BUDGETARY CHANGES IN CUSTOMS – PART I

[Mr. M. GOVINDARAJAN]

The Hon’ble Finance Minister presented his budget for the year 2018 – 19 in the Lok Sabha on 01.02.2018.  The Finance Bill, 2018 (‘Bill’ for short)  has brought many changes in the direct tax as well as indirect taxation and further made many changes in many of the Acts.  In this article important changes caused in Customs Act (‘Act’ for short) by the Finance Bill, 2018 are discussed.

Assessment

Clause 56(i) of the Bill proposes to amend the definition of the term ‘assessment’ under section 2(2) of the Act.  As per the new definition the term ‘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 or under any other law for the time being in force with reference to-

• the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act;
• the value of such goods as determined in accordance with the provisions of this Act and the Customs Tariff Act;
• exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued there for under this Act or under the Customs Tariff Act or under any other law for the time being in force;
• 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;
• the origin of such goods determined in accordance with the provisions of Customs Tariff Act or the rules made there under, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods;
• 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.

Change of name of the Board

Clause 56(ii) of the Bill proposes to change the definition of the term ‘Board’.  According to the new definition the term ‘Board’ means ‘Central Board of Indirect Taxes and Customs’ constituted under the Central Boards of Revenue Act, 1963.

Prohibition on importation  and exportation of goods

Section 11 of the Act provides the power to Central Government to prohibit either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification, the import or export of goods of any specified description.

Clause 57 of the Bill proposes to insert sub clause (3) after section 11(2) of the Act.  The newly inserted section 11(3) provides that 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 there under, 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.

Provisional assessment – obligations of importer or exporter

Section 18 of the Act prescribes the procedure for provisional assessment of duty.  Clause 59(ii) of the Bill proposes to insert a new sub section (1A).  The newly inserted section 18(1A) provides that where, pursuant to the provisional assessment, 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 finalize the provisional assessment within such time and in such manner, as may be prescribed.

Inward processing of goods and outward processing of goods

Clause 60 of the Bill proposes to insert new sections 25A and 25B after section 25 which deals with the inward processing of goods.

The newly inserted section 25A provides that where the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification, exempt such of the goods which are imported for the purpose of repair, further processing or manufacture, as may be specified therein, from the whole or any part of duty of customs leviable thereon, subject to the following conditions-

• the goods shall be re-exported after such repair, further processing or manufacture, as the case may be, within a period of one year from the date on which the order for clearance imported goods is made;
• the imported goods are identifiable in the export goods; and
• such other conditions as may be specified in the notification.

The newly inserted section 25B provides that notwithstanding anything contained in section 20 (dealing with re-importation of goods), where the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification, exempt such of the goods which are re-imported after being exported for the purposes of repair, further processing or manufacture, as may be specified therein, from the whole or any part of duty of customs leviable thereon, subject to the following conditions-

• the goods shall be re-imported into India after such repair, further processing or manufacture as the case may be, within a period of one year from the date on which the order permitting clearance for export is made;
• the exported goods are identifiable in the re-imported goods; and
• such other conditions as may be specified in the notification.

Holding pre-notice consultation

Section 28 of the Act provides for the recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.  Section 28(1) (a)  provides that where any duty has not been levied or not paid or has been short-levied or short- paid] or erroneously refunded, or  any interest payable has not been paid, part-paid or erroneously refunded, for any reason other than  the reasons of collusion or any willful mis-statement or suppression of facts, the proper officer shall, within two years from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

Clause 61(i) of the Bill proposes to insert a proviso to section 28(1)(a) of the Act.  The new proviso provides 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 notice

Clause 61(ii) of the Bill proposes to insert a new clause after section 28 (7), (7A).  The newly inserted section 28(7A) provides that save as otherwise provided in clause (a) of sub section (1) or 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 subsection (1) or (4).

Extension of time for determination of duty

Section 28 (8) provides that the proper officer shall, after allowing the concerned person an opportunity of being  heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice.     Section 28(9) provides that the proper officer shall determine the amount of duty or interest under sub-section (8),-

• within six months from the date of notice in respect of cases falling under clause (a) of subsection (1);
• within one year from the date of notice in respect of cases falling under sub-section (4).

