The levy of custom duty or tax on goods imported into and exported from the country were organised through various laws during the british period. After independence the different allied enactments were repealed by a consolidating and amending legislation entitled the Customs Act, 1962. Customs Act, 1962 just like any other tax law is primarily for the levy and collection of duties but at the same time it has the other and equally important purposes such as:

  • Regulation of imports and exports;
  • Protection of domestic industry;
  • Prevention of smuggling;
  • Conservation and augmentation of foreign exchange and so on.

Section 12 of the Custom Act provides that duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or other applicable Acts on goods imported into or exported from India.

There are four stages in any tax structure, viz., levy, assessment, collection and postponement. The basis of levy of tax is specified in Section 12, charging section of the Customs Act. It identifies the person or properties in respect of which tax or duty is to be levied or charged. Under assessment, the liability for payment of duty is quantified and the last stage is the collection of duty which may be postponed for administrative convenience.

Types of Custom Duty

Custom duties are levied almost universally on all goods imported into the country. Export duties are levied on a few goods as specified under the Second Schedule. Import duties are not levied on a few items including lifesaving drugs, equipments, fertilizers, food grains etc. Import duties are further divided into basic duty, additional customs duty, true countervailing duty, protective duty, education cess and anti-dumping duty or safeguard duty.

Basic Custom Duty
Basic custom duty is applicable on imported items that fall under the ambit of Section 12 of the Customs Act, 1962. These duties are levied at the rates prescribed in First Schedule to Customs Tariff Act, 1975, under the terms specified in Section 2 of the Act. The levied rates may be standard or preferential as per the country of import.

Additional Customs Duty (Countervailing Duty (CVD))
This duty is levied on imported items under Section 3 of Customs Tariff Act, 1975. It is equal to the Central Excise Duty which is levied on similar goods produced within India. This duty is calculated on the aggregate value of goods including BCD and landing charges.

Protective Duty
Protective duty may be imposed to shield the domestic industry against imports at a rate recommended by the Tariff Commissioner.

Education Cess
This duty is levied at 2% and higher education cess at another 1% of aggregate of customs duties.

Anti-dumping Duty
Anti-dumping duty may be imposed if the good being imported is at below fair market price, and is limited to the difference between export and normal price (dumping margin).

Safeguard Duty
Safeguard duty is levied if the government feels that a sudden increase in exports can potentially damage the domestic industry.

If any person/firm/company contravenes the procedure under Customs Act, the Central government takes the following actions against them.

Confiscation of Goods and Conveyances and Imposition of Penalties

Section 111. Confiscation of improperly imported goods, etc

Section 112. Penalty for improper importation of goods, etc.-

Section 113. Confiscation of goods attempted to be improperly exported, etc

Section 114. Penalty for attempt to export goods improperly, etc

Section 115. Confiscation of conveyances

Section 116. Penalty for not accounting for goods

Section 117. Penalties for contravention, etc., not expressly mentioned.

Section 118. Confiscation of packages and their contents

Section 119. Confiscation of goods used for concealing smuggled goods

Section 120. Confiscation of smuggled goods notwithstanding any change in form, etc

Section 121. Confiscation of sale-proceeds of smuggled goods

Adjudication of Confiscations and Penalties

Where anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged, -

  • Without limit, by a Principal Commissioner of Customs or Commissioner of Customs or a Joint Commissioner of Customs;
  • Where the value of the goods liable to confiscation does not exceed five lakh rupees, by an Assistant Commissioner of Customs or Deputy Commissioner of Customs;
  • Where the value of the goods liable to confiscation does not exceed, fifty thousand rupees, by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs or Deputy Commissioner of Customs.

Issue of show cause notice before confiscation of goods, etc. - No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person

  • is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;
  • is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and
  • is given a reasonable opportunity of being heard in the matter :

Application for Settlement of Cases

Any importer, exporter or any other person may, at any stage of a case relating to him make an application in such form and in such manner as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of mis-classification or otherwise of goods, to the Settlement Commission to have the case settled and such application shall be disposed of by the Settlement Commission. However no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court.

Appeals To Commissioner (Appeals)

Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a Commissioner of Customs, may appeal to the Commissioner Appeals within sixty days from the date of communication to him of such decision or order.

Appeals To the Appellate Tribunal 

(1) Any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order

  1. a decision or order passed by the Commissioner of Customs as an adjudicating authority;
  2. an order passed by the Commissioner (Appeals) under section 128A;
  3. an order passed by the Board or the Appellate Commissioner of Customs under Section 128, as it stood immediately before the appointed day;
  4. an order passed by the Board or the Commissioner of Customs, either before or after the appointed day, under section 130, as it stood immediately before that day. Every appeal under this section shall be filed within three months from the date on which the order sought to be appealed against is communicated to the Commissioner of Customs, or as the case may be, the other party preferring the appeal.

Appeal To High Court 

An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law within 180 days from the date on which the order appealed against is received by the Commissioner of Customs or the other party.

Appeal To Supreme Court 

An appeal shall lie to the Supreme Court from

  • any judgment of the High Court delivered
    1. in an appeal made under section 130; or
    2. on a reference made under section 130 by the Appellate Tribunal before the 1st day of July, 2003;
    3. on a reference made under section 130 A. in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgment, the High Court certifies to be a fit one for appeal to the Supreme Court; or
  • any order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment.

We at NN Legal Partners manage all the phases of the litigation which arise out of the disputes comprehensively. We provide end to end solutions to our clients starting from the issuance of show cause notice to the appellate stage up to the Supreme Court. We also support our clients during departmental investigations by Directorate of Revenue Intelligence, the Special Intelligence and Investigative Branch, the Central Intelligence Unit of Customs etc. Our services can vary based on the nature of the dispute. With an outstanding team of competent and experienced lawyers with convincing skills, NN Legal Partners is a one stop solution to all your legal troubles.