Know more about Custom Duty

Central Govt. has power of levy from list-I union list of the 7th schedule to constitution.

1)      Classification tariff of excise and customs are based on HSN and principles of classification are identical.
2)      Customs duty is on imports into India and export out of India.
3)      Sec. 12 of customs Act, often called charging section, provides that duties of customs shall be levied at such rates as may be specified under, “The Custom Tariff Act, 1975” (CUTA) or any other law for the time being in force, on goods imported in to, or exported from, India.

Taxable event
1)      In case of imports taxable event occurs when goods mix with landmass of India.
2)      In case of warehoused goods (import) taxes place only when goods are cleared from warehouse.
3)      In case of export taxable event occurs when goods, crosses territorial water of India.
Territorial water extends upto 12 N.M (nautical miles) from the baseline on the coast of India and includes any bay, harbor, creek or tidal river.
Sovereignty of India extends to the territorial waters and to the seabed and subsoil under levy and the air space over the water.
Exclusive economic zone (EEZ) extends to 200N.M from the base line.
Indian custom water extends upto 12NM beyond territorial water this is also called continental zone. (Means 24NM from the base line), where powers of custom officer is executed.
Beyond 200NM the area is high sea where all countries have equal rights.
Goods under custom
1.     Sec 2(22) gives inclusive definition of goods as follows- goods includes vessels, aircrafts and vehicles, stores, baggage, currency and negotiable instruments, and any other kinds of movable property.
2.     The duty is payable on goods belonging to Govt, and Goods not belonging to Govt.
3.     Sec 2(14) Dutiable goods means any goods which are chargeable to duty and which duty has not been paid.
4.     So, goods continue to be dutiable till they are not cleared from the port. However, once goods are assessed at ‘Nil’ rate of duty, they no more remain dutiable goods.
Imported Goods: sec 2(25) of Custom Act defines imported goods as nay goods bought in India from a place outside India.
Exported Goods: Sec 2(19) of Custom Act, export goods mean any goods which are to be taken out of India to a place outside India.
Types of custom duty
Duty %
Total Duty
Assessable value Rs.10,000
Basic Custom Duty
Sub Total [A+B]
CVD [‘C’*Excise Duty Rate]                            Presently
Sub Total [B+D] for education cess on custom
Education cess of custom @2% on E
HSEC of Custom @1% on E
Sub Total for special CVD [C+D+F+G]
Special CVD u/s 3 (5 ) @4%
Total Duty
Total duty round off
Note: Education and HSEC on CVD is exempted w.e.f 17.03.2012
1] Buyer, who is a manufacturer, is eligible to avail cenvat credit of D and I above.
      2] Buyer, who is a service provider, is eligible to avail cenvat credit of D above.    
      3] A trader, who sells imported goods in India after charging VAT/Sales tax get refund of special
         CVD @4% i.e. I.
 Additional custom duty/countervailing duty (CVD) u/s 3(1)
CVD levied u/s 3(1) of CUTA. It is not a duty under the custom Act.
·         This duty is equal to excise duty levied on a like product manufactured or produced in India.
·         If like article is not produced or manufactured in India. Then excise duty would be livable on that article had it been produced in India is the base.
·         CVD can be valued on MRP if goods are under MRP provisions.
·         The duty is livable on value of goods plus custom duty payable.
·         Note: Education and HSEC on CVD is exempted w.e.f 17.03.2012
Additional custom duty u/s 3(5) Special CVD (SAD)
·         CVD cannot exceed 4% of value of that article
·         Purpose of the additional duty u/s 3(5) is to counter balance sales tax, Vat, local tax and other charges leviable on articles on its sale, purchase or transaction in India.
·         It is leviable as to provide level playing field to manufacturers in India who are manufacturing similar goods.
Exemption from SAD or refund of SAD
·         Goods on which excise duty is payable on basis of MRP price
·         Patient and proprietary medicines
·         Readymade garments
·         Passenger baggage
·         Goods exempt from custom duty
·         Project imports
·         Articles of jewellary attracts a lower rate of SAD @1%
Countervailing Duty on Subsidized Goods
     If a country or territory pays any subsidy (directly or indirectly) to its exports for exporting goods in India, central Govt. can impose countervailing duty upto the amount of such subsidy u/s 9 of CUTA
     No education cess or HSEC on subsidized goods
Anti dumping duties on dumped articles
     Often, large manufacturers from abroad may export goods at very low price compared to prices normally prevalent in export market. Such dumping may be with intention to cripple domestic industry. This is called ‘dumping’ and is an unfair trade practice.

     In order to avoid such dumping and to protect domestic industry, central govt. can impose anti dumping duty u/s 9 of CUTA.

     The antidumping duty will be dumping margin or injury margin, whichever is lower.

 Dumping margin means the difference between normal value in the export country and export price (i.e. the price at which these goods are exported)

 Injury margin means difference between fair selling price of domestic industry and landed cost of imported goods.
Dumping margin
Injury margin
Normal value in export country say Rs.11.00
Export price Rs.8.00
Dumping margin = Rs. (11.00-8.00)= Rs.3.00
Landed cost of product say Rs.9.00
Fair selling price of domestic industry is Rs.10.00
Injury margin = Rs(Rs10.00-9.00)= Rs.1.00s
So, anti dumping duty is only Rs.1.00 can be imposed

Safe Guard Duties
*         Central govt. is empowered to impose ‘safe guard duty’ on specified imported goods if central govt. 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.
*        Safeguard duty can be imposed if imports from that country exceeds 3%

Discussed in excise