Types of Custom Duties

8/10/2019 Types of Custom Duties

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TAX LAW

Submitted By:

Shikhar Agarwal

TypesofCustom Duties


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INDEX

1. Background of Customs Law.3

1.1 Customs Tariff Act.3

1.2 Growth in Revenue.4

1.3 Scope and Coverage of Customs Law4

1.4 Overview of Customs Act..5

2. Nature of Customs Duty.7

2.1 Taxable Event for Import Duty..8

2.2 Taxable Event in case of Warehoused Goods9

2.3 Taxable Event when goods cross customer barrier..10

3. Types of Custom Duties.......................................................................................................11

3.1 Basic Customs Duty.................................................................................................11

3.2 Additional Customs Duty u/s 3(1) (CVD)...............................................................11

3.3. Education cess on Customs Duty............................................................................14

3.4 Additional Duty u/s 3(3)..........................................................................................14

3.5 Additional Duty imposed u/s 3(5)............................................................................15

3.6 Anti- Dumping Duty................................................................................................16

3.7 Safeguard Duty........................................................................................................25

3.8 NCCD of Customs...................................................................................................26

3.9 Export Duty..............................................................................................................27

3.10. Cess.......................................................................................................................27

3.11 Special Additional Duty of Customs......................................................................28

4. Bibliography.........................................................................................................................29


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Background of Customs Law

Customs duty is on import into India and export out of India. As per ancient custom, a

merchant entering a kingdom with his goods had to make a suitable gift to the King. In the

course of time, this custom was formalised into Customs Duty. This is collected on

imports. The word Customary is derived from customs, which indicates that it is a very

old tax. Taxes on goods were levied on various goods right from the Veda period.

Customs Duty as we understand today has its origin in British period. British established its

first Board of Revenue in 1786 at Calcutta. New Board of Trade was established in 1808. A

uniform Tariff Act was introduced in 1859 all over India. General rate of import duty was

10%, which was reduced to 7.5% in 1864. Customs duty in India is linked with history of

textile industry. British manufacturers wanted to export their products to India and due to

their presence, duty on coarser varieties of cotton goods was abolished in 1877. In the

meanwhile, Sea Customs Act was passed in 1878. In 1882, all import duties were abolished,

but re-introduced in 1894 at general rate of 5%. Indian Tariff Act was passed in 1894. At the

same time, excise duty on Indian cotton goods was imposed, which was bitterly resented in

India and it was finally abolished in 1925. General rate of customs duty was later increased to

7.5%. Land Customs Act was passed in 1924. After independence, manufacturing industry

grew and trade expanded. Customs Act, 1962 was passed to consolidate Sea Customs Act,

Land Customs Act and provisions for air customs.

Customs Tariff Act

Indian Tariff Act, 1934 was found to be inadequate to meet the needs of expansion of trade

and industry. Tariff Revision Committee was formed, which recommended adoption of

Brussels Trade Nomenclature of Customs Cooperation Council (CCCN), with modifications


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to suit Indian conditions. Accordingly Customs Tariff Act, 1975 was replaced with a new

schedule, based on HSN.

Growth in Revenue

Customs duty started with 5%. After independence, need arose to reduce imports as foreign

exchange became scarce and to protect Indian industry from foreign competition. Customs

duty rates were increased. Auxiliary duty and Countervailing duty was introduced. The total

duty burden was over 100% and in some cases, even more than 200% or 300%. Revenue

from customs duty was Rs. 524 crores in 70.71 and Rs. 3350 crores in 80-81.This rose to Rs.

25500 crores in 92-93, which was 32.5% of tax revenue of Central Government.

Scope and coverage of Customs Law

Section 12(1) of Customs Act is the charging section, which provides for levy of duty on

imports as well as exports. The rate of duty is as prescribed in Customs Tariff Act, 1975, read

with relevant exemption notifications. Import duty is levied on almost all items, while export

duty is levied only on a few limited products, where Indian goods are in commanding

position.

Section 12(2) of Customs Act makes it clear that customs duty is payable by Government

also. Thus, there is no general exemption to goods imported by Government. However,

various exemption notifications have been issued and Imports by Indian Navy, specific

equipment required by Police, Ministry of Defence, Coastal Guard etc. are fully exempt from

customs duty. However, if there is no such exemption notification, duty will be payable even

if goods are imported by Central/State Government.


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Overview of Customs Act

Raising revenue for Central Government is the main but not the only purpose of Customs

Act. Customs Act is used to (a) regulate imports and exports (b) protect Indian industry from

dumping (c) collect revenue of customs duty. In addition, provisions of Customs Act are used

for other Acts like Foreign Trade (Development and Regulation) Act, Foreign Exchange

Management Act (FEMA) etc. Customs Law is covered under various Acts, rules, regulations

and notifications, as follows:

Customs Act, 1962- This is the main Act, which provides for levy and collection of duty,

import/export procedures, prohibitions on importation and exportation of goods, penalties,

offences, etc.

