Customs Law and Procedures

Introduction

Customs duty is a tax which the State collects on goods imported into or exported out of the boundaries of a country. Customs duties now form a significant source of revenue for all countries, more so in the case of developing countries like India. In India, customs duties are levied on the goods and at the rates specified in the Schedules to the Customs Tariff Act, 1975. The taxable event is import into export from India. Export duties are practically non-existent at present. They are levied occasionally to mop up excess profitability in international price of goods in respect of which domestic prices may be low at given time. But sweep of import duties is very wide, almost universal, barring a few goods like food grains, fertilizer, life saving drugs and equipment etc. Import duties generally consist of the following: 

1. Basic duty. It may be at the standard rate or, in the case of import from some countries, at the preferential rate.
2. Additional customs duty equal to central excise duty leviable on like goods produced or manufactured in India. It is commonly referred to as countervailing duty or C.V.D.
3. Special additional duty of Customs at the rate of 4% in order to provide a level playing field to indigenous goods which have to bear sales tax. This duty is to computed on the aggregate of–

1. assessable value; 
2. basic duty of Customs;
3. surcharge; and
4. additional duty of Customs leviable under section 3 of the Customs Tariff Act, 1975 (c.v.d.)

1. Additional duty of Customs at the rate of Re. 1/- per liter on imported motor spirit (petrol) and high speed diesel oil.

Anti-dumping duty/Safeguard duty for import to specified goods with a view to protecting domestic industry from unfair injury.

Import & Export through Courier

In order to regulate the import and export, of light weight goods into and out of the country the Government of India had framed Courier Imports (Clearance) Regulation in 1995 which were revised by framing an up to date Courier Imports and Exports (Clearance) Regulations in 1998. Private companies have been registered as authorised couriers in the International Airports at Mumbai, Delhi, Chennai, Calcutta, Bangalore, Hyderabad, Ahmedabad and Jaipur by the Customs Commissioner of the respective places.

TYPE OF GOODS THAT CAN BE SENT

 All types of goods can be sent through the courier mode into India and out of India except few articles. The goods which are prohibited for import through courier are:

1. Animals & parts thereof or plants & parts thereof, 
2. Perishable goods, 
3. Publications containing maps showing incorrect boundaries of India,
4. Gold or silver in any form,
5. Precious and semi precious stones & Studded jewellery,
6. Chemicals of chapter 28, 29 & 38 of the first schedule to Customs Tariff Act which need testing

Similarly, the export of the following goods are also restricted:

1. Goods which are subject to levy of any duty on their export,
2. Goods proposed to be exported with claim for Draw of Customs duty,
3. Goods exported under Duty Entitlement Pass Book Schemes or Duty Exemption Scheme or Export Promotion Capital Goods Scheme, and
4. Goods where the value of consignment is above Rs. 25,000/- and Waiver from the RBI not to bring in Foreign Exchange is not available, 

SAMPLES, GIFTS AND TRADE GOODS 

1. Document of any form including messages, information or data recorded on papers, cards, photographs which are not subjected to any prohibition or restrictions can be imported and exported. 
2. Bonafide commercial samples can be imported through courier provided the said samples are being received free of cost (see Import of Samples). Similarly, gifts from persons abroad up to the value of Rs. 5,000/- and all the life saving drugs and equipment which are not chargeable to any duty at present (see Notification 20/99-Cus) can also be sent to India through the courier mode. 
3. Commercial goods which are dutiable can also be imported through the courier without any restriction of quantity subject to payment of duty by the courier company at the time of clearance of the said goods from the Customs. 

IMPORTANT CLARIFICATIONS

Whether the value of Rs. 5,000/- for the gift or the commercial samples means the value of the goods in India or the country of sender?

