commissioner of Customs has decided to take the original price as the transaction value of the
goods on the ground that the price is reduced only after the goods have been shipped. Do you agree
to the stand taken by the Commissioner? Give reasons in support of your answer.

2. A material was imported by air at CIF price of 5,000 US$. Freight paid was 1,500 US$ and insurance
cost was 500 US$. The banker realized the payment from importer at the exchange rate of ₹ 61 per
dollar. Central Board of Indirect Tax and Customs notified the exchange rate as ₹ 60 per US$. Find
the value of the material for the purpose of levying duty.

3. M/s. Foreign Trade International Ltd. have imported one machine from England. They have given
the following particulars:

a. F.O.B. value of machine 8,000 UK Pounds.

b. Freight paid (air) 2,500 UK Pounds.
c. Design and development charges paid in UK 500 UK Pounds.
d. Commission payable to local agent @ 2% of F.O.B., in Indian Rupees.
e. Date of bill of entry 24.10.20XX (Rate BCD 10%; Exchange rate as notified by CBIC ₹ 100 per
UK Pound).
f. Date of entry inward 20.10.20XX (Rate of BCD 20%; Exchange rate as notified by CBIC ₹ 98
per UK Pound).
g. IGST is payable @ 12% and SWS @ 10%
h. Insurance charges have been actually paid but details are not available.

Compute the assessable value of the machine and the customs duty payable.

4. Compute the duty payable under the Customs Act, 1962 for an imported equipment.

a. Assessable value of the imported equipment US $ 10,100.

b. Date of bill of entry is 25.4.20XX. Basic customs duty on this date is 10% and exchange rate
notified by the Central Board of Indirect Tax and Customs is US $ 1 = ₹ 65.
c. Date of entry inwards is 21.4.20XX. Basic customs duty on this date is 20% and exchange rate
notified by the Central Board of Indirect Tax and Customs is US $ 1 = ₹ 60.
d. IGST under section 3(7) of the Customs Tariff Act, 1975: 12%.
e. Social welfare surcharge is at 10%.

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5. XYZ Industries Ltd., has imported certain equipment from Japan at an FOB value of 2,00,000 Yen
(Japanese). Determine the assessable value if, the other expenses incurred by M/s. XYZ Industries
in this connection are as follows:

a. Freight from Japan to Indian Port 20,000 Yen.

b. Insurance paid to insurer in India ₹ 10,000.
c. Designing charges paid to Consultancy firm in Japan 30,000 Yen.
d. M/s. XYZ Industries had expended ₹ 1,00,000 in India for certain development activities with
respect to the imported equipment.
e. XYZ Industries had incurred road transport cost from Mumbai port to their factory in Karnataka
₹ 30,000.
f. The Central Board of Indirect Tax and Customs had notified for purpose of section 14 of the
Customs Act, exchange rate of 1 Yen = ₹ 0.63. The interbank rate was 1 Yen = ₹ 0.65.
g. M/s XYZ Industries had effected payment to Bank based on exchange rate 1 Yen=₹ 0.66.
h. The commission payable to the agent in India was 5% of FOB value of the equipment in Indian
Rupees.

6. Compute the assessable value for the purpose of determination of customs duty from the following:

a. Machinery imported from USA by air (FOB price) 4,000 USD.

b. Accessories compulsorily supplied alongwith the machinery 1,000 USD.
c. Air freight 1,200 USD and Insurance charges Actuals not available.
d. Local agent’s commission to be paid in Indian currency ₹ 9,300.
e. Transportation from Indian airport to factory ₹ 4,000. Exchange rate US $ 1 = ₹ 60

7. From the following particulars, calculate assessable value and total customs duty payable:

a. Date of presentation of bill of entry: 20.6.20XX [Rate of BCD 20%; Exchange Rate: ₹ 61.60
and rate notified by CBIC ₹ 62].
b. Date of arrival of goods in India 30.6.20XX [Rate of BCD 10%; Exchange Rate: ₹ 61.80 and
rate notified by CBIC ₹ 63.00].
c. Rate of IGST : 12%.
d. CIF value 2,000 US Dollars; Air Freight 500 US Dollars, Insurance cost 100 US Dollars
[Landing charges not ascertainable].
e. Social welfare surcharge is at 10%.

8. From the following particulars, determine Assessable value for the purpose of customs duty:

a. Cost of the machine at the factory of the exporting country 10,000 USD.
b. Transport charges from the factory of exporter to the port for shipment 500 USD.
c. Handling charges paid for loading the machine in the ship 50 USD.
d. Buying commission paid by the importer 50 USD.
e. Freight charges from exporting country to India 1,000 USD
f. Rate of exchange ₹ 60 per USD.

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9. From the following particulars, determine Assessable value for the purpose of customs duty:

a. F.O.B cost of the machine 10,000 U.K. Pounds.

b. Freight (air) 3,000 U.K. Pounds
c. Engineering and design charges paid to a firm in U.K. 500 U.K. Pounds.
d. License fee relating to imported goods payable by the buyer as a condition of sale 20% of
F.O.B. cost.
e. Materials and components supplied by the buyer free of cost valued ₹ 20,000.
f. Insurance paid to the insurer in India ₹ 6,000.
g. Buying commission paid by the buyer to his agent in U.K. 100 U.K. Pounds

Other Information:

a. Inter-bank exchange rate as arrived by the authorized dealer: ₹ 98 per U.K. Pound.
b. CBIC had notified exchange rate of ₹ 100 per U.K. Pound.
c. Importer paid ₹ 5,000 towards demurrage charges for delay in clearing the machine.

10. A consignment of 800 metric tonnes of edible oil of Malaysian origin was imported by a charitable
organization in India for free distribution to below poverty line citizens in a backward area under the
scheme designed by the Food and Agricultural Organization. This being a special transaction, a
nominal price of US$ 10 per metric tonne was charged for the consignment to cover the freight and
insurance charges. The Customs House found out that at or about the time of importation of this gift
consignment there were following imports of edible oil of Malaysian origin:

Quantity imported in metric tonnes Unit Price in US$ (CIF)

20 260
100 220
500 200
900 175
780 160

The rate of exchange on the relevant date was 1 US $ = ₹ 60.00 and the rate of basic customs duty
was 10% ad valorem. SWS is at 10%. There is no IGST. Calculate the amount of duty leviable on
the consignment under the Customs Act, 1962.

11. Mr. X has imported a machine from Japan in June, 2018 for ₹ 50 lakh. However, the machine was
exported back in December, 2018 for repairs. The supplier has agreed to carry out the repairs as
the machine was still in warranty period, which would normally take 6 months. The fair cost of the
repairs will cost ₹ 10 lakh. In the meantime, Mr. X has requested the supplier to provide him another
machine so that he can carry out his operations without hindrance. Acceding to the request, the
supplier has provided him with another machine which was imported during February, 20XX. The
value of the new machine is ₹ 55 lakh. Freight charges incurred were ₹ 2 lakh. You are required to
compute the assessable value and total duty payable for the above transaction of replacement.
Customs duty is 10% and IGST is 12%. Social Welfare Surcharge to be taken at 10%.

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12. Jolly overseas Ltd. of Hyderabad has imported a machine from U.K (England) through the sea route
by a vessel. The details of the import transaction are as follows:

Sl. Particulars Amount in

No. U.K. (£)
(i) Cost of the machine at the factory of the exporter 20,000
(ii) Transport charges from the factory of exporter to the port for shipment 600
(iii) Handling charges paid for loading the machine on the ship at the port of 500
exportation
(iv) License fee relating to the imported goods payable by the importer as a 900
condition of sale
(v) Actual Freight charges from the port of export to the port of import are not -
ascertainable
(vi) Actual insurance charges paid 200
(vii) Landing charges paid at the place of importation are not ascertainable -
(i) Handling charges associated with the delivery of the imported goods at ₹ 15,000
the place of importation

1 Bill of entry: Dated 21.01.2018

Exchange rate on that day:-
(a) Notified by CBIC 1 UK £ = ₹ 101 (b) Prescribed by RBI 1 UK £ = ₹ 100
2 Entry inward: Dated 26.01.2018
Exchange rate on that day:-
(a) Notified by CBIC 1 UK £ = ₹ 102 (b) Prescribed by RBI 1 UK £ = ₹ 103
Compute the assessable value of the machine (in rupees) for the purpose of levy of Customs Duty.

13. Mr. X imported certain goods from a related person Mr. Paul of US and transaction value has been
rejected. Rules 4 and 5 of the Import Valuation Rules are found inapplicable, as no similar / identical
goods are imported in India. Mr. X furnishes cost related data of imports and requests Customs
Authorities to determine value accordingly as per Rule 8. The relevant data are –

(1) Cost of materials incurred by Mr. Paul $ 2,000

(2) Fabrication charges incurred by Mr. Pual $ 1,000
(3) Other chargeable expenses incurred by Mr. Paul $ 400
(4) Other indirect costs incurred by Mr. Paul $ 250
(5) Freight from Mr. Paul’s factory to US Port $ 250
(6) Loading charges at US port $ 100
(7) Normal net profit margin of Mr. Paul 20% of FOB
(8) Air freight form US port to Indian port $ 1,500
(9) Insurance from US port to Indian port $ 50
(10) Exchange Rate ₹ 65 per $

The Customs Authorities are of the opinion that since value as per Rule 7 can be determined at
₹4,00,000, there is no need to apply Rule 8.
______________________________________________________________________________
Mr Backpack Problem to be solved from 4th Chapter – ICAI Module

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Additional Problems and Some Solutions

1. Determine whether the amount is liable to Custom duty

Sl Transactions Solutions
No
1 Raw material supplied by the importer at ₹ 2000 ₹ 8000 to be added to the value of
while the value was ₹ 10000 imported goods
2 Demurrage charges at the port Not includible. Only normal port
dues is to added
3 Ship demurrage, Lighterage and Barge charges Includible as Sea Freight
4 Compulsory accessory but separately charged Not includible in value of goods.
Duty to be charged separately
5 Development charges incurred in India for the Not includible
imported product
6 Local agents commission in India Includible
7 Landing charges at the import port ₹ 7000 Not includible.
8 Cost of returnable container if exported back Not Includible
9 Loading charges at the export port ₹ 7000 Includible

2. Illustration: Product ‘Z’ was imported by Mr. X by air. The details of the import transaction are as
follows:

PARTICULARS US $
Price of ‘Z’ at exporter’s factory 8,500
Freight from factory of the exporter to load airport (airport in the country of 250
exporter)
Loading and handling charges at the load airport 250
Freight from load airport to the airport of importation in India 4,500
Insurance charges 2,000

Though the aircraft arrived on 22.08.20XX, the bill of entry for home consumption was presented by
Mr. X on 20.08.20XX.
The other details furnished by Mr. X are:
Particulars 20.08.20XX 22.08.20XX
Rate of basic customs duty 20% 10%
Exchange rate notified by CBIC ₹ 60 per US$ ₹ 63 per US$
Exchange rate prescribed by RBI ₹ 61 per US$ ₹ 62 per US$
Integrated tax leviable under section 3(7) of the Customs 18% 12%
Tariff Act, 1975

Compute the value of product ‘Z’ for the purpose of levying customs duty and Customs duty and tax
payable assuming SWS @ 10%.

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Solution: Computation of assessable value of product ‘Z’

Particulars Amount
Ex-factory price of the goods 8,500 US $
Freight from factory of the exporter to load airport (airport in the 250 US $
country of exporter)
Loading and handling charges at the load airport 250 US $
Freight from load airport to the airport of importation in India 4,500 US
$
Total cost of transport, loading and handling charges associated with 5,000 US
the delivery of the imported goods to the place of importation $
Add: Cost of transport, loading, unloading and handling charges associated with 1,800 US $
the delivery of the imported goods to the place of importation (restricted to 20% of
FOB value) [Note 1]
Insurance (actual) 2,000 US $
CIF for customs purpose 12,300 US $
Value for customs purpose 12,300 US $
Exchange rate as per CBIC [Note 2] ₹ 60 per US $
Amount (₹)
Assessable value (₹ 60 x 12,300 US $) 7,38,000
Add: Basic customs duty @ 10% [Note 3] 73,800
Add: SWS [10% of ₹ 73,800] 7,380
Value for the purpose of levying integrated tax [Note 4] 8,19,180
Add: Integrated tax leviable under section 3(7) @ 12% 98,302
Total duty & tax payable (rounded off) 1,79,482
Notes:
i. In the case of goods imported by air, the cost of transport, loading, unloading and handling
charges associated with the delivery of the imported goods to the place of importation shall not
exceed 20% of the FOB value of the goods. [Fifth proviso to rule 10(2) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 (CVR)].
FOB value in this case is the ex-factory price of the goods (8,500 US $) plus the cost of transport
from factory to load airport (250 US $) plus loading and handling charges at the load airport (250
US $) which is 9,000 US $.
ii. Rate of exchange determined by CBIC is to be considered [Clause (a) of the explanation to
section 14 of the Customs Act, 1962].
iii. Section 15 of the Customs Act, 1962 provides that rate of duty shall be the rate in force on the
date of presentation of bill of entry or the rate in force on the date of arrival of aircraft, whichever
is later.
iv. Integrated tax is levied on the sum total of the assessable value of the imported goods and
customs duties [Section 3(8) of the Customs Tariff Act, 1962]. Education Cess and Secondary
Higher Education Cess leviable on integrated tax have been exempted vide Notification Nos. 54
& 55 Cus both dated 30.06.2017.
v. No landing charges are to be added to the CIF value in view of the amendment in rule 10(2) of
the CVR vide Notification No. 91/2017 – Cus. (NT) dated 26.09.2017.

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3. Illustration: An importer from Cochin imports goods from an exporter in US. The vessel carrying the
goods reaches Mumbai port first and from there goods are transshipped to Cochin port.
Determine the assessable value of the imported goods under the Customs Act, 1962 from the
following particulars:
Sl. Particulars Amount
No.
1 Cost of the machine at the factory of the exporter US $ 20,000
2 Transport charges from the factory of exporter to the port for shipment US $ 1,000
3 Handling charges paid for loading the machine in the ship US $ 100
4 Buying commission paid by the importer US $ 100
5 Freight charges from exporting country to India US $ 2,000
6 Actual insurance charges paid are not ascertainable ---
7 Charges for design and engineering work undertaken for the machine US $ 5,000
in US
8 Unloading and handling charges paid at the place of importation ₹ 1,500
9 Transport charges from Mumbai to Cochin port ₹ 25,000
10 Exchange rate to be considered: 1$ = ₹ 60

Solution: Computation of assessable value of imported goods

Particulars Amount (US
$)
Price of the machine at the factory of the exporter 20,000
Add: Transport charges up to the port in the country of the exporter [Note 1] 1,000
Add: Handling charges at the port in the country of the exporter [Note 1] 1,00
Add: Charges for design and engineering work undertaken for the machine in 5,000
US [Note 2]
Add: Buying commission [Note 3] Nil
FOB value 26,100.00
Add: Freight charges up to India 2,000.00
Add: Insurance charges @ 1.125% of FOB [Note 4] 293.63
Add: Transport charges from Mumbai to Cochin port [Note 5] Nil
CIF value 28,393.63
Add: Unloading and handling charges paid at the place of importation [Note 6] Nil
Assessable value 28,393.63
Assessable value in Indian rupees @ ₹ 60/ per $ ₹
17,03,617.80
Assessable value (rounded off) ₹ 17,03,618
Notes:
i. The cost of transport, loading, unloading and handling charges associated with the delivery of
the imported goods to the place of importation are includible in the assessable value [Rule
10(2)(a) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
(CVR)].
ii. Design and engineering work undertaken elsewhere than in India and necessary for the
production of the imported goods is includible in the assessable value [Rule 10(1)(b)(iv) of the
CVR].
iii. Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of the CVR].