Customs Tariff Act, 1975- The Act contains two schedules- Schedule 1 gives classification

and rate of duties for imports, while schedule 2 gives classification and rates of duties for

exports. In addition, the CTA (Customs Tariff Act) makes provisions for duties like

additional duty(CVD), preferential duty, anti-dumping duty, protective duties etc.

Rules under Customs Act- Under section 156 of Customs Act, 1962, Central Government

has been empowered to make rules, consistent with provisions of the Act, to carry out the

purposes of the Act. Various rules have been framed under these powers. Major among these

are: Customs Valuation Rules, 1988: for valuation of imported goods for calculating duty

payable; Customs and Central Excise Duties Drawback Rules, 1995: mode of calculating

rates of duty drawback on exports;Baggage Rules, 1998: rules and allowances for bringing in

baggage from abroad by Indian and tourists; Customs (Import of Goods of Concessional Rate

of Duty for Manufacture of Excisable Goods) Rules, 1996: provides procedure to be followed

when goods are imported for export purposes; Other rules are: Rules regarding notified


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goods, specified goods, determination of additional duty for dumping, determination of origin

of goods etc.

Regulations under Customs Act: Under section 157 of Customs Act, 1962, Board

(CBE&C) has been empowered to make regulations, consistent with provisions of the Act, to

carry out the purposes of the Act. Various regulations have been framed under these powers.

Major among these: Project Import Regulations, 1986: procedures for project imports;

Customs House Agents Licensing Regulations: Regulations of CHA. Other regulations

regarding transhipment of goods, Import and Export report, Import and Export manifest,

manufacture in warehouse, shipping bill and bill of export etc. have been made.

In Sukhdev Singh v. Bhagatram Sardar Singh1, it was held that regulations framed under

statutory provisions would have the force of law.

Notifications under Customs Act- Various sections authorise Central Government to issue

notifications. The main are: section 25(1) to grant or full exemption from duty and section 11

to prohibit import or export of goods.

Board Circulars- CBE&C is empowered u/s 151A of Customs Act to issue, for purpose of

uniformity in classification of goods or with respect to the levy of duty thereon, issue such

instructions and directions to officers of customs and they are required to observed and

follow such orders, instructions and directors of Board. CBE&C issues circulars giving

various instructions/prescribing various procedures etc. Normally, these instructions should

be allowed.

Customs Manual, 2001- Customs Manual, 2001 was released by CBE&C in September,

2001. The Manual gives an overview of Customs Law and Procedures. It is not stated that the

1(1975) 1 SCC 421


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Customs Manual is issued under any provision of Customs Act or Rules. However, normally,

instructions in Customs Manual, 2001 should be followed.

Public Notices- Often, Commissioners of Customs issue Public Notices. Often they just

forward the Board circulars, but sometimes, public notices for local requirements are also

issued.

Nature of Customs Duty

Entry 83 to List I- (Union List) of Seventh Schedule to Constitution reads Duties of customs

including export duties. Thus, import and export duty is a Union subject and power to levy is

derived from Constitution. Section 12 of Customs Act, often called charging section,

provides that duties of customs shall be levied at such rates as may be specified under The

Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported

into, or exported from, India. Section 3 of Customs Tariff Act has also been held as charging

section for levy of CVD.2

Customs duty is payable on replacement of parts provided free of cost during warranty period

even if duty was paid on parts originally supplied.3

Free replacements during warranty period are exempt under notification 80/70- Cus dated 29-

8-1970, if the articles are private personal property of importer. This exemption is not

available to imports of free replacements during warranty of commercial purpose.4

2

Jain Brothers v. UOI, AIR 1999 SC 25503New Video Ltd. v. CC, (1996) 87 ELT 509

4Echjay Industries v. UOI, 1994 (52) ECR 366


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Taxable Event for Import Duty

Goods become liable to import duty or export duty when there is import into, or export from

India. As per section 2(18), export with its grammatical variations and cognate

expressions, means taking out of India to a place outside India.

As per section 2(23), import with its grammatical variations and cognate expressions,

means bringing into India from a place outside India. In Gramophone Company of India v.

Birendra Bahadur Pandey5, it was held that import included goods imported for transit

across to Nepal.

In Indian Airlines v. CC6, Indian Airlines had international flights. After return from

international flight, the fuel (ATF) was used for domestic run. It was held that fuel left in the

fuel tank after termination of international run is import and liable to customs duty.

