Ca Final Excise and Custom

Prof.
Tayals Notes on Indirect Taxes

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Central Excise: An Introduction
The main source of revenue for the government is collection of taxes, out of which indirect
taxes contribute a major portion. Indirect tax is a tax which is borne by the consumer directly
at the time of purchase of goods or availing of services e.g. Excise, Customs, ervice Tax,
ales Tax etc.
Central Excise Duty An Introduction
Excise duty is an indirect tax levied on !manufacture or production of excisable goods" in India. The
taxable event under the Central Excise law is manufacture and the liability of Excise duty arises as
soon as the goods are manufactured. The duty, though it becomes payable on the manufacture of
goods, is collected periodically as prescribed.
Excise duty is levied throughout the country on manufacture#production of goods from the
manufacturer but the ultimate burden of tax is borne by the consumer. It is not a tax on sale.
Therefore, for the purpose of charging excise duty, sale of goods is immaterial. In various
judgments, the honourable upreme Court has held that "Excise Duty is essentially a tax on the
production or manufacture of excisable goods produced or manufacture within the country and is
unrelated to the sale of the same." The duty is now actually called the Central Value Added Tax
(CENVAT!.
Constitutional validity and entitlement to collect Excise Duty
$rticle %&' of the Constitution of India provides that no tax shall be levied or collected except by
authority of law. The (nion )overnment or tate )overnment can charge tax#duty from the entry
wise legislative enabling power specified in the (nion *ist, tate *ist or the Concurrent *ist of the
eventh chedule of the Constitution and corresponding acts passed by the +arliament or the tate
*egislatures, as the case may be. The power to levy excise duty is given to (nion of India ,i.e.
Central )ovt.- (nder Entry ./, *ist I to the eventh chedule of the Constitution of India.
Entry ./ in the (nion *ist empowers the Central )overnment to enact laws to levy0
"duties of excise on tobacco and other goods manufactured or produced in India, except
a. alcoholic liquors for human consumption;
b. opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet
preparations containing alcohol or any substances included in sub-paragraph b! of this entry."
Thus, the Central )overnment is empowered to impose excise duties on all commodities, except
alcoholic li1uors meant for human consumption, opium, Indian hemp, narcotics and other narcotic
drugs.
Tayal Institute Private Limited, Mumbai Ph: !"!#$%!, &mail: tayalsir'(mail.com
1
Prof. Tayals Notes on Indirect Taxes
"asics of Central Excise #a$
2or understanding of excise law, one have to have thorough 3nowledge of the Central Excise $ct
14// ,CE$-, the Central Excise 5ules %66% ,CE5-, CE78$T Credit 5ules %66/ ,CC5-, Central
Excise 8aluation 5ules, %666 and the Central Excise Tariff $ct 14.' ,CET$-.
Central Excise Act% &'(( ( CEA : This $ct came into force on %.#%#14// and applies to the
whole of India. It provides for levy of excise duty, valuation of goods and collection of duty. The
$ct is divided into 11 chapter and /6 sections ,16' sections in total-
Central Excise Tariff Act% &')* : This $ct classifies all the goods under 4& Chapters broadly
on the basis of 9armonised ystem of 7omenclature. These chapters, grouped into %6
sections, are further divided into headings, sub:headings and sub:classification. The $ct contains
two schedules. chedule I specifies the rate of CE78$T ,earlier 3nown as ;asic Excise <uty-
and chedule II specifies the rates of pecial Excise <uty.
Central Excise +ules ,--, ( CE+ : ection => of the Central Excise $ct, 14// authorises the
Central )overnment to frame rules on various subject matters such as registration, export,
payment of duty, records etc.
CENVAT Credit +ules% ,--( : These 5ules contain the rules for availing of credit of duty
already paid on inputs by a manufacturer and for utili?ing the same for discharge of liability
of the manufacturer towards payment of duty.
Central Excise Valuation (Determination of .rice of Excisable /oods +ules% ,--- :
There are 11 rules for valuation of excisable goods. 8aluation is essential for charging of
duty.
Central Excise (Determination of +etail 0ale .rice of Excisable /oods +ules% ,--): There are '
rules for determination of retail sale price of excisable goods.
.o$er of Central /overnment to ma1e +ules2 0ection 34 (5ay -3
ection => of the Central Excise $ct, empowers the Central )overnment to ma3e rules to carry
Central Excise De6artment 7ierarc8y
@inistry of 2inance
<epartment of 5evenue
Central ;oard of Customs, Excise and ervice Tax
Chief Commissioner
Commissioner#$ddl. Commissioner#Aoint Commissioner
$ssistant#<eputy Commissioner
uperintendent
Inspector
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into effect the powers. The rules may lay down the procedures governing several specific
situations to carry out the effect of the $ct.
$ total of =& different situations have been explicitly enumerated under ection =>,%-. ome of
the important powers are0
1. To provide the nearest ascertainable e1uivalent of the normal price u#s /.
%. To ma3e rules u#s / to determine and provide for trade discount etc.
=. To provide for the issue of registration certificated and transport permits and the fees, if
any, to be charged therefore.
/. @anner in which application for refund can be made ,ection11;-.
'. To provide for the assessment, collection of excise duties, authorities by whom functions
under this $ct are to be discharged.
&. To ma3e rules regarding removal of excisable goods from the place where they are
produced, stored or manufactured and their transport to or from the premises of a
registered person, or a bonded warehouse, or to a mar3et.
>. To provide for the appointment, licensing, management and supervision of bonded
warehouse.
.. To provide for the employment of officers of the )overnment to supervise the carrying
out of any rules made under this $ct.
ection =. provides that the 5ules shall be made by issue of notification and the notification
shall be placed before the +arliament for a period of t8irty days whenever it is in session,
whether comprised in one session or more. If parliament decides to amend any of the
notifications so issued then the notification will have effect in modified form. Btherwise any
such notification will cease to have effect. ince notification is issued under the $ct, these
also have statutory force.
Effect of amendments% etc9% of rules% notifications or orders
$ccording to section #$% &'here any rule, notification or order made or issued under this %ct or
any notification or order issued under such rule, is amended, repealed, superseded or rescinded,
then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall
not(
a! re)i)e anything not in force or existing at the time at which the amendment, repeal,
supersession or rescinding ta*es effect; or
b! affect the pre)ious operation of any rule, notification or order so amended, repealed,
superseded or rescinded or anything duly done or suffered thereunder; or
c! affect any right, pri)ilege, obligation or liability acquired, accrued or incurred under any
rule, notification or order so amended, repealed, superseded or rescinded; or
d! affect any penalty, forfeiture or punishment incurred in respect of any offence committed
under or in )iolation of any rule, notification or order so amended, repealed, superseded or
rescinded; or
e! affect any in)estigation, legal proceeding or remedy in respect of any such right, pri)ilege,
obligation, liability, penalty, forfeiture or punishment as aforesaid,
and any such in)estigation, legal proceeding or remedy may be instituted, continued or enforced and
any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the
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case may be, had not been amended, repealed, superseded or rescinded."
"indin: effect and a66licability of Notifications;Circulars;Trade Notices
The Central Excise $ct, 14// authorises the Central )overnment to issue notifications and the ;oard
can issue circulars. These circulars have binding effect on officers of the <epartment but not on the
assessee. +nion of India ,s. %r)i)a Industries India! -imited ./0012.
$ny circular issued by the ;oard may have retrospective effect if it is beneficial to the assessee but
any oppressive circular can be applied only prospectively. 3uchitra 4omponents -imited.
Central Excise Duties
1. "asic Excise Duty ("ED;CENVAT: ;asic Excise <uty ,;E<- is leviable on all excisable goods
produced or manufactured in India at the rates set forth in the 2irst chedule to the Central Excise
Tariff $ct, 14.' read with exemption notifications issued u#s '$ of the Central Excise $ct, if any.
It is also 3nown as CE78$T.
The duty may be specific or advalorem.
In the case of s6ecific rate of duty, the basis of levy is a specific 1uantity of the goods such as
weight, length, volume, number of units produced etc. Thus specific rate of duty has no
relevance to the selling price or value of the excisable goods and is, in fact, independent of it.
In the case of ad valorem rate of duty, the basis of levy is the value of the goods. It is,
therefore, necessary to determine the !value" of the excisable goods and then apply the ad
valorem rate of duty which is a fixed percentage of the value, say, 1'C ad valorem, %6C ad
valorem etc. Thus, ad valorem rate of duty is entirely related to and is dependant on the value
of excisable goods. <5ay -3=
%. 06ecial Excise Duty (0ED: E< is leviable under the econd chedule to the Central Excise
Tariff $ct, 14.'. In terms of 7otification 7o. 4#%66& dated 1.=.%66& all goods falling under
chedule II of CET$ have been exempted from E<. In most of the cases the special excise duty
has been merged with basic excise duty. <5ay -3=
=. Additional Duty of Excise (Textile > Textile Articles: This duty, as the name suggests, is
leviable only on textile and textile articles under the $dditional <uties of Excise ,Textile D
Textile $rticles- $ct, 14>.. Textile articles such as cotton fibres, sil3, wool etc. attract additional
duty of excise. Notification no. 31/2004 CE dated 9-7-2004 exempts all goods from lev of
additional d!ties of textile and textile articles.
/. Additional Duty of Excise (/oods of 06ecial Im6ortance: This duty is leviable under the
$dditional <uties of Excise ,)oods of pecial Importance- $ct, 14'>. "ll goods #ave $een
exempted from t#is lev vide Notification No. 11/200% dated 1.3.200%
'. National Calamity contin:ent Duty (NCCD: It is levied under 2inance $ct, %661. ection 1=&
of the said 2inance $ct provides for levy of the aforesaid duty on goods specified in the eventh
chedule of the Central Excise Tariff $ct. Excisable goods such as cigarettes, pan masala,
motorcars, two wheelers and multi:utility vehicles are covered under the eventh chedule.
&. Duty on ?e$ellery: $ duty of %C has been imposed on branded articles of jewellery falling under
Chapter >11= of the Central Excise $ct, 14//. The duty is leviable only if the brand name or the
trade name is indelibly affixed or embossed on the article of jewellery itself. $ Chapter note has
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been inserted in Chapter >1 in terms of which, for the purpose of the heading >11=, the process of
affixing or embossing trade name or brand name on articles of jewellery shall amount to
manufacture.
49 Information Tec8nolo:y
,i- Excise duty of 1%C has been imposed on computers w.e.f.1.=.%66&.
,ii- Excise duty of .C has been imposed on pac3aged software. There is a general exemption
for customised software ,any custom designed software developed for a specific user or
client- other than pac3aged software or canned software. !+ac3aged software or canned
software means software developed to meet the needs of variety of users and it is
intended for sale or capable of being sold off the shelf."
,iii- Excise duty at the rate of 1&C has been imposed on set top boxes not covered by
Information Technology $greement.
.. Cess: Cess is a tax imposed for specific purpose with reference to some goods. Cess is imposed on
different goods on specific enactments in addition to excise duty. It should be utili?ed only for the
purpose for which it has been levied. Entry ./ of *ist I of the eventh chedule to the
Constitution of India empowers the Central )overnment to levy cess. Cess is levied and collected
by the Central Excise $uthorities and the provisions of the Central Excise $ct and rules, unless
otherwise provided, are applicable to cess.
(nder ection .1 of the 2inance $ct, %66/, an education cess ,calculated E %C F econdery and
and 9igher Education Cess E 1C- would be levied on the aggregate of the duties which are levied
and collected by the Central )overnment. Education cess is to be calculated on the aggregate of all
the duties.
Difference bet$een Cess > Duty
Cess Duty
1. It is a charge levied and collected for
specified purposes e.g. Education Cess.
It is levied on goods.
%. Cess is for a specified purpose. <uty is for general revenue purposes.
=. It may be on production of goods or export of
goods or consumption in production of goods.
<uty is a 3ind of tax for which no specific
benefit is given. Thus, duty is not for a
specific purpose.
/. Cesses are collected under the Excise or
Customs *aw on specified articles under
various enactments of the )overnment of
India. These are collected as duty of Central
Excise# Customs and transferred to the
respective agencies for administration of the
commodity cess.
Ghen the duty is collected, it becomes a
part of the Consolidated 2und of India.
Definitions for t8e 6ur6ose of Central Excise
Definitions under section , of t8e Central Excise Act
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(a Ad?udicatin: aut8ority! means any authority competent to pass any order or decision under
this $ct, but does not include the Central ;oard of Excise and Customs constituted under the Central
;oards of 5evenue $ct, 14&= ,'/ of 14&=-, Commissioner of Central Excise ,$ppeals- or
$ppellate TribunalH
(aa A66ellate Tribunal! means the Customs, Excise and ervice Tax $ppellate Tribunal
constituted under section 1%4 of the Customs $ct, 14&% ,'% of 14&%-H
(aaa bro1er! or commission a:ent! means a person who in the ordinary course of business
ma3es contracts for the sale or purchase of excisable goods for othersH
(b Central Excise @fficer! means the Chief Commissioner of Central Excise, Commissioner of
Central Excise, Commissioner of Central Excise ,$ppeals-, $dditional Commissioner of Central
Excise, Aoint Commissioner of Central Excise $ssistant Commissioner of Central Excise or <eputy
Commissioner of Central Excise or any other officer of the Central Excise <epartment, or any person
,including an officer of the tate )overnment- invested by the Central ;oard of Excise and Customs
constituted under the Central ;oards of 5evenue $ct, 14&= ,'/ of 14&=- with any of the powers of a
Central Excise Bfficer under this $ct.
(c curin:! includes wilting, drying, fermenting and any process for rendering an unmanufactured
product fit for mar3eting or manufactureH
(d excisable :oods! means goods specified in the 2irst chedule and the econd chedule to the
Central Excise Tariff $ct, 14.' ,' of 14.&- as being subject to a duty of excise and includes saltH
Explanation. ( 2or the purposes of this clause, IgoodsJ includes any article, material or substance
which is capable of being bought and sold for a consideration and such goods shall be deemed to be
mar3etable.
(e factory! means any premises, including the precincts thereof, wherein or in any part of which
excisable goods other than salt are manufactured, or wherein or in any part of which any
manufacturing process connected with the production of these goods is being carried on or is
ordinarily carried onH
(ee Aund! means the Consumer Gelfare 2und established under section 1%CH
(f manufacture! includes any process, :
,i- incidental or ancillary to the completion of a manufactured productH
,ii- which is specified in relation to any goods in the ection or Chapter notes of the 2irst
chedule to the Central Excise Tariff $ct, 14.' ,' of 14.&- as amounting to manufactureH
or
,iii- which, in relation to the goods specified in the Third chedule, involves pac3ing or
repac3ing of such goods in a unit container or labelling or re:labelling of containers
including the declaration or alteration of retail sale price on it or adoption of any other
treatment on the goods to render the product mar3etable to the consumer,
and the word ImanufacturerJ shall be construed accordingly and shall include not only a person who
employs hired labour in the production or manufacture of excisable goods, but also any person who
engages in their production or manufacture on his own accountH
(ff !National Tax Tribunal! means the 7ational Tax Tribunal established under section = of the
7ational Tax Tribunal $ct, %66'H"
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(: 6rescribed! means prescribed by rules made under this $ctH
(8 sale! and 6urc8ase!% with their grammatical variations and cognate expressions, mean any
transfer of the possession of goods by one person to another in the ordinary course of trade or
business for cash or deferred payment or other valuable considerationH
(1 $8olesale dealer! means a person who buys or sells excisable goods wholesale for the
purpose of trade or manufacture, and includes a bro3er or commission agent who, in addition to
ma3ing contracts for the sale or purchase of excisable goods for others, stoc3s such goods
belonging to others as an agent for the purpose of sale.
Definitions under section ((3 of t8e Central Excise Act
(a assessee! means the person who is liable to pay the duty of excise under this $ct and includes
his agentH
(b persons shall be deemed to be related! if :
,i- they are inter:connected underta3ingsH
,ii- they are relativesH
,iii- amongst them the buyer is a relative and a distributor of the assessee, or a sub:distributor of
such distributorH or
,iv- they are so associated that they have interest, directly or indirectly, in the business of each
other.
Explanation. K In this clause :
&i' (inter-connected !nderta)ings( means two or more underta*ings which are inter-connected
with each other in any of the following manners, namely566
%! if one owns or controls the other;
7! where the underta*ings are owned by firms, if such firms ha)e one or more common
partners;
4! where the underta*ings are owned by bodies corporate,66
I! if one body corporate manages the other body corporate; or
II! if one body corporate is a subsidiary of the other body corporate; or
III! if the bodies corporate are under the same management; or
I,! if one body corporate exercises control o)er the other body corporate in any
other manner;
D! where one underta*ing is owned by a body corporate and the other is owned by a
firm, if one or more partners of the firm,66
I! hold, directly or indirectly, not less than fifty per cent. of the shares, whether
preference or equity, of the body corporate; or
II! exercise control, directly or indirectly, whether as director or otherwise, o)er
the body corporate;
E! if one is owned by a body corporate and the other is owned by a firm ha)ing bodies
corporate as its partners, if such bodies corporate are under the same management;
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8! if the underta*ings are owned or controlled by the same person or by the same group;
9! if one is connected with the other either directly or through any number of
underta*ings which are inter-connected underta*ings within the meaning of one or
more of the foregoing subclauses.
Explanation I.66 8or the purposes of this clause, two bodies corporate shall be deemed to
be under the same management,66
i! if one such body corporate exercises control o)er the other or both are under the control
of the same group or any of the constituents of the same group; or
ii! if the managing director or manager of one such body corporate is the managing director
or manager of the other; or
iii! if one such body corporate holds not less than one-fourth of the equity shares in the other
or controls the composition of not less than one-fourth of the total membership of the
7oard of directors of the other; or
i)! if one or more directors of one such body corporate constitute, or at any time within a
period of six months immediately preceding the day when the question arises as to
whether such bodies corporate are under the same management, constituted whether
independently or together with relati)es of such directors or employees of the first
mentioned body corporate! one-fourth of the directors of the other; or
)! if the same indi)idual or indi)iduals belonging to a group, while holding whether by
themsel)es or together with their relati)es! not less than one-fourth of the equity shares in
one such body corporate also hold whether by themsel)es or together with their
relati)es! not less than one-fourth of the equity shares in the other; or
)i! if the same body corporate or bodies corporate belonging to a group, holding, whether
independently or along with its or their subsidiary or subsidiaries, not less than one-
fourth of the equity shares in one body corporate, also hold not less than one-fourth of
the equity shares in the other; or
)ii! if not less than one-fourth of the total )oting power in relation to each of the two bodies
corporate is exercised or controlled by the same indi)idual whether independently or
together with his relati)es! or the same body corporate whether independently or
together with its subsidiaries!; or
)iii! if not less than one-fourth of the total )oting power in relation to each of the two bodies
corporate is exercised or controlled by the same indi)iduals belonging to a group or by
the same bodies corporate belonging to a group, or :ointly by such indi)idual or
indi)iduals and one or more of such bodies corporate; or
ix! if the directors of one such body corporate are accustomed to act in accordance with the
directions or instructions of one or more of the directors of the other, or if the directors of
both the bodies corporate are accustomed to act in accordance with the directions or
instructions of an indi)idual, whether belonging to a group or not.
Explanation **.( If a group exercises control o)er a body corporate, that body corporate
and e)ery other body corporate, which is a constituent of, or controlled by, the group shall be
deemed to be under the same management.
Explanation ***.( If two or more bodies corporate under the same management hold, in
the aggregate, not less than one-fourth equity share capital in any other body corporate, such
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other body corporate shall be deemed to be under the same management as the first mentioned
bodies corporate.
Explanation *+.( In determining whether or not two or more bodies corporate are under
the same management, the shares held by financial institutions in such bodies corporate shall not
be ta*en into account.
*ll!stration
+nderta*ing 7 is inter-connected with underta*ing % and underta*ing 4 is inter-connected with
underta*ing 7. +nderta*ing 4 is inter-connected with underta*ing %; if underta*ing D is inter-
connected with underta*ing 4, underta*ing D will be inter-connected with underta*ing 7 and
consequently with underta*ing %; and so on.
Explanation ,.( 8or the purposes of this clause, "group" means a group of(
i! two or more indi)iduals, associations of indi)iduals, firms, trusts, trustees or bodies
corporate excluding financial institutions!, or any combination thereof, which exercises, or is
established to be in a position to exercise, control, directly or indirectly, o)er any body corporate,
firm or trust; or
ii! associated persons.
Explanation +*.( 8or the purposes of this clause,66
I! a group of persons who are able, directly or indirectly, to control the policy of a body
corporate, firm or trust, without ha)ing a controlling interest in that body corporate, firm or trust,
shall also be deemed to be in a position to exercise control o)er it;
II! "associated persons"(
a! in relation to a director of a body corporate, means(
i! a relati)e of such director, and includes a firm in which such director or his relati)e
is a partner;
ii! any trust of which any such director or his relati)e is a trustee;
iii! any company of which such director, whether independently or together with his
relati)es, constitutes one-fourth of its 7oard of directors;
i)! any other body corporate, at any general meeting of which not less than one-fourth
of the total number of directors of such other body corporate are appointed or controlled by the
director of the first mentioned body corporate or his relati)e, whether acting singly or :ointly;
b! in relation to the partner of a firm, means a relati)e of such partner and includes any
other partner of such firm; and
c! in relation to the trustee of a trust, means any other trustee of such trust;
III! where any person is an associated person in relation to another, the latter shall
also be deemed to be an associated person in relation to the former;

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(ii relative! shall have the meaning assigned to it in clause ,/1- of section % of the Companies
$ct, 14'& ,1 of 14'&-H
(c 6lace of removal! means :
,i- a factory or any other place or premises of production or manufacture of the excisable goodsH
,ii- a warehouse or any other place or premises wherein the excisable goods have been permitted to
be deposited without payment of dutyH
,iii- a depot, premises of a consignment agent or any other place or premises from where the
excisable goods are to be sold after their clearance from the factoryH
from where such goods are removedH
(cc time of removal!% in respect of the excisable goods removed from the place of removal referred
to in sub:clause ,iii- of clause ,c-, shall be deemed to be the time at which such goods are cleared
from the factoryH
(d transaction value! means the price actually paid or payable for the goods, when sold, and
includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or
on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of
the sale or at any other time, including, but not limited to, any amount charged for, or to ma3e
provision for, advertising or publicity, mar3eting and selling organi?ation expenses, storage, outward
handling, servicing, warranty, commission or any other matterH but does not include the amount of
duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
Definitions under section (A of t8e Central Excise Act
Explanation 1. K 2or the purposes of this section, Iretail sale priceJ means the maximum price at
which the excisable goods in pac3aged form may be sold to the ultimate consumer and includes all
taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges
towards advertisement, delivery, pac3ing, forwarding and the li3e and the price is the sole
consideration for such sale 0
.rovided that in case the provisions of the $ct, rules or other law as referred to in sub:section ,1-
re1uire to declare on the pac3age, the retail sale price excluding any taxes, local or otherwise, the
retail sale price shall be construed accordingly.
Definitions under +ule , of t8e Central Excise +ules% ,--,
(a Act! means the Central Excise $ct, 14// , 1 of 14//-H
(b assessment! includes self:assessment of duty made by the assessee and provisional
assessment under rule >H
(c assessee! means any person who is liable for payment of duty assessed or a producer or
manufacturer of excisable goods or a registered person of a private warehouse in which
excisable goods are stored and includes an authori?ed agent of such personH
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(d "oard! means the Central ;oard of Excise and Customs constituted under the Central
;oard of 5evenue $ct, 14&= ,'/ of 14&=-H
(e duty! means the duty payable under section = of the $ctH
(ea lar:e tax 6ayer! means a person who, :
,i- has one or more registered premises under the Central Excise $ct, 14// ,1 of 14//-H
or
,ii- has one or more registered premises under Chapter 8 of the 2inance $ct, 144/ ,=% of
144/-H
and is an assessee under the Income:Tax $ct, 14&1 ,/= of 14&1-, who holds a +ermanent
$ccount 7umber issued under section 1=4$ of the said $ct, and satisfies the conditions and
observes the procedures as notified by the Central )overnment in this regard.L
(f notification! means the notification published in the Bfficial )a?etteH
(: Tariff Act! means the Central Excise Tariff $ct, 14.' ,' of 14.&-H
(8 $are8ouse! means any place or premises registered under rule 4H and

11
,
Conce6t of /oods and Excisable /oods
The term !)oods" has not been defined under the Central Excise $ct and the definition given under
the ales of )oods $ct cannot be adopted for the purpose because applicability of Central Excise is
limited and it does not apply to all the goods within the meaning of ales of )oods $ct. 2or the
purpose of understanding, we can say all the goods which are manufactured or produced within the
meaning of Central Excise $ct are the goods.
9ere it is to be clearly understood that all goods are not excisable. Therefore, all the goods are
broadly divisible into two categories i.e. excisable and non:excisable.
$ccording to ection %,d- of Central Excise $ct, 14//0 (Excisa$le goods means goods specified in
t#e ,irst -c#ed!le and t#e -econd -c#ed!le to t#e Central Excise .ariff "ct/ 1901 as $eing s!$2ect
to a d!t of excise and incl!des salt.3
Explanation.K ,or t#e p!rposes of t#is cla!se/ (goods( incl!des an article/ material or
s!$stance 4#ic# is capa$le of $eing $o!g#t and sold for a consideration and s!c# goods s#all $e
deemed to $e mar)eta$le.5.
It means all goods specified or covered in the tariff are the excisable goods. Thus, if the goods are
listed in the chedules to the Tariff, they are excisable. $fter payment of duty, the goods do not cease
to be excisable goods.

Excisable /oods% Non Excisable /oods > /oods Carryin: Nil +ate of Duty
$ll excisable goods are not dutiable either because of nil rate of duty applicable or because of exemption
granted by the Central )overnment under ection '$ of the $ct. Term !Excisable )oods" has already
been defined above.
&a' Non- Excisa$le goods 6 7on:Excisable are the goods which are not listed in the Tariff chedule.
&$' 7oods Carring Nil 8ate of 9!t 6 )oods covered in tariff and chargeable with nil rate of duty
continue to be excisable goods because nil rate of duty is also a rate of duty. ,CCE 8s 8a?ir ultan
Tobacco Co. *td.-

12

Difference bet$een Excisable > Dutiable /oods
Excisable /oods Dutiable /oods
1. Excisable goods are those goods which are
specified in Central Excise Tariff chedule.
<utiable goods are those goods which attract duty as
per the tariff. 7on dutiable goods are !excisable
goods" on which no duty is payable, either because
of !7il" rate of duty or because of exemption.
%. $ll excisable goods are not necessarily dutiable
goods. Therefore, excisability is a wider term
when compared to dutiability.
$ll dutiable goods are necessarily excisable goods.
<utiability is a narrow term when compared to
excisability.
=. If goods are non: excisable , if the goods are not
mentioned in the tariff at all-, the provisions of
CE $ct, 14//, CE 5ules, %66% etc are not
applicable.
Even if the goods are non:dutiable, provisions of the
CE $ct, 14// and CE 5ules, %66% are applicable.
Difference bet$een Exem6ted /oods > BNilC +ate /oods
Exem6ted /oods Nil +ate /oods
1. Exempted goods are those goods that are
exempted from payment of duty by way of
exemption notification issued under ec '$ of
Central Excise $ct read with Central Excise
Tariff $ct.
!7il" rate goods are those goods on which no excise
duty is payable, as under the relevant Central Excise
Tariff heading or subheading, the duty payable is
!7il".
%. 2or !exempted goods", the tariff indicates a
rate of duty, but the duty is exempt by issue of
an exemption notification.
!7il" rate duty means the Central Excise Tariff itself
indicates !7il" rate.
=. Exemption may be granted with or without
conditions.
!7il" rate as indicated in Tariff may also be with
some condition of use etc., if the Tariff itself
specifies such a condition.
Dutiability of excisable :oods
Excisability and dutiability are somewhat distinct terms because all the goods referred under schedule
I and II of CET$ are said to be excisable goods but all of those are not dutiable. In :;* +s. 9C</
the upreme Court held that in order to become !goods" on which duty of excise can be charged, an
article must be something which can ordinarily come to the mar*et for being bought and sold.
In order to constitute the !dutiable" the following ingredients must be present0 :
,i- The goods should be movable ,7o levy on immovable goods-,
,ii- The goods should be mar1etable, capable of being bought and sold,
,iii- The goods should arise out of manufacturin: process and
,iv- The goods should be mentioned in the Central Excise Tariff $ct, 14.'
I Conce6t of 5ovability
13
$s per the )eneral Clauses $ct, 1.4>, ;mo)able goods< means property of every description except immovable
property. 2or the purpose of excise the goods are said to be movable if those are capable of K
,a- being brought to mar3et in the same formH and
,b- being sold ,Delhi 4loth = 9eneral >ills 4o. -td ,s +?I!
Ghether an item is movable or not, depends on various facts and circumstances. In -irp!r =aper
<ills +. CCE/ >dera$ad, @AA$, the upreme Court stated that the paper ma3ing machine, though
erected on concrete foundation, is movable and mar3etable. The concrete foundation is only to ma3e
the machine wobble free and the machine can be dismantled into parts and shifted to any site, if need
be. 9owever, in the case of .riveni Engg and *nd!stries ?td. +s. CCE/ /000, the upreme Court
opined that installation of turbo alternator on concrete base specifically constructed on the land
cannot be treated as a common base. Therefore, the installation and erection of turbo alternator on the
platform constructed on the land is immovable property which is not excisable.
In >unicipal 4orporation of 9reater >umbai ,. +nion of India, a petrol pump of huge capacity
which was not embedded in earth but which could not be removed without being dismantled was held
to be immovable. Therefore, whether an article is movable or not depends on the facts of the case.
C;EC has vide its circular 7B '.#1#%66%:CM dated 1'#1#%66% clarified that Iif any goods installed at
site are capable of being sold or shifted as such after remo)al from the base and without dismantling
into its componentsBparts, the goods would be considered to be mo)able and thus, excisable. Che
mere fact that the goods, though being capable of being sold or shifted without dismantling, are
actually dismantled into their own componentsBparts for the ease of transportation etc., they will not
cease to be dutiable merely because they are transported in dismantled condition.
DDDDDDDDDD.
Che intention of the party is also a factor to be ta*en into consideration to ascertain whether the
embedment of a machinery in the earth was a temporary or permanent to determine whether the
goods are mo)able or immo)able."
(II Conce6t of 5ar1etability;Vendibility:
The 2inance $ct %66. has added an explanation to the definition of Excisable )oods i.e.
Explanation.K 8or the purposes of this clause, "goods" includes any article, material or substance
which is capa$le of $eing $o!g#t and sold for a consideration and such goods shall be deemed to be
mar*etable.
Therefore, concept of mar3etability, as decided in various cases earlier has become redundant. $s of
now, goods to be considered as mar3etable should be ca6able of being bought and sold.
@!estionA <ere selling of a commodit does not mean it is mar)eta$le(. El!cidate. <Nov9 -*=
;r
@!estionA BEvert#ing t#at is sold is not necessaril a mar)eta$le commodit c#argea$le to excise
d!t !nder t#e provisions of t#e Central Excise "ct/ 1944.3 9isc!ss. &1 <ar)s'<Nov9 -D=
Ans$erA The 2inance $ct %66. has inserted an explanation to section %,d- of the Central Excise
$ct which states that I2or the purposes of this clause, NgoodsN includes any article, material or
substance which is capable of being bought and sold for a consideration and such goods shall be
deemed to be mar3etable.O Therefore,

mere selling of a commodity means it is mar3etable.
14
(III Conce6t of 5anufacture
The definition of the term !manufacture" given under section %,f- enlarges the scope of the word
manufacture. $ccording to section %,f- of the Central Excise $ct, 14//0
"manufacture" includes any process,(
i! incidental or ancillary to the completion of a manufactured product; and
ii! which is specified in relation to any goods in the 3ection or 4hapter notes of the 8irst
3chedule to the 4entral Excise Cariff %ct, @A$E E of @A$F! as amounting to manufacture; or
iii! which, in relation to the goods specified in Chird 3chedule in)ol)es pac*ing or re-pac*ing of
such goods in a unit container or labeling or re-labeling of containers including the declaration
or alteration of retail sale price on it or adoption of any other treatment on the goods to render
the product mar*etable to the consumer,
and the word "manufacturer" shall be construed accordingly and shall include not only a person
who employs hired labour in the production or manufacture of excisable goods, but also any
person who engages in their production or manufacture on his own account;
The word manufacture is a compound word of *atin origin derived from the word !manu" by hand
!facere", to do, to ma3e, to formH but the meaning is not confined that which is done by hand alone,
but by machinery as well. Gindustan Holes 4orporation ,. 44E, Iol*ata ./00F2
The upreme Court in Delhi 4loth = 9eneral >ills 4o. -td stated that &>anufacture implies change
but e)ery change is not manufacture and yet e)ery change of an article is the result of treatment,
labour and manipulation. 7ut something more is necessary and there must be transformation. % new
and different article must emerge ha)ing a distinct name, character or use."
,acts of t#e caseA The Company, manufacturing vegetable 3nown as !8anaspati", filed +etition. The
petitioners purchased groundnut oil and til oil from the open mar3et and subjected it to various
processes in order to obtain vanaspati. The <epartment contended that in the course of manufacture
of vanaspatiH the company, at one stage, after carrying out some processes with the aid of power,
brings into existence what is 3nown in the mar3et as Irefined oilJ. The <epartment proposed to levy
duty on the ground that the company had manufactured refined oil. The assessee contended that mere
processing of oil does not amount to manufacture as at that stage the oil was not fit for human
consumption.
9ecision of t#e -!preme Co!rtA The $pex Court held that, in the given case, processing of oil does
not amount to !manufacture" since the oil was not fit for human consumption. The excise duty is on
the manufacture of goods and not on their sale. Therefore the fact that a substance produced at an
intermediate stage is not put in the mar3et would not ma3e any difference. The word !manufacture" in
ection %,f- is to be understood to mean as !bringing into existence a new substance" and does not
merely mean !to produce some change in a substance". @ere processing of goods is not liable to
excise duty. @anufacture implies change but every change is not manufacture.
Essential in:redients to call a 6rocess as 5anufacture! P
,a- There must be some input material
,b- The material undergoes some process ,treatment and labour- which results into change
,c- Every change is not manufacture. There must be complete transformation. $s a result of the
process, some new article emerges. The new article must have :
,i- distinctive name
,ii- distinctive character
15
,iii- distinctive use.
+olishing of tiles does not amount to manufacture of gla?ed tiles as gla?ed tiles are normally not
polished at all. )la?ed tiles are produced when a coating of melt glass is applied on the surface of the
body of the tiles. Thus, mere fact of polishing does not lead to the conclusion that the tiles are gla?ed.
44Ex ,s. 7ell 9ranito 4eramics -imited 34! ./00F2
.roduced
The word produced is used to cover items li3e tobacco, coffee, ore etc., which are produced, but no
manufacturing process may be carried out. ;y:products, waste and scrap is also produced, they are
not manufactured.
5anufacture Vs .rocessin::
@anufacture involves a series of processes, whereas a process is one of the activities underta3en for
manufacture of a product from input materials. @anufacture is the cumulative effect of various
processes to which raw materials are subjected and each such step towards the finished product would
constitute processing in relation to the manufacture.
If there is no essential difference in identity between the original product and the processed product,
then no manufacture has ta3en placed for the purpose of excise. $lthough the input material has
undergone a degree of processing, it must be regarded as still retaining its original identity. Ghere the
product retains its substantial identity through the stage of processing, it could be said to have been
merely processes and not manufactured.
The distinction between the manufacture and process has been dealt by the upreme Court in the case
of :nion of *ndia +. 7lass *nd!stries ?td. where in the apex court observed that the answer to the
1uestion whether the process is that of ImanufactureJ would be based on two fold test P
2irstly, whether by the said process a different product comes into existence or whether the identity of
the original product ceases to exist.
econdly, whether the product which was already in existence will serve no purpose or will be of no
commercial use but for the said process.
Certain ot8er issues in 5anufacture
&9 E8et8er assembly amounts to manufactureF
Ghere the process of assembling of parts or components results in the transformation of the product
into a new product which has a distinct name, character and use and which has a separate entry in the
Central Excise Tariff, then such assembling activities amount to manufacture.
In Jarne Culaman >anufacturers H)t -td ,s 44E, the appellant had fitted a platform, load cells and
indicator system, which in the assembled form became a weigh bridge. The assessee contended that
such assembling activity did not amount to manufacture. The assessee also contended that since duty
was paid on the items purchased, further duty cannot be demanded. Geld that the weighbridge was a
commercial commodity, having a distinct name, character and use and hence the activity of assembly
amounts to manufacture.
imilarly, in 7H- India -td ,s. 44E, the upreme Court held that assembly of imported 3its of 8T5
16
with colour monitors imported in disassembled condition amounted to manufacture since the end
product had a distinct character and use and the process of assembly was done by technical experts or
s3illed persons. 9owever, if the assembly of such duty paid components does not result in the
emergence of a new article having a distinct character and use, then it will not amount to
manufacture.
