SECTION 22 AND EXAMPLES

1. Law of Customs
Dr. king

2. ABATEMENT OF DUTY ON DAMAGED OR
DETERIORATED GOODS [S. 22]
• Satisfy Asst. CC / Deputy CC
• The term ‘damage’ denotes physical damage
to the goods. This implies that the goods are
not fit to be used for the purpose for which
they are meant.
• ‘Deterioration’ is reduction in quality of goods
due to natural causes.

3. Sl. No. Goods damaged/deteriorated
1. before or during unloading
2. by accident after unloading but before
examination for assessment by the customs
authorities
Provided such accident is
not due to any wilful act,
negligence or default of
the importer, his employee
or agent
3. by accident in warehouse before their actual
clearance from such warehouse
The duty to be charged on the goods shall bear the same proportion to the duty
chargeable on the goods before the damage or deterioration which the value of the
damaged or deteriorated goods bears to the value of the goods before the damage
or deterioration.
Eg: If the value of goods is ` 10,000 and after damage the value is ` 2,000 then duty
payable on ` 10,000/- should be appropriately reduced to 20% (proportion of 2000
to 10000).

4. Valuation of the damaged or
deteriorated goods
• The value shall be:-
– Value ascertained by the proper officer
or
– The proper officer may sell such goods by public
auction/tender or if the importer agrees, in any
other manner and the gross sale proceeds shall be
deemed to be the value of such goods.

5. DENATURING OR MUTILATION OF GOODS [S. 24]
• Empowers C.G. to make rules for permitting to denature/mutilate the
imported goods - ordinarily used for more than one purpose, so as to
render them unfit for one or more of such purpose
• Goods can be used for more than one purpose - duty is leviable on the
basis of its purpose of utilization - then denaturing or mutilation of such
goods is useful
• By denaturing - goods are made unfit for other purposes
• After denaturing process, goods can be used only for one purpose and
accordingly duty can be levied
Eg. Ethyl Alcohol which is not denatured attracts a higher rate of customs
duty as it can be used for industrial as well as human consumption
purposes. Whereas, denatured ethyl alcohol can only be used for
industrial purposes and hence attracts lower rate of duty. Assuming
undenatured ethyl alcohol is imported, but is to be used by the importer
for industrial purposes only, then importer may make a request for
denaturing of Ethyl Alcohol. Certain very bitter chemicals can be added to
denature the spirits as per Rules and once they are denatured, they
attract the lower rate of duty

6. EXEMPTION FROM CUSTOMS DUTY (S. 25)
• Power to grant exemption - CG
• Power to alter duty rate structure - known as - delegated legislation
• Delegated legislation – because - delegated by Parliament to CG.
• Power is always subject to superintendence & check by Parliament
1. General exemption – If CG satisfied that it is necessary in public
interest so to do - notification in Off. Gazette, exempt generally
absolutely or subject to such conditions (to be fulfilled before or
after clearance) - goods of any specified description from the
whole or any part of duty of customs leviable
Note: Where any exemption is granted subject to any condition, such
exemption shall, unless otherwise specified or varied or
rescinded, be valid up to 31st day of March falling immediately
after two years from the date of such grant or variation.

7. 2. Special exemption – If CG satisfied - necessary in public
interest - by special order in each case, exempt from
payment of duty, any goods on which duty is leviable only
under circumstances of an exceptional nature to be stated
in such order.
No duty shall be collected if the amount of duty leviable is
equal / less than Rs. 100
• General & Special exemptions may be granted by providing
for levy of duty on such goods at a rate expressed in a form
or method different from the form or method in which the
statutory duty is leviable
• Duty leviable under such altered form or method shall in no
case exceed the statutory duty leviable under the normal
form or method

8. Reason
• Moral grounds, where the duty should not be
levied at all. Instances
– Where the goods do not reach the Indian soil at all
– Where the goods have reached the Indian soil but are
not available for consumption
– Where the goods get damaged or deteriorated in
transit
• Discretionary provision, where the exemption is
used for controlling the economy and industrial
growth of the country

9. Effective date
• S. 25 - date of effect of the notification will be the date of its issue
for publication in the Official Gazette
General exemption -
Where exemption notification does not mention the date of its
effect - notification comes into effect from the date of its issue by
CG for publication in the Official Gazette
Special exemption –
Through a special order, the above rules do not apply. Special
orders are issued separately for each case and communicated to
the beneficiary directly by the Government. The beneficiary can
claim refund for the period reckoned from the date of its issue.
• S. 25 (2A) empowers the Government to issue clarifications to the
notifications within one year from the issue of the notification and
such clarifications will have retrospective effect