Section 2(27) of Customs Act defines India as inclusive of territorial waters. Hence, it was

thought that import is complete as soon as goods enter territorial water. Similarly, export is

complete only when goods cross territorial waters. There were conflicting judgments of High

Courts.

Finally, inKiran Spinning Mills v. CC7, it has been held that import is completed only when

goods cross the customs barrier. The taxable event is the day of crossing of customs barrier

and not on the date when goods landed in India or had entered territorial waters. In the case

of goods which are in the warehouse the customs barrier would be crossed when they are

sought to be taken out of the customs and brought to the mass of goods in the country.

5

AIR 1984 SC 66762005 (180) ELT 502

71999 (113) ELT 753


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In Garden Silk Mills Ltd. v. UOI8, it was held that import of goods in India commences when

they enter into territorial waters but continues and is completed when the goods become part

of the mass of goods within the country. The taxable event is reached at the time when the

goods reach customs barrier and bill of entry for home consumption is filled.

Thus, it can be said that mixing up with mass of goods in the countryafter crossing customs

barrier is the taxable eventfor customs duty on imports.

Taxable event in case of warehoused goods

In case of warehoused goods, the goods continue to be in customs bond. Hence, import

takes place only when goods are cleared from the warehouse.9 In Kiran Spinning Mills v.

CC10, it was held that taxable event occurs when goods cross customs barrier and not when

goods land in India or enter territorial waters.

This was followed in LML v. CCE11. In this case, there was no Special Additional Duty

(SAD) when goods were imported, but SAD was imposed later. It was held that SAD is

payable when goods are cleared from customs bonded warehouse as removal from customs

bonded warehouse is the taxable event and rate of duty as applicable on that day applies.

This was also followed inMangalore Refinery v. CCE12, where it was held that customs duty

is payable only on the quantity which is cleared from warehouse and not the quantity which

had entered the territorial waters.

In State Trading Corporation v. State of Tamil Nadu13, it was held that if documents of title

of goods are transferred before clearance of goods from customs bonded warehouse, it is

81999 AIR SCW 4150

9UOI v. Apar P. Ltd., 1999 AIR SCW 2676

10

1999 (113) ELT 753112002 (142) ELT 273

122002 (141) ELT 247


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sale during import and hence exempt from sales tax, as sale takes place before goods cross

frontier of India.

Taxable event when goods cross customer barrier

In CC v. HPCL14, it was held that the bulk liquid cargo would be considered to have crossed

customs barrier only when they are pumped into shore tanks. That being the taxable event,

duty is leviable only on that quantity. The view has been accepted by the department. It has

been confirmed that the duty will be payable on the basis of shore tank receipt i.e. dip

measurement in tanks on shore into which oil is pumped from tanker; and not on the basis of

usage survey report i.e. usage quantity at the port of discharge on board the vessel, as

determined by independent surveyors in presence of customs officers.

132003 (129) STC 294 (Mad HC DB).

142000 (121) ELT 109.


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Types of Custom Duties

Basic Customs Duty

Basic customs duty is levied under Section 12 of Customs Act. Normally, it is levied as a

percentage of Value as determined under section 14(1). The rates vary for different items, but

general rate on non-agricultural goods at present is 12.5% w.e.f. 1-3-2006. To protect Indian

agriculture and Indian automobile sector, duties on some articles is higher. Duty on liquor is

also high.

Additional Customs Duty u/s 3(1) (CVD)

Additional Customs Duty is often called Countervailing Duty(CVD). Additional duty is

levied under section 3(1) of Customs Tariff Act. Thus, it is not a duty under the Customs

Act.15However, it is duty of customs.16It was also held that additional customs duty is

not called as Countervailing duty though it may result in serving such purpose for

manufacture of such articles in India.

As per section 3(7) of the Customs Tariff Act, this duty is in addition to any other duty

imposed under Customs Act or any other law. As per section 3(8), all provisions of Customs

Act and Rules, including those relating to drawbacks, refunds and exemptions will apply to

this duty.

Calculation of CVD

CVD is equal to excise duty levied on a like product manufactured or produced in India. If

like article is not produced or manufactured in India, the excise duty that would be leviable

on that article had it been produced in India as the base. If the product is leviable with

15CC v. Indian Organic Chemicals, 2000 AIR SCW 1633

16CC v. Presto Industries, 2001 AIR SCW 828


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different rates, then highest rate among those rates is to be considered. The duty is leviable on

value of goods plus customs duty payable.

Mode of calculation of CVD

CVD is payable on assessable value (as determined u/s 14(1) of Customs Act or tariff value

fixed u/s 14(2) of Customs Act) plus basic customs duty chargeable u/s 12 of Customs Act

plus any other sum chargeable on that article under any law in addition to, and in the same

manner as duty of customs.

