Presented By: Saniel D Almeida 0916067 EXEMPTION FROM CUSTOMS DUTY Some exemptions from duties are provided

in Customs Act, while some are provided in Customs Tariff Act. Besides, Central Government can grant partial or full exemption from duty under section 25 of Customs Act. Exemptions by Notification - Section 25(1) of Customs Act 1962 authorize Central Government to issue notifications granting exemptions from duty. Such exemption may be unconditional or subject to conditions. Such conditions may be required to be fulfilled before or after clearance. Government can also grant exemption by a special order in exceptional circumstances. The exemption notification should be published in gazette. The notification can be issued only in 'public interest'. Some provisions are similar to Central Excise provisions - Following provisions discussed under Central Excise are applicable under Customs Act too (a) Method of granting exemption is similar (b) Different Form and method is permitted under section 25(3) of Customs Act. (c) Notification should be in 'public interest' (d) Different exemptions to different categories or classes permissible (e) No exemption with retrospective effect (f) Notification to be placed before Parliament (g) Interpretation of notification (h) Effective date of exemption (i) Exemptions have full statutory force (j) Estoppel in exemption notification, (k) Exemption by special order can be under section 25(2) of Customs Act - similar to section 5 A(2) of Excise Act. All these are discussed in detail under Central Excise and hence are not reproduced here for sake of brevity. Exemption to minor amounts of customs duty - Customs duty is not payable if amount of duty is Equal to or less than Rs 100. [Section 25(6)]. Ad hoc exemptions Section 25(2) of Customs Act permits Government to issue ad hoc exemption from customs duty by issue of a special order in exceptional circumstances. The order should specify the exceptional circumstances for granting ad hoc exemption. [Similar provision in section 5A(2) of Central Excise Act]. - - It has been clarified that such exemption can be granted even after duty is paid. In such case, duty has to be refunded - MF(DR) circular No 12/97-Cus dated 12.5.1997. Exemption for past general practice If there was past general practice of exempting certain goods from customs duty, but later it is discovered that, in fact, customs duty was payable, Government can grant exemption with retrospective effect. - Section 28A of Customs Act.

Project Imports Heavy Customs duty on imported machinery for projects make the initial project cost very high and project may become unviable. Hence, concept of 'project Import' has been introduced to bring machinery etc. required for initial setup or substantial exemption at concessional customs duty. The goods are classified under heading 9801, though the machinery and its parts may actually fall under different tariff heading. This simple method is adopted, as otherwise, classifying each machinery and its parts in different heads and valuing them would have been cumbersome and would have delayed clearances, which would cause demurrages. - Chapter 5 Para 1 of CBE&C's Customs Manual, 2001. Duty payable on project Imports - Duty on project imports is basic 5% plus CVD plus education cess of customs and excise. Duty for mega power projects, nuclear power projects and water supply projects for agricultural & industrial use is Nil. General customs duty rate is 10%. Hence, project imports are attractive for large projects. Items eligible for Project Imports - The items eligible are specified in heading 9801 of Customs Tariff Act The projects eligible are: (1) Industrial Plant (2) Irrigation Project (3) Power Project (4) Mining Project (5) Project for oil or mineral exploration (6) Other projects as may be specified by Central Government. Registration of Contract - Contract for import has to be registered with Customs. Application for registration of Contract must be made before importation and contract must be registered before order for clearance of goods is made from Customs. The contract can be amended if required. Free Trade Agreements (FTA) India has free trade agreements (FTA) with various countries. FTA is an arrangement between two or more countries to reduce tariffs and non-tariff barriers on mutual agreement basis. Biggest FTA is EU (European Union) which consists of 27 European countries. Others are (a) Gulf Cooperation Council (GCC) of seven Gulf nations (b) Association of South-east Asian Countries (ASEAS) (c) MERCOSUR - Southern Common Market (Argentina, Brazil, Paraguay and Uruguay). Important regional groupings as far as India is concerned are as follows APTA - Asia Pacific Trade Agreement (APTA) consisting of Bangladesh, China, India, Republic of Korea and Sri Lanka

BIMSTEC - Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooptation (also includes Bhutan and Nepal) IBSA - India, Brazil and South Africa SAFTA - South Asia Free Trade Agreement (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and Maldives). Such FTAs are actually against basic principle of WTO but are being allowed under WTO Article XXIV with some conditions. In addition, India has FTA with Singapore, Sri Lanka, MERCOSUR, Afghanistan, Chile and South Korea. India has Treaty of Trade with Nepal and Bhutan. Preferential Rates of Customs Duty Some countries have been declared as 'preferential areas'. These are - Mauritius Seychelles and Tonga. Goods manufactured and produced in these countries are eligible for preferential rate of duty under section 4 of Customs Tariff Act. Customs Tariff Act provides two columns - one for 'Standard rate' and other for 'Preferential Area'. Control over end use exemptions Sometimes, concession or exemption from customs duty is subject to condition in respect of end use. Sometimes, the exemption or concession is subject to condition that the imported goods should be used for manufacture in India of an excisable commodity. In such cases, the control over the end use will be exercised by Assistant Commissioner of Cent Excise having jurisdiction over the factory of manufacturer. [These provisions are applicable only in respect of certain specified exemption notifications]. The manufacturer intending to avail the benefit has to register with jurisdictional Assistant Commissioner of Central Excise, by applying in prescribed form. He has to execute a bond a give an undertaking that the imported goods shall be used for the intended purpose. He has to submit a monthly return in prescribed form within 10 days of the following month to AC/DC. The manufacturer-importer has to maintain accounts of the imported goods received. If the goods are not used for intended purposes, he will take steps for recovery of the differential duty leviable. The differential duty is required to be paid along with interest at the rate fixed u/s 28AB of Customs Act. [Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996]. References: Datey V.S (2010) Indirect Taxes, Taxman Publications, New Delhi.