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Types of duties under customs

CMA Poornima Madhava 
on 11 June 2015

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Various duties under Customs can be levied on almost all imports whereas only few goods are subject to export duty. Let us understand different types of duties under Customs Law for the purpose of import of goods.

Let us study each of the above in detail:

Basic Customs Duty

Goods imported into India are chargeable to basic customs duty (BCD) under Customs Act, 1962. The rates of BCD are indicated in I Schedule (for Imports) of Customs Tariff Act, 1975. Education cess (EC) @2% and secondary & higher education cess (SHEC) @1% are applicable extra.

Generally, BCD is levied at standard rate of duty but if certain conditions are satisfied (below), the importer can avail the benefit of preferential rate of duty on imported goods.

Conditions for availing the benefit of preferential rate of duty:

1. Specific claim for preferential rate must be made by the importer,
2. Import must be from preferential area as notified by the Central Government,
3. The goods should be produced/manufactured in such preferential area.

For more details on preferential rate of duty:
http://www.cbec.gov.in/customs/cst2012-13/cs-gen/cs-gen69-93.pdf.

National Calamity Contingent Duty (NCCD)

It is levied on import of pan masala, chewing tobacco & cigarettes at different rates as applicable. It is levied @1% on PFY, motor cars, multi utility vehicles and 2-wheelers and Rs.50 per ton on crude oil vide section 169 of Finance Act, 2003.

Additional Duty of Customs or Countervailing Duty (CVD)

As per section 3(1) of Customs Tariff Act, any article imported into India is liable to duty (in addition to BCD) equal to excise duty for the time being leviable on a like article if produced/manufactured (or could be or capable of being produced/manufactured) in India.

If goods manufactured in India are exempt from excise duty, then there is no CVD – CCE Vs J K Synthetics (2000) (SC).

CVD cannot be levied, if exemption from central excise duty is based on goods manufactured by SSI units or goods manufactured without aid of power – CC Vs Malwa Industries (2009) 235 ELT 214 (SC). If the importer is the manufacturer availing benefit of SSI exemption under notification 8/2003 under Central Excise, thereby not paying excise duty on final product manufactured. Such manufacturer is not liable to pay CVD on imports, even if not liable to pay any duty under Central Excise Act, 1944.

If imported goods are used by the importer in the same factory or factory belonging to the importer, then no CVD attracted on such imported goods – CC Vs Malwa Industries (2009) 235 ELT 214 (SC).

If imported goods attract excise duty in India as per section 4A of Central Excise Act, then CVD will be calculated on MRP basis only.

CVD can be levied only when the importer has imported manufactured goods. It means CVD can be levied only if goods are obtained by a process of manufacture – Hyderabad Industries Ltd Vs Union of India (1995) (SC).

CVD can be imposed even if there is exemption from BCD.

If the importer is the manufacturer, he can claim cenvat credit of CVD.

No EC and SHEC applicable on CVD w.e.f 1/3/2015.

No CVD on Anti-dumping duty, Safeguard duty, Protective duty or Countervailing duty on subsidized articles.

Special Additional Customs Duty (Special CVD)

U/s 3(5) of Customs Tariff Act, imported goods in addition to BCD & CVD shall also be liable to Special CVD at the rate notified by Central Government (CG) (at present, it is @4%).

Special CVD is fully exempt in respect of the following imported goods:

a. Goods packed for retail sales covered under Standards of Weight & Measurement Act (Legal Metrology Act, 2009)
b. Wrist watches & pocket watches
c. Telephones for cellular networks
d. Articles of apparel excluding parts of made-up clothing accessories

A manufacturer is eligible to claim cenvat credit of Special CVD paid. A dealer is allowed refund of Special CVD provided such dealer is liable for VAT. A service provider is not eligible to avail cenvat credit of Special CVD.

Protective Duty

As per section 6(1) of Customs Tariff Act, protective duty is levied by the CG upon recommendation made by the Tariff Committee and upon CG being satisfied that it is necessary to provide protection to any industry established in India. At present, this duty is not in force. No CVD, EC & SHEC are applicable.

Safeguard Duty

As per section 8B(1) of Customs Tariff Act, safeguard duty is imposed for protecting the interests of any domestic industry in India and it is product specific. CG can impose provisional safeguard duty, pending final determination up to 200 days. Effective from 6th August 2014, if imported goods are cleared in Domestic Tariff Area (DTA) then safeguard duty is payable. No CVD, EC & SHEC are applicable.

Countervailing Duty on Subsidized Articles

As per section 9 of Customs Tariff Act, it is levied on articles which are imported by getting subsidies from other country. No CVD, EC & SHEC are applicable.

Anti-dumping Duty

As per section 9A of Customs Tariff Act, it is imposed on imports of a particular country. It is country specific. Dumping exists when a product is exported from one country to another at a price which is less than its normal value prevailing in the exporting country. The difference between the normal value and the export price is the dumping margin based on which anti dumping duty is imposed. No CVD, EC & SHEC are applicable.

Illustrations

Illustration 1 (computation of customs duty on import):

The following information is furnished by X on 8th June 2015 in respect of machinery imported from USA:

Assessable Value: Rs.11,00,000
Basic Customs duty: 7.5%
Excise duty chargeable on similar goods in India as per tariff rate: 12.5%
Additional duty of customs u/s 3(5) of CTA: 4%
Calculate the total customs duty payable by X.

Solution 1:

Particulars

Amount in Rs.

Amount in Rs.

Remarks/Working

Assessable value

11,00,000

Add: BCD @7.5%

82,500

82,500

Add: NCCD

-

Not applicable

Subtotal

11,82,500

Add: CVD @12.5%

1,47,813

1,47,813

11,82,500 x 12.5%

Add: EC & SHEC

-

Not applicable w.e.f 1/3/15

Subtotal

13,30,313

Add: EC & SHEC @3%

2,475

2,475

82,500 x 3%

Subtotal

13,32,788

Add: Special CVD @4%

53,312

53,312

13,32,788 x 4%

Value of imported goods

13,86,100

Value of total customs duty

2,86,100


Illustration 2 (computation of anti-dumping duty):

A commodity is imported into India from a country covered by a notification issued by CG u/s 9A of CTA. Following particulars are given:

Assessable value: USD25,250
Quantity imported: 500 kg
Exchange rate applicable: Rs.64 = USD1
BCD: 12%, EC & SHEC as applicable

As per the notification, anti-dumping duty will be equal to the difference between the cost of commodity calculated @USD70 per kg and the landed value of the commodity imported. Calculate anti-dumping duty and total customs duty payable.

Solution 2:

Particulars

Amount in Rs.

Amount in Rs.

Remarks/Working

Assessable value

16,16,000

25250 x 64

Add: BCD @12%

1,93,920

1,93,920

Add: NCCD

-

Not applicable

Subtotal

18,09,920

Add: CVD @12.5%

-

Not applicable

Add: EC & SHEC

-

Not applicable w.e.f 1/3/15

Subtotal

18,09,920

Add: EC & SHEC @3%

5,818

5,818

1,93,920 x 3%

Subtotal

18,15,738

Add: Special CVD @4%

-

Not applicable

Value of imported goods (Landed value)

18,15,738

Market value of imported goods

22,40,000

500 kg x Rs.64 x USD70

Anti-dumping duty

4,24,262

4,24,262

22,40,000 – 18,15,738

Value of total customs duty

6,24,000


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