However, while calculating CVD, following duties are not to be considered- Safeguard duty

u/ss 8B and 8C of Customs Tariff Act, Countervailing duty, if any, u/s 9 of Customs Tariff

Act, Anti dumping duty payable u/s 9A of Customs Tariff Act, Customs portion of education

cess on imported goods, CVD itself which is payable u/s 3(1) Additional Duty payable u/s

3(3) and 3(5) of Customs Tariff Act.

In other words, CVD is payable on assessable value plus basic customs duty plus NCCD of

customs. While calculating CVD, Anti Dumping Duty, education cess of customs and

safeguard duty is not required to be considered.

As per notification No. 77/2003-Cus dated 14-5-2003, while calculating CVD, NCCD of

excise is not required to be considered. In other words, while calculating CVD, only basic

excise duty and education cess of excise should be considered and not NCCD of Central

Excise.


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Nature of CVD

In S. K. Pattnaik v. State of Orissa17, it was observed that countervailing duty is imposed

when excisable articles are imported, in order to counter balance the excise duty, which is

leviable on similar goods if manufactured within the State. This statement was further

approved in the case of Aristrocrat Agencies v. Excise Superintendent18. In Shroff & Co. v.

Municipal Corporation19, it was observed that CVD is imposed so as to place the home

producer on an equal footing with the importer of foreign goods.

In Hyderabad Industries Ltd. v. UOI

20

, it has been held that section 3(1) is the charging

section for levy of additional customs duty(CVD). It was also held that this duty is levied to

counter balance the excise duty leviable on a like article manufactured or produced in India,

to provide for a level playing field for present or future manufacturers in India. In Jain

Brothers v. UOI21, both section 3(1) and 3(2) have been held as charging sections.

Rationale behind CVD is to safeguard interests of manufacturers in India and to provide level

playing field to indigenous producers or manufacturers22.

CVD is leviable under section 3(1) Customs Tariff Act, while customs duty is levied u/s 12

of Customs Act. Thus, there are two separate independent duties under different statutes.

However, u/s 3(8) of Customs Tariff Act, the provisions of Customs Act regarding recovery,

payment, drawbacks, exemption, refunds, appeals etc. are applicable to Additonal Customs

Duty (CVD). Though excise duty is considered for measurement or quantifying CVD

payable, it is not excise duty.23

172000 AIR SCW 41: AIR 2000 SC 612: 115 ELT 9: 2001(1) SCC 413

182000 AIR SCW 4454

19(1989) 72 STC 150(SC)

20AIR SCW 1449: AIR 1999 SC 1847: 1999(5) SCC 15: 108 ELT 321

21

112 ELT 5: AIR 1999 SC 2550: 1999 AIR SCW 271822TTK-LIG Ltd. v. CC, 2006(193) ELT 169

23Mohd. Zackria v. State of Tamil Nadu, (1999) 115 STC 697


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Additional duty is charged on value plus basic customs duty. Thus, effectively, duty is

charged on duty. Validity of this provision has been upheld inJain Brothers v. UOI24.

Education Cess on customs duty

An education cess of customs has been imposed on imported goods w.e.f. 9-7-2004. The cess

will be 2% of the aggregate duty of customs. However, education cess will not be payable on

(a) Special CVD payable u/s 3(5) of Customs Tariff Act (aa) Safeguard duty under sections

8B and 8C (b) Countervailing duty under section 9 and (c) Anti Dumping Duty under section

9A of the Customs Tariff Act and (d) Education cess on imported goods.

Section 94 of Finance (No. 2) Act, 2004 states that education cess on customs duty is a duty

of customs. As per section 94(3) of Finance (No. 2) Act, 2004, all provisions of Customs

Act, and rules and regulations made under that Act will apply to education cess on imported

goods, including those relating to refund, exemption from duty and imposition of penalty.

Additional duty under Section 3(3)

In addition to Additional Duty under section 3(1) of Customs Tariff Act which is chargeable

on all goods, further additional duty can be levied by Central Government to counter-balance

excise duty leviable on raw materials, components etc. similar to those used in production of

such article.

As per section 3(7) of Customs Tariff Act, this duty is in addition to any other duty imposed

under Customs Act or any other law. As per section 3(8), all provisions of Customs Act and

Rules, including those relating to drawbacks, refunds and exemptions will apply to this duty.

This levy has use when goods manufactured indigenously is exempt from excise duty. In

such case, the indigenous manufacturer will be loser to the extent of duty paid on inputs. This24

112 ELT 5


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or Tariff Value determined u/s 14(2) of Customs Act (ii-a) Basic customs duty payable u/s 12

of Customs Act and (ii-b) Any sum chargeable on that article in the same manner as duty of

customs.

