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Tightening of Customs Law in Budget 2017

Among the noteworthy changes that take place with effect from the date of enactment of the Finance Bill 2017, several have the effect of more stringent customs law.

  • The definitions of ‘importer’ and ‘exporter’ are being amended to include the ‘beneficial owner’ of the goods, who exercises effective control over the goods.
  • Bill of entry will have to be filed within the day after the date of arrival of the vessel / aircraft/ vehicle at the customs station, failing which penal charges will be attracted.
  • Customs duty will have to be paid within a day of assessment.
  • Vessels and aircraft will be required to file a passenger and crew manifest, both for arrival and for departure.
  • The label will not suffice as a declaration for postal and courier imports. A document will be prescribed for the purpose.
  • Section 9 of the Customs Tariff Act 1975 has been amended to remove the exceptions for subsidies for research, environment and disadvantaged regions. These subsidies too, if connected to goods exported to India, will attract possible action in the form of countervailing duty under section 9 of the Customs Tariff Act 1975.

These changes made in the direction of tightening of the law are discussed below

Changes in definition of Importer and Exporter

The Finance Bill 2017 proposes to amend the definition of ‘importer’ and ‘exporter’ to include the person who has effective control over the goods being imported or exported.

The legislative changes proposed to change the legal meaning of ‘importer’ and ‘exporter’ are as follows:

Section 2(20) and 2(26) of the Customs Act 1962 as they stand at present:
(20) “exporter”, in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner or any person holding himself out to be the exporter;
(26) “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer;

Section 2(20) and 2(26), and the new 2(3A) of the Customs Act 1962, as per the proposed amendment:
(20) “exporter”, in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner, beneficial owner or any person holding himself out to be the exporter;

(26) “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer;
(3A) “beneficial owner” means any person on whose behalf the goods are being imported or exported or who exercises effective control over the goods being imported or exported;

Thus ‘importer’ and ‘exporter’ will include a person who does not do anything concerned to the actual act of import or export but on whose behalf the goods are being imported / exported, or who has effective control over the goods.

As the position stands at present, customs law does have provision to treat the owner of the goods as the importer / exporter even if he is not concerned with the actual act of import or export. The amendment adds a concept of “beneficial owner” to this, treating such a person also as the importer or exporter.

In the normal course of things, the customs authorities would deal with whoever holds himself out as the importer / exporter; but if there is a dispute the differential duties and / or penalties can be recovered from this “beneficial owner”. This may be a response to the attempts to evade customs duties or perpetrate frauds by putting up a dummy as the importer /exporter; the dummy would vanish after the transaction, leaving the actual importer safe from customs action because of the definition of “importer” and “exporter” in law.

While the loophole is plugged in law, investigations would need to establish the factum of ‘effective control’ and whether the person acting as importer / exporter is acting on “behalf of” somebody else.

Reduction in Time Limit for Presenting Bill of Entry

Section 46, sub-section (3) of the Customs Act is being amended to

“(3) The importer shall present the bill of entry under sub-section (1) before the end of the next day following the day (excluding holidays) on which the aircraft or vessel or vehicle carrying the goods arrives at a customs station at which such goods are to be cleared for home consumption or warehousing:
Provided that a bill of entry may be presented within thirty days of the expected arrival of the aircraft or vessel or vehicle by which the goods have been shipped for importation into India:
Provided further that where the bill of entry is not presented within the time so specified and the proper officer is satisfied that there was no sufficient cause for such delay, the importer shall pay such charges for late presentation of the bill of entry as may be prescribed.”

As the law stands at present there is no time limit for presentation of the bill of entry. After amendment, the importer must present the bill of entry within the day after the arrival of the vessel or aircraft that is carrying the goods.