,9 Dutiability of 0ite +elated Activities:
Qeeping in view the various judgments passed by the upreme Court, in exercise of the power
conferred under ection =>; of the Central Excise $ct, 14//, and with a view to bring uniformity in
connection with the classification of goods erected and installed at site, the C;EC has issued order
7o. '.#1#%66% P CM dated 1'
th
Aanuary %66%. $ccording to it0 K
,i- 2or goods manufactured at site to be dutiable, they should have a new identity, character and
use, distinct from the inputs#components that have gone into its production. 2urther, such
resultant goods should be specified in the Central Excise Tariff as excisable goods besides being
mar3etable i.e. they can be ta3en to the mar3et and sold ,even if they are not actually sold-. The
goods should not be immovable.
,ii- Ghere processing of inputs results in a new product with a distinct commercial name, identity
and use, excise duty would be chargeable on such goods immediately upon their change of
identity and prior to their assimilation in the structure or other immovable property.
,iii- Ghere change of identity ta3es place in the course of construction or erection of a structure
which is an immovable property, then there would be no manufacture of NgoodsN involved and
no levy of excise duty.
,iv- Integrated plants#machines, as a whole, may or may not be !goods" e.g. plants for transportation
of material ,such as handling plants- are actually a system or a networ3 of machines. The system
comes into being upon assembly of its component. In such a situation there is no manufacture of
NgoodsN as it is only a case of assembly of manufactured goods into a system.
,v- If items assembled or erected at site and attached by foundation to earth cannot be dismantled
without substantial damage to its components and thus cannot be reassembled, then the items
would not be considered as moveable and will, therefore, not be excisable goods.
,vi- If any goods installed at site ,example paper ma3ing machine- are capable of being sold or
shifted !as such" after removal from the base and without dismantling into its components#parts,
the goods would be considered to be movable and thus excisable. The mere fact that the goods,
though being capable of being sold or shifted without dismantling, are actually dismantled into
their components#parts for ease of transportation etc., they will not cease to be dutiable merely
because they are transported in dismantled condition. 5ule %,a- of the 5ules for the
Interpretation of Central Excise Tariff will be attracted as the guiding factor is capability of
being mar3eted in the original form and not whether it is actually dismantled or not, into its
components.
,vii- Ghen the final product is considered as immovable and hence not excisable goods, the same
product in CQ< or unassembled form will also not be dutiable as a whole by applying 5ule %,a-
of the 5ules of Interpretation of the Central Excise Tariff. 9owever, components, inputs and
parts which are specified excisable products will remain dutiable as such identifiable goods at
the time of their clearance from the factory or warehouse.
,viii- The intention of the party is also a factor to be ta3en into consideration to ascertain whether the
embedment of machinery in the earth was to be temporary or permanent.
17
06ecific instances of site related activities
(i .!rn )e pro2ects li3e teel +lants, Cement plants, +ower plants etc. involving supply of
large number of components, machinery, e1uipments, pipes and tubes etc. for their
assembly # installation # erection # integration # inter:connectivity on foundation#civil structure
etc. at site, will not be considered as excisable goods for imposition of Central Excise <uty P
the components, however, would be dutiable in the normal course.
,ii- >!ge tan)s made of metal for storage of petroleum products in oil refineries or installations.
These tan3s, though not embedded in the earth, are erected at site, stage by stage, and after
completion they cannot be physically moved. Bn sale#disposal they have to be necessarily
dismantled and sold as metal sheets#scrap. It is not possible to assemble the tan3 all over
again. uch tan3s are therefore not moveable and cannot be considered as excisable goods
Cri)eni Engg. 4ase!.
,iii- 8efrigeration/"ir conditioning plants. These are basically systems comprising of
compressors, ducting, piping, insulators and sometimes cooling towers etc. They are in the
nature of systems and are not machines as a whole. They come into existence only by
assembly and connection of various components and parts. Though each component is
dutiable, the refrigeration#air conditioning system as a whole cannot be considered to be
excisable goods. $ir conditioning units, however, would continue to remain dutiable as per
the Central Excise Tariff $ct. CCEx./ *ndore +s. +irdi Crot#ers D2007ED-CE
,iv- ?ifts and escalatorsA
,a- Though lifts and escalators are specifically mentioned in sub heading ./%..16, those which
are installed in buildings and permanently fitted into the civil structure, cannot be considered
to be excisable goods. uch lifts and escalators have also been held to be non:excisable by
the )ovt. of India in the case of ?tis Ele)ators India 4o -td.
,b- There may, however, be instances of fabrication of complete lifts and escalators which are
movable in nature as a whole and can be temporarily installed at construction sites or
exhibitions for carrying men or material. uch cases alone would be liable to duty under sub:
heading ./%..16 of the Central Excise Tariff. ;ut there is no duty liabiloity when such lift is
shifted to another site.
+rocuring various duty paid components of burglar and fire alarm system to a customer"s
site and thereafter connecting same does not amount to manufacture and, hence, not
excisable. Kicom Electronics 3ecurity 3ystems -imited ,s. 44Ex., >umbai ./0012.Cri-
>um2. imilar is the case with lifts, escalators, air:conditioners etc.
39 Dutiability of Intermediate .roduct
The definition of manufacture u#s %,f- also imply that manufacture would ta3e place at an
intermediate stage of the process, as long as the intermediate products are 3nown commercially as a
distinct and identifiable product.
9owever, although excise duty is chargeable on manufacture of goods, the collection of the duty is
postponed to the time of removal of goods from the factory. The intermediate goods would be
chargeable to duty as they would be deemed to have been removed prior to consumption in the
manufacturing process. 9owever an intermediate product would be excisable only if it is a complete
product in the sense that it is capable of being sold to a consumer.
Intermediate products, which are capable of being mar3eted as goods in their own right, will be
18
chargeable to duty, notwithstanding that they are not pac3ed or stored separately but are used as part
of a continuous process.
$lthough mar3etable intermediate goods are chargeable to duty, there are currently several
exemption notification in force which exempt captively consumed intermediate products fromR duty
if these are used in manufacture of final product which is dutiable. If such exemption is not available,
duty liability is certain.
(9 Ca6tive Consum6tion
Ghen excisable goods manufactured in a factory are used within the factory as an intermediate goods
for manufacturing some other goods, it is 3nown as captive consumption e.g. engines manufactured
in one part of the factory may be used in manufacture of car in another part of the factory. ection =
of the C.E. $ct 14// lays down that Excise <uty shall be levied on excisable goods which are
manufactured or produced in India, as may be prescribed by the rules.
5ule / D . of Central Excise 5ules deal with the time and manner of payment of duty and lays down
that duty is chargeable only on removal of goods from the factory premises or from an approved
place of storage. Thus whether duty is payable on captive consumption of goods is a 1uestion to be
decided by reference to 5ule / D . of C.E. 5ules.
+reviously it was a practice that intermediate products, which are captively consumed in the factory,
are not chargeable to duty since they are not removed from the factory. ;ut now, with the amendment
of rules, removal of goods from the place of manufacture is not essential for charging of excise duty.
If the good were manufactured are specified in the Central Excise Tariff $ct, 14.', then the same
would be subject to duty. 2urthermore, utilisation of excisable goods even in a continuous process,
so long as the goods are identifiable and capable of physical removal, would attract duty, whether in
fact they are physically removed or not.
The )ovt. has issued an exemption notification 7o. &>#4' dated 1&
th
@arch, 144' as per which
exemption is available to0
a. Inputs manufactured in a factory and used within a factory for manufacture of final products
which are liable to excise duty e.g. !$" is produced in the course of manufacture of !;". !$" is
liable to duty E 1&C. !;" is also liable to excise duty. In this case, there is a deemed removal
of !$" but it is exempted under the said notification.
b. Capital )oods eligible for CE78$T credit manufactured in the factory and used within the
factory e.g. !M" is produced in the manufacture of !S". !M" is liable to duty E 1&C, whereas
!S" is fully exempt from duty. <uty is payable on !M" at the time of its utilisation in the
production of !S".
*9 Dutiability of Easte > 0cra6
The Central Excise Tariff $ct has identified waste products, which have a potential to generate
revenue and it has mentioned such products under applicable chapter headings. The C in the case of
Ihandelwal >etals = Engg 'or*s ,s +?I has held that levy of excise duty on waste and scrap is not
ultra)ires ection =,1- of the Central Excise $ct, 14//.
Hrocess waste = scrap is a commercially distinct identifiable product and ha)e commercial )alue
i.e. >ar*etable! = if incorporated in tariff, it will be chargeable to duty. Jo duty on scrap if final
product is exempt ,notification no. =#4' dt. 1&#=#4'-.
Gaste and scrap generated out of used barrels, used barrel sheets, burnt fire bric3s, bro3en grinding
19
wheels, used 9<+E bags and iron scrap are result of wear and tear. -!c# 4aste and scrap/ not
arising o!t of man!fact!re/prod!ction/ is not excisa$le. Hanasonic 4arbon India 4o. -td. ,s.
44Ex., 7angalore ./0012.Cri-7ang2B Gaste and scrap generated during plant expansion is also not
excisable. Kuari 4ement -imited ,s. 44Ex., Cirupati ./0012.Cri-7ang.2
D9 Duty on by 6roducts
Ghile main goods are being produced certain by:products are also emerge. 2or the purpose of
dutiability, whether goods are main goods or by:products. <uty is attracted on main goods as well as
by:products.
49 E8et8er Blabelin:% 6ac1in: and brandin:C amounts to manufacture
a. In relation to goods other than those which are covered under schedule III of the CE$, these
activities will amount to manufacture only if so specified under the ection#Chapter notes of CET$.
b. In relation to goods covered under schedule III of the CE$, these activites will amount to
manufacture only if these have the effect of creating mar3etability of the goods to the consumer
directly.

Guestion: 0tate briefly $8et8er t8e follo$in: circumstances $ould constitute manufacture!
for 6ur6oses of section ,(f of t8e Central Excise Act% &'((:
&i' "ot8 in6uts and t8e final 6roduct fall under t8e same tariff 8eadin: under t8e first
sc8edule to t8e Central Excise Tariff Act% &')* (Tariff Act9
&ii' In6uts and final 6roduct fall under different tariff 8eadin:s of t8e Tariff Act9 (3 x , H D
5ar1s
Ans$er: ,i- !@anufacture" is bringing into being goods 3nown in the mar3et having distinctive name,
character or use and separate and identifiable function. Bnce a new commodity having a definite and
distinct commercial identity in mar3et is produced and the same has been specified in the tariff, it is
exigible to duty. It is irrelevant whether the new article falls into the same tariff heading as the duty
paid raw material from which it is manufactured or belongs to a separate tariff heading.
It was held in CCEx. v. Fapri *nternational &=' ?td. /00/! @L/ E-C @0 34! that if manufacture
ta3es place, the commodity is dutiable even if the raw material and the resultant product fall under the
same tariff heading. It was followed recently in 44Ex., Maipur ). >aha)ir %luminium -td. /001! /@/
E-C # 34!, wherein it was held that converting aluminium ingots ,>&61.16 P old entry- into
aluminium billets ,>&61.16 P old entry- is !manufacture", because they have separate, distinct and
identifiable mar3etability and saleability.
,ii- $s held in CCEx. v. <ar)fed +anaspati /00#! @E# E-C LA@ 34!, mere change in tariff does not
mean there is !manufacture". It was again confirmed in 44Ex. ). 3 N Cissues /00E! @$F E-C #$E
34! that just because raw material and finished product fall in different tariff headings it cannot be
presumed that process of obtaining finished product from such raw material automatically constitutes
!manufacture". Therefore, manufacturing is not only about a process and a product but it is about a
new identity that must emerge out of the given process. @ere mention of process in tariff entry is not
sufficient, it must be specifically stated that a particular process !amounts to manufacture" P 3hyam
?il 4a*e -td. ). 44Ex. /00E! @1L E-C @LE 34 6 # members bench!.
20
Conce6t of Deemed 5anufacture

$s per clause ii! and iii! of 3ection /f! of The Central Excise $ct, 14//, manufacture also includes
any process P
ii! which is specified in relation to any goods in the 3ection or 4hapter notes of the 8irst
3chedule to the 4entral Excise Cariff %ct, @A$E as amounting to manufacture; or
iii! which, in relation to the goods specified in Chird 3chedule in)ol)es pac*ing or re-pac*ing of
such goods in a unit container or labeling or re-labeling of containers including the declaration
or alteration of retail sale price on it or adoption of any other treatment on the goods to render
the product mar*etable to the consumer,
The processes that 1ualify to be manufacture as per clause ,ii- and ,iii- of section %,f- are
termed as deemed manufacture.
Thus, if any process which is specified in the ection or Chapter 7otes of the 2irst chedule to
the Central Excise Tariff $ct, 14.' as amounting to manufacture is carried out, goods will be
deemed as manufactured, even if as per Court decisions, the process may not amount to
manufacture. 2or instance, 7ote % of Chapter 4 provides that in case of tea, or tea waste,
blending, sorting, pac3ing or re:pac3ing into smaller containers shall amount to manufacture.
imilarly, if any of specified processes ,li3e re:pac3ing, re:labelling, alteration of retail sale price
etc.- is being carried out on goods covered in Third chedule to the Central Excise $ct, 14// , the
process will be deemed to be as that of manufacture and, thus, will be liable to excise duty.
Ghere an activity is deemed to be manufacture, duty liability is created even though there is no
transformation.
-ome examples of deemed man!fact!re
1. $;C *imited gets wafers manufactured by B+T *imited and gets in a pac3ing of ' Qg. Bn
receipt of the same, $;C *imited repac3s it in pac3ets of '6 gms. each. Gafers are included
in the third schedule of the Central Excise $ct. Therefore, although $;C *imited carries out
only repac3ing of the wafers manufactured by B+T *imited, still amounts to manufacture.
Therefore, $;C *imited to liable to pay duty on removal of consumer pac3s of the wafers.
%. Bne company buys pressure coo3ers from the manufacturer and after repac3ing sells the
same pressure coo3er under its own brand name. ince pressure coo3er is covered under
chedule III, repac3ing and branding amounts to manufacture within the meaning of section
%,f-,iii-
Computers are not covered under chedule III. Therefore, same activities in case of computer
would not amount to manufacture within the meaning of section %,f-,iii-.
=. In case of dairy products li3e mil3, cream, butter D cheese, labelling or re:labelling of
containers D repac3ing from bul3 pac3s to retail pac3s or application of any other treatment
to render the product mar3etable to the consumer shall amounts to manufacture.
/. *abelling or re:labelling of containers and re:pac3ing from bul3 pac3s to retail pac3s of 0
+an masala U7ote > to Chapter %1L,
natural or artificial mineral waters U7ote % to Chapter %%L,
un:manufactured tobacco, cigar and cigarettes U7ote % to Chapter %/L,
organic chemicals U7ote 11 to Chapter %4L,
21
colouring matter U7ote = to Chapter =%L,
perfumes, beauty preparations for use on the hairs U7ote / to Chapter ==L,
soaps, waxes etc.U7ote & to Chapter =/L
shall amount to manufacture.
'. ;leaching merceri?ing, dyeing, printing etc. to
yarn of wool U7ote = to Chapter '1L,
cotton fabrics U7ote = to Chapter '%L,
mono:filaments U7ote = and / to Chapter '/L,
synthetic woven fabrics U7ote / to Chapter ''L,
special woven fabrics, tufted textile fabrics U7ote . to Chapter '.L,
Qnitted or crocheted fabrics U7ote / to Chapter &6L
shall amount to manufacture.
&. <rawing or re:drawing of tubes, pipes of iron or steel shall amount to manufacture. U7ote = to
Ch. >=L
>. 5ecording of sound or other phenomena on audio or video tapes shall amount to
manufacture. U7ote > to Chapter .'L
.. The process of cutting or sawing or si?ing or polishing or any other process, for converting of
stone bloc3s into slabs#tiles
4. The process of metallisi?ing of cover plates, sheets, film, foil and strip of plastics etc.
16. The process of drawing or redrawing of iron and steel bar, rod, wire rod, round bar or any
other similar article into bright bar
11. Coating of pipes of iron and steel with cement or polyetehelene or other plastic material.
1%. 5efining of edible oil.
*abeling of assessee"s name, address and brand name on barrels containing lubricating oil additives
imported by them, carried out to meet re1uirements of 5ule == of tandard Geights and @easures
,+ac3aged Commodities- 5ules, 14>> and not to render the goods mar3etable does amount to
manufacture. 44Ex., 4hennai ,s. Indian %dditi)es -imited. ./0012.Cri-4hennai2
@!estionA "CC Compan imported medicines in pallets 4it# one $ig $ox containing assorted
medicines in smaller !nits 4#ic# 4ere/ t#en/ repac)ed in t#ermocole $oxes of different siGes 4#ic#
again 4ere p!t into card$oard $oxes. .#e card$oard $oxes 4ere in t!rn la$elled containing/
interalia/ t#e name of t#e medicine/ t#e name of t#e man!fact!rer/ t#e H!antit/ $atc# no./
man!fact!ring date/ expir date and name of t#e mar)eting agenc. .#e department reling !pon
note 1 to c#apter 30/ claimed t#at t#e activities as aforesaid amo!nt to man!fact!re i.e./ $!l) pac)
to retail pac). 9ecide 4#et#er t#e a$ove activities tantamo!nt to man!fact!re. &4 <ar)s'
Ans$er: The facts of the case are similar to the case of 44Ex., >umbai ). Mohnson = Mohnson -td.,
/00E @$$! E-C LF1 34!. Ghile dismissing the case, the upreme Court observed that merely
pac3ing for being mar3eted does not amount to manufacture for the purpose of 7ote ' to Chapter =6
of Central Excise Tariff. The products have to be repac3ed from bul* pac*s to retail pac*s so as to
ma3e them mar3etable to the consumer for the activity to be termed as !manufacture". In that case
there was no evidence relied upon by the department to the effect that the cardboard boxes or the
thermocole containers in which the units were placed were !retail pac3s".
In view of the abovementioned decision, the activity of repac3ing described in the 1uestion would not
amount to manufacture.
22
Conce6t of 5anufacturer
$ccording to ection %,f- of the Central Excise $ct, 14// &the word ;manufacturer< shall be
construed accordingly and shall include not only a person who employs hired labour in the
production or manufacture of excisable goods, but also any person who engages in their production
or manufacture on his own account". Thus, the definition of manufacturer provides for two
categories of manufacturers0
a. +ersons who manufacture on their own account.
b. +ersons who get goods manufactured through hired labourers.
$ person may own a brand but another independent manufacturer may manufacture the product. In
such cases, the person who gets his goods manufactured by the independent manufacturer, does not
become a !manufacturer" merely due to the reasons such as0
the goods are produced according to his specifications, or
the goods are produced under franchisee agreement, or
his trademar3 or brand name is affixed to such goods, or
he supplies the raw material to the actual manufacturer, or
entire production is supplied to one customer.
9owever, it should be noted that the actual manufacturer should not merely be a dummy or a hired
labour of the supplier.
$ manufacturer is one who actually underta3es the manufacturing activity. $ raw material supplier
is not the manufacturer. imilarly, a customer who gets the goods manufactured according to his
specifications and#or designs or with his brand or trade name does not become the manufacturer.
CCE Vs9 55 I8ambat$ala
imilarly, in J?a:ar .rints Case, it has been held that manufacturer is one who actually
manufactures the goods. It is immaterial whether he manufactures his own goods or others goods. 2or
example, where !M" supplied raw material to !S" and gets manufacture done by the later, !S" is the
manufacturer though !M" supplied the re1uisite raw material. (5ay '4
imilarly, in Aood 06ecialities Case, 2ood pecialities *td manufactured goods under 7estle"s brand
name and trademar3. 7estle controlled production and also prescribed 1uality specifications. The
upreme Court held that the manufacturer is 2ood pecialities *td and not 7estle who is merely a
brand holder.
In Cibatul #imited goods produced under agreement with the buyer"s brand name. The buyer is
entitled to test every lot and to reject the goods which are found to be sub:standard. The buyer also
holds 'C share capital in the selling company. ;uyer cannot be treated as manufacturer.
Guestion: $ merchant manufacturer gets the goods manufactured according to his design and
specifications from a job:wor3er. Gho will be called as manufacturer under the Centrla Excise *aw.
<Nov9 -)=
Taxable Event for #evy of Excise Duty
Conce6t of #evy under Central Excise:
The levy of excise duty is governed by ection = of the Central Excise $ct, 14//. The word levy
means imposition and assessment of duty. 9ence, ection = is called the !charging section". *evy
and collection are not synonymous terms. Collection comes after 1uantification of duty i.e. levy.
23
9istinction $et4een lev and collection
In +?I ,s 7ombay Cyre International -td. the upreme Court held that while the levy of excise duty
is on the manufacture or production of excisable goods, the stage of collection need not in point of
time coincide with the completion of the manufacturing process. The duty can be levied at any stage
as long as the duty is imposed on manufacture or production of excisable goods.
Thus, the excide duty is levied on manufacture or production of excisable goods but the rate of duty is
determined as per the rules framed in this behalf by the Central )overnment. (5ay ')
0ection 3 2 Determination of Taxable event for levy of duty
@! Chere shall be le)ied and collected in such manner as may be prescribed (
a! a duty of excise to be called the Central +al!e "dded .ax 4EJ,%C!, on all excisable goods
which are produced or manufactured in India as, and at the rates, set forth in the ,irst -c#ed!le
to the 4entral Excise Cariff %ct, @A$E;
b! a special duty of excise, in addition to the duty of excise specified in clause a! abo)e, on
excisable goods specified in the 3econd 3chedule to the 4entral Excise Cariff %ct, @A$E, which
are produced or manufactured in India, as, and at the rates, set forth in the said 3econd
3chedule5
Hro)ided that the duties of excise which shall be le)ied and collected on any excisable goods
which are produced or manufactured (
i! DDDDD.. ?mitted!
ii! by a hundred per cent export-oriented underta*ing and brought to any other
place in India,
shall be an amount equal to the aggregate of the duties of customs which would be le)iable
under the 4ustoms %ct, @AF/ or an ot#er la4 for t#e time $eing in force on li*e goods
produced or manufactured outside India if imported into India, and where the said duties of
customs are chargeable by reference to their )alue, the )alue of such excisable goods shall be
determined in accordance with the pro)isions of the 4ustoms %ct, @AF/ and the 4ustoms Cariff
%ct, @A1E. DNov. 90E
Explanation 1 ('here in respect of any such li*e goods, any duty of customs le)iable for the
time being in force is le)iable at different rates, then, such duty shall, be deemed to be le)iable
at the highest of those rates.
Explanation 2 (In this pro)iso,(
i! "free trade Oone" means a Oone which the 4entral 9o)ernment may, by notification in the
?fficial 9aOette, specify in this behalf;
ii! "hundred per cent export-oriented underta*ing" means an underta*ing which has been
appro)ed as a hundred per cent export-oriented underta*ing by the 7oard appointed in this
behalf by the 4entral 9o)ernment in exercise of the powers conferred by section @L of the
Industries De)elopment and Negulation! %ct,@AE@ FE of @AE@!, and the rules made under
that %ct;
iii! "special economic Oone" means a Oone which the 4entral 9o)ernment may, by
notification in the ?fficial 9aOette, specify in this behalf.
24
@%! Che pro)isions of sub-section @! shall apply in respect of all excisable goods other than salt
which are produced or manufactured in India by, or on behalf of 9o)ernment, as they apply in
respect of goods which are not produced or manufactured by 9o)ernment.
/! Che 4entral 9o)ernment may, by notification in the ?fficial 9aOette, fix, for the purpose of
le)ying the said duties, tariff )alues of any articles enumerated, either specifically or under general
headings, in the 8irst 3chedule and the 3econd 3chedule to the 4entral Excise Cariff %ct, @A$E as
chargeable with duty ad )alorem and may alter any tariff )alues for the time being in force.
#! Different tariff )alues may be fixed(
a! for different classes or descriptions of the same excisable goods; or
b! for excisable goods of the same class or description(
,i- produced or manufactured by different classes of producers or manufacturersH or
,ii- sold to different classes of buyers0
Hro)ided that in fixing different tariff )alues in respect of excisable goods falling under sub-clause i!
or sub-clause ii!, regard shall be had to the sale prices charged by the different classes of producers
or manufacturers or, as the case may be, the normal practice of the wholesale trade in such goods."
India
$s per 7otification dated 1..>.%66& issued by @inistry of External $ffairs read with @aritime Vones
$ct, 14>& oil rigs erected within %66 nautical miles are within India. Therefore,
- Excise duty is levied on the crude extracted
- upply of goods from main land to oil rigs is not export
- upply to oil rigs from abroad is import.
Essentials for c8ar:in: of excise duty
In order to attract the levy of Central Excise duty, the following conditions must be satisfied0
a- The product# article, on which the levy of duty is sought, must be goods
b- The goods must be, excisable goods, as defined u#s %,d- of the Central Excise $ct, 14//.
c- The goods must have been produced or manufactured ,the term !manufacture" has been
defined u#s %,f- of the Central Excise $ct, 14//-.
d- uch production or manufacture of excisable goods must be in India ,as stipulated in ection
= of the Central Excise $ct, 14//-.
e- The goods must be movable.
f- The goods must be mar3etable, and
g- The goods should not be exempt.
-!mmar 6 $ll excisable goods which are produced or manufactured in India ,excluding goods
produced on manufactured in special economic ?ones- shall be chargeable to
1. a duty of excise ,CE78$T duty- at the rates mentioned in the first schedule of CET$ ,referred as
basic excise duty- and
%. a special duty of excise, as specified in the second schedule of CET$. ,this will be in addition to
;asic CE78$T duty-
No excise duty on 0EK units
ection =,1- excludes pecial Economic Vones ,EV- from payment of excise duty. In other words,
and goods manufactured or produced in a unit situated within pecial Economic Vone shall not be
25
liable to pay any excise duty. The reason behind this is that these unit are treated as units situated out
India to promote export. 9owever, this exclusion is only for EV. Bther export promotion ?ones or
par3s or unit will continue to pay excise duty. There is special method of collection of duty on unit
established in 2TV and 166C Export Briented (nits.
Duty on :oods manufactured in &--L E@Js
Excisable goods manufactured in 166C export oriented underta3ings, electronic hardware par3s,
software par3s and bio:technology also attracts excise duty when such goods are removed to domestic
tariff areas. Excise duty is payable as per the Custom Tariff $ct and the 8aluation of such goods will
also be done in accordance with the provisions of the Customs $ct, 14&%.
;ut by virtue of 7otification 7o. %=#%66= P CE dated =1.=.%66= basic custom duty is exempt to the
extent of '6C.
Duty on /overnment underta1in:s
ection =,1$- of the Central Excise $ct, 14// states that, &Che pro)isions of sub-section @! shall
apply in respect of all excisable goods other than salt which are produced or manufactured in India
by, or on behalf of 9o)ernment, as they apply in respect of goods which are not produced or
manufactured by 9o)ernment." Therefore, the goods manufactured or produced in a factory owned or
controlled by Central or tate )overnment is e1ually liable to excise duty in the same manner as non
government manufacturer.
Taxable event
Taxable event is the happening because of which liability to pay tax arises. Even though taxable event
ta3es place at a particular point of time, for the purpose of administrative ease, its assessment and
collection may be postposed to a future date.
2or the purpose of levy of central excise, the taxable event is manufacture or production of excisable
goods in India. Time and rate of payment of duty is regulated by 5ule ' and . of Central Excise
5ules, %66% respectively. Discussed in a separate chapter later!. $s per 5ule ', a person shall be
liable to pay excise duty at the rate prevalent at the time of clearance of excisable goods from the
factory# warehouse and not at the rate prevalent at the time of manufacture. Collection of duty at the
stage of removal does not mean that it is imposed on sale or transfer of ownership.
Duty liability $8en :oods are not sold
It is to be noted that the taxable event is manufacture of excisable goods and its sale. Therefore, duty
is attracted even when P
a. goods are used within the factory
b. goods are captively consumed for further manufacture
c. goods are given as free samples
d. <ispatch of goods to own depot or branches
e. *ost # destroyed goods after their manufacturing
@!estionA Criefl examine t#e correctness or ot#er4ise of t#e statement 4it# reference to t#e
Central Excise "ct/ 1944 giving reasons to s!pport o!r ans4erA =arts !sed for repair or
replacement d!ring 4arrant period are excisa$le.
26
"ns4erA (nder Central Excise, Taxable event is manufacture of exisable goods. Therefore, duty is
payable even if goods are provided free of cost during gurantee or warranty period. @oreover, 5ule /
of the 8aluation 5ules also supports the fact that duty is payable even on parts which are supplied free
of cost during guarantee or warranty period. The upreme Court in the case of E4E Industries -td. ).
44Ex. /00L @FL! E-C /#F 34! has held that parts used for repair, replacement during the warranty
period are excisable. If some spare parts are supplied as free replacements for defective parts, excise
duty is payable on such spare parts also.
In ?arsen I .o!$ro ?td. +. CCE also it was held that the duty is payable even when goods are
supplied free of cost under warranty period.
=o4er of Central 7overnment to c#arge excise d!t on t#e $asis of capacit of prod!ction in
respect of notified goods.
@
- 0ection 3A
3". @! Jotwithstanding anything contained in section #, where the 4entral 9o)ernment, ha)ing
regard to the nature of the process of manufacture or production of excisable goods of any specified
description, the extent of e)asion of duty in regard to such goods or such other factors as may be
rele)ant, is of the opinion that it is necessary to safeguard the interest of re)enue, specify, by
notification in the ?fficial 9aOette, such goods as notified goods and there shall be le)ied and
collected duty of excise on such goods in accordance with the pro)isions of this section.
/! 'here a notification is issued under sub-section @!, the 4entral 9o)ernment may, by rules,(
a! pro)ide the manner for determination of the annual capacity of production of the factory,
in which such goods are produced, by an officer not below the ran* of %ssistant
4ommissioner of 4entral Excise and such annual capacity shall be deemed to be the annual
production of such goods by such factory; or
b! i! specify the factor rele)ant to the production of such goods and the quantity that is
deemed to be produced by use of a unit of such factor; and
ii! pro)ide for the determination of the annual capacity of production of the factory in which such
goods are produced on the basis of such factor by an officer not below the ran* of %ssistant
4ommissioner of 4entral Excise and such annual capacity of production shall be deemed to be the
annual production of such goods by such factory5
Hro)ided that where a factory producing notified goods is in operation during a part of the year only,
the annual production thereof shall be calculated on proportionate basis of the annual capacity of
production5
Hro)ided further that in a case where the factor rele)ant to the production is altered or modified at
any time during the year, the annual production shall be re-determined on a proportionate basis
ha)ing regard to such alteration or modification.
#! Che duty of excise on notified goods shall be le)ied, at such rate, on the unit of production or, as
the case may be, on such factor rele)ant to the production, as the 4entral 9o)ernment may, by
notification in the ?fficial 9aOette, specify, and collected in such manner as may be prescribed5
Hro)ided that where a factory producing notified goods did not produce the notified goods during any
continuous period of fifteen days or more, the duty calculated on a proportionate basis shall be
1
Inserted through Finance Act, 2008
27
abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be
prescribed.
L! Che pro)isions of this section shall not apply to goods produced or manufactured, by a hundred
per cent. export-oriented underta*ing and brought to any other place in India.
Explanation 1.(8or the remo)al of doubts, it is hereby clarified that for the purposes of section # of
the 4ustoms Cariff %ct, @A1E, the duty of excise le)iable on the notified goods shall be deemed to be
the duty of excise le)iable on such goods under the 8irst 3chedule and the 3econd 3chedule to the
4entral Excise Cariff %ct, @A$E, read with any notification for the time being in force.
Explanation 2.(8or the purposes of this section, the expression &hundred per cent. export-oriented
underta*ing" shall ha)e the meaning assigned to it in section #.<.
Notes
- These provisions have been inserted w.e.f. 16.'.%66.
- +rovisions are applicable to certain goods notified by the Central
)overnment.
- <uty is payable on the basis of annual installed capacity which is to
be determined by the $C#<C
- The Central )overnment shall also notify duty payable. The duty is
payable on monthly basis
- $ctual production and removal of goods have no relevance.
- +rovisions are not applicable for the goods manufactured by 166
EB(s.
- If the factory remains closed for a continuous period of 1' days, the
amount of duty will be reduced proportionately.
- This provision is mandatory and not optinal.
8ide Notification No9 ,';-) dated &
st
Muly ,--)% in exercise of the powers conferred by sub:section
,1- of section =$ of the Central Excise $ct, 14// ,1 of 14//-, the Central )overnment hereby
specifies,:
,i- pan masala falling under tariff item %16& 46 %6 of the 2irst chedule to the Central Excise Tariff
$ct, 14.' ,' of 14.&-, except the pan masala containing not more than 1'C betel nutH and
,ii- pan masala containing tobacco, commonly 3nown as gut3ha, falling under tariff item %/6= 44 46
of the said Tariff $ct, manufactured with the aid of pac3ing machine and pac3ed in pouches as
notified goods, on which there shall be levied and collected duty of excise in accordance with the
provisions of the said section =$.
Ex6lanation . - 2or the purposes of this notification, Npac3ing machineN includes all types of 2orm,
2ill and eal ,22- machines and +rofile +ouch @a3ing @achine, by whatever names called, whether
vertical or hori?ontal, with or without collar, single:trac3 or multi:trac3, and any other type of pac3ing
machine used for pac3ing of pouches of notified goods.
Note: +an @asala +ac3ing @achines ,Capacity <etermination and Collection of <uty- 5ules, %66.
have been given in the annexure to this boo3.
Accountin: treatment of excise duty
28
)uidance 7otes issued by IC$I on $ccounting Treatment for Excise <uty provides that the excise
duty shall be considered as a manufacturing cost and thus, it should be considered as an element of
cost for inventory valuation.
Duty is 6ayable even if not collected
$ manufacturer is liable to pay excise duty once he removes the goods manufactured from his factory.
*ater it became irrelevant that the buyer of that goods have not paid amount of duty full or in part.
(nli3e in sales tax where non receipt of sales consideration within a stipulated period is allowed to be
adjusted against the liability of sales tax, in excise no such 3ind of adjustment is possible.
@$ners8i6 of :oods is not relevant
It can be envisaged from the basic conditions discussed above, that duty is on manufacture of
excisable goods. It is not necessary that the manufacture must be the owner of such goods. 2or
instances, a job wor3er underta3es certain processes on goods supplied by the raw material supplier
,unprocessed or partial processed- and result of such processes is manufacture of a new goods then
such job wor3er will be liable to pay excise duty. 9owever, there is an exemption notification
exempting a job wor3er from payment of excise duty if the supplier of material is liable to pay excise
duty on such goods P 7otification 7o. %1/#.& CE dated %':=:14.&.
Guestion: 7oble +lastics manufactures plastic trays on job wor3 basis at its factory situated at +une
by using the ingredients supplied by another company, ;right Industries. 7oble +lastics has received
a show cause notice from the central excise department demanding duty on the sale price of ;right
Industries. 7oble +lastics contends that it is only a job wor3er for ;right Industries and it is not the
owner of the ingredients and therefore not liable to pay duty on the price at which plastic trays are
sold by ;right Industries. <iscuss, with the help of decided case law, if any, whether the contention of
7oble +lastics is justified. E mar*s!.43 8inal Dec. 012
.o$er not to recover duty of excise not levied or s8ort2levied <0ection &&C=
(nder section 11C, if the Central )overnment is satisfied
,a- that a practice was, or is, generally prevalent regarding levy of duty of excise ,including non:
levy thereof- on any excisable goodsH and
,b- that such goods were, or are, liable
,i- to duty of excise, in cases where according to the said practice the duty was not,
or is not being, levied, or
,ii- to a higher amount of duty of excise than what was, or is being, levied, according
to the said practice,
then, the Central )overnment may, by notification in the Bffice )a?ette, direct that the whole of the
duty of excise payable on such goods or as the case may be, the duty of excise in excess of that
payable on such goods, but for the said practice, shall not be re1uired to be paid in respect of the
goods on which the duty of excise was not, or is not being, levied, or was, or is being, short:levied, in
accordance with the said practice.
#iability to 6ay duty
+ule ( of Central Excise +ules
5ule / of the Central Excise 5ules provide that :
29
,1- E)ery person who produces or manufactures any excisable goods, or who stores such goods
in a warehouse, shall pay the duty le)iable on such goods in the manner pro)ided in rule $ or
under any other law, and no excisable goods, on which any duty is payable, shall be remo)ed
without payment of duty from any place, where they are produced or manufactured, or from
a warehouse, unless otherwise pro)ided5

/! Jotwithstanding anything contained in sub-rule @!, where molasses are produced in a
*handsari sugar factory, the person who procures such molasses, whether directly from such
factory or otherwise, for use in the manufacture of any commodity, whether or not excisable,
shall pay the duty le)iable on such molasses, in the same manner as if such molasses ha)e
been produced by the procurer.
