Budget 2018 – Proposed Changes in Customs Law

Changes in Budget

♠ Changes in Customs tariff ( Rates)

-Make in India theme

-Reduction in duty on raw materials

-Increase in duty on finished goods

♠ Significant Changes in Legislative Changes in Customs Act, 1962

♠ Changes in Customs tariff Act, 1975

Budgetary Changes

• Customs Duty Rates
  • Customs Tariff: Notification No. 6/2018-Customs to No. 23/2018-Customs all dated 2nd February, 2018
• Central Excise Duty Rates
  • Notification No. 1/2018-CE to No.13/2018-CE all dt 2nd February, 2018
• Provisional Collection of Taxes Act, 1931
  • Above Proposals take effect from the midnight of 1st February I 2nd February, 2018.
• Legislative Changes- Effective w.e.f date when Finance Act will comes into force
  • Customs Act, 1962; Customs Tariff Act, 1975

Social Welfare Surcharge

• Education Cess and H. Ed Cess … removed
• Social Welfare Charge introduced
  • to provide for finance education, health and social security
  • @10% on the aggregate of duties, taxes and cesses which are levied and collected under Section 12 of Customs Act, 1962
  • and any sum chargeable on the goods specified in subsection (1) under any other law for the time being in force,
  • Not levied on ADD/Safeguard Duty/Countervailing duty
• The provisions of the Customs Act, 1962 and the rules and regulations made there under, shall, apply in relation to the levy and collection of the Social Welfare Surcharge as they apply in relation to the levy and collection of duties of customs
• Levy of Social Welfare Surcharge on Integrated Tax and GST Compensation Cess on imported goods
  • fully exempted by Notification No. 13/2018- Customs dated 02.02.2018

CBEC to CBIC

Name of Central Board of Excise and Customs is being changed to Central Board of Indirect Taxes and Customs, with consequential amendments in the following Acts: –

• The Central Boards of Revenue Act, 1963 (54 of 1963)
• The Customs Act, 1962 (52 of 1962)
• The Central Goods and Services Tax Act, 2017 (12 of 2017)

This amendment will be effective from the date of enactment of the Finance Bill 2018.

Section 2(6) of CA, 62 will read as

“Board” means the Central Board of Excise Indirect Taxes and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963)]

Arrival/ Departure Manifest

• Throughout the Customs Act, for the words “import manifest” and “export manifest”, wherever they occur,
  • the words “arrival manifest or import manifest” and “departure manifest or export manifest” shall, respectively, be substituted.
  • Expands the scope of manifest, to include all goods carried by the conveyance, required to be delivered before its arrival and departure.

Section 1

• Scope of Customs Act, 1962
  • Enhanced
  • to include any offence or contravention committed thereunder outside India by any person
• Section 1. Short title, extent and commencement.—

(1) This Act may be called the Customs Act, 1962.

(2) It extends to the whole of India “and, save as otherwise provided in this Act, it applies also to any offence or contravention thereunder committed outside India by any person”

Section 2(2)- New Definition of Assessment

Definition of Assessment – Inclusive to definitive definition

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

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

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

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

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

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

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

Indian Customs Waters

• Limits of Indian Customs Waters Enhanced
• “Indian Customs Waters” means the waters extending into the sea up to the limit of contiguous zone of India under section 5 Exclusive Economic Zone under section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, (80 of 1976)] and includes any bay, gulf, harbour, creek or tidal river;
• The definition now is in tune with the definition of India in GST

Definition of Notification

• A sub-section 30AA on definition of notification inserted in Section 2
• ‘(30AA) “notification” means notification published in the Official Gazette and the expression “notify” with its cognate meaning and grammatical variation shall be construed accordingly;’

Section 11- Prohibitions/Restrictions/Obligations under any other Law

• Section 11(3) inserted
• “(3) Any prohibition or restriction or obligation relating to import or export of any goods or class of goods or clearance thereof provided in any other law for the time being in force, or any rule or regulation made or any order or notification issued thereunder, shall be executed under the provisions of that Act only if such prohibition or restriction or obligation is notified under the provisions of this Act, subject to such exceptions, modifications or adaptations as the Central Government deems fit.”.

