MEMO 2 - NOTES ON CLAUSES - CUSTOMS - Finance (No. 2) Bill, 2014

CUSTOMS Note: (a) Basic Customs Duty means the customs duty levied under the Customs Act, 1962. (b) CVD means the Additional Duty of Customs levied under sub-section (1) of section 3 of the Customs Tariff Act, 1975. (c) SAD means the Special Additional Duty of Customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975. (d) Export duty means duty of Customs leviable on goods specified in the Second Schedule to the Customs Tariff Act, 1975. (e) Clause nos. in square brackets [ ] indicate the relevant clause of the Finance Bill, 2014. Amendments carried out through the Finance Bill, 2014 come into effect on the date of its enactment unless otherwise specified. AMENDMENTS IN THE CUSTOMS ACT, 1962: 1) The Customs Act, 1962 is being amended so as to provide that a reference in that Act to a Chief Commissioner of Customs or a Commissioner of Customs may also include a reference to the Principal Chief Commissioner of Customs or the Principal Commissioner of Customs, as the case may be. It also seeks to provide for consequential amendments in the Act. [Clause 72] 2) Section 3 is being amended so as to provide for inclusion of the Principal Chief Commissioner of Customs and Principal Commissioner of Customs in the class of officers of customs. [Clause 73] 3) Section 15(1) is being amended to provide for determination of rate of duty and tariff valuation for imports through a vehicle in cases where the Bill of Entry is filed prior to the filing of Import Report (as the Manifest is called in case of imports by land). [Clause 74] 4) Section 25 is being amended to provide that the customs duties on mineral oils including petroleum natural gas extracted or produced in the continental shelf of India or the exclusive economic zone of India shall not be recovered for the period prior to 7th February, 2002. [Clause 75] 5) Section 46(3) is being amended to allow the filing of a Bill of Entry prior to the filing of Import Report (as the Manifest is called in case of imports by land) for imports through land route. [Clause 76] 6) Section 127A is being amended to change the name of the Customs and Central Excise Settlement Commission to the Customs, Central Excise and Service Tax Settlement Commission since the scope of the functioning of the Customs and Central Excise Settlement Commission was expanded in the year 2012 so as to include settlement of Service Tax matters as well. [Clause 77] 7) Section 127B(1) is being amended to replace the reference to section 28AB with a reference to section 28AA since section 28AB has been omitted by the Finance Act, 2011 and to provide that an application for settlement of cases can also be filed in cases where a Bill of Export, Baggage Declaration, Label or Declaration accompanying the goods effected through Post or Courier have been filed. [Clause 78] 8) Section 127B is also being amended so as to omit sub-section (2) since the same is redundant. [Clause 78] 9) Section 127L is being amended so as to insert an Explanation that the concealment of particulars of duty liability relates to any such concealment made from the officer of customs and not from the Settlement Commission. [Clause 79] 10) Section 129A(1) is being amended so as to increase the discretionary powers of the Tribunal to refuse admission of appeal from the existing ₹ 50,000 to ₹ 2 lakh. [Clause 80] 11) Section 129A(1B) is being amended to substitute the words by notification in the official gazette with the words by order so as to enable the Board to constitute a Review Committee by way of an order instead of by way of a notification. [Clause 80] 12) Section 129B(2A) is being amended to omit the first, second and third proviso in view of substitution of section 129E with a new section. [Clause 81] 13) Section 129D is being amended to insert a proviso in sub-section (3) so as to vest the Board with powers to condone delay for a period of upto 30 days, for review by the Committee of Chief Commissioners of the orders in original passed by the Commissioner of Customs. [Clause 82] 14) Section 129E is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of ₹ 10 crores. [Clause 83] 15) Section 131BA is being amended so as to enable the Commissioner (Appeal) to take into consideration the fact that a particular order being cited as a precedent decision on the issue has not been appealed against for reasons of low amount. [Clause 84] AMENDMENT IN THE CUSTOMS TARIFF ACT, 1975: 1) Section 8B of the Customs Tariff Act, 1975 is being amended so as to provide for levy of safeguard duty on inputs/raw materials imported by an EOU and cleared into DTA as such or are used in the manufacture of final products cleared into DTA. [Clause 86] This change will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931. AMENDMENT IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975: 1) Tariff item 2402 20 60 is being omitted as a consequential change to amendment in the First Schedule to the Central Excise Tariff Act. 2) The tariff rate of basic customs duty on goods falling under tariff items 8517 62 90 and 8517 69 90 is being increased from Nil to 10%. 