The value of Rs. 5,000/- is the export value of the goods excluding locally refundable taxes like VAT in the country from where the goods have been dispatched. In case of gifts and samples up to Rs. 5000/- it does not include freight or courier charges and insurance. However, in case of goods valued above Rs. 5000/- it freight and insurance would be added to calculate the duty payable. The sender may not necessarily be residing in the country from where the goods have been dispatched. A sender in the U.K. can send goods from South Korea to India. The value in South Korea would be taken into consideration.

What types of goods cannot be sent as gift or commercial samples through courier?

 All types of goods which are banned for import under the Foreign Trade (Development and Regulation) Act, 1992 are banned for import into India even as gifts or as commercial samples. The example of such goods are wild animals, wild birds or parts of wild animals and birds, narcotic drugs like opium, marijuana, ivory, arms like revolvers or pistols or other hand guns and ammunitions

 Can a person send jewellery to any manufacturer in India as sample?

 Gold jewellery or studded jewellery including samples thereof is not allowed to be imported by or sent to ordinary persons in India through courier route. However, the units in export processing zones or Export Oriented Units are allowed to import gems and jewellery, including samples thereof, through an authorised courier. However, the jewellery and its samples can be exported by all units through the courier.

 Why is there a prohibition for import of chemicals and perishable goods even of low value?

 It is not convenient to handle perishable goods through normal courier mode. The system of import or export of goods through courier is designed for very fast movement through the Customs. The chemicals imported may require testing of the same to ascertain its identity which would need some time and would also delay the processing of other consignments through courier. Therefore, the import of chemicals have been prohibited through courier route.

Chemicals can be sent through the same courier company who would submit it separately at the Air Cargo Complex for clearance. The Air Cargo Complex is invariably situated beside the Courier Terminal. However, the clearance is likely to take more time.

 Is there any limit of weight and size of the package that can be sent through the courier?

Packages up to 70 Kgs. of weight can be imported to India through courier mode. However, there is no such weight limit for export of goods through courier from India.

Why there is a restriction on goods to be exported with claim for Draw or any duty entitlement pass-book scheme of Export Promotion Capital Goods Scheme?

Under these schemes additional paper work is involved and, therefore, it delays clearance of this packet and in addition clearance of other packages is also delayed. However, these consignments can be cleared through the air-cargo complex by the same courier company. Invariably the air cargo complex and the courier terminal are situated side by side and, therefore, there is no inconvenience to the exporters.

HOW DUTY IS PAID, IF LEVIABLE?

 If the duty is small, the Courier Company makes the payment and collects it from the receiver at the time of delivery of the goods. If the duty assessed is high, they advise the party of the arrival of the goods and the party clears the goods directly from the Customs. The courier can get the goods detained, inform the client and with his consent make the payment of duty.

Machinery parts are sent abroad through couriers for repairs and reconditioning etc. what procedure is to be adopted during export of the said goods.

While sending the goods abroad, proper documents should accompany the package. The invoice may be attested by the Customs and a copy retained to enable Customs to identify the goods at the time of re-import of the said goods. The repairer may be advised to enclose a copy of sender invoice along with their own invoice. The repairer may be advised to clearly mention their repair charges for similar goods in the invoice, even if they have done it free. Along with invoice or on its body list of jobs carried out (fault list) may be given.

If part of the machinery cannot be repaired or replaced then during re-import such machinery has to bear duty as if it is being imported. The invoice should show separately cost of such parts/raw materials to enable proper valuation.

Refer to Notification No. 87/98-Cus (NT) dt. 9.11.98

Import of Gifts

All goods imported into India from abroad is liable to duties of Customs under

Section 12 of the Customs Act and also is liable to all the restrictions under the Foreign Trade (Development & Regulations) Act 1992. However, the Government has exempted gifts received from abroad by persons residing in India from the whole of duties of Customs and from restriction under FT (D&R) Act. At present, import of goods upto the value of Rs. 5,000/- is allowed as gift, duty free. This exemption is allowed only for bona fide gifts imported by air or post. For the purpose of calculation of this value of Rs. 5,000/- the air freight or postal charges paid are not added.