Clause 61 (iii) (b) proposes to insert two provisos after section 28(9).  The first proviso provides that where the proper officer fails to so determine within the specified period, any officer senior in the rank to the proper officer may, having regard to the circumstances under which the proper officer was prevented from determining the duty or interest under sub section (8), extend the period specified in clause (a) to a further period of six months and the period specified in clause (b) to a further period of one year.

The second proviso provides that where the proper officer fails to determine within such extended period, such proceedings shall be deemed to have concluded as if no notice had been issued.

Reason for non determination of duty to be informed

Clause 61(iv) proposes to insert a new section 28(9A) after section 28(9).  The newly inserted section 28(9A) provides that notwithstanding anything contained in sub-section(9), where the proper officer is unable to determine the amount of duty or interest under sub-section (8) for the reason that-

• 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 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

the proper officer shall inform the person concerned the reason for non determination of the amount of duty or interest under sub-section (8) and in such case, the time specified in sub-section (9) shall apply not from the date of notice, but from the date when such reason ceases to exit.

Recovery of excess amount refunded

Clause 61(v) proposes to insert two new sections viz., 28(10A) and 28(10B) after section 28(10).

The newly inserted section 28(10A) provides that notwithstanding anything contained in this Act, where an order for refund under section 27(2) is modified in any appeal and the amount of refund so determined is less than the amount refunded under said sub section, the excess amount so refunded shall be recovered along with interest thereon at the rate fixed by the Central Government under section 28AA from the date of refund up to the date of recovery, as a sum due to the Government.

Deemed notice

The newly inserted section 28(10B) provides that a notice issued under section 28(4) shall be deemed to have been issued under section 28(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 willful 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.

Notice issued after 14.05.2015 to the date of effect of Finance Bill, 2018           

Clause 61(vi) proposes to insert Explanation 4 after Explanation 3 to Section 28.  The newly inserted explanation declares that in cases where notice has been issued for non levy, not paid, short levy or short paid or erroneous refund after 14.05.2015 but before the date on which the Finance Bill, 2018 receives the assent of the President, they shall continue to be governed by the provisions of section 28 as it stood immediately before date on which such assent is received.

Advance Rulings

Definitions

Chapter VB of the Act deals with the Advance Rulings containing sections from 28E to 28M.

Clause 62 of the Bill proposes to omit some definitions and amend some definitions contained in Section 28E of the Act and inserted sub-clauses.

The definition of the term ‘activity’ under section 28E (a) is proposed to be omitted. 

As per the amendment the expression ‘advance ruling’ under section 28E(b) is defined as a written decision on any of the questions referred in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation.

Section 28E (ba) is inserted.  According to this new section the expression ‘Appellate Authority’ means the Authority for Advance Rulings constituted under section 245-O of the Income Tax Act, 1961.

Section 28E(c) as amended defines the term ‘applicant’ as any person-

• holding a valid importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or
• exporting any goods to India; or
• with a justifiable cause to the satisfaction of the Authority

who makes an application for advance ruling under section 28H.

Section 28E(e) as amended defines the term ‘Authority’ as the Customs Authority for Advance Rulings appointed under Section 28EA.

Customs Authority for Advance Rulings

Clause 63 of the Bill proposes to insert section 28EA after section 28E.  The new section 28EA(1) provides that the Board may, for the purposes of giving advance rulings under this Act, by notification, appoint an officer of the rank of Principal Commissioner of Customs or Commissioner of Customs to function as a Customs Authority for Advance Rulings.  Till the date of appointment of the Customs Authority for Advance Rulings, the existing Authority for Advance Rulings constituted under Section 245-O of the Income Tax Act, 1961 shall continue to be the Authority for giving advance rulings for the purposes of this Act.

Section 28EA (2) provides that the offices of the Authority may be established in New Delhi and at such other places, as the Board may deem fit.

