CHANGES IN CUSTOMS ACT BROUGHT BY THE FINANCIAL (NO.2) BILL, 2019

[Mr. M. GOVINDARAJAN]

Delivery of departure manifest or export manifest or export report.

Clause 69 of the Finance (No.2) Bill, 2019 (‘Bill’ for short) substituted section 41(1) of the Customs Act, 1962 (‘Act’ for short) except the proviso to that section.  The newly substituted section 41(1) of the Act provides that the person-in-charge of a conveyance carrying export goods or imported goods or any other person as may be specified by the Central Government, by notification, shall, before departure of the conveyance from a customs station, deliver to the proper officer in the case of a vessel or aircraft, a departure manifest or an export manifest by presenting electronically, and in the case of a vehicle, an export report, in such form and manner as may be prescribed and in case, such person-in-charge or other person fails to deliver the departure manifest or export manifest or the export report or any part thereof within such time, and the proper officer is satisfied that there is no sufficient cause for such delay, such person-in-charge or other person shall be liable to pay penalty not exceeding ₹ 50,000/-.

New Chapter XII B

Clause 70 of the Bill proposed to insert a new Chapter XII B containing section 99B  for the purpose of verification of identity and compliance. 

Ascertaining compliance of provisions

New section 99B(1) provides that The proper officer, authorized in this behalf by the Principal Commissioner of Customs/the Commissioner of Customs, may, for the purposes of ascertaining compliance of the provisions of this Act or any other law for the time being in force, require a person, whose verification he considers necessary for protecting the interest of revenue or for preventing smuggling, to do all or any of the following-

• undergo authentication, or furnish proof of possession of Aadhaar number, in such manner and within such time as may be prescribed;
• submit such other document or information, in such manner and within such time as may be prescribed.

Where such person has not been assigned the Aadhaar number, or where so assigned, but authentication of such person has failed due to technical reasons or for reasons beyond his control, then, he shall be provided an opportunity to furnish such other alternative and viable means of identification in such form and manner and within such time as may be prescribed.

Non applicability

Section 99B (2) provides that the provisions of sub-section (1) shall not apply to such person or class of persons as may be prescribed.

Failure to comply with the provisions

Section 99B(3) provides that where the Principal Commissioner of Customs or the Commissioner of Customs comes to the conclusion, based on reasons to be recorded in writing, that the person referred to in sub-section (1) has–

• failed to comply with the requirements of the said sub-section or submitted incorrect documents or information under the said sub-section, he may, by order, suspend–

1. clearance of imported goods or export goods;
2. sanction of refund;
3. sanction of drawback;
4. exemption from duty;
5. licence or registration granted under this Act; or
6. any benefit, monetary or otherwise, arising out of import or export

relating to such person, subject to such conditions as may be prescribed;

• failed authentication as required under the said sub-section, he may, by order, direct that such person shall not have the benefit of any of the items specified in sub-clauses (a) to (f) as above.

Order of suspension

The order of suspension under sub-section (3) shall remain in force until the person concerned complies with the requirements of sub-section (1) or furnishes correct document or information.

 Power to screen or X-ray bodies of suspected persons

Clause 71 of the bill proposed to substitute section 103 (1) which provides that Where the proper officer has reason to believe that any person referred to in section 100(2) has any goods liable to confiscation secreted inside his body, he may detain such person and shall,–

•  with the prior approval of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as soon as practicable, screen or scan such person using such equipment as may be available at the customs station, but without prejudice to any of the rights available to such person under any other law for the time being in force, including his consent for such screening or scanning, and forward a report of such screening or scanning to the nearest magistrate if such goods appear to be secreted inside his body; or
• produce him without unnecessary delay before the nearest magistrate.

Cognizable offences

Section 104 deals with the power to arrest by the Customs officers.  Section 104(4) provides the list of cognizable offences.  Section 104(4) provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973 any offence relating to-

• Prohibited goods; or
• evasion or attempted evasion of duty exceeding fifty lakh rupees,

shall be cognizable.

Clause 72(ii)(B) of the Bill proposed two additional offences as cognizable offences under section 104(4) which are-

• fraudulently availing of or attempting to avail drawback or any exemption from duty provided under this Act, where the amount of drawback or exemption from duty exceeds ₹ 50 lakhs; or
• fraudulently obtaining an instrument for the purposes of this Act or the Foreign Trade (Development and Regulation) Act, 1992, and such instrument is utilized under this Act, where duty relatable to such utilization of instrument exceeds ₹ 50 lakhs;

Non bailable offences

Section 104(6) provides the list of non bailable offences which are-

• evasion or attempted evasion of duty exceeding fifty lakh rupees; or
• prohibited goods notified under section 11 which are also notified under  section 135 (1)(i)(c); or
•  import or export of any goods which have not been declared in accordance with the provisions of this Act and the market price of which exceeds ₹ 1 crore; or
• fraudulently availing of or attempt to avail of drawback or any exemption from duty provided under this Act, if the amount of drawback or exemption from duty exceeds ₹ 50 lakhs.