IMPORTANT CLARIFICATIONS

1. The value of Rs. 5,000/- is the value of the goods in the country from where the goods have been dispatched. The sender may not necessarily be residing in the country from where the goods have been dispatched.

2. The import has to be only through Air or through Post Parcel. 3. Any person abroad can send gifts. There is no specific restriction that only relatives can send the goods. Business associated, friends, relatives, companies or acquaintances can also send the gifts to residents in India.

ELEMENTS NECESSARY FOR DRAW UNDER SECTION 74 

The elements necessary to claim drawback are:

1. The goods on which drawback is claimed must have been previously imported;
2. Import duty must have been paid on these goods when they were imported;
3. The goods should be entered for export within two years from the date of payment of duty on their importation (whether provisional or final duty). The period can be further extended to three years by the Commissioner of Customs on sufficient cause being shown.
4. The goods are identified as the goods imported.
5. The goods must be capable of being identified as imported goods.
6. The goods must actually be re-exported to any place outside India.
7. The market price of such goods must not be less than the amount of drawback claimed.
8. The amount of drawback should not be less than Rs. 50/- as per Section 76-(1) (c) of the Customs Act. 

PROCEDURE TO CLAIM DRAW UNDER SECTION 74.

Drawback claims under Section 74 of the Customs Act are now being processed manually. To claim drawback under Section 74, the exporter should file the shipping bill under claim for drawback in the prescribed form and after assessment the goods are to be examined by the Customs officers for purposes of physical identification. After shipment, the claim is filed in the department, for sanction of drawback. The pre-receipted drawback payment order has to be forwarded to the drawback department upon which cheque is issued. If the information submitted by the exporter is insufficient to process the claim, a deficiency memo will be issued to the exporter seeking further information or documents to process the claim. On compliance the claims will be processed in the usual manner.

SUPPORTING DOCUMENTS REQUIRED FOR PROCESSING DRAW CLAIM UNDER SECTION 74 

1. Triplicate copy of the Shipping Bill bearing examination report recorded by the proper officer of the customs at the time of export.
2. Copy of the Bill of entry or any other prescribed documents against which goods were cleared for importation.
3. Import invoice.
4. Evidence of payment of duty paid at the time of importation of goods.
5. Permission from the Reserve Bank of India for re-exports of goods, wherever necessary.
6. Export invoice and packing list.
7. Copy of the Bill of Lading or Airway bill. 
8. Any other documents as may be specified in the deficiency Memo.

TIME LIMIT UNDER SECTION 74

In order to claim drawback under Section 74 the goods should be entered for export within two years from the date of payment of duty on the importation thereof. Provided that in any particular case the period of two years may on sufficient cause shown be extended by the by the Central Board of Customs and Central Excise by such period as it may deem fit.

The time limit have to be computed from the date of payment of duty up to the date of entry of goods for export under Sec 50 of the Customs Act for export by air or sea, under Section 77 for baggage items and Under Section 83 of the Customs Act for export by post

The claims should be filed in the manner prescribed under Rule 5 of Re-export of Imported Goods(Drawback of Customs Duties) Rules,1995, read with Public Notices issued by the Custom Houses. The time limit for filing the claim is three months from the date of let export order. If the exporter was prevented by sufficient cause from filing the claims within three months, the Asst. Commissioner of Customs can relax the time limit by three months.

The claim for drawback is processed under the following systems:

1. Manual System
2. EDI System
3. By Post

PROCEDURE FOR CLAIMING DRAW UNDER SECTION 75 OF THE CUSTOMS ACT UNDER THE MANUAL SYSTEM: 

For the purpose of claiming drawback, the exporter is required to file a drawback-shipping bill in the prescribed Format as required under Rule 13 along with the necessary declaration. The goods after assessment are examined by the officers posted in the Examination Shed as required for each individual case. The examination report will indicate the nature of goods in terms of drawback schedule for classification and application of correct rate. Samples may have to be drawn for testing by lab in respect of chemicals, synthetic fabrics’ etc as specified from time to time to confirm the declarations in the export documents. The triplicate Copy if the drawback shipping bill which contain the examination report is the claim copy

SUPPORTING DOCUMENTS REQUIRED FOR PROCESSING THE CLAIM. 