Time limit Reduced for Payment of Duties

Section 47 as it stands now requires the importer to pay the import duties within two days of return of the bill of entry to him after assessment. This is being amended as follows:

“The importer shall pay the import duty—
(a) on the date of presentation of the bill of entry in the case of self-assessment; or
(b) within one day (excluding holidays) from the date on which the bill of entry is returned to him by the proper officer for payment of duty in the case of assessment, reassessment or provisional assessment; or
(c) in the case of deferred payment under the proviso to sub-section (1), from such due date as may be specified by rules made in this behalf,
and if he fails to pay the duty within the time so specified, he shall pay interest on the duty not paid or short-paid till the date of its payment, at such rate, not less than ten per cent. but not exceeding thirty-six per cent. per annum, as may be fixed by the Central Government, by notification in the Official Gazette.”

As per the proposed changes,
(i) the importer must pay the duty as self-assessed on the same date as he presents the bill of entry;
(ii) If the bill of entry is assessed by the proper officer, or reassessed or provisionally assessed, then the importer must pay the duty assessed within one day of the date on which the bill of entry is returned to him by the proper officer for payment of duty.

Passenger and Crew Manifest to be Filed

New sections are proposed to be inserted in the Customs Act, as follows, to make it mandatory for the person-in-charge of a conveyance that enters India or leaves India to file a passenger and crew manifest.

Section 30A deals with incoming conveyances:

“30A. (1) The person-in-charge of a conveyance that enters India from any place outside India or any other person as may be specified by the Central Government by notification in the Official Gazette, shall deliver to the proper officer—
(i) the passenger and crew arrival manifest before arrival in the case of an aircraft or a vessel and upon arrival in the case of a vehicle; and
(ii) the passenger name record information of arriving passengers, in such form, containing such particulars, in such manner and within such time, as may be prescribed.
(2) Where the passenger and crew arrival manifest or the passenger name record information or any part thereof is not delivered to the proper officer within the prescribed time and if the proper officer is satisfied that there was no sufficient cause for such delay, the person-in-charge or the other person referred to in sub-section (1) shall be liable to such penalty, not exceeding fifty thousand rupees, as may be prescribed.”.

The Proposed New Section 41A Deals with Outgoing Conveyances

“41A. (1) The person-in-charge of a conveyance that departs from India to a place outside India or any other person as may be specified by the Central Government by notification in the Official Gazette, shall deliver to the proper officer—
(i) the passenger and crew departure manifest; and
(ii) the passenger name record information of departing passengers, in such form, containing such particulars, in such manner and within such time, as may be prescribed.
(2) Where the passenger and crew departure manifest or the passenger name record information or any part thereof is not delivered to the proper officer within the prescribed time and if the proper officer is satisfied that there was no sufficient cause for such delay, the person-in-charge or the other person referred to in sub-section (1) shall be liable to such penalty, not exceeding fifty thousand rupees, as may be prescribed.”

Procedure for Postal and Courier Imports Changed

Under section 82 as it stands now, the label on the package or declaration accompanying the package imported through post or courier is treated as the entry for the purpose of import or export. This section is being deleted, and simultaneously the central government is being empowered to declare foreign post offices or international courier terminals as customs stations. Section 84 is also being amended, to empower the central government to make regulations to prescribe the form and manner in which entry will be made in respect of goods imported or exported by post.

Anti-Subsidy (countervailing) duty: Exceptions being removed.

Section 9 of the Customs Tariff Act 1975 provides for levy of a countervailing duty to counteract subsidization of the imported goods by the government at the country of export. In the section as it stands now, certain subsidies are excluded from this treatment; in other words, certain subsidies are allowed. These exceptions are now proposed to be deleted. The exceptions that are proposed to be deleted are for

(i) research activities conducted by or on behalf of persons engaged in the manufacture, production or export;
(ii) assistance to disadvantaged regions within the territory of the exporting country; and
iii) assistance to promote adaptation of existing facilities to new environmental requirements.
After deletion of the exceptions, subsidies given for these purposes too in the country of export would attract action against the imported goods.

Ms. Radha Arun
Consultants to Udyog Software (India) Ltd.
radha.arjuni@gmail.com

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