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iv. If insurance cost is not ascertainable, the same shall be added @ 1.125% of FOB value of the
goods [Third proviso to rule 10(2) of the CVR].
v. Cost of insurance, transport, loading, unloading, handling charges associated with
transshipment of imported goods to another customs station in India is not included in the
assessable value [Sixth proviso to rule 10(2) of the CVR].
vi. By virtue of the amendment carried out in rule 10(2) of the CVR vide Notification No.
91/2017Cus. (NT) dated 26.09.2017, only charges incurred for delivery of goods “to” the place
of importation are includible in the transaction value.
The loading, unloading and handling charges associated with the delivery of the imported goods
at the place of importation are not to be added to the CIF value of the goods. [Circular No. 39 /
2017 Cus. dated 26.09.2017].

4. Illustration: Determine the assessable value of imported goods in the following cases:

CASE 1:
Particulars US $
FOB value 1,000
Freight, loading, unloading and handling charges associated with the delivery of Not known
the imported goods to the place of importation
Insurance charges 10

CASE 2:
Particulars US $
FOB value plus insurance charges 1,010
Freight, loading, unloading and handling charges associated with the delivery of Not known
the imported goods to the place of importation

CASE 3:
Particulars US $
FOB value 1,000
Sea Freight, loading, unloading and handling charges associated with the 60
delivery of the imported goods to the place of importation
Insurance charges Not known

CASE 4:
Particulars US $
FOB value plus sea freight and loading, unloading and handling charges 1,060
associated with the delivery of the imported goods to the place of importation
Insurance charges Not known

CASE 5:
Particulars US $
FOB value 1,000
Air Freight, loading, unloading and handling charges associated with the delivery 250
of the imported goods to the place of importation
Insurance charges 10

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Solution: . Rule 10(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007
(CVR) has been substituted by a new sub-rule. The new sub-rule provides that for the purposes of
sub-section (1) of section 14 of the Customs Act, 1962 and these rules, the value of the imported
goods shall be the value of such goods, and shall include –

(a) The cost of transport, loading, unloading and handling charges associated with the delivery of
the imported goods to the place of importation;

(b) The cost of insurance to the place of importation:

Provided that where the cost referred to in clause (a) is not ascertainable, such cost shall be 20% of
the free on board value of the goods.

Provided further that where the free on board value of the goods is not ascertainable but the sum of
free on board value of the goods and the cost referred to in clause (b) is ascertainable, the cost
referred to in clause (a) shall be 20% of such sum:

Provided also that where the cost referred to in clause (b) is not ascertainable, such cost shall be
1.125% of free on board value of the goods.

Provided also that where the free on board value of the goods is not ascertainable but the sum of
free on board value of the goods and the cost referred to in clause (a) is ascertainable, the cost
referred to in clause (b) shall be 1.125% of such sum.

Provided also that in the case of goods imported by air, where the cost referred to in clause (a) is
ascertainable, such cost shall not exceed 20% of free on board value of the goods.
Provided also that in the case of goods imported by sea or air and transshipped to another customs
station in India, the cost of insurance, transport, loading, unloading, handling charges associated
with such transshipment shall be excluded.

Explanation- The cost of transport of the imported goods referred to in clause (a) includes the ship
demurrage charges on charted vessels, lighterage or barge charges.

In the backdrop of the above provisions, the assessable value in the various cases will be computed
as under:
Computation of assessable value

Case 1
Particulars US $
FOB value 1,000
Add: Cost of transport, loading, unloading and handling charges associated 200
with the delivery of the imported goods to the place of importation [20% of FOB
value in terms of first proviso to rule 10(2) of CVR]
Cost of insurance [Includible in terms of rule 10(2)(b) of CVR] 10
Assessable value [CIF value] 1,210

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Case 2
Particulars US $
FOB value plus insurance charges 1,010
Add: Cost of transport, loading, unloading and handling charges associated 202
with the delivery of the imported goods to the place of importation [20% of sum
of FOB value of the goods and the cost of insurance in terms of second proviso
to rule 10(2) of CVR]
Assessable value [CIF value] 1,212

Case 3
Particulars US $
FOB value 1,000
Add: Cost of sea transport, loading, unloading and handling charges 60
associated with the delivery of the imported goods to the place of importation
[Includible in terms of rule 10(2)(a) of CVR]
Insurance [1.125% of sum of FOB value of the goods in terms of third proviso 11.25
to rule 10(2) of CVR]
Assessable value [CIF value] 1,071.25
Assessable value rounded off 1,071

Case 4
Particulars US $
FOB value plus sea freight and loading, unloading and handling charges 1,060
associated with the delivery of the imported goods to the place of importation
Add: Insurance [1.125% of sum of FOB value of the goods and sea freight and 11.925
loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation in terms of fourth proviso to rule
10(2) of CVR]
Assessable value [CIF value] 1071.925
Assessable value [CIF value] 1,072

Case 5
Particulars US $
FOB value 1,000
Add: Cost of air transport, loading, unloading and handling charges associated 200
with the delivery of the imported goods to the place of importation is restricted
to 20% of FOB value when transportation of goods is through air [Fifth proviso
to rule 10(2) of CVR]
Cost of insurance 10
Assessable value [CIF value] 1,210

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5. Solutions to Problems

 Question number 8

Computation of Assessable Value of Machinery

Particulars Machinery
– US $
Cost of machinery 10000
Transportation upto port 500
Handling at the port 50
FOB price 10550
Add : Sea Freight 1000
Add : Insurance charges @ 1.125% 118.69
CIF 11668.69
Exchange rate 1US $ = ₹ 60 ₹
Assessable value 700121

 Question number 9

Computation of Assessable Value of Machinery

Particulars Machinery
– Pound
FOB value of the machine 10000
Add: Engineering and design charges paid in UK [Note 1] 500
Licence fee relating to imported goods payable by the buyer as a 2,000
condition of sale (20% of FOB) [Note 1]
Total 12500

Amount INR
Value in Indian currency [£12,500 x ₹100] [Note 2] 12,50,000
Add: Materials and components supplied by the buyer free of cost [Note 20,000
1]
Customs FOB 12,70,000
Add: Freight [Note 3] 2,54,000
Insurance paid to the insurer in India [Note 1] 6,000
CIF value – Assessable Value 15,30,000

Notes:

1. Engineering and design charges paid in UK, licence fee relating to imported goods payable by the buyer
as a condition of sale, materials and components supplied by the buyer free of cost and actual insurance
charges paid are all includible in the assessable value [Rule 10 of the Customs (Determination of Value of
Imported Goods) Rules, 2007].

2. As per Explanation to section 14(1) of the Customs Act, 1962, assessable value should be calculated
with reference to the rate of exchange notified by the CBIC.

3. If the goods are imported by air, the freight cannot exceed 20% of FOB price

4. Buying commission is not included in the assessable value [Rule 10(1)(a) of the Customs (Determination
of Value of Imported Goods) Rules, 2007].

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 Answer to Question number 10

Computation of amount of duty payable

CIF value of 800 metric tonnes: 800 x 160 = US $ 1,28,000

At the exchange rate of $ 1 60
CIF Value (in Rupees) Assesable value = 76,80,000

BCD @ 10% of Ad Valorem duty on ₹ 76,80,000 7,68,000

Add: Social Welfare Surcharge at 10% 76,800
Total custom duty payable 8,44,800

Reasoning for transaction value of the subject goods: -

In the instant case, while determining the transaction value of the goods, following factors need
consideration:-
1. In the given case, US $10 per metric tonne has been paid only towards freight and insurance charges
and no amount has been paid or payable towards the cost of goods. Thus, there is no transaction value
for the subject goods. Consequently, we have to look for transaction value of identical goods under rule 4
of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 [Customs Valuation (DVIG)
Rules, 2007].

2. Rule 4(1)(a) of the aforementioned rules provides that subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of identical goods sold for export to India and imported at or
about the same time as the goods being valued. In the six imports given during the relevant time, the
goods are identical in description and of the same country of origin.

3. Further, clause (b) of rule 4(1) of the said rules requires that the comparable import should be at the
same commercial level and in substantially same quantity as the goods being valued. Since, nothing is
known about the level of the transactions of the comparable consignments, it is assumed to be at the same
commercial level.

4. As far as the quantities are concerned, the consignments of 20 and 100 metric tonnes cannot be
considered to be of substantially the same quantity. Hence, remaining 4 consignments are left for our
consideration.

5. However, the unit prices in these 4 consignments are different. Rule 4(3) of Customs Valuation (DVIG)
Rules, 2007 stipulates that in applying rule 4 of the said rules, if more than one transaction value of identical
goods is found, the lowest of such value shall be used to determine the value of imported goods.
Accordingly, the unit price of the consignment under valuation would be US $ 160 per metric tonne.

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Goods Imported/ Exported by Post/courier

1. Entry of goods for import/ export- Section 82

 In the case of goods imported or exported by post or courier, any label or declaration accompanying
the goods, which contains the description and its value, shall be deemed to be an entry for import or
export.

2. Power to deal with postal articles- Section 24

 The postal authority or courier authority has a right and duty to open and examine a postal article.
The right can be exercised only if he has a reasonable suspicion that the goods contained in the
postal article are:

 Liable to duty of customs; or

 Subject to a prohibition under any law in force.

 Before opening and examining the postal article he should issue a notice in writing to the addressee
asking him to be present at an appointed time and place for the opening of the postal article.

 The addressee can be present either in person or by an agent and if the addressee or his agent
does not turn up at the appointed time and place, the postal authorities or courier authority are
entitled to open and examine the postal article in his absence.

3. Rate of duty –Section 83

Case Relevant Date

Goods imported Date on which the postal authorities or courier authority present to the
by post or PO a list containing the particulars of such goods for the purpose of assessing
courier the duty thereon.

However, in case of vessel, if the list of the goods is presented before the
date of the arrival of the vessel, it shall be deemed to have been presented
on the date of arrival.

In case of Date on which the exporter delivers such goods to postal authorities or
exports courier authority for exportation.

 Gifts from abroad upto ₹ 10,000 of goods which are not prohibited goods for import are duty free if
sent by post or through courier. The postal charges or air freight will not be taken into account for
determining value limit of ₹ 10,000. In case of exports the value shall be ₹ 25,000.

 Post parcels where customs duty payable is less than ₹ 100 are fully exempt from duty. Post parcels
posted from India but returned un-delivered are also exempt from customs duty, if no export benefit
was claimed on these parcels.

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Goods Imported/ Exported as Stores

1. Introduction

 Stores means goods for use in a vessel or aircraft and includes fuel and spare parts and other
articles of equipment, whether or not for immediate fitting.[Section 2(38)]

 Few illustrative items that qualify to be stores are Food, drink, stock of fuel, essential spare parts,
medical items, lifesaving items such as boats, life belts etc.

2. Duty liability in various cases – Section 85-89

Type of stores Treatment

Domestic or  Stores for consumption in India will be liable to IGST.
indigenous
stores  Stores for supply to a foreign going vessel or aircraft is permitted to be
cleared without payment of duty and will be treated export (Note 1)
Imported Stores  Stores for consumption in India will be liable to Customs.

 Stores for supply to a foreign going vessel or aircraft can be stored in

warehouse or directly supplied without payment of customs. (Note 1)

Note 1: It may so happen that imported ship stores are supplied to a foreign going aircraft or vessel.
However a part of such stores is consumed while the ship or aircraft was in India. Notwithstanding,
such consumption will not attract any duty if the ship or aircraft is ultimately foreign going.

In case the ship or aircraft carries out a coastal run, the stores consumed in course of the indigenous
domestic run, it would attract IGST or custom duty as the case may be.

3. Section 90

 Imported stores for the use of a ship of the Indian Navy, may without payment of duty be consumed
on board of a ship on the Indian Navy. Stores supplied free by the Government for the use of the
crew of a ship of the Indian Navy are also included above.

4. Foreign Going Vessel or Aircraft- Section 2(21)

 Foreign Going Vessel or Aircraft means any vessel or aircraft for the time being engaged in the
carriage of goods or passengers between any port or airport in India and any port or airport outside
India, whether touching any intermediate port or airport in India or not, and includes:

 Any naval vessel of a foreign government taking part in any naval exercise;
 Any vessel engaged in fishing or any other operations outside the territorial waters of India;
 Any vessel or aircraft proceeding to a place outside India for any purpose.

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Assessment
1. Definitions

 Assessment means determination of the dutiability of any goods and the amount of duty, tax, cess
or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (hereinafter
referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference
to—

(a) The tariff classification of such goods as determined in accordance with the provisions of the
Customs Tariff Act;

(b) The value of such goods as determined in accordance with the provisions of this Act and the
Customs Tariff Act;

(c) Exemption or concession of duty, tax, cess or any other sum, consequent upon any notification
issued therefor under this Act or under the Customs Tariff Act or under any other law for the time
being in force;

(d) The quantity, weight, volume, measurement or other specifics where such duty, tax, cess or
any other sum is leviable on the basis of the quantity, weight, volume, measurement or other
specifics of such goods;

(e) The origin of such goods determined in accordance with the provisions of the Customs Tariff Act
or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the
origin of such goods;

(f) Any other specific factor which affects the duty, tax, cess or any other sum payable on such
goods,
and includes provisional assessment, self-assessment, re-assessment and any assessment in
which the duty assessed is nil;

2. Self-Assessment of duty- Section 17

 Self-Assessment: An importer entering any imported goods u/s 46, or an exporter entering any
export goods u/s 50, shall self-assess the duty, if any, leviable on such goods.

 Verification: The PO may verify the self-assessment of such goods. For this purpose, examine or
test any imported goods or export goods or such part thereof as may be necessary.

 Provided that the selection of cases for verification shall primarily be on the basis of risk
evaluation through appropriate selection criteria

 The PO may require the importer, exporter or any other person to produce any contract,
broker’s note, insurance policy, catalogue or other document so as to ascertain the correctness
of the duty.

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 Reassessment: Where it is found on verification, examination or testing of the goods or otherwise

that the self-assessment is not done correctly, the proper officer may, without prejudice to any other
action which may be taken under this Act, re-assess the duty leviable on such goods.

 Speaking order: Where any re-assessment done is contrary to the self-assessment and the
assessee does not accept the reassessment in writing, the PO shall pass a speaking order on the
re-assessment, within 15 days from the date of re-assessment of the bill of entry or the shipping
bill.

