BUDGETARY CHANGES IN CUSTOMS LAW

[Mr. M. GOVINDARAJAN]

Introduction

The Finance Bill has brought certain amendments to the Customs Act.  The amendment proposes to introduce a new Chapter VAA dealing with the procedure regarding claim of preferential rate of duty.   In this article the changes that have been made in the Customs Act (‘Act’ for short) through the Finance Bill, 2020 is discussed in detail.

Prohibition of import or export of goods

The Finance Bill proposes to amend Section 11 of the Act.  Section 11(1) of the Act provides that if the Central Government is satisfied that it is necessary so to do for any of the purposes specified in sub-section (2), it may, by notification in the Official Gazette, 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.  Section 11(2) provides nearly 23 purposes for the purpose of section 11(1).  One among them is - the prevention of injury to the economy of the country by the uncontrolled import or export of gold or silver [section 11(2)(f)].

The Finance Bill proposes to substitute words ‘gold, silver or any other goods’ for the words ‘gold or silver’.

Recovery of duties

Section 28 of the Act provides the procedure for recovery of duties not levied or not paid or short-levied or short-paid] or erroneously refunded.  Explanation 4 to this section declares that in cases where notice has been issued for non-levy, not paid, short-levy or short-paid or erroneous refund after the 14th day of May, 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 the date on which such assent is received.

The Finance Bill proposes to substitute Explanation 4 to the new one.  The newly substituted Explanation 4 provides that notwithstanding anything contrary in any judgment, decree or order of any Appellate Tribunal or any Court or in any other provisions of this Act or the rules or the regulations made there under, or in any other law for the time being in force, in cases where notices has been issued for non levy, short levy, nonpayment, short payment or erroneous refund, prior to 29.05.2018, being the commencement of Finance Act, 2018, such notice shall continue to  be governed by the provisions of section 28 as it stood immediately before such date.

Recovery of duties in certain cases

Section 28AAA(1) of the Act provides that Where an instrument issued to a person has been obtained by him by means of  collusion or willful misstatement or  suppression of facts  for the purposes of this Act or the Foreign Trade (Development and Regulation) Act, 1992, by such person or his agent or employee and such instrument is utilized under the provisions of this Act or the rules made or notifications issued there under, by a person other than the person to whom the instrument was issued, the duty relatable to such utilization of instrument shall be deemed never to have been exempted or debited and such duty shall be recovered from the person to whom the said instrument was issued.

The Finance Bill proposes to substitute the words ‘any other law or any other scheme of the Central Government, for the time being in force by such person’ for the words ‘such person’ and insert the words ‘or regulations’ after the word ‘rules’.

Explanation 1 to section 28AAA(1)  provides that for the purposes of this sub-section, "instrument" means any scrip or authorization or licence or certificate or such other document, by whatever name called, issued under the Foreign Trade (Development and Regulation) Act, 1992, with respect to a reward or incentive scheme or duty exemption scheme or duty remission scheme or such other scheme bestowing financial or fiscal benefits, which may be utilized under the provisions of this Act or the rules made or notifications issued there under.

The Finance Bill proposes to substitute the words ‘or duty credit issued under section 51B, with respect to’ for the words ‘with respect to’.

New Chapter VAA

The Finance Bill proposes to insert a new Chapter VAA entitled ‘Administration of Rules of Origin under Trade Agreement under section 28DA.  This Chapter provides the procedure for the claim of preferential rate of duty.  The procedure is as detailed below-

• An importer making claim for preferential rate of duty, in terms of any trade agreement, shall-

• make a declaration that goods qualify as originating goods for preferential rate of duty under such agreement;
• possess sufficient information in which the country of origin, regional value content and product specific criteria, specified in the rules of origin, in the trade agreement, are satisfied;
• furnish such information in such manner as may be provided in the rules;
• exercise reasonable care as to the accuracy and truthfulness of the information furnished;

• Submitting a certificate of origin issued by the Issuing Authority shall not absolve the importer of the responsibility to exercise reasonable care.
• Where the proper officer has reasons to believe that the country of origin criteria has not been met, he may require the importer to furnish further information, consistent with the trade agreement, in such manner as may be provided by rules.
• Where the importer fails to provide the said information, the proper officer may cause further verification consistent with the trade agreement in such manner as may be provided in the rules.
• The proper officer may suspend the preferential tariff treatment to such goods pending verification.
• On the basis of the information furnished by the importer or the information available with him or on the relinquishment of the claim for preferential rate of duty by the importer, the Principal Commissioner of Customs may disallow the claim for preferential rate of duty without further verification.
• The reasons for such disallowances shall be in writing.
• The proper officer may, on the request of the importer, release the goods subject to furnishing by the importer a security amount equal to the difference between the duty provisionally assessed under section 18 and the preferential duty claimed.
• The Principal Commissioner of Customs or the Commissioner of Customs may, instead of security, require the importer to deposit the differential duty amount in the ledger maintained under section 51A of the Act.
• The proper officer shall inform the Issuing Authority of reasons for suspension of preferential tariff treatment and seek specific information as may be necessary to determine the origin of goods within such time and in such manner as may be provided by the rules.
• On receipt of the specific information, the proper officer may, on being satisfied with the information furnished, restore the preferential tariff treatment.
• If no information is received, the proper officer shall  disallow the preferential tariff treatment for reasons to be recorded in writing.
• In case of incomplete or non specific information is received, the proper officer may send another request to the Issuing Authority stating specifically the shortcoming in the information furnished by such Authority, in such circumstances and in such manner as may be provided by the rules.
• Any request for verification shall be sent within a period of 5 years from the date of claim of preferential rate of duty by an importer, unless otherwise specified in the trade agreement.
• The preferential tariff treatment may be refused in the following circumstances-

• 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.

• If the verification establishes non compliance of the imported goods with the country of origin criteria, the proper officer may reject the preferential tariff treatment to the imports of the identical goods from the same producer or exporter, unless sufficient information is furnished to show identical goods meet the country of origin criteria.

Chapter VIIA

The Finance Bill proposes to change the title of Chapter VII A from Payments through Electronic Cash Ledger to Payments through Electronic Cash Ledger And Electronic Credit Ledger.

Ledger for Duty Credit

The Finance Bill proposes to insert a new section 51B.  The new section 51B(1) provides that the Central Government may, by notification in the Official Gazette, specify the manner in which it shall issue duty credit-

• in lieu of remission of any duty or tax or levy, chargeable on any material used in the manufacture or processing of goods or for carrying out any operation on such goods in India that are exported; or
• in lieu of such other financial benefit subject to such conditions and restrictions as may be specified therein.

Section 51B(2) provides that the duty credit issued shall be maintained in the customs automated system in the form of an electronic duty credit of ledger of the person who is in receipt of such duty credit, in such manner as may be prescribed.

Section 51B(3) provides that the duty credit available in the electronic credit ledger may be utilized by the person to whom it is issued or the person to whom it is transferred, towards making payment of duties in such manner and subject to such conditions and restrictions and within such time as may be prescribed.

Confiscation of goods

Section 111 of the Act provides for confiscation of goods and conveyances and imposition of penalties.  The Finance Bill proposes introduce a new sub section 111(q) which provides that the any goods imported on a claim of preferential rate of duty which contravenes the provisions of Chapter VAA or any rule made there under, shall be liable to confiscation.