#! PPPPPPPPPPPPP
L! Jotwithstanding anything contained in sub-rule @!, 4ommissioner may, in exceptional
circumstances ha)ing regard to the nature of the goods and shortage of storage space at the
premises of the manufacturer where the goods are made, permit a manufacturer to store his
goods in any other place outside such premises, without payment of duty sub:ect to such
conditions as he may specify.
@!estionA *s t#ere an exception to t#e r!le t#at central excise d!t is paa$le $ a prod!cer or
man!fact!rer of goods on removal t#ereof from t#e factor and d!t is paa$le $ someone
elseJ &2 mar)s'
;r
@!estionA Explain 4#et#er a person 4#o is neit#er a prod!cer nor a c!rer nor a man!fact!rer of
excisa$le goods/ $!t onl stores s!c# goods in a 4are#o!se/ can $e called !pon to pa t#e d!ties of
excise on s!c# goodsJ &3 <ar)s'
"ns4erA $s per rule /,1- of the Central Excise 5ules, %66%, excise duty is payable by a person
who produces or manufactures excisable goods, or who stores such goods in a warehouse.
9owever sub:rule ,%- of 5ule / lays down that in respect of molasses produced in a 3handsari
sugar factory, the person who procures such molasses, whether directly from such factory or
otherwise, pays duty leviable on such molasses in the same manner as if such molasses have been
produced by him.
*mportant points
a. <uty can be recovered from the manufacturer only. imilarly, any penalty can also
be imposed only on the manufacturer and not on raw material supplier or brand name owner.
9!gar Electronics +. CCE
b. (nder 5ule %6 of the Central Excise 5ules the commissioner may authorise storage
of finished goods outside the factory even without payment of duty. If finished goods are stored
in such a warehouse then liability to pay duty on such goods is on the warehouse 3eeper. Thus, a
person who is neither a producer nor a curer nor a manufacturer of excisable goods, but who only
stores such goods in a warehouse, shall be liable to pay duty. <5ay ')=
30
+elevant Date for +ate of Duty or tariff value
U5ule ' of The Central Excise 5ules, %66%L
$ccording to 5ule ' Central Excise 5ules, %66%:
,1- The rate of duty or tariff value applicable to any excisable goods, other than 3handsari
molasses, shall be the rate or value in force on the date when such goods are removed from a
factory or a warehouse, as the case may be.
,%- The rate of duty in the case of 3handsari molasses shall be the rate in force on the date of
receipt of such molasses in the factory of the procurer of such molasses.
9eemed removal K If any goods are used within the factory, the date of removal of such goods shall
be the date on which such goods are issued for use and duty is also chargeable at the rate prevailing
on that date though it is payable at the time of removal of finished goods.
Dutiable 2 Lallace ,lo!r <ills Co. ?imited +s. CCE 6 )oods were fully exempt from duty when
those were manufactured and pac3ed but exemption was withdrawn before the goods were removed.
It was held that the exempted goods will be chargeable to duty at the time of removal if subse1uent to
manufacture but before removal, the exemption is withdrawn.
Excisable 2 Com$a .re *nternational &-C' K <5ay ')=
*evy and collection of duty need not be at the same time.
Collection of duty may be postpones due to administrative convenience.
<uty can be levied only if goods were excisable as on the date of manufacture or
production and not as on the date of removal.
0ummary of various case la$s:
<uty can be demanded only if goods are excisable at the time of manufacture. If goods are
not excisable at the time of manufacture but become excisable at or before removal, duty
cannot be demanded. 44E ,s ,aOir 3ultan Cobacco 4o. -td.! >ay 00!
Ghere a product is subject to a rate of duty at the time of manufacture, the rate of excise duty
that prevails on the date of removal shall apply. Therefore, where the product is specified in
the Central Excise Tariff $ct and is subject to nil rate of duty, then nil rate is also a rate of
duty. Therefore if the rates are altered prior to removal, the altered rates would apply. 44E
,s ,aOir 3ultan Cobacco 4o. -td.!
Ghere an exemption notification is available at the time of manufacture and withdrawn prior
to removal of the product from the factory of manufacture but subse1uent to manufacture,
then the product would be liable to excise duty. 'allace 8lour >ills -td. ,s 44E!
If at the time of manufacture, there was no levy of s6ecial excise duty, then the goods
manufactured during such period cannot be subjected to special excise duty at the time of
removal. 44E ,s ,aOir 3ultan Cobacco 4o. -td.! Thus, any levy of special excise duty can
be made only prospectively by the <epartment and not retrospectively. &Nov 9%'. In various
cases, the upreme Court has held that if a levy is not there at the time of manufacture, it
cannot levied at the time of removal e.g. secondary and higher education cess became
applicable w.e.f. 1.=.%66>. 9E cannot be charged on the goods manufactured prior to
1.=.%66>.
31
Table s8o$in: Excisability > Dutiability in various cases
/oods Tariff +ate of Duty 0tatus as 6er
Exem6tion
Notification
E8et8er
ExcisableF
E8et8er
DutiableF
$ %6C 7o Exemption Ses Ses
; %6C /6C Exemption Ses Ses
C %6C 166C Exemption Ses 7o
< 7il 7o Exemption Ses 7o
E 7ot mentioned in
CET$
7.$ 7o 7.$
Table s8o$in: determination of +ate of Duty
0tatus on t8e Date of
5anufacture
0tatus on t8e Date of +emoval Effective +ate of Duty
Tariff 5o< P 7I* Tariff 5o< :1&C ,CET$ amended- 1&C
Tariff 5o< : .C Tariff 5o< :1&C ,CET$ amended- 1&C
Tariff 5o< : 1&C Tariff 5o< : .C ,CET$ amended- .C
7ot mentioned in CET$ 5o< : 1&C ,CET$ amended- 7o <uty *iability
5o< : 1&C 7ot mentioned in CET$ ,CET$ amended- <uty is payable as on the
last day when goods were
dutiable.
Tariff 5o< : 1&C but effective
5o< P 7I* due to exemption
notification
Tariff 5o< : 1&C and Effective 5o< P 1&C
due to withdrawal of exemption notification
1&C
Exercise Guestion
$pply the principles of dutiability in the following situations P
a. )oods were manufactured on 1&.16.6> but were removed from the factory on
16.11.6>. The goods are covered under CET$ since 1./.6>
b. )oods were manufactured on 1&.16.6> but were removed from the factory on
16.11.6>. +rior to 1
st
7ovember the goods were chargeable with 7il rate of duty abd thereafter the
rate becomes 1'C ad:valorem.
.o$er of Central /overnment to :rant exem6tions from Duty of Excise (0ection *A:
$ccording to ection '$ of the Central Excise $ct, 14// K
@! If the 4entral 9o)ernment is satisfied that it is necessary in the public interest so to do, it
may, by notification in the ?fficial 9aOette, exempt generally either absolutely or sub:ect to such
conditions to be fulfilled before or after remo)al! as may be specified in the notification, excisable
goods of any specified description from the whole or any part of the duty of excise le)iable thereon5
Hro)ided that, unless specifically pro)ided in such notification, no exemption therein shall apply
to excisable goods which are produced or manufactured(
32
i! in a free trade Oone and brought to any other place in India; or
b! by a hundred per cent export-oriented underta*ing and brought to any other place in India.
Explanation.(In this pro)iso, "free trade Oone," and "hundred per cent export-oriented
underta*ing" shall ha)e the same meanings as in Explanation / to sub-section @! of section #.
@%! 8or the remo)al of doubts, it is hereby declared that where an exemption under sub-section
@! in respect of any excisable goods from the whole of the duty of excise le)iable thereon has been
granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such
goods.
/! If the 4entral 9o)ernment is satisfied that it is necessary in the public interest so to do, it
may, by special order in each case, exempt from payment of duty of excise, under circumstances of an
exceptional nature to be stated in such order, any excisable goods on which duty of excise is le)iable.
/%! Che 4entral 9o)ernment may, if it considers it necessary or expedient so to do for the
purpose of clarifying the scope or applicability of any notification issued under sub-section @! or
order issued under sub-section /!, insert an Explanation in such notification or order, as the case
may be, by notification in the ?fficial 9aOette at any time within one year of issue of the notification
under sub-section @! or order under sub-section /!, and e)ery such Explanation shall ha)e effect as
if it had always been the part of the first such notification or order, as the case may be.
#! %n exemption under sub-section @! or sub-section /! in respect of any excisable goods from
any part of the duty of excise le)iable thereon the duty of excise le)iable thereon being hereinafter
referred to as the statutory duty! may be granted by pro)iding for the le)y of a 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
le)iable and any exemption granted in relation to any excisable goods in the manner pro)ided in this
sub-section shall ha)e effect sub:ect to the condition that the duty of excise chargeable on such goods
shall in no case exceed the statutory duty.
Explanation.("8orm or method", in relation to a rate of duty of excise means the basis, namely,
)aluation, weight, number, length, area, )olume or other measure with reference to which the duty is
le)iable.
L! E)ery notification issued under sub-rule @!, and e)ery order made under sub-rule /!, of rule
$ of the 4entral Excise Nules, @ALL, and in force immediately before the commencement of the
4ustoms and 4entral Excises -aws %mendment! %ct, @A$$ /A of @A$$! shall be deemed to ha)e
been issued or made under the pro)isions of this section and shall continue to ha)e the same force
and effect after such commencement until it is amended, )aried, rescinded or superseded under the
pro)isions of this section.
E! E)ery notification issued under sub-section @! or sub-section /% shall,(
a! unless otherwise pro)ided, come into force on the date of its issue by the 4entral 9o)ernment
for publication in the ?fficial 9aOette;
b! also be published and offered for sale on the date of its issue by the Directorate of Hublicity
and Hublic Nelations, 4ustoms and 4entral Excise, Jew Delhi, under the 4entral 7oard of
Excise and 4ustoms constituted under the 4entral 7oards of Ne)enue %ct, @AF# EL of @AF#!.
F! Jotwithstanding anything contained in sub-section E!, where a notification comes into force
on a date later than the date of its issue, the same shall be published and offered for sale by the said
Directorate of Hublicity and Hublic Nelations on a date on or before the date on which the said
notification comes into force.
33
0ection *A of t8e Central Excise Act 6rovides t8at
a. $s per sub:section ,1- if Central )overnment is satisfied that it is in
public interest so to do, it may grant exemption from central excise duty either generally or subject to
certain conditions from whole or part of duty, by issuing a notification in the official ga?ette.
b. $s per sub:section ,1$- where exemption has been granted from whole
of the duty absolutely, the assessee cannot pay duty on such goods.
c. $ny such exemption shall not be applicable for goods manufactured by
166C export oriented units or free trade ?ones and brought to any place in India.
d. ub:section ,%- provides that whenever the Central )overnment is of the
opinion that it is in public interest, it may grant exemption to any goods from duty. The exceptional
circumstances on the basis of which exemption is granted shall be mentioned in the order.
e. The Central )overnment may by another notification or order add any
clarification within a period of one year. $ny such clarification shall have effect as if it is part of original
order or notification.
f. The exemption or special order may be granted by providing for a levy of
duty on such goods at a rate specified in a form or a method different from the form or method in which
the statutory duty is leviable. 9owever, the duty prescribed in the notification cannot exceed the
statutory duty.
g. $ny notification or special order issued under sub:section ,1- or ,%-
becomes applicable from the date of issue.
Exemption granted under section '$ can be of various 3inds such as +roduct based, industry based, process
based, area based.
In -eader Engineering 'or*s ,s. 44E 34!, the appellant cleared goods to be used in manufacture of ships
to be used by Indian 7avy, without payment of duty. $n exemption notification stated that goods can be
supplied to Indian 7avy ships to be used as stores. Therefore, exemption is not available in the given case.
Emer:ency 6o$er of Central /overnment to increase t8e rate of duty: <0ection 3 of CETA=
=o4er to increase D-!$-section &1'E
Ghere, in respect of any goods, the Central )overnment is satisfied that the duty leviable thereon
under section = of the Central Excise $ct, 14// should be increased and that circumstances exist
which render it necessary to ta3e immediate action, the Central )overnment may, by notification in
the Bfficial )a?ette, direct an amendment of the 2irst chedule and the econd chedule to be made
so as to substitute for the rate of duty specified in the 2irst chedule and the econd chedule in
respect of such goods, :
,a- in a case where the rate of duty as specified in the 2irst chedule and the econd chedule as
in force immediately before the issue of such notification is nil, a rate of duty not exceeding fifty 6er
cent ad valorem expressed in any form or methodH
,b- in any other case, a rate of duty which shall not be more t8an t$ice the rate of duty specified
in respect of such goods in the 2irst chedule and the econd chedule as in force immediately
before the issue of the said notification.
34
+rovided that the Central )overnment shall not issue any notification under this sub:section for
substituting the rate of duty in respect of any goods as specified by an earlier notification issued under
this sub:section by that )overnment before such earlier notification has been approved with or
without modifications under sub:section ,%-.
Explanation. : I2orm or methodJ, in relation to a rate of duty of excise, means the basis, namely,
valuation, weight, number, length, area, volume or other measure with reference to which the duty
may be levied.
"pproval of t#e =arliament D-!$-section &2'E
Every such notification issued under sub:section ,1-, shall be laid before each 9ouse of +arliament, if
it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven
days of its re:assembly, and the Central )overnment shall see3 the approval of +arliament to the
notification by a resolution moved within a period of fifteen days beginning with the day on which the
notification is so laid before the 9ouse of the +eople and if +arliament ma3es any modification in the
notification or directs that the notification should cease to have effect, the notification shall thereafter
have effect only in such modified form or be of no effect, as the case may be, but without prejudice to
the validity of anything previously done thereunder.
=o4er to rescind D-!$-section &3'E
$ny notification issued under sub:section ,1- or ,%- may be rescinded by the Central )overnment at
any time by notification in the Bfficial )a?ette.
35
Mob2Eor1 Jnder Central Excise
Aob wor3 means supplying the material by a customer to a job wor3er who carries out certain
processes such as machining, drilling, welding, printing, dyeing etc. and returns the material to the
customer after carrying out the processes who will than either use it for further manufacture or clear
the product as received from the job wor3er.
9!t lia$ilit of goods man!fact!red !nder 2o$ 4or)
ince duty liability arises only on fully manufactured goods, therefore if no !manufacture" of goods
ta3es place during job wor3 i.e. if wor3 carried out by the job wor3er does not amount to manufacture,
there is no duty liability e.g. goods are not mar3etable or if only repairing or reconditioning is done.
Bn the other side, if job wor3 amounts to manufacture, duty liability will arise and the fact who has
supplied the raw material is immaterial.
L#o 4ill $ear t#e $!rden of d!t lia$ilit in case of 2o$-4or)J
7ormally, duty liability is on the actual manufacturer ,<uty liability is of the job wor3er as he is the
manufacturer- and not of the raw material supplier. 9owever, if raw:material or semi:finished
components are sent for job:wor3 under Cenvat provisions or under notification no.%1/#.&:CE no excise
duty will be payable by the job:wor3er, duty liability is of manufacturer who is sending his inputs#
components for job wor3.
In other cases, where job wor3 results in !manufacture" of a product, duty liability will be of job:
wor3er. ometimes, the job:wor3er would li3e to pay duty, even if raw:material supplier has sent the
goods under Cenvat provisions, he should do so if : ,i- he has put his own inputs, or ,ii- he has
unutili?ed Cenvat credit. In such case, either of them can avail Cenvat credit on inputs sent for job
wor3, i.e. if job wor3er has not availed Cenvat credit the raw:material supplier can avail the Cenvat
credit.
L#ic# inp!ts can $e sent for 2o$ 4or)J
$ll inputs can be send for job wor3 other than, high speed diesel oil, *ight <iesel Bil, polyester
filament yarn and motor spirit commonly 3nown as petrol. The job wor3er can manufacture any final
product included in Central Excise Tariff.
:se of goods after 2o$-4or)
$fter job wor3, the goods can P
either, be returned to person who had send it for job wor3, who will either use them for
further manufacture or clear the product as received from the job wor3er, or
dispatch them directly from the place of job wor3er with permission of $C# <C.
Mo$ 4or) !nder Notification No. 214/ 0%
7otification 7o. %1/# .& provides that !Aob wor3er" is exempt from all types of duties i.e. basic duty,
special duty, additional duty ,goods for special importance- and 7CC<. The duty liability is of the
supplier of raw material provided the supplier of the raw materials or semi:finished goods gives an
underta3ing to the $C# <C of central excise having jurisdiction over the factory of the job wor3er that
after the job wor3,
the material returned by the job wor3er will either be used by the supplier for further
manufacture or clear the product as received from the job wor3er, and
36
he ,supplier of raw material- discharges the duty liability on the final product.
;t#er points to $e noted !nder t#is notification areA -
The exemption is available even if job wor3er manufactures an intermediate product.
Eligibility of inputs to be sent and final products to be manufacture are as discussed above.
Exemption under notification is not available, if no duty liability arises on final product.
Gaste and scrap arising during job:wor3 is not re1uired to be returned to raw material
supplier as new Cenvat credit provisions ma3e no provision of returning the scrap to the raw
material supplier. Thus, job:wor3er is liable to pay duty on scrap as he is the !manufacturer" of
the scrap.
Trader cannot send goods for job:wor3 under this notification. 2ollowing are eligible to send
materials for job:wor3 P
W @anufacturer
W Exporter
W (nits in EV, EB(, E9T+, T+
W (nits supplying final products to (7 and international organi?ation for official use or to
project funded by them.
XXXXXXXXXXXXXXXXXXXXXXXXXXX
37
3
Classification of Excisable /oods
Introduction
The Central Excise duty is chargeable at the rates specified in the schedule to the Central Excise
Tariff $ct, 14.' UCET$L. This Tariff is modeled as per practices followed internationally, based on
9armoni?ed ystem of 7omenclature ,97-. 97 is an internationally accepted product coding
system formulated under the )eneral $greement of Trade and Tariff ,)$TT-.
CET$ is divided into %6 sections and 4& Chapters. Effectively there are 41 chapters only because
there are no Chapters with numbers 1,&,16,1% and >>. The chapters are arranged classifying all goods
of a 3ind beginning with the raw material and ending with the finished goods, within the same
chapter.
Each Chapter is further divided into headings and sub:headings. 2or ascertaining the rate of duty in
respect of a particular item, the positioning of that item under a particular head or sub:head is
essential. .#e positioning of an item in t#e appropriate #eading/s!$-#eading is called
classification.
CE." +s. CE" K
Central Excise $ct ,CE$- and Central Excise Tariff $ct ,CET$- are lin3ed together as follows P
,b- ection % of CET$ states that rate at which duties of excise shall be levied
under CE$ are as specified in schedule to CET$ ,chedule to CET$ contains 41 chapters-
,c- ection =,1- of CE$ specifies that duty shall be levied and collected on all
excisable goods which are produced or manufactured in India as, and at the rates, set forth in the
chedule to the Central Excise Tariff $ct ,CET$-.
Thus, both $cts are lin3ed to each other.
.ur6ose of Classification
Classification means determination of the heading and sub:heading of CET$ under which the goods
fall. It is essential for determining the rate of duty applicable as well as eligibility for any exemption,
as may be granted by Central )overnment from time to time.
Classification code
The excisable goods have been classified by using four digit system, with two more digits added for
further sub:classification. 2irst two digits refer to the Chapter of the Tariff, next two digits refer to
specific item of the chapter and last two digits indicate sub:classification.
CETA Vs9 70N
CET$ is based on International convention of 9armonised ystem of 7omenclature ,97-, called
9armonised Commodity <escription and Coding ystem. This is an International 7omenclature
standard adopted by most of the Countries to ensure uniformity in classification in International
Trade. Though CET$ generally follows 97 pattern, it is not a copy of 97. Bften, there are wide
)ariations between 97 and CET$. The CET$ also )aries significantly from 4ustoms Cariff, though
both are based on 97.
Ex6lanatory notes to t8e 70N:
38
These are the official notes issued by the customs co:operation council, ;russels. They explain and
clarify the scope and extent of each and every heading of the 97. It is to be noted that these
explanatory notes do not have any legal bac3ing as in the case of Chapter 7otes and ection 7otes
contained in the tariff. Therefore, these notes are of persuasive value only and can be used as an aid
for classification of goods when there is an ambiguity as to the scope of the entry.
Aeatures of Central Excise Tariff Act% &')*:
a- The $ct has been drafted ta3ing into account both technical and legal aspects. Classification is
based on 9armonised ystem of 7omenclature ,97- which is an internationally accepted
product coding system formulated under )$TT.
b- The items have been so codified commencing with the raw material and ending with the finished
goods.
c- )oods of the same class have been grouped together so as to bring parity in treatment and restrict
disputes in classification matters.
d- The scope and ambit of a Chapter is set out through ection 7otes and Chapter 7otes. 2urther, in
a few activities have been deemed as manufacturing activities in certain chapters.
e- The 5ules for interpretation form part of the Tariff $ct.
f- The $ct also provides for emergency power of Central )overnment to increase rate of duty.
g- The 2irst chedule comprises of 4& chapters. These chapters broadly fall under %6 ections. $
ection represents a broader categori?ation.
h- Each Chapter has been further divided into various headings and the headings are further divided
into sub headings for sub: classification of goods.
i- +roduct classification is done by using a /:digit system with % more digits available for further
sub:classification. The first % digits refer to the chapter and the next % digits refer to the specific
items in the chapter. Two more digits are available for the further classification if re1uired.
j- The earlier general residuary entry namely tariff entry &., which covered all goods not elsewhere
specified has been removed. In the tariff $ct, appropriate residuary entries have been inserted in
chapters.
-c#ed!les of CE."
CET$ consists of two schedules P
a. The first schedule gives basic excise duties leviable on various products.
b. econd schedule gives list of items on which special excise duty is payable. ,econd schedule
contains only few items.-
0ections and C8a6ters of CEA
-ections
Tariff is divided in %6 sections. Each of %6 sections is related to a broader class of goods.
ection 7otes are given at the beginning of each ection, which govern entries in that
ection.
These notes are applicable to all Chapters in that section.
39
C#apters
2urther each of the sections is divided into various Chapters and each Chapter contains goods
of one class.
Chapter 7otes : Chapter 7otes are given at the beginning of each Chapter, which govern
entries in that Chapter.
/eneral Ex6lanatory Notes:
Ghere the description of an article or a group under a heading is preceded by !P" ,single dash-, the
said article or group of articles shall be ta3en to be a sub:classification of the article or group of
articles covered by the said heading.
Ghere the description of an article or a group is preceded by !: :" ,double dash-, the said article or
group of articles shall be ta3en to be a sub:classification of the immediately preceding description of
article or group of articles which has ! P ! ,single dash-.
Ghere the description of an article or a group is preceded by !: : :" or !: : : :", the said article or
group of articles shall be ta3en to be a sub:classification of the immediately preceding description of
article or group of articles which has ! P :" or !::::".
0ection C8a6ter /oods
I 1 to ' $nimal products
II & to 1/ 8egetable products
III 1' $nimal or vegetable fats and oils and their clearage productsH
prepared edible fats, animal or vegetable waxes
I8 1& to %/ +repared foodstuffH beverages and vinegar, tobacco and
manufactured tobacco substitutes
8 %' to %> @ineral products
8I %. to =. +roducts of the chemical and allied industries
8II =4 and /6 +lastics and articles thereof, 5ubber and articles thereof.
8III /1 to /= *eather and articles of leather, manufacture of fur s3ins and
artifical fur, saddlery and harness, travel goods, hand bags and
similar containers, articles of animal gut ,other than sil3 worm
gut-
IM // to /& Good and articles of wood, cor3 and articles of cor3,
manufacturer of straw of esparto or of other plating material,
bas3etware and wic3erwor3.
M /> to /4 +ulp, +aper, +aper:board and articles
MI '6 to &= Textile and Textile +roducts
MII &/ to &> 2ootwear, 9eadgear, (mbrellas, $rticles of human hair
MIII &. to >6 $rticles of stone, plaster, ceramic, glass
MI8 >1 +earls, precious metals
M8 >% to .=
,>> blan3-
;ase metals and articles of base metal ,Iron, teel, Copper,
7ic3el, Vinc, Tin etc.-.
M8I ./ and .' @achinery and mechanical appliances, electrical e1uipments,
television etc.
M8II .& to .4 8ehicles, $ircrafts, vessels
40
M8III 46 to 4% Bptical, photographic, medical, surgical instruments, cloc3s,
musical instruments
MIM 4= $rms and $mmunition
MM 4/ to 4&
41
An illustration of certain entries in C8a6ter 3( of CETA
=/61 oapH organic surface active products and preparations for use as soap, in
the form of bars, ca3es, moulded pieces or shapes, whether or not
containing soap, organic surface active products and preparations for
washing the s3in in the form of li1uid or cream and put for retail sale,
whether or not containing soapH paper, wadding, felt and non:wovens,
impregnated, coated or covered with soap or detergents.
2 oap and organic surface:active products and preparations, in the form of
bars, ca3es, moulded pieces or shapes, and paper, wadding, felt and non:
wovens, impregnated, cated or covered with soap or detergents.
=/61 11 22 2or toilet use ,including medicated products-
=/61 11 16 222 @edicated toilet soaps
=/61 11 %6 222 having soap other than shaving cream
=/61 11 46 222 Bther
=/61 14 22 Bther
222 ;ars and bloc3s of not less than '66 gms in weight
=/61 14 11 2222 Industrial soap
=/61 14 14 2222 Bther
$ reading of all these numbers and !:".": :",": : :", and !: : : :" indicates the following0
1. soap in various forms is preceded by !:!.
%. =/61 11 refers to !for toilet use" and is preceded by !: :!. Therefore, soaps,
paper which are coated with soap, etc. when for toilet use would fall within the family of !:!
=. =/61 11 16 refers to !medicated toilet soaps" and is preceded by a !: : :!.
Therefore, it belongs to the immediately preceding !: :! vi?. toilet use.
/. =/61 11 %6 will cover !shaving soaps for toilet use".
'. =/61 11 46 refers to !other" and is preceded by a !: : :! which means it belongs to the family of
immediately preceding !: :! items. In other words, items which are not medicated toilet soaps or
shaving soaps for toilet use but items which are meant for toilets use would fall under =/61 11 46
&. =/61 14 refers to !other" and as a !: :! this indicates that this entry covers other items not being
items referred to in =/61 11.
>. Ghere the items is in bars and bloc3s of not less than '66 gms in weight it is one sub:category
under the !other".
.. =/61 14 11 refers to !industrial soaps" and is preceded by !: : : :! . anything other than industrial
soap would fall under =/61 14 14.
.o$er of Central /overnment to amend first and second sc8edule of CETA (ot8er t8an rates of
duty
42
ection ' of CET$ authorises the Central )overnment to amend first and second schedule of CET$
by issuing a notification in the official ga?ette.
uch amendment shall not alter or affect in any manner the rates specified in the 2irst chedule and
the econd chedule in respect of goods at which duties of excise shall be leviable on the goods under
the Central Excise $ct, 14//.
Every such notification shall be laid, at the earliest possible, before each 9ouse of +arliament, while it
is in session, for a total period of thirty days which may be comprised in one session or in two or more
successive sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both 9ouses agree in ma3ing any modification in the notification or
both 9ouses agree that the notification should not be issued, the notification shall thereafter have
effect only in such modified form or be of no effect, as the case may beH so, however, that any such
modification or annulment shall be without prejudice to the validity of anything previously done
under that notification.
Inter6retative +ules for classification

The Central Excise Tariff $ct, 14.' contains five 5ules of interpretation. These 5ules provide
necessary guidelines for classification of various products under the schedule. 2or the purpose of
classification first of all 5ule 1 is applied. 5ule %,= and / are applied serially only if classification is
not possible as per 5ule 1.
These 5ules are as under K
(i 8!le 1A This rule provides that 0ection and C8a6ter titles are only for the ease of reference and,
therefore, do not 8ave any le:al bearin: on the classification of goods, which is determined
according to the terms of headings and relevant ection or Chapter notes and according to the other
interpretative rules. Thus goods are to be classified in terms of the heading and relative sections or
Chapter notes without recourse to any interpretative rules. It is only when the goods cannot be
classified on this basis, the assistance is to be sought from the interpretative rules.
&ii' 8!le 2&a'A This rule provides classification of an article referred to in a heading, even if that
article is incom6lete or unfinis8ed, or is presented in an unassembled or disassembled form. $n
important condition to be satisfied for classification in this manner is that in its incomplete or
unfinished state, the article has the essential c8aracter of t8e com6lete of finis8ed article. ome of
the important aspects which are relevant in this regard are functional aspect, physical aspect and the
degree of completion of the product.
ome illustrations in 97 Explanatory notes are : Y a machine or apparatus normally incorporating an
electric motor is classified in the same heading even if presented without motor. Y +assenger coach
not fitted with seats will still be a passenger coach Y @otor vehicle not yet fitted with wheels, battery
or tyres Y ;icycles without saddles and tyres Y +hotographic camera without an optical element Y
Electric supply metre without its totalling device.
In <*C; ?imited +. "C 1992 &%2' E?. 13&<ad', it was held that only goods re1uiring minor
adjustments would be covered by this interpretive note and if major processes li3e turning, grinding
etc. are to be underta3en, the incomplete goods cannot be classified as finished goods.
43
Ghether an assembly would be classified as complete item or as parts, would depend upon facts of
the case. In 9elp#i "!tomotives -stems +. CCE/ Noida 2004 &1%3' E?. 47 &.ri-9el', it was held
that supply of components li3e evaporator coil, condenser coil, fan or blower for circulating the air
and compressor will be considered as the main product, if it has the essential characteristics of the
complete air:conditioning system or else it will be classified as !parts" only.
(iii +ule ,(b: $ny reference in a heading to a material or substance shall be ta3en to include a
reference to mixtures or combinations of that material or substance with other material or substance.
$ny reference to goods of a given material or substance shall be ta3en to include a reference to goods
consisting wholly or partly of such material or substance. The classification of goods consisting of
more than one material or substance shall be according to the principles contained in 5ule =.
This rule relates to mixture or combination of materials or substances, and goods consisting of two or
more materials or substances. This rule does not apply where specific provisions exist in the headings
or the ections or Chapter notes excluding such classification.
(iv +ule 3: This rule lays down three se1uential steps for classifying the goods which are prima facie
classifiable under several headings.
Ghen by application of sub:rule %,b- if 5ule % or for any other reason, goods are, prima facie,
classifiable under two or more headings, classification shall be effected as follows0
,a- The heading which provides the most specific description shall be preferred to heading
providing a more general description. 9owever, when two or more headings each refer to part
only of the materials or substances contained in the mixed or composite goods or to part only
of the items in a set, those headings are to be regarded as e1ually specific in relation to those
goods, even if one of them gives a more complete and precise description of the goods. e.g. $
two wheeler is more specific description as compared to automobile or a duplicating machine
is more specific for a photocopy machine as compared to photographic camera even though
duplicating machine is also having a camera.
imilarly, for classification of electric shaving machine, description of 9eading .'.16 i.e.
!havers and 9air clippers, with self contained electric motor" is more specific than
description of 9eading .'.64 i.e. Electro:mechanical domestic appliances with self:contained
electric motor"
,b- @ixtures, composite goods consisting of different material or made up of different
components, and put up in sets, which can not be classified by reference to ,a-, shall be
classified as if they consisted of the material or components which give them their essential
c#aracter, in so far this criterion applicable e.g. a pen fitted with digital watch is essentially a
writing instrument.
If a set consists of drawing instruments ,46.1>-, pencil ,4&.64- and pencil sharpener ,.%.1/-,
put up in a leather case ,/%61.46-H the set will be classifiable under 46.1> i.e. drawing
instrument.
,c- Ghen goods cannot be classified by reference to ,a- or ,b-, they shall be classified under the
heading which occurs last in t#e n!merical order among those which e1ually merit
consideration.
This rule applies when goods are prima facie classifiable under two or more headings.
44
,irst step 6 The general guidelines are that a description by name is more specific than the
description by character and a description which identifies the goods clearly and precisely is
more specific than the one which is less complete. <+ule 3(a=
pecific description will have to be adopted in place of general description. >oorco India -td.
,. 44 @AAL1L! E-C E.
Ghere goods are covered under two headings, 5ule =,a- should be resorted to. >iniwool Noc*
8ibres -imited ,. 44E, 7hopal /00#@E#! E-C @#ECri-Del!.
-econd step 6 @ixtures, composite goods consisting of different materials or components and
goods put up in sets have to be classified as if they consist of material or components which
gives them their essential character. <+ule 3 (b=
<ecorative photo frames made of plastic and steel both have to be classified as article of plastic
only because plastic only gives the essential characteristic to the article. Gem*unt Indystries ,.
44E, Delhi-@ @EF! E-C /LF Cri-Del!.
44Ex., Crichy ,s. Jaga -imited ./001.342 P In 8im <ish Gash ince abrasive powder
contents are around >6C, it is neither a soap not a surface cleaner but it is a mixture of detergent
and abrasive powder. Classification under 5ule =,b-.
.#ird -tep 6 This is a fall bac3 provision for resolving the matter when no heading can be
regarded as providing a more specific description than the others and when it is not possible to
identify the material or component which gives the concerned goods their essential character.
Ghen goods cannot be classified with reference to 5ules =,a- and =,b-, they are to be classified
in the heading which occurs last in numerical order among those which e1ually merit
consideration. <+ule 3(c=
@!estionA 9oes t#e maxim (?atter t#e Cetter( appl in classifing t#e excisa$le goodsJ &3
mar)s' D<a 01E
Ans$er: The Central Excise Tariff $ct, 14.' contains 5ules of Interpretation. 5ule =,c-
provides that when goods cannot be classified by reference to rule =,a- or rule =,b-, they
shall be classified under the heading which occurs last in the numerical order among those
which e1ually merit consideration.
Thus the maxim I*atter the ;etterJ applies in determining the classification of the excisable
goods.
&v' 8!le 4A Ghen goods cannot be classified in accordance with 5ules 1,%, D =, then they are to be
classified in a heading of a product, which is most a1in to the goods in 1uestion.
+hotographic film waste made of polyester has to be classified as polyester material only and not as
photographic film. It is because of the fact that the material in 1uestion is most a3in to polyester.
44E ,. 9arware Holyesters -td. /00L @FL! E-C #LLCri->um!.
(vi +ule *: In addition to the above rules, following shall apply in respect of the goods referred to
therein P
+ule *(a 06ecial Cases ; containers
45
camera cases, musical instrument cases, gun cases, drawing instrument cases, nec3lace cases and
similar containers, specially shaped or Ztted to contain a speciZc article or set of articles, suitable for
long:term use and presented with the articles for which they are intended, shall be classiZed with such
articles when of a 3ind normally sold therewith. This rule does not, however, apply to containers
which give the whole its essential characterH
+ule *(b .ac1in: 5aterial ; Containers (+e6etitive use material
subject to the provisions of ,a- above, pac3ing materials and pac3ing containers presented with the
goods therein shall be classiZed with the goods if they are of a 3ind normally used for pac3ing such
goods. 9owever, this provision does not apply when such pac3ing materials or pac3ing containers are
clearly suitable for repetitive use.
(vi +ule D: This rule postulates that the classification of any product under a sub:heading is to be
contemplated after the product concerned has been properly classified under its proper four digit
Chapter heading. The classification in the sub:heading of a heading is determined mutatis mutandis in
accordance with the principles applicable to classification in the four digit headings.
0te6s of classification
2ollowing are the steps of classification.
,1- 5efer the heading and sub:heading. 5ead corresponding ection 7otes and Chapter 7otes. If there
is no ambiguity or confusion, the classification is final and you do not have to loo3 to classification
rules or trade practice or dictionary meaning.
,%- If meaning of word is not clear, refer to trade practice. If trade understanding of a product cannot
be established, find technical or dictionary meaning of the term used in the tariff. Sou may also refer
to ;I or other standards, but trade parlance is most important.
,=- If goods are incomplete or un:finished, but classification of finished product is 3nown, find if the
un:finished item has essential characteristics of finished goods. If so, classify in same heading.
,/- If ambiguity persists, find out which heading is specific and which heading is more general. +refer
specific heading.
,'- If problem is not resolved, find which material or component is giving Oessential characterO to the
goods in 1uestion.
,&- If both are e1ually specific, find which comes last in the Tariff and ta3e it.
,>- If you are unable to find any entry which matches the goods in 1uestion, find goods which are
most a3in.
Classification of .arts > Accessories:
The Central Excise Tariff $ct provides for a method for classification of parts and accessories.
$ccessories are goods by themselves and can be used for various products. $ccessories cannot be
characterised as component or integral part of an article and therefore they cannot be classified as an
article to which they are attached. They only add to the convenience, beauty and effectiveness of the
main product.
Classification of parts is governed by the following principles0
46
1. +arts which are suitable for use solely or principally with a particular machine or group are
classified under the same heading e.g. parts of engine, textile machinery etc.
%. +arts, which are by themselves articles, are classified under their own appropriate heading e.g.
pumps, compressors etc.
=. Bther parts, which are not suitable wholly or principally with a particular machine and not falling
under the aforesaid category are classified under0
Chapter ./..' P 7on: Electrical @achinery +arts
Chapter .'./. P Electrical @achinery +arts
The assessee is a manufacturer of chillers as well as air:conditioners. Chiller itself does not do air
conditioning. Bnly because 46C of the chillers are used in air:conditioning system, it would not ta3e
away the basic function of the chiller. Therefore chillers cannot be classified as air conditioners.