3. Section 99A – Power to conduct audit

 The proper officer may carry out the audit of assessment of imported goods or export goods or of an
auditee under this Act either in his office or in the premises of the auditee in such manner as may
be prescribed.

 Explanation: For the purposes of this section, "auditee" means a person who is subject to an audit
under this section and includes an importer or exporter or custodian approved under section 45 or
licensee of a warehouse and any other person concerned directly or indirectly in clearing, forwarding,
stocking, carrying, selling or purchasing of import or export goods or dutiable goods

4. Provisional Assessment – Section 18

a) Cases where provisional assessment can be carried out

 Where the importer or exporter is unable to make self-assessment and makes a request in
writing to the proper officer for assessment; or

 Where the PO deems it necessary to subject any imported goods or export goods to any chemical
or other test; or

 Where the importer or exporter has produced all the necessary documents and furnished full
information but the PO deems it necessary to make further enquiry; or

 Where necessary documents have not been produced or information has not been furnished
and the PO deems it necessary to make further enquiry.

b) Provisional assessment

 Based on the above grounds the PO shall make an estimate of the duty that is most likely to be
levied hereinafter referred to as the provisional duty.

 The importer may clear the goods on payment of provisional duty or transfer the goods to the
warehouse by executing a bond twice the provisional duty amount.

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c) Final Assessment

 When the duty leviable on such goods is assessed finally or re-assessed by the proper officer:

 In the case of goods cleared for home consumption or exportation, the amount paid shall
be adjusted against the duty finally assessed and if the amount so paid falls short of, or is in
excess of the duty finally assessed, the importer or the exporter of the goods shall pay the
deficiency or be entitled to a refund, as the case may be;

 In the case of warehoused goods, the PO may, where the duty finally assessed is in excess
of the duty provisionally assessed, require the importer to execute a bond, binding himself
for a sum equal to twice the amount of the excess duty.

d) Customs (Finalization of Provisional Assessment) Regulations, 2018

 (i) One month will be allowed for importer/exporter to furnish the deficient information from the
date of the provisional assessment order or as requested

 (ii) Intimation for furnishing deficient information will be issued to the importer/exporter within fifteen
days from date of provisional assessment order

 (iii) Extension not exceeding three months will be granted to the importer/ exporter for this purpose.
Power to extend by a further three months is available with the Additional Commissioner or Joint
Commissioner of Customs and with further powers with Commissioner of Customs

 (iv) Upon receipt of the information, assessment is required to be finalized within two months from
the date when the last of the information was furnished by the importer/exporter. Where
documents are not furnished, provisional assessment is to be finalized within two months from the
end of the time allowed for furnishing the information. This time period of two months may be
extended by Commissioner of Customs by additional three months.

 (v) Assessment to be finalized as per section 18 and any shortfall in duty paid to be appropriated
from the security collected.

 (vi) Bond executed at the time of order of provisional assessment may be cancelled on
finalization of the assessment

 (vii) Failure to adhere to these Regulations attracts penalty of ₹ 50,000 to importer/exporter

and authorized person/ CH Broker.

e) Interest in case of short payment and refund

 Short Payment- Interest at the rate of 15% p.a. from the 1st day of the month in which the duty
is provisionally assessed till the date of payment.

 Refund- If the refund is not granted within 3 months from the date of final assessment, he shall
be paid an interest at the rate of 6% p.a. till date of refund. Refund is subject to unjust enrichment.

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f) May 18 – Question

Moris Lal has imported goods from Germany and is finally re-assessed u/s 18(2) of the Customs
Act, 1962 for two such consignments. Particulars are as follows:

Date of provisional assessment 12th December, 2017

Date of final re-assessment 2nd February, 2018
Duty demand for 1st consignment ₹ 1,80,000
Refund for the 2nd consignment ₹ 4,20,000
Date of refund made by the department 28th April, 2018
Date of payment of duty demanded 5th February, 2018

Determine the interest payable and receivable, if any, by Moris Lal on the final re-assessment of the
two consignments, with suitable notes thereon.

5. Faceless Assessment

What is Faceless Assessment?

 Faceless Assessment is a major Customs Reforms where a Bill of Entry that is identified for scrutiny
(non-facilitated Bill of Entry) is assigned to an assessing officer who is physically located at a
Customs station, which is not the Port of Import in the Customs Automated System. It separates the
assessment process from the physical location of Port of Import, using a technology platform.

 Faceless Assessment (also referred to as virtual assessment or anonymised assessment) uses a

technology platform to separate the Customs assessment process from the physical location of a
Customs officer at the port of arrival. This measure will bolster efforts to ensure an objective, free,
fair and just assessment.

 From an importer’s perspective, there will be no changes to the process of filing a Bill of entry. He
will continue to file his documentation including bill of entry and supporting documents on the
ICEGATE portal.

Key objectives of Faceless Assessment:

 i. Anonymity in assessment for reduced physical interface between trade and Customs
 ii. Speedier Customs clearances through efficient utilisation of manpower
 iii. Greater uniformity of assessment across locations
 iv. Promoting sector specific and functional specialisation in assessment”

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Exemptions
1. Power of Central Government to grant exemption

Section 25 – Provisions
General Exemption: If the CG is satisfied that it is necessary in the public interest, it may
exempt, goods of any specified description from the whole or any part of the duty of customs
leviable thereon, subject to such conditions as may be specified in the notification.

Special Exemption: The Central Government may also by special order in each case, exempt
goods of any specified description from the whole or any part of the duty of customs leviable
thereon, under circumstances of an exceptional nature to be stated in such order, subject to
such conditions as may be specified in the order.

This type of exemption is also called as ad-hoc exemption and can also be granted
retrospectively.

The exemption above may be granted by providing for the levy of duty at a rate expressed in a
form or method different from the form or method in which custom duty is leviable. Any exemption
(Concessional duty) granted shall in no case exceed the statutory duty.

Every notification issued shall, unless otherwise specified shall be effective from the date of issue
by CG for publication in official gazette
Notification means notification published in the Official Gazette and the expression “notify” with its
cognate meaning and grammatical variation shall be construed accordingly.
Where any exemption is granted subject to any condition, such exemption shall, unless
otherwise specified or varied or rescinded, be valid up to 31st day of March falling immediately
after two years from the date of such grant or variation.

Comment: If a conditional exemption is given by Central Government on January 15, 2022, then
such exemption will be valid till 31st March 2024 unless Central Government extends it or rescinds
(removes) it or changes it. Please note that this amendment is only for conditional exemptions
and not for unconditional exemptions. An unconditional exemption would continue to remain valid
unless revoked, as this provision is not applicable to it.

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Customs (Import of Goods at Concessional Rate of Duty or

for Specified End Use) Rules, 2022
1. Introduction

 Who is required to follow these rules –

- a) A notification which provides for observance of these rules;

- b) An importer, who intends to avail the benefit of any notification including notification issued
u/s 25(1) [Exemption Notification] of Customs Act or notification u/s 11 [Power to prohibit
Import/Export of Goods] of Customs Act and where the benefit of such notification is
dependent upon the use of imported goods covered by that notification for the manufacture
of any commodity or provision of output service or being put to a specified end use, may
import goods at concessional rate.

 Common portal means the common customs electronic portal as referred to in section 154C of the
Act. CBIC has notified ICEGATE ( https://www.icegate.gov.in) as common Customs electronic portal.

 Specified end use means dealing with the goods imported in a manner specified in the notification
and includes supply to the intended person and the term “end use recipient” shall be construed
accordingly.

2. Important Points

 Importer to give one-time prior information [Rule 4]

- The importer is required to provide one-time information on common portal in the prescribed
form consisting of the following particulars namely:-

 (i) The name and address of the importer and his job worker, if any;
 (ii) The goods produced or process undertaken at the manufacturing facility of the importer
or his job worker, if any, or both;
 (iii) The nature and description of goods imported used in the manufacture of goods at the
premises of the importer or the job worker, if any;
 (iv) Particulars of the notification applicable for such import
 (v) Nature of output service rendered utilising the goods imported;
 (vi) Particulars of premises intended to be used in case of unit transfer;
 (vii) Details of the end use recipient in cases where goods imported are supplied for
specified end use; and
 (viii) The intended port(s) of import

- On acceptance of the above information, an Import of Goods at Concessional Rate

Identification Number (IIN) shall be generated against such information furnished.

- The importer also has an option to update the prescribed form in case of any change in the
details on the common portal.

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- The importer who intends to avail the benefit of a notification shall submit a continuity bond
with such surety or security as deemed appropriate by the AC/DC of Customs having
jurisdiction over the premises where the goods imported shall be put to use for manufacture
of goods or for rendering output service or being put to use for specified end use, with an
undertaking to pay

 In case of exemption notification, the amount equal to the duty leviable on inputs without
exemption reduced by the duty already paid at the time of import, along with interest at
15% p.a. for the period starting from the date of import of the goods and ending with the
date of actual payment
 In all cases where the notification is other than one that provides an exemption benefit,
the amount equal to the assessable value of the goods being imported.

 Procedure to be followed [Rule 5]

- The importer who intends to avail the benefit of any notification shall mention IIN and
continuity bond number while filing bill of entry.

- Accordingly, the AC/DC of Customs at the Custom Station of importation, shall allow the
benefit of the notification to the importer.

- Once a Bill of Entry is cleared for home consumption, the bond submitted by the importer gets
debited automatically in the customs automated system and the details shall be made
available electronically to the Jurisdictional Custom Officer.

 Importer to maintain records [Rule 6]

- The importer shall maintain an account in such manner to clearly indicate the -

 (i) Quantity and value of goods imported;

 (ii) Quantity and date of receipt of the goods imported in the relevant premises;
 (iii) Quantity of such goods consumed including the quantity used domestically for
manufacture, quantity exported, if any, to fulfil the intended purpose and quantity of goods
sent to an end use recipient;
 (iv) Quantity of goods sent for job work, nature of job work carried out;
 (v) Quantity of goods received after job work;
 (vi) Quantity of goods re-exported, if any, under rule 10; and
 (vii) Quantity remaining in stock, according to Bills of Entry

- The importer shall produce the said account as and when required by the jurisdictional
AC/DC. Further, in case of non-receipt or short receipt of goods imported in the relevant
premises, the importer shall intimate such non-receipt or short receipt immediately on the
common portal in the prescribed form.

- The importer shall submit a monthly statement on the common portal in the prescribed form
by the 10th day of the following month. However, the importer may submit details of goods

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 FINAL – INDIRECT TAX

consumed in the prescribed form at any point of time, for immediate recredit of the bond which
shall become a part of the monthly statement of the subsequent month.

 Procedure for allowing imported goods for job work [Rule 7]

- The importer shall maintain a record of the goods sent for job work during the month and
mention the same in the prescribed monthly statement.

- The importer shall send the goods to the premises of the job worker under an invoice or
wherever applicable through an e-way bill, as specified in the CGST Act, 2017, mentioning
the description and quantity of the goods.

- The maximum period for which the goods can be sent to the job worker shall be 6 months
from the date of invoice or an e-way bill.

- In case the importer is not able to establish that the goods sent for job work have been used
as per the particulars mentioned under rule 4, the Jurisdictional Custom Officer shall take
necessary action against the importer under rules 11 and 12.

- The job worker shall,- (i) maintain an account of receipt of goods, manufacturing process
undertaken thereon and the waste generated, if any, during such process; (ii) produce the
account details before the Jurisdictional Custom Officer as and when required by the said
officer; and (iii) after completion of the job work, send the processed goods to the importer or
to another job worker as directed by the importer for carrying out the remaining processes, if
any, under the cover of an invoice or an e-way bill.

 Procedure for allowing imported goods for unit transfer [Rule 8]

- The importer shall maintain a record of the goods sent for unit transfer during the month and
mention the same in the specified monthly statement.

- The importer shall send the goods under an invoice or wherever applicable through an e-way
bill, as specified in the CGST Act, 2017, mentioning the description and quantity of the
goods. The importer shall in relation to transfer of goods to another unit,-

 (i) Maintain an account of receipt of goods, manufacturing process undertaken thereon and
the waste generated, if any, during such process;
 (ii) Produce the account details before the Jurisdictional Custom Officer as and when
required by the said officer; and
 (iii) After completion of the said process, send the processed goods back to the premises
of the importer from where the goods were received or to a job worker for carrying out the
remaining processes, if any, under the cover of an invoice or an e-way bill.

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 FINAL – INDIRECT TAX

 Procedure for supplying imported goods to the end use recipient [Rule 9]

- The importer shall maintain a record of the goods supplied to the end use recipient during the
month and mention the same in the specified monthly statement.

- The importer shall send goods under an invoice or wherever applicable through an e-way bill,
as specified in the CGST Act, 2017, mentioning the description and quantity of the goods.

- In case of supply for replenishment or export against supply, the end use recipient shall

 (i) Maintain an account of receipt of goods, manufacturing process undertaken thereon and
the waste generated, if any, during such process;
 (ii) Produce the account details before the Jurisdictional Custom Officer as and when
required by the said officer; and
 (iii) Produce the relevant details to the importer for fulfilment of the benefit under the
notification.

 Re-export or clearance of unutilized or defective goods [Rule 10]

- The importer who has availed the benefit of a notification shall use the goods imported in
accordance with the conditions specified in concerned notification within the period specified
in the notification or within 6 months of date of import if the period is not specified in the
concerned notification.

However, the said period of 6 months can be further extended by the jurisdictional
Commissioner for a period not exceeding 3 months, if sufficient reason is shown that the
causes for not conforming to the time period were beyond the importer’s control.

- Any reexport of unutilised or defective goods shall be recorded by the importer in the monthly
statement by providing details of necessary export documents. Further, value of such goods
for re-export shall not be less than the value of the said goods at the time of import.

- The importer who opts to clear the unutilised or defective goods for home consumption, shall
pay the duty along with interest on the common portal and the particulars of such clearance
and the payment of duty shall be recorded by the importer in the monthly statement.

- The importer has an option to clear the capital goods imported, after having been used for the
specified purpose, on payment of duty along with interest on the depreciated value allowed in
straight line method, as specified below, namely: —

Particulars Percentage
For every quarter of 1st year 4%
For every quarter of 2nd year 3%
For every quarter of 3rd year 3%
For every quarter of 4th year and 5th year 2.5%
And thereafter for every quarter 2%

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 FINAL – INDIRECT TAX

Explanation. – (i) For the purpose of computing rate of depreciation for any part of a
quarter, a full quarter shall be taken into account. (ii) The depreciation shall be allowed from
the date when the imported capital goods have come into use for the purpose as
specified in the notification upto the date of its clearance. The importer shall, record the
particulars of such clearance and payment of duty in the monthly statement.

 Recovery of duty in certain cases [Rule 11]

- In the event of any failure on the part of the importer to comply with the conditions mentioned
Rule 10 [Either use it within time period or pay custom duty, the AC/DC having jurisdiction over
the premises where the imported goods shall be put to use for manufacture of goods or for
specified end use or for rendering output service shall take action by invoking the Bond to
initiate the recovery proceedings of an amount as under -

 In case of exemption notification, the amount equal to the duty leviable on inputs without
exemption reduced by the duty already paid at the time of import, along with interest at
15% p.a. for the period starting from the date of import of the goods and ending with the
date of actual payment
 In all cases where the notification is other than one that provides an exemption benefit,
the amount equal to the assessable value of the goods being imported.

