BUDGETARY CHANGES IN CUSTOMS

[Mr. M. GOVINDARAJAN]

Chapter IV of the Finance (No.2) Bill, 2009 ('bill' for short) deals with Indirect taxes. Clause 84 to Clause 92 of the bill deals with the amendments brought in customs.

Refund of Import Duty:

Clause 84 of the bill seeks to insert a new section 26A in the Customs Act to provide for refund of import duty paid at the time of clearance for home consumption on imported goods capable of being easily identified if, the goods have been found to be defective or otherwise not in conformity with the specifications agreed upon between the importer and the supplier of goods, the goods are identified to the satisfaction of the officer of customs, the goods have been exported or the importer has relinquished his title to the goods, etc., so as to comply with the standards under the International Convention on the Simplification and Harmonization of Customs Procedure (Revised Kyoto Convention).

The newly inserted Sec. 26A provides as follows:

26A (1) Where on the importation of any goods capitals of being easily identified as such imported goods, any duty has been paid on clearance of such goods for home consumption, such duty shall be refunded to the person by whom or on whose behalf it was paid if-

(a) the goods are found to be defective or otherwise not in conformity with the specifications agreed upon between the importer and the supplier of goods:

Provided that the goods have not been worked, repaired or used after importation except where such use was indispensable to discover the defects or non conformity with the specifications;

(b) the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported;

(c) the importer does not claim drawback under any other provisions of this Act; and

(d) (i) the goods are exported; or

(ii) the importer relinquishes his title to the goods and abandons them to customs; or

(iii) such goods are destroyed or rendered commercially valueless  in the presence of then proper officer,

in such manner as may be prescribed and within a period not exceeding thirty days from the date on which the proper officer makes an order for the clearance of imported goods for home consumption under Section 47:

Provided that the period of thirty days may, on sufficient cause being show, be extended by the Commissioner of Customs for a period not exceeding three months:

Provided further that nothing contained in this section shall apply to the goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force.

(2) An application for refund of duty shall be made before the expiry of six months from the relevant date in such form and in such manner as may be prescribed.

Explanation - For the purpose of this sub-section, 'relevant date' means-

a) In cases where the goods are exported out of India, the date on which the proper officer makes an order permitting clearance and lading of goods for exportation under Section 51;

b) In cases where the title to the goods is relinquished, the date of such relinquishment;

c) In cases where the goods are destroyed or rendered commercially valueless, the date of such destruction or rendering of goods commercially valueless.

(3) No refund under sub section (1) shall be allowed in respect of perishable goods and goods which exceeded their shelf life or their recommended storage-before-use period.

(4) The Board may, by notification in the Official Gazette, specify any other condition subject to which the refund under sub section (1) may be allowed.

Authority for Advance Ruling:

Clause 85 of the bill seeks to amend Section 28F of the Customs Act with a view to provide that the Central Government may, by notification, authorize the Authority for Advance Ruling constituted under Section 245-O of the Income Tax Act to act as an Authority under the said Act with the modification that a member from Indian Customs and Central Excise Service who is qualified to be a Member of the Board shall act as the member of the said authority and all the applications and proceedings of pending before the authority constituted under the Customs Act shall be transferred to such notified authority from the date of authorization.   Sub section (2B) of the said section provides that the Authority constituted under sub section (1) shall remain dormant on the issuance of notification under sub section (2A).

Appeal to High Court:

Clause 86 of the bill seeks to amend Section 130 of the Customs Act retrospectively with effect from 1st day of July, 2003 so as to make express provision empowering the High Court to condone the delay in filing appeals beyond the period of one hundred and eighty days, as the Supreme Court and the High Courts in certain judgments have held that the High Courts have no power to condone the delay under the said provision.   The amendment is of procedural nature hence it shall apply to all the appeals and review petition including the application or appeal or review petition, as the case may be, pending before the Supreme Court or High Court.

