BUDGETARY CHANGES IN CUSTOMS ACT, 1962

[Mr. M. GOVINDARAJAN]

The Finance Bill, 2024 has not brought much amendments in the Customs Act, 1962 (‘Act’ for short).  Amendments are made for the following sections-

• Section 28DA – Procedure regarding claiming of preferential rate of duty;
• Section 65 – Manufacture and other operations in relation to goods in a warehouse;
• Section 143AA – Power to simplify or provide different procedure to facilitate trade;
• Section 157 – General Powers to make regulations;
• Retrospective effect to the following notifications-

• G.S.R. 394 (E), dated the 12th July, 2024
• G.S.R.356(E), dated the 10th May, 2023.

Certificate of origin

Section 28DA of the Act provides that procedure regarding claiming of preferential rate of duty.  Section 28DA (1) provides the conditions for making claim for preferential rate of duty in terms of trade agreement.  Section 28DA (2) provides, for this purpose, that the fact that the importer has submitted a certificate of origin issued by an Issuing Authority shall not absolve the importer of the responsibility to exercise reasonable care.

Section 28DA (10) provides that the preferential tariff treatment may be refused without verification in the following circumstances, namely: -

• the tariff item is not eligible for preferential tariff treatment;
• complete description of goods is not contained in the certificate of origin;
• any alteration in the certificate of origin is not authenticated by the Issuing Authority;
• the certificate of origin is produced after the period of its expiry,

Clause 100(a) of the Financial Bill substituted the terms ‘proof of origin’ for the words ‘certificate of origin appeared as above.

Clause 100(b) of the Finance Bill substituted the meaning of expression ‘proof of origin’ and ‘issuing authority’ in the Explanation to the said section.

The expression ‘proof of origin’ is defined as a certificate or declaration issued in accordance with a trade agreement certifying or declaring, as the case may be, that the goods fulfil the country-of-origin criteria and other requirements specified in the said agreement.

The expression ‘issuing authority’ is defined as an authority or person designated for the purposes of issuing proof of origin under a trade agreement.

Manufacture and other operations in relation to goods in a warehouse

Section 65 of the Act provides the procedure and other operations in relation to goods in a warehouse.  Section 65(1) of the Act provides that With the permission of the Principal Commissioner of Customs or Commissioner of Customs and subject to the provisions of section 65A and such conditions as may be prescribed, the owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse in relation to such goods.

Clause 101 of the Finance Bill inserted a proviso to Section 65(1) which provides that the Central Government may, if satisfied that it is necessary in the public interest so to do, by notification in the Official Gazette, specify the manufacturing processes and other operations in relation to a class of goods that shall not be permitted in a warehouse.

Powers of Central Government

Section 143AA of the Act gives powers to the Central Government to simplify or provide different procedure to facilitate trade.  Section 157 of the Act gives powers to the Central Government general powers to make regulations.

Section 143AA provides that notwithstanding anything contained in any other provision of this Act, the Board may, for the purposes of facilitation of trade, take such measures or prescribe 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, in order to,-

•  maintain transparency in the import and export documentation; or
• expedite clearance or release of goods entered for import or export; or
• reduce the transaction cost of clearance of importing or exporting goods; or
• maintain balance between customs control and facilitation of legitimate trade.

Section 157(2)(m) gives powers to the Central Government to make regulations for the measures and separate procedure or documentation for a class of importers or exporters or categories of goods or on the basis of the modes of transport of goods.

Clause 102 and 103 of the Bill inserted the words ‘or any other persons’ after ‘importers and exporters’ as in Section 143AA and Section 157(2)(m) of the Act.

Retrospective amendments

• Vide Notification No. 27/2024-Customs, dated 12.07.2024, the Central Government  exempted all goods imported by a unit or a developer in the Special Economic Zone for authorized operations, from the whole of goods and service tax compensation cess leviable thereon under sub-section (9) of section 3, of Customs Tariff Act, 1975 (51 of 1975) read with sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017.  This notification came into effect from 15.07.2024.  The Finance bill made this amendment with retrospective effect from 01.07.2017.
• Vide Notification No. 37/2023-Customs, dated 10.05.2023 the Central Government exempted the following goods –

• 1507 10 00 - Crude Soya-bean oil, whether or not degummed;
• 1512 11 10 - Crude Sunflower seed oil

when imported into India, from the whole of the customs duty leviable thereon under the First Schedule to the Customs Tariff Act and from the whole of the Agriculture Infrastructure and Development Cess leviable thereon under the said section of the Finance Act, 2021, subject to the conditions-

• Importer produces to the Deputy Commissioner or the Assistant Commissioner of Customs, as the case may be, a valid Tariff Rate Quota (TRQ) authorization for the Financial Year 2022-23 allotted by Directorate General of Foreign Trade;
•  The TRQ is allotted to the importer by the Directorate General of Foreign Trade, in accordance with the relevant procedure as specified in the Hand Book of Procedures, 2015-20 or 2023 as applicable;
• The TRQ authorization shall contain the name and address of the importer, IEC code, Customs notification No., sub-heading or tariff item as applicable, quantity and validity period of certificate;
• The TRQ authorization shall be issued electronically by the Directorate General of Foreign Trade and transmitted to ICES system;
• Imports made against the TRQ shall be allowed only upon debiting electronically in the ICES system.

The said notification came into effect from 30.06.2023.

The Finance Bill provides that the above said notification shall be deemed to have, and always to have, for all purposes, come into force with effect from the 01.04.2023 and remain in force during the period from the 01.04.2023 and ending with the 30.06.2023 (both days inclusive).

The Finance Bill stands amended the conditions prescribed in the Notification dated 10.05.2023 as detailed below (Schedule 2 to the Finance Bill)-

• Importer produces to the Deputy Commissioner or the Assistant Commissioner of Customs, as the case may be, a valid Tariff Rate Quota (TRQ) authorization for the Financial Year 2022-23 allotted by Directorate General of Foreign Trade;
• The duty and cess benefit under the afore-said valid TRQ authorization shall be restricted only to the extent of unutilized quota which is not used to claim such benefit under notification No. 30/2022-Customs, dated the 24.05.2022, or under this notification from 11.05.2023 and up to 30.06. 2023 (both days inclusive)
• Bill of lading for concerned import consignment is issued on or before 31.03.2023.
• The TRQ is allotted to the importer by the Directorate General of Foreign Trade, in accordance with the relevant procedure as specified in the Hand Book of Procedures, 2015-20 or 2023, as applicable; and
• The TRQ authorization shall contain the name and address of the importer, IEC code, Customs notification No., sub-heading or tariff item as applicable, quantity and validity period of certificate.

The said notification also provides that the Central Government shall have and shall be deemed to have the power to amend the notification referred to in the said sub-section with retrospective effect as if the Central Government had the power to amend the said notification under sub-section (1) of section 25 of the Customs Act read with section 124 of the Finance Act at all material times.

The said notification further provides that the refund shall be made of the whole of duty and cess, which has been collected, but which would not have been so collected, had the notification referred to in sub-section (1) been in force in the manner and to the extent specified in sub-sections (1) and (2), in accordance with the provisions of sub-section (2) of section 27 of the Customs Act.

The person claiming the refund of such duty and cess makes an application in this behalf to the jurisdictional Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, on or before the 31.03.2025.