Section 28EA (3) provides that subject to the provisions of this Act, the Authority shall exercise the powers and authority conferred on it by or under this Act.

Authority for Advance Ruling

Clause 64 of the Bill provides amendment to section 28F.  After amendment section 28F (1) will provide as follows-

Section 28F(1) -Subject to the provisions of this Act, the Appellate Authority for deciding appeal under this Chapter and the said Appellate Authority shall exercise the jurisdiction, powers and authority conferred on it by or under this Act:

Provided that the Member from the Indian Revenue Service (Customs and Central Excise), who is qualified to be a Member of the Board, shall be the revenue Member of the Appellate Authority for the purposes of this Act.

The newly inserted section 28F(3) provides that on and from the date of appointment of Customs Authority for Advance Rulings, every application and proceeding pending before the erstwhile Authority for Advance Rulings shall stand transferred to the Authority from the stage at which such application or proceedings stood as on the date of such appointment.

Application for Advance Ruling

Clause 65 brings amendments to Section 28H.  Section 28H after amendment reads as follows-

 SECTION 28H. - Application for advance ruling (1) - An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and in such manner as may be prescribed, stating the question on which the advance ruling is sought. . (2) The question on which the advance ruling is sought shall be in respect of, -

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975);

(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act.

(d) applicability of notifications issued in respect of duties under this Act, the Customs Tariff Act, 1975 or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act.

(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto.

(f) any other matter as the Central Government may, by notification, specify.

(3) The application shall be made in quadruplicate and be accompanied by a fee of   ten thousand rupees.

(4) An applicant may withdraw his application within thirty days from the date of the application.

(5) The applicant may be represented by any person resident in India who is authorized in his behalf.

Explanation – For the purposes of this sub-section’ resident’ shall have the same meaning as assigned to it in section (42) of the Income Tax Act, 1961.

Time limit to decide Advance Ruling

Clause 66 of the Bill seeks to reduce the time limit to pronounce the Advance Ruling to 3 months from 6 months under section 28-I.

Advance Ruling to be void in certain circumstances

Section 28-K deals with the voidability of Advance Ruling in certain circumstances.  Clause 67 proposes to insert a new proviso to section 28K(1) which provides that in computing the period of 2 years referred to in section 28(1)(a) or 5 years referred in section 28(4) thereof, for service of notice for recovery of any duty not levied, short levied, not paid or short paid on account of the advance ruling, the period beginning with the date of such advance ruling and ending with the date of the order this sub section shall be excluded.

Appeal to the Appellate Authority

Clause 68 of the Bill seeks to insert section 28KA after section 28K.  Section 28KA(1) provides that any officer authorized by the Board, by notification, or the applicant may file an appeal to the Appellate Authority against any ruling or order passed by the Authority within 60 days from the date of the communication of such ruling or order, in such form and manner as may be prescribed.

Where the Appellate Authority is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the period so specified, it may allow a further period of 30 days for filing such appeal.

Section 28KA (2) provides that the provisions of section 28I and 28J shall mutatis mutandis apply to the appeal under this section.

Powers of Appellate Authority          

Clause 69 of the Bill proposes to substitute the words ‘Appellate Authority’ for the words ‘Authority’ in section 28L.  Section 28L, originally, deals with the powers of the Authority.  After amendment Section 28L will read as follows-

SECTION 28L. Powers of Appellate Authority. - (1) The Appellate Authority shall, for the purpose of exercising its powers regarding discovery and inspection, enforcing the attendance of any person and examining him on oath, issuing commissions and compelling production of books of account and other records, have all the powers of a civil court under the Code of Civil Procedure, 1908 (5 of 1908).

(2) The Appellate Authority shall be deemed to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974), and every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860).

Procedure of Authority

Clause 70 of the Bill proposes to substitute the existing section 28M which deals with the procedure of the Authority.  The newly substituted section 28M provides that the Authority shall follow such procedure as may be prescribed.  The Appellate Authority shall, subject to the provisions of this chapter, have power to regulate its own procedure in all matters arising out of the exercise of its powers and authority under this Act.