However, value will not include following- (a) Additional Duty payable u/s 3(5), (b)

Safeguard duty payable u/ss 8B and 8C, (c) Countervailing duty payable u/s 9 and (d) Anti

dumping duty u/s 9A of Customs Tariff Act.

Countervailing duty on subsidized goods

If a country or territory pays any subsidy to its exporters for exporting goods to India, Central

Government can impose countervailing duty upto the amount of such subsidy under Section 9

of Customs Tariff Act. If the amount of subsidy cannot be ascertained, provisional duty can

be collected and after final determination, difference may be refunded. Such imposition

should be by way of a notification.

Anti Dumping Duty

Often, large manufacturers from abroad may export goods at very low prices compared to

prices in his domestic market. Such dumping may be with intention to cripple domestic

industry or to dispose of their excess stock. This is called dumping and is an unfair trade

practice. In order to avoid such dumping and protect domestic industry, Central Government

can impose, under section 9A of Customs Tariff Act, anti dumping duty, if the goods are

being sold at less than its normal value. Levy of such anti-dumping duty is permissible as per

WTO agreement. Anti dumping action can be taken only when there is an Indian industry

producing like articles.


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In Shenyang Mastusushita v. Exide Batteries25, it was observed, Principle behind anti-

dumping laws is to protect the domestic industry from being adversely affected by import of

goods at export prices which are below the normal value of the goods in the domestic market

of the exporter. The duty is calculated on the margin of dumping which is the difference

between the export price and the normal value.

However, in Reliance Industries Ltd. v. Designated Authority26, it was observed that the

concept of anti-dumping is founded on the basis that a foreign manufacturer sells below the

normal value in order to destabilize domestic manufacturers. Dumping, in short term, may

give some transitory benefits to local customers on account of lower priced goods, but in the

long run, destroys the local industries and may have a drastic effect on prices in the long run.

In the last para of the judgment Supreme Court observed that national aim must be to create

India as a modern, highly industrialized, powerful State. Anti dumping law is a salutary

measure which prevents destruction of our industries.

In SS Enterprise v. Designated Authority27, it was held that purpose being imposition of anti-

dumping duty is to curb unfair trade practices resorted to by exporters of a particular country

of flooding the domestic markets at rates which are lower than the rate at which the exporters

normally sell the same or like goods in their own countries, so as to cause or be likely to

cause injury to domestic market. The levy of dumping duty is a method recognized by WTO

which seeks to remedy the injury and at the same time balances the rights f exporters from

other countries to sell their products within the country with the interest of domestic markets.

Thus the factors to constitute dumping is (i) an import at prices which are lower than the

normal value of goods in exporting country, (ii) the exports must be sufficient to cause injury

25

2005 (181) ELT 320262006 (202) ELT 23

27AIR 2005 SC 1527


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to domestic industry. However, negligible quantity of imports would not be sufficient to

cause such injury.

Provisional anti-dumping duty

Pending determination of margin of dumping, duty can be imposed on provisional basis.

After dumping duty is finally determined, Central Government can reduce such duty and

refund duty extra collected than that finally calculated. Such duty can be imposed upto 90

days prior to date of notification, if there is history of dumping which importer was aware or

where serious injury is caused due to dumping.

InNitco Tiles Ltd. v. Designated Authority28, validity of provisional duty had expired. Later,

definitive anti-dumping duty was imposed with retrospective effect. It was held that anti-

dumping is payable in respect of imports during the intermediate period. It was also observed

that provisional duty is not a provisional deposit, but is a duty imposed on provisional

estimate of normal value and margin of dumping.

Anti-dumping duty and Safeguard Duty is not required to be considered while calculating

CVD. Education cess is not payable on anti-dumping duty. Anti-dumping duty is not

applicable for imports by EOU or SEZ units, unless it is specifically made applicable in the

notification imposing anti-dumping duty.

Margin of Dumping

Margin of dumpingmeans the difference between normal value and export price (i.e. the

price at which these goods are exported). [section 9A(1)(a)].

Normal Value means comparable price in ordinary course in trade, for like article, when

destined for consumption in the exporting country or territory. If such price is not available or

282006 (193) ELT 17


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not comparable (a) comparable representative price of like article exported from exporting

country or territory to appropriate third country or (b) cost of production plus reasonable

profit, can be considered. [section 9A(1)(c) of Customs Tariff Act]. The normal value is to

be determined as per rules.

InReliance Industries Ltd. v. Designated Authority29, it was held that normal value are not

exporter specific but exporting country specific. Once dumping of specific goods from a

country is established, dumping duty can be imposed on all exports of those goods from that

country in India, irrespective of the exporter. Rate of duty may vary from exporter to exporter

depending upon the export price.