Clause 72 (iii)(B) of the bill proposed to add one more non bailable offence as-

• fraudulently obtaining an instrument for the purposes of this Act or the Foreign Trade (Development and Regulation) Act, 1992, and such instrument is utilized under this Act, where duty relatable to such utilization of instrument exceeds ₹ 50 lakhs.

Definition of ‘instrument’

Clause 72(iv) of the Bill proposed to insert an explanation after section 104(7) to define the term ‘instrument’.  The term ‘instrument’ is defined as having the same meaning as assigned to it in Explanation 1 to section 28AAA.

Seizure of goods, documents and things

Section 110 (1) of the Act provides that if the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods.  The proviso to this section provides that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

Clause 73(i) proposed to insert furthermore two provisions after the proviso to section 110(1).  The second proviso provides that where it is not practicable to remove, transport, store or take physical possession of the seized goods for any reason, the proper officer may give custody of the seized goods to the owner of the goods or the beneficial owner or any person holding himself out to be the importer, or any other person from whose custody such goods have been seized, on execution of an undertaking by such person that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

The third proviso provides that where it is not practicable to seize any such goods, the proper officer may serve an order on the owner of the goods or the beneficial owner or any person holding himself out to be importer, or any other person from whose custody such goods have been found, directing that such person shall not remove, part with, or otherwise deal with such goods except with the previous permission of such officer.

Attachment of bank accounts

Clause 73(ii) of the Bill proposed to insert sub-section (5).  According to this new section where the proper officer, during any proceedings under the Act, is of the opinion that for the purposes of protecting the interest of revenue or preventing smuggling, it is necessary so to do, he may, with the approval of the Principal Commissioner of Customs or Commissioner of Customs, by order in writing, provisionally attach any bank account for a period not exceeding 6 months. The Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding 6 months and inform such extension of time to the person whose bank account is provisionally attached, before the expiry of the period so specified.

Penalty for obtaining instrument by fraud

Clause 75 of the Bill proposed to insert new section 114AB.  This section provides that where any person has obtained any instrument by fraud, collusion, willful misstatement or suppression of facts and such instrument has been utilized by such person or any other person for discharging duty, the person to whom the instrument was issued shall be liable for penalty not exceeding the face value of such instrument.

Penalty for contravention etc., not expressly mentioned

Section 117 provides that any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding ₹ 1 lakh.

Clause 76 of the Bill proposed to enhance the penalty amount from ₹ 1 lakh to ₹ 4 lakhs.

Evasion of duty or prohibition

Section 135 (1)(d) of the Act provides that without prejudice to any action that may be taken under this Act, if any person  fraudulently avails of or attempts to avail of drawback or any exemption from duty provided under this Act in connection with export of goods, he shall be punishable. 

Clause 78(b) of the Bill proposed to add clause (e) after the clause (d) which is - obtains an instrument from any authority by fraud, collusion, willful misstatement or suppression of facts and such instrument has been utilized by such person or any other person.

Clause 78 (c)(ii) of the bill proposed to insert item no. E to the section 135 (1)(d)(i) as – “obtaining an instrument from any authority by fraud, collusion, willful misstatement or suppression of facts and such instrument has been utilized by any person, where the duty relatable to utilization of the instrument exceeds fifty lakh rupees,”.

Power to make rules

Clause 80(i) of the Bill proposed to give powers to the Central Government to make rules in new clause (ka) of Section 157 - the manner of authentication and the time limit for such authentication, the document or information to be furnished and the manner of submitting such document or information and the time limit for such submission, the form and the manner of furnishing alternative means of identification and the time limit for furnishing such identification, person or class of persons to be exempted and conditions subject to which suspension may be made, under Chapter XIIB.

Penalty for contravention of rules and regulations

Section 158 (2)(ii) provides that any person who contravenes any provision of a rule or regulation or abets such contravention or who fails to comply with any provision of a rule or regulation with which it was his duty to comply, shall be liable to a penalty which may extend to ₹ 50,000/-.

Clause 81 of the bill proposed to enhance the penalty amount from ₹ 50,000/- to ₹ 2 lakhs.