44Ex., Delhi ,s. 4arrier %ircon -imited ./00F2.342
2an regulator cannot be classified as fan. It is only an accessory. Jorthwest 3witchgears -imited
./00F2
Trade;Commercial .arlance T8eory
The classification of an item is generally decided in view of how it is described in commercial
parlance. 9owever a deviation from this principle is made when the trade meaning or commercial
nomenclature does not fit into the scheme of the statute. In ")$ar Cadr!ddin Mai4ani +. CC
1990&47' E?. 1%1 the upreme Court has held that the express wordings of Tariff 9eadings and
relevant section and Chapter 7otes would ta3e precedence over the commercial or trade parlance test
for classifying excisable goods. 9owever, if the specific headings and notes do not cover the
excisable goods, then resort must be had to the commercial or trade understanding of the goods. ;ut,
it is also to be noted that the rules of interpretation given under the $ct will be preferred over trade
parlance.
ome relevant case laws will help you understand this in a better way.
,a- +lastic torch cannot be classified as plastic tube or any other plastic article as torch is having
a distinct identity. 9eep 8lashlight Industries -imited .@A$E2
,b- @irror cannot be classified as glass item. %tul 9lass Industries -imited .@A$F2
,c- *al <ant @anjan cannot be classified as ayurvedic medicine. It is a toilet preparation. 3hree
7aidyanath %yur)ed 7ha)an .@AAF2
,d- Bperating tables for the hospitals are not furniture.
,e- It is firmly established that on the 1uestion of classification of the product under CET$
Icommercial parlance theoryJ has to be applied. 3unny Industries H)t. -Cd. ,. 44E,
4alcutta, /00# .@E#2 E-C /EA 34!
,f- Commercial classification test is best test for classification when not artificially defined by
law. M 7 Impex 4. 44E /00@ .@#L2 E-C /@0 C!
,g- II specifications are meant for ensuring 1uality control is not relevant for determining
classification. ,eto 4o. ,. 44E, @AA/ .F/2 E-C E$L C!. ;ut these specifications are not
ignorable in absence of any other material. Jational 3ales 4orporation ,. 44E @AAE .1$2
E-C FE#34!
,h- Ghen legislature has adopted technical term in a particular entry, classification will have to
be done in the technical sense and resort to common parlance cannot be done. Neliance
47
4ellulose Hroducts -td. ,. 4ollector @AA1 .A#2 E-C FLF 34!. ;ut in all other cases, the
goods shall be classified according to their popular meaning and not as per the technical or
scientific meaning. Hlasma >achine >fg. 4o. H)t. -td. ,. 44E @AA@ .E@2 E-C @F@ 34!
,i- In interpreting tariff entries trade meaning as well as dictionary meaning is also re1uired to
be considered to reconcile and harmonise with the tariff entry. 4ollector of 4entral Excise,
>adras ,. IC4 -td. /00# .@E/2 E-C /L@ 34!
,j- Commercial parlance is to be priority over functionality test. 9 3 %uto International -td. ,.
44E /00# .@E/2 E-C # 34!.
Mudicial 6rinci6les of classification
In addition to interpretative rules, courts in various judgments have laid down various other rules. It
may be noted that statutory principles shall have precedence over judicial rules which are as under K
a. The !Trade +arlance" is relevant only when the statute does not define the words. If
the words are defined in the statute, !trade parlance" is not relevant. Indo International
Industrial ,. 43C
b. )oods shall be classified according to its popular meaning. 3hree ,aidyanath
%yur)ed 7ha)an -td. ,. 44E .@AAF2 $# E-C LA/ 34!
c. The identity of the product is associated in the mind of the consumer with its
primary function. This mental association is very important for classification. %tul 9lass
Industries H! -td. ,. 44E
d. Ghere a product can be used for various purposes. +articular use to which an article
can be applied in the hands of a special consumer, is not determinative of the nature of the
goods e.g. in some parts of the country washing machine is used for ma3ing !lassi". ;y
such use of washing machine, it does not become lassi ma3ing machine. Even description
used by the seller or nature of business of the buyer is not conclusive. >u*esh Iumar
%ggarwal ,. 3tate of >H. $ vessel suitable for operating in the ocean is to be classified as
ocen going vessel even if it is used in inland waters.
)enerally, a product can be used for various purposes and it is not correct to classify the
goods on the basis of its final use. upreme Court in Dunlop India v. +?I, :C,14.=-
have held that end use is irrelevant for interpretation, unless definition so re1uires.
e. 2orm in which goods are cleared from the factory, is the criteria for classification.
44E ,. > > Nubber 4o. -td.
f. II specifications are not relevant for classification but those cannot be ignored if
there is no other material. Jational 3ales 4orporation ,. 44E
g. If two views are possible, the one in favour of the assessee would guide the
interpretation. Houlose and >athen ,. 4ollector
h. If there is an established practice of classification, it cannot be changed without any
cogent reason. 4ollector ,. CI34?
"urden of 6roof of classification:
In Iirlos*ar ?il engines ,. +?I, the court held that it is well settled that the burden to establish that
certain goods can be classified and excise duty levied thereon under a specified tariff item would
exclusively lie on the <epartment.
.o$ers of t8e C9"9E9C9 to issue orders of classification of :oods: section 34"
48
ection =>; of the Central Excise $ct, 14// empowers the Central ;oard of Excise D Customs to
issue orders, instructions and directions, for the purpose of uniformity in the classification of goods or
with respect to the levy of excise duties on such goods. It is to be noted that no direction can be issued
to Central Excise Bfficers so as to ma3e particular assessment or to dispose of any case in any
particular manner. It means any direction cannot be issued to the Commissioner ,$ppeals- so as to
interfere with the discretionary function of the Commissioner ,$ppeals-.
The directions issued by C;EC are binding on the officers. The assessee can claim to be erroneous
but 5evenue cannot advance argument contrary to the terms of Tariff $dvice and Trade 7otices.
44E, 7ombay ,. Iores India! -td.
In 7irla Mute Industries -td. ,. %44E, the Calcutta 9igh Court interpreted the section as under K
a. Ghile an instruction issued under section =>; cannot be binding upon a 1uasi:judicial
authority under the $ct, the <epartmental officers conducting the proceeding before the
1uasi:judicial authority cannot ta3e a stand contrary to the directive# instruction issued.
b. The instructions are binding on the Central Excise Bfficers and not on the assessee. The
assessee may 1uestion the correctness of the instruction before the 1uasi:judicial authority
and the court.
c. $n assessee has the right to claim compliance with such instructions as are for the benefit of
the assessee.
.ast Examination Guestions
Guestion &: A manufacturer of cameras sells leat8er cases;soft cases and instruction manuals
alon: $it8 cameras9 T8e cost of suc8 cases and manuals $ere bein: c8ar:ed se6arately a6art
from t8e cost of t8e camera9 T8e excise de6artment 8as claimed t8at t8e cost of suc8 cases and
manuals s8ould be included in t8e assessable value of t8e camera9 Accordin: to t8e excise
de6artment% as 6er +ule * of t8e Inter6retative +ules for Central Excise Tariff brou:8t into
force from ,)2,2,--*% cases for cameras% musical instruments% dra$in: instruments% nec1laces
etc9 s6ecially s8a6ed for t8ose articles% suitable for lon:term use $ill be classified alon: $it8
t8ose articles% if suc8 articles are normally sold alon: $it8 suc8 cases9
Examine briefly $it8 t8e 8el6 of decided case la$% if any% $8et8er t8e stand ta1en by t8e
de6artment is correct in la$9 (* 5ar1s
Ans$er: The upreme Court in the case of 44Ex.,9oa ). Hhil 4orporation -td. /00E! @$0 E-C #@@
34! has observed that the 1uestion of includibility of the cost of instruction manual and soft case in
the camera would depend on the fact that whether such articles can be considered to be the
components of the camera or whether they are merely accessories. It has been held by the $pex Court
that such articles are mere accessories and therefore their value should not be included in the
assessable value of the camera.
5ule ' of new Interpretative 5ules for Central Excise Tariff inter alia provides that camera cases,
musical instrument cases, gun cases, drawing instrument cases, nec3lace cases and similar containers,
specially shaped or fitted to contain a specific article or set of articles, suitable for long:term use and
presented with the articles for which they are intended, shall be classified with such articles when of a
3ind normally sold therewith. 9owever, here it has to be 3ept in mind that valuation and classification
49
provisions are two independent provisions and thus, should not be interlin3ed. Therefore, the
<epartment"s claim is not tenable.
NNNNNN
Guestion ,: T8e assessee $as a manufacturer of I9C9 en:ine 6arts li1e 6iston and :ud:eon 6ins9
7e used to 6rocure from t8e mar1et 6iston rin:s and circli6s and su66ly t8em alon: $it8 t8e
items t8at 8e 8ad manufactured% to t8e buyers9 7e $as also sellin: t8ese 6rocured items
se6arately9 T8e de6artment contended t8at t8ose bou:8t2out items% su66lied alon: $it8 t8e
manufactured items% $ere 6art of 6iston assembly and t8erefore% t8eir value s8ould be included
in t8e value of t8e 6iston assemblies cleared by t8e manufacturer9 "ut t8e assessee contended
t8at t8e 6iston rin:s and circli6s $ere all different 6arts of I9C9 en:ine and t8erefore t8ey $ere
not to be considered as 6arts of anot8er item9 Decide $8et8er t8e contention of t8e de6artment
is correct or not9 (D 5ar1s
"ns4erA This problem is based on the case of 9oetOe India! -td. ). 44Ex, 4handigarh /00L @FA!
E-C /1L Cri.-Del.!. The case was decided in favour of the assessee. The Tribunal observed that the
trading practice made it clear that each of the item was bought and sold separately and not as parts of
one item. The fact that they were assembled together in an I.C. engine or that each part had an integral
function in an assembly was not sufficient to hold that one item formed part of another item.
The Tribunal reiterated the well settled law that excise duty was a levy on manufacture and a
manufacturer would be liable to pay duty on the goods manufactured by him and not on all the goods
supplied by him. Therefore, it was decided by the Tribunal that value of such items would not be
included in the assessable value of the manufactured goods.
In view of the abovementioned decision, the contention of the department is not correct.
PPPPP
Guestion 3: 5;s9 I8an #td9 is a small scale unit manufacturin: 6lastic name 6lates for motor
ve8icles as 6er s6ecifications 6rovided to t8em by t8eir customers% $8o are ve8icle
manufacturers9 Aor 6ur6oses of classification under t8e first sc8edule to t8e Central Excise
Tariff Act% &')* t8e assessee 8as claimed t8at t8e 6lastic name 6lates are 6arts and accessories
of motor ve8icles!9 T8e Central Excise De6artment 8as 6ro6osed classification as ot8er 6lastic
6roducts! in res6ect of t8ese 6lastic name 6lates9 T8e de6artmentCs vie$ is t8at t8e motor
ve8icle is com6lete $it8out t8e affixation of name 6lates and cannot be treated as a 6art of t8e
motor ve8icle9 Erite a brief note on $8et8er t8e stand ta1en by t8e de6artment is correct in
la$9 (( 5ar1s
Ans$er: 7o, the stand ta3en by the <epartment is not valid in law. The plastic nameplates should be
classified as parts and accessories of motor vehicles on following grounds0
i! name plates are solely and exclusively used for motor vehicles.
ii! classification as parts and accessories of motor vehicles is more specific while the
classification as other plastic products is residuary and more general in nature.
The <epartment has examined only whether the name plates can be considered !parts" of motor
vehicles, it has not at all considered whether these name plates can be considered !accessories" of
motor vehicle P $n !accessory" by its very definition is something supplementary or subordinate in
nature and need not be essential for the actual
functioning of the product.
50
In a similar case of Hragati 3ilicons H)t. -td. ). 44Ex. Delhi /001! /@@ E-C E#L 34!, the $pex
Court applying the test laid down in the case of >ehra 7ros. ). Moint 4ommercial ?fficer @AA@! E@
E-C @1# 34! has held that number plates add to convenient use of motor vehicle and give an identity
to it. They add effectiveness and value to vehicle and are at very least accessories of vehicles. Thus,
even if there was any difficulty in the inclusion of the name plates as !parts" of the motor vehicles,
they would most certainly have been covered by the broader term !accessory" as car seat covers and
upholstery etc.
NNNNN
Guestion (: Can t8e De6artment c8an:e; alter t8e Classification of :oodsF
Ans$er: There is no estoppel under the taxation matters, the department can change the
classification only for cogent reasons e.g. fresh facts are brought on record or the process of
manufacture has changed or the relevant tariff entry has undergone modification or subse1uent
to earlier decision. There has been pronouncement of a high court or the upreme Court which
necessitates the reconsideration of the issue. Thus, review #reopening of a classification list may
only be done for cogent reasons. 9owever, a classification list can be changed or modified by the
<epartment when material facts were not disclosed in the classification list and they came to the
notice or 3nowledge of <epartment subse1uently. 9owever, change based on re:evaluation of
the same facts is not permissible as it may tantamount to review which was not permissible
earlier. <epartment cannot change the classification arbitrarily. In MI 3ynthetics -td. ,. +?I
.@A$@2 $ E-C #/$, the <elhi high Court has held that an authority can depart from its earlier
stand only for cogent reasons.
YYYYYY
Guestion *: Indicate t8e res6ective 6rovisions of t8e Central Excise Act% &'(( > Central Excise
Tariff Act% &')* by virtue of $8ic8 t8e t$o enactments :et lin1ed to:et8er9
Ans$er: ection = of Central Excise $ct, 14// D ection % of Central Excise Tariff $ct, 14.' are
lin3ing sections.
ection = of Central Excise $ct, 14// provides that there shall be le)ied and collected in such
manner as may be prescribed, (
a! a duty of excise to be called the 4entral ,alue %dded Cax 4EJ,%C!, on all excisable goods
which are produced or manufactured in India as, and at the rates, set forth in the 8irst 3chedule to
the 4entral Excise Cariff %ct, @A$E;
b! a special duty of excise, in addition to the duty of excise specified in clause a! abo)e, on
excisable goods specified in the 3econd 3chedule to the 4entral Excise Cariff %ct, @A$E which are
produced or manufactured in India, as, and at the rates, set forth in the said 3econd 3chedule.
ection % of Central Excise Tariff $ct, 14.' provides that the rates of duties for Central Excise $ct,
14// are specified in the tariff schedule.
@oreover, the power to grant exemption from excise duty vests with the Central )overnment as per
ection '$ of the Central Excise $ct, 14//. These exemptions are based on classifications per the
tariff schedule.
YYYYYY
Guestion D: Does t8e 5axim B#atter t8e "etterC a66ly in classifyin: t8e excisable :oodsF
51
Ans$er: The maxim !*atter the better" applies to 5ule =,C- of Classification 5ules. The said 5ule
=,c- provides that the goods are to be classified under the heading, which appears last in numerical
order among the headings having e1ual merit, if the goods cannot be classified under 5ule = ,a- D ,b-
above.
YYYYYY
@!estion 7A Ex6lain briefly $8et8er duty liability under t8e Central Excise Act% &'(( $ill be
attracted in t8e follo$in: case 5N > Co9 en:a:ed in t8e manufacture of Vanas6ati oil used
activated clay for deodorin:% bleac8in: and decolourin: of oil9 As a result of t8is 6rocessin: t8e
activated clay $as transformed into Bs6ent eart8C $8ic8 $as notin: but t8e residue of t8e
activated clay9 T8e activated clay residue lost its absorbent c8aracter durin: t8e course of
refinin: and bleac8in: of oil9 Excise De6artment sou:8t to classify t8e Bs6ent eart8C under t8e
Central Excise Tariff C8a6ter 7eadin: No9 &*-4% $8ic8 reads as residues resultin: from
treatment of fatty substances or animal or ve:etable $axes!9
Ans$er: The facts and circumstances given in the 1uestion are similar to the facts of the case CCE
V9 5ar1fed Vanas6at8i > Allied Industries wherein the upreme court held that merely because
goods fall in a chapter heading under the Central Excise Tariff they do not become excisable unless
there is manufacture and the goods are mar3etable. The burden of proof of manufacture and
mar3etability is on the revenue. pent earth was earth on which duty had already been paid. It
remained earth only even after the processing. Therefore, if duty is levied again, it would amount to
double duty on same product which Is not permissible.
YYYYYY
Guestion ): A boo1 often contains a CD9 If a soft$are is 6urc8ased% a manual is :iven alon:
$it8 CD9 T8e CD contains t8e soft$are9 T8us% in bot8 cases% t8ere is a boo1 and CD9 E8at test
$ill be a66lied $8ile classifyin: t8ese 6roductsF
7int: The test to be applied is of !essential character". In the first case, the !boo3" gives !essential
character" while in the second case, !software gives essential character.
NNNNNNN
Guestion ': A 6articular notification :rants full exem6tion to Ball 6roducts of 6rintin: industry
includin: ne$s 6a6ers and 6rinted 6eriodicalsC9 A manufacturer $8o is manufacturin:
cardboard cartons and subseOuently doin: varied 6rintin: on t8em% claims t8e benefit of said
exem6tion notification on t8e :round t8at every material on $8ic8 6rintin: $or1 is done
becomes a 6roduct of 6rintin: industry9 Is t8e claim of manufacturer is ?ustified9 /ive reasons
for your vie$s9
Ans$er: The claim of the card board manufacturer that printed cartons are the products of printing
industry is not justified because cartons, even without printing, are complete products which are used
for pac3aging. +rinting on cardboard cartons add only some value to it and it does not change its
nature.
In the given 1uestions, exemption has been granted to the products of printing industry and cardboard
boxes are not the products of printing industry. Therefore, claim of the manufacturer is not tenable.
8ollatainers ?imited +. :;*.
52
53
In the case of specific rate of duty, the
basis of e!" is a s#ecific $uantit" of
goods such as %eight, ength, !ou&e,
nu&ber of units #roduced etc' (hus
s#ecific rate of dut" has no ree!ance to
the seing #rice or !aue of the e)cisabe
goods and is, in fact, inde#endent of it
e'g' *s' 50+- #er ,- or *s' 5000+- #er ,.
In the case of ad-valorem rate of duty, the basis of
e!" is the !aue of the goods' It is, therefore,
necessar" to deter&ine the /!aue0 of the e)cisabe
goods and then a##" the ad-!aore& rate of dut"
%hich is a fi)ed #ercentage of the !aue, sa", 151 ad-
!aore&, 201 ad-!aore& etc' (hus, ad-!aore& rate
of dut" is entire" reated to and is de#endant on the
!aue of e)cisabe goods e'g' 201 or 81'
(
Valuation of Excisable /oods
(nder Central Excise $ct, excise duty may be specific or ad:valorem. pecific duty is 1uantity based
while ad:valorem duty is value based. This chapter is relevant only where duty is ad:valorem.
Ty6es of Duties under t8e Central Excise
This chapter deals with determination of assessable value on the basis of which duty may be charged.
It is to be noted that !price" and !value" are not synonymous terms for the purpose of excise. The
assessable value for the purpose of duty may be :
,a- Tariff 8alue fixed by Central )overnment under ection =,%- of Central Excise $ct, 14//H or
,b- Bn the basis of valuation under ection / of Central Excise $ct, 14//0
,i- Transaction 8alue
,ii- 8aluation as per Central Excise 8aluation ,<etermination of +rice of Excisable
)oods- 5ules, %666, or
,c- Bn the basis of 5etail ale +rice P 8aluation under ection /$ of Central Excise $ct, 14//.
Valuation under 0ection 3(, of Central Excise Act% &'(( i9e9% Tariff Value
The Central )overnment may, by notification in the Bfficial )a?ette, fix, for the purpose of levying
CE78$T or pecial Excise <uty on any articles chargeable with duty ad )alorem, the 4entral
9o)ernment may, by notification in the Bfficial )a?ette ,
2ix the tariff value of any article enumerated in 2irst#econd chedule
$lter any tariff values for the time being in force.
(nder ection =,=-, the Central )overnment may fix different tariff values for K
,a- <ifferent classes or descriptions of the same excisable goodsH or
,b- Excisable goods of the same class or descriptionK
54
i! Hroduced or manufactured by different classes of producers or manufacturers; or
ii! sold to different classes of buyers5
+rovided that in fixing different tariff values, regard shall be had to the sale prices charged by the
different classes of producers or manufacturers, or the normal practice of the wholesale trade in such
goods.
4entury >anufacturing 4ompany -imited ,. +?I 6 ection / is subject to section =,%- i.e. when
tariff value is fixed, provision of section / will not be applicable. ection =,%- over rides section /.
ection =,%- and section /$ are mutually exclusive.
Valuation under 0ection (A or +0. based Valuation
@! Che 4entral 9o)ernment may, by notification in the ?fficial 9aOette, specify any goods, in
relation to which it is required, under the pro)isions of the -egal >etrology %ct, /00/ or the rules
made thereunder or under any other law for the time being in force, to declare on the pac*age
thereof the retail sale price of such goods, to which the pro)isions of sub-section /! shall apply.
/! 'here the goods specified under sub-section @! are excisable goods and are chargeable to duty
of excise with reference to )alue, then, notwithstanding anything contained in section L, such )alue
shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if
any, from such retail sale price as the 4entral 9o)ernment may allow by notification in the ?fficial
9aOette.
#! Che 4entral 9o)ernment may, for the purpose of allowing any abatement, ta*e into account the
amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
L! 'here any goods specified under sub-section @! are excisable goods and the manufacturer-
a! remo)es such goods form the place of manufacture without declaring the retail sale price of such
goods on the pac*ages or declares a retail sale price which is not the retail sale price as required to
be declared under the pro)isions of the %ct, Nules or other law as referred to in sub-section @! ; or
b! tampers with, obliterates or alters the retail sale price declared on the pac*ages of such goods
after their remo)al from place of manufacture,
then, such goods shall be liable to confiscation and the 4entral 9o)ernment shall ascertain in the
prescribed manner the retail sale price of such goods and the retail sale price so ascertained shall be
deemed to be the retail sale price for the purposes of this section.
Explanation @5 (8etail sale price( means the maximum price at which the excisable goods in
pac*aged form may be sold to the ultimate consumer and incl!des all taxes local or otherwise,
freight, transport charges, commission payable to dealers, and all charges towards ad)ertisement,
deli)ery, pac*ing, forwarding and the li*e, as the case may be, and the price is the sole consideration
for such sale.
Hro)ided that in case the pro)isions of the %ct, Nules or other law as referred to in sub-section @!
required to declare on the pac*age, the retail sale price excluding any taxes, local or otherwise, the
retail sale price shall be construed accordingly. .Jo). 0E2
Explanation /5
55
a! 'here on the pac*ages of any excisable goods more than one retail sale price is declared, the
maximum of such retail sale price shall be deemed to be the retail sale price;
b! 'here the retail price declared on the pac*age of any excisable goods at the time of its clearance
from the place of manufacture, is altered to increase the retail sale price, such altered retail sale
price shall be deemed to be the retail sale price.
c! 'here different retail sale prices declared on different pac*ages for the sale of any excisable
goods in pac*aged form in different areas, each such retail price shall be the retail sale price for
the purposes of )aluation of the excisable goods intended to be sold in the area to which the
retail sale price relates.
A66licability
+rovisions of section /$ are applicable if all the following re1uirements are satisfied P
a- The goods are satisfied goods
b- The goods are already covered under the *egal @etrology $ct, %66%, and
c- The goods have been notified by the central government under sub:section ,1- of this section.
9owever, in following cases, provision of section /$ will not be applicable even if all the aforesaid
re1uirements are satisfied ::
a- The weight is less than 16 grams
b- *i1uid contents are less than 16 @*
c- The goods covered under section /$ are not being removed in consumer pac3
d- The goods covered under section /$ are being offered as free along with the goods covered
under section /.
Assessable value
The assessable value of the goods covered under section /$ shall be the 5+ declared on the goods
reduced by the rate of abatement prescribed by the Central )overnment i.e.
$8 X 5+ declared ,:- +rescribed rate of abatement
+ate of abatement
The rate of abatement is fixed the Central )overnment after ta3ing into account all the expenses
incurred by the assessee, any bro3erage or commission, his prodit margin as well as all applicable
taxes. It means except the prescribed rate of abatement no other deduction shall be admissible.
Ae$ exam6les of rate of abatement 6rescribed by Central /overnment: list illustrati)e and not
exhausti)e!5 )overnment has notified 44 categories of goods under section /$. 2ew of them are as
under
Descri6tion Abatement as a L of +0.
Condensed @il3 ='C
Chocolates ='C
Toothpaste ='C
2ootwear /6C
Electric 2ans /6C
$erated Gaters /'C
Ice Cream /'C
56
The procedure of valuation of calculation of central excise duty may be understood with the following
example0
@5+ is affixed on product IMJ, including sales tax E =C, is 5s. 166#:. 5ate of 5ebate is /6C in
terms of notification no. %#%66&. 5ate of Excise <uty is 1&C and Cess =C ,%C F 1C-. Gholesale
price of the product is 5s. /' with duties of excise and local taxes.
7ow for the purpose of Excise duty the following steps should be ta3en0
1 @5+ 5s. 166
% *ess 5ebate E /6C 5s. /6
= 8alue on which excise duty is to be paid 5s. &6
/ $mount of duties 5s. 4....
a. ;asic Excise <uty E 1&C X 5s. 4.&
b. Education Cess E %C X 5s. 6.14%
c. 9 Education Cess E 1C X 5s. 6.64&
' 2or the purpose of calculation of excise duty actual sale price shall be
ignored.
& *ocal taxes li3e sales tax shall be ignored
> $ny discount whether 1uantity discount # volume discount or
performance discount shall be ignored
. $ll other adjustments prescribed under section / shall be ignored.
4. +rovisions of Central Excise 8aluation ,<etermination of +rice of
Excisable )oods- 5ules, %666 shall be ignored.
Contravention
2ollowing contraventions can ta3e place under this section P
a- 5+ is re1uired to be declared on the goods but it is not decalredH
b- The value declared on the goods is not the 5+H or
c- 5+ declared on the goods has been obliterated
In any such case, the goods are liable to be confiscated and the 5+ shall be ddetermined in
accordance with the prescribed 5ules.
Central Excise (Determination of +etail 0ale .rice of Excisable /oods +ules% ,--)
&.,1- These rules may be called the Central Excise ,<etermination of 5etail ale +rice of Excisable
)oods- 5ules, %66..
,%- They shall come into force on the date of their publication in the Bfficial )a?ette.
57
,. In these rules, unless the context otherwise re1uires,:
,a- O$ctO means the Central Excise $ct, 14// ,1 of 14//-H
,b- Oretail sale priceO means the retail sale price as defined in section /$ of the $ctH and
,c- words and expressions used in these rules and not defined but defined in the $ct or any other
rules made under the $ct shall have the meaning as assigned therein.
39 The retail sale price of any excisable goods under sub:section ,/- of section /$ of the $ct,
shall be determined in accordance with these rules.
(9 Ghere a manufacturer removes the excisable goods specified under sub:section ,1- of section
/$ of the $ct,:
,a- without declaring the retail sale price on the pac3ages of such goodsH or
,b- by declaring the retail sale price, which is not the retail sale price as re1uired to be declared
under the provisions of the tandards of Geights and @easures $ct, 14>& ,&6 of 14>&- or
rules made thereunder or any other law for the time being in force H or
,c- by declaring the retail sale price but obliterates the same after their removal from the place of
manufacture, then, the retail sale price of such goods shall be ascertained in the following
manner, namely0:
,i- if the manufacturer has manufactured and removed identical goods, within a period of
one month, before or after removal of such goods, by declaring the retail sale price, then, the
said declared retail sale price shall be ta3en as the retail sale price of such goods0
,ii- if the retail sale price cannot be ascertained in terms of clause ,i-, the retail sale price
of such goods shall be ascertained by conducting the en1uiries in the retail mar3et where such
goods have normally been sold at or about the same time of the removal of such goods from
the place of manufacture0
+rovided that if more than one retail sale price is ascertained under clause ,i- or clause ,ii-, then, the
8i:8est of t8e retail sale 6rice, so ascertained, shall be ta3en as the retail sale price of all such goods.
Explanation.: 2or the purposes of this rule, when retail sale price is re1uired to be ascertained based
on mar3et in1uiries, the said in1uiries shall be carried out on sample basis.
*9 Ghere a manufacturer alters or tampers the retail sale price declared on the pac3age of
goods after their removal from the place of manufacture, resulting into increase in the
retail sale price, then such increased retail sale price shall be ta3en as the retail sale price
of all goods removed during a period of one month before and after the date of removal
of such goods.
5ulti6le +0.s
@ultiple 5+s declared on the
goods but there is only one
valid 5+ and remaining have
been cancelled by assessee
@ultiple valid 5+s are
declared on the goods ,for any
reason-
<ifferent 5+s have been
declared on different units of
the same goods
$ssessment shall be based on
declared valid 5+ only
$ssessment shall be based on
highest declared 5+
Each unit shall be assessed
according to 5+ declared on
it.
58
5ulti26ac1
Ghen more than one assessable units of the goods are contained in the same pac3, it is referred as
multipac3. $ssessable value of the multipac3 shall be determined in accordance with ;oard"s
Circular dated %.
th
2ebruary %66% has clarified as under P
,a- If individual item comprises the multi:pac3 ,two or more items with @5+ printed- have clear
mar3ing that they should not be sold separately or they are pac3ed in such a way that they
cannot be sold separately then @5+ indicated on the multi:pac3 would be the basis for
section /$.
,b- Ghere individual item do not contain such an inscription and they are capable of being sold
separately at the @5+ printed on the individual pieces, then aggregate of @5+s of the prices
comprising the multi:pac3 would be considered for payment of duty under section /$.
,c- Ghere the individual items have @5+s printed on them but are scored out, then only valid
@5+ on the multi:pac3 would be adopted.
,d- If an individual item is supplied free in the multi:pac3 and has no @5+ printed on it, the
@5+ printed on the multi:pac3 would be for the purpose of section /$.
8ef!nda$le sec!rit deposit P The issue has been clarified by the <epartment vide Circualr 7o.
&/=#=/#%66%. $ccording to it, if cost of reusable containers ,glass bottles, crates etc.- is amortised and
included in the cost of the product itself, the 1uestion of adding any further amount does not arise
except where audit of accounts reveals that such cost has not been amortised and included in the
value of the product.
$. 44Ex ,. Hepsi 8oods -imited P Ghen the goods falling under section /$ are supplied free of
cost with other products and the pac3et of such goods does not bear any @5+, the such goods
will be assessed under section / and not under section /$.
;. >ount E)erest >ineral 'ater -imited ,. 44Ex 6 The assessee had different sale prices on its
mineral water bottles for sale in different regions. It contended that each of those prices
should be ta3en for assessment depending upon to which region this is cleared.
9eld that the assessee did not satisfy the re1uirement under explanation %,c- to section /$
that mar3ing of different prices must be on different pac3ages. Thus, as per explanation %,a-
the highest price declared on the pac3age is to be ta3en into account for valuation.
C. Indica -aboratories H)t. -td. ,s. 44Ex., %hmedabad 6 In case of @5+ based assessment, no
deduction is admissible for 1uantity discount and actual transaction value is also irrelevant.
<. Nallis India -imited ,s. 44Ex., Jagpur ./0012.Cri->um2 P If goods covered under section
/$ are not offered for sale in retail but those are supplied free of cost then valuation of such
goods has to be done under section / and not under section /$.
E. Iwality 7iscuits H)t. -td. ,s. 44Ex.%p! ./0012.Cri-7ang2 - )oods covered under section
/$ are to be valued under these provisions only even if goods are sold in bul3.
2. +rovisions of tandards of Geight D @easures ,+ac3aged Commodities- 5ules, 14>> shall
apply in case of bul3 sale of ice cream in pac3ages to hotel#catering industry etc. and
accordingly, the assesee is re1uired to declare the retail sale price on such pac3ages.
U4ircular Jo. $L#B@B/001-4Q dated @1.0@./001L
). Ghere different @5+s are mentioned on different pac3eages of the same commodity, the area
in which such pac3ages have to be sold need not mentioned on it and the @5+ declared on
59
each of them is re1uired to accepted for assessment. 9+M%N%C 9?-D4?IJ 4EN%>I43
-CD. ,s. 4?>>I33I?JEN ?8 4. EQ., N%MI?C - /00$ //#! E.-.C. EEF Cri. - %hmd.!
@!estionA = ?imited man!fact!res t4o prod!cts namel O"P and OCP." is a specified prod!ct !nder
section 4" of t#e Central Excise "ct/ 1944..#e sale prices of $ot# t#e prod!cts are 8s. 10/- per !nit
and 8s. 30/- per !nit respectivel. .#e sale price of $ot# t#e prod!cts incl!ded 14Q $asic excise
d!t pl!s 2Q ed!cation cess and 1Q secondar and #i#er ed!cation cess.Central -ales .ax R 3Q
is also incl!ded in $ot# t#e selling prices.
1/00/000 !nits of eac# of t#e t4o prod!cts 4ere removed from t#e factor for sale. Calc!late t#e
total excise d!t lia$ilit of = ?imited on $ot# t#e prod!cts ass!ming t#at 40Q a$atement is
permissi$le !nder section 4" on prod!ct ". &1 mar)s'
@!estionA L#at are t#e conditions !nder 4#ic# <8= $ased val!ation s#all appl !nder Central
ExciseJ 4 <ar)s'
Ans$er: The provisions relating to valuation of excisable goods based on @5+ are dealt with in
section /$ of the Central Excise $ct, 14//. The conditions under which the @5+ based valuation
shall apply are as follows0
,a- the excisable goods to be valued are covered under tandards of Geights and @easures $ct, 14>&
or related rules or under any other law and such law re1uires to declare on the pac3age the retail sale
price thereofH and
,b- the Central )overnment has notified the said goods as goods in relation to which the payment of
excise duty shall be on the basis of the @5+ less such deductions#abatements as it may allow in the
notification. 9owever, it must be noted that if the goods have been so notified, tandards of Geights
and @easures $ct or the rules made thereunder must re1uire a declaration of the retail sale price on
the pac3age of such goods.
@!estionA L#at legal/penal actions can $e ta)en in case t#e retail sale price is not mentioned or is
!nd!l tampered after t#e removalJ &4 <ar)s'
"ns4erA If the retail sale price is not mentioned on the excisable goods or is unduly tampered after the
removal, then
,i- such goods shall be liable to confiscation and
,ii- the retail sale price of such goods shall be ascertained in the manner prescribed by the Central
)overnment and such price shall be deemed to be the retail sale price.
Valuation under 0ection ( of Central Excise Act% &'((
+rovisions of ection / become applicable only where the Central )overnment has not fixed any
tariff value for the goods under section =,%- and such goods are also not specified under section /$.
-ection 4A +al!ation of excisa$le goods for p!rposes of c#arging of d!t of excise
@! 'here under this %ct, the duty of excise is chargeable on any excisable goods with reference
to their )alue, then, on each remo)al of the goods, such )alue shall(
a! in a case where the goods are sold by the assessee, for deli)ery at the time and place of the
remo)al, the assessee and the buyer of the goods are not related and the price is the sole
consideration for the sale, be the transaction )alue;
b! in any other case, including the case where the goods are not sold, be the )alue determined
60
in such manner as may be prescribed.
Explanation.(8or the remo)al of doubts, it is hereby declared that the price-cum-duty of the
excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the
money )alue of the additional consideration, if any, flowing directly or indirectly from the buyer to
the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax
and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
/! Che pro)isions of this section shall not apply in respect of any excisable goods for which a
tariff )alue has been fixed under sub-section /! of section #.
#! 8or the purpose of this section,(
a! "assessee" means the person who is liable to pay the duty of excise under this %ct and
includes his agent;
b! persons shall be deemed to be "related" if(
i! they are inter-connected underta*ings;
ii! they are relati)es;
iii! amongst them the buyer is a relati)e and a distributor of the assessee, or a sub-
distributor of such distributor; or
i)! they are so associated that they ha)e interest, directly or indirectly, in the business of
each other.
Explanation.(In this clause(
i! "inter-connected !nderta)ings" this definition has been gi)en in detail in the first
chapter!
ii! "relative" shall ha)e the meaning assigned to it in clause L@! of section / of the
4ompanies %ct, @AEF @ of @AEF!;
c! (place of removal( means(
i! a factory or any other place or premises of production or manufacture of the excisable
goods;
ii! a warehouse or any other place of premises wherein the excisable goods ha)e been
permitted to be deposited without payment of duty .;2
iii! a depot, premises of a consignment agent or any other place or premises from where the
excisable goods are to be sold after their clearance from the factory;
from where such goods are remo)ed.
cc! (time of removal(/ in respect of the excisable goods remo)ed from the place of remo)al
referred to in sub-clause iii! of clause c!, shall be deemed to be the time at which such
goods are cleared from the factory;
d! (transaction val!e( means the price actually paid or payable for the goods, when sold, and
includes in addition to the amount charged as price, any amount that the buyer is liable to
pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether
payable at the time of the sale or at any other time, including, but not limited to, any amount
charged for, or to ma*e pro)ision for, ad)ertising or publicity, mar*eting and selling
organiOation expenses, storage, outward handling, ser)icing, warranty, commission or any
other matter; but does not include the amount of duty of excise, sales tax and other taxes, if
any, actually paid or actually payable on such goods.