This change would come into force from a date to be notified

Amendment of Section 17 (Assessment)

• Scope of verification in assessment enhanced
• Section 17(2)
• (2) The proper officer may verify the self-assessment of such goods “the entries made under section 46 or section 50 and the self-assessment of goods referred to in subsection (1)” and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary.

Legal Backing to RMS (Risk Based Selection)

• Proviso to Section 17(2) inserted:
• “Provided that the selection of cases for verification shall primarily be on the basis of risk evaluation through appropriate selection criteria.”;

Section 17(5)

• Scope of verification and re-assessment broadened; Need for speaking order
• (5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification issued therefor under this Act and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re- assessment in writing, the proper officer shall pass a speaking order on the reassessment, within fifteen days from the date of reassessment of the bill of entry or the shipping bill, as the case may be.

Section 17(6)- PCA/OSPCA

• Section 17 (6): Where re-assessment has not been done or a speaking order has not been passed on re- assessment, the proper officer may audit the assessment of duty of the imported goods or export goods at his office or at the premises of the importer or exporter, as may be expedient, in such manner as may be prescribed.
• The above clause deleted as New chapter dedicated to Audit inserted

Section 18- Provisional Assessment

• Export consignments covered under provisional assessment of duty;
• SECTION 18 . Provisional assessment of duty – (1)
  Notwithstanding anything contained in this Act but without prejudice to the provisions of section 46, and Section 50 ………

Section 18- Time Limit for finalisation of Provisional Assessment

• Rules for time Limits for submission of information by importer/exporter and finalization of provisional assessments
• Section 18(1A) inserted
• “(1A) Where, pursuant to the provisional assessment under sub-section (1), if any document or information is required by the proper officer for final assessment, the importer or exporter, as the case may be, shall submit such document or information within such time, and the proper officer shall finalise the provisional assessment within such time and in such manner, as may be prescribed.’’;

Section 18(3)- Interest on finalisation of Provisional Assessment

• (3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order or re-assessment order under sub-section (2), at the rate fixed by the Central Government under section 28AB 28AA from the first day of the month in which the duty is provisionally assessed till the date of payment thereof.
• The above change to be done retrospectively w.r.t 8th April, 2011; Anomaly rectified – 28AB does not exists in the Customs Act, 1962

SECTION 25. Power to grant exemption from duty

• A new section 25A inserted, so as to empower the Central Government
  • to exempt goods imported for repair, further processing or manufacture [‘Inward Processing of Goods’] from payment of whole or any part of duty of customs, leviable thereon subject to certain conditions.
• A new section 25B is being inserted so as to empower Central Government
  • to exempt goods re-imported after export for repair, further processing or manufacture [‘Outward Processing of Goods’] from payment of whole or any part of duty of customs, leviable thereon subject to certain conditions

Section 28

• Pre-Notice Consultations
• Proviso to Section 28(1)(a) inserted
• “Provided that before issuing notice, the proper officer shall hold pre-notice consultation with the person chargeable with duty or interest in such manner as may be prescribed;”
• Supplementary Show cause Notice
• New sub-section (7A) inserted
• (7A) Save as otherwise provided in clause (a) of sub-section (1) or in sub-section (4), the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed, and the provisions of this section shall apply to such supplementary notice as if it was issued under the said subsection (1) or sub-section (4).”;

Section 28- Time Limit for adjudication

• Definitive Time Limits for adjudication
  • Six months for normal cases and one years for extended period cases
  • “Where it is possible to do so”… deleted
• Section 28 (9) The proper officer shall determine the amount of duty or interest under sub-section (8),-
• (a) within six months from the date of notice, where it is possible to do so, in respect of cases falling under clause (a) of sub- section (1);
• (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4).

