1. Applied Indirect Taxation
Customs Act
Questions and Answers for June 2011 Examination
1. What are goods under Customs Act, 1962?
Ans. Goods [Sec.2(22)]: Goods includes —
(a)vessels, aircrafts and vehicles; (b)stores; (c)baggage; (d)currency and negotiable
instruments; and
(e) any other kind of movable property
Imported Goods [Sec.2(25)] - It means any goods brought into India from a place outside
India but does not include goods which have been cleared for home consumption.
Dutiable goods [Sec.2(14)] - It means any goods which are chargeable to duty and on
which duty has not been paid. Where no customs duty is chargeable either by reason of
tariff not providing for it or because of the exemption notification, those goods will not be
regarded as dutiable goods.
Coastal goods [Sec.2(7)]- It means goods, other than imported goods, transported in a
vessel from one port in India to another
Prohibited goods [Sec.2(33)] - It means any goods the import or export of which is subject-
to any prohibition under this Act or any other law for the time being in force but does not
include any such goods in respect of which the conditions subject to which the goods are
permitted to be imported or exported have been complied with.
2. Define "Indian Customs Waters", What is its significance in terms of Customs Act,
1962?
Ans. Indian Customs Waters [Sec.2(28) of Customs Act, 1962] - "Indian Customs Waters"
means, the waters extending into the sea upto the limit of contiguous zone of India under
the Maritimes Zones Act and includes any bay, gulf, harbour, creek, or tidal river. It is to
be noted that 'India' extends to only 12 nautical miles, Indian Customs Waters extends to
24 nautical miles.
Significance of various maritime zones for customs purposes - The significance of
territorial water, Indian Customs waters and Indian Exclusive Economic Zone for Customs
Law are as under -
12 nautical miles from base In case of importation, import of goods will commence
line i.e. the Territorial waters when the goods cross territorial waters and exportation is
of India completed when the goods cross the territorial borders.
24 nautical miles from base Any person engaged in the smuggling of goods can be
line i.e. the Indian customs arrested if he is found in Indian Custom Waters. Similarly,
waters conveyances found in Indian Customs Waters constructed
and fitted in such a manner so as to conceal smuggled
goods is liable to be confiscated.
200 nautical miles from base Economic Exploitation in the sea and sea bed can be done
line i.e. the Indian Exclusive by India upto only 200 nautical miles from the base line.
Economic Zones
3. What is the purpose of 'safeguard duty'? What are the restrictions of WTO in respect of
safeguard duty? Can it be imposed on provisional basis?
Ans. Safeguard Duty [Sec.8B of Customs Tariff Act]: Where the Central Government is
satisfied that -
 An article is imported into India in increased quantities; and
 Such article is imported in such manner which shall cause or is threatening to cause
serious injury to the domestic market, - then it may impose safeguard duty on such
imported articles.
Notes:
 Provisional Safeguard Duty - The Central Government may, pending the enquiry,
impose a provisional safeguard duty on the basis of preliminary determination that
increased imports have caused or is threatened to cause serious injury to a domestic
industry. However, such provisional safeguard duty shall not remain in force for more
than 200 days from the date on which it was imposed.
 Unless and until specifically mentioned in the notification, safeguard duty or

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provisional safeguard duty shall not apply on articles imported by a 100% export
oriented undertaking or a unit in free trade zone or in special economic zone.
 The condition under WTO for imposing safeguard duty is that it should not discriminate
between imports from different countries having Most Favoured Nation.
4. How is value determined for purposes of special CVD under the Customs Tariff Act?
Ans. As per Sec.3(6) of the Customs Tariff Act, the value of the imported article for the
purpose of additional duty on any imported article, shall, be the aggregate of: (i) the value
of the imported article determined u/s 14 or the tariff value of such
article, as the case may be; and (ii) any duty of customs chargeable on that article u/s 12
of the Customs Act,
1962, and (iii) CVD payable u/s 3(1) and Additional Duty u/s 3(3); but does not include:
(a) Additional duty levied u/s 3(5);
(b) the safeguard duty referred to in Sec.8B and 8C;
(c) the countervailing duty referred to in Sec.9; and
(d) the anti-dumping duty referred to in Sec.9A
5. In the context of valuation of goods for determining the price paid or payable in the
course of arriving at the assessable value under the Customs Act, discuss about the
inclusion of the following item:
(a) Cost of durable and reusable containers used for transportation;
(b) Technical know-how drawings supplied by importer;
(c) Air freight charges incurred for importing items urgently required, which are normally
imported by sea;
(d) Cost of insurance not readily ascertainable.
Ans.
(a) Cost of durable and reusable container used for transportation shall not be considered
for customs valuation provided if importer agrees to execute a bond to re-export the
container within 6 months.
(b) Cost of engineering, development, art work, design work, and plans and sketches
undertaken elsewhere than in India and necessary for the production of the imported
goods shall be added while computing assessable value.
(c) While computing assessable value, 20% of FOB of the goods shall be added for freight.
(d) While computing assessable value, 1.125% of FOB shall be added for cost of insurance,
if such cost is not ascertainable.
6. Customs Valuation Rules provide that if valuation is not possible on the basis of
transaction value of identical goods, valuation can be done on basis of transaction value
of 'similar goods'. What are the distinctions and similarities between 'identical goods' and
'similar goods'?
Ans. Identical goods means imported goods -
(a) 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 goods;
(b) produced in the country in which the goods being valued were produced; and
(c) produced by the same person who produced the goods or where no such goods are
available, then goods produced by a different manufacturer.
However, identical goods do not include goods imported goods where engineering,
development work, art work, design work, plan or sketch under taken 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.