61
Ex6lanation to 0ection ((&:
Che price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him
for the goods sold and the money )alue of the additional consideration, if any, flowing directly or
indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-
cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the
duty payable on such goods.
ExampleA Certain Excisable goods are sold by @ for 5s.1/6 and %6C is the rate of duty. Then,
transaction value for charging excise duty is computed as shown below0
8alueX ,+rice Cum <uty-# U1F,5ate of <uty#166-L
X ,1/6-#U1F,%6#166-L X 5s.11&.&> ,approx-.
ubse1uently, if it is found that the cum duty price of goods was 5s.1.6 and not 5s.1/6, as the
assessee had collected 5s./6 separately, then such additional consideration shall be deemed to include
the excise duty payable on such goods. In this case, the revised transaction value of goods shall be as
shown below0
8alueX ,+rice Cum <uty-# U1F,5ate of <uty#166-L
X ,1/6F/6-#U1F,%6#166-L X 5s.1'6 ,approx-.
Chus, -ection 4&1'&a' pro)ides for calculation of assessable )alue as per .ransaction +al!e and
-ection 4&1'&$' pro)ides for calculation of assessable )alue as per +al!ation 8!les.
<uty is chargeable at the rate and on the price prevailing on the date of actual removal of goods from
the factory gate and subse1uent reduction in the price even at the behest of the government does not
create a right in favour of assessee for refund of duty on reduction in the price. <8, ?td. +. CCEx.
Transaction value as assessable value under section ((&(a
$ccording to ection /,1-,a- I'here under this %ct, the duty of excise is chargeable on any excisable
goods with reference to their )alue, then, on each remo)al of the goods, such )alue shall ( in a case
where the goods are sold by the assessee, for deli)ery at the time and place of the remo)al, the
assessee and the buyer of the goods are not related and the price is the sole consideration for the
sale, be the transaction )alue".
Therefore, the transaction value will be accepted as assessable value only if0 :
,a- )oods are sold
,b- The sale is by assessee
,c- <elivery is at the time and place of removal
,d- The assessee and buyer are not related persons
,e- +rice is the sole consideration for sale
If these conditions are satisfied, ection /,1-,a- accepts different transaction value which may be
charged by the assessee to different buyers, for assessment purpose. Ghen there is nothing to show
that either the buyer was a related person or that the price was not the sole consideration or there were
other vitiating circumstances to doubt the normal price, the price under ection /,1-,a- shall be
considered for valuation. :;* +. >indalco *nd!stries.
It is to be noted that the though the excisable event under the $ct is manufacture or production of
goods but payment of duty is postponed till removal of goods from the place of removal. The removal
of goods may be because of sale or for some other reason. Ghere the goods are not sold but those are
consumed captively or those are transferred to depot, in absence of transaction value, the valuation of
62
goods has to be in accordance with 5ule . of 8aluation 5ules or 5ule > of valuation rules,
respectively.
The value to be adopted is the price at which Isuch goods are ordinarily sold by the assessee to a
buyer in the course of trade for delivery at the time and place of remo)al." Therefore, chargeability
of excise is based on the value of goods on each removal at the time and place of removal.
Elements of Cost $8ic8 are :enerally included in t8e assessable value
The term !transaction value" as per ection / means the price actually paid or payable for the goods,
when sold, and includes in addition to the amount charged as price, any amount that the buyer is
liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether
payable at the time of the sale or at any other time, incl!ding/ $!t not limited to, any amount
charged for, or to ma*e pro)ision for, ad)ertising or publicity, mar*eting and selling organiOation
expenses, storage, outward handling, ser)icing, warranty, commission or any other matter but does
not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually
payable on such goods.
The words !including but not limited to< used in the definition of transaction value indicate that the
items included are only illustrative and many other items may be includible. ExampleA Ghere the
assessee recovers advertising charges from the buyer either at the time of sale or subse1uently, the
assessee cannot claim that such charges are not includible in the transaction value.
It is to be noted that an item is includible only if the buyer is liable to pay for or on behalf of the
assessee. ;ut any amount of taxes, which are paid or payable by the assessee and recovered from the
buyer, are not includible in assessable value.
5eanin: of transaction value
The price actually paid or payable for the goods
<ifferential pricing is acceptable
The amount which the buyer is liable to pay may have to pay it to the assessee or to some other
person on behalf of the assessee.
The amount may be payable at the time of sale or at any time later on.
The amount payable should be by reason of or in connection with the sale of goods.
Amount referred above includes t8e follo$in: but not limited to
$dvertising and publicity
@ar3eting selling and organi?ation expenses
torage and warehousing
ervicing and warranty
Commission
Does not include any tax already
6aid or actually 6ayable e9:9
Excise duty
ales Tax
Bther taxes
In nut shell, any amount already 3nown at the time of delivery of goods is includible in the assessable value
provided such payment is in relation to goods e.g. extra test or pac3ing but interest amount, being finance
charges, is not includible.
$ny payment received by the assessee in relation to goods, not 3nown at the time of delivery is not
includible in the assessable value e.g. extended warranty or service charges
Guestion: E8at are t8e situations $8ere transaction value under 0ection ( of t8e Central
Excise Act does not a66lyF (( mar1s
Ans$er: $s per section /,1- of the Central Excise $ct, the transaction value shall be the
63
assessable if the following conditions are fulfilled P
i! If the goods are sold
ii! ;y the assessee
iii! 2or delivery at the time and place of removal
i)! Ghere assessee and buyer are not related personsH and
)! +rice is the sole consideration for sale.
If any one or more of the above conditions are not satisfied, the transaction value will not be
ta3en as the assessable value. The value in such a case shall be determined on the basis of the
Central Excise ,<etermination of +rice of Excisable )oods- 5ules, %666 notified under section
/,1-,b- of the Central Excise $ct.
2urther, Transaction value also does not apply where tariff value has been fixed by the Central
government under section =,%- and in cases where provisions of section /$ are applicable.
06ecific Inclusions in Transaction Value
$ll the expenses incurred by the assessee or any other person, in connection with the goods, upto the
time and place of removal, whether in the ordinary course of business or on specific re1uirement of
the customer are re1uired to be added in the assessable value.
7ormally, assessee includes all the expenses in the price but there may be situations in which the
assessee recovers certain costs from the customer separately in the name of re:imbursements.
$ctually those are also re1uired to be added for determining correct assessable value.
ince all the goods are covered under self assessment, the assessee himself determines the value and
pays duty accordingly. $ccording to section 1/$ of the CE$, where any subject matter relating to
assessment is pending before the $C#<C and if he is of the opinion that the value declared by the
assessee is not correct, he may ma3e an order for special audit, only in connection with the value
declared. uch order can be passed only after obtaining prior approval of the Chief Commissioner.
pecial audit is to be carried out by a cost accountant or a chartered accountant already empanelled
with the Chief Commissioner and the report of special audit shall be submitted within the time
specified in the order. If re1uired, extension may be allowed from time to time. In any case, the
maximum time that can be allowed for submission of the report is 1.6 days.
It is further provided that no action shall be ta3en against the assessee on the basis of report of special
audit unless he has been given opportunity of being heard.
ome of the costs which are to be included in the assessable value, are discussed hereunder0 K
Accessories and Com6onents:
The word !accessory" means an addenda or adjunct, not essential but which adds to the
efficiency. !Component" means a constituent part or ingredient.
The value of bought out items which are essential and re1uired for operation of machine are to be
included in the assessable value. Nifostar Equipment 3ales ,. 4ommissioner of 4us.= 4. Excise,
Hune. Bn the other hand, in 3iemens -td. ,. 44E the Tribunal held that batteries supplied from
trading division directly is not addable to the cost of (+. @ere sales from the factory should not
attract excise if the product is trading item.
64
imilarly, straw supplied separately along with the final product fruit juice ,2rooti- is not an
essential item and only an accessory. traw is a bought out product and supplied by specific
re1uest of the customer and not forming part of the final product. Therefore, value of straw is not
be added in assessable value. Ie)enter %gro -td ,.. 44E.
Administrative C8ar:es
$dministrative expenses relating to manufacturing activity are includible in assessable value.
,i:aywada 7ottling 4o. -td. ,. 4ollector
Advertisin:
Ghere advertising for the product is done by some person other than the manufacturer and the
advertiser is not having nay understanding with the manufacturer in that regard then cost of such
advertising cannot be included in the assessable value for the manufacturer.
a. The assessee manufactured non:alcoholic beverages and sold it to various bottlers.
The bottlers after processing the concentrate, bottled the outcome and sold the same. (nder
the agreement between the bottlers and the assessee, the assessee was re1uired to advertise
the finished product. The $pex court held that the advertising expenses incurred by the
assessee cannot be included in the assessable value of the soft drin3 sold sold by the bottlers.
44Ex ,x. Harle International -imited. ./00F234!
Guestion: @#s + *td. manufactured concentrates of non:alcoholic beverages and sold it to
various bottlers. The bottlers after processing the concentrates bottled the outcome and sold
the same. (nder the agreement between + *td. and the bottlers, + *td. was re1uired to
advertise the finished products. ubse1uently, the bottlers formed *td. to wor3 as a
centrali?ed agency for the advertisement of the finished products. The shareholders as well as
the directors of *td. were the representatives of the bottlers.
<etermine whether or not the expenses of advertisement incurred by *td. to advertise
aerated products manufactured by the third party i.e. bottlers, is includible in the assessable
cost of concentrate manufactured by + *td. ,/ @ar3s-<5ay -4=
b. $dvertisement expenses incurred by the dealers on their own are not includible in
assessable value even if assessee reimburses '6C of such expenses, without any written
agreement for the same. %mco 7atteries -imited ,s. 44Ex., 7angalore ./0012.Cri-7ang.2
Cenvat Credit% Duty Dra$bac1% 0ales Tax refunds etc9
Ghere the higher rate of duty is initially assessed and collected from the customer by a
manufacturer and paid to the )overnment and subse1uently on a proper computation the duty
gets reduced and becomes refundable to the manufacturer, excise duty on the amount so
becoming refundable is includible in the assessable value, if the benefit of refund is not passed on
to the buyer. 7a:a: %uto -td. ,. +?I.
<uty collected but not payable results into increase of profit element and therefore, such
element cannot be deducted from the value. %4 ,. 7ata India -td.
D8armada
The ;oard in its circular 7o. >&=#>4#%66=:CM dated %1:11:%66= has clarified that <harmada
collected by the assessee from the buyer is includible in the assessable value of the goods.
The Circular is based on the upreme Court judgment passed in case of 4ollector of 4entral
Excise ,. Hanchmu*hi Engg. 'or*s.
65
Dra$in: > desi:nin: c8ar:es and consultancy c8ar:es to$ards 6re2installation 6lannin: and
layout desi:n etc:
$ll drawing and designing charges incurred in connection with the manufacturing are
includible in assessable value. 9owever, they must have a nexus to the excisable goods
manufactured and cleared in as much as the excise duty liability is on production or manufacture
of goods. 44E, >adras ,. Electron India .
Ghere moulds and dies are procured by the buyer and supplied to the manufacturer free of
cost, the sale price of the manufacturer is not acceptable as assessable value as it does not indicate
true commercial value. Dugar Electronics ,. 44E .
Cost of moulds supplied free of cost to be amorti?ed over the life span of the moulds. >utual
Industries -imited ,. 44E.
In Nifostar Equipment 3ales ,. 4ommissioner of 4ustoms and 4 Ex., Hune - Consultancy
charges collected from only 4 customers out of total &=. Therefore, it was held that consultancy
charges are not includible in the assessable value.
.ac1in: c8ar:es:
ection / does not have any specific mention of pac3ing charges. It does not mean that pac3ing
charges are not to be included in assessable value. $ny charges recovered for pac3ing are to be
included because these are essentially in relation to the goods under assessment and will form
part of the transaction value.
44Ex ,. Gindustan 3afety 9lass 'or*s -imited 34! P ince glass sheets were delicate#fragile in
nature and could not be moved in whole sale trade without being pac3ed in wooden crates,
therefore, the wooden crates were meant to ma3e the glass sheet mar3etable and thus, the cost
thereof was includible in the assessable value of glass sheet.
The ;oard has issued a clarification vide Circular 7o. &/=#=/#%66% dated 1
st
Auly %66%. $ccording
to it K
a. There is no provision for deduction of cost of secondary pac3ing in the concept of transaction
value but the cost of reusable pac3ing e.g. glass bottles, gas cylinders etc. need not be added
because it is amorti?ed and included in the cost of product itself otherwise.
b. Ghere the assessee has charged any amount towards rental for reusable pac3ing then such
rental is to be included in the assessable value. In 9rasim Industries -imited ,. 44E chlorine
was supplied in the containers owned by the appellant, the buyer is charged 5s.1'6#: per @T
for !durable and returnable" pac3ing in which chlorine is supplied. In this case the sale is that
of chlorine. It cannot be contended that the rental paid by the buyer is an amount which he is
liable to pay by reason of or in connection with the sale.
c. Ghere the buyer supplies pac3ing material, the valuation has to be done under section /,1-,b-
i.e. in accordance with 5ule & of the 8aluation 5ules.
0oft$are
In %cer India -imited ./00L2 the <epartment contended that operating software should be included in
the value of computers. The upreme Court held that P
a. Computer is complete without software.
b. Even though operating software is re1uired for functioning of the computer it does not ma3e it a
part of computer.
c. +re:loading of software does not ma3e it hardware.
66
d. 8alue of operating system cannot be added in the assessable value.
0tora:e > 8andlin: c8ar:es and interest:
torage D handling charges and interest upto date of removal are to be included in
the assessable value. 7ombay Cyre International -td. ,. +?I .
Costs of supervision, unloading charges are includible in the assessable value but
cost incurred for maintenance of cylinders, which are durable, is not includible. 9o)ind Hoy
?xygen -td. ,. 4ollector.
Interest on receivable as well as collection charges are admissible deductions since
those are already 3nown in advance. Cata Cea -imited ,. 44E.
Trans6ortation% loadin: and 8andlin: c8ar:es inside t8e factory:
ince all these costs are essential to bring the goods in mar3etable condition, these
form part of the assessable value.
Ghere sale is ex:factory, freight is not to be included in the assessable value.
Jeel*amal Hlastics -imited ,. 44E, Joida.
2reight and insurance charges paid by the manufacturer and recovered from the buyer
are not to be included in the assessable value since sale is ex:factory. 44E ,. Escorts M47
-td.
44EQ ,. Hoona 7ottling 4o. -imited 34! P *oading and unloading charges incurred by a distributor
of the assessee are not includible in the assessable value of goods. Bnly those charges incurred for
loading the finished goods within the factory of the assessee are includible.
+oyalty% tec8nical 1no$28o$ fee etc9
5ecurring royalty charges has direct nexus with the manufacturing activity of the product and hence,
includible in the assessable value. Citanium Equipment = %node >fg. 4o. ,. 4ollector
Testin: c8ar:es:
$ny type of testing charges on manufacture of product are includible in the
assessable value. In absence of any evidence to prove that the testing charges were re:testing
charges underta3en in respect of the final product after manufacture, such charges shall be
included in the assessable value. 3a*et H,4 Hipes Industries H)t. -td. ,. 44E.
;ut where special testing charges are incurred at the instance of the buyer, such
testing charges are not includible in the assessable value. 9E4 India -td. ,. 4ollector.
Earranty c8ar:es
<efinition of the term !assessable value" includes warranty charges also.
It is immaterial whether such warranty charges are charged along with the sale price
or these are charged separately. The ;oard has also clarified in its Circular 7o. ='/#.1 dated =6:
&:%666 that it is immaterial whether the warranty is optional or mandatory. Transaction value
may differ from customer to customer. Therefore, where warranty charges are charged, those are
to be included in the assessable value.
@aintenance charges paid by the buyer cannot be considered as part of sale proceeds.
Therefore, not includible in assessable value. +olvo *ndia ?imited D2001E
Extended warranty is offered to customer by the dealer of the assessee, at the choice
of customer. The choice is to be made at the time of delivery of vehicle by the dealer and not at
the time of delivery of vehicle by the assessee to the dealer. Therefore, any amount realised by
67
the assessee on account of extended warranty is not includible in the assessable value. <ar!ti
:dog ?imited D200%E
7harat Gea)y Electricals -imited ,. 44Ex 34! - @erely because manufacturer and dealers choose
to offer incentives of free replacement during warranty period, does not mean that goods, which are
otherwise exsicable, should be exempted from paying excise duty.
The goods remain excisable for the 5evenue even if the manufacturer or dealer ta3es upon himself to
bear the cost of those goods.
/oods +etained by t8e ?ob2$or1er e9:9 scra6 :enerated durin: t8e 6rocess
The gods manufactured out of input supplied by the principal manufacturer were retained by the job:
wor3er, who sold them and retained the sale proceeds. 9eld that such sale proceeds will be an
additional consideration to the job:wor3er for doing the job:wor3 and will form part of the assessable
value of goods. Jirma -imited ,. 44Ex.B44Ex., Jagpur ,s. -loyds 3teel Industries -imited ./0012
.342
In 7ombay Cyre International, the upreme Court held that all expenses incurred on account of
several factors which have contributed to the value of excisable goods upto the date of sale are liable
to be included. Conse1uently, where the sale is effected at the factory gate, expenses incurred by the
assessee upto the date of delivery on account of
torage charges
Butward handling charges
Interest on inventories
Charges for other services after delivery to the buyer, namely after:sales service and
@ar3eting and selling organi?ation expenses including advertisement expenses
are includible in !value" and cannot be allowed as a deduction.
06ecific Exclusions from Transaction Value
Advertisement ex6enses incurred by t8e dealer
$dvertisement expenses incurred by the dealer on his own behalf are not to be included in the
assessable value provided the dealing with the assessee is on the principal to principal basis.
Gello >ineral 'ater H. -td. ,. 44E
"ou:8t out :oods su66lied $it8 ot8er :oods
Ghere bought out goods, being $CCEB5IE, are supplied along with manufactured goods,
without availing any Cenvat credit then value of bought out items is not includible in assessable
value. It is to be noted that in case of +$5T, value thereof will always be added in the
assessable value of the goods.
Erection and Installation c8ar:es:
Erection and installation is a taxable service within the meaning of section &',16'- of the 2inance
$ct, 144/. Therefore, excise duty cannot be levied on erection and installation charges collected by
the assessee from the customer.
68
@oreover, even from the point of view of excise, all such expenses at the customer"s site are post
manufacturing expenses and, thus, not includible in the assessable value. Thermax *imited 8.
Collector
Arei:8t and Insurance:
2reight and insurance charges upto the depot have to be included but those
incurred for delivery to customer from depot are not includible in assessable value. Hrabhat
Karda 8actory ,. 44E
Ghen transfer of title too3 place at the factory gate, freight and transit
insurance is not includible in the assessable value. %sean 7rown 7o)eri -td. ,. 44E%d:.!
>umbai-,. @oreover, in a similar case, if assessee collects more than his actual
expenditure, excess freight collected cannot be included in the assessable value. %ndhra
3ugars -imited ,s. 44Ex., 9untur ./0012.Cri-7ang.2
Interest received or receivable for delayed 6ayment
Interest on delayed payments is deductible.
It has also been clarified that interest charges under a financing arrangement
entered into between the assessee and buyer shall not be regarded as part of the assessable
value provided K
the interest charges are clearly distinguished from the price actually paid or payable
the financing arrangement is made in writingH and
if re1uired, the assessee shall show that such goods are actually sold at the price actually
paid or payable.
;an3 charges are not includible in assessable value. 44E ,. Gindustan -e)er
-td.
The interest charges received on goods sold on credit need not be shown
separately. If it can be shown by the manufacturer that the invoice price is includible of
interest component for the credit allowed to the customer, such interest amount is deductible
for arriving at the assessable value. 7ombay 7urmah Crading 4orpn. -td. ,. 4ommr. ?f 4us
= 4. Ex
;eing inbuilt in the price but not charged separately is deductible from
assessable value. 44Ex., Gyderabad ,s. Jo)apan Industries -td. ./0012.342
Interest on borro$in: for 6urc8ase of ca6ital :oods
In a recent judgment in case of ITC *imited U%66&L the upreme court has held that even though as
per C$ issued by The Council of the Institute of Cost and Gor3s $ccountants of India the interest
on borrowing shall also be includible for arriving at the cost of production of goods, it is not
includible for arriving at assessable value for the purpose of charging of excise duty.
#iOuidated dama:es 6aid by t8e buyer
*i1uidated damages are those damages which are paid by the buyer to the seller due to failure to
fulfill re1uirements of the contract. uch damages are not related to goods. Therefore, it is not
includible in the assessable value. I37 Humps -imited ,s. 44Ex., Hune ./0012.Cri->um2
@ut$ard 8andlin: c8ar:es (Nov ')
The transaction value definition specifically includes outward handling
charges within its scope and hence outward handling charges i.e., charges upto the factory
gate for loading of goods in the vehicle, are includible in the transaction value.
69
9owever, the cost of transportation from the place of removal to the place of
delivery will be excluded from the price of such goods as per 5ule ' of Central Excise
8aluation 5ules, %666.
.rocess carried out at t8e site
Cost of process carried out at site of the buyer is not includible in assessable value. 44Ex.,
Gyderabad ,s. Cahel %li Industries = Hro:ects Hri)ate -imited ./0012.Cri-7ang2
+e2ins6ection c8ar:es:
$ny type of testing charges incurred by the assessee prior to removal and
which are necessary for ma3ing the goods mar3etable are includible in the assessable value
but any additional testing or inspection done by the assessee on re1uest of the buyer will not
form part of the assessable value.
Testing charges incurred by the buyer in his own factory after removal from
the factory of manufacture just to ensure 1uality, are not to be included in assessable value.
Qelvinator of India 8. Collector.
Inspection charges which are initially paid by the manufacturer but
subse1uently reimbursed by the buyer are not includible in the assessable value. 44E,
Maipur-II ,. Infrastructure -td.
Inspection carried out on the re1uest of the buyer and inspection charges
were paid by the buyer to the inspecting agency directly. uch inspection charges are not
includible in assessable value. Idcol Ialinga Iron 'or*s -td. ,s. 44Ex., 7huwanaeshawara
./0012.Cri-Iol2
+efundable security de6osit
The refundable security deposit received from the buyer is not paid towards the price of the goods
sold. Therefore, it is not to be included in the assessable value. 4ollector of 4entral Excise ,. Eicher
Cractors -imited
Trade Discount
The definition of transaction value does not have any specific reference of
trade discounts but any discount allowed on declared price of goods and actually passed on to
the buyer as per common practice ,e.g. 1uantity discount, cash discount etc-, then such
discount cannot be included in the assessable value. In other words, any type of discount
allowed to the buyer, which is 3nown in advance at the time of delivery, is allowable as
deduction. +?I ,. 7ombay Cyre International -td.
Ghere assessee claims that the actual amount of discount will be 3nown later
on only e.g. year end, he may ma3e a re1uest for provisional assessment. CCE 8. 9industan
*ever *imited
In certain cases a dealer receives from the assessee a stated extra 1uantity if
he buys a certain other 1uantity, which is 3nown and agreed at the time, the transaction is
entered into. It is trade discount and admissible as deduction. CCE 8. 9industan *ever
*imited
<iscounts under various headings actually given and declared in price
declaration as well as in sale documents 3nown at the time of sale is deductible from
assessable value. Electrolux Iel)inator -td. ,. 44E
70
+erformance incentive given to dealers unconnected with 1uantity or value of
goods lifted by dealers but in the nature of sales promotion expenditure. uch incentives are
not deductible from assessable value. 44Ex., 4hennai ,s. Citan Industries 'atch Di)ision!
./0012.Cri-4hennai2
In @etal ;ox India, the upreme Court held that different trade discounts
may be offered to different class of buyers falling under different regions. 9ence, uniformity
in trade discount is not necessary. ,7ov 44-
Time of granting discount is not relevant for determining eligibility for
deduction provided it was 3nown at the time of removal of goods. >aha)ir 3pinning >ills
-imited ,s. 44Ex., Malandhar ./0012.Cri-Del2
Trainin: cost
Charges for training of customers" personnel to operate and maintain a machine are not includible in
assessable value. H3I Data 3ys. -td. ,. 4ollector .
Valuation under section ((&(b as 6er Central Excise Valuation +ules% ,---
$ccording to section /,1- I'here under this %ct, the duty of excise is chargeable on any excisable
goods with reference to their )alue, then, on each remo)al of the goods, such )alue shall -
a. in a case where the goods are sold by the assessee, for deli)ery at the time and place of the
remo)al, the assessee and the buyer of the goods are not related and the price is the sole
consideration for the sale, be the transaction )alue;
b. in any other case, including the case where the goods are not sold, be the )alue determined in
such manner as may be prescribed."
;y virtue of powers vested under section =>, the Central )overnment has made Central Excise
8aluation ,<etermination of +rice of Excisable )oods- 5ules, %666 that came into effect from 1
st
Auly
%666. These 5ules are reproduced, with comments, hereunder for ready reference.
Central Excise Valuation
(Determination of .rice of Excisable /oods +ules% ,---
4G%HCEN I
=8E?*<*N"8S
+ule ,: In these rules, unless the context otherwise requires5 -
a! "%ct" means the 4entral Excise %ct, @ALL @ of @ALL!;
b! (normal transaction val!e( means the transaction )alue at which the greatest aggregate
quantity of goods are sold;DNov. 00E
c! ")alue" means the )alue referred to in 3ection L of the %ct;
d! words and expressions used in these rules and not defined but defined in the %ct shall ha)e
the meanings respecti)ely assigned to them in the %ct.
+ule 3: The value of any excisable goods shall, for the purposes of ection /,1-,b- of the $ct, be
determined in accordance with these rules.
71
+ule (: E8ere 6rice of t8e :oods is not 1no$n at t8e time and 6lace of removal
The value of the excisable goods shall be based on the value of such goods sold by the assessee for
delivery at any other time nearest to the time of the removal of goods under assessment, subject, if
necessary, to such adjustment on account of the difference in the dates of delivery of such goods and
of the excisable goods under assessment, as may appear reasonable to the proper officer.
uch a situation arises when the goods are not sold at the time of removal.
Guestion: "riefly examine t8e correctness or ot8er$ise of t8e statement $it8 reference to t8e
Central Excise Act% &'(( :ivin: reasons to su66ort your ans$er: In case of sam6les distributed
free% valuation s8ould be ado6ted on t8e basis of +ule ) of t8e Central Excise Valuation
(Determination of .rice of Excisable /oods +ules% ,--- i9e9 cost of 6roduction 6lus &-L
"ns4erA Incorrect. C;EC vide 4ircular Jo.$@#B@0B/00E-4Q dated /E.L./00E has clarified that in
case of samples distributed free, valuation should be done on basis of rule /, i.e. valuation should be
done on the basis of value of identical goods cleared at or around the same time. In IC4 -imited case,
./00F2, the upreme Court has decided samples have to be valued under 5ule /.
+ule *: 0ale of :oods for delivery a 6lace ot8er t8an t8e 6lace of removal
Ghere any excisable goods are sold in the circumstances specified in ection /,1-,a- of the $ct
except the circumstances in which the excisable goods are sold for delivery at a place other than the
place of removal, then the value of such excisable goods shall be deemed to be the transaction value,
excluding the cost of transportation from the place of removal upto the place of delivery of such
excisable goods.
Ex6lanation &:ICost of transportationJ includes P
,i- the actual cost of transportationH and
,ii- in case where freight is averaged, the cost of transportation calculated in accordance with
generally accepted principles of costing.
Ex6lanation ,: The cost of transportation from the factory to the place of removal, where the factory
is not the place of removal, shall not be excluded for the purposes of determining the value of the
excisable goods.
Illustration : !M" ,assessee- clears goods from a factory at +une to the customer"s factory located in
@umbai. The goods are loaded in a lorry at +une and delivered at @umbai and !M" recovers freight
from the buyer. In this case, all the conditions of ection /,1-,a- are satisfied except that the goods
are not delivered at the time and place of removal ,delivery which happens at @umbai-. ;y virtue of
5ule ', $ssessable 8alue in such a case would be Transaction 8alue minus the freight incurred in
delivering the goods at @umbai.
Ghere the goods are sold at ex:factory price, the transit ris3 and insurance is to be borne by the buyer
and the place of removal in such a case shall be the factory premises since sale of goods, payment of
price and delivery to the buyer or his representative all occurs at the factory premises. In such a case,
freight and insurance are not includible in the assessable value. M47 Escorts -td ,s 44E
+ule D: E8en 6rice is not t8e sole consideration for sale
Ghere the excisable goods are sold in the circumstances specified in ection /,1-,a- of the $ct except
the circumstances where the price is not the sole consideration for sale, the value of such goods shall
72
be deemed to be the aggregate of such transaction value and the amount of money value of any
additional consideration flowing directly or indirectly from the buyer to the assessee.
Ex6lanation &: The value, apportioned as appropriate, of the following goods and services, whether
supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection
with the production and sale of such goods, to the extent that such value has not been included in the
price actually paid or payable, shall be treated to be the amount of money value of additional
consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the
goods being valued and aggregated accordingly, namely0:
,i- value of materials, components, parts and similar items relatable to such goodsH
,ii- value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar
items used in the production of such goodsH
,iii- value of material consumed, including pac3aging materials, in the production of such
goods, and
,iv- value or engineering, development, art wor3, design wor3 and plans and s3etches
underta3en elsewhere than in the factory of production and necessary for the production of
such goods.
Ex6lanation ,A Ghere an assessee receives any advance payment from the buyer against delivery of
any excisable goods, no notional interest on such advance shall be added to the value unless the
Central Excise Bfficer has evidence to the effect that the advance received has influenced the fixation
of the price of the goods by way of charging a lesser price from or by offering a special discount to
the buyer who has made the advance deposit.
Illustration &: M, an assessee, sells his goods to S against full advance payment at 5s.166 per piece.
9owever, M also sells such goods to V without any advance payment at the same price of 5s.166 per
piece. 7o notional interest on the advance received by M is includible in the transaction value.
Illustration ,: $, an assessee, manufactures and supplies certain goods as per design and
specification furnished by ; at a price of 5s.16 la3hs. $ ta3es '6C of the price as advance against
these goods and there is no sale of such goods to any other buyer. There is no evidence available with
the Central Excise Bfficer that the notional interest on such advance has resulted in lowering of the
prices. Thus, no notional interest on the advance received shall be added to the transaction value.
In +?I ,s -a*shmi 'or*s -td, it was held that in case interest accrued on advances received by the
manufacturer is to be added to the assessable value, then the burden is on the <epartment to show the
extent of benefit obtained by the assessee on interest free loan. @oreover, the price has to be loaded
only to the extent the <epartment is able to show the extent of benefit obtained by the assessee on
interest free loan. (5ay ')% 5ay -,
Im6ortant 6oints
Ghere price is not the sole consideration for the sale, but the other re1uirements of ection
/,1-,a- of the Central Excise $ct are satisfied, the value shall be determined in accordance with
the provisions of 5ule & of the 8aluation 5ules.
This rule provides for adding to the transaction value the money value of any additional
consideration flowing directly or indirectly from the buyer to the assessee.
uch additional consideration would include the money value of goods and services provided
free or at reduced cost by or on behalf of the buyer to the assessee.
73
9owever, where the same price is charged from the buyers who have given the deposit and
who have not given the deposit and#or where the advance is purely a security deposit and the
interest earned thereon is credited to the buyerH then, in such cases, the notional interest cannot be
added to the price. ,3C Industries -td ,s 44E (5ay ')% 5ay -,
CCEx +. *,7? 8efractories &-C' P ;enefits received under the licence received by the assessee as a
result of surrender of licence by the buyer, is additional consideration and its value is the difference
between original offer price and actual sale price.
CCEx +. <aGgaon 9oc) ?imited &-C' P ubsidy received from the government is not an additional
consideration while subsidy received from the buyer of the goods is an additional consideration even
if the same is received under a policy of the government.
Guestion: "riefly ans$er $it8 reference to t8e 6rovisions of t8e Central Excise Valuation
(Determination of .rice of Excisable /oods +ules% ,--- $8et8er in t8e follo$in: cases any
notional interest on t8e advance received is includible in t8e value for 6ur6ose of assessment:
(i An assessee sells 8is :oods a:ainst full advance 6ayment to P9 7e also sell suc8 :oods
to Q $it8out any advance 6ayment at t8e same 6rice 6er unit9
(ii A% t8e assessee manufactures and su66lies certain :oods as 6er desi:n and
s6ecification of "9 A ta1es *-L of t8e 6rice as advance a:ainst t8ese :oods and t8ere is no
sale of suc8 :oods to any ot8er buyer9 (, x , H ( 5ar1s
Ans$er: Explanation % to rule & of the Central Excise 8aluation ,<etermination of +rice of Excisable
)oods- 5ules, %666 provides that where any advance payment from the buyer is received against
delivery of excisable goods, no notional interest on such advance shall be added to the value unless
the central excise officer has evidence to the effect that the advance received has influenced the
fixation of price of the goods by way of charging a lesser price or by offering of a special discount to
the buyer who has made the advance deposit.
,i- 7o notional interest on the advance received by the assessee is includible in the transaction value
in the present case as same price is also charged from S ,another buyer- who has not given the
advance deposit.
,ii- 7otional interest would be includible only if there is evidence available with the central excise
officer that advance has resulted in lowering of prices. In the absence of any such evidence, no
notional interest on the advance received shall be added to the transaction value.
+ule 4: E8en :oods are removed to de6ot etc9
Ghere the excisable goods are not sold by the assessee at the time and place of removal but are
transferred to a depot, premises of a consignment agent or any other place or premises ,hereinafter to
as Nsuch other placeN- from where the excisable goods are to be sold after their clearance from the
place of removal and where the assessee and the buyer of the said goods are not related and the price
is the sole consideration for the sale, the value shall be the normal transaction value of such goods
sold from such other place at or about the same time and, where such goods are not sold at or about
the same time, at the time nearest to the time of removal of goods under assessment.
If the goods are not sold at the factory gate or at the warehouse but they are transferred by the
assessee to his depots or consignment agents or any other place for sale, the assessable value in such
case for the goods cleared from factory#warehouse shall be the normal transaction value of such
74
goods at the depot, etc. at or about the same time on which the goods as being valued are removed
from the factory or warehouse.
Normal Transaction value means the transaction value at which the greatest aggregate 1uantity of
goods are sold. It has been clarified by the )overnment that while adopting the normal transaction
value, the largest 1uantity sold on a particular date is relevant and not the number of buyers e.g. $;C
*td. transfers %663gs of +roduct V to its depot on 1:1:%66>. Bn that date, there has been no sale from
the depot. 9owever, +roduct V has been sold from the depot at the nearest point of time i.e., %':1%:
%66&.
The sales details on that date were as follows0
i. .66 3gs at 5s.%' per 3g
ii. .6 3gs at 5s.=% per 3g
iii. 166 3gs at 5s.%> per 3g
iv. >66 3gs at 5s.=% per 3g
7ormal transaction value, for the purpose of valuation of %66 3gs of +roduct V transferred to the
depot on 1:1:%66>, will be ta3en as 5s.%'.
Hrabaht Karda 8actory -imited ,. 44E 34B 44Ex ,. 7ra*es India -imiuted 34! P In case of inter:
depot transfer the price prevalent at the later depot i.e. the last depot from where the goods are
actually sold will be ta3en as the assessable value of the goods.
+ule ): E8en :oods are ca6tively consumed
Ghere the excisable goods are not sold by the assessee but are used for consumption by him or on his
behalf in the production or manufacture of other articles, the value shall be one #!ndred and ten per
cent of the cost of production or manufacture of such goods.
Thus, the assessable value of captively consumed goods will be ta3en at 116C of the cost of
manufacture of goods even if identical or comparable goods are manufacture and sold by the same
assessee. If the cost of production based upon general principles of costing of a commodity is
5s.16,666 per unit, the assessable value of the goods shall be 5s.11,666 per unit.
Im6ortant .oints
The ICG$I has introduced Cost $ccounting tandard : / ,C$: /- for determining cost of
production for the purpose of Excise valuation. The C;EC has clarified that cost of
production of captively consumed goods has to be strictly done in accordance with C$:/
issued by ICG$I.
$s per C$:/, the Cost of +roduction shall consist of material consumed, direct wages,
salaries, direct expenses, wor3 overheads, administrative overheads relating to production,
1uality control cost, research and development cost and pac3ing cost. 2urther, adjustment for
stoc3 of wor3:in:progress, finished goods, recoveries for sales of scrap. Gastage etc shall be
made for arriving at the cost of production of goods which are used for captive consumption.
The cost of material should be net of excise duty if CE78$T credit has been availed for such
inputs. In case no CE78$T credit has been availed on such inputs, the material cost should
be inclusive of the excise duty.