- Notwithstanding anything contained in these rules in relation to removal and processing of

imported goods for job-work, the importer shall be responsible for ensuring that the said
goods are used in accordance with the purposes provided in the notification and in the event
of failure to do so, AC/DC having jurisdiction over the premises where the imported goods shall
be put to use for manufacture of goods or for specified end use or for rendering output service
shall take action in accordance with these rules, without prejudice to any other action which
may be taken under the Act, rules or regulations made thereunder or under any other law for
the time being in force

 Penalty [Rule 12]

- The importer or a job worker who contravenes any of the provisions of these rules or abets
such contravention, shall be liable to a penalty to an extent of the amount specified u/s
158(2)(ii) of Customs Act without prejudice to any other action which may be taken under the
Act, rules or regulations made thereunder or under any other law for the time being in force.

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Refund
1. Various Circumstances

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2. Concept of Unjust Enrichment

 The term “unjust enrichment” is used to describe a situation when a person undeservedly gets
enriched.

 When an importer imports goods, he has to pay the customs duty on such goods. This duty is
recovered from the purchasers when the goods are sold by the importer. In other words, the
incidence or burden of duty is passed on to the purchaser, from whom the importer collects the
customs duty. Subsequently, if the importer makes a claim for refund of duty and receives the amount
from the government also, then this would be called as unjust enrichment.

 Refund of duty should, therefore, be paid to the customer who has borne the burden of duty.
Since it is practically not feasible to identify such customers on individual basis, the amount of refund
is credited to Consumer Welfare Fund.

 This concept is not applicable to the following cases:

 Drawback of duty payable under sections 74 and 75.

 Export duty as specified in section 26.
 The duty and interest on imports made by an individual for his personal use;
 The duty paid in excess by the importer before an order permitting clearance of goods for
home consumption is made where (i) Such excess payment of duty is evident from the bill
of entry in the case of self-assessed bill of entry; or (ii) The duty actually payable is reflected
in the reassessed bill of entry in the case of reassessment.

3. Procedure to claim Refund- Section 27

Particulars Provisions
Presentation of Any person claiming refund of any duty and interest paid on such duty paid
claim by the by him or borne by him
applicant
Shall present a claim in Form R along with the required documents to prove
the claim and to prove that he has not passed the incidence of duty.

Minimum Monetary Limit – ₹ 100

Authority AC/DC

Time Limit for 1 year from the Relevant date. However, this time period is not applicable
filing the claim in case of “Duty paid under protest”

Order of Refund The AC/DC may make the refund order, if he is satisfied that the whole or
any part of duty / tax including interest paid by the applicant is refundable.
The amount so determined shall be credited to the Consumer Welfare
Fund, unless it is proved that he applicant has not passed on the
incidence

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4. Circumstances for which refund is available

Section 27(2)
The export duty in circumstances as mentioned in Section 26.
The duty and interest if any, on imports made by an individual for his personal use.
In case when Duty Drawback is payable.
The duty and interest if any, paid by the importer or the exporter, if he had not passed on the
incidence of such duty/interest, to any other person.
The duty and interest if any, borne by the buyer, if he had not passed on the incidence of such
duty/ interest.
The duty or interest, borne by such class of applicants may be notified by CG

5. Refund of Export duty under section 26 of Customs Act

 Where on exportation of any goods any duty has been paid, such duty shall be refunded to the
person by whom or on whose behalf it was paid, if

 The goods are returned to such person otherwise than by way of re-sale and

 The goods are re-imported within one year from the date of exportation.

 An application for refund of such duty is made before the expiry of 6 months from the date on
which the proper officer makes an order for the clearance of the goods.

6. Relevant Date

Case Relevant Date

Where application for refund is made by a person Date of purchase of goods by such
other than the importer, the period of limitation shall person.
begin from

In case of goods which are exempt from payment of Date of issue of such order.
duty by a special order

Where duty is paid under provisional assessment, Date of adjustment of duty after final
assessment thereof.
Where the duty becomes refundable as a Date of such judgment, decree, order or
consequence of any judgment, decree, order or direction.
direction of the appellate authority, Appellate Tribunal
or any court

In any other case Date of payment of duty or interest.

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Parimal Ray v. Ccus. 2015 (318) ELT 379 (Cal.)

Question: Is limitation period of one year applicable for claiming the refund of amount paid on account
of wrong classification of the imported goods?

Facts: The petitioners imported tunnel boring machines which were otherwise fully exempt from
customs duty. However, owing to erroneous classification of such machines, they paid large amount
of customs duty. After expiry of more than 3 years, the petitioners filed a writ petition claiming the
refund of the amount so paid. The said refund claim was rejected on the ground that the petitioners
failed to make a proper application of refund under section 27 of the Customs Act, 1962 within the
stipulated period of 1 year of payment of duty.

Judgement: The High Court observed that the provisions of section 27 apply only when there is
over payment of duty or interest under the Customs Act, 1962. When the petitioners case is that
tunnel boring machines imported by it were not exigible to any duty, any sum paid into the exchequer
by them was not duty or excess duty but simply money paid into the Government account. The
Government could not have claimed or appropriated any part of this as duty or interest. Therefore,
there was no question of refund of any duty by the Government. The money received by
Government could more appropriately be called money paid by mistake by one person to
another, which the other person is under obligation to repay under section 72 of the Indian
Contract Act, 1872.

When the said amount was paid by mistake by the petitioner to the Government of India, the
latter instantly became a trustee to repay that amount to the petitioner.

7. Interest on delayed payment of refund- Section 27A

 If any duty ordered to be refunded to an applicant, is not refunded within 3 months from the
date of receipt of application, interest @ 6% p.a shall be paid to the applicant from the date
immediately, after expiry of said 3 months till the date of actual refund.

 The interest is payable only in respect of delayed refunds of Customs duty and no interest is
payable in respect of deposits such as deposits for project imports security for provisional
release of goods etc.

Example

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Miscellaneous Provisions

1. Re-importation of goods- Section 20

 If goods are imported into India after exportation therefrom, such goods shall be liable to duty & be
subject to all conditions & restrictions to which like goods imported into India are liable & subject to.

 If an exporter has availed export incentives in the nature of duty drawback or rebate, the import duty
shall be restricted to the amount of incentive availed.
__________________________________________________________________________
2. Section 25A –Goods imported for repair

 Where the CG is satisfied that it is necessary in the public interest so to do, it may, by notification,
exempt such of the goods which are imported for the purposes of repair, further processing or
manufacture, as may be specified therein, from the whole or any part of duty of customs leviable
thereon, subject to the following conditions, namely:

 The goods shall be re-exported after such repair, further processing or manufacture, as the
case may be, within a period of 1 year from the date on which the order for clearance of the
imported goods is made;
 The imported goods are identifiable in the export goods; and
 Such other conditions as may be specified in that notification.

 Notification no 158/95 -Goods manufactured in India and exported may come back for repairs
and re-export. In such a situation, the re-imported goods can avail exemption from paying of
import duty if:

 The re-importation is for repairs only within 3 years and for Nepal it is 10 years;
 The goods must be re-exported after repairs;
 The time limit for export is 6 months (extendable upto one year).

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3. Section 25B – Reimport after repair outside India

 Notwithstanding anything contained in section 20, where CG is satisfied that it is necessary in public
interest so to do, it may, by notification, exempt such goods which are re-imported after being
exported for the purposes of repair, further processing or manufacture, as may be specified therein,
from whole or any part of duty of customs leviable, subject to the following conditions:

 (a) The goods shall be re-imported into India after such repair, further processing or
manufacture, as the case may be, within a period of 1 year from the date on which the order
permitting clearance for export is made;
 (b) The exported goods are identifiable in the re-imported goods; and
 (c) Such other conditions as may be specified in that notification.

 Notification no 45/2017 - If the imported goods have been exported to the overseas supplier for
repairs, the duty on re-importation is restricted to the (fair cost of repairs done abroad + cost
of materials [whether actually incurred or not] + Insurance and freight both ways), this is
subject to the following:

 The time limit for re-importation is 3 years. This is extendable to 5 years;

 The exported goods and the re-imported goods must be the same. The ownership of the goods
should also not have changed;
 The repairs should not amount to re-manufacture.

Example: A machine was originally imported from Japan at ₹ 250 lakh in July 2020 on payment of
custom duty. The said machine was exported (sent back) to suppliers for repairs in December 2020
and re-imported without any re-manufacturing or re-processing in October next year after repairs.
Since the machine was under warranty period, the repairs were carried out free of cost.

However, the fair cost of repair carried out (including cost of material ₹ 6 lakh) would have been ₹ 9
lakh. Actual insurance and freight charges (to & fro) were ₹ 3 lakh. The rate of BCD is 10%, SWS
@ 10% and IGST 12%. Ignore GST compensation cess. Calculate Custom Duty payable

4. Derelict, wreck etc- Section 21

 Derelict means vessel or cargo which is abandoned in a sea without any hope of recovering it.
Jetsam is where goods are cast into sea to reduce weight of ship to prevent it from sinking and such
thrown goods, sink. Flotsam is when goods continue to float after thrown in sea. Wreck means
property cast ashore after ship wreck.

 All goods, derelict, jetsam, flotsam and wreck brought or coming into India, shall be treated as if
they were imported into India. However, if it is shown to the satisfaction of the proper officer that
they are entitled to be admitted as duty free, no duty shall be levied.

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Warehousing Provisions
1. Process Flow

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2. Introduction

 The types of warehouses are as follows:

Warehouse Brief
Public Warehouse – These are Government owned warehouses licensed by Commissioner.
Section 57
Private Warehouse – It is licensed by Commissioner. Only goods of licensee can be stored in
Section 58 these warehouses.
Special warehouse Licensed by Commissioner under section 58A. For goods notified by
– Section 58A CBIC58 (Section 58A) – Under Custom Lock and supervision of PO.
Deemed Warehouse Offices/ Factory of 100% EOU, STP, EHTP & SEZ units are deemed
- FTP warehouses under Foreign Trade Policy.

3. Cancellation of License – Section 58B

 The license of a warehouse may be cancelled by the Principal Commissioner of Customs or

Commissioner where a licensee contravenes any of the provisions of this Act or the rules or
regulations made thereunder or breaches any of the conditions of the license.

 The section also provides that before any license is cancelled, the licensee shall be given a
reasonable opportunity of being heard. No goods shall be deposited in the warehouse whose
operations are suspended.

 The goods warehoused shall, within seven days from the date on which order of such
cancellation is served on the licensee or within such extended period as the proper officer may
allow, be removed from such warehouse to another warehouse or be cleared for home
consumption or export.

 The section also provides that the provisions of this Chapter shall continue to apply to the
goods already deposited in the warehouse till they are removed to another warehouse or
cleared for home consumption or for export, during such period.

4. Warehousing Bond- Section 59

 The importer of goods which have been entered for warehousing and assessed to duty shall bind
himself by a bond for a sum equal to thrice the amount of duty assessed.

 The AC/ DC is empowered to permit the importer to execute a general bond in respect of
warehousing of goods to be imported by him within a specified period.

 If the goods are transferred to any other person, then the PO is empowered to accept a fresh bond
from the transferee and thereupon discharge the earlier bond.

58
Gold, Silver, other precious metals and semi-precious metals and articles thereof. Goods warehoused for Supply to Duty
Free Shops in a custom area or supply of stores to vessels and aircraft for transit outside India . These are not relevant for
exams.

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 The PO shall cancel the bond (section 73) as discharged in full when:

 The whole of the goods covered by the Bond have been cleared for home consumption or
exported or transferred or are otherwise duly accounted for.

 All the consequential charges on the goods including interest on the duty amount, penalty etc.
have been paid;

 All the conditions and obligations undertaken under the warehousing bond have been compiled
with or duly fulfilled.

5. Period of warehousing- Section 61

Type of Period Interest59

warehouse
Deemed  In case of capital goods- Till clearance from No Interest.
Warehouse such unit
(100% EOU,
SEZ etc)  In case of other goods- Till clearance from
such unit

Normal  1 year from the date of order passed by PO Interest payable at the rate of
Warehousing for warehousing. 15% p.a. beyond 90 days
from the date of order given
 If the goods are not likely to deteriorate, then by PO to deposit to
the Commissioner may extend the warehouse. Interest is
warehousing period by not more than 1 year payable on the duty payable
at a time. The extension may be reduced at the time of clearance.
based on shelf life of the goods.

Illustration:

59
The CBIC has been given the power to waive full or part of interest payable under this section. It may also
specify certain class of goods on which interest will not be payable.

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6. Owners right to deal with warehoused goods- Section 64

 The owner of the warehoused goods after taking permission from the proper officer and on payment
of prescribed fees may either before or after warehousing of goods is eligible to:

 Inspect the goods;

 Sort the goods or change their containers for the purpose of preservation, sale, export or
disposal of the goods;

 Deal with the goods and their containers in such manner as may be necessary to prevent loss
or deterioration or damage to the goods;

 Show the goods for sale;

7. Clearance of warehoused goods for export- Section 69

 Any warehoused goods may be exported to a place outside India without payment of import duty if:

 A shipping bill or a bill of export in the prescribed form or a label or declaration

accompanying the post parcel as referred to in section 82 has been presented in respect
of such goods.

 The export duty, penalties and interest have been paid.

 An order for clearance of such goods for export has been made by the PO. Such order may
also be made electronically through the custom automated system on the basis of risk
evaluation through appropriate selection criteria.

 The Provisions of this section will be operative only during the validity period of warehousing
under section 61. In other words, goods cannot be exported without payment of duty after
the expiry of the warehousing period.

8. Allowance in respect of volatile Goods – Section 70

 Where any warehoused goods notified goods60, are at the time of delivery from a warehouse found
to be deficient in quantity on account of natural loss, the AC/DC may remit the duty on such
deficiency.

 Goods are notified under this section having regard to the volatility of the goods and the manner of
their storage.

60
Aviation Fuel, motor spirit, acetone, methanol, raw naptha, kerosene, high speed diesel, batching oil, furnace oil,
liquid helium gas, wine, spirit and beer – These examples are only for knowledge and not for exam.

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9. Operations in the warehouse- Section 65 & 66

 On sanction of the Commissioner and on payment of prescribed fees, the owner of any warehoused
goods may carry on any manufacturing process or other operations in the warehouse.

 Duty liability would be as follows:

Case Duty Liability

Case 1: Post operations,  No liability of Finished Goods exported out of India.
entire goods exported
out of India.  Waste or refuse, if destroyed then no liability.

 If waste or refuse is cleared to Domestic Tariff Area (DTA), then

custom duty as if waste/ refuse was imported into India.