3) The unit quantity code against certain entries is being changed. [Clause 87] The changes at 1) and 2) will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931. RETROSPECTIVE EXEMTPIONS: 1) Liquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) imported by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum Corporation Limited, for supply to Non-Domestic Exempted Category (NDEC) customers is being fully exempted retrospectively w.e.f. 08.02.2013 so as to treat NDEC customers, such as, hospitals, government canteens, BSF/CISF mess, etc., at par with domestic customers for the purposes of supply of LPG. [Clause 85] A. General 1) Baggage Rules are being amended to,- (i) raise the free baggage allowance from ₹ 35,000 to ₹ 45,000. (ii) reduce the duty free allowance of cigarettes from 200 to 100, of cigars from 50 to 25 and of tobacco from 250 gms to 125 gms. B. Proposals involving changes in rates of duty: I. AGRICULTURE/AGRO PROCESSING/PLANTATION SECTOR: 1) Description of the product sun dried dark seedless raisins in notification No.12/2012-Customs, dated 17.03.2012, which attracts concessional Basic Customs Duty of 30% is being changed to dark seedless raisins . 2) Full exemption from customs duty is being granted to de-oiled soya extract, groundnut oil cake/oil cake meal, sunflower oil cake/oil cake meal, canola oil cake/oil cake meal, mustard oil cake/oil cake meal, rice bran/rice bran oil cake and palm kernel cake, up to 31.12.2014. II. CHEMICALS AND PETROCHEMICALS 1) Basic Customs duty on reformate is being reduced from 10% to 2.5%. Basic Customs duty on propane, ethane, ethylene, propylene, butadiene is being reduced from 5% to 2.5%. 2) Basic Customs Duty on ortho-xylene is being reduced from 5% to 2.5%. 3) Basic Customs Duty on denatured ethyl alcohol and methyl alcohol is being reduced from 7.5% to 5%. 4) Basic Customs Duty on crude naphthalene is being reduced from 10% to 5%. 5) Basic Customs Duty on fatty acids, crude palm stearin, RBD and other palm stearin and specified industrial grade crude oils is being reduced from 7.5% to Nil for manufacture of soaps and oleochemicals subject to actual user condition. Basic Customs Duty is also being reduced on crude glycerine from 12.5% to 7.5% in general and from 12.5% to Nil for manufacture of soaps subject to actual user condition. III. ENERGY SECTOR 1) The duty structure on non-agglomerated coal of various types is being rationalized at 2.5% BCD and 2% CVD. Accordingly, the BCD on Coking coal is being increased from NIL to 2.5% and on steam coal and bituminous coal from 2% to 2.5%. The BCD on anthracite coal and other coal is being reduced from 5% to 2.5%. The CVD on Anthracite coal, Coking coal and other Coal is being reduced from 6% to 2%. 2) Basic Customs Duty on metallurgical coke is being increased from Nil to 2.5%. 3) Exemption from Basic Customs Duty is being granted on re-gasified LNG for supply to Pakistan. 4) Liquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and Liquefied Petroleum Gases (LPG) imported by the Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited or Bharat Petroleum Corporation Limited, for supply to Non-Domestic Exempted Category (NDEC) customers is being fully exempted retrospectively w.e.f. 08.02.2013. IV. TEXTILES: 1) The duty free entitlement for import of trimmings embellishments used by the readymade textile garment sector for manufacture of garments for export is being increased from 3% to 5%. 2) Non-fusible embroidery motifs or prints are being included in the list of items eligible to be imported duty free for manufacture of garments for export. 3) The list of specified goods required by handicraft manufacturer-exporters is being expanded by including wire rolls so as to provide Customs Duty exemption on import by handicraft manufacturer-exporters. 4) Fusible embroidery motifs or prints, anti-theft devices, pin bullets for packing, plastic tag bullets, metal tabs, bows, ring and slider hand rings are being included in the list of items eligible to be imported duty free for manufacture of handloom made ups or cotton made ups or manmade made ups for export. 5) Specified goods imported for use in the manufacture of textile garments for export are fully exempt from BCD and CVD subject to the condition that the manufacturer produces an entitlement certificate from the Apparel Export Promotion Council. In addition, Indian Silk Export Promotion Council (ISEPC) is being authorised to issue entitlement certificate. 6) Basic Customs Duty on raw materials for manufacture of spandex yarn viz. Polytetramethylene ether glycol (PT MEG) and Diphenylmethane 4,4 di-isocyanate (MDI) is being reduced from 5% to Nil. V. METALS: 1) Basic Customs Duty on stainless steel flat products (CTH 7219 and 7220) is being increased from 5% to 7.5% 2) The BCD on ships imported for breaking up is being reduced from 5% to 2.5%. 3) Export duty on bauxite is being increased from 10% to 20% . 4) Basic Customs Duty on coal tar pitch is being reduced from 10% to 5%. 5) Basic Customs Duty on battery waste and battery scrap is being reduced from 10% to 5% 6) Basic Customs Duty on steel grade limestone and steel grade dolomite is being reduced from 5% to 2.5%. VI. PRECIOUS METALS: 1) Basic Customs Duty on half-cut or broken diamonds is being increased from NIL to 2.5% and on cut polished diamonds and colored gemstones from 2% to 2.5%. 2) Full exemption from Basic Customs Duty is being granted to pre-forms of precious and semi-precious stones. 3) The variation level and the parameter of measurement in respect of re-import of cut and polished diamonds after certification/grading from a foreign laboratory/agency are being increased as a trade facilitation measure. VII. ELECTRONICS/HARDWARE: 1) Basic Customs Duty on LCD and LED TV panels of below 19 inches is being reduced from 10% to NIL. 2) Basic Customs Duty is being exempted on specified parts of LCD and LED panels for TVs. 3) Basic Customs Duty on colour picture tubes for manufacture of cathode ray TVs is being reduced from 10% to NIL. 4) Basic Customs Duty on specified telecommunication products not covered under the ITA (Information Technology Agreement) is being increased from NIL to 10%. 