Application to High Court:

Clause 87 of the bill seeks to amend Section 130A of the Customs Act retrospectively with effect from 1st day of July, 1999 so as to make express provision empowering the High Court to condone the delay in filing of application or memorandum of cross objections, beyond the relevant period as specified in sub sections (1) and (3), as the case may be, as the Supreme Court or the High Court in certain judgments have held that the High Courts have no power to condone the delay under the said provision. The amendment is procedural nature hence it shall apply to all applications, appeals and review petitions including the application or appeal or review petition, as the case may be, pending before Supreme Court or High Court.

Cognition of offence:

Clause 88 of the Bill seeks to amend sub section (3) of section 137 of the Customs Act to-

> Empower the Central Government to make rules to provide for the manner of compounding of offences;

> Exclude compounding of certain serious offences and in certain circumstances by inserting a proviso to that sub section.

The following is the proviso, proposed to be inserted:

"Provided that nothing contained in this sub section shall apply to-

a) A person who has been allowed to compound once in respect of any offence under Section 135 and 135A;

b) A person who has been accused of committing an offence under this Act which is also an offence under any of the following Acts, namely:-

i. The Narcotic Drugs and Psychotropic Substances Act, 1985;

ii. The Chemical Weapons Convention Act, 2000;

iii. The Arms Act, 1959;

iv. The Wild Life (Protection) Act, 1972;

c) a person involved in smuggling of goods falling under any of the following, namely:-

i. Goods specified in the list of Special Chemicals, Organisms, Materials, Equipment and Technology in Appendix to Schedule 2 (Export Policy) of ITC (HS) Classification of Export and Import items of the Foreign Trade Policy, a s amended from time to time, issued under Section 5 of Foreign Trade (Development and Regulation) Act, 1992;

ii. Goods which are specified as prohibited items for import and export in the ITC (HS) Classification of Export and Import items of the Foreign Trade Policy, as amended from time to time, issued under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992;

iii. Any other goods of documents, which are likely to affect friendly relations with a foreign state or are derogatory to national honor;

d) a person who has been allowed to compound once in respect of any offence under this Chapter for goods of value exceeding rupees one crore;

e) a person who has been convicted under this Act on or after the 30th day of December, 2005.

Power to make Rules:

Clause 89 of the bill seeks to amend Section 156 of the Customs Act with a view to empower the Central Government to make rules regarding the manner of compounding.

Power to make regulations:

Clause 90 of the bill seeks to amend Section 157 of the Customs Act with a view to empower the Board to make regulations to provide for the manner of-

> Export of goods, relinquishment of title to the goods and abandoning to customers; and destruction or rendering the goods commercially valueless in the presence of proper officer;

> Filing the application for refund of duty and form thereof.

Validation of certain action taken:

Clause 91 of the bill seeks to give retrospective effect to the notification published vide GSR No. 173(E), dated 17th March, 2009, appointing officers of customs under sub section (1) of section 4 read with sub section (1) of section 5 of the Customs Act and specifying their area of jurisdiction and to validate actions taken by such officers of customs on and from 9th day of Mary, 2000 as if the notification specifying their area of jurisdiction was in force at all material times.

Amendment of Notification:

Clause 92 of the bill seeks to amend the notification number GSR 260(E), dated the 1st May, 2006 retrospectively with effect from the 1st day of May, 2006 so as to-

(a) allow the facility under rule 18 (rebate of duty paid on materials used in the manufacture of resultant product) or sub rule (2) of rule 19 of the Central Excise Rules, 2002 or CENVAT credit under CENVAT credit Rules, 2004, in respect of materials which have been locally procured and have been used in the manufacture of goods exported under the Duty Free Import Authorization Scheme;

(b) provide that, the duty free replenishments in respect of which the facilities stated in (a) above have been availed shall be used for the manufacture of dutiable goods in the factory of the exporter or in the factory of his supporting manufacturer even after the discharge of the system obligation.

(c) provide that the importer shall pay an account equal to the additional duty of customs together with interest at the rate of fifteen per cent per annum from the date of clearance of the said materials, in case:

i. Materials are imported against an authorization transferred by the Regional Authority; or

ii. The imported materials are transferred with the permission of Regional Authority;

But no such amount shall be payable in respect of Authorization issued from1st Mary, 2006 till 31st March, 2007; and

(d) define the word 'dutiable goods' for the purposes of the said notification.