Export Price means the price at which goods are exported. If the export price is unreliable

due to association or compensatory arrangement between exporter and importer or a third

party, export price can be constructed on the basis of price at which the imported articles are

first sole to independent buyer or according to rules made for determining margin of

dumping.

Margin of dumping is determined on the basis of weighted average of normal value and the

export price of product under consideration.

In Volznsky Pipe Plant v. Designated Authority30, it was held that domestic price of foreign

exporter in his country should be considered, provided it is not below per unit cost of

production plus administrative selling and general cost.

In case of non-market economy countries, normal value can be determined on basis of price

in a market economy third country, price paid in India for a like product or any other

reasonable basis.

292006 (202) ELT 23

302001 (129) ELT 208


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As per para 8 of Annexure I to Anti-Dumping Duty Rules, non-market economy means any

country which the designated authority determines as not operating on market principles of

cost or pricing structure, so that the sales in such country do not reflect the fair value of

merchandise. Designated Authority will consider various aspects to determine whether the

country is a market economy.

InExide Industries v. Designated Authority31, it was held that in case of units in non-market

economy, they have to establish that they are run according to market principles.

In Amijal Chemicals v. Designated Authority

32

, it was held that domestic price in China

cannot be considered as Chine PR is not having a free economy. It was also held that cost of

production cannot be calculated at 100% capacity utilization, as no domestic industry can

survive if its 100% production is sold at cost price.

In Universal Chemicals v. Designated Authority33, it was held that if the foreign exporter

does not provide full and reliable data, he should be treated as non-cooperating exporter and

normal value should be determined by designated authority in terms of norms applicable to

no-cooperating exporters.

InBirla Ericson Ltd. v. Designated Authority34, it was held that there can be different normal

values in relation to different producers in the same country.

In Pig Iron Manufacturers Association v. Designated Authority35, it was held that anti-

dumping duty is exporter specific and hence duty can vary from exporter to exporter,

depending on dumping margin. It was also observed that cost accounts maintained by

312003 (155) ELT 35

322000 (119) ELT 338

33

2002 (146) ELT 449342001 (127) ELT 363

352000 (116) ELT 67


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exporters from China do not satisfy the generally accepted accounting principles and do not

clearly show correct costs of various elements. The prices are not economic market prices.

In Jai Corp. Ltd. v. Designated Authority

36

, it was held that anti-dumping duty being

manufacturer specific, normal value for one manufacturer cannot be based on information

supplied by other cooperative exporters.

In Oswal Woollen Mills v. Designated Authority37, it was held that since anti-dumping duty is

exporter specific, it can be imposed even if goods imported through a trading house,

depending on original producer abroad.

It should be noted that dumping is with respect to domestic price in exporting country and

not the importing country e.g. if goods are imported in India from Japan, price ruling in

Japan of that product will be relevant and not price of similar product ruling in India. Thus, if

prices are high in India due to inefficiency or other reasons, dumping duty cannot be imposed

simply because manufacturers in Japan are more competent and efficient and can produce

goods at lower costs.38

In SS Enterprise v. Designated Authority39, it was held that if it is found that if price

difference between export price and its normal value is less than 2% or when the volume of

dumped imports is less than 3% of total imports of like article, the de miniimus rule applies

and anti-dumping duty cannot be imposed.

The anti-dumping duty will be dumping margin or injury margin, whichever is lower. Injury

margin means difference between fair selling price of domestic industry and landed cost of

imported product. The landed cost will include landing charges of 1% and basic customs

362000 (116) ELT 356

37

2000 (118) ELT 27538H&R Johnson (India) Ltd. v. UOI, 2004 (177) ELT 22

39AIR 2005 SC 1527


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duty. Thus, only anti-dumping duty enough to remove injury to domestic industry can be

levied.

InReliance Industries Ltd. Designated Authority

40

, it was held that non-injurious price has to

be calculated for domestic industry as a whole and not in respect of any particular company

or enterprise. Hence, even if product is captively consumed by Indian manufacturer, transfer

price of inputs is to be considered and not actual cost of captive consumption. It was

observed that there has to be a single NIP for a product and not several NIP for the same

product. NIP is not exporter specific.

In Alkali Manufacturers Association on India v. Designated Authority41, Designated

Authority had calculated domestic price on basis of profit of 22% of investment. It was held

that this is reasonable.

InPuneet Resins v. Designated Authority42, it was held that landed value will be on the basis

of actual duty payable i.e. by excluding duties exempted by various notifications.

In Korea Kunho Petrochemical v. Designated Authority43, it was held that while deciding

injury margin, a sound appreciation based on relevant criteria, volume effect and price effect

of dumped imports are of vital importance.