$s per this standard, following shall not form part of Icost of productionJ P
- elling and distribution expenses
- Interest and financial charges
75
- $dministrative overheads which are not related to factory
- $bnormal and non:recurring cost
Note: In a recent case of ITC #imited% the upreme Court has held that the interest for
borrowing for purchase of capital goods is not includible in assessable value.
-teel Complex ?imited +. CCEx If a part of goods, instead of being sold, are transferred to job:
wor3ers and the assessee is incurring huge losses, the goods so transferred are to be valued at sale
price to unconnected buyers and not as per rule . at 116C of cost of production.
+ule ': E8en sale is made only to or t8rou:8 Brelated 6ersonsC not bein: inter2 connected
underta1in:s (ICJs
Ghen the assessee so arranges that the excisable goods are not sold by an assessee except to or
through a person who is related in the manner specified in either of sub:clauses ,ii-, ,iii- or ,iv- of
clause ,b- of sub:section ,=- of ection / of the $ct, the value of the goods shall be the normal
transaction value at which these are sold by the related person at the time of removal, to buyers ,not
being related person-H or where such goods are not sold to such buyers, to buyers ,being related
person-, who sells such goods in retailH
+rovided that in a case where the related person does not sell the goods but uses or consumes such
goods in the production or manufacture or articles, the value shall be determined in the manner
specified in 5ule ..
$ccording to ection /,=-,b- of the Central Excise $ct, 14//, the assessee and the buyer shall be
deemed to be related persons, if0 :
i. they are inter connected underta3ings ,as per @5T+ $ct- or
ii. they are relatives ,as per Company"s $ct- or
iii. amongst them the buyer is a relative and a distributor of the assessee, or a sub:distributor of such
distributor or
iv. they are so associated that they have interest, directly or indirectly, in the business of each other.
.#!s/ 8!le 9 provides t#at 4#ere t#e assessee arranges to sell goods onl to or t#ro!g#A
a. his relative
b. relative and distributor or sub:distributor of such distributor.
c. persons who are mutually interested in the business of each other
then, the normal transaction value at which the goods are sold by such persons at the time of removal
can be ta3en as value, provided the other buyer is not related.
Ghen goods are sold to related persons who are also retailers, then the price at which goods are sold
to the related retailer shall be adopted.
Exam6les:
1. !$" sells to !;" ,$ D ; are related- a product M E 5s.%>'. 7ormal Transaction 8alue at which
!;" sells the goods to a buyer ,who is unrelated- is 5s.=66. $pplying 5ule 4, the value of +roduct
M in hands of !$" is 5s.=66.
%. !$" sells to !;" ,$ D ; are related- a product M E 5s.%>'. !;" sells to !C" ,; D C are related- the
same product M E 5s.=66. 7ormal Transaction 8alue at which !C" sells the goods to a buyer
,who is unrelated- is 5s.=&'. $pplying 5ule 4, the value of +roduct M in hands of !$" is 5s.=&'.
76
=. !$" sells to !;" ,$ D ; are related- a product M E 5s.%>'. !;" sells to !C" ,; D C are related- the
same product M E 5s.=66. !C" sells to !<" the same product M E 5s.==' ,C D < are related and
< sells the product in retail-. 7ormal Transaction 8alue for !$" shall be the price at which the
goods are sold to the retailer i.e., !<" in this case. 9ence the value of +roduct M to be ta3en for !$"
for valuation purpose shall be 5s.=='.
To sum u6:
If the assessee sells to 5elated +erson ,who is a Ghole ale Trader, then the sale price of 5elated
+erson on Ghole ale Trade to (n:5elated +erson should be adopted.
If assessee sells to 5elated +erson ,in Ghole ale Trade-, who in turn sells to another 5elated
+erson ,in Ghole ale Trade-, and if the latter sells in retail, then adopt the last Ghole ale Trade
price as assessable value for the assessee.
In both these cases, ale +rice means the 7ormal Transaction 8alue.
+ule &-: E8en t8e sale is made only to or t8rou:8 6ersons bein: interconnected underta1in:s
(ICJ
Ghen the assessee so arranges that the excisable goods are not sold by him except to or through an
inter:connected underta3ing, the value of goods shall be determined in the following manner, namely0
:
,a- If the underta3ings are so connected that they are also related in terms of sub:clause ,ii- or
,iii- or ,iv- of clause ,b- of sub:section ,=- of ection / of the $ct or the buyer is a holding
company or subsidiary company of the assessee, then the value shall be determined in the
manner prescribed in 5ule 4.
Ex6lanation2 In this clause Nholding companyN and Nsubsidiary companyN shall have the same
meanings as in the Companies act, 14'& ,1 of 14'&-.
,b- in any other case, the value shall be determined as if they are not related persons for the
purpose of sub:section ,1- of section /.
Chus, Nule @0 pro)ides that e)en if the assessee and the buyer are ;inter-connected underta*ings<, the
transaction )alue will be re:ected only when they are ;related< in any of the following manner5
@! Chey are relati)es
/! Che buyer is a relati)e and a distributor of the assessee or sub-distributor of such distributor
#! Chey ha)e a direct or indirect interest in the business of each other.
In other cases, they will not be considered related.
Exam6les:
1. @#s $nil *td D @#s @u3esh *td hold %'C of the e1uity in @#s <hiru *td. @#s $nil *td D @#s
@u3esh *td are interconnected as per @5T+ $ct. 9owever, only if mutuality of business interest
is established between @#s $nil *td D @#s @u3esh *td, 5ule 4 can be applied when excisable
goods are sold by the former to the latter. In case the mutuality of business interest cannot be
established, then @#s $nil *td D @#s @u3esh *td would be treated as unrelated and the value
shall be determined as per ection /,1- i.e., transaction value shall form the basis for valuation.
%. @#s Aohn *td sold goods to @#s (day *td, which is its subsidiary company. ;oth the companies
are interconnected as per @5T+ $ct. 9owever, since there is a holding: subsidiary
relationship, value has to be determined as per 5ule 4. Thus, the price at which @#s (day *td
sells the goods to an unrelated buyer will form the basis for valuation.
77
Im6ortant 6oints
Che term inter-connected underta*ings co)er large categories of legal
entitiesBunderta*ings, to whom goods are sold by the assessee, which may be held as "related
person".
Gowe)er, where the assessee and the buyer are inter-connected underta*ings, the
transaction )alue will be "re:ected" only when they are "related" in the sense of any of clauses
ii!, iii! or i)! of 3ection L#!b! or the buyer is a holding company or a subsidiary company of
the assessee.
Chus, while dealing with transactions between inter-connected underta*ings, if the
relationship as described in clauses ii!, iii! or i)! does not exist and the buyer is also not a
holding company or a subsidiary company, then for assessment purposes, they will not be
considered related.
"Cransaction )alue" could then form the basis of )aluation pro)ided other two
conditions, namely, price is for deli)ery at the time and place of remo)al and the price is the sole
consideration for sale are satisfied.
+ule &-A Valuation in case of :oods manufactured by ?ob2$or1er
Ghere the excisable goods are produced or manufactured by a job:wor3er, on behalf of a person
,hereinafter referred to as principal manufacturer-, then,:
,i- in a case 4#ere t#e goods are sold $ t#e principal man!fact!rer for delivery at the time of
removal of goods from the factory of job:wor3er, where the principal manufacturer and the buyer of
the goods are not related and the price is the sole consideration for the sale, the value of the excisable
goods shall be the transaction val!e of the said goods sold by the principal manufacturerH
,ii- in a case 4#ere t#e goods are not sold $ t#e principal man!fact!rer at the time of removal of
goods from the factory of the job:wor3er, but are transferred to some other place from where the said
goods are to be sold after their clearance from the factory of job:wor3er and where the principal
manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale,
the value of the excisable goods shall be the normal transaction val!e of such goods sold from such
other place at or about the same time and, where such goods are not sold at or about the same time, at
the time nearest to the time of removal of said goods from the factory of job:wor3erH
,iii- in a case not covered under clause ,i- or ,ii-, the provisions of foregoing rules, wherever
applicable, shall mutatis mutandis apply for determination of the value of the excisable goods0
+rovided that the cost of transportation, if any, from the premises, wherefrom the goods are sold, to
the place of delivery shall not be included in the value of excisable goods.
Explanation : 2or the purposes of this rule, job:wor3er means a person engaged in the manufacture
or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by
the said principal manufacturer or by any other person authorised by him.
+ule &&: +esiduary +ule "est Mud:ement 5et8od
If the value of any excisable goods cannot be determined under the foregoing rules, the value shall be
determined using reasonable means consistent with the principles and general provisions of these
rules and sub:section ,1- of section / of the Central Excise $ct, 14//.
78
Circular No9D(3;3(;,--,2CP9 Dated &
st
Muly% ,--,
0ub?ect : Clarification of doubts under t8e Valuation +ules
0l
no9
.oints of doubt Clarification
1. Ghat is the scope of the term
Ngreatest aggregate 1uantityN
used in 5ule %,b- of the Central
Excise 8aluation
,<etermination of +rice of
Excisable )oods- 5ules, %666.
The definition does not indicate
the time period over which the
1uantity is to be computed.
2urther, it is not clear whether it
refers to the largest 1uantity
sold to any particular assessee
during the period or to the
goods sold to the largest
number of buyers.
The term Ngreatest aggregate 1uantityN has been used to
define the term Nnormal transaction valueN used in 5ules >
and 4 of the Central Excise 8aluation ,<etermination of
+rice of Excisable )oods- 5ules, %666. een in this context
the time period should be ta3en as the whole day and the
transaction value of the Ngreatest aggregate 1uantityN would
refer to the price at which the largest 1uantity of identical
goods are sold on a particular day, irrespective of the number
of buyers. In case the Nnormal transaction valueN from the
depot or other place is not ascertainable on the day identical
goods are being removed from the factory#warehouse, the
nearest day when clearances of the goods were affected from
the depot or other place should be ta3en into consideration.
%. 2reight charges0 :
a. 9ow is the cost of
transportation to be deducted in
case of vehicles owned by the
manufacturer[
b. If manufacturer#transporter
charges cost of transportation
both for outward journey up to
the point of delivery and return
there from, whether the cost of
transportation for the return
journey of the empty
truc3#vehicle should also be
allowed as deduction[ (Nov ''
c. Ghether transit insurance
can be allowed as deduction as
being part of transportation
cost[
,a- In such cases the cost of transportation can be calculated
through costing method following the accepted principles of
costing. $ cost certificate from a certified Cost
$ccountant#Chartered $ccountant# Company ecretary may
be accepted. The cost of transportation should be separately
shown in the invoice.
,b- $s per 5ule ' of the 8aluation 5ules the actual cost of
transportation from the place of removal up to the place of
delivery is only to be excluded. If the assessee is recovering
an amount from the buyer towards the cost of return fare of
the empty vehicle from the place of delivery, this amount
will not be available as a deduction. If, however, only the
cost of transportation has been indicated in the invoice
without any brea3up for the forward and return journey,
normally it should be accepted as the cost of transportation
from the place of removal to the place of delivery.
,c- Ses, the $pex Court in the case of Com$a .res
*nternational has held that the cost of transportation will
include the cost of insurance also during the transportation of
the goods. ;ut the transit insurance should either be shown
separately in the invoice or can be included in the
79
transportation cost shown separately.
=. ,a-Ghether abatement of sales
tax and other taxes can be
allowed based on average tax
actually paid by the assessee as
supported by costing
certificate[
,b- $s per ;oard"s Circular
7o.%#4/:CM.1 dt.11.1.4/
,2.7o.&#%6#4/:CM.1- the sales
tax set:off available in respect
of inputs is to be ignored while
computing the sales tax
payable. Ghether this is still
valid[

a. 7o. $s per definition of Ntransaction valueN taxes are
deductible only on actual basis either paid or payable by the
assessee.
b. 7o. The Circular dt.11
th
Aan.144/ was based on the
definition of !duty of excise payable" given in Explanation to
the erstwhile ec./,/-,d-,ii-. The new sec./ does not
incorporate any such Explanation. The Ntransaction valueN
will exclude the sales tax actually paid or payable on the
goods. Thus, for example, if the effective sales tax on cum:
duty price of 5s.166 is /C and the assessee is eligible for
set:off of sales tax of, say, 5s.16 paid#suffered on the inputs,
the actual sales tax paid#payable would be 5s./6:16 X 5s.=6
and this will be the amount permissible as deduction from the
Ntransaction valueN and not 5s. /6.
/. +ac3ing0 :
a- Ghether cost of secondary
pac3ing is to be excluded from
the transaction value[
b- 9ow is the cost of reusable
containers to be determined for
inclusion in the transaction
value[
c- Ghether rental charges or
cost of maintenance of reusable
metal containers li3e gas
cylinders etc. are to be included
in the transaction value[
d- Ghat about cost of
containers supplied by the
buyer[ (5ay ''
,a- 7o. There is no provision for such a deduction in the
concept of transaction value
,b- 7ormally the cost of reusable containers ,glass bottles,
crates etc.- is amorti?ed and included in the cost of the
product itself. Therefore the 1uestion of adding any further
amount towards this account does not arise, except where
$udit of accounts reveals that the cost of the reusable
container has not been amorti?ed and included in the value of
the product
,c- Ses, since the amount has been charged by reason of, or
in connection with the sale of goods, this amount will be
added to the transaction value
,d- ince in such cases the price will not be the sole
consideration for the sale, the valuation would be governed
by 5ule & and the cost of such pac3ing, whether durable or
not, will be included in the transaction value of the goods. In
respect of pac3ing which can be used repeatedly the cost will
have to be amorti?ed over the life span of the pac3ing
material as is done in the case of dies, moulds etc. supplied
by the buyer.
'. 9ow will valuation be done in
cases of captive consumption
,i.e., consumed within the same
factory- including transfer to a
sister unit or another factory of
2or captive consumption in one"s own factory, valuation
would be done as per rule . of the 8aluation 5ules i.e. the
assessable value will be 116C of the Ncost of productionN of
the goods.
If the same goods are partly sold by the assessee and partly
80
the same company#firm for
further use in the manufacture
of goods[
consumed captively, the goods sold would be assessed on the
basis of Ntransaction valueN Uprovided they meet the
conditions of ec./,1-,a-L and the goods captively consumed
would be valued as per 5ule . of the 8aluation 5ules. This is
because, as per new section /, transaction value has to be
determined for each removal.
Ghere goods are transferred to a sister unit or another unit of
the same company valuation will be done as per the proviso
to 5ule 4.
&. Ghether advertisement and
publicity charges borne by the
dealers#buyers are to be
excluded from the assessable
value[
7o. Even where the dealings are on principal to principal
basis but there is an agreement either written or oral that the
buyer will incur certain expenditure for advertising the goods
of the assessee, the cost of such advertisement and publicity
will be added to the price of the goods to determine the
assessable value. In such cases since price would not be sole
consideration for sale, the transaction value would be
covered by 5ule & of the 8aluation 5ules
$s per definition, Ntransaction valueN has to include the cost
which the buyer incurs, or ma3es provision for, or on behalf
of the assessee, for advertising or publicity charges.
>. Ghat about the cost of after
sales service charges and pre
delivery inspection ,+<I-
charges, incurred by the dealer
during the warranty period[
ince these services are provided free by the dealer on behalf
of the assessee, the cost towards this is included in the
dealerOs margin ,or reimbursed to him-. This is one of the
considerations for sale of the goods ,motor vehicles,
consumer items etc.- to the dealer and will therefore be
governed by 5ule & of the 8aluation 5ules on the same
grounds as indicated in respect of $dvertisement and
+ublicity charges. That is, in such cases the after sales
service charges and +<I charges will be included in the
assessable value.
.. Gill delayed payment charges
be excluded from the
transaction value[
Ses, since N transaction valueN relates to the price paid or
payable for the goods. In this case the delayed payment
charge is nothing but the interest on the price of the goods
which is not paid during the normal credit period. 9owever,
to be admissible as deduction it should be separately shown
or indicated in the invoice and should be charged over and
above the sale price of the goods.
4. Is cash discount an admissible
deduction[
ince valuation is now based on Ntransaction valueN the cash
discount, if actually passed on to the buyers, will be allowed
as deduction, the transaction being on principal to principal
basis.
16. hould erection, installation and If the final product is not excisable, the 1uestion of including
81
commissioning charges be
included in the assessable
value[
these charges in the assessable value of the product does not
arise. imilarly, if a machine is cleared from a factory on
payment of appropriate duty and later on ta3en to the
premises of the buyer for installation#erection and
commissioning into an immovable property, no further duty
would be payable. Bn the other hand if parts#components of
a generator are brought to a site and the generator
erected#installed and commissioned at the site then, the
generator being an excisable commodity, the cost of erection,
installation and commissioning charges would be included in
its assessable value. In other words if the expenditure on
erection, installation and commissioning has been incurred to
bring into existence any excisable goods, these charges
would be included in the assessable value of the goods. If
these costs are incurred to bring into existence some
immovable property, they will not be included in the
assessable value of such resultant property.
11 9ow will valuation be done in
cases of job:wor3[
$s per 5ule 16$.
1% 9ow will valuation be done
when goods are sold partly to
related persons and partly to
independent buyers[ (Nov -3
There is no specific rule covering such a contingency.
Transaction value in respect of sales to unrelated buyers
cannot be adopted for sales to related buyers since as per
section /,1- transaction value is to be determined for each
removal. 2or sales to unrelated buyers valuation will be done
as per section /,1-,a- and for sale of the same goods to
related buyers recourse will have to be ta3en to the residuary
rule 11 read with rule 4 ,or 16-. 5ule 4 cannot be applied in
such cases directly since it covers only those cases where all
the sales are to be related to buyers only.
1= 9ow will valuation of samples
be done which are distributed
free, as part of mar3eting
strategy, or as gifts or
donations[ (Nov -&% Nov -3%
Nov9 -D
In *.C ?imited case/ D200%E/ the upreme Court has decided
samples have to be valued under 5ule /.
5utuality of business interest
The shareholders of a public company do not, by reason only of their shareholding, have
an interest in the business of the company. imilarly, two public companies having some of the
82
common directors cannot be said to be having interest in the business of each other. %lembic
9lass Industries ,. 44E /00/ @L#! E-C /LL 34!
$ limited company cannot be said to be having indirect interest in the business carried
on by one of its shareholder. 4ollector 4. C.I. >iller -imited @A$$#E! E-C @$AF34!
The words !relative and a distributor of the assessee" do not refer to any distributor but
!the distributor who is a relative of the assessee" within the meaning of the Companies $ct, 14'&.
+?I ,. 7ombay Cyre International -td. @A$#@L! E-C @$AF34!
)oods sold to dealers under an agreement. The dealers to have own show room, repair
shop etc. <ealer is not a related person. >oped India -imited ,. %4 @A$F/#!E-C $34!. ;ut
where goods are sold to dealers having no funds of their own or business premises, the dealer is
merely a sham and to be ignored. M I 4otton 3pg. %nd 'ea)ing >ills 4o. -td. ,. 444E
@AA1A@!E-C E#L34!.
Bnce existence of mutual business interest is established, the extent of such interest is not
material. Indo-Jational -imited ,. +?I, @A1AL! E-C:##L!%H!
@erely because goods are manufactured with the customer"s brand name and entire
production sold to customer, does not mean that sales are to related person. 4eam Electronics H.
-imited ,. +?I @AA@ E@! E-C #0A 7om!B +?I ,. Hlay 'orld Electronics H. -td. @A$AL@! E-C
#F$ 34!
Ghen 46C of the goods are sold to the wholesaler and only 16C to the related person,
the assessable value will be price charged to the wholesale dealer. Iirlos*ar 4ummins -td. ,.
+?I @AA@ E@! E-C #/E 7om!
ole distributor is not covered under the term !related person" unless the revenue is able
to establish the fact that distributor is also a relative. >oon 7e)erages -td. ,. 44E, >eerut.
/00#@EF!E-C #AF tri-Del.!
Ghen there is no finding to show that either the buyer was a related person or that the
price was not the sole consideration or there were other vitiating circumstances to doubt the
normal price, the price under clause ,a- section /,1- shall be considered for valuation. +?I ,.
Gindalco Industries /00# @E#! E-C L$@ 34!.
Ghere supplier of input material provides loan to the job:wor3er for procurement of
machinery and other e1uipment and all the transactions are on principal to principal basis, it
cannot be treated as a case of mutual business interest. 44Ex., 7angalore ,s. 4%>H4?.
83
.ast Examination Guestions
Guestion &: T8e value of 6rice su66ort incentives received from t8e ra$ materials su66lier
s8ould be included in t8e assessable value of t8e final 6roducts!9 Do you a:reeF Ex6lain9 (3
5ar1s
Ans$er: In the case of CCEx. v. ;isleri International +rivate *imited %66' ,1.&- E*T %'> ,C-, the
value of the price support incentives was held as not includible in the assessable value of the final
product as
a. there was no flow bac3 of any additional consideration from the buyersH
b. the price uniformity was maintainedH
c. there was no evidence of any concession to any of the buyers or existence of any
favoured buyers.
It is possible to ta3e a view that if the conditions pointed out by the $pex Court are not satisfied, the
value of the price support incentives would be includible in the assessable value of the final product.
Guestion ,: 5;s 0u6er .i6es #td9 is en:a:ed in t8e manufacture of m9s9 :alvaniRed 6i6es9 T8e
excise de6artment 8as reOuired t8e assessee to include t8e cost of :alvaniRation in t8e assessable
value of t8e m9s9 :alvaniRed 6i6es for t8e 6ur6oses of determination of excise duty9 T8e assessee
claims t8at as t8e 6rocess of :alvaniRation does not amount to manufacture% t8e cost of
:alvaniRation is not includible in t8e assessable value of t8e said 6i6es made from 79+9 coils9
"riefly discuss $8et8er t8e stand ta1en by t8e assessee is correct $it8 reference to t8e
6rovisions of t8e Central Excise% Act% &'((9 * 5ar1s
"ns4erA The facts of the case are similar to the case of 3iddhartha Cubes -td. ). 44E, Indore 6 /00F
@A#! E-C F ,C- wherein the $pex Court has held that galvani?ation cost is includible in the
assessable value of m.s. galvani?ed pipes even though !galvani?ation" does not amount to
manufacture. The $pex Court explained that the concepts of !manufacture" and !valuation" are two
different and distinct concepts and the present case relates to valuation. The upreme Court stated that
m.s. galvani?ed pipes were manufactured out of 9.5. coils after passing through various processes
,including galvani?ation-. uch a process added to the 1uality of the product and increased the value
of pipes. +rocess of galvani?ation was incidental to the manufacture of pipes and, therefore, cost of
that process was rightly included in the assessable value. Therefore, the stand ta3en by @#s. uper
+ipes *td. is not correct in law.
Guestion 3: (i .G+ #td9 $8o are in t8e manufacture of excisable :oods 8ad t8e 6ractice of
6rovidin: full reimbursement to all its dealers to$ards t8e value of dama:ed :oods9 T8e
com6any used to c8ar:e a certain sum to$ards t8e cost of frei:8t in t8e return of t8e dama:ed
:oods to it9 No ot8er consideration $as received by t8e com6any9 T8e Central Excise
De6artment 8as issued a s8o$ cause notice t8at t8e return frei:8t in res6ect of dama:ed :oods
8as to be included in t8e assessable value for 6ur6oses of duty9 Examine briefly t8e correctness
in la$ of t8e s8o$ cause notice9 (, mar1s
(ii 0tate briefly $8et8er Sdama:e discountS is 6ermissible as a deduction for 6ur6ose of
arrivin: at t8e assessable value under 0ection ( of t8e Central Excise Act% &'((9 (, mar1s
84
Ans$er: (i The facts in this case are similar to the facts in Jeel*amal Hlastics -td., ). 44E, Joida
/00L! Cribunal-Delhi!. In this case the Tribunal had held that the amount collected by the company
was related to the cost of return freight on the damaged goods and hence did not in any way represent
the value of the goods. The assessee company did not receive any additional consideration for the sale
nor were any clearances effected towards replacement without payment of duty. Therefore, the return
freight was not liable to be added to the assessable value.
,ii- In the case of 44E ) ,i*ram Detergent -td. /00@ 34! the $pex Court held that Idamage
discountJ is in the nature of a refund or benefit to the buyer by way of compensation for damage,
brea3age or losses suffered by the goods after removal from the factory and is not eligible for
deduction. This is the case where goods suffer damage after removal. 9owever, if goods are already
damaged prior to removal then any type of discount allowed in the ordinary course of business and
prior to removal is deductible for arriving at the assessable value i.e. duty will be chargeable on actual
transaction value.
Guestion (: 5;s @TV #imited manufacture TV sets9 T8ey 8ad sent TV sets from t8eir 6lant to
t8eir de6ot at Mammu9 T8e De6ot sold t8e same at +s9 &,%--- on &9)9,--, and at +s9 &,%*-- 6er
set on &-9)9-,9 .lease mention $8at $ould be t8e value of t8e TV sets removed from t8e factory
on 39)9-, and &-9)9-,9
Ans$er: In the given case the goods are sold at the time and place of removal but those are being
transferred from the manufacturing plant to the <epot at Aammu. Thus, valuation of the goods will be
in accordance with 5ule > of the Central Excise 8aluation 5ules, %666.
In accordance with the provisions of 5ule > P
- the sets removed on =...6% will be valued at 5s. 1%,666, being the nearest to the
time of removal of goods i.e. as on 1...6% , and
- the sets removed on 16...6% will be valued at 5s. 1%,'66 being the value of the
goods at which those are being sold at the depot as on the date of removal from the factory.
Guestion *: A manufacturer manufactures a 6roduct C! $8ic8 is c8ar:eable to excise duty9
7e avails CENVAT credit of t8e duty 6aid on in6uts% $8ic8 are used in or in relation to t8e
manufacture of 6roduct C!9 T8e 6roduct is intermediate 6roduct and is consumed ca6tively
in t8e manufacture of final 6roduct9 T8e final 6roduct is $8olly exem6t from t8e 6ayment of
duty under t8e Central Excise Act% &'((9 E8ile determinin: t8e assessable value under +ule
No9 ) of t8e Central Excise (Valuation +ules% ,---% t8e manufacture does not include t8e
element of duty 6aid on in6uts9 T8e reasonin: advanced by t8e manufacturer is t8at since
credit 8as been ta1en of t8e duty 6aid on t8e said in6uts% t8e cost of manufacture automatically
stands reduced to t8at extent9 Ex6lain briefly $it8 reference to t8e decided case la$% if any%
$8et8er t8e stand ta1en by t8e manufacturer in not includin: t8e amount duty 6aid on in6uts
for 6ur6ose of valuation is correct9
Ans$er:
85
1. 2acts of the given case are similar to the facts of <ai Ichi Qar3aria *imited 8. CCE. In this
case the issue before the upreme Court was whether excise duty paid on the raw material should
be included in the value while calculating value of the goods captively consumed.
%. The upreme Court held that the manufacturer gets credit on excise duty paid on raw material
to be used in the manufacture of finished goods. The manufacturer is entitled to use the credit
anytime thereafter for payment of excise duty.
=. There is no provision which provides for reversal of credit except where it was illegally or
improperly ta3en. Credit, therefore, is indefeasible.
/. Ghen duty is paid on the raw material, it should be added to the cost while arriving at the
value since it represents an item which gets excluded from computation in hands of supplier as
value does not include excise duty.
'. If a product is purchased at a price of 5s. 166 and duty is 5s. %6 only, then cost of materialis
ta3en as 5s. 166#: and credit is ta3en for 5s. %6#:.
&. Therefore, duty paid on inputs does not form part of the value of finished goods.
>. In view of the above, the methodology adopted by the manufacturer is correct.
Guestion 4: Determine t8e cost of 6roduction on manufacture of t8e undermentioned 6roduct
for 6ur6ose of ca6tive consum6tion in terms of +ule ) of t8e Central Excise Valuation +ules%
,---
+s9
Direct 5aterial &&%D--
Direct $a:es and salaries )%(--
Eor1s over8eads D%,--
Guality control costs 3%,--
+esearc8 and Develo6ment Cost ,%(--
Administrative @ver8eads (%&--
0ellin: and Distribution costs &%D--
+ealiRable value of scra6 &%,--
Administrative over8eads are in relation to 6roduction activities9 5aterial cost includes excise
duty +s9 &%D--9
Ans$er: In accordance with the provisions of 5ule . of the Central Excise 8aluation 5ules, %666,
the value of goods captively consumed shall be as under 2
5s. 5s.
<irect @aterial cost 11,&66
-ess5 Excise <uty 1,&66 16,666
<irect wages and salaries .,/66
Gor3s overheads &,%66
Tuality control costs =,%66
5esearch and <evelopment Cost %,/66
$dministrative Bverheads /,166
Total =/,=66
*ess0 5eali?able value of scrap 1,%66
86
Cost of production ==,166
$dd0 16C of the Cost of production =,=16
Total value of goods as per 5ule . =&,/16
Notes:
,a- Cost of production has been calculated in accordance with C$ / issued by ICG$I
and circulated by the Central ;oard.
,b- 8aluation shall be at 116C of the cost of production : 7otification 7o. &6#%66= CE
,7T- dated '...%66=
,c- elling and distribution expenses have not been ta3en into account because of captive
consumtion.
Guestion ): Examine :ivin: adeOuate reasons as to $8et8er t8e manufacturin: com6any P and
its customer com6any Q are Brelated 6ersonsC for t8e 6ur6ose of valuation of excisable :oods
under t8e follo$in: circumstances
(a 0ome directors of P are also t8e directors of Q9
(b P sells ma?ority of its 6roduction to Q and 8as financial investment% a6art from not
c8ar:in: rent for use of its ve8icles by Q and t8at t8e advertisement ex6enses of P $ere
incurred by Q9
(c Q is a distributor of P but not a BrelativeC9
Qour ans$er s8ould be distinct and se6arate for eac8 :iven situation9
Ans$er: In accordance with section / persons are said to be related persons if they are inter:
connected underta3ings within the meaning of the @5T+ $ct or they are relatives within the meaning
of the Companies $ct, or amongst them the buyer is a relative and a distributor of the assessee, or a
sub:distributor of such distributor or they are so associated that they have interest, directly or
indirectly, in the business of each other.
In +?I ,. %tic Industries, the upreme court has stated that the mutuality of business interest, which
this definition contemplates, cannot be established by merely showing that the persons have business
dealings between them. It must also be shown that one has special business interest in the promotion
or development of the business of each other.
In view of this, three situations are as under P
,a- $ fact that certain directors of M are also the directors of S is not sufficient to establish that
these are related persons. 7ra*es India -td. ,. %44E.
,b- In the given situation, existence of mutual business interest can be established as M sells
majority of its goods to S, it is not charging any amount for its vehicles being used by S and
on the other hand S incurs all the advertisement expenses of M. $ll the facts put together
clearly indicate existence of mutual business interest between M and S. Hiolic Hharma ,.
44E.
,c- <efinition of the term !related person" includes !relative and a distributor". The word
!relative" and a distributor of the assessee do not refer to any distributor but the distributor
who is relative of the assessee within the meaning of the Companies $ct, 14'& In +nion of
India ,. 7ombay Cyre International -td., the upreme Court opined that every distributor
87
cannot be treated as a relative but the definition indicates towards a distributor who is also a
relative.
In view of aforesaid and 3eeping in mind that M and S, both are bodies corporate, they cannot be
relative within the meaning of section & of the Companies $ct, 14'&. Therefore, in this situation, both
cannot be treated as related persons.
Guestion ': 5;s I#5 :ets t8eir :rey clot8 6rocessed by 5;s A"C9 5;s A"C carried out t8e
6rocess of bleac8in:% dyein:% siRin:% finis8in: etc9% on :rey clot8 and returns t8e same to 5;s
I#59 T8e clot8 is su66lied by 5;s I#5 and t8e o$ners8i6 of t8e :oods vests $it8 5;s I#5
all t8e time9 5;s I#5 sells t8e 6rocessed clot8 at t8e rate of +s9 &-- 6er meter9 Cost of :rey
clot8 in t8e 8ands of 5;s I#5 is +s9 *- 6er meter and 5;s A"C c8ar:es +s9 ,- 6er meter as
t8e ?ob c8ar:es ($8ic8 includes 5;s A"CCc 6rofit and t8e ?ob c8ar:es are recovered from 5;s
I#59
J6on t8e above facts% discuss briefly $it8 reference to t8e relevant 6rovisions of t8e Central
Excise Act% &'(( and t8e +ules made t8ereunder t8e follo$in: Ouestions
&9 Does t8e 6rocess of bleac8in:% dyein:% siRin:% finis8in: etc9 is t8e above context amounts
to manufacture $it8in t8e meanin: of section ,(f of t8e Central Excise Act% &'((F
,9 In t8e facts and circumstances of t8e above case% $8o $ill be re:arded as manufacturer
for t8e 6ur6ose of t8e Central Excise Act i9e9 5;s I#5 or 5;s A"C9
39 7o$ $ill t8e assessable value of t8e 6rocessed clot8 for t8e 6ur6ose of section ( of t8e
Central Excise Act% &'(( and t8e +ules made t8ereunder be arrivedF
7int for ans$er: $s per 5ule 16$, the value shall be 5s. 166#:
Guestion &-: A trader su66lies fabrics to t8e inde6endent 6rocessor9 Cost of fabrics is +s9
&&)-9 T8e 6rocessor c8ar:es +s9 (*- $8ic8 includes +s9 3*- as 6rocessin: c8ar:es and +s9&-- as
8is 6rofit9 After 6rocessin: :oods are sent bac1 to t8e trader $8o sells t8em at +s9 &)--9
Trans6ort c8ar:es for receivin: t8e :oods at t8e 6remises of t8e 6rocessor is +s9 &*- and
trans6ort c8ar:es for sendin: :oods after 6rocessin: is +s9 D-9 .lease determine t8e assessable
value of t8e :oods under section ( of t8e Central Excise Act9
0olution: $s per rule 16$, the assessable value shall be the value at which the goods are sold by the
supplier of inputs to his customers. In the given case, the supplier of inputs is selling the goods to his
customers at 5s. 1.66. Therefore, the assessable value shall be 5s. 1.66.
NNNNNNN
Ex6lanation to section ((&
Guestion &&: Deal $it8 t8e 8el6 of case la$s% if any
5;s AJ# avails of CENVAT credit of t8e duty 6aid on t8e in6uts namely% steel s8eets9 T8e
scra6 :enerated durin: t8e manufacture of t8eir final 6roduct $as cleared by t8em $it8out
6ayment duty9 0ubseOuently t8e De6artment raised a demand of excise duty on $aste and
scra6e9 5;s AJ# acce6ted t8e duty liability but contended t8at t8e 6rice at $8ic8 $aste and
scra6 8ad been sold s8ould be considered to be cum2duty 6rice and assessable value s8all be
88
determined after deductin: t8e element of excise duty9 T8e contention of t8e De6artment is t8at
as no central excise duty 8as been 6aid $8ile clearin: t8e scra6% no deduction on account of
excise duty is available to 5;s AJ#9
Ans$er: $ccording to Explanation to section /,1- of the Central Excise $ct, !The price:cum:duty of
the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and
the money value of the additional consideration, if any, flowing directly or indirectly from the buyer
to the assessee in connection with the sale of such goods, and such price:cum:duty, excluding sales
tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods."
In CCE 8. @aruti (dyog *imited, it has been held that the price should be ta3en as cum:duty price
and duty shall be calculated by wor3ing bac3.
$ccordingly in the presents case, as the <epartment has raised the demand on waste and scrap, the
price collected by @#s $(* will be considered as cum:duty price. It means, the amount of duty is
considered to be already included in the price at which such waste and scrap has been sold by $(*.
Thus, the contention ta3en by the assessee is correct and the stand ta3en by the <epartment is not
proper.
Thus, the transaction value for charging excise duty is computed as follows P
8alue X ,+rice:cum:duty P +ermissible <eductions-#U1F,5ate of <uty#166-L
Arei:8t on return of dama:ed :oods
Guestion &,: .G+ #imited $8o are in t8e manufacture of excisable :oods 8ad t8e 6ractice of
6rovidin: full reimbursement to all t8e dealers to$ards t8e value of dama:ed :oods9 T8e
com6any used to c8ar:e a certain sum to$ards t8e cost of frei:8t in t8e return of dama:ed
:oods to it9 No ot8er consideration received by t8e com6any9 T8e Central Excise De6artment
8as issued a s8o$ cause notice t8at t8e return frei:8t in res6ect of dama:ed :oods 8as to be
included in t8e assessable value for t8e 6ur6ose of duty9 Examine briefly% t8e correctness in la$
of t8e s8o$ cause notice9
Ans$er: The facts in the given case are similar to the case of 7eel Qamal +lastics *imited 8. CCE.
In this case the CET$T has held that the amount collected by the company was related to the cost of
return freight on the damaged goods and hence did not in any way represent the value of the goods.
The assessee company did not receive any additional consideration for the sale nor were any
clearances effected towards replacement without payment of duty. Therefore, the return freight was
not liable to be added to the assessable value.