Similar goods means imported goods -
(a) which although not alike in all respect, have like characteristics and like component
materials which enable them to perform the same function. Such goods shall be
commercially interchangeable with the goods being valued having regard to the
quality, reputation and the existence of trade-mark.
(b) produced in the country in which the goods being valued were produced; and
(c) produced by the same person who produced the goods or where no such goods are
available, then goods produced by a different manufacturer.
However, similar goods do 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.

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7. An India company imported certain consumer goods from abroad with MRP printed in
packing cartons. In respect of similar goods manufactured in India, excise duty is payable
on basis of MRP. The importer will be using the goods for further processing. Customs
authorities contend that CVD will be calculated based on MRP printed in the goods, to this
proper? Will your answer be different, if the goods are imported for retail sales?
Ans. Where excise duty is payable on the basis of MRP, CVD on import of that goods is
also computed on the basis of MRP. However, DGFT vide Circular No. 38 (RE-2000)/1997-
2002, dated 22-1-2001 clarifies that this is applicable only to imports of those
prepackaged commodities which are intended for retail sale. Where imported raw
materials, components, bulk imports, etc. would invariably undergo further processing or
assembly before they are sold to consumers, these imports shall not be covered under
MRP based duty computation.
8. Briefly discuss about the Deductive value method for customs valuation.
Ans. Deductive Value [Rule 7] - Where the goods being valued or identical or similar
imported goods are sold in India at or about the time of determination of value, then the
value of imported goods shall be based on the unit price at which such goods are sold in
the greatest aggregate quantity to the unrelated person in India as reduced by —
(a) the commission usually paid or payable or the additions usually made for profits and
general expenses for sales in India;
(b) the cost of transport and insurance and other cost incurred within India;
(c) the customs duty and other taxes payable in India by reason of importation or sale of
the goods.
Notes:
 Where such goods are not sold at or about the same time of importation of the goods
being valued, then the value of imported goods shall 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.
 Where such goods are sold in India after further processing, then the value shall be
based on the unit price at which the imported goods after processing are sold in the
greatest aggregate quantity to unrelated person in India as reduced by processing and
other cost (as referred above) incurred in India.
9. What are the methods of valuation of customs duty? Is it mandatory that they should be
applied sequentially?
Ans. Methods to be followed (in hierarchal order) for determination of price of imported
goods —
a. Primary Method: Transaction value [Rule 3]
b. Secondary Method:
 Transaction value of identical goods [Rule 4]
 Transaction value of similar goods [Rule 5]
 Deductive value [Rule 7]
 Computed value [Rule 8]
 Residual method [Rule 9]
However, at the request of the importer, and with the approval of the proper officer, the
order of application of Rules 7 and 8 shall be reversed.
10. Mr. Ram, the assessee, has purchased goods from Mr. Rahim, on high sea Sales basis.
Mr. Rahim has imported the same from Mr. Antony of Malaysia for an invoice value of
10,000 USD. Mr. Rahim has charged the assessee for 11,000 USD. The assessee contends
that while arriving at the assessable value of customs, the price charged by the foreign
supplier to Mr. Rahim should be taken as the basis. Is the same correct?
Ans. Customs duty is payable as a percentage of value. Primarily, Transaction value shall
be considered as assessable vale. Hence, contention of the Mr. Ram is incorrect. Further,
in this regard, it is to be noted that in Godavari Fertilizers -vs.- CC, it was held that in case
of high sea sale, price charged by the importer to assessee would form the assessable
value and invoice issued by the foreign supplier is not relevant.
11. Discuss the includibility or otherwise to the assessable value the Customs Act, 1962
of the following payments made by an importer to the overseas supplier of a second hand
Plant in India: (i) Dismantling charges for removing the second hand Plant at the supplier's
place and shipping to the Indian importer. (ii) Fees for supervision of erection and
commissioning of plant in India. For this purpose the Foreign Supplier deputed their
technicians in India.
Ans.

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(i) A payments actually made or payable by the importer in connection with the import of
goods, to the extent not included in the price of the goods are to be included. In the
give case payment of dismantling charges is certainly incidental and essential for
import of machine. Therefore, it is to be included in the assessable value. The same
view has been held by the Apex Court in Bombay Dyeing & Manufacturing Co. Ltd.
(ii) The activity of erection an commissioning is post import activity and thus, any amount
of supervision for the same are not includible in the assessable value. It is also to be
noted that such cost is not included in price of the plant at the time of importation into
India.
12. Discuss the importance of noting of bill of entry vis-à-vis rate of customs duty
applicable for import of goods, under the Customs Act; (ii) An Indian resident visiting
Germany brought following goods while returning to India (a) his personal effects like
cloth etc. valued at X 25,000; (b) one litre of liquor of Rs. 1,600; (c) new camera of
122,800. What is the customs duty payable?
Ans.
(i) Noting of bill of entry - When a bill of entry is presented by the importer or CHA, then it
is cross-checked by the noter with the 'Import Manifest' submitted by the person-in-
charge of the carrier. Noter compare the details in the manifest with that declared in the
bill of entry and documents attached with it. If description tallied, then- noter shall record
the name of importer/CHA by 'noting and give a number (known as Thoka number). On the
other hand, if there are any differences, then the bill of entry is returned for clarification.
In case of computerised system, noter will allot the serial number and date as generated
by the computer.
(ii) No duty is payable on his personal effects.
If the person returns after staying abroad for more than 3 days, General Free Allowance of
Rs. 25000 is available. In the instant case, his baggage does not include excess baggage.
Thus, no customs duty is payable by him.