10. EXEMPTION FROM CUSTOMS DUTY ON IMPORTED GOODS
USED FOR INWARD PROCESSING OF GOODS [S. 25A]
• Where CG satisfied – for public interest – by notification
exempt such of the goods which are imported for the
purposes of repair, further processing or manufacture -
from the whole or any part of duty
Conditions:
• the goods shall be re-exported after such repair, further
processing or manufacture, as the case may be, within 1
year from the date on which the order for clearance of the
imported goods is made;
• the imported goods are identifiable in the export goods;
and
• such other conditions as may be specified in that
notification

11. EXEMPTION FROM CUSTOMS DUTY ON RE-IMPORTED GOODS
USED FOR OUTWARD PROCESSING [S. 25B]
• Where CG satisfied – for public interest - by notification,
exempt goods which are re-imported after being exported
for the purposes of repair, further processing or
manufacture from the whole or any part of duty
Conditions:
• Goods shall be re-imported into India after such repair,
further processing or manufacture, as the case may be,
within 1 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 that
notification

12. Problem
M/s Ready Energy Ltd. is engaged in oil exploration and has
imported software containing seismic data. The importer is
entitled to exemption from customs duty subject to the
condition that an “essentiality certificate” granted by the
Director General of Hydrocarbons is produced at the time of
importation of the goods. Though the importer applied for
the certificate within the statutory time limit prescribed for
the same, the certificate was not made available to the
importer within a reasonable time by the Director General of
Hydrocarbons. The customs department rejected the
importer’s claim for exemption.
Examine briefly whether the department’s action is
sustainable in law.

13. • This issue has been addressed by the Supreme Court in the case of
Commissioner of Customs v. Tullow India Operations Ltd. (2005) 189
ELT 401(SC). The Apex Court has observed that if a condition is not
within the power and control of the importer and depends upon
the acts of public functionaries, non-compliance of such a
condition, subject to just exceptions cannot be held to be a
condition precedent which would disable it from obtaining the
benefit for all times to come.
• In the given case also the certificate has not been granted within a
reasonable time. Therefore, in view of the above-mentioned
judgement, the importer M/s Ready Energy Ltd. cannot be blamed
for the lapse by the authorities. The Directorate General of
Hydrocarbons is under the Ministry of Petroleum and Natural Gas
and such a public functionary is supposed to grant the essentiality
certificate within a reasonable time so as to enable the importer to
avail of the benefits under the notification.

14. Problem
An importer imported certain inputs for manufacture of
final product. A small portion of the imported inputs
were damaged in transit and could not be used in the
manufacture of the final product. An exemption
notification was in force providing exemption in respect
of specified raw materials imported into India for use in
manufacture of specified goods, which was applicable to
the imports made by the importer in the present case.
Briefly examine whether the importer could claim the
benefit of the aforesaid notification in respect of the
entire lot of the inputs imported including those that
were damaged in transit.

15. • The facts of the case are similar to the case of BPL Display Devices
Ltd. v. CCEx., Ghaziabad (2004) 174 ELT 5 (SC) wherein the Supreme
Court has held that the benefit of the notifications cannot be
denied in respect of goods which are intended for use for
manufacture of the final product but cannot be so used due to
shortage or leakage.
• The Apex Court has held that no material distinction can be drawn
between loss on account of leakage and loss on account of damage.
The benefit of said exemption cannot be denied as inputs were
intended for use in the manufacture of final product but could not
be so used due to shortage/leakage/damage. It has been clarified
by the Supreme Court that words “for use” have to be construed to
mean “intended for use”.
• Therefore, the importer can claim the benefit of the notification in
respect of the entire lot of the inputs imported including those that
were damaged in transit.

16. Dutiable goods (S 12)
(1) Except as otherwise provided in this Act, or any
other law for the time being in force, duties of
customs shall be levied at such rates as may be
specified under Customs Tariff Act, 1975, or any
other law for the time being in force, on goods
imported into, or exported from, India.
(2) The provisions of sub-section (1) shall apply in
respect of all goods belonging to Government as
they apply in respect of goods not belonging to
Government.