5) Special Additional Duty (SAD) on all inputs/components used in the manufacture of Personal Computers (laptops/desktops) and tablet computers is being exempted, subject to actual user condition. 6) Education cess and Secondary and Higher Education (SHE) cess is being levied on imported electronic products. 7) Full exemption from Special Additional Duty (SAD) is being provided on specified inputs (PVC sheet Ribbon) used in the manufacture of smart cards. 8) Basic Customs Duty is being reduced from 7.5% to NIL on E-Book readers. 9) CVD exemption on portable X-ray machine / system is being withdrawn. VIII. RENEWABLEENERGY: 1) Basic Customs Duty is being reduced from 10% to 5% on forged steel rings used in the manufacture of bearings of wind operated electricity generators. 2) Full exemption from Special Additional Duty is being provided on parts and components required for the manufacture of wind operated electricity generators. 3) Basic customs duty on machinery, equipments, etc. required for setting up of solar energy production projects is being reduced to 5%. 4) Full exemption from Basic Customs Duty is being provided on specified raw materials used in the manufacture of solar backsheet and EVA sheet. 5) Full exemption from Basic Customs Duty is being provided on flat copper wire used in the manufacture of PV ribbons (tinned copper interconnect) for solar PV cells/modules. 6) Concessional customs duty of 5% is being provided on machinery, equipments, etc. required for setting up of compressed biogas plant (Bio-CNG). IX. CAPITAL GOODS/INFRASTRUCTURE: 1) It is being clarified that road construction machinery imported duty free can be sold within 5 years of importation subject to payment of customs duty on depreciated value and that individual constituents of the consortium whose names appear in the contract can import goods without payment of duty. 2) State Governments concerned are being notified as sponsoring authority for Metro Rail Projects covered under the Project Import Regulations, 1986. 3) Plants Equipment imported prior to 2008 for use in projects financed by the UN or an international organization, which hitherto could not be transferred / sold / re-exported out of the project site, are now being allowed to be transferred / sold / re-exported from the project site. 4) The requirement of certification by Ministry of Road Transport (or NHAI) for availing of customs duty exemption on specified goods required for construction of roads is being done away with. 5) Director (Electrical) is being authorized to issue the requisite certificate to enable Delhi Metro Rail Corporation to avail of Nil BCD and Nil CVD benefits in respect of their Phase-1 and Phase-2 projects instead of Director (Rolling Stock, Electrical Signalling) at present. X. HEALTH 1) Full exemption from customs duty is being provided for HIV/AIDS drugs and diagnostic kits imported under National AIDS Control Programme (NACP) funded by the Global Fund to Fight AIDS, TB and Malaria (GFATM). XI. SECURITY AND STRATEGIC PURPOSES: 1) Full exemption from Basic customs Duty is being provided to goods imported by National Technical Research Organisation (NTRO). 2) Full exemption of customs duty is being provided on security fibre, security threads and M-feature imported by Bank Note Paper Mill India Private Limited (BNPMIPL), Mysore. Full exemption from BCD and CVD is also being provided for raw materials required for manufacture of security threads and security fibre subject to actual user condition. 3) The scope of exemption notification No.39/96-Customs dated 23.07.1996 [S.No.7] granting full exemption from BCD and CVD on goods imported for use in the manufacture of aircrafts for the Ministry of Defence is being clarified to the effect that the exemption is available to all materials in any form and articles thereof, subject to the overall condition that they conform to aeronautical specification accompanied with certificate of conformance/release note/airworthiness certificate for development. XII. AIRCRAFTS SHIPS: 1) It is being clarified that aircraft engines and parts thereof are eligible for duty exemption when imported for servicing, repair or maintenance of aircrafts used for scheduled operations. XIII. MISCELLANEOUS: 1) Tariff item 3903 19 90 is being deleted from notification No.10/2008-Customs, [India-Singapore Comprehensive Economic Co-operation Agreement (CECA)]. As a result, Basic Customs Duty on Polystyrene (other than moulding powder) is being increased from 1.15% to 7.5%. 2) Basic Customs Duty is being reduced from 5% to 2.5% on electrolysers and their parts/spares required by caustic soda or caustic potash units and membranes and their parts/spares required by industrial plants based on membrane cell technology. The BCD on other spares (other than membranes and parts thereof) is also being reduced from 7.5% to 2.5%. 3) A provision is being made for refund of Customs duty paid at the time of import of scientific and technical instruments, apparatus, etc. by public funded and other research institutions, subject to submission of a certificate of registration from the Department of Scientific Industrial Research (DSIR). 4) Section 8B of the Customs Tariff Act, 1975 is being amended so as to provide for levy of safeguard duty on inputs/raw materials imported by an EOU and cleared into DTA as such or are used in the manufacture of final products cleared into DTA.