13. State purpose of B-2 and B-4 bond.
Ans.. B-2 - Bond B-2 is a surety/security bond for provisional assessment. B-4 - A security
bond for provisional release of seized goods.
14. State purpose and use of 'Yellow Bill of Entry".
Ans. Yellow Bill of Entry is for warehousing. It is also termed as 'into bond Bill of Entry' as
bond is executed. This has to be filed when the importer does not want to pay duty
immediately but prefers to keep the goods in a warehouse and pay the duty subsequently
and clear the goods for home consumption. Green Bill of Entry is required to be filed for
clearance "from warehouse on payment of customs duty.
15. Briefly discuss about EDI system of assessment under the Customs Act.
Ans. In the EDI System, the Bill of Entry is to be filed through the Service Center by the
Importer/CHA, who has to submit the signed declaration in a prescribed format along with
copy of Invoice and Packing List if filed through Service Centre. The document can also
be filed through the Remote EDI System. After the data entry at the service center, a
"Check List" is generated which is to be verified by the Importer/CHA and corrected in
case any error is detected and the signed "Check List" is to be submitted in the Service
Center. In case of RES, the system validates the data and if errors are found, a message is
sent back to the party. If the data passes the check, system accepts the data and an ac-
knowledgment is sent to the Importer/CHA.
The Bill of Entry then appears in the screen of the respective Group Appraiser. The Group
Appraiser then assesses the Bill of Entry on the system and marks it to the Audit
Appraiser. After the Audit is complete, the Bill of Entry appears in the screen of the
concerned Group Assistant Commissioner. After the assessment is approved by the Asstt.
Commissioner concerned, TR-6 is printed at the Service Center for payment of duty. The
Examination Order is also printed along with the TR-6 Challan.
If the Appraiser does not agree with the importer regarding tariff classifica-
tion/notification/declared value etc., he can raise a query in this regard. The Importer/CHA
has to enquire at the Service Center whether there is any query in respect of their Bill of
Entry and should reply to the same through the Service Center if there is any.
The duty is to be paid through the designated bank.
After payment of the Duty, the Bank enters the same into the system at a terminal at their
end. Then the Bill of Entry appears on the screen of the Appraiser (Docks). The
Importer/CHA should present a copy of the B/E alongwith duty paid challan and other
documents including invoice, packing list etc. at the time of examination of the goods.

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The Shed Appraiser shall examine the goods and enter the examination report in the
system. After the examination of the goods is complete, the Appraiser (Docks) would give
the "Out of Charge" order on the system. Thereafter, the system will print two copies of
Bill of Entry for the importer and the Exchange Control Copies. In case of any discrepancy
found in the docks with respect to the goods, the same is reported to the respective
Group through the system with the comments of the Dock Officers. On the basis of the
examination report and the comments of the dock officers, the Group may revise the
assessment or may raise a query.
16. Briefly explain the procedure for assessment and clearance of imported goods through
a customs sea port under the Customs Act, 1962.
Ans.. Procedure for import Clearance
Arrival of vessel and aircrafts in India [Sec. 29] - The person-in-charge of a vessel or an
aircraft entering India from any, place outside India shall call or land only at customs port
or a customs airport.
However, vessel or aircraft compelled by accident, stress of weather or other unavoidable
cause shall call or land at a place other, than a customs port or a customs airport, in such
case, person-in-charge of such vessel or aircraft shall immediately report to the nearest
customs officer or the officer-in-charge of a police station. The person-in-charge should
not allow any unloading of goods and passengers to leave the vicinity of vessels unless
due to health, safety or preservation of life or property.
Delivery of Import Manifest or Import Report [Sec. 30] - Person in charge of a vessel or an
aircraft or a vehicle or agent thereof shall deliver -
In case of Document required to be delivered to Time limit for such delivery
proper officer
Vessel Import manifest in duplicate in the form Prior to arrival of such vessel
prescribed under Import Manifest (Vessels)
Regulation, 1971
Aircraft Import manifest in duplicate in the form Prior to arrival of such aircraft
prescribed under Import Manifest (Aircraft)
Regulation, 1976
Vehicle Import report in duplicate in the form Within 12 hours after arrival in
prescribed under Import Report (Form) the customs station
Regulation, 1976
Notes:
1. Manifest [also known as Import General Manifest (IGM)] means list of all cargo carried
on by such conveyance. Such list contains information about -
 The goods are required to be unloaded at the port;
 Unaccompanied baggage;
 Stores;
 Goods to be transshipped;
 Goods to be transshipped.
2. Further, it should separately mention about -
 Arms and ammunition;
 Explosives;
 Narcotics;
 Dangerous drugs;
 Gold and silver.
3. The person delivering the import manifest or the import report shall at the foot thereof
make and subscribe to a declaration as to the truth of its contents.
4. If there was no fraudulent intention, then the proper officer may permit to amend the
import manifest or report;
5. If the import manifest or the import report is not delivered without any sufficient cause
for delay, then the person-in-charge or such agent shall be liable to a penalty not
exceeding Rs. 50,000.
Imported goods not to be unloaded from vessel until entry inwards granted [Sec. 31];
1. When-
(a) All documents relating to entry like arrival report, import manifest, have been received
and proper officer found them appropriate; and
(b) Berth is available at wharf; then proper officer shall allot Rotation Number (known as
IGM No.) and grant entry inward.

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2. On granting entry inward, the master of the vessel shall be permitted to unload (i.e.
break-bulk) any imported goods.
3. However, entry inwards shall not be granted until -
 An import manifest has been delivered or
 The proper officer is satisfied that there was sufficient cause for not delivering import
manifest.