1. Triplicate of the Shipping Bill
2. Copy of the Bank Certified Invoices.
3. Copy of the Bill Lading/Airway Bill
4. Sixtuplicate Copy of AR-4 wherever applicable
5. Freight and Insurance certificate wherever the contract is CIF / C&F
6. Copy of the Test report where the goods are required to be tested
7. Copy of the Brand rate letters where the drawback claim is against the Brand rate
8. Mate receipt
9. Copy of the Contract or Letter of credit as the case may be
10. Modvat Declaration wherever applicable
11. Any declaration required as per foot note of the Drawback schedule
12. Worksheet showing the drawback amount claimed
13. DEEC Book and license copy where applicable.
14. Transshipment certificate where applicable
15. Proof of foreign agency commission paid if any
16. Blank acknowledgement card in duplicate
17. Pre–receipt for drawback amount on the reverse of Shipping Bill duly signed on the Rs1/- revenue stamp 

The claims are settled and passed by the appraiser if the amount sanctioned is below Rs 1,00,000/- and by the Assistant Commissioner, if the amount of drawback exceeds Rs1.00.000/-. After pre-audit, the cheques are issued to the designated banks for credit to the exporters account or handed over to the authorized representative of the exporter. For further details refer to the Public Notices issued by the concerned Custom Houses/ Central Excise Commissionerate. 

PROCESSING OF DRAW CLAIMS UNDER SECTION 75 OF THE CUSTOMS ACT UNDER THE EDI SYSTEM 

1. Computerized processing of shipping bills is in vogue at over 19 ports in India. The shipping bills are processed under the Indian Customs EDI systems (ICES).
2. Under the system, there would be no processing of paper documents except statutory declarations and endorsements until ‘let export’ order stage. Till such time exporters / CHAs are given access to file documents through the Service centre set up in the Custom Houses / Air Cargo complexes.
3. Processing of drawback claims under the system will be applicable for all exports except in respect of the claims under Section 74 of the Customs Act and those relating to EPZ/100% EOU.
4. For the excluded categories the export Shipping Bills will be filed manually and processed by AC Drawback, as hitherto. Under the EDI system there is no need for filing separate drawback claims. The shipping bill itself treated as drawback claim.
5. In the EDI system the exporters are required to open their accounts with the Bank nominated by the Custom Houses/ ACC. This has to be done to enable direct credit of drawback amount to their accounts, obviating the need for issue of cheques.
6. For export of goods under claim for drawback, the exporters will file S.D.F declaration in Annexure B in lieu of GR –1 FORM. The declaration in Annexure C would also be filed when the export goods are presented at the Export shed for examination and Let export. In addition they should file a declaration if any in the appendices applicable to the goods mentioned in the Public Notices issued by the Customs Houses / ACC for processing Shipping Bills under the EDI system.
7. The rates of drawback under S.S Nos. are dependent upon conditions mentioned against them in the Drawback Schedule. To enable the EDI system to process the claims correctly exporters are advised to give the correct Sl.No. of relevant appendix applicable to their case. If the relevant declarations are not filed along with the Shipping Bill the system will not process the drawback claims. The exporters are therefore advised to file the declaration along with the Shipping Bills.
8. After actual export of the goods, the drawback claims will be processed through the system on first come first served basis. The status of Shipping Bills and sanction of drawback claim can be ascertained from the query counter set up at the Service centre. If any query has been raised or deficiency noticed, the same will be shown on the terminal provided there. The exporter or his authorised representative may obtain a printout of the query/deficiency form the Service Centre if he so desires. The claim will come in Que. of the system as soon the reply is entered.
9. Shipping Bills in respect of goods under claim for drawback against brand rates would also be processed in the same manner, except that drawback would be sanctioned only after the original brand letter is produced to AC Export and is entered in the system. The exporter should specify the S.S No 98.01 for such provisional claim
10. All the claims sanctioned on a particular day will be enumerated in a scroll and transferred to the Nominated Bank through the system. The Bank will credit the drawback amount in their respective accounts of the exporters on the next day. Bank will send a fortnightly statement to the exporters of such credits made in their accounts.
11. The steamer agents / Airlines will transfer the EGM electronically to the system so that the physical Export of goods is confirmed. The system will process the claims only on receipt of the EGM. 