17. BASIC CUSTOMS DUTY
• levied under provisions of S. 12 of Customs Act, 1962
• S. 2 of Customs Tariff Act, 1975
• Customs Tariff Act
- 1st Schedule (rates of duty on import of goods)
- 2nd Schedule (rates of duty on export of goods)
- India – WTO member, 1st Schedule - basic customs duty on import
of goods - aligned with Harmonised System of Nomenclature (HSN)
at the 6 digit level.
- The Harmonized System is an international nomenclature for
classification of products. It allows participating countries to classify
traded goods on a common basis for customs purposes.
- At the international level, the Harmonized System (HS) for
classifying goods is a six-digit code system. In India, the First
Schedule classifies goods at 8 digit level.

18. 1st Schedule
• 1st Schedule 5 columns
• first one being for HSN,
• second for description,
• third for the unit,
• fourth and fifth for rate of duty.
• fourth column provides standard rate of BCD and
• fifth column provides for preferential rate of BCD

19. • Standard rate of duty: Generally, the standard rate of BCD
is applicable.
• Preferential rate of duty: If the goods are imported from
the areas notified by the Central Government to be
preferential areas, then lower preferential rate of BCD will
be applicable. Preferential Rates of Duty are reduced tariff
rates levied on the basis of trade agreements between two
or more countries. These rates are usually substantially
lower than the normal tariff rates.
• The Government may by notification under section 25 of
the Customs Act prescribe preferential rate of duty in
respect of imports from certain preferential areas.

20. Conditions to be fulfilled for
preferential rate of duty
• The importer will have to fulfill the following conditions to
make the imported goods eligible for preferential rate of
duty:-
• At the time of importation, he should make a specific claim
for the preferential rate.
• He should also claim that the goods are produced or
manufactured in such preferential area.
• The area should be notified under section 4(3) of the
Customs Tariff Act to be a preferential area.
• The origin of the goods shall be determined in accordance
with the rules made under section 4(2) of the Customs
Tariff Act. If the importer fails to discharge the above, the
goods shall be liable to standard rate of duty.

21. 2nd Schedule
• Second Schedule to the Customs Tariff Act
provides for rate of export duty on goods
exported out of India
• As per Foreign Trade Policy adopted by India,
goods are to be exported and not taxed
• Hence, generally there are no export duties on
goods exported out of India
• However, still there is a small list of goods on
which export duty is leviable as a policy adopted
by the Ministry on time to time basis

22. Types of Customs Duty
(Customs Tariff Act)
- Revenue Duties
- Protective Duties
Revenue Duties - levied for the purpose of
raising customs revenue.
Protective duties - intended to give protection
to indigenous industries. If resort to protective
duties is not made there could be a glut of
cheap imported articles in the market making
the indigenous goods unattractive

23. Factors to be considered while giving
protection through protective duties:
The protection through protective duties is
given considering the following factors:
1. The protective duties should not be very stiff
so as to discourage imports
2. It should be sufficiently attractive to
encourage imports to bridge the gap between
demand and supply of those articles in the
market

24. Levy of protective duty
• The protective duties are levied by the Central
Government upon the recommendation made to
it by the Tariff Commission and upon it being
satisfied that circumstances exist which render it
necessary to take immediate action to provide
protection to any industry established in India
[Section 6]
• Duration of protective duties: The protective
duty shall be effective only upto and inclusive of
the date if any, specified in the First Schedule
[Section 7(1)]

25. Alteration
• Power of Central Government to alter such
duties: The Central Government may reduce or
increase the duty by notification in Off. Gazette
• However, such duty shall be altered only if it is
satisfied, after such inquiry as it thinks necessary,
that such duty has become ineffective or
excessive for the purpose of securing the
protection intended to be afforded by it to a
similar article manufactured in India [Section
7(2)].

26. Approval of Parliament
• In case of increase in duty, approval of Parliament required: If
there is any increase in the duty as specified above, then the
Central Government is required to place such notification in the
Parliament for its approval.
• Every notification insofar as it relates to increase of such duty, shall
be laid before each House of Parliament if it is sitting as soon as
may be after the issue of the notification, and if it is not sitting
within seven days of its re-assembly, and the Central Government
shall seek the approval of Parliament to the notification by a
resolution moved within a period of fifteen days beginning with the
day on which the notification is so laid before the House of the
People. If the Parliament recommends any change in the
notification, then the notification shall have effect subject to such
changes. However, anything done pursuant to the notification
before the recommendation by the Parliament shall be valid
[Section 7(3)].