Notes:
a) The date of entry inwards is relevant for determining rate of duty.
b) The requirement of entry inwards does not apply on unloading of
(i) baggage accompanying a passenger;
(ii) baggage accompanying the member of the crew;
(iii) mail bags;
(iv) animals;
(v) perishable goods; and
(vi) hazardous goods.
Imported goods not to be unloaded unless mentioned in Import Manifest or Import Report
[Sec.32] - Imported goods shall not be permitted to be unloaded unless such goods are
mentioned in the import manifest or report. However, proper officer may grant permission
for unloading such goods.
Unloading and loading of goods at approved places only [Sec. 33] - Imported goods shall
be unloaded or export goods shall be loaded at landing places specified u/s 8(a). However,
proper officer may allow loading and unloading of cargo at any other place.
Goods not to be unloaded or loaded except under supervision of customs officer [Sec. 34]
- Imported goods shall be unloaded or export goods shall be loaded under the supervision
of proper officer. However, in the following circumstances, goods may be loaded or
unloaded without the supervision of proper officer -
a) When the Board has granted general permission regarding such goods or any class of
goods;
b) When the proper officer has granted special permission in any particular case.
Restriction on unloading and loading of goods on holidays [Sec. 36] - Imported goods shall
not be unloaded or export goods shall not be loaded on any conveyance -
a) on any Sunday or on any holiday observed by the customs department; or
b) on any day after the working hours.
However, loading or unloading is possible on that day or at that time after giving the
prescribed notice and on payment of the prescribed fees.
Note - Fees shall not be levied for the unloading or loading of baggage accompanying a
passenger or the member of the crew and mail bags. Power to board conveyances [Sec.
37] - The proper officer may board any conveyance carrying imported goods or export
goods at any time. He may remain on such conveyance for such period as he consider
necessary. Bill of entry [Sec. 46]:
1. The importer of any goods (other than goods intended for transit or transshipment)
shall present a bill of entry for home consumption or warehousing in the prescribed
form to the proper officer.
2. Where the importer makes and subscribes to a declaration before the proper officer
that he is unable for want of full information to furnish all the particulars in the bill of
entry, then the proper officer may permit him -
(a) To examine the goods in the presence of an officer of the customs;
(b) To deposit the goods in a public warehouse without warehousing the same,
3. A bill of entry shall include all the goods mentioned in the bill of lading or airway bill or
railway receipt or roadway bill, giving by the carrier to the consignor.
4. The importer shall, at the foot of bill of entry, make and subscribe to a declaration as
to the truth of the contents of such bill of entry. He shall (in support of such
declaration) produce to the proper officer the invoice relating to the imported goods.
5. Types of bill of entry - Bill of entry may be of following types -
a) Bill of entry for home consumption or White bill of entry - This type of bill of entry is,
filed when importer intended to remove the goods from customs area for
consumption or use in India.
b) Bill of entry for warehouse or Into-bond bill of entry or Yellow bill of entry - This
type of bill of entry is filed when importer intended to warehouse the goods.

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c) Bill of entry for ex-bond clearance or Green bill of entry - This type of bill of entry is
filed when importer intended to remove the goods from warehouse for
consumption or use in India.
6. Copy of bill of entry required to be submitted - Bill of entry shall be submitted in
quadruplicate -
 Original for custom department for assessment and collection of duty;
 Duplicate for custodian of the cargo for release of cargo to the importer;
 Triplicate for record of importer; and
 Quadruplicate for bank for making remittance.
7. Contents of bill of entry - Filling of bill of entry requires information about following -
 Importers Name, Address and BIN (Business Identification Number);
 CHA (Customs House Agent) Name, Address, Licence No. and Code No.
 Vessels name;
 Port of shipment;
 Country of origin;
 Country of consignment;
 Bill of lading No. and date;
 Rotation No. and Date;
 Line No.;
 Number and description of package;
 Quantity of goods;
 Description of goods;
 Customs tariff heading;
 Exemption notification no. and date (if any);
 Nature of duty;
 Assessable value;
 Rate of duty (Basic, Auxiliary, etc.);
 Amount of duty.
Rotation number is a number allotted by the customs department to the person in charge
of the conveyance after examining and recoding the manifest. "Line number is the serial
number of the goods in the manifest.
8. Documents to be attached with bill of entry - Following documents are required to be
submitted along with bill of entry -
 Invoice;
 Packing list;
 Bill of lading or Delivery order/Airway Bill;
 GATT declaration form duly filled in;
 Importers/CHA's declaration;
 License (wherever necessary)
 Letter of credit/Bank draft (wherever necessary);
 Insurance documents;
 Import license;
 Industrial license (if required);
 Test report in case of chemicals; -
 Adhoc exemption order;
 Certificate of country of origin, if preferential rate of duty is claimed;
 Catalogue or Technical literature;
 Separately split up value of spares, components machineries;
 No commission declaration;
 Indent.
9. Time for presenting bill of entry - A bill of entry shall be presented at any time after the
delivery of the import manifest or import report.
A bill of entry may be presented even before the delivery of manifest if the vessel or
aircraft by which the goods have been shipped for importation into India is expected to
arrive within 30 days from the date of such presentation.
Duty on such goods shall be determined at the rate in force on the date of presenting bill
of entry, hence the date of presenting bill of entry is very important. Further, it is to be
noted that if bill of entry has been presented before the date of —
 entry inwards of the vessel; or
 arrival of the aircraft,

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the bill of entry shall be deemed to be presented on the date of such entry inwards or the
arrival, as the case may be.