In Lubrizol (India) v. Designated Authority44, imposition of anti-dumping duty was upheld

when landed price of imported goods was below non-injurious price.

InPuneet Resins v. Designated Authority45, it was observed, There are three forms of fixing

anti-dumping duty- (i) Fixed Duty- difference between normal value and export price or

402006 (202) ELT 23

412006 (194) ELT 161

42(2004) 170 ELT 274

43

2003 (155) ELT 265442005 (187) ELT 402

45(2004) 170 ELT 274


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difference between the non-injurious price and landed cost of the article, whichever is lower

(ii) Ad valorem duty- Expressed as percentage of CIF value of imported goods and (iii)

Variable duty- Based on reference price which will be export price during period of

investment plus customs duty plus the fixed duty as determined. The anti-dumping duty

payable on any consignment will be the difference between reference price so determined

and the landed value of the consignment in question. Anti-dumping duty can be levied by

adopting any one of the form.

Dumping duty for WTO countries

Section 9B of Customs Tariff Act provides restrictions on imposing duties in case of imports

from WTO countries or countries given Most Favoured Nation by an agreement. Dumping

duty can be levied on import from such countries, only if central Government declares that

import of such articles in India causes mater injury to industry established in India or

materially retards establishment of industry in India.

Injury to domestic industry will be considered on basis of volume effect and price effect on

Indian industry. There must be causal link between material injury being suffered by dumped

articles and the dumped imports.

In SS Enterprise v. Designated Authority46, it was held that it is found that if the volume of

dumped imports is less than 3% of total imports of like article, the de miniimus rule applies

and anti-dumping duty cannot be imposed.

In Nippon Zeon Co. Ltd. v. Designated Authority47, it was held that when material injury is

caused to domestic industry and causal link between dumping and material injury to Indian

domestic industry established, imposition of anti-dumping duty is justified.

46AIR 2005 SC 1527


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InBirla Periclase v. Designated Authority48, it was held that as per rule 11 of Anti Dumping

Rules, it is a pre-requirement that import of such article in India causes or threatens material

injury to any established industry in India or retards establishment of any industry in India. In

absence of material injury to industry in India and casual link with imports, anti-dumping

duty is not permissible.

InIndian Spinners Association v. Designated Authority49, it was held that injury to domestic

industry can be considered as preliminary issue. If there was no injury to domestic industry,

other aspects need not be gone into, as dumping duty cannot be imposed in such cases.

InRishiroop Polymers Pvt. Ltd. v. Designated Authority50, it was held that imports from all

countries should be cumulated together to determine the injury to domestic industry, as is

permissible under Determination of Injury Rules.

If certain grade of goods is not manufactured in India, there is no justification for imposing

anti-dumping duty on such goods. Imposition of minimum anti-dumping duty is not

permissible in law.51

Gains to other sections not considered

In India, only injury to concerned local industry is considered, and protection is given to

them, but gains to other industry and economy in general due to availability of imports at

lower prices are not considered, i.e. welfare of society at large is not taken into account. This

principle is adopted in Europe and in certain cases, dumping duties were not imposed, even

when dumping was established, considering that public at large is being benefited.

471997 (96) ELT 126

482000 (116) ELT 336

49

2004 (170) ELT 144502000 (119) ELT 157

512000 (118) ELT 275


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Imports at lower prices not necessarily against public interest

In Haridas Exports v. All India Float Glass Mfrs. Association52, it was held that Public

interest does not necessarily mean interest of only the industry. Indian importer obtaining

goods at a lower price does not contravene any law. He has obtained a good bargain. Indian

industry has to gear up so as to meet the challenges from abroad.

InReliance Industries Ltd. v. Designated Authority53, it was observed that the concept of anti-

dumping is founded on the basis that a foreign manufacturer sells below the normal value in

order to destabilize domestic manufacturers. Dumping, in short term, may give some

transitory benefits to local customers on account of lower priced goods, but in the long run,

destroys the local industries and may have a drastic effect on prices in the long run. In the last

para of the judgment Supreme Court observed that national aim must be to create Indian as a

modern, highly industrialized, powerful State. Anti dumping law is a salutary measure which

prevents destruction of our industries.

Safeguard Duty

Central Government is empowered to impose safeguard duty on specified imported goods if

Central Government is satisfied that the goods are being imported in large quantities and

under such conditions that they are causing or threatening to cause serious injury to domestic

industry. Such duty is permissible under WTO agreement. The only condition under WTO is

that it should not discriminate between imports from different countries having Most

Favoured Nation (MFN) status.

Safeguard duty is a step in providing a need based protection to domestic industry for a

limited period, with ultimate objective of restoring free and fair competition. Safeguard duty

522002 AIR SCW 3077

532006 (202) ELT 23


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is targeted at remedying or preventing serious injury to domestic industry with a view to

making it competitive and to enable it to stand on its own.