Extension of time limit for adjudication

• Provisos added to Section 28(9)
• Adjudication time period extendable by the officer senior to adjudicating authority for a further period of six months and one year respectively in normal cases and extended clause cases
• Deemed Conclusion of Proceedings
• If the demand notice is not adjudicated even within the extended period,
  • such proceeding shall be deemed to have concluded as if no notice had been issued.”

Non possibility of adjudication with in time limit- Relaxation in specified cases

• Section 28(9A) inserted
• Special Cases for relaxation of time limit specified as
• an appeal in a similar matter of the same person or any other person is pending before the Appellate Tribunal or the High Court or the Supreme Court; or
• an interim order of stay has been issued by the Appellate Tribunal or the High Court or the Supreme Court; or
• the Board has, in a similar matter, issued specific direction or order to keep such matter pending; or
• the Settlement Commission has admitted an application made by the person concerned

Recovery of excess refund paid

• Section 28 (10A) inserted
• where an order for refund is modified in appeal and the amount of refund so determined is less than the amount refunded, the excess amount so refunded shall be recovered along with interest thereon at the applicable rate, from the date of refund up to the date of recovery, as a sum due to the Government.

Section 28(10B) inserted

• Safeguarding of revenue under Section 28(1) when not found sustainable under Section 28(4)
• Section 28(10B) inserted
• A notice issued under sub-section (4) shall be deemed to have been issued under subsection (1), if such notice demanding duty is held not sustainable in any proceeding under this Act, including at any stage of appeal, for the reason that the charges of collusion or any wilful mis-statement or suppression of facts to evade duty has not been established against the person to whom such notice was issued and the amount of duty and the interest thereon shall be computed accordingly.”;

Provisions for Advance Ruling revamped

• AAR to be of the rank of
  • Principal Commissioner of Customs or Commissioner of Customs to function as a Customs Authority for Advance Rulings
• Appeal Provisions introduced
  • New Section 28KA inserted; Authority for Advance Rulings constituted under section 245-O of the Income-tax Act, 1961 to act as Appellate Authority
• Definition of Applicant further expanded so as to include any person,––
  • (i) holding a valid IEC Number granted under section 7 of the FT (DR) Act, 1992; or
  • (ii) exporting any goods to India; or
  • (iii) with a justifiable cause to the satisfaction of the Authority

Provisions for Advance Ruling

• Time Limit within which the authority shall pronounce its advance ruling.
  • Section 28-I(6) amended
• Reduced from six months to three months
• changes shall come into force only when customs authority for advance ruling is appointed under section 28EA

Manifest under Sections 30 and 41

• Section 30 and Section 41 being amended so as to:
• include export goods in addition to imported goods in Section 30 ( import gods in addition to export goods in Section 41) as part of the information provided in the manifest;
• provide for prescribing the manner of delivery of manifest through regulations
• provide penalty provisions for late filing of manifest;

Clearance of goods

Section 45 amended

• Manner of clearance by other ways in addition to existing system of clearance by the proper officer as may be prescribed

Section 47, 50, 51, 60 and 68 amended

• provision for clearance of goods by Customs Automated System in addition to existing clearance by the proper officer.

Concept of Electronic Cash Ledger

• Chapter VIIA and Section 51A inserted– Payment through Electronic Cash Ledger
• Provisions for advance deposit which would enable payment of duties, taxes, fee, interest, and penalty through electronic cash ledger.

Chapter XI- Courier included

• Chapter XI- to include Courier along with posts
• Section 82, 83 and 84 amended accordingly

Chapter XIIA ( Audit)

• New Chapter XIIA and section 99A inserted
• 99A. The proper officer may carry out the audit of assessment of imported goods or export goods or of an auditee under this Act either in his office or in the premises of the auditee in such manner as may be prescribed.
• Explanation.––For the purposes of this section, “auditee” means a person who is subject to an audit under this section and includes an importer or exporter or custodian approved under section 45 or licensee of a warehouse and any other person concerned directly or indirectly in clearing, forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable goods.’