10. If the proper officer is satisfied that -
a) the interests of revenue are not prejudicially affected; and
b) there was no fraudulent intention,
He may permit substitution of a bill of entry for home consumption for a bill of entry for
warehousing or vice versa.
Noting of bill of entry - When a bill of entry is presented by the importer or CHA, then it is
cross-checked by the noter with the 'Import Manifest' submitted by the person-in-charge
of the carrier. Noter compare the details in the manifest with that declared in the bill of
entry and documents attached with it. If description tallied, then noter shall record the
name of importer/CHA by 'noting' and give a number (known as Thoka number). On the
other hand, if there are any differences, then the bill of entry is returned for clarification.
In case of computerised system, the presentation shall be done at TOG and noter will allot
the serial number and date as generated by the computer.
Assessment - After noting, the bill of entry shall be sent to the Appraising department for
assessment. While assessment, appraising department has to -
a) Classify the goods;
b) Value the goods;
c) Decide applicable rate of duty; and
d) Verify that goods are not imported in violation of any law.
There are two procedure of assessment -
 First-check procedure i.e. Assessment after examination.
 Second-check procedure i.e. Assessment on the basis of documents.
Assessment after examination (First Check Appraisement) [Sec.17(2)]:
 Imported goods shall be examined and tested by the proper officer.
 Where the proper officer requires any contract, broker's note, policy of insurance,
catalogue or other documents and information, then importer shall produce such
documents and information.
 After such examination and testing, the duty on such goods shall be assessed.
Assessment on the basis of documents (Second Check Appraisement) [Sec.17(4)] -
Proper officer makes an assessment on the basis of statement made in the bill of entry
and other documents and information i.e. more rely is given on importer. However, proper
officer may examine and test the goods after assessment. Re-assessment - On
examination or testing of goods, when it is found that any statement in such entry or
document or information is not true, then the goods may be re-assessed to duty.
Approval of assessment - When appraiser finishes the assessment, then Assistant
Commissioner approves such value. After such approval, the duty payable is typed by a
'pin-point typewriter1 so that it cannot be tempered with. Further, the Assessing Officer
should sign in full in bill of entry followed by his name. Note - There is no time limit for
completion of assessment. Payment of Customs Duty - After assessment, bill of entry is
returned to the importer for payment of duty. Importer is required to pay duty within a
period of 5 days (excluding holidays) from the date on which the bill of entry is returned to
him. It can be paid in cash/DD through TR-6 challans or through Provisional Duty (PD)
Account. If the goods are assessed under first check method, then collection department
gives 'out of charge' order and return 3 copies of bill of entry interest on late payment -
Where importer fails to pay duty within 5 days then he shall be liable to pay interest @ 13%
on such duty till the date of payment. However, the Board may waive the whole or part of
such interest.
Clearance of goods [Sec. 47] - After payment of duty, if goods are already examined,
delivery of goods shall be taken from port trust (i.e. custodian) after paying their dues. On
the other hand, if goods are not examined, bill of entry shall be submitted to the
examination staff. After examination, shed appraiser gives 'out of charge' order and then
delivery shall be taken from custodian.
Procedure in case of goods not cleared within 30 days after unloading [Sec. 48] - If any
imported goods are not cleared for home consumption or warehoused or transshipped
within 30 days from the date of unloading thereof at a customs station (or within time
extended by the proper officer), then such goods may be sold by the custodian. However,
custodian shall sell such goods after -
1. giving notice to the importer; and
2. getting permission from the proper officer.

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Note:
a) With the permission of the proper officer, animals, perishable goods and hazardous
goods may be sold at any time.
b) Arms and ammunition may be sold at such time and place and in such manner as the
Central Government may direct.
17. What do you understand by transit and transhipment of goods? Under what conditions
do they enjoy exemptions from duty under the Customs Act, 1962?
Ans. Goods in transit and transshipment of goods - All goods carried on by a conveyance
may not have same destination. Such goods have different destination at different ports of
India or any foreign port(s). In this case there are two possibilities -
Transit - The goods will continue to be carried by that conveyance and delivered at
different port.
Transshipment- Such conveyance shall unload the goods at the particular port and
thereafter the goods shall be loaded on and carried on by different conveyance for its
destination.
Special provisions regarding goods in transit and transhipment of goods Non-applicability
of special provision [Sec. 52] - Special provision regarding transit and transhipment of
goods shall not be applicable to -
(a) Baggage;(b)Goods imported by post and (c) Stores.
Transit of certain goods without payment of duty [Sec. 53] - Any goods imported in a
conveyance and mentioned in the import manifest or the import report as for transit in the
same conveyance to any place outside India or any custom station may be allowed to be
so transited without payment of duty.
Transshipment of certain goods without payment of duty [Sec. 54] –
(a) Where any goods imported into a custom station are intended for transshipment, a bill
of transshipment shall be presented to the proper officer in the prescribed form.
Note: Where the goods are being transshipped under an international treaty or bilateral
agreement between the Government of India and Government of a foreign country, a
declaration for transshipment (instead of a bill of transshipment) shall be presented to the
proper officer in the prescribed form,
(b) Where any goods imported into a customs station are mentioned in the import manifest
or the import report as for transshipment to any place outside India or any custom station
in India, then such goods may be allowed to be so transshipped (subject to such
conditions as may be prescribed for the due arrival of such goods at the customs station
to which transshipment is allowed) without payment of duty.
Liability of duty on goods transited or transshipped [Sec. 55] -Where any goods are
allowed to be transited or transshipped to any custom station, then on their arrival at
such station, they shall be liable to duty. Such goods shall be entered in like manner as
goods are entered on the first importation thereof and the provisions of this Act and rules
and regulations shall apply in relation to such goods.