Case 2: Post operations,  Finished Goods cleared to DTA shall be liable to customs duty. If
whole or part of the the custom duty on goods manufactured is more than duty on
goods are cleared for imported material, then CG has the power to exempt such excess
Home Consumption. duty.

 Finished Goods Exported – No Custom Duty.

 Waste relatable to Finished Goods Exported – Same as 1st case.

 Waste relatable to Finished Goods cleared to DTA - The quantity

of warehoused goods contained in waste or refuse shall be liable
to custom duty (Note: Here, duty is based on value and ROD of
imported materials and not value of waste).

10. Warehousing without warehousing – Section 49

 Normally the goods are warehoused after they are assessed to duty. However, occasionally, it may
happen that assessment of duty may take time for want of some clarification/reports etc. In such
cases, goods lying at docks may incur heavy demurrage.

 Hence, if assessment is likely to be delayed, Section 49 allows that goods can be stored in public
warehouse. However, such goods are not treated as "warehoused goods" as the goods are not
assessed to duty. Hence, it is called "warehousing without warehousing”.

 The goods may be permitted to be stored in public warehouse for a period not exceeding 30 days.
The Commissioner is empowered to extend the period not exceed 30 days at a time.

 In case where an importer makes a declaration that he is unable furnish all particulars of the goods
due to non-availability of information, the PO may, before filing Bill of Entry permit him, to examine
the goods in the presence of an officer of customs or deposit the goods in a warehouse without
warehousing the same.

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 FINAL – INDIRECT TAX

11. Improper removal of goods- Section 72

 Where the goods are removed from the warehouse in an improper manner (as specified under this
section) the proper officer may demand and consequently the owner shall pay the full amount of duty
chargeable together with all penalties under the Act.

 Goods removed otherwise than for home consumption, export or re-warehousing or as

provided in the Act.

 Goods are not removed within the prescribed period u/s 61. In such a case the date after the
end the prescribed period shall be deemed date of removal of goods.

 Mismatch between quantity of goods stored and found in warehouse without valid reasons.

 If any owner fails to pay any amount demanded, the PO may, in addition to other provisions, cause
to be detained and sold, after notice to the owner, requisite amount of warehoused goods

Summary- payment of duty on warehoused goods

12. Custody of the goods – section 73A

 All warehoused goods shall remain in the custody of the person who has been granted a license
under section 57 or section 58 or section 58A until they are cleared for home consumption or are
transferred to another warehouse or are exported or removed as provided under this Act.

 The responsibilities of the person referred above who has custody of the warehoused goods shall
be such as may be prescribed.

 Where any warehoused goods are removed in contravention of section 7161, the licensee shall be
liable to pay duty, interest, fine and penalties without prejudice to any other action that may be taken
against him under this Act or any other law for the time being in force.

61
Clearance other than for home consumption, export or re-warehousing.

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 FINAL – INDIRECT TAX

Foreign Trade Policy 2023

1. Introduction

 FTP is a set of guidelines or instructions issued by the Central Government in matters related to
import and export of goods in India i.e. Foreign Trade.

 The governing legislature concerning foreign trade is Foreign Trade (Development and Regulation)
Act, 1992 (FTDR Act). In exercise of the powers conferred under FTDR Act, the Central Government
announces Foreign Trade policy with certain underlined guidelines.

 FTP is formulated, controlled and supervised by Director General of Foreign Trade (DGFT).

2. Features of FTP

 Exports are promoted through various promotional schemes. There should be no taxes on exports
and hence, taxes are either exempted or adjusted or refunded on both outputs and inputs through
duty exemption or duty refund.

 Export and import goods could be (a) Free (b) Restricted (c) Prohibited for import and export. Some
products are Free but can be imported only by State Trading Enterprise.

 Even capital goods can be imported at NIL duty for purpose of exports under the scheme of EPCG.

 Exports and imports are free unless regulated. (Does not mean duty free)

3. Administration of the FTP

 DGFT issues authorization (earlier called as licence) for import/export. ‘Authorization’ means a
permission in terms of the FTDR Act to import or export (which is applicable for only specified goods
which are restricted). It also grants Importer Exporter Code (IEC) Number to importers and
exporters. Import and Export without IEC number is not permitted, unless specifically exempted.

 DGFT may in public interest pass such orders or grant such exemption, relaxation or relief, as
he may deem fit and proper, on grounds of genuine hardship and adverse impact on trade to any
person or class or category of persons from any provision of FTP or any procedures.

 While granting such exemption, DGFT may impose certain conditions after consulting Norms
Committees (for Fixation/modification of product norms under all schemes), EPCG Committee
(Nexus with Capital Goods (CG) and benefits under EPCG Schemes) and Policy Relaxation
Committee (PRC) (for all other issues).

 If an importer/ exporter is aggrieved by any decision taken by PRC, or a decision/order by any

authority in the DGFT, a specific request for Personal Hearing (PH) has to be made to DGFT.
DGFT may consider request for relaxation after consulting concerned Norms Committee, EPCG
Committee or Policy Relaxation Committee (PRC) and the decision conveyed in pursuance to the
personal hearing shall be final and binding.

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 FINAL – INDIRECT TAX

 Government is committed to easy and speedy redressal of grievances from Trade and Industry. The
Settlement Commission set up by the Department of Revenue has been empowered to settle
matters of default in export obligation also.

 Other authorities involved in FTP: Central Board of Indirect Taxes and Customs (CBIC), Reserve
Bank of India and State GST Departments.

4. Contents of FTP

 The present FTP which was announced on 1.4.2023 shall continue to be operative unless otherwise
specified or amended.

 Handbook of Procedures 2023 and Appendices and Aayat Niryat Forms and Standard input output
Norms (SION).

 ITC62 (HS) 2023 provides classification of import and export items. Schedule I - Import Policy –
ITC(HS) 2023 describe the rules and guidelines related to import policies whereas Schedule II–
Export Policy – ITC(HS) 2023 describes the rules and regulation related to export policies.
Presently, most of the goods can be imported without any authorization. Schedule II contains
very few products, where export is prohibited or restricted. Excluding those items, export of all
other goods is free. SCOMET63 LIST is also provided.

 FTP vis a vis tax laws: FTP is closely linked with the Customs, GST Laws and Excise/state laws of
India. However, the policy provisions per-se do not override tax laws. The exemptions extended
by FTP are given effect to by issuing notifications under the respective tax laws (e.g., Customs
Tariff Act). Thus, actual benefit of the exemption depends on the language of exemption notifications.

5. Scope of FTP

 Policy for regulating imports and exports of goods and services. Export promotion measures are
provided in the FTP.

 Export promotion capital goods scheme is a key area wherein capital goods can be imported at NIL
rate of duty.

 EOU/EHTP/STP/BTP, Deemed Exports, Developing districts as export hubs and other duty
exemption schemes. Promotion of cross border trade.

62
Indian Trade Classification (Harmonised System)
63
SPECIAL CHEMICALS, ORGANISMS, MATERIALS, EQUIPMENT AND TECHNOLOGIES - India is a signatory to
international conventions on disarmament and non-proliferation and is a member of major multilateral export control regimes.
Resultantly, export of dual-use items, including software and technologies, having potential civilian/ industrial applications as well
as use in weapons of mass destruction is regulated under FTP. It is either prohibited or is permitted under an Authorization
unless specifically exempted. SCOMET list is our National Export Control List of dual use items ammunitions and nuclear related
items, including software and technology and is aligned to the control lists of the all the multilateral export control regimes and
conventions.

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 FINAL – INDIRECT TAX

6. Benefits under FTP 2023 – Duty Exemption, Duty Remission and other benefits

6.1. Advance Authorisation Scheme

 Benefit: Under this scheme, inputs which are used in the export product can be imported
without payment of customs duty. Goods imported are exempt from basic customs duty,
additional customs duty, education cess, anti-dumping duty64, countervailing duty and
safeguard duty including transition product specific safeguard duty, IGST & Compensation Cess.

 Validity: Validity Period of an advance authorization in two situations is as follows:

 Validity period of Advance Authorisation shall be 12 months from the date of issue of
Authorisation. This means that import under the authorisation must be made within this period.
Re-validation for another period of 12 months can be allowed once only. Application for
re-validation can be made online.
 Validity of Advance Authorisation for supplies under deemed exports shall be co-terminus
with contracted duration of project execution or 12 months from the date of issue of
Authorisation, whichever is later.

 Who are eligible for advance authorization - It can be issued either to a manufacturer exporter
or merchant exporter tied to supporting manufacturer(s). For pharmaceutical products
manufactured through Non-Infringing (not violating or infringing on someone else’s right) process
shall be issued to manufacturer exporter only.

An exporter (manufacturer or merchant), who holds Authorised Economic Operator (AEO65)

Certificate under Common Accreditation Programme of CBIC is eligible to opt for this scheme. A
status holder who is a manufacturer cum actual user and holds valid 2-star or above status and
who has already submitted its application for grant of AEO on CBIC’s AEO portal is also eligible to
apply for this scheme subject to the specified conditions.

However, DGFT may deny authorisation under this scheme to two star and above status holder
based on its risk management principles. The scheme is not available for the specified export
products as well as specified inputs.

It is issued for Physical exports (including export to SEZ), deemed exports, intermediate
supply and supply of stores on foreign going vessel/ aircraft, subject to condition that there
is specific SION66 in respect of item supplied.

64
However, specified deemed exports (Deemed exports specified for this purpose are Supply of capital goods against EPCG
authorisation and supply to goods to UN or international organisations for their official use or supplied to projects financed by
them) are not exempted from payment of applicable anti-dumping duty, countervailing duty, safeguard duty and transition
product specific safeguard duty, if any
65
Under AEO programme of Indian Customs, a business entity engaged in international trade is granted AEO status if it is
approved by Customs as compliant with supply chain security standards. Such entities are considered as trusted trade
partner of Indian customs. AEO status holders get extensive benefits including preferential customs treatment in terms of
reduced examination and faster processing and clearance of cargo, deferred payment of duty, direct port delivery/entry,
enhanced border clearance privileges in Mutual Recognition Agreement (MRA) partner countries, greater facilitation and self-
certification. AEO programme is based on WCO’s SAFE Framework of Standards (FoS).
66
Standard Input Output Norm

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 FINAL – INDIRECT TAX

 Export Obligation Period: “Export Obligation” means obligation to export product or products
covered by Authorisation in terms of quantity, value or both, as may be prescribed or specified by
Regional or competent authority. The Export Obligation Period (EOP) of Advance Authorisations
issued for such items shall be 90 days from the date of clearance of import consignment and
no extension in EOP shall be allowed. Such import shall be subject to actual user condition and
no transfer of imported raw material, for any purpose, including job work, shall be permitted.

 Items which can be imported duty free against advance authorization:

 Inputs, which are physically incorporated in export product (making normal allowance for
wastage)
 Fuel, oil, energy, catalysts which are consumed / utilized to obtain export products
 Mandatory spares upto 10% of CIF value of Authorization which are required to be
exported/ supplied with resultant product.

 Basis of issuance of Advance Authorisation - It is issued for inputs in relation to resultant

product, on the following basis:

 As per Standard Input Output Norms (SION) notified; or

 On the basis of self-declaration or
 Applicant-specific prior fixation of norm by the Norms Committee or
 On the basis of Self Ratification Scheme67

 Features of Advance Authorization Scheme

 Pre-import condition - Imported inputs are subject to pre-import condition and they should
be physically incorporated in the export product (making normal allowance for wastage).
In case of local procurement under invalidation/ARO, the inputs shall be procured prior to
manufacture of export item and shall be physically incorporated in the export product.

 Actual user condition to be applicable. It will not be transferable even after completion
of export obligation. However products manufactured from such duty free inputs can be
transferred once export obligation is met. If CENVAT/Input tax credit facility on input has
been availed for the exported goods, even after completion of export obligation, the goods
imported against such Advance Authorisation shall be utilized only in the manufacture
of dutiable goods whether within the same factory or outside (by a supporting manufacturer).
Waste/Scrap arising out of manufacturing process, as allowed, can be disposed off on
payment of applicable duty even before fulfillment of export obligation.

67
Where there is no SION/valid Adhoc Norms for an export product or where SION has been notified but exporter intends to
use additional inputs in the manufacturing process, eligible exporter can apply for an Advance Authorisation under this scheme
on self declaration and self ratification basis. The expression “additional inputs” refers not to additionality in terms of
quantity/value of an input specified in a norm, but to another additional input. Say, if the inputs specified in the norm are X1 and
X2 only, then input Y would represent an additional input. RA may issue Advance Authorisations and such cases need not be
referred to Norms Committees for ratification of norms. Application under this scheme shall be made along with a Certificate
from Chartered Engineer.

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 FINAL – INDIRECT TAX

 Advance Authorization necessitates exports with a minimum value addition of 15%68.

However, in case of specified products (petroleum products etc), value addition could be less
than 15%.

 If some items are supplied free of cost by foreign buyer, its notional value of free of cost
input is added in the CIF value of import and FOB value of export for the purpose of
computation of value addition. However, realization of export proceeds will be equivalent to
an amount excluding notional value of such input.

 Invalidation letter- Regional Authority shall issue Invalidation Letter when domestic supplier
intends to obtain duty free material for inputs through Advance Authorisation for supplying
resultant product to another Advance Authorisation / DFIA /EPCG Authorisation.

 Advance Release Order (ARO) - Regional Authority shall issue Advance Release Order if the
domestic supplier intends to seek refund of duties exempted through Deemed Exports
mechanism.

 Annual Advance authorization:

 Advance Authorisation for Annual Requirement shall only be issued for items notified in SION.
And it shall not be available in case of adhoc norms under Self-Declared Authorisations
where SION does not exist.
 Advance Authorisation for Annual Requirement shall also not be available in respect of SION
where any item of input is specifically notified (List of such inputs not in syllabus).
 Exporters having past export performance (in at least preceding two financial years) shall
be entitled for Advance Authorisation for Annual requirement.
 Entitlement in terms of CIF value of imports shall be upto 300% of the FOB value of physical
export and / or FOR value of deemed export in preceding financial year or Rs. 1 Crore,
whichever is higher.

 Admissibility of Drawback: Duty drawback as per rate determined and fixed by Customs authority
is available for duty paid imported or indigenous inputs (not specified in the norms) used in the
export product. For this purpose, applicant shall indicate clearly details of duty paid input in the
application for Advance Authorisation.

 Audit/Special audit: Concerned Norms Committee may conduct audit of the manufacturer.
Concerned Norms Committee may also initiate special audit, considering the nature and complexity
of the case and revenue of government, if he is of the opinion at any stage of
scrutiny/enquiry/investigation that the norms have not been claimed correctly or the excess benefit
has been availed. Special audit can be conducted even if the manufacturer has already been audited
before.

68 The separate rate of minimum value addition is prescribed in case of gems & jewellery sector, tea and spices.

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Common Provisions applicable to Advance Authorisation and DFIA

 Accounting of Input: Where SION permits use of either (a) a generic input or (b) alternative input,
the name/description of the input used (or to be used) in the Authorisation must match exactly with
the name/description endorsed in the shipping bill.