Government has to conduct an enquiry and then issue a notification. The duty, once imposed,

is valid for four years, unless revoked earlier. This can be extended by Central Government,

but total period of safeguard duty cannot be more than ten years. The duty is in addition to

any other customs duty being imposed on the goods.

In case of imports from any developing country, safeguard duty can be imposed if imports

from that country exceeds 3%. If the Article originates from more than one developing

countries and if imports from each developing country is less than 3%, safeguard duty can be

imposed if imports from all such developing countries taken together exceeds 9% of total

imports of that Article in India.

In United Phosphorous v. Director General (Safeguard)54, it was held that even if Director

General finds serious domestic injury and casual link with imports, he is not bound to

recommend imposing safeguard duty, as he has to consider other factors.

Safeguard duty is not applicable for imports by EOU or SEZ units, unless it is specifically

made applicable in the notification imposing anti-dumping duty. Education cess is not

payable on safeguard duty payable u/s 8B.

NCCD of Customs

A National Calamity Contingent Duty (NCCD) of customs has been imposed vide section

134 of Finance Act, 2003, on pan masala, chewing tobacco and cigarettes. Further, NCCD of

customs of 1% has been imposed on PFY, motor cars, multi utility vehicles and two

wheelers. NCCD of Rs.50 per ton is imposed on domestic crude oil. For purpose of

542000 (118) ELT 326 (Del DB)


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calculation on NCCD, value will be same as calculated for purpose of CVD u/s 3(2) of

Customs Tariff Act.

As per notification No. 77/2003- Cus dated 14-5-2003, while calculating CVD, NCCD of

excise is not required to be considered. In other words, while calculating CVD, only basic

excise duty and education cess of excise should be considered and not NCCD.

Export Duty

Since Government actively encourages export, there is export duty on very few products.

Articles on which export duty is leviable are given in second schedule to Customs Tariff. At

present, 25% export duty is imposed on luggage leather, 15% Export Duty is levied only on

hides, skins and leather, and duty of 10% is levied on snake skins and lamb skins. There is no

export duty on any other product.

Section 8 of Customs Tariff Act empowers Central Government to amend second schedule to

Customs Tariff and increase or impose export duty on any product, by issue of a notification.

Such notification should be placed before Parliament within 15 days after it assembles.

Cess

Education cess is levied on all imported goods. Similarly, is cess is leviable on goods

manufactured or produced in India, corresponding cess will be payable if similar goods are

imported. Besides, cess is leviable on export of some specific goods.

Distinction between cess and duty is that cess is a charge levied and collected for specified

purposes, while duty is for general revenue of Government. Duty is for general revenue

pruposes, while cess is for a definite purpose. Cess may be on production of goods or on

export of goods.


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Cess on export of tobacco (under Tobacco Cess Act), coffee (under Coffee Act), agricultural

products (under Agricultural & Processed Foods Export Cess Act, 1985), cess on marine

products (under Marine Products Export Development Authority Act) ans spices (under

Spices Cess Act) has been abolished w.e.f. 1-6-2006 vide Cess Laws (Repealing and

Amending) Act, 2006. Cess on these products was collected as duty of Customs. This was

hindering smooth flow of exports and making Indian products costly in international market.

Cess is levied on indigenous manufactured goods like sugar, tea, jute, beedis, automobiles,

tobacco, coffee, rubber, paper and paper board, iron ore, limestone and dolomite, manganese

ore, chrome ore and coking and non-coking coal. This is recoverable as excise duty. If these

are imported, corresponding cess will be payable.55

Special Additional Duty of Customs

A special additional duty (SAD) @ 4% was payable vide section 3A of Customs Tariff Act.

The duty was introduced w.e.f. 2nd

June 98, but has been completely withdrawn w.e.f. 9-1-

2004 vide notification no. 6/2004- Cus dated 8-1-2004. The section 3A of Customs Tariff Act

has been omitted w.e.f. 13-5-2005.

55TTK-LIG Ltd. v. CC, 2006 (193) ELT 169


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BIBLIOGRAPHY

Books referred:

V.S. Datey,Elements of Central Excise and Customs Law, Taxmann Publications.

V.S. Datey, Customs Law: Practice and Procedures, 4th Edition, Taxmann

Publications.

V.S. Datey,Indirect Taxes: Law and Practice, 27thEdition, Taxmann Publications.

Websites referred:

http://www.custom-duty.com/types_custom_duties.html

http://business.gov.in/taxation/types_customsduties.php

http://wirc-icai.org/wirc_referencer/indirect%20tax/Customs%20Act.htm

Types of Custom Duties

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