Transport of goods [Sec. 56] - Imported goods may be transported without payment of
duty from one land customs station to another. Goods may also be transported from one
part of India to another part through any foreign territory subject to such conditions as
may be prescribed for the due arrival of such goods at the place of destination.
18. Briefly discuss the aspects relating to self assessment by an importer on the basis of
'Risk Management System'. State the categories of eligible and ineligible persons who can
make use of this scheme.
Ans. The ever increasing volumes and complexity of international trade and the
deteriorating global security scenario present formidable challenges to Customs. The
exponential growth in trade volumes means that the traditional approach of scrutinizing
every document and examining every consignment will simply not work, as it would
neither be desirable nor possible to constantly increase the resources with the increasing
workload. Also, there is a need to reduce the dwell-time of cargo at the ports and airports
and to reduce the transaction costs in order to enhance the competitiveness of Indian
businesses, by expediting release of cargo where compliance is high. This necessitates
that the department should be selective in its approach to deployment of its resources.
The advances in Information Technology offer an opportunity to address these challenges
faced by the department by putting in place an effective risk management system. The
primary objective of the Risk Management System, therefore, is to strike an optimal

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balance between facilitation and enforcement and to promote a culture of compliance. It
is intended to improve the management of the resources of the department to enhance
the efficiency and effectiveness in meeting stake-holder expectations and to bring the
Customs processes at par with the bills international practices.
With the introduction of the RMS, the present practice of routine assessment concurrent
audit and examination of almost all Bills of Entry will be discontinue and the focus will be
on quality assessment, examination and Post Clearance Audit of Bills of Entry selected by
the Risk Management System. Bills of Entry and IGMs filed electronically into ICES
through the Service Centre or the ICEGATE will be transmitted by ICES to the RMS. The
RMS will process the data through a series of steps and produce an electronic output for
the ICES. This output will determine whether the Bill of Entry will be taken-up for action
(appraisement or examination or both) or be cleared, after payment of duty and Out of
Charge directly, without any assessment and examination. Also when necessary, RMS will
provide instructions for Appraising Officer, Examining Officer or the Out-of-Charge Officer.
It needs to be noted that the decisions communicated by the RMS on the need for
assessment and/or examination and the appraising and examination instructions
communicated by the RMS have be followed by the field formations. It is possible that in a
few cases, the field formations might decide to apply a particular treatment to the BE
which is at variance with the decision received from the RMS owing to risks which are not
factored in the RMS. Such a course of action shall however be taken only with the prior
approval of the jurisdictional Commissioner of Customs or an officer authorized by him for
this purpose, who shall not be below the rank of Addl./Joint Commissioner of Customs,
and after recording the reasons for the same. A brief remark on the reasons and the
particulars of Commissioner's authorization should be made by the officer examining the
goods in the departmental comments in the EDI system.
The existing system of concurrent audit shall be abolished and replaced by a Post-
Clearance Compliance Verification (Audit) function. The objective of the Post Clearance
Verification Programme is to monitor, maintain and enhance compliance levels, while
reducing the dwell time of cargo. The RMS will select the bills of entry for audit, after
clearance of the goods, and these selected bills of entry will be directed to the audit
officers for scrutiny by the EDI system. In case any possible short levies are noticed, the
officers will issue a Consultative Letter setting out the grounds for their view to the
Importers/CHAs. This is intended to give the importers an opportunity to voluntarily
comply and pay the duty difference if they agree with the department's point of view. In
case there is no agreement, the formal processes of demand notices, adjudication etc.
would follow. It may also be noted that the auditors are specifically being instructed to
scrutinize declarations with reference to data quality and advise the importers/CHAs
suitably where the quality of their declarations is found deficient. Such advice is expected
to be followed and will be monitored by the local risk managers. It hardly needs emphasis
that compliance in all its dimensions is in the mutual interest of the Government and the
Trade and Industry and it will enable the government of give increasing levels of
facilitation. The Importers/CHAs are urged to co-operate in the department's efforts in this
direction.
The national management of the Risk Management System shall be the responsibility of
the Risk Management Division, being established under the Directorate General of
Systems. There will be a local Risk Management System catering to the needs of the
Custom Houses. The local Risk Management System will carry out the live processing of
the Bills of Entry, and Import General Manifests etc. The Commissioners of Customs are
required to appoint the administrator for the 'Local Risk Management System' at the level
of the Joint/Additional Commissioner for assigning user privileges on the Local Risk
Management System. The implementation of RMS will necessitate reorganization of staff.
Custom Houses are required to undertake a comprehensive re-organization of the officers
deployed for processing Bills of Entry. The present appraising facilities should be right-
sized in tune with the reduced quantum of Bills of entry coming for assessment. Such staff
should be diverted to the Post Clearance Audit. The strength of the staff for examination
of cargo would also be required to be readjusted.
The existing facilitation schemes viz., the Self-assessment scheme, Fast track/green
channel scheme. Accelerated customs clearance schemes etc., would be phased out with
the implementation of the RMS and the Accredited Clients Programme. As the deployment
of the RMS is likely to take place in phased manner across the ICES locations, the

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existing facilitation schemes will continue to be operative in each Customs station until
the operationalisation of the RMS at that station.
19. Can an importer, exporter or 'person in charge' amend the documents submitted to
customs authorities? If yes, from what date is the amendment effective?
Ans. As per Sec.149 of the Customs Act, the proper officer may, in his discretion,
authorise any document, after it has been presented in the custom house to be amended.