Earranty C8ar:es
Guestion &3: A #td9% a manufacturer of tyre $as extendin: a $arranty discount on any tyres t8at
$ere defective9 T8e sc8eme of $arranty discount o6erated t8us: t8e customers lod:ed t8eir claim
$it8 re:ard to any defects in t8e tyre9 0uc8 claims $ere t8en scrutiniRed by a Tec8nical
Committee of A #td9% $8ic8 $ould decide t8e amount of refund due to t8e customer on t8e basis
of reduction in t8e normal life of tyre attributable to t8e effect9 T8is refund $as to be :iven by t8e
Tec8nical Committee9 T8e 6ractice $as bein: follo$ed by A #td9 for last &* years9 A #td9 claimed
t8e $arranty discount as a Trade discount $8ic8 is deductible in com6utin: t8e assessable value
89
of t8e tyres9 Is t8is correctF Discuss in li:8t of t8e 6rovisions under section ( of t8e Central Excise
Act% &'(( $it8 res6ect to trade discount9
Ans$er: The defective tyres brought bac3 by the customers are scrutini?ed by the Technical
Committee so as to examine the defects which were not apparent at the time of sale.
The assessee claims that the warranty discount is a established trade practice and fact of such discount
is already 3nown prior to removal of goods.
9owever, the Technical Committee assesses the defects and determines the refund after the removal
of goods. $ny increase or reduction in value after the removal of goods does not affect the amount of
duty already paid. The upreme Court also stated the same in <8, Case.
Garranty discount is in the nature of a benefit given to the customers by way of compensation for
loss suffered by them and not in the nature of discount. Thus warranty discount cannot be allowed as
a trade discount.
Dama:e discount
Guestion &(: 0tate briefly $8et8er Bdama:e discountC is 6ermissible as a deduction for 6ur6ose
of arrivin: at t8e assessable value under section ( of t8e Central Excise Act% &'((9
Ans$er: $s per section /,=-,d- the term !transaction value" means the !actual price paid or payable
\". It means, all discounts actually offered to the customer at the time of removal of goods are
acceptable for deduction. Thus, where damaged goods are being sold by the assessee at a discounted
price, the !damage discount" is admissible as deduction.
;ut, where discount is offered after removal of goods, then such discount is not an admissible
deduction. It has been decided by the upreme Court in CCE 8. 8e3ram <etergents *imited that
damage discount is in the nature of a refund or benefit to the buyer by way of compensation for
damage, brea3age or loss suffered by the goods after removal from the factory and is not eligible for
deduction.
Com6utation of assessable value
Guestion &*: 7avin: re:ard to t8e 6rovisions of section ( of t8e Central Excise Act% &'((
com6ute;derive t8e assessable value of t8e excisable :oods for levy of excise duty of excise%
:iven t8e follo$in: information
.articulars
Cum2duty $8ole sale 6rice includin: sales tax of +s9 ,--- +s9 &*%---
Normal secondary 6ac1in: cost +s9 &%---
Cost of s6ecial secondary 6ac1in: +s9 &%*--
Cost of durable and returnable 6ac1in: +s9 &%*--
Arei:8t +s9 4*-
Insurance on frei:8t +s9 ,--
Trade discount (normal 6ractice +s9 &%---
+ate of Central Excise &DL Ad Valorem
0tate in t8e footnote to your ans$er% reasons for admissibility or ot8er$ise of t8e deductions9
Ans$er:
Com6utation of assessable value
90
.articulars +s9
Cum:duty whole sale price including sales tax of 5s. %666
*ess0 $mount of sales tax
Cost of returnable and durable pac3ing
Trade <iscount ,7ormal +ractice-
2reight
Insurance on freight
1',666
%,666
1,'66
1,666
>'6
%66
$ssessable value including excise duty 4,'66
Duty includin: education cess and 07E0 T &D9()L
('**-P&D9();&&D9()
&%3*&
Assessable value )%&''
Eor1in: Notes
1. 7ormal secondary pac3ing cost of 5s. 1666 and cost of secondary pac3ing of 5s. 1'66 has
not been deducted.
%. The value does not include excise duty, sales tax, trade discount, freight and insurance.
=. 2reight and insurance on freight will be allowed as deduction as per 5ule ' of the Central
Excise 8aluation 5ules.
Guestion &D: A:ricultural Im6lements #imited sold farm eOui6ments to t8e a:riculturists on
ex2factory basis u6on 6ayments made before dis6atc8 of t8e :oods9 A:ricultural Im6lements
#imited% at t8e reOuest of t8eir customers% arran:e for 6ayment of frei:8t and transit insurance
and for t8e dis6atc8 of t8e :oods to t8e destination9 T8e De6artmentCs vie$ is t8at since t8ey
8ave also arran:ed for trans6ort of :oods% t8ere is no ex2factory delivery of :oods and t8e cost
of insurance and frei:8t is to be included to t8e 6rice for determination of value and excise duty
s8ould be 6ayable on suc8 basis9 "riefly examine $8et8er contention of t8e De6artment is
correct in la$9
Ans$er: $ccording to section /,1-,a- of the Central Excise $ct, 14//, in a case where the goods are
sold by the assessee, for delivery at the time and place of removal, the assessee and buyer of the
goods are not related persons and the price is the sole consideration for sale, the assessable value shall
be the transaction value. In the given case, the place of removal is factory.
The contention of the assessee is that the transaction ends at the factory and nothing remains to be
done afterwards. The delivery of the goods at the customer"s destination and payment of freight anf
transit insurance are only made by the company on the re1uest of the customer. 9ence the insurance
and freight have no relevance in the matter.
$ccordingly, the company is not liable to pay excise duty on the basis of price inclusive of freight
and insurance. The view has been upheld in Escorts AC; *imited 8. CCE. 9ence, contention of the
<epartment is not goods in law.
Guestion &4: A 00I unit clears :oods $it8 label carryin: 5+. of +s9 D4;2 6er unit in t8e
ordinary course of business9 T8e same :oods are su66lied at +s9 *,;2 6er unit 6ac1 mar1ed as
5+. +s9 *, 6er unit to Canteen 0tores De6artment (C0D% $8ic8 in turn sales t8e same % at t8e
91
same 6rice to t8e Defence .ersonnel at different 6laces9 T8e :oods sold to C0D carry t8e
inscri6tion Bfor C0D onlyC9 T8e Excise De6artment insists t8at t8e 00I unit s8ould 6ay duty
$it8 reference to t8e 5+. +s9 D4;2 even in res6ect of sale to C0D9 Eit8 reference to t8e
6rovisions of 0ection (A of t8e Central Excise Act% &'((% briefly discuss $8et8er t8e stand ta1en
by t8e De6artment is correct9
Ans$er: ection /$ of the Central Excise $ct, 14// empowers the Central )overnment to levy
Central Excise on the basis of @5+ specified on the pac3age of the goods.
Explanation %,c- to section /$ to the said section states that where different retail sale prices are
declared on different pac3ages each such retail sale price shall be the retail sale price for the purposes
of valuation of the excisable goods. Therefore, in the given case, stand ta3en by the <epartment is
not correct.
Guestion &): As8a #imited su66lies ra$ material to t8e ?ob2$or1er Iareena #imited9 After
com6letin: t8e ?ob2$or1% *--- 6ac1ets of finis8ed :oods are returned to As8a #imited 6uttin:
t8e retail sale 6rice of +s9 ,-;2 on eac8 6ac1et9 T8e 6roduct in t8e 6ac1et is covered under t8e
5+. 6rovisions and (-L abatement is available on it9 Determine t8e assessable value under
t8e Central Excise 6rovisions from t8e follo$in: details
Cost of ra$ material su66lied +s9 3-%---
Mob $or1erCs c8ar:es includin: 8is 6rofit +s9 &-%---
Trans6ortation c8ar:es for sendin: t8e :oods to t8e ?ob $or1er +s9 3%---
Trans6ortation c8ar:es for returnin: t8e :oods to As8a #imited +s9 3%---
Ans$er: In case of goods covered under section /$ of the Central Excise $ct, 14//, the assessable
value is to be arrived at after allowing permitted abatement from @5+. In the given case, @5+ is 5s.
%6#: and abatement allowed is /6C. Therefore, assessable value will be 5s. 1%#: per unit and
aggregate value for all '666 units will be 5s. &6,666.
Guestion &': An assessee sold certain :oods for +s9(%3*%--- and did not c8ar:e any excise duty
in 8is invoice on t8e understandin: t8at t8e 6roduct $as exem6t from excise duty9
0ubseOuently% it $as found t8at suc8 :oods $ere not exem6t% but $ere liable to duty T &DL9
Calculate t8e amount of duty 6ayable t8ereon% statin: t8e reasons for your calculation9
Ans$er:
In such cases, it has been held in CCE +. <ar!ti :dog that the invoice price should be
considered as cum:duty price and excise duty shall be calculated by ma3ing bac3ward
calculations.
Thus, assessable value in the given case will be 5s./,=',666 M166#11&./. X 5s.=,>=,/''.
It has been held that the whole sale price includes the element of duty payable on any goods
because such duty forms part of any goods and is a part of the consideration for sale of the goods.
If any further demand of duty is created against an assessee, he cannot pass on such demand on to
his customer.
Therefore, the original consideration received by an assessee has to be ta3en as cum:duty price
for the purpose of demand of higher duty subse1uently.
92
Total duty proposed to be demanded still has to be abated from the cum duty price. 9owever, the
final duty payable is subject to CE78$T credit on inputs consumed.
0ome more solved .ractical .roblems
Com6utation of Assessable Value > Excise Duty:
1. The selling price of a product inclusive of excise duty and sales tax is 5s.=,'66 per do?en. ales
tax is /C. The excise duty payable is 1&C. Gor3 out the assessable value and total duty payable
per do?en.
0olution: Com6utation of Assessable Value > Duty .ayable 6er 6iece
elling price inclusive of sales tax E /C ='66
*ess : ales Tax ,='66 M /#16/- 1=/.&1
Cum:duty price ==&'.=4
*ess0 Excise <uty including education cess E
1&./.C X ==&'.=4 M 1&./.#11&./. />&.1/
$ssessable value %..4.%'
YYYYYYY
%. If a product was sold at 5s.'66 per piece inclusive of sales tax E 16C and excise duty as per an
exemption notification E .C ,though the tariff rate of excise duty is 1&C-, what would be0
,i- the assessable value per pieceH and
,ii- the duty payable per piece[
0olution: Com6utation of Assessable Value > Duty .ayable 6er 6iece
elling price inclusive of sales tax E /C '66
*ess : ales Tax ,'66 M 16#116- /'./'
Cum:duty price /'/.''
*ess0 Excise <uty including education cess E
..%/C X /'/.'' M ..%/#16..%/ =/.&6
$ssessable value /14.4'
NNNNNNN
Com6utation of Transaction Value > Excise Duty:
=. 9ow would you arrive at the T.8. for the purpose of levying excise duty from the following data[
Cum:duty selling price ,exclusive of ales Tax- 5s.16,666
5ate of Excise <uty 1&C
Trade discount allowed 5s.1,%66
2reight 5s.>'6
93
0olution:
$- Cum:duty selling price ,exclusive of ales Tax- 5s.16,666
;- *ess0 +ermissible <eductions
Trade discount allowed 5s.1,%66
2reight 5s.>'6 5s.1,4'6
C- 7et price excluding taxes on final product ,but inclusive
of excise duty-
5s..,6'6
<-Excise duty thereon E1&./.C ,5s..,6'6 M 1&./.#11&./.- 5s.1,1=4
E- $ssessable 8alue ,C:<- 5s.&,411
Eor1in: Notes:
Excise <uty is to be charged on the net price. 9ence, Trade <iscount is allowed as deduction.
2reight will be allowed as deduction ,5efer 5ule ' of C.E.8aluation 5ules, %666-
Thus, trade discount of 5s.1,%66 and freight of 5s.>'6 are allowed as deductions.
YYYYYYY
Com6utation of Transaction Value > Excise Duty:
/. 9ow would you arrive at the assessable value for the purpose of levy of excise duty from the
following particulars0
Cum:duty selling price exclusive of sales tax 5s.%6,666
5ate of excise duty applicable to the product 1'C
Trade discount allowed 5s.%,/66
2reight 5s.1,'66.
0olution:
$- Cum:duty selling price ,exclusive of ales Tax- 5s.%6,666
Trade discount allowed 5s.%,/66
2reight 5s.1,'66 5s.=,466
C- $ssessable 8alue including excise duty E 1'./'C 5s.1&,166
<-Excise duty thereon E1'./'C ,5s.1&,166M1'./'#11'./'- 5s.%,1''
E- $ssessable 8alue ,C:<- 5s.1=,4/'
Eor1in: Notes:
Excise <uty is to be charged on the net price. 9ence, Trade <iscount is allowed as deduction.
2reight will be allowed as deduction ,5efer 5ule ' of C.E.8aluation 5ules, %666-
Thus, trade discount of 5s.1,%66 and freight of 5s.>'6 are allowed as deductions.
NNNNNNN
'. 2ind $ssessable 8alue and duty payable from the following particulars0
a- @aximum 5etail Trade +rice0 5s.1,166#: per unit.
b- ales:Tax, urcharge, Bctroi and other *ocal Taxes0 16C
94
c- Cash <iscount0 %C
d- Trade <iscount0 .C
e- +rimary and econdary pac3ing cost included in the above @5+0 5s.166
f- Excise duty rate0 .C ad valorem.
0olution:
Com6utation of Assessable Value > Excise Duty
@5+ 1166
ales:Tax, urcharge, Bctroi and other *ocal Taxes 166
Cash <iscount F Trade <iscount ,% F . X 16C- 166
8alue of goods inclusive of duty 466
<uty E ..%/C ,466 M ..%/#16..%/- &..'1
$ssessable value .=1./4
Eor1in: Notes:
a- Cash discount D Trade discount shall be allowed as a deduction for the purpose of determining
the assessable value. Therefore :
%C of 5s.1,166 X 5s.%% shall be allowed as a deduction towards Cash discount.
.C of 5s.1,166 X 5s... shall be allowed as a deduction towards Trade discount.
b- +ac3ing cost is not allowable as deduction. $ny charges recovered for pac3ing are to be included
because these are essentially in relation to the goods under assessment and will form part of the
transaction value.
NNNNNN
&. $ manufacturer has agreed to supply a machine on following terms0 :
,i- +rice of the machine at 5s./,'6,666 ,Exclusive of taxes and duties-
,ii- +ac3ing for transportation of the machine 5s.1',666
,iii- Transport charges of machinery 5s.%',666
,iv- <evelopment and tooling charges 5s./6,666 ,exclusive of taxes and duties-
,v- C..T. E /C
,vi- Bctroi paid on machine supplied 5s.%,666 ,not recovered from party separately-
,vii- Excise duty E 1&C
,viii- Interest will be charged E 1&C on delayed payment beyond =6 days
,ix- pecial discount of 5s.',666 if advance of 5s.%,66,666 is paid with order.
Gor3 out the excise duty liability based on following additional information0
,i- $ctual transportation cost is 5s.%&,666
,ii- Interest of 5s.',666 was charged as party has failed to ma3e payment within =6 days
,iii- The buyer paid advance with the order.
0olution:
Com6utation of Assessable Value > Excide Duty liability:
.articulars
Amount
(+s9
+eason for inclusion;exclusion from Assessable
Value
95
$- +rice of the machine
,exclusive of taxes-
/,'6,666 Cost of machine
;- +ac3ing Charges for
Transportation
1',666 +ac3ing Charges are includible in $ssessable 8alue.
These charges are essentially in relation to the goods
under assessment and will form part of the transaction
value.
C- Transport charges of
machinery
,:- 1666 $ctual expenditure incurred on transpUortation is
re1uired to be dedcuted. The fact is that transport
charges charged were 5s.%',666 against actual charges
incurred of 5s.%&,666. *oss of 5s.1,666 shall be
allowed as deduction.
<- <evelopment and tooling
charges
/6,666 uch charges are incurred by reason of or in
connection with sale. 9ence includible in the
$ssessable 8alue.
E- C..T. E /C 7I* CT is not includible in the price of the machinery.
2- Bctroi paid on machine
supplied
7I* Bctroi is not includible in the price of the machinery.
)- Interest E 1&C on delayed
payment
7I* If Interest on delayed is allowed as deduction, then
OpriceO will not be the sole considerationO. 9ence, not
allowable.
9- pecial discount if advance
of 5s.%,66,666 is paid with
order.
7I* If special discount is allowed as deduction, then OpriceO
will not be the sole considerationO. 9ence, not
allowable.
I- $ssessable 8alue 5s.',6/,666 ,$-F,;-F,<-
A-Excise duty thereon E 1&./.
C
5s..=, 6'4 E1&./.C,5s.',6/,666M1&./.#166-
NNNNNN
>. 9aving regard to provisions of section / of the Central Excise $ct, 14//, compute the assessable
value of excisable goods and the duty amount, given the following information0
,i- Cum:duty wholesale price ,inclusive of sales tax 5s.=,666- : 5s.1&,666
,ii- 7ormal secondary pac3ing cost : 5s.1,666
,iii- Cost of special secondary pac3ing : 5s.%,666
,iv- Cost of durable and returnable pac3age : 5s.1,666
,v- 2reight ,outward- : 5s.>'6
,vi- Insurance on freight : 5s.=66
,vii- Trade discount ,as per normal practice- : 5s.466.
,viii- The rate of central excise duty as per the central excise tariff is 1'C.
0olution: $ssessable 8alue X ,Cum:duty +rice P +ermissible <eductions-#,1F 5ate of Excise <uty-
Com6utation of Assessable value > Duty liability:
96
.articulars Amount
(+s9
+easons for inclusion;exclusion
Cum <uty price 1&,666
.ermissible Deductions:
ales Tax =,666 ales tax of 5s.=,666 is allowable as deduction.
7ormal secondary pac3ing cost 7I* econdary +ac3ing cost of 5s.1,666 is includible.
Cost of special secondary pac3ing 7I* Cost of special secondary 5s.%,666 is includible if it is in
connection with sales. In absence of information, assumed
that it is essential for sale and hence included in
assessable value.
Cost of durable and returnable
pac3age
1,666 Cost of durable and returnable pac3ing is not includible in
assessable value.
2reight ,outward- >'6 Transport charges are not includible in $8.
Insurance on freight =66 Insurance charges on freight are not includible in $8.
Trade discount ,as per normal
practice-
466 Trade discount is allowable as deduction.
Total &-%-*- 5s.1&,666:=,666:1,666:>'6:=66:466
<uty liability E 1'./'C 1,''= 5s.166'6 M 1'./'#11'./'
Assessable Value )%('4
NNNNNNN
Ex6lanation to 0ec ((&:
.. $n assessee was under impression that his product is exempt from excise duty and hence sold the
goods E 5s.166 per piece without charging excise duty. *ater, it was found that actually, the
product was dutiable E 1&C. <epartment claimed that since goods were removed without duty,
assessable value should be 5s.166 and duty is payable accordingly. $ssessee contended that price
of 5s.166 should be ta3en as cum:duty price and actual duty payable should be calculated by
bac3 calculations. <etermine the correct duty payable per piece.
0olution
Explanation to -ection 4&1' providesA
The price:cum:duty of the excisable goods sold by the assessee shall be the price actually paid to him
for the goods sold and the money value of the additional consideration, if any, flowing directly or
indirectly from the buyer to the assessee in connection with the sale of such goods, and such price:
cum:duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the
duty payable on such goods.
$lso, in CCE v. <ar!ti :dog ?td. &2002' 141 E?. 3 &-C' it has been held that the price should be
ta3en as cum:duty price and duty payable should be calculated by wor3ing bac3.
Thus, the transaction value for charging excide duty is computed as shown below0
8alue X ,+rice Cum <uty-# U1F,5ate of <uty#166-L
X ,166-#U1F,1&./.#166-L X 5s.1.&.%1 ,approx-.
<uty payable is X 5s.1/.1/ i.e ],166-#U1F,1&./.#166-L ^
97
NNNNNN
4. <etermine the transaction value and the Excise duty payable from the following information0
Total Invoice +rice 5s.1.,666
The Invoice +rice includes the following0
a-ales:tax 5s. 1666
b-urcharge on T 5s. 166
c-Bctroi 5s. 166
d-Insurance from 2actory to depot 5s. 166
e-2reight from factory to depot 5s. >66
f-5ate of ;asic Excise duty 1&C ad valorem
g-5ate of pecial Excise duty %/C ad valorem
0olution:
Com6utation of Assessable Value > Duty liability:
$- Cum:duty elling +rice 5s.1.,666
ales Tax 5s.1,666
urcharge on ales Tax 5s.166
Bctroi 5s.166
C- 7et price excluding taxes on final product ,but inclusive of excise duty- 5s.1&,.66
<-Excise duty thereon E/1.%6C ,C ;asic Excise <uty F %/C pecial Excise
<utyF Education cess- U5s.1&,.66 M /1.%6#1/1.%6L
5s./,46%
E- $ssessable 8alue ,C:<- 5s.11,.4.
Eor1in: Notes:
$ssumed that the Invoice +rice of 5s.1.,666 is the price prevailing at the depot. 9ence,
insurance and transport charges from factory to depot will not be allowed as a deduction.
$lternative treatment possible.
NNNNNN
Com6utation of Assessable Value > Excise Duty U +ule D
16. igma *td. as3ed for a 1uotation from Bmega *td. for the supply of 166 complete computer
systems. Bmega ltd. furnished the following 1uotation 0
,$- Components
C+( 5s.%6,666
@onitor 5s.16,666
Qeyboard 5s.',666
-!$-.otal 8s.31/000
,;- *abour D Bverheads 5s.16,666
,C- +rofit 5s.',666
Total 6rice 6er unit (AU"UC +s9*-%---
98
$dvance of 5s.%6,666 was payable along with order. <elivery period was one month from date of
receipt of firm order and advance.
igma *td. accepts the 1uotation subject to the following alterations which are agreed to by Bmega
*td.0
i- Qeyboard would be supplied free of cost by igma *td. to Bmega *td. since igma *td. is able to
purchase the 3eyboard for 5s.=,666 per unit.
ii- +rofit charged by Bmega *td. is to be reduced to 5s./666 since igma *td. would ma3e an
advance of 5s.%6,666. 9owever, no interest is payable on the advance.
<etermine the assessable value under section / of the Central Excise $ct, 14//, and the Excise <uty
liability E 1'C ad valorem.
99
0olution:
Com6utation of Assessable Value > Excise duty liability:
.articulars Amount in
+s9
+easons for inclusion;exclusion
$- Components0
C+( %6,666
@onitor 16,666
Qeyboard =,666 ince the 3eyboard is supplied free of cost by igma *td,
it cannot be said that price is the sole consideration for
sale. 5ule & of CE 8aluation 5ules, %666 provides that
in such cases the cost of materials supplied by the buyer
shall be added to determine the assessable value.
Total 5aterial Cost 33%---
;- $dd0 *abour D
Bverheads
16,666
Cost of .roduction (3%---
C- $dd0 +rofit element ',666 The profit margin shall not be reduced by the element of
interest earned.
'here the same price is charged from the buyers who
ha)e gi)en the deposit and who ha)e not gi)en the
deposit andBor where the ad)ance is purely a security
deposit and the interest earned thereon is credited to the
buyer; then, in such cases, the notional interest cannot
be added to the price.&+-. *nd!stries ?td +s CCE'
Assessable Value ()%--- AU"UC
Excise <uty payable E
1'./'C
>,/1& /.,666 M 1'./'C
NNNNNN
+ule 4 of CE Valuation +ules%,---:
11. hiva and Co., an assessee, transferred a consignment of 16 tons paper to the depot from <elhi to
Chandigarh on 16
th
Auly, %66= for value of 5s.1%,'66 per ton. The transport cost was 5s.'66 per
ton. The same variety and 1uality of paper normally being sold at Chandigarh depot on 16
th
Auly,
%66= was at a transaction value of 5s.1',666 per ton to unrelated buyers.
a- Ghich transaction value should be considered for assessment to excise duty[
b- In case there were no sales of that variety and 1uality of paper on 16
th
Auly, %66=, but sales
were effected on 1
st
Auly, %66= previously for 5s.1/,666 per ton, what would be the position[
0olution: $s per the provisions of 5ule > of Central Excise valuation 5ules, %6660
IGhere the excisable goods are not sold by the assessee at the time and place of removal but are
transferred to a depot, premises of a consignment agent or any other place or premises from where the
excisable goods are to be sold after their clearance from the place of removal and where the assessee
and the buyer of the said goods are not related and the price is the sole consideration for the sale, the
value shall be the normal transaction value of such goods sold from such other place at or about the
100
same time and, where such goods are not sold at or about the same time, at the time nearest to the
time of removal of goods under assessment.J
ituation ,a-0 The goods removed from the factory on 16.6>.%66= shall be assessed to duty by
adopting 5s.1',666 per ton as value ,this is the normal transaction value of goods sold from depot at
the same time as to the time of removal of goods from the factory.-
ituation ,b-0 7ormal Transaction 8alue on 1.>.%66= from Chandigarh depot to unrelated buyers shall
be the valuation of the goods removed from factory on 16.>.%66= provided price is the sole
consideration. Thus, the transaction value to be considered for assessment to excise duty shall be the
price at the depot nearest to the time of removal of goods from the factory i.e, on 1.>.%66= at
5s.1/,666.
NNNNNN
+ule ) of CE Valuation +ules%,---:
1%. Thunder T8 *td. is engaged in the manufacture of colour television sets having its factories at
;angalore and +une. $t ;angalore the company manufactures picture tubes which are stoc3
transferred to +une factory where it is consumed to produce television sets. <etermine the Excise
duty liability of captively consumed picture tubes from the following information0 :
<irect material cost ,per unit- 5s.&66
Indirect @aterials 5s.'6
<irect *abour 5s.166
Indirect *abour 5s.'6
<irect Expenses 5s.166
Indirect Expenses 5s.'6
$dministrative Bverheads 5s.'6
elling and <istribution Bverheads 5s.166.
$dditional Information0 :
,1- +rofit @argin as per the $nnual 5eport of the company for 1444:%666 was 1'C before Income Tax.
,%- @aterial Cost includes Excise <uty paid 5s.166
,=- Excise <uty 5ate applicable is 1&C.
0olution: 5ule . of CE 8aluation 5ules, %666 provides :
IGhere the excisable goods are not sold by the assessee but are used for consumption by him or on
his behalf in the production or manufacture of other articles, the value shall be 116C of the cost of
production or manufacture of such goods.J
The ICG$I has introduced Cost $ccounting tandard : / ,C$: /- for determining cost of
production for the purpose of Excise valuation. The C;EC has clarified that cost of
production of captively consumed goods has to be strictly done in accordance with C$:/
issued by ICG$I.
$s per C$:/, the Cost of +roduction shall consist of material consumed, direct wages,
salaries, direct expenses, wor3 overheads, administrative overheads relating to production,
1uality control cost, research and development cost and pac3ing cost. 2urther, adjustment for
stoc3 of wor3:in:progress, finished goods, recoveries for sales of scrap. Gastage etc shall be
made for arriving at the cost of production of goods which are used for captive consumption.
The cost of material should be net of excise duty if CE78$T credit has been availed for such
inputs. In case no CE78$T credit has been availed on such inputs, the material cost should
be inclusive of the excise duty.
101
Com6utation of Assessable Value:
.articulars Amount in +s9 Amount in +s9
<irect @aterial Cost &66
*ess0 Excise <uty ,assuming CE78$T has been
claimed-
166 '66
Indirect @aterials '6
<irect *abour 166
Indirect *abour '6
<irect Expenses 166
Indirect Expenses '6
$dministrative Bverheads '6
elling D <istribution Bverheads 7I*
Total Cost of +roduction as per C$:/ 466
$ssessable 8alue ,Total Cost of +roduction M 116C- 446
Excise <uty payable E 1&./.C on 5s.446 1&=.1'
YYYYYY
+ule ' > &- of CE Valuation +ules% ,---:
1=. <etermine the value on which Excise duty is payable in the following instances. Tuote the
relevant section # rules of Central Excise *aw.
i- $. *td. sold goods to ; *td., at a value of 5s.166 per unit. In turn, ; *td. sold the same to C
*td. at a value of 5s.116 per unit. $ *td. and ; *td. are related, whereas ; *td. and C *td. are
unrelated.
ii- $ *td. and ;. *td. are inter:connected underta3ings under section %,g- of @5T+ $ct. $ *td.
sells goods to ; *td. at a value of 5s.166 per unit and to C *td. at 5s.116 per unit, who is an
independent buyer.
iii- $ *td. sells goods to ; *td. at a value of 5s.166 per unit. The said goods are captively
consumed by ; *td. in its factory. $ *td. and ; *td. are unrelated. The cost of production of the
goods to $ *td. is 5s.1%6 per unit.
iv- $ *td. sells motor spirit to ; *td. at a value of 5s.=1 per litre. ;ut motor spirit has
administered price of 5s.=6 per litre, fixed by the Central )overnment.
v- $ *td. sells to ; *td. at a value of 5s.166 per unit. ; *td. sells the goods in retail mar3et at a
value of 5s.1%6 per unit. The sale price of 5s.166 per unit is wholesale price of $ *td. $lso, $
*td. and ; *td. are related.
vi- <epot price of a company are P
+lace of
removal
+rice at depot
on 1.1.%661
+rice at depot on
=1.1.%661
$ctual sale price at depot on
1.%.%661
$mritsar <epot 5s.166 per unit 5s.16' per unit 5s.11' per unit
;hopal <epot 5s.1%6 per unit 5s.11' per unit 5s.1%' per unit
Cuttac3 depot 5s.1=6 per unit 5s.1%' per unit 5s.1=' per unit
$dditional information0
102
i- Tuantity cleared to $mritsar <epot : 166 units
ii- Tuantity cleared to ;hopal <epot : %66 units
iii- Tuantity cleared to Cuttac3 <epot : %66 units
iv- The goods were cleared to respective depots on 61#61#%661 and actually sold at the depots on
61#6%#%661.
0olution:
,i- 5s.116 per unit shall be the Transaction value. ,5efer 5ule 4 !ale only to or through !related
persons" not being inter: connected underta3ings ,IC(s-"of Central Excise 8aluation 5ules, %666-.
,ii- Transaction value shall be 5s.166 per unit for sale to ; and 5s.116 for sale to C ,5efer 5ule 16
!ale only to or through persons being interconnected underta3ings ,IC(-" of Central Excise
8aluation 5ules, %666-
,iii- Ghere the sale is made to an unrelated person, the 1uestion of cost of production does not arise.
Thus, transaction value will be 5s.166 as per ection /,1- of CE$, 14//.
,iv- The price at which the goods are actually sold shall be considered for the purpose of determining
the transaction value and not the administered price. Thus, the transaction value will be 5s.=1 as per
ection / of CE$, 14//.
,v- 5ule 4 of Central Excise 8aluation 5ules provides that when the assessee sells goods to a related
person who in turn sells it to an unrelated dealer ,whether a wholesaler or retailer-, the value of the
goods shall be the normal transaction value at which these goods are sold by the related person to
such unrelated person at the tome of removal of goods from the place of removal. Thus, in the given
case, the transaction value shall be 5s.1%6 per unit.
,vi- 5ule > of the Central Excise 8aluation 5ules, %666 provide that the price prevailing at the <epot
on the date of clearance from the factory will be the relevant value to pay Excise duty. Thus, in the
given problem0
Clearance to $mritsar depot will attract duty based on the price as on 61#61#%661.
Transaction value is 5s.166 M 166 units X 5s.16,666#:
Clearance to ;hopal depot will attract duty based on the price as on 61#61#%661. Transaction
value is 5s.1%6 M %66 units X %/,666#:
Clearance to Cuttac3 <epot will attract duty based on the price as on 61#61#%661. Transaction
value is 5s.1=6 M %66 units X 5s. %&,666#:
7ote0 The relevant date is 61#61#%661, since the goods were cleared to the depots on that date. 7o
additional duty is payable even if goods are later sold from depot at a higher price.
YYYYYY
+ule ' > &- of CE Valuation +ules% ,---:
1/. M *td. manufactures three health drin3s vi?. lim, Trim, +rim.
lim was sold only to S *td., a subsidiary company of M *td.
Trim was sold to V *td., where the @anaging <irector of M *td. is a @anager.
+rim is sold to + *td. who are sole distributor of M *td., and was coming under the same
management of M *td.
<etermine the assessable value#transaction value of the three products in the hands of M *td. on the
basis of the following information0
103
a- +rice of M *td. to S *td. 5s. 166
b- +rice of M *td. to V *td. 5s. '6
c- +rice of M *td. to + *td. 5s. %6
d- +rice of S *td. to consumer 5s. 1%6
e- +rice of V *td. to consumer 5s. &6
f- +rice of + *td. to consumer 5s. =6
0olution:
5ule 4 of C.E 8aluation 5ules, %666 provides that where the assessee arranges to sell goods only to
or through0
1. his relative
%. relative and distributor or sub:distributor of such distributor.
=. persons who are mutually interested in the business of each other
then, the normal transaction value at which the goods are sold by such persons at the time of removal
can be ta3en as value, provided the other buyer is not related.
Ghen goods are sold to related persons who are also retailers, then the price at which goods are sold
to the related retailer shall be adopted.
5ule 16 of C.E 8aluation 5ules, %666 provides that when the assessee so arranges that the excisable
goods are not sold by him except to or through an inter:connected underta3ing, the value of goods
shall be determined in the following manner, namely0
1. If the underta3ings are so connected that they are also related in terms of sub:clause ,ii- or ,iii- or
,iv- of clause ,b- of sub:section ,=- of ection / of the $ct or the buyer is a holding company or
subsidiary company of the assessee, then the value shall be determined in the manner prescribed
in 5ule 4.
%. in any other case, the value shall be determined as if they are not related persons for the purpose
of sub:section ,1- of section /.
Cases :iven in t8e 6roblem:
1. +roduct !lim" was sold exclusively to !S" which is a subsidiary company of !M". ince
Company !S" falls under the definition of !relative" under ection /,=-,b- of Central Excise $ct,
14//, transaction value in such a case will be the price at which S sells the product to ultimate
consumer i.e., 5s.1%6.
%. +roduct !Trim" is sold to !V" where @< of the manufacturer is @anager. 9ence, as per the
definition, Company !M" and Company !V" are !inter connected underta3ings". 5ule 16 of C.E.
8aluation 5ules provides that inter connected underta3ings are considered as !related" only if
there is !holding:subsidiary" relationship.
ince in the given case there is no such holding:subsidiary relationship, the transaction value will
be the price at which M sales to V i.e., 5s.'6.
=. +roduct !+rim" was sold to + and it has been given that M and + are under same management.
9ence, as per the definition, Company !M" and Company !+" are !inter connected underta3ings".
5ule 16 of C.E. 8aluation 5ules provides that inter connected underta3ings are considered as
!related" only if there is !holding:subsidiary" relationship
104
ince in the given case there is no such holding:subsidiary relationship, the transaction value will be
the price at which M sales to + i.e., 5s.%6.
YYYYYY
+ule &-A
1&. @#s ;harat ,Trader- supplies raw material costing 5s./,'66 to processor. +rocessor processes the
raw material and supplies finished product to the trader.
The processor charged 5s.1,6'6 as processing charges which includes 5s..66 as processing
charges and 5s.%'6 as his profit margin.
The cost of transportation of raw material to the premises of the processor is 5s./66 and for
returning of the finished product to the trader is 5s./'6.
The finished product is sold by the trader for 5s.&,>66.
The rate of excise duty is 1&C.
Ghat is the assessable value and what is the total duty payable.
0olution: $s per 5ule 16$, the assessable value in the aforesaid case shall be the value at which
goods are sold by @#s ;harat ,Trader- i.e. 5s. &>66#:. The duty inclusive of education cess E 1&./.C
shall be 5s. 116/.1&.
NNNNNN
+ule &-A
Guestion: A trader su66lies fabrics to inde6endent 6rocessor9 Cost of fabrics is +s9&%&*-9
T8e 6rocessor c8ar:es +s9(*- $8ic8 includes +s93*- as 6rocessin: c8ar:es and +s9&-- as 8is
6rofit9 After 6rocessin:% :oods are sent bac1 to t8e trader $8o sells t8em at +s9&%)--9
Trans6ort c8ar:es for receivin: :oods at t8e 6remises of t8e 6rocessor is +s9*- and t8e
trans6ort c8ar:es for sendin: :oods after 6rocessin: is +s9D-9
.lease determine t8e assessable value of t8e :oods under 0ection ( of t8e Central Excise Act9
(D mar1s
"ns4erA $s per 5ule 16$ of the Central Excise ,<etermination of +rice of Excisable )oods-
5ules, %666 where goods are manufactured on job:wor3 basis, the assessable value shall be the
price at which the finished goods are sold by the principal manufacturer who gets the goods
manufactured on job:wor3 basis, to his customers where customer is not a related person.
Therefore, applying the above rule the assessable value shall be 5s.1.66 at which the
trader sells the goods.