At the time of discharge of export obligation (issue of EODC) or at the time of redemption, Regional
Authority shall allow only those inputs which have been specifically indicated in the shipping
bill together with quantity. The above provisions will also be applicable for supplies to SEZs and
supplies made under Deemed exports.

 Importability / Exportability of items that are Prohibited/ Restricted / STE

Prohibited items: No export/import of an item shall be allowed under Advance Authorisation / DFIA
if the item is prohibited. Export of a prohibited item may be allowed under Advance Authorisation
provided it is separately so notified, subject to the conditions given therein.

State Trading Enterprise69: Items reserved for imports by STEs cannot be imported against
Advance Authorisation / DFIA. However, those items can be procured from STEs against ARO or
Invalidation letter. Items reserved for export by STE can be exported under Advance Authorisation
/ DFIA only after obtaining a ‘No Objection Certificate’ from the concerned STE.

Restricted items: Import of restricted items shall be allowed under Advance Authorisation/DFIA
unless specifically disallowed. Export of restricted / SCOMET items however, shall be subject to all
conditionalities or requirements of export authorisation or permission.

 Domestic Sourcing of Inputs: Holder of an Advance Authorisation / Duty Free Import Authorisation
can procure inputs from indigenous supplier/ State Trading Enterprise/EOU/EHTP/BTP/ STP in lieu
of direct import. Such procurement can be against Advance Release Order (ARO), or Invalidation
Letter. Validity of Advance Release Order / Invalidation Letter shall be co- terminous with validity of
Authorisation.

 Currency for Realisation of Export Proceeds: Export proceeds shall be realized in freely
convertible currency70 or in Indian Rupees, except otherwise specified.

 Re-import of exported goods under Duty Exemption/ Remission Scheme: Goods exported
under advance authorisation/ duty free import authorisation may be re-imported in same or
substantially same form subject to the specified conditions.

69
State Trading Enterprises: ITC(HS) specifies against certain goods that they can be imported/exported only through ‘State
Trading Enterprises’ notified by DGFT. State Trading Enterprises (STEs) are governmental/non-governmental enterprises,
including marketing boards, which deal with goods for export and /or import. However, DGFT has the discretion to issue
authorisation to other entities to import or export goods that are notified for exclusive trading through STEs. Some of the
STEs are Food Corporation of India, Oil and Natural Gas Corporation Ltd, National Fertilizers Limited, Indian Rare Earth
Ltd., National Dairy Development Board, National Agricultural Cooperative Marketing Federation of India (NAFED), State
Cooperative Marketing Federation, etc.

70
Freely convertible foreign currency refers to a currency that can be exchanged or converted into other currencies without
significant restrictions or limitations imposed by the government or regulatory authorities.

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 FINAL – INDIRECT TAX

 Illustration: Answer the following questions with reference to the provisions of FTP

(i) FIintex Manufacturers manufactures goods by using imported inputs and supplies the same under
Aid Programme of the United Nations. Payment for such supply is received in free foreign exchange.
Can FIintex Manufacturers seek Advance Authorization for the supplies made by it?

(ii) XYZ Ltd. has imported inputs without payment of duty under Advance Authorization. The CIF
value of such inputs is ₹ 10,00,000. The inputs are processed and the final product is exported. The
exports made by XYZ Ltd. are subject to general rate of value addition prescribed under Advance
Authorization Scheme. No other input is being used by XYZ Ltd. in the processing. What should be
the minimum FOB value of the exports made by the XYZ Ltd. as per the provisions of Advance
Authorization?

(iii) ‘A’ has used some duty paid inputs in its export products. However, for the rest of the inputs, he
wants to apply for the Advance Authorization. Can he do so? Explain.

Answer

(i) Supply to goods to UN or international organisations for their official use or supplied to projects
financed by them are ‘deemed exports’. Advance Authorization can be issued for supplies made to
such ‘deemed exports’. Therefore, Flintex Manufacturers can seek an Advance Authorization for the
supplies made by it.

(ii) Advance Authorization necessitates exports with a minimum of 15% value addition (VA).
VA = [(A – B)/B x 100]
A = FOB value of export realized, B = CIF value of inputs covered by authorization.
Therefore, the minimum FOB value of the exports made by XYZ Ltd. should be ₹ 11,50,000.

(iii) Yes, ‘A’ can do so. In case of part duty free and part duty paid imports, both Advance
Authorization and drawback will be available. Drawback can be obtained for any duty paid material,
whether imported or indigenous, used in goods exported, as per drawback rate fixed by DoR,
Ministry of Finance (Directorate of Drawback). Advance Authorization can be used for importing duty
free material. Drawback allowed must be mentioned in the application for Advance Authorization. In
such case, All Industry Brand Rates are not applicable. The manufacturer has to get specific brand
rate fixed from Commissioner for these exported goods.

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 FINAL – INDIRECT TAX

6.2. Duty Free Import Authorization (DFIA) Scheme

 Benefit: Provisions of Advance Authorization scheme (as contained in FTP) are applicable in
case of DFIA. However, these Authorizations shall be issued only for products for which
Standard Input and Output Norms (SION) have been notified.

 DFIA is issued to allow duty free import of inputs as well as of oil and catalyst which is consumed/
utilised in the process of production of export product. Import of Tyre is not allowed.

 The goods are exempted only from Basic Custom Duty.

 Drawback as per rate determined and fixed by Customs authority shall be available for duty paid
inputs, whether imported or indigenous, used in the export product.

 Eligibility: Duty Free Import Authorisation shall be issued on post export basis for products for
which SION have been notified. Application is to be filed with concerned Regional Authority before
starting export under DFIA. Merchant Exporter shall be required to mention name and address of
supporting manufacturer of the export product on the export document viz. Shipping Bill/ Bill of Export
/ Tax Invoice for export prescribed under the GST Rules.

 Validity of DFIA: Export shall be completed within 12 months from the date of filing online
application and generation of file number. DFIA shall be valid for 12 months from the date of
issue. No further revalidation shall be granted by Regional Authority. Separate DFIA shall be
issued for each SION.

 No DFIA for Actual User condition inputs: No DFIA shall be issued for an input which is subject
to pre-import condition or where SION prescribes ‘Actual User’ condition or certain other specified
inputs with pre import condition.

 Transferability of DFIA: Regional Authority shall issue transferable DFIA.

 Minimum value addition required to be achieved under DFIA is 20%.

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 FINAL – INDIRECT TAX

6.3. Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP)

 The objective of the scheme is to refund, currently un-refunded duties and taxes at Central and
State level, borne on the exported product, including prior stage cumulative indirect
taxes/taxes/levies on goods and services used for production of the exported product or indirect
taxes/taxes/levies in respect of distribution of exported products.

 Under the scheme, a rebate would be granted to eligible exporters at a notified rate as percentage
of FOB value with a value cap per unit of exported product, wherever required. However, for certain
export items, a fixed quantum of rebate per unit may also be notified.

 The rebate allowed is subject to receipt of sale proceeds within the time allowed under FEMA,
1999. If forex is not received, then the amount of rebate will be recoverable along with interest.

 The rebate would be credited in the form of transferable electronic scrips (E-scrips) to E-Credit
Ledger under Customs Act, 1962 which can be transferred from one person to another and it can
be used only for making payment of Basic Custom Duty.

 The rebate under the scheme shall not be available in respect of duties and taxes already exempted
or remitted or credited.

 Ineligible categories under RoDTEP:

1. Export of imported goods in same or substantially same form;

2. Exports through trans-shipment, i.e., exports that are originating in third country but trans-
shipped through India;

3. Export products which are subject to Minimum export price or export duty;

4. Products which are restricted or prohibited for export under FTP;

5. Deemed Exports or supplies of products manufactured by DTA units to Special Economic

Zone/Free Trade Warehousing Zone;

6. Products manufactured by EHTP/BTP/EOU/SEZ/Free Trade Zone/Export Processing Zone;

7. Products manufactured or exported in discharge of export obligation under AA/DFIA/EPCG;

8. Products manufactured or exported availing the benefit of Notification No. 32/1997 Cus. dated
01.04.1997 (job work and re-export of goods supplied by the foreign supplier);

9. Export for which electronic documentation in ICEGATE EDI (Electronic Data Interchange) has
not been generated/exports from non-EDI ports;

10. Goods which have been taken into use after manufacture.

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6.4. Status Holders

 Status Holders are business leaders who have excelled in international trade and have successfully
contributed to country‘s foreign trade. They are expected to not only contribute towards India’s
exports but also provide guidance and handholding to new entrepreneurs. All exporters of goods,
services and technology having an import-export code (IEC) number shall be eligible for
recognition as a status holder. Status recognition depends upon export performance.

 An applicant shall be categorized as status holder upon achieving export performance during
current and previous three financial years71, as indicated below:

Category Export performance – FOB/ FOR in $

One Star Export House 3 million
Two Star Export House 15 million
Three Star Export House 50 million
Four Star Export House 200 million
Five Star Export House 800 million

 Additional Points which merit consideration while computing export performance

(a) The export performance shall be counted on the basis of FOB of export earnings in freely
convertible foreign currencies or in Indian Rupees.
(b) For deemed export, FOR value of exports in Indian Rupees shall be converted in US$ at the
exchange rate notified by CBIC, as applicable on 1st April of each Financial Year.
(c) For granting status, an export performance would be necessary in all the three preceding FYs.
(d) For calculating export performance for grant of One Star Export House Status category, exports
by IEC holders under the following categories shall be granted double weightage:
(i) Micro, Small & Medium Enterprises (MSME) as defined in MSME Act, 2006.
(ii) Manufacturing units having ISO/BIS.
(iii) Units located in North Eastern States including Sikkim, UT of Jammu, Kashmir and Ladakh.
(iv) Export of fruits and vegetables.
(e) Exports made on re-export basis shall not be counted for recognition.
(f) Export of items under authorization, including SCOMET items (Special Chemical, Organism,
Material, Equipment and Technology) would be included for calculation of export performance.
(g) Export performance is not transferrable among IEC holders.

 Privileges to Status Holders

 Authorisation and custom clearances for both imports and exports on self-declaration basis.

 Fixation of Input Output Norms (SION) on priority i.e. within 60 days by Norms Committee

 Exemption from compulsory negotiation of documents through banks. The remittance

receipts, however, would continue to be received through banking channels.

71Separate provisions regarding Status Holder recognition are prescribed for Gems & Jewellery sector which is not relevant for
exams

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 FINAL – INDIRECT TAX

 Exemption from furnishing of Bank Guarantee in Schemes under FTP.

 Two Star Export Houses and above are permitted to establish export warehouses.

 Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be enabled
to self-certify their manufactured goods (as per their Industrial Entrepreneurs Memorandum
(IEM)72 / Industrial License (IL)73 /Letter of Intent (LOI)74 ) as originating from India with a
view to qualify for preferential treatment under specified agreements.

 Status holders shall be entitled to export freely exportable items (excluding gems and
jewellery, articles of gold and precious metals) on free of cost basis for export promotion
subject to a specified annual limit.

 The status holders would be entitled to preferential treatment and priority in handling of their
consignments by the concerned agencies.

 Skilling and mentorship obligations of Status Holders Status Holders (other than One Star
Export House) are being made “partners” in providing mentoring and training in international
trade to specified number of trainees each year based on status they achieve.

 Illustration: Two exporters namely, Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. have achieved the
status of Status Holders (One Star Export House) in the current financial year. Both the exporters
have been regularly exporting goods (other than Gems and Jewellery) every year. What would have
been the minimum export performance of the two exporters to achieve such status?

Both the exporters want to establish export warehouses in accordance with the applicable guidelines.
What should be their export turnover to enable them to establish export warehouses?

Answer

Status Holders are business leaders who have excelled in international trade and have successfully
contributed to country’s foreign trade. All exporters of goods, services and technology having an
import-export code (IEC) number shall be eligible for recognition as a status holder. Status
recognition depends upon export performance.

In order to be categorized as One Star Export House, an exporter needs to achieve the export
performance of 3 million US $ million [FOB/ FOR (as converted)] during current and previous three
financial years. Thus, export performance of Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. would have

72
Industrial undertakings exempted from the requirements of Industrial Licensing under THE INDUSTRIES (DEVELOPMENT
AND REGULATION) ACT I (D&R),1951 are required to file information relating to setting up of industries is known as IEM
(Industrial Entrepreneur Memorandum)
73 An industrial license is a legal authorization or permission granted by the government to establish and operate an industrial

enterprise in certain sectors or for specific activities

74 Letter of Intent (LOI) typically refers to a document issued by an exporter to indicate their intention to export goods or services.

The LOI serves as an initial communication between the exporter and the buyer, outlining the key terms and conditions of the
proposed export transaction

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been at least 3 million US $ million [FOB/ FOR (as converted)] during current and previous three
financial years.

Further, Two Star Export Houses and above are permitted to establish export warehouses.
Therefore, they can establish export warehouses in India only if they achieve the status of Two Star
Export House and above as indicated below:

Category Export performance – FOB/ FOR in $

One Star Export House 3 millon
Two Star Export House 15 millon
Three Star Export House 50 million
Four Star Export House 200 million
Five Star Export House 800 million

6.5. EPCG Schemes

6.5.1. General Points

 Benefit: Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods
for pre-production, production and post-production at zero customs duty or procure them
indigenously without paying duty in the prescribed manner. In return, exporter is under an obligation
to fulfill the export obligation. IGST and Compensation cess is also exempted.

 Export Obligation (EO): Import under EPCG scheme shall be subject to an export obligation
equivalent to 6 times of duty, taxes & cess saved on capital goods to be fulfilled in 6 years reckoned
from date of issue of authorization.

 Authorisation shall be valid for 24 months from the date of issue. Revalidation of EPCG
Authorisation shall not be permitted.

 In case integrated tax and compensation cess are paid in cash on imports under EPCG,
incidence of the said integrated tax and compensation cess would not be taken for
computation of net duty saved provided input tax credit is not availed.

 Restricted import/export - Import of items which are restricted for import shall be permitted
under EPCG Scheme only after requisite approval. Similarly, if the goods proposed to be exported
under EPCG Authorisation are restricted for export, the EPCG Authorisation shall be issued only
after requisite approval for issuance of Export Authorisation

 Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier - A person holding
an EPCG authorisation may source capital goods from a domestic manufacturer either through
Invalidation letter or through Advance Release Order. Such domestic manufacturer shall be
eligible for deemed export benefits. Such domestic sourcing shall also be permitted from EOUs.

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 FINAL – INDIRECT TAX

 Condition for fulfilment of Export Obligation

 Specific EO means the prescribed exports to be achieved. 6 times duty saved in 6 years. 75

 Average EO under the scheme shall be, over and above, the average level of exports
achieved by the applicant in the preceding three licensing years for the same and similar
products within the overall EO period.

 In case of indigenous sourcing of capital goods, specific EO shall be 25% less than the EO
stipulated under the scheme.

 Shipments under Advance Authorisation, DFIA, Drawback scheme, or RoDTEP or RoSCTL

(Rebate of State and Central Taxes and Levies – Not in syllabus) would also be counted for
fulfilment of EO under EPCG Scheme.