However, amendment of a bill of entry or a shipping bill or bill of export shall not be
authorised after the imported goods have been cleared for home consumption or
deposited in a warehouse, or the export goods have been exported, except on the basis of
documentary evidence which was in existence at the time the goods were cleared,
deposited or exported, as the case may be.
20. What is the "taxable event" in the case of export of goods under customs law? Is
export duty payable in case of applicable goods where ship travels 40 nautical miles from
Indian port and the title passes to the buyer, but the ship returns to India because of
engine trouble? What is the relevant date for export duty?
Ans. In case of exports, taxable event occurs when goods cross territorial waters of India
– UOI vs. Rajindra Dyeing and Printing Mills 2005 (180) ELT 433 (SC). In Sun Industries -vs.-
Collector of Customs, Kolkata 1988(35) ELI 241 (SC), wherein the Supreme Court has held
that export is complete on loading after clearance. It is further held that off-loading of
goods at foreign port is not art essential requirement for export to take place.
Date for determination of rate of duty and tariff valuation of export goods [Sec. 16]: The
rate of duty and tariff valuation (if any) applicable to any export goods (other than
baggage and goods exported by post), shall be rate and valuation in force –
Case Rate and Value in force on
When goods entered for Date on which the proper officer makes an order permitting
export u/s 50 clearance and loading of the goods for exportation u/s 51
in any other case Date on which duty is paid
21. What is "Interest-free period" in respect of warehoused goods under the Customs Act,
1962? Is interest payable when warehoused goods are exempt from duty on the date of
clearance?
Ans. Any warehoused goods may be left in the warehouse without paying interest upto
following time period, -
(a) in the case of capital goods intended for use in any 100% export oriented undertaking,
till the expiry of 5 years;
(b) in the case of goods other than capital goods intended for use in any 100% export-
oriented undertaking, till the expiry of 3 years; and
(c) in the case of any other goods, till the expiry of 90 days,
Interest @ 15% is payable on duty liability at the time of clearance. However, no
interest is payable when warehoused goods are exempt from duty on the date of
clearance.
22. Explain how DEPB scheme helps in making exported products tax free.
Ans. The objective of Duty Entitlement Pass Book (DEPB) Scheme is to neutralise the
incidence of Customs duty on the import content of the export product. The neutralisation
shall be provided by way of grant of duty credit against the export product.
Under the Duty Entitlement Pass Book (DEPB) scheme, an exporter may apply for credit,
as a specified percentage of FOB value of exports, made in freely convertible currency or
the payment made from the Foreign Currency Account of the SEZ unit in case of supply by
DTA to SEZ unit. The credit shall be available against such export products and at such
rates as may be specified by the Director General of Foreign Trade by way of public notice
issued in this behalf, for import of raw materials, intermediates, components, plans,
packaging material etc. The credit may also be utilized for payment of Customs Duty on
any item which is freely importable. The holder of Duty Entitlement Pass Book (DEPB)
Scheme shall have the option to pay additional customs duty, if any, in cash as well. The
Duty Entitlement Pass Book (DEPB) Scheme and/or the items imported against it are freely
transferable. The transfer of Duty Entitlement Pass Book (DEPB) Scheme shall however be
for import at the port specified in the Duty Entitlement Pass Book (DEPB) Scheme, which
shall be the port from where exports have been made. Imports from a port other than the
port of export shall be allowed under TRA facility as per the terms and conditions of the
notification issued by Department of Revenue.

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23. Mention briefly any five illustrative cases under the Customs, Central Excise Duties
and Serviced Tax Drawback Rules, 1995, where all the industry Drawback rates will not
apply.
Ans. In the following cases All Industry Drawback Rules are not applicable:
a. Goods manufactured in customs bonded warehouse;
b. Goods manufactured against Advance Licence;'
c. Goods manufactured or exported under DEPB Scheme;
d. Exports by 100% EOU or a unit located in SEZ
e. Goods exported against excise rebate as per Rule 18 of the Central Excise Rules.
24. Briefly explain the provisions under the Customs Act relating to import through
courier.
Ans. Special provisions regarding goods imported or exported by post Label or
declaration accompanying goods to be treated as entry [Sec. 82] -Any label or declaration
(containing description, quantity and value thereof) accompanying the goods shall be
deemed to be an entry for import or export.
Rate of duty and tariff valuation [Sec. 83]
In case of import - The rate of duty and tariff value (if any) applicable to any goods
imported by post shall be the rate and valuation in force on the date on which the postal
authorities present to the proper officer a list containing the particulars of such goods for
the purpose of assessing the duty thereon.
Note - Where such goods are imported by a vessel and the list of the goods was presented
before the date of the arrival of such vessel, then it shall be deemed to have been
presented on the date of such arrival.
In case of export - The rate of duty and tariff value (if any) applicable to goods exported by
post shall be the rate and valuation in force on the date on which the exporter delivers
such goods to the postal authorities for exportation.
Regulation regarding goods imported or exported by post [Sec. 84] - The Board may make
regulations providing for -
a) Where goods are not accompanied by a label or declaration, the form and manner in
which an entry may be made;
b) The examination, assessment to duty & clearance of goods imported or exported by
post;
c) The transit or transshipment of goods imported by post from one customs station to
another or to a place outside India.
25. Mr. A., a person holding Indian passport, brings 1 kg gold, out of which Rs. 3,60,000
are in form of biscuits and balance of Rs. 40,000 in form of gold jewellery which he was
using abroad (valued at international rates). What is the duty payable if (i) the person is
returning after 3 months stay; (ii) the person is returning after 9 months stay abroad and
the gold belongs to him; (iii) the person is returning after 8 months stay abroad and the
gold belongs to his friend, who has given it only for carrying to India, (iv) He is returning
after 18 months stay abroad (ignore difference due to minor impurities in jewellery).