Controlled Delivery ( Section 109A)

• 109A. Notwithstanding anything contained in this Act, the proper officer or any other officer authorised by him in this behalf, may undertake controlled delivery of any consignment of such goods and in such manner as may be prescribed, to––
• (a) any destination in India; or
• (b) a foreign country, in consultation with the competent authority of such country to which such consignment is destined.
• Explanation.––For the purposes of this section “controlled delivery” means the procedure of allowing consignment of such goods to pass out of, or into, the territory of India with the knowledge and under the supervision of proper officer for identifying the persons involved in the commission of an offence or contravention under this Act.’.

Monetary Powers for Adjudication

• Section 122 of CA, 62 amended
• Existing clauses (b) and (c) deleted and replaced by-
• “(b) up to such limit, by such officers, as the Board may, by notification, specify.”.
• Board to fix monetary limits for adjudication of cases by officers below the rank of Joint Commissioner( Supdt/ Appraiser/AC/DC) by way of Notification.
• Powers of Joint Commissioner/Commissioner ….. No Limit as per subsection (a)

CC(Appeals) – Power to remand

• Section 128A: Commissioner (Appeals) to remand back the matters to original adjudicating authority in specified categories of cases, namely:
  • where an order or decision has been passed without following the principles of natural justice; or
  • where no order or decision has been passed after reassessment under section 17; or
  • where an order of refund under section 27 has been issued crediting the amount to the Fund without recording any finding on the evidence produced by the applicant.;

Section 143AA Inserted

• empower the Board to prescribe trade facilitation measures or separate procedure or documentation for a class of importers or exporters or for categories of goods or on the basis of the modes of transport of goods for:
  • maintenance of transparency m import and export documentation and procedure; or
  •  expeditious clearance or release of goods entered for import or export; or
  • reduction in the transaction cost of clearance of importing or exporting goods; or
  • maintenance of balance between customs control and facilitation of legitimate trade.;

Reciprocal arrangement for exchange of information

• Section 151B inserted
• authorize the Central Government to enter into an agreement or any other arrangement with the Government of any country or with such competent authorities of that country, as it deems fit, for facilitation of trade, enforcing the provisions of Customs Act and exchange of information for trade facilitation, effective risk analysis, verification of compliance and prevention, combating and investigation of offences under the provisions of this Act or under the corresponding laws in force in that country

Service of order, decision etc; Section 153

• Section 153 is being substituted ; Mode of service expanded
• Aligned with the provisions of the section 169 of the CGST Act
• to include Speed Post, Courier, and registered email as valid modes of delivery and
• in case of non-service by such means,
  • to also provide for affixing it at some conspicuous place at the last known place of business or residence in addition to affixing it on the notice board of the Customs House etc.
  • Provide for publishing it in a newspaper widely circulated in the locality in which the person to whom it is issued is last known to have resided or carried on business

Changes in Customs Tariff Act, 1975

Sale of goods while the same are in Customs Bonded Warehouse

• Finance Bill, 2018
• Section 3 of the Customs Tariff Act, 1975 is proposed to be amended by way of insertion of two sub-sections 8A and 10A
  • provide for value of goods when they are sold within the warehousing period for calculation of integrated tax and Compensation Cess
• The Value for the purpose of integrated tax shall be the value determined under sub-section (8) of Section 3 or the transaction value of such goods, whichever is higher

Amendment of Second Schedule to CTA, 1975

• Second Schedule to Customs Tariff Act, 1975
  • Note 4 added:
• “4. In respect of all other goods which are not covered under column (2) of this Schedule, the rate of duty shall be ‘Nil’.’

Source- NACIN