 Exports made from DTA units shall only be counted for calculation and/or fulfillment of AEO
and/or EO.

 EO can also be fulfilled by the supply of Information Technology Agreement (ITA) -I items to
DTA, provided realization is in free foreign exchange.

 Both physical and specified deemed exports would be covered for calculating export
obligation.

 Import of capital goods shall be subject to Actual User condition till export obligation is completed
and Export Obligation Discharge Certificate (EODC) is granted. After getting EODC, capital goods
can be sold or transferred.

Eligible exporters – Manufacturer exporters with or without supporting manufacturer(s),

Merchant Exporters tied to a supporting manufacturer(s), Service providers including Common
service provider (CSP) subject to prescribed conditions.

 Eligible capital goods

 Capital Goods including capital goods in CKD/SKD condition

 Computer systems and software which are a part of the Capital Goods being imported
 Spares, moulds, dies, jigs, fixtures, tools & refractories
 Catalysts for initial charge plus one subsequent charge

 Incentives for fast track companies: If 75% of the specific EO and 100% of the average EO in half
or less than half of the obligation period then the remaining EO shall be condoned and authorization
would be redeemed.

75
Note: In case of direct imports, EO shall be reckoned with reference to actual duty saved amount. In case of domestic sourcing,
EO shall be reckoned with reference to notional Customs duties saved on FOR value.

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 Illustration: XP Pvt. Ltd., a manufacturer, wants to import capital goods in CKD condition from a
foreign country and assemble the same in India. The import of the capital goods will be under notified
Project Imports. The capital goods will be used for pre-production processes. The final products of
XP Pvt. Ltd. would be supplied in SEZ. XP Pvt. Ltd. wishes to sell the capital goods imported by it
as soon as the production process starts. XP Pvt. Ltd. seeks your advice whether it can avail the
benefit of EPCG Scheme for importing the intended capital goods.
Note – Base your opinion on the facts given above assuming that all other conditions required for
being eligible to the EPCG Scheme are fulfilled in the above case.

Answer: Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods
at zero customs duty or procure them indigenously without paying duty in prescribed manner. In
return, exporter is under an obligation to fulfill the export obligation. Export obligation means
obligation to export product(s) covered by Authorisation/permission in terms of quantity or value or
both, as may be prescribed/specified by Regional or competent authority. Exports to SEZ
unit/developer/co-developer will be considered for discharge of export obligation of EPCG
Authorization, irrespective of currency.

The authorisation holder can either procure the capital goods (whether used for pre-production,
production or post-production) from global market or domestic market. The capital goods can also
be imported in CKD/ SKD to be assembled in India.

EPCG Authorization can also be issued for import of capital goods under Project Imports scheme
notified by CBIC. Export obligation for such EPCG Authorizations would be 6 times of duty saved.

However, import of capital goods is subject to ‘Actual User’ condition till export obligation is
completed. After export obligation is completed, capital goods can be sold or transferred.

Therefore, based on the above discussion, XP Pvt. Ltd. can import the capital goods under EPCG
Scheme. However, it has to make sure that it does not sell the capital goods till the export obligation
is completed.

6.6. EOU/ EHTP/ STP/ BTP Schemes

6.6.1. General Points

 Units under Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP)
Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) Scheme export
their entire production of goods and services (except permissible sales in DTA). They can import
inputs and capital goods without payment of customs duty.

 Units undertaking to export their entire production of goods and services (except permissible sales
in DTA), may be set up under these schemes for manufacture of goods, including repair, remaking,
reconditioning, re- engineering, rendering of services, development of software, agriculture including
agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture,
pisciculture, viticulture, poultry and sericulture.

 Trading units are not covered under these schemes.

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 Application for setting up an EOU shall be considered by Unit Approval Committee (UAC)/ Board of
Approval (BoA) as the case may be.

 Only projects having a minimum investment of Rs. 1 crore in plant & machinery shall be
considered for establishment as EOUs. However, this shall not apply to existing units, units in
EHTP/STP/BTP, and EOUs in handicrafts/ agriculture/ floriculture/ aquaculture/ animal husbandry/
information technology, services, brass hardware and handmade jewellery sectors. Board of
Approval may allow establishment of EOUs with a lower investment criteria.

6.6.2. Net Foreign Exchange Earnings

 EOU/EHTP/STP/BTP unit shall be a positive net foreign exchange earner. Moreover, certain sector
specific provisions have also been laid down where a higher value addition and other conditions are
given. NFE Earnings shall be calculated cumulatively in blocks of 5 years (extendible in specifed
cases), starting from commencement of production.

6.6.3. Other Entitlements for such units

 Exemption from industrial licensing for manufacture of items reserved for micro and small
enterprises.

 Export proceeds will be realized within 9 months.

 Units will be allowed to retain 100% of its export earnings in the EEFC (Exchange Earners' Foreign
Currency) account.

 Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA
subject to fulfilment of specified conditions.

 100% Foreign Direct investment (FDI) permitted through automatic route similar to SEZ units.

6.6.4. Objectives and other benefits

 Promote exports, enhance foreign exchange earnings, attract investment for export production and
employment generation.

 EOU/EHTP/STP/BTP units may export all kinds of goods and services except items that are
prohibited in ITC (HS).

 An EOU / EHTP/ STP/ BTP unit may import and / or procure, from DTA or bonded warehouses in
DTA / international exhibition held in India, all types of goods (Provided they are not prohibited).
required for its activities, without payment of basic customs duty, additional duty (leviable u/s 3 of
the Customs Tariff Act), IGST and compensation cess.

 However, procurement of goods covered under GST from DTA would be on payment of applicable
GST and compensation cess.

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 Units can also import goods including capital goods required for approved activity on a self-
certification basis.

 Goods imported by a unit shall be with actual user condition and shall be utilized for export
production.

 State Trading regime shall not apply to EOU manufacturing units except for specified products.

 Supplies from DTA to EOU/EHTP/STP/BTP units for use in their manufacture for exports will be
eligible for “benefits under deemed exports”.

 DTA supplier shall be eligible for relevant entitlements under deemed exports provisions of FTP,
besides discharge of export obligation, if any, on the supplier. The refund of GST paid on such
supply from DTA to EOU would be available to the supplier subject to specified conditions and
documentations.

 In addition, EOU/EHTP/STP/BTP units shall be entitled to following:- (i) Reimbursement of Central

Sales Tax (CST) on goods manufactured in India, wherever applicable. Simple interest @ 6% per
annum will be payable on delay in refund of CST, if the case is not settled within 30 days of receipt
of complete application. (ii) Exemption from payment of central excise duty on goods, falling in
Fourth Schedule of Central Excise Act, procured from DTA on such goods manufactured in India.

6.6.5. Inter unit transfer

 Transfer of manufactured goods/capital goods from one EOU/ EHTP/STP/BTP unit to another EOU
/ EHTP/ STP/ BTP unit is allowed on payment of applicable GST and compensation cess with prior
intimation to concerned Development Commissioners of the transferor and transferee units as well
as concerned Customs authorities as per the specified procedure. Goods supplied by one unit to
another unit shall be treated as imported goods for second unit for payment of duty, on DTA sale
by second unit.

6.6.6. Exit from EOU Scheme

 With approval of Development Commissioner/Designated officer of EHTP/ STP/BTP, an

EOU/EHTP/STP/BTP unit may opt out of scheme. Such exit shall be subject to payment of applicable
excise and customs duties and on payment of applicable IGST/ CGST/ SGST/ UTGST and
compensation cess, if any, and industrial policy in force. If unit has not achieved obligations, it shall
also be liable to penalty at the time of exit.

6.6.7. Conversion

 Existing DTA units may also apply for conversion into an EOU / EHTP / STP/ BTP unit. Existing
EHTP / STP units may also apply for conversion / merger to EOU unit and vice-versa. In such cases,
units will avail exemptions in duties and taxes as applicable.

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6.7. Deemed Exports under FTP

6.7.1. Basics

 Deemed Exports refers to those transactions in which goods supplied do not leave country, and
payment for such supplies is received either in Indian rupees or in free foreign exchange. Supply of
goods as specified in FTP shall be regarded as “Deemed Exports” provided goods are manufactured
in India.

 They can be broadly be classified in the following categories:

 Supplies to domestic entities who can import their requirements duty free or at reduced rates
of duty.

 Supplies to projects/ purposes that involve international competitive bidding.

 Supplies to infrastructure projects of national importance.

6.7.2. Categories of Deemed Exports

Supply by Manufacturer Supply by main/sub-contractor

Supply of goods against Advance Supply of goods to projects or turnkey contracts
Authorisation/Advance Authorisation for financed by multilateral or bilateral agencies/Funds
annual requirement/ Duty Free Import notified by Department of Economic Affairs (DEA),
Authorisation under International Competitive Bidding (ICB)
Supply of goods to units located in EOU/ Supply of goods to any project or for any purpose
STP/ EHTP/ BTP where import is permitted at zero basic customs duty
provided supply is made against International
Competitive Bidding

Supply of capital goods against EPCG Supply of goods to mega power projects
authorisation
Supply to goods to UN or international organisations
for their official use or supplied to projects financed by
them
Supply of goods to nuclear projects through
national/international competitive bidding

6.7.3. Benefits of Deemed Exports to the supplier

 Advance Authorisation/ Advance Authorisation for Annual requirement/ DFIA.

 Deemed Export Drawback: Refund of drawback on the inputs used in manufacture and supply
under the deemed exports category can be claimed on 'All Industry Rate' of Duty Drawback
Schedule provided no CENVAT credit has been availed by supplier of goods on excisable inputs or

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on ‘Brand rate basis’ upon submission of documents evidencing actual payment of basic custom
duties.

 Refund of terminal excise duty for specified excisable goods: Supply of goods will be eligible
for refund of terminal excise duty provided recipient of goods does not avail CENVAT credit/rebate
on such goods and supply is eligible under that category of deemed exports.

6.7.4. Common Conditions for Deemed Export benefits

 Supplies shall be made directly to entities listed in the point categories of deemed export. Third
party supply shall not be eligible for benefits/exemption.

 In all cases, supplies shall be made directly to the designated Projects/Agencies/Units/ Advance
Authorisation/ EPCG Authorisation holder. Sub-contractors may, however, make supplies to main
contractor instead of supplying directly to designated Projects/ Agencies. Payments in such cases
shall be made to sub-contractor by main-contractor and not by project Authority.

 Supply of domestically manufactured goods by an Indian Sub-contractor to any Indian or foreign

main contractor, directly at the designated project’s/ Agency’s site, shall also be eligible for
deemed export benefit

7. Trade Facilitation and ease of doing business

 Since India ratified the World Trade Organization’s Trade Facilitation Agreement (TFA), there’s a
special focus on implementing the international trade facilitation measures. DGFT, in consultation
with Export Promotion Councils and Trade and Industry bodies, dedicatedly functions as a facilitator
of exports and imports.

 National Committee on Trade Facilitation (NCTF) has been constituted to facilitate coordination
and implementation of the TFA provisions. National Trade Facilitation Action Plan aims to achieve:

 Improvement in Ease of Doing Business through reduction in transaction cost and time
 Reduction in cargo release time
 A paperless regulatory environment
 A transparent and predictable legal regime
 Improved investment climate through better infrastructure

 In view of the same, following trade facilitation measures are provided under FTP

 Free passage will be provided to export consignment and there will not be any seizure of
export related stock except in exceptional cases
 Single window system to facilitate export of perishable agricultural produce
 DGFT is implementing the Niryat Bandhu Scheme for mentoring new and potential exporter
on the intricacies of foreign trade through counseling, training and outreach programmes
including the ‘Districts as Export Hubs’
 DGFT online customer portal (https://dgft.gov.in) provides information relating to export and
import including Acts, rules, policy and procedures. Online facilities for e-RCMC (Registration

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cum Membership Certificate)/Registration Certificate related processes, e-Certificate of Origin

(eCoO) and Quality Control and Trade Disputes (QCTD) are also available on said common
digital platform.
 DGFT has undertaken a number of IT Initiatives to enable a paperless, contactless and
transparent environment for availing benefits under the export promotion schemes.
 A dedicated 24 X 7 Helpdesk facility has been put in place to assist the exporters in filing
online applications on the DGFT portal and other matters pertaining to FTP
 A large number of Trade Facilitation measures have been taken by Customs Department76

 TOWNS OF EXPORT EXCELLENCE (TEE): Selected towns which are contributing handsomely to
India’s exports by producing goods of specified amount may be granted recognition as TEE. They
will be provided targeted support and infrastructure development to maximize their export
competitiveness and enable them to move up the value chain and also to tap new markets by
granting specified privileges to them.

 Other initiatives such as Status Holder and Authorised Economic Operator have already been
discussed in detail.

8. Provision related to Import, Export and other Miscellaneous Provisions

8.1. Miscellaneous Provisions

 DEVELOPING DISTRICTS AS EXPORT HUBS: Every district has products and services which
are being exported, and can be further promoted, along with new products/ services, to increase
production, grow exports, generate economic activity and achieve the goal of Atma Nirbhar Bharat,
Vocal for local and Make in India. Products/services (GI products, agricultural clusters, toy
clusters etc.) with export potential in each District have to be identified and institutional mechanism
in the form of District Export Promotion Committees (DEPCs) at the district level is to be created
to provide support for export promotion and address the bottlenecks for export growth in the districts.

A District Export Action Plan (DEAP) may be prepared for each district. 2-3 high potential
products/services from the districts may be prioritised and comprehensive plan for their export
growth may be prepared and implemented. DGFT and Regional Authorities will be engaging with all
the relevant State and Central agencies to take forward this initiative in each district.

 QUALITY COMPLAINTS AND TRADE DISPUTES: In case of import/export, owner is liable to state
the value, quality and description of the goods/services/technology to the best of his knowledge and
belief, in the Bill of Entry or the Shipping Bill or any other prescribed document.

In case of export, certification regarding quality and specification of the goods/ services/technology
being in accordance with the terms of export contract is also required. Necessary action is prescribed
against the erring exporters/importers under the FT(D&R) Act, as amended and under Foreign

76 Some of these measures are 24X7 customs clearance in specified seaports and airports, Single Window Interface for Trade
(SWIFT) under customs which allows importers and exporters, the facility to lodge their clearance documents online at a single
point only, E-Sanchit or E-Storage and Computerized Handling of Indirect Tax documents facilitates traders with paperless
processing, TURANT Customs (faceless assessment), Compliance Information Portal (CIP) which is one stop solution for
information on all clearance related procedures, duties, fee and charges for import/export of any goods, etc

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Trade (Regulation) Rules, 1993. Further, a mechanism has been laid down to resolve complaints/
trade disputes between foreign buyer/supplier and Indian exporter/importer in respect of quality of
goods/services/technology supplied or unethical commercial dealings including non-supply/ partial
supply/ wrong supply/ non- payment; nonadherence to delivery schedules, etc. Committee on
Quality complaints and Trade Disputes (CQCTD) will be responsible for enquiring and
investigating into all quality related complaints and other trade related complaints falling under
the jurisdiction of the respective RAs. It will take prompt and effective steps to redress and resolve
the grievances of the importers/ exporters and overseas buyers/ suppliers.