1. PROCEDURE FOR CLAIMING DRAW ON EXPORT BY POST- SECTION 75 OF THE CUSTOMS ACT 

For claiming drawback on goods exported by post, exporter is required to file his claim at the time of booking parcel with the postal authorities in the form prescribed in the Rules. The date of receipt of this form from the postal authorities by the Customs Authorities shall be treated as date of filing claim by the exporter for the purpose of Section 75 A of the Customs Act. Thus drawback is paid to the exporter within three months from the date of receipt of claim from the postal authorities. On receipt of the claim form, intimation is to be given to he exporter. Where claim form is incomplete a deficiency memo is issued within fifteen days of its receipt form the postal authorities. The exporter can resubmit this form after compliance with deficiencies within a period of 30 days. If such a claim is found to be in order, the same is acknowledged and the period of three months for payment of drawback in terms of Section 75 in such cases shall commence form the date of such acknowledgement.

TIME LIMIT UNDER SECTION 75

The claims should be filed in the manner prescribed under Rule 13, read with Public Notices issued by the Custom Houses. The time limit for filing the claim is three months from the date of let export order. If the exporter was prevented by sufficient cause FORM filing the claims within three months, the Asst. Commissioner of Customs can relax the time limit by three months and the Commissioner of Customs can relax the time limit for a period of nine months. Duties Rebated Under Drawback Scheme

Under the drawback scheme, the relief is given from the burden of duty incidence of Customs & Central Excise on basic inputs like raw materials. Components, Intermediates and packing materials used at various stages of production/manufacture. No relief of drawback is extended to duties suffered on capital goods, fuels and consumables used in relation to the manufacture of the export goods. It may also be noted that no relief of Sales Tax or Octroi or any other indirect tax is given by way of drawback. The finished stage of excise duties on the export product is also not reimbursed under this scheme and there are separate provisions for rebate of such finished stage duties under the Central Excises and Salt Act 1944 and the Rules framed thereunder.

Interest Payment

A new Section 75 A has been incorporated in the Customs Act to provide for payment of interest on delayed payment of drawback. Interest at the rate of 15% P.A. is payable to the exporters if the claim is not settled within three months from the date of issue of acknowledgement by the department. Acknowledgement under Rule 13(I) is issued only if the claim is complete in all respect. If the claim is deficient, the department within 15 days from the date of filing the claim will issue a deficiency memo. The exporter is required to comply with the deficiency memo within 30 days from the date of receipt of deficiency memo. The time limit in these cases will be completed after receipt of compliance and issue of acknowledgement card. Similarly, where an exporter has been paid erroneous or excess drawback and fails to repay the same within three months from the date of demand, he is liable to pay interest at the rate of 20% P.A.

Supplementary Chain

If the exporter finds that the amount of drawback paid is less than what he is entitled to, there is a provision for claiming supplementary drawback claims in the prescribed Format Under Rule 15 of the Drawback Rules, 1995. The time limit filing supplementary claim is three months from the date of original settlement.

CONCLUSION

Customs Duty is a tariff or tax imposed on goods when transported across international borders. The purpose of Customs Duty is to protect each country’s economy, residents, jobs, environment, etc., by controlling the flow of goods, especially restrictive and prohibited goods, into and out of the country.