27. Anti - Dumping
• When the export price of a product imported into India is less than the
Normal Value of ‘like articles’ sold in the domestic market of the exporter,
it is known as dumping. Although there is nothing inherently illegal or
immoral in exporter charging a price less than the price prevailing in its
domestic market, Designated Authority can initiate necessary action for
investigations and subsequent imposition of anti-dumping duties, if such
dumping causes or threatens to cause material injury to the domestic
industry of India.
• Anti-dumping action can be taken only when there is an Indian industry
which produces “like articles” when compared to the allegedly dumped
imported goods. Further, this duty is country specific i.e. it is imposed on
imports from a particular country.
• Under the General Agreement on Tariffs and Trade (GATT) provisions, anti-
dumping duties higher than the margin of dumping cannot be imposed.
However, a lesser duty which is adequate to remove the injury to the
domestic industry, is permissible. In India, the Government is obliged to
restrict the anti- dumping duty to the lower of the two i.e., dumping
margin and the injury margin

28. Dumping is
Normal value in the
exporting market
Export Price

29. Provisions
• S. 9A(1)of Customs Tariff Act, 1975 - where any article is exported
by an exporter or producer from any country or territory
(hereinafter in this section referred to as the exporting country or
territory) to India at less than its normal value, then, upon the
importation of such article into India, the Central Government may,
by notification in the Official Gazette, impose an anti-dumping duty
not exceeding the margin of dumping in relation to such article
• Every notification issued under this section shall as soon as may be
after it is issued, be laid before each House of Parliament [S.s (7)]
• Further, the provisions of the Customs Act, 1962 and the rules and
regulations made thereunder, including those relating to the date
for determination of rate of duty, assessment, non-levy, short levy,
refunds, interest, appeals, offences and penalties shall, as far as
may be, apply to the duty chargeable under this section as they
apply in relation to duties leviable under that Act [Ss. (8)]

30. Computation of anti-dumping duty
Anti-dumping duty is:
• Margin of dumping
• or
• Injury margin whichever is lower.

31. • Margin of dumping
In relation to an article, it means the
difference between its export price and
normal value. It is generally expressed as a
percentage of the export price.

32. Margin
of
dumping
Normal
value
Export
price

33. • Export price: in relation to an article, means the price
of an article exported from the exporting country or
territory.
• Constructed export price: in cases where there is no
export price or the export price is unreliable because of
association or a compensatory arrangement between
the exporter and the importer or a third party, the
export price may be constructed at the price at which
the imported articles are first resold to an independent
buyer.
• In case where the article is not resold to an
independent buyer or not resold in the condition as
imported, the export price shall be constructed on such
reasonable basis as may be determined in accordance
with the rules made.

34. • Normal value: in relation to an article, means comparable price, in the
ordinary course of trade, for the like article when destined for
consumption in the exporting country or territory as determined in
accordance with the rules.
– When there are no sales of the like article in the ordinary course of trade in
the domestic market of the exporting country or territory, or when because of
the particular market situation or low volume of sales in the domestic market
of the exporting country or territory, such sales do not permit a proper
comparison, the normal value shall be either –
– Comparable representative price of the like article when exported from the
exporting country or territory or an appropriate third country as determined
in accordance with the rules made; or
– The cost of production of the said article in the country of origin along with
reasonable addition for administrative, selling and general costs, and for
profits, as determined in accordance with the rules made.
– However, in case the article is imported from a country other than the country
of origin or where the article has merely been transshipped through the
country of export or such article is not produced in the country of export or
there is no comparable price in the country of export, the normal value shall
be determined with reference to its price in the country of origin.

35. • Comparable price at which the goods
under complaint are sold in the
domestic market of the exporting
country or territory in the ordinary
course of trade
Normal value
• Comparable representative export
price to an appropriate third country,
or
• Cost of production in the country of
origin + Administrative, selling and
general costs, profits
If the normal value
cannot be
determined as per
the sales in the
domestic market of
exporting country,
normal value shall
be

36. • Injury margin: Injury margin is the margin adequate to
remove the injury to the domestic industry. It is the
difference between the Fair Selling Price [Non-Injurious
Price (NIP)]due to the Domestic Industry and the Landed
Value of the dumped imports.
• Fair Selling Price (FSP) [Non-Injurious Price]:is that level of
price, which the industry is, expected to have charged
under normal circumstances in the Indian market during
the period defined. This price would have enabled
reasonable recovery of cost of production and profit after
nullifying adverse impact of those factors of production
which could have adversely affected the company and for
which dumped imports can’t be held responsible. In other
words, it is the fair selling price of a product for the
domestic industry.
• Landed Value: is taken as the assessable value under the
Customs Act and the applicable basic customs duties except
CVD, SAD and special duties.