Ans. Any passenger of Indian Origin or a passenger holding a valid passport, issued under
the Passport Act, 1967, who is coming to India after a period of not less than 6 months of
stay abroad; and short visits, if any, made by the passenger during the aforesaid period of
6 months shall be ignored if the total duration of stay on such visits does not exceed 30
days.
Other Conditions to be satisfied:
 The duty shall be paid in convertible foreign currency.
 The weight of gold (including ornaments) should not exceed 10 kgs. per passenger.
 The passenger should not have brought gold or other ornaments during an of his visits
(short visits) in the last 6 months i.e. he has not availed 0 the exemption under this
scheme, at the time of short visits.
 Ornaments studded with stones and pearls are not allowed to be imported.
 The passenger can either bring the gold himself at the time of arrival or import the
same within 15 days of his arrival in India as unaccompanied baggage.
 The passenger can also obtain the permitted quantity of gold from Customs bonded
warehouse of State Bank of India and Metals' and Mineral Trading Corporation subject
to conditions (i) and (ii) above. He is required to file a declaration in the prescribed
Form before the Customs Officer at the time of arrival in India stating his intention to
obtain the gold from the Customs bonded warehouse and pay the duty before
clearance.

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Rate of Duty
1. Gold bars, other than tola bars, bearing manufacturers or Rs.200 per10 gms.
refiners engraved serial number and weight expressed in + 3% Edu. Cess
metric units and gold coins
2. Gold in any form other than at SI.No. 1 above including tola Rs. 500 per 10
bars and ornaments, but excluding ornaments studded with gms. + 3% Edu.
stones or pearls Cess
26. The Jewellery which is in addition to the jewellery otherwise allowed without payment
of duty, only is liable to payment of duty under the above mentioned scheme of import of
gold.
What is the effective rate of customs duty on baggage?
Ans. The effective rate of customs duty on baggage is 35%. However, such duty is further
increased by education cess and SHEC @ 2% and 1% of duty respectively. It is to be noted
that CVD is not applicable.
27. Can gold be brought into India? What is the customs duty payable thereon? Can such
gold be subsequently sold in India?
Ans. Gold can be brought into India after paying customs duty (+ education cess and
SHEC) at the following rate:
Gold bars, other titan tola bars, bearing Manufacturer's or Rs.200 per 10gms.
refiner's engraved serial number and weight expressed in metric
units, and old coins
Gold in any other form including liquid gold and tola bars Rs.500 per 10 gms.
Notes:
a. 'Gold in any form' shall include medallions and coins, but shall not include jewellery
made of gold or silver, as the case may be, and foreign currency coins.
b. Duty is required to be paid in convertible foreign exchange.
c. The gold can be sold in India, provided that payment for the same is obtained by cheque
in Indian Rupees.
28. Briefly explain the provision in respect of "burden of poof in respect of goods covered
under Section 123 of Customs Act, 1962. List at least four articles which are covered
under these provisions.
Ans. As per Sec. 123, where any specified goods are seized in the reasonable belief that
they are smuggled goods, the burden of proving that they are not smuggled goods shall be
—
(a) in a case where such seizure is made from the possession of any person,
(i) on the person from whose possession the goods were seized; and
(ii) if any person, other than the person from whose possession the goods were seized,
claims to be the owner thereof, also on such other person;
(b) in any other case, on the person, if any, who claims to be the owner of the goods so
seized.
This section shall apply to gold, and manufactures thereof, watches, synthetic yarn,
metallic yarn, zip fasteners, silver bullion and any other specified goods by the Central
Government.
29. Who can file refund claims under the Customs act?
Ans. Generally, refund is claimed by the importer. However, if the incidence of the duty is
borne by the buyer of the imported goods, the buyer can file claim for the refund.
30. Ability to pay is one of the most important Cannons of Taxation.
Ans. The noted 18th Century English economist, Adam Smith, had enunciated the Cannons
of Taxation in his celebrated work, An Inquiry into the Nature and Causes of the Wealth of
Nations, which was popularly abbreviated to Wealth of Nations. According to Smith there
are four basic cannons of taxation, which are based on the concepts of equality,
certainty, convenience and economy. The cannon of equality arises from the following
idea, 'The subjects of every state ought to contribute towards the support of the
government as nearly as possible in proportion to their respective abilities that is in
proportion to the revenue which they respectively enjoy under the protection of the state.
This canon embodies the principle of equity or justice and lays down the moral foundation
of the tax system. 'It is not unreasonable that the rich should contribute to the public
expense not only in proportion to their revenue but something more than that proportion.
Smith had written in his Wealth of Nations. Thus, tax should in proportion to the ability to
pay.

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Direct Taxes are based on the principle of equity or ability to pay. The burden of a direct
tax is equitably distributed on different people & institutions as they are progressive in
nature. Which means as income increases the rate of income tax also increases.
Indirect Taxes on necessities, which are. consumed by poor are regressive in nature. The
rich & poor are required to pay the same amount of tax on such commodities like
matchbox, soap, toothpaste, blades etc. but, the burden is heavy on poor than on the rich,
thus they do not satisfy the canon of equity.
31. Is it possible for a Trader to claim refund of special CVD from customs department?
State your views.
Ans. Yes. A dealer who imports goods and sales them in India after paying Vat/sales tax
can claim refund of special CVD [Notification No. 102/2007-Cus dated 14-9-2007].