8.2. General Provisions applicable to import and export of goods

 Importer-Exporter Code (IEC): A person can undertake export or import activity only after obtaining
Importer-Exporter Code (IEC) unless specifically exempted. It is a ten-character alphanumeric
number allotted to an entity. It is the same number as the applicant’s PAN but is issued separately
by the DGFT. An online application has to be filed for IEC. Specified categories of importers or
exporters are exempted from obtaining IEC. IEC details have to be electronically updated every
year, even if there are no changes; failing which it will be de-activated till updation.

 Mandatory documents: For export, the following documents are mandatory: 1. Bill of Lading/
Airway Bill/ Lorry Receipt/ Railway Receipt/Postal Receipt 2. Commercial Invoice cum Packing List
(or separate invoice and packing list) 3. Shipping Bill/Bill of Export/ Postal Bill of Export

For import, the following documents are mandatory: 1. Bill of Lading/Airway Bill/Lorry Receipt/
Railway Receipt/Postal Receipt 2. Commercial Invoice cum Packing List (or separate invoice and
packing list) 3. Bill of Entry

For import/export of specific goods or in specific cases of export or import, additional documents
may be notified/sought.

 Penal action and placing of an entity in Denied Entity List (DEL)

(a) Penal action: In following situations, a person shall be liable to penal action under FT (D&R)
Act and rules and orders made thereunder, FTP and any other law for time being in force:
 (i) authorisation holder: • violates any condition of such Authorisation • fails to fulfill export
obligation • fails to deposit the requisite amount within the period specified in demand notice
 (ii) any information/particulars furnished by applicant subsequently found untrue/incorrect

(b) Denied Entity List (DEL): A firm may be placed under DEL, by the concerned Regional Authority
(RA) of the DGFT. In such a case:
 (i) firm may be refused grant or renewal of a licence/authorization /certificate/scrip/any
instrument bestowing financial/fiscal benefits, and
 (ii) all new licences, authorisations, scrips, certificates, instruments etc. will be blocked from
printing/ issue/renewal.

A firm’s name can be removed from DEL, by the concerned RA for reasons if the firm completes
Export Obligation/ pays penalty/ fulfils requirement of demand notice(s) issued by the
RA/submits documents required by the RA.

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8.3. Provisions relating to Import of Goods

 ‘Actual user’ condition: Goods which are importable freely without any ‘restriction’ may be
imported by any person. However, if such imports require an authorisation, actual user alone may
import such good(s) unless said condition is specifically dispensed with by DGFT.

 Import of specific categories of goods

(a) Samples: Import of samples of even ‘restricted’ items, is allowed without import authorisation.
Exceptions are defence / security items, seeds, bees, and new drugs; these need authorisation.
Duty free import of samples upto Rs. 3,00,000 for all exporters shall be allowed subject to terms
and conditions of customs notification number 154/94 as amended [Notification not in syllabus].

(b) Gifts: Import of gifts (including those purchased from e-commerce portals) through post / courier,
where customs clearance is sought as gifts, is prohibited. Exceptions are ‘rakhi’ and life-saving
medicines. Gifts, however, can be imported upon payment of applicable customs duties. If duty
leviable on rakhi is upto Rs. 100, no duty will be collected on the same.

(c) Passenger baggage: Following are allowed to be imported as part of passenger baggage
without an authorisation subject to the Baggage Rules, 2016:
 Bona-fide household goods and personal effects;
 Samples of items freely importable under FTP77;
 Drawings, patterns, labels, price tags, buttons, belts, trimming and embellishments required
for export, imported as part of the passenger baggage of exporters coming from abroad, upto
prescribed value limit.

(d) Re-import of repaired goods: Capital goods, equipment, components, parts and accessories,
whether imported or indigenous, except those restricted under ITC (HS) may be sent abroad for
repairs, testing, quality improvement or upgradation or standardization of technology and re-
imported without an Authorisation.

(e) Goods used in projects abroad: Project contractors after completion of projects abroad, may
import without an Authorisation, goods including capital goods used in the project, provided they
have been used for at least one year.

(f) Prototypes: New / second hand prototypes / second hand samples may be imported without an
Authorisation on the following conditions:

 The importer is an Actual User (industrial)

 He is engaged in production of, or having industrial license / letter of intent for research in an
item for which prototype is sought for product development or research, as the case may be,
 The importer files a self-declaration to that effect, to the satisfaction of Customs authorities.

77
Any item(s) including Samples/Prototypes of items whose import policy is “restricted” or “prohibited” or is channelised through
STEs are not permitted as part of passenger baggage except with a valid authorization.

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(g) Metallic waste & scrap: Import of any form of metallic waste, scrap will be subject to the
condition that it will not contain hazardous, toxic waste, radioactive contaminated waste / scrap
containing radioactive material, any type of arms, ammunition, mines, shells, live or used cartridge
or any other explosive material in any form either used or otherwise.

(h) Second hand goods: Import policy for second hand goods is as follows:

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 Miscellaneous provisions regarding import: Some of the provisions to be noted are –

 Goods for import into India can be sold on the high seas, subject to FTP/other laws in force.

 Merchanting trade means shipment of goods from one foreign country to another foreign
country without touching Indian ports, involving an Indian intermediary. This is allowed,
subject to RBI guidelines, except for goods in the CITES78 and SCOMET lists.

 Import of capital goods under lease financing does not require any specific permission from
the DGFT.

 For imported goods, Bank Guarantee / Letter of Undertaking/ Bond (BG/ LUT /Bond) is to be
executed with customs in case of duty-free import or otherwise required, before clearance of
goods. For indigenously sourced goods, an authorisation-holder has to execute LUT/BG/Bond
with the RA concerned, before sourcing such material

8.4. Provisions relating to Export of Goods - All goods may be exported without any restriction
except to the extent that such exports are regulated by ITC(HS) or any other provision of FTP or any other
law for the time being in force.

 Benefits for supporting manufacturers: Supporting manufacturer is one who manufactures

goods/products or any part/ accessories/ components of a good/ product for a merchant
exporter/manufacturer exporter under a specific Authorisation. For any benefit to accrue to the
supporting manufacturer, the names of both supporting manufacturer as well as the merchant
exporter must figure in the concerned export documents, especially in tax invoice / shipping bill /
bill of export/ airway bill.

 Third Party Exports: Third party exports is allowed under FTP. Third-party exports means exports
made by an exporter/manufacturer on behalf of another exporter(s). In such cases, export
documents such as shipping bills shall indicate names of both manufacturer exporter/manufacturer
and third party exporter(s). Bank Realisation Certificate (BRC), Self-Declaration Form (SDF), export
order and invoice should be in the name of third-party exporter

 Samples: Exports of trade and technical samples of goods of freely importable items are allowed
without any limit.

 Gifts: Goods including edible items, of value not exceeding Rs. 5,00,000 in a licensing year (1st
April-31st March), may be exported as a gift. However, items mentioned as restricted for exports in
ITC(HS) shall not be exported as a gift, without an authorisation.

 Passenger baggage: Bona-fide personal baggage may be exported either along with passenger or,
if unaccompanied, within 1 year before or after passenger’s departure from India. However, items
mentioned as restricted for exports in ITC(HS) shall not be exported as a gift, without an
Authorisation. Samples that freely exportable can be exported as part of passenger baggage.

78CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) is an international agreement
between governments. Its aim is to ensure that international trade in specimens of wild animals and plants does not threaten
the survival of the species.

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 FINAL – INDIRECT TAX

Authorisation will be required for restricted items. Samples of freely exportable items may be
exported as part of passenger baggage without an authorisation.

 Import for export

(a) Goods that are freely importable as well as freely exportable can be imported and then exported
in same or substantially the same form, without any authorisation.

(b) Goods including capital goods (both new and second hand) can be imported under customs
bond and then cleared for export against freely convertible foreign currency provided they are freely
exportable. This includes goods that are ‘restricted’ for import.

(c) Capital goods that are freely importable and freely exportable can be imported for export upon
execution of LUT/Bank Guarantee with the customs authorities.

(d) Notwithstanding the above, goods of other than Indian origin that are ‘restricted’ for export
(other than ‘prohibited’ or SCOMET items) but ‘free’ for import can be imported for exports in same
or substantially the same form. Such goods shall be kept in bonded warehouse and re-exported
from there subject to provisions of section 69 [warehousing] of the Customs Act, 1962.

(e) Goods that are imported against payment in freely convertible foreign currency can be
exported only against payment in freely convertible foreign currency, unless otherwise notified.

 Payments and Receipts on Imports / Exports:

(a) Denomination of Export Contracts: Export contracts may be denominated either in Indian
rupees or freely convertible currency, but export proceeds should be realised in freely convertible
foreign currency. However, in specified cases, exports proceeds may be realized in rupees
subject to fulfilment of specified conditions.

(b) Non-realisation of export proceeds: If an exporter fails to realize export proceeds within time
specified by RBI, he shall be liable to return all benefits/ incentives availed against such exports
and shall be liable to penal action under FT (D&R) Act and the FTP. However, if such non-realization
is for reasons beyond his control, he may approach RBI for writing off the unrealized amount.

(c) Export Credit Agencies (ECAs): ECAs provide financial support to exporters. They support
exports by insurance, guarantee and also direct lending. For instance, Export Credit Guarantee
Corporation of India Ltd. (ECGC), Exim Bank, etc.

 Export Promotion Councils: Export Promotion Councils (EPCs) are organizations of exporters, set
up to promote and develop Indian exports. Each Council is responsible for promotion of a particular
group of products/ projects/services.

EPCs are also eligible to function as Registering Authorities to issue Registration-cum-

Membership Certificate (RCMC). RCMC is required to be furnished by any person, applying for an
Authorisation to import/ export under the FTP (except ‘Restricted’ items) or applying for any other
benefit or concession under FTP.

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 FINAL – INDIRECT TAX

 Self-certification of origin of goods: Till now, certificate of origin of goods for export was issued
by the designated agencies. Now, self-certification has been enabled for “approved exporters”.
Manufacturers who are also status holders will be eligible for the ‘approved exporter’ scheme.

Approved Exporters will be entitled to self-certify their manufactured goods as originating from India
with a view to qualifying for preferential treatment under different Preferential Trade Agreements
[PTAs], Free Trade Agreements [FTAs], Comprehensive Economic Cooperation Agreements
[CECA] and Comprehensive Economic Partnerships Agreements [CEPA] which are in operation.
Self-certification will be permitted only for the goods that are manufactured as per the Industrial
Entrepreneurs Memorandum (IEM) / Industrial License (IL) /Letter of Intent (LOI) issued to
manufacturers.

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 FINAL – INDIRECT TAX

Proposed Changes for online gaming industry

1. Negative List and corresponding definitions

 The term “Lottery, Betting, Gambling” in negative list is replaced by “Specified Actionable Claim”. It
means that these Specified Actionable Claims will now be subject to GST.

 “Specified actionable claim” means the actionable claim involved in or by way of— (i) betting; (ii)
casinos; (iii) gambling; (iv) horse racing; (v) lottery; or (vi) online money gaming

 "Online gaming" means offering of a game on the internet or an electronic network and includes
online money gaming

 "Online money gaming" means online gaming in which players pay or deposit money or money's
worth, including virtual digital assets, in the expectation of winning money or money's worth, including
virtual digital assets, in any event including game, scheme, competition or any other activity or
process, whether or not its outcome or performance is based on skill, chance or both and whether
the same is permissible or otherwise under any other law for the time being in force

 “Virtual Digital Asset" shall have the same meaning as assigned to it in clause (47A) of section 2
of the Income-tax Act, 1961

2. Additional Proviso in the definition of “Supplier”

 “Provided that a person who organises or arranges, directly or indirectly, supply of specified
actionable claims, including a person who owns, operates or manages digital or electronic
platform for such supply, shall be deemed to be a supplier of such actionable claims, whether
such actionable claims are supplied by him or through him and whether consideration in money or
money's worth, including virtual digital assets, for supply of such actionable claims is paid or
conveyed to him or through him or placed at his disposal in any manner, and all the provisions
of this Act shall apply to such supplier of specified actionable claims, as if he is the supplier liable
to pay the tax in relation to the supply of such actionable claims”

3. Section 24 of CGST Act – Compulsory Registration

 The following clause has been added

“every person supplying online money gaming from a place outside India to a person in India”

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4. Valuation Rules

 Rule 31B - Value of supply in case of online gaming including online money gaming–

Notwithstanding anything contained in this chapter, the value of supply of online gaming, including
supply of actionable claims involved in online money gaming, shall be the total amount paid or
payable to or deposited with the supplier by way of money or money’s worth, including virtual digital
assets, by or on behalf of the player:

Provided that any amount returned or refunded by the supplier to the player for any reasons
whatsoever, including player not using the amount paid or deposited with the supplier for
participating in any event, shall not be deductible from the value of supply of online money gaming.

 Rule 31C - Value of supply of actionable claims in case of casino–

Notwithstanding anything contained in this chapter, the value of supply of actionable claims in casino
shall be the total amount paid or payable by or on behalf of the player for –

(i) purchase of the tokens, chips, coins or tickets, by whatever name called, for use in casino; or
(ii) participating in any event, including game, scheme, competition or any other activity or process,
in the casino, in cases where the token, chips, coins or tickets, by whatever name called, are not
required.

Provided that any amount returned or refunded by the casino to the player on return of token,
coins, chips, or tickets, as the case may be, or otherwise, shall not be deductible from the value of
the supply of actionable claims in casino.

Explanation.- For the purpose of rule 31B and rule 31C, any amount received by the player by
winning any event, including game, scheme, competition or any other activity or process,
which is used for playing by the said player in a further event without withdrawing, shall not
be considered as the amount paid to or deposited with the supplier by or on behalf of the
said player.

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5. Definition of OIDAR

 The definition of OIDAR will exclude online money gaming.

“(vii) online gaming, excluding the online money gaming”

6. Section 14A of IGST Act, 2017

 A supplier of online money gaming as defined in section 2(80B) of the CGST Act, 2017, not
located in the taxable territory, shall in respect of the supply of online money gaming by him to a
person in the taxable territory, be liable to pay integrated tax on such supply.

 For the purposes of complying with provisions, the supplier of online money gaming shall obtain a
single registration under the Simplified Registration Scheme as in section 14 of IGST Act:

Provided that any person located in the taxable territory representing such supplier for any
purpose in the taxable territory shall get registered and pay the integrated tax on behalf of the
supplier

Provided further that if such supplier does not have a physical presence or does not have a
representative for any purpose in the taxable territory, he shall appoint a person in the taxable
territory for the purpose of paying integrated tax and such person shall be liable for payment of such
tax.

 In case of failure to comply with above provisions by the supplier of the online money gaming or a
person appointed by such supplier or both, notwithstanding anything contained in section 69A of
the Information Technology Act, 2000, any information generated, transmitted, received or hosted
in any computer resource used for supply of online money gaming by such supplier shall be liable
to be blocked for access by the public in such manner as specified in the said Act.

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