NNNNNN
0ec ( > (A a66licability:
1>. ; *td. manufactures two products namely, Eye Bintment and 3in Bintment. 3in Bintment is a
specified product u#sec. /$ of Central Excise $ct, 14//. The sales prices of both the products are
at 5s./=#unit and 5s.==#unit respectively. The sales price of both products included 1&C excise
duty as ;E< and .C excise duty as E<. It also includes CT of /C. $dditional information is
as follows0
(nits
cleared
Eye Bintment 0 1,66,666 units 5s. /=#: per unit
3in Bintment 0 1,'6,666 units 5s. ==#: per unit
<eduction permissible u#sec /$0 /6C.
105
Calculate the total excise duty liability of ; *td. on both the products.
0olution: <uty on eye ointment and s3in ointment is re1uired to be calculated separately.
"' 9!t lia$ilit in case of Ee ointmentA
*et the $ssessable 8alue of Eye Bintment be M per unit.
5upees
elling price including sales tax /=
*ess : ales Tax E /C U/= M /#16/L 1.&'
+rice including duty /1.='
<uty E %/.>%E U;E< 1&C F E< &C F EC =CL ..%6
$ssessable 8alue ==.1'
ince the excise duty payable per unit of Eye ointment is 5s...%6 and the total 1uantity cleared is
1,66,666H the total excise duty on eye ointment shall be 5s..,%6,666.
C' 9!t lia$ilit in case of -)in ointmentA
ince the product is specified under ection /$, $ssessable 8alue shall be computed by deducting
the abatement of /6C from the @5+.
@aximum 5etail price ,@5+- X 5s.==.66
*ess0 $batement E /6C X 5s.1=.%6
Assessable Value 6er unit of 01in ointment H +s9&'9)-
Excise duty payable per unit E %/.>%C X 5s./..4
Total Excise <uty payable on 1,'6,666 units of 3in ointment shall be
,5s./../> x 1,'6,666 units-
X 5s.>,=/,1./
NNNNNN
0ec (A of CEA% &'((:
1.. $ product which is covered under section /$ provisions has @5+ of 5s.%' printed on the carton.
It is cancelled by drawing two lines across the price, but the price is easily readable. ;elow that
price, @5+ price of 5s.%1 is shown to indicate the saving which will be made by buyer. The
abatement available is /6C on @5+. Excise duty rate is 1&C. Calculate the excise duty payable.
0olution:
C;EC vide its circular 7o.&>=#&/#%66%:CM dt.%..16.%66% has notified that once an @5+ is scored
out and even then it remains visible and another @5+ is printed on the pac3age, then it cannot be said
that two @5+"s are printed on the pac3age. The scored out @5+ cannot be considered as an @5+
either by the seller or by the buyer and hence such @5+ shall be ignored.
2or the purpose of valuation for determination of duty liability, the new @5+ shall be considered.
Thus, in the given problem, the @5+ shall be ta3en as 5s.%1.
Com6utation for determinin: t8e Duty liability:
@aximum 5etail price ,@5+- X 5s.%1
106
*ess0 $batement E /6C X 5s.../
Assessable Value H +s9&,9D
Excise duty payable per unit E 1&./.C X 5s.%.6>
NNNNNN
0ec (A of CEA% &'((:
14. 5efrigerators under heading 7o. ./1..16 carry !abatement rate" of /6C and they are specified
only in the 2irst chedule to the Central Excise Tariff $ct 14.'. 2ind out the amount of duty, if
the maximum retail price ,@5+- of a refrigerator is 5s.%6,666 only and the rate of excise duty is
1&C.
0olution: Comp!tation of 9!t lia$ilit
ince the product is specified under ection /$, $ssessable 8alue shall be computed by deducting
the abatement of /6C from the @5+.
@aximum 5etail price ,@5+- X 5s.%6,666
*ess0 $batement E /6C X 5s..,666
Assessable Value H +s9&,%---
Excise duty payable per unit E 1&./.C X 5s.1,4>>.&6
NNNNNN
107
'
Central Excise +ules% ,--,
+ule ,9 Definitions.: In these rules, unless the context otherwise re1uires, :
(b SassessmentS includes self:assessment of duty made by the assessee and provisional
assessment under rule >H
(c SassesseeS means any person who is liable for payment of duty assessed or a producer or
manufacturer of excisable goods or a registered person of a private warehouse in which excisable
goods are stored and includes an authori?ed agent of such personH
(ea Slar:e tax6ayerS means a person who,:
has one or more registered premises under the Central Excise $ct, 14// ,1 of 14//-H or
has one or more registered premises under Chapter 8 of the 2inance $ct, 144/ ,=% of
144/-H
and is an assessee under the Income Tax $ct, 14&1 ,/= of 14&1-, who holds a +ermanent $ccount
7umber issued under section 1=4$ of the said $ct, and satisfies the conditions and observes the
procedures as notified by the Central )overnment in this regard.

+ule 3: A66ointment and ?urisdiction of Central Excise @fficers
(& The ;oard may, by notification, appoint such person as it thin3s fit to be Central Excise Bfficer to
exercise all or any of the powers conferred by or under the $ct and these rules.
(, The ;oard may, by notification, specify the jurisdiction of a Chief Commissioner of Central
Excise, Commissioner of Central Excise or Commissioner of Central Excise ,$ppeals- for the
purposes of the $ct and the rules made there under.
(3 $ny Central Excise Bfficer may exercise the powers and discharge the duties conferred or
imposed by or under the $ct or these rules on any other Central Excise Bfficer who is subordinate to
him.
Definition of Central Excise @fficer 0ection ,(b of CEA
(Central Excise ;fficer( means the 4hief 4ommissioner of 4entral Excise, 4ommissioner of 4entral
Excise, 4ommissioner of 4entral Excise %ppeals!, %dditional 4ommissioner of 4entral Excise, Moint
4ommissioner of 4entral Excise, %ssistant 4ommissioner of 4entral Excise or Deputy 4ommissioner
of 4entral Excise or any other officer of the 4entral Excise Department, or any person including an
officer of the 3tate 9o)ernment! in)ested by the 4entral 7oard of Excise and 4ustoms constituted
108
under the 4entral 7oards of Ne)enue %ct, @AF# with any of the powers of a 4entral Excise ?fficer
under this %ct;
0ection &,E9 .o$ers of Central Excise @fficers92
@! % 4entral Excise ?fficer may exercise the powers and discharge the duties conferred or imposed
under this %ct on any other 4entral Excise ?fficer who is subordinate to him.
/! Jotwithstanding anything contained in sub-section @!, the 4ommissioner of 4entral Excise
%ppeals! shall not exercise the powers and discharge the duties conferred or imposed on a
4entral Excise ?fficer other than those specified in section 14 or C#apter +*".
0ection &(: .o$er to summon 6ersons to :ive evidence and 6roduce documents in inOuiries
under t8is Act
@! %ny 4entral Excise ?fficer duly empowered by the 4entral 9o)ernment in this behalf, shall ha)e
power to summon any person whose attendance he considers necessary either to gi)e e)idence or to
produce a document or any other thing in any inquiry which such officer is ma*ing for any of the
purposes of this %ct. % summons to produce documents or other things may be for the production of
certain specified documents or things or for the production of all documents or things of a certain
description in the possession or under the control of the persons summoned.
/! %ll persons so summoned shall be bound to attend, either in person or by an authorised agent, as
such officer may direct; and all persons so summoned shall be bound to state the truth upon any
sub:ect respecting which they are examined or ma*e statements and to produce such documents and
other things as may be required5
Hro)ided that the exemptions under sections @#/ and @## of the 4ode of 4i)il Hrocedure,@A0$E of
@A0$! shall be applicable to requisitions for attendance under this section.
#! E)ery such inquiry as aforesaid shall be deemed to be a ":udicial proceeding" within the meaning
of section @A# and section //$ of the Indian Henal 4ode, @$F0 LE of @$F0!.
+ule (: .ayment of duty on removal
(& Every person who produces or manufactures any excisable goods, or who stores such goods in a
warehouse, shall pay the duty livable on such goods in the manner provided in rule . or under any
other law.
7o excisable goods, on which any duty is payable, shall be removed without payment of duty from
any place, where they are produced or manufactured, or from a warehouse, unless otherwise
provided0
(&A 7otwithstanding anything contained in sub:rule ,1-, every person who gets the goods, falling
under Chapter &1 or &% or &= of the 2irst chedule to the Tariff $ct, produced or manufactured on his
109
account on job wor3, shall pay the duty leviable on such goods, at such time and in such manner as is
provided under these rules, as if such goods have been manufactured by such person0
.rovided t8at such person may authori?e the job wor3er to pay the duty leviable on such goods on
his behalf and the job wor3er so authori?ed may underta3e to discharge all liabilities and comply with
all the provisions of these rules0
Explanation92 2or the purposes of this sub:rule, the expression Njob wor3erN means a person engaged
in manufacture, or underta3ing any process on behalf and under the instructions of such person for
manufacturing, from any inputs or goods supplied by such person or by any other person authori?ed
by such person so as to complete a part or whole of the process resulting ultimately in the
manufacture of goods falling under chapters &1 or &% or &= of the 2irst schedule to the Tariff $ct, and
the term Ijob wor3J shall be construed accordingly. D.#is is ne4 -!$-8!leE
In case of molasses, the duty shall be paid by the procurer
In all other case, if the goods are in the factory, the duty liability shall be of the manufacturers
If goods have been stored in the warehouse, the duty liability shall be of the warehouse
3eeper.
<epending upon the nature of goods or due to shortage of space in the factory, the
Commissioner may allow storage of finished goods out side the factory, without paying duty
thereon, subject to such terms and conditions, as may be deemed for protecting the interest of
revenue.
,%- 7otwithstanding anything contained in sub:rule ,1-, where molasses are produced in a 3handsari
sugar factory, the person who procures such molasses, whether directly from such factory or
otherwise, for use in the manufacture of any commodity, whether or not excisable, shall pay the duty
leviable on such molasses, in the same manner as if such molasses have been produced by the
procurer.
,=- YYYYY
,/- 7otwithstanding anything contained in sub:rule ,1-, Commissioner may, in exceptional
circumstances having regard to the nature of the goods and shortage of storage space at the premises
of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other
place outside such premises, without payment of duty subject to such conditions as he may specify.
+ule *: Effective +ate of duty and tariff value
In case of molasses, the duty shall be payable at the rate prevailing when goods are received
in the premises of the procurer
In case of all other goods the duty shall be payable at the rate prevailing on the date of
removal of goods from the place of removal
In case of captive consumption, the duty shall be payable at the rate prevailing when the
goods are released for captive consumption.
110
+ule D: Assessment
Except where goods are covered under section =$ and where the assessee has opted for
Compounded levy scheme under 5ule 1' of these 5ules, all other goods are covered under
self assessment i.e. 8alue, classification, rate of duty and amount of duty shall be determined
by the assessee himself.
Except cigarettes, all the goods shall be removed by assessee under self control.
Cigarettes shall be removed only when the invoice has also been signed by a central excise
officer. This is referred as removal under 68ysical control9
+ule 4: .rovisional Assessment
Except where goods are covered under section =$ and where the assessee has opted for
Compounded levy scheme under 5ule 1' of these 5ules, where the assessee cannot determine
the correct value or rate of duty applicable, he may apply to $C#<C for obtaining permission
to pay the duty on provisional basis.
The $C#<C will fix value#rate of duty provisionally, at which duty shall be paid by the
assessee for removal of the goods and the assessee shall also execute a bond to pay the
differential amount of duty together with interest, if any, determined by the $C#<C.
uch permission is generally not given for more than six months.
<uring this period, all the invoices issued by the assessee shall be endorsed with the fact that
the duty has been paid provisionally.
The assessment shall be finali?ed by the $C#<C within six months since the date of order
under which he has authorised the assessee to pay the duty provisionally.
Ghere duty paid provisionally is less than the actual liability of the assessee, the assessee
shall pay the differential amount of duty together with interest E 1=C p.a. starting from 1
st
day after the end of the month in which the duty should have been paid, until it is paid.
Ghere duty already paid provisionally is on the higher side, the excess amount becomes
refundable, subject o <octrine of (njust Enrichment.
+ule ): Time and manner of 6ayment of duty
$ll assessees who have paid duty of exceeding 5s. 16.66 lacs during preceding financial year are
re1uired to pay the duty during current financial year only through e:payment.
$ll payments made through e:payment upto ..66 +@ are considered to be payment made on the
same day otherwise it will be treated as payment made on the next day.
Ghere payment is made in cash ,Che1ue-, the date on which che1ue is presented in the ban3 is
the date of payment of duty provided the che1ue is not dishoniured later on.
$ssessees availing value based exemption during current financial year are re1uired to ma3e
payment 1uarterly and all other assessees are re1uired to ma3e payment on monthly.
$ll assessee shall pay duty within ' days after the end of month or 1uarter, as the case may be and
if duty is being paid through e:payment then within & days.
In case of month or 1uarter ending =1
st
@arch, the duty shall also be paid on or before =1
st
@arch.
In case of any delay, interest is payable E1=C p.a. for the period of delay and if the delay
exceeds =6 days, periodical facility of payment lapses automatically. It means, the assessee will
111
have to pay the duty on consignment basis, only in cash, before removal of every consignment,
until all the previous dues are cleared.
+ule ': +e:istration
$ll the manufacturers of excisable goods, traders and consumers are re1uired to be registered
under the Central Excise $ct but the C;EC is empowered to prescribe the persons who are not
re1uiring registration under the $ct. UThese provisions are discussed in detail under section & of
the Central Excise $ct in next ChapterL
+ule &-: Daily 0toc1 Account
The assessee shall maintain <$ for inputs as well as finished goods containing entries in
respect of opening stoc3 of the day, additions during the day, removals during the day and
closing stoc3.
This re1uired shall be updated on daily basis at a fixed time and the time so fixed by the
assessee shall be informed to the uperintendent.
The record shall be preserved for ' years after the end of financial year to which it relates.
If record is maintained on computer then print out shall be ta3en on monthly basis and
then it be preserved for ' years after the end of financial year to which it relates.
+ule &&: Invoice
$ny of the goods shall not be removed from the factory for delivery to the customer unless it is
accompanied with an invoice containing name of the assessee, address of the premises, jurisdiction
office of the superintendent, date and time of removal of goods, description, classification and value
of goods, amount of excise duty and education cess shown separately.
The invoice is re1uired to be signed by the assessee or any of his authorised agent and in case of
cigarettes, every invoice shall be signed by the Central Excise office also.
The invoice is to be prepared in three copies out of which first copy is for the customer, second copy
is for the transporter and third copy is for assessee"s own record.
eparate invoice is re1uired to be prepared for every vehicle though which goods are being removed.
$ll the invoices issued during the financial year shall be consecutively numbered and where printed
invoice boo3 is being maintained, in case of cancellation of any invoice, all three copies shall be
preserved in record.
+ule &,: +eturns
Every person liable to pay duty is re1uired to pay duty under the $ct shall file a return.
$ssessee availing value based exemption is re1uired to file 1uarterly return within 16 days
after the end of 1uarter and every other assessee shall file a monthly return within ten days
after the end of month.
112
Every assessee who has paid duty of rupees ten lacs or more during the preceding
financial year is re1uired to file all the returns during current financial year only through e:
filing.
Every assessee has paid duty of rupees ten lacs or more during the preceding financial
year is also re1uired to file an annual financial statement in the prescribed format on or before
=6
th
7ovember.
$ssessee who opts for compounded levy scheme as well as an assessee under section =$
shall file a return of installed capacity of production on or before =6
th
$pril.
+ule &,AA: Me$llery and ot8er articles of 6recious metals
$n article or piece of jewllery on which brand name has been printed or embossed or engraved is
referred as branded jewllery for the purpose of Central Excise. +rovisions are applicable for jewllery
as well as other articles of precious metals.
If such articles are manufactured on job wor3 basis, the duty liability is only on the principle on
behalf of such goods are manufactured by the job wor3er.
ince duty liability is on the principle, he has to be registered with the department as an assessee and
he is re1uired to comply with all the re1uirements of the $ct as well as 5ules framed thereunder.
The principle is authorised to remove the gods from the premises of the job:wor3er under his own
invoice. 2or the purpose of removal the assessee shall prepare an invoice without date and time and
removal and all the copies are sent to the job:wor3er. Ghen goods are actually removed, the job:
wor3er will fill up the date and time of removal and assessee"s copy is returned to the assessee.
+ule &,"": #ar:e Tax .ayer
*arge Tax payer means an assessee P
a. having a permanent account number allotted under the Income Tax $ct, and
b. 9aving one or more registered premises, and
c. Gho has paid excise duty or service tax or both, in cash, during preceding financial year
not less than 5s. '.66 cr or who has paid income tax for the previous financial year or advance tax
for the current financial year not less than 5s. 16.66 cr.
2or *T+s the Central )overnment has extended a facility of centrali?ed assessment in respect of
income tax, central excise and service tax. The office assigned for centrali?ed assessment is called as
*T(.
The facility is optional for the assessee and an eligible assessee may enter into the scheme by ma3ing
of an application the Commissioner having jurisdiction over the *T( but an assessee already under
*T( may exit from the scheme only on change of financial year with the prior approval of the
Commissioner provided an application has been made in this regard at least =6 days before the
change of financial year.
113
*T+ is authorised to transfer any of the inputs and semi finished goods, other than petrol and diesel,
from one premises to another without reversal of cenvat credit as well as without paying duty but
such goods shall be removed from the recipient premises within & months on payment of duty.
*T+ is also authorised to transfer cenvat credit from one premises to another through challan.
+ule &,CC: .o$er to im6ose restrictions
Gith a view to ensure compliance with all the provisions of the $ct, rules, regulations and to protect
the interest of revenue, the commissioner has been authorised to impose any reasonable restrictions on
an assessee.
+ule &*: Com6ounded #evy 0c8eme
This is scheme is optional for the manufacturers of $luminum circles and steel patties. If assessee is
opting for this scheme, duty is payable on installed capacity of production on monthly basis, within
first ' days of the month. The assessee need not maintain any record, need not file any return and the
amount of duty paid by him cannot be shown in the invoice of the assessee. Effectively, customers of
such an assessee cannot avail any cenvat credit.
+ule &D: "rin:in: bac1 duty 6aid :oods in t8e factory
Ghere any goods have been removed from the factory on payment of duty and those are brought bac3
,before sale- the assessee is entitled to avail credit for the duty paid by him at the time of removal of
goods.
If such goods are removed subse1uently without nay process being carried out, then the credit availed
shall be reversed.
If such goods are subjected to any process then P
a. If the process amounts to manufacture then duty is payable at the time of removal
b. If the process does not amount to manufacture then cenvat credit availed shall be
reversed.
+ule &DA: +emoval of :oods for ?ob2$or1 outside
Ghere inputs of semi:finished goods are re1uired to be sent for the job:wor3 outside, without reversal
of credit, it re1uires prior approval of the Commissioner and this approval is granted on annual basis.
The approval is given subject to such terms and conditions as may be necessary for protection of
interest of revenue.
The goods sent out for job:wor3 shall be received bac3 within 1.6 days.
+ule &D": +emoval for 6art activity in anot8er 6remises of t8e assessee
114
Ghere inputs of semi:finished goods are re1uired to be sent to another premises of the assessee for
carrying out some activity, without reversal of credit, it re1uires prior approval of the Commissioner
and this approval is granted on annual basis.
The approval is given subject to such terms and conditions as may be necessary for protection of
interest of revenue.
The goods sent out for job:wor3 shall be received bac3 within 1.6 days.
pecial permission may also be granted for final removal of the goods from the premises of job:
wor3er or from another premises of the assessee.
+ule &DC: +emoval for some activity t8at does not amount to manufacture
If goods are re1uired to removed for some activity outside the factory which does not amount to
manufacture that it re1uires prior approval of the commissioner e.g. road test of vehicles.
The goods shall be brought bac3 within the specified time limit.
+ule &4: +emoval of :oods by &--L E@J in DTA
The unit shall be registered as per rule 4
)oods shall be removed under the cover of an invoice as per rule 7o. 11
The unit shall pay duty monthly as per rule 7o..
The unit shall file a monthly return as per rule 7o. 1%
The returns filed by such units may be scrutini?ed by the <eptt.
+ule &): Ex6ort under claim of rebate
Ghere finished goods have been removed on payment of duty and such goods are exported
within six months then duty paid on such goods at the time of removal shall be refunded as
rebate provided P
,a- <uty drawbac3 is not claimed under the Custom $ct
,b- The goods have not been declared by the Central )overnment as non:identifiable
Ghere finished goods are removed for export without paying duty and cenvat credit has not
been availed then rebate is allowed for the duty paid on inputs provided duty drawbac3 has
not been claimed under the Custom $ct.
+ule &': +emoval of :oods $it8out 6ayin: duty
$n assessee is authorsed to remove finished goods without paying duty for export directly or through
a merchant exporter as well as for manufacture of export goods.
115
+ule ,-: Eare8ousin: of finis8ed :oods
The central government may authorise warehousing of finished goods outside the factory without
paying duty subject to such terms and conditions are deemed fit for protecting the interest of revenue.
uch authori?ation is given either due to shortage of space in the factory or due to nature of the goods
<uring the course of transit between factory and warehouse or between one warehouse to another, the
duty liability shall be of the consignor until the goods have been delivered to the consignee.
+ule ,&: +emission of duty
Ghere finished goods are destroyed or lost or those become non:mar3etable otherwise, before
removal of goods from the factory, on an application of the assessee, the Central Excise officer may
allow remission of duty on such goods within his authori?ation limit.
The limits within which remission of duty may be allowed by the officer are as under P
@fficer $8o is aut8orised to allo$ remission of
duty
Amount of duty for $8ic8 remission may be
allo$ed
uperintendent (pto 5s. 16,666#:
$sst. Commissioner# <y. Commissioner Exceeding 5s. 16,666#: and upto 5s. 1,66,666#:
At. Commissioner Exceeding 5s. 1,66,666#: upto 5s. ',66,666#:
Commissioner Exceeding 5s. ',66,666#:
+ule ,,: Ins6ection
$ central excise officer authorised by general or special order of the commissioner may enter into any
registered premises at any time for verification of stoc3 and record as may be necessary for
safeguarding the interest of revenue.
Every assessee, and first stage and second stage dealer shall furnish to the officer empowered under
sub:rule ,1-, a list in duplicate, of:
i. $ll the records prepared and maintained for accounting of transaction in regard to receipt,
purchase, manufacture, storage, sales or delivery of the goods including inputs and capital
goods, as the case may beH
ii. $ll the records prepared and maintained for accounting of transaction in regard to
payment for input services and their receipt or procurementH and
iii. $ll the financial records and statements including trial balance or its e1uivalent.
ub:rule ,=- provides that every assessee, and first stage and second stage dealer shall, on demand
ma3e available to the officer empowered under sub:rule ,1- or the audit party deputed by the
Commissioner or the Comptroller and $uditor: )eneral of India, or a cost accountant or chartered
accountant nominated under section 1/ $ or section 1/ $$ of the $ct,:
,i- the records maintained or prepared by him in terms of sub:rule ,%-H
,ii- the cost audit reports, if any, under section %==; of the Companies $ct, 14'&,1 of
14'&-H and
116
,iii- the income:tax audit report, if any, under section // $; of the Income:tax $ct, 14&1
,/= of 14&1-,
for the scrutiny of the officer or the audit party or the cost accountant or chartered accountant, within
the time limit specified by the said officer or the audit party or the cost accountant or chartered
accountant, as the case may be.
-eiG!re of record K Ghere the central excise officer is of the opinion that the record may be destroyed
or falsified or mutilated then he may sei?e such record.
+ule ,3: Ins6ection
Ghere the central excise officer is of the opinion that any conveyance is carrying any goods on which
duty has been evaded, he may re1uire such conveyance to stop for inspection.
+ule ,(: 0eiRure or detention of :oods
If a Central Excise Bfficer, has reason to believe that any goods, which are liable to excise duty but
no duty has been paid thereon or the said goods were removed with the intention of evading the duty
payable thereon, the Central Excise Bfficer may detain or sei?e such goods.
+ule ,(A: +eturn of seiRed records
The boo3s of accounts or other documents, sei?ed by the Central Excise Bfficer or produced by an
assessee or any other person, which have not been relied on for the issue of notice under the $ct or
the rules made thereunder, shall be returned within thirty days of the issue of said notice or within
thirty days from the date of expiry of the period for issue of said notice0
+rovided that the Commissioner of Central Excise may order for the retention of such boo3s of
accounts or documents, for reasons to be recorded in writing and the Central Excise Bfficer shall
intimate to the assessee or such person about such retention.
+ule ,*: .enalty
If any producer, manufacturer, registered person of a warehouse or a registered dealer, K
,a- removes any excisable goods in contravention of any of the provisions of these rules or the
notifications issued under these rulesH or
,b- does not account for any excisable goods produced or manufactured or stored by himH or
,c- engages in the manufacture, production or storage of any excisable goods without having applied
for the registration certificate re1uired under section & of the $ctH or
,d- contravenes any of the provisions of these rules or the notifications issued under these rules with
intent to evade payment of duty,:
then, all such goods shall be liable to confiscation and the producer or manufacturer or registered
person of the warehouse or a registered dealer , as the case may be, shall be liable to a penalty not
exceeding the duty on the excisable goods in respect of which any contravention of the nature
referred to in clause ,a- or clause ,b- or clause ,c- or clause ,d- has been committed, or rupees two
thousand , whichever is greater.
117
+ule ,D: .enalty for abatin: t8e offence
$ny person who ac1uires possession of, or is in
any way concerned in transporting, removing,
depositing, 3eeping, concealing, selling or
purchasing, or in any other manner deals with,
any excisable goods which he 3nows or has
reason to believe are liable to confiscation under
the $ct or these rules, shall be liable to a penalty
not exceeding the duty on such goods or
rupees
&
Utwo thousand rupees,L whichever is
greater.
$ny person, who issues:
,i- an excise duty invoice without delivery of
the goods specified therein or abets in
ma3ing such invoiceH or
,ii- any other document or abets in ma3ing
such document, on the basis of which the
user of said invoice or document is li3ely
to ta3e or has ta3en any ineligible benefit
under the $ct or the rules made there
under li3e claiming of CE78$T credit
under the CE78$T Credit 5ules, %66/ or
refund,
shall be liable to a penalty not exceeding the
amount of such benefit or five thousand rupees,
whichever is greater.
+ule ,4: /eneral 6enalty
$ny contravention of the rules for which no specific penalty is prescribed is punishable with fine
which may extend upto 5s. ',666.
+ule ,): Confiscated 6ro6erty vests in t8e C/
$ll the goods confiscated under the provisions of these rules shall vest in Central )overnment.
+ule ,': Dis6osal of confiscated :oods
The goods confiscated under the provisions of these rules shall be disposed as may be directed by the
Commissioner
+ule 3-: Eare8ousin: c8ar:es
Ghere goods are confiscated under the provisions of these rules and the person from whose
possession goods are confiscated agrees to pay extra fine in lieu of confiscation then he shall also pay
warehousing charges of the department.
118
D
Central Excise Act% &'((
]$mended upto =6
th
$pril %61=^
0ection &: +rovisions of the $ct are applicable throughout India since %.
th
2ebruary 14//
Note Though provisions of the $ct are applicable all over India but it does not mean that duty shall
be charged throughout India. (nder section '$ of the $ct, the Central )overnment is empowered to
allow exemptions. 8arious areas are exempted form duty liability e.g. Aammu and Qashmir, Quttch
<istrict of )ujarat.
0ection ,: Definitions
(a Ad?udicatin: Aut8ority $ny authority or officer who is authorised to ta3e a decision or to
pass an order under the $ct but does not include C;EC, $ppellate Tribunal and Commissioner
,$ppeals-
(aa A66ellate Tribunal means $ppellate Tribunal constituted under section 1%4 of the
Custom $ct
(aaa "ro1er or Commission A:ent @eans any person who is generally engaged in the course
of entering into contract for buying#selling of goods on behalf of others in the ordinary course of
his business.
(b Central Excise officer means Chief Commissioner, Commissioner, Commissioner
,$ppeals-, $dditional Commissioner, Aoint Commissioner, $ssistant Commissioner, <eputy
Commissioner, uperintendent and other junior officers who are appointed for discharging
functions under the $ct.
(c curin: means any activity related to unmanufactured goods by which such goods become
capable of being used in manufacture or for sale e.g. cutting, drying, wilting etc..
(d Excisable :oods means all the goods referred under schedule I and II of the Central Excise
Tariff $ct, 14.' and includes salt.
Explanation K $ny article or material resulting out of manufacture and capable of being bought
and sold for a consideration will re regarded as mar3etable.
(e Aactory means any premises including precincts thereof in any part of which any activity
related to manufacture of excisable goods is being carried on or generally so carried on.
(ee Aund means Consumer Gelfare 2und constituted under section 1%C of the $ct.
(f 5anufacture includes ,i- every activity ancillary or incidental to the completion of
manufacture ,ii- $ctivities specified under the Chapter or section notes of chedule I of CET$
,iii- In relation to goods referred under schedule III of the CE$, pac3ing, repac3ing, labeling,
relabeling, pricing, repricing and any other activity by which such goods become mar3etable to
the ultimate consumer.
(8 B0aleC and B.urc8aseC means transfer of possession for any valuable consideration.
119
(1 E8ole sale dealer means any person who buys the goods in bul3 for the purpose of under
in manufacture or for resale and also includes a bro3er or commission who also stores goods on
behalf of another.
0ection 3 #evy and collection of duty
Excise duty shall be levied and collected on all the excisable goods as under P
/oods manufactured in India and removed to
DTA
/oods manufactured in &--L E@J and
brou:8t to DTA
The ;asic Excise <uty shall be as per chedule I
of CET$ and pecial Excise <uty shall be as
chedule II of CET$.
It is to be noted that the duty shall be e1ually
chargeable even when goods are manufactured by
or for government.
Excise duty on such goods shall be e1ual to
aggregate of all the custom duties chargeable on
import of same goods and where custom duty is
chargeable at different rates then for the purpose
of excise duty, custom duty shall be calculated at
the highest rate. 8aluation of such goods shall
also be as per Custom $ct only.
(nder section 3&2'/ the Central )overnment may fix tariff value of any of the articles for the purpose
of charging duty and tariff value may differ for different categories of same articles, different areas,
different manufacturers and customers.
0ection 3A Duty on installed ca6acity of 6roduction
+rovisions of this section are applicable only for pan masala and gut3ha. ,7o option
available-
@anufacturers of these articles are not entitled for 8alue ;ased Exemption ,also 3nown
as I exemption-.
Every such manufacturer shall file a return of installed capacity of production with the
$C#<C on or before =6
th
$pril and then the $C#<C shall determine the capacity for the purpose
of charging duty in the prescribed manner.
<uty is payable every month on or before '
th
day of the month, in advance.
If there is any change in rate of duty or production capacity during the month then
adjustment is allowed in the following month.
Ghere advance intimation is given that any machine or unit is not going to be in
production for a continuous period of 1' days then adjustment is allowed in the next month.
0ection ( Valuation based on transaction value
$ssessable value of the goods for the purpose of charging duty shall be P
120
,a- Transaction value P where goods are sold by the assessee for the purpose delivery to the
customer at the time and place of removal where price is the sole consideration and the buyer
and seller are not related.
,b- Ghere assessable value cannot be determined under clause ,a- then it shall be determined
in the prescribed manner.
ub:section ,%- provides that where tariff value has been fixed by the Central )overnment for the
purpose of duty, nothing contained above i.e. related to transaction value, shall be applicable.
There are few definitions we have already discussed under the 8aluation chapter and those definitions
are relevant for correct interpretation of sub:section ,1- referred above. Bnly for your reference,
please note that those definitions are ::
,a- $ssessee
,b- 5elated
,c- +lace of 5emoval
,cc- Time of 5emoval
,d- Transaction 8alue
0ection (A9 Valuation of excisable :oods $it8 reference to retail sale 6rice9
This topic we have already covered in detail under the 8aluation Chapter. o, here it is only is 1uic3
reference of the section.
,1- The Central )overnment may, by notification in the Bfficial )a?ette, specify any goods, in
relation to which it is re1uired, under the provisions of the *egal @etrology $ct, %664 ,1of %616 or
the rules made thereunder or under any other law for the time being in force, to declare on the
pac3age thereof the retail sale price of such goods, to which the provisions of sub:section ,%- shall
apply.
,%- Ghere the goods specified under sub:section ,1- are excisable goods and are chargeable to duty
of excise with reference to value, then, notwithstanding anything contained in section /, such value
shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if
any, from such retail sale price as the Central )overnment may allow by notification in the Bfficial
)a?ette.
,=- The Central )overnment may, for the purpose of allowing any abatement under sub:section ,%-,
ta3e into account the amount of duty of excise, sales tax and other taxes, if any, payable on such
goods.
,/- where any goods specified under sub:section ,1- are excisable goods and the manufacturer:
,a- remove such goods form the place of manufacture without declaring the retail sale price of
such goods on the pac3ages or declares a retail sale price which is not the retail sale price as
re1uired to be declared under the provisions of the $ct, 5ules or other law as referred to in sub:
section ,1- H or
,b- tampers with, obliterates or alters the retail sale price declared on the pac3ages of such
goods after their removal from place of manufacture,
121
then, such goods shall be liable to confiscation and the retail sale price of such goods shall be
ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for
the purposes of this section.
Explanation 1.(2or the purposes of this section, Nretail sale priceN means the maximum price at
which the excisable goods in pac3aged form may be sold to the ultimate consumer and includes all
taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges
towards advertisement, delivery, pac3ing, forwarding and the li3e, as the case may be, and the price
is the sole consideration for such sale.
.rovided that in case the provisions of the $ct, 5ules or other law as referred to in sub:section
,1- re1uired to declare on the pac3age, the retail sale price excluding any taxes, local or otherwise,
the retail sale price shall be construed accordingly.
Ex6lanation , 0 2or the purposes of this section,:
,a- Ghere on the pac3ages of any excisable goods more than one retail sale price is declared,
the maximum of such retail sale price shall be deemed to be the retail sale priceH
,b- Ghere the retail price, declared on the pac3age of any excisable goods at the time of its
clearance from the place of manufacture, is altered to increase the retail sale price, such altered
retail sale price shall be deemed to be the retail sale price.
,c- where different retail sale prices declared on different pac3ages for the sale of any excisable
goods in pac3aged form in different areas, each such retail price shall be the retail sale price for the
purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale
price relates.
0ection * +emission of duty
8emission K @eans waiver of duty. Sou have understood the fact that the duty liability accrues as
soon as goods are manufactured but there are all the possibilities the some of the manufactured goods
are destroyed or wasted during handling also before the goods are actually removed. Therefore, need
arises for remission of duty
+rovisions of this section are applicable for normal loss of goods during handling as well as natural
loss due to nature of goods.
The Central government is empowered to fix the limit upto which normal#natural loss is acceptable
and if the normal#natural loss is within the permissible limit, the assessee is having right to claim
remission for that much 1uantity of goods.
The prescribed limit of natural loss may differ for different areas, and for period of storage.
0ection *A .o$er of t8e Central /overnment to :rant exem6tion
The word exemption creates an impression that duty will not be payable but this is not true always
because exemption can be of various types P
,a- +artial or 2ull
,b- Conditional or unconditional
,c- Compulsory#Bptional
122
,d- )oods
,e- $ssessee
,f- $rea
,g- Transaction
,h- +urpose ,use of goods-
(nder this section the central government is empowered is empowered to allow all types of
exemptions.
Exemption can be granted in 6ublic interest Exemption can be granted under s6ecial
circumstances
uch exemption of given by way of issue of
notification
uch exemption is given by way of issue of order
$ny such exemption is automatically available to
every person if he is eligible
$ny such exemption is available only to the
person to whom it is granted.
(nless otherwise provided, the exemption is
applicable from the date of issue of notification.
Exemption is applicable from the date specified
in teh order.
$ny such exemption is not applicable for the
goods manufactured in 166C EB(s and brought
to <T$
Ghere goods are unconditionally fully exempt,
the assessee cannot pay any duty
It is to be noted that the power to grant exemption automatically includes power to withdraw the
exemption.
The central government may add any clarification in the notification or oder within one year since
issue and any such clarification will have effect as if it was a part of original notification or order.
0ection D: +e:istration
$ccording to this section every manufacturer, store3eeper, trader and consumer shall be registered
under the $ct but this is to be read along with 5ule 4 of the Central Excise 5ules.
(nder 5ule 4 of the CE5, the C;EC is authorised to prescribe person re1uiring registration and the
persons not re1uiring registration
.ersons necessarily reOuired to be re:istered .ersons not necessarily reOuired to be
re:istered
1. Every manufacturer of dutiable goods
who is liable to pay duty
%. Every person willing to avail CE78$T
credit
=. Every person who is willing to store
dutiable goods outside the factory without
payment of duty
/. Every trader who wishes to issue
cenvatable invoice
'. Every person who is entitled to avail end
1. @anufacturer of 7on:excisable goods,
Exempted goods, nil rate goods.
%. @anufacturer of dutiable goods but
availing I exemption
=. @anufacture under section &' of the
Custom $ct is a bonded warehouse.
/. $ny person storing or trading in duty
paid goods
'. $ny consumer of goods who is not
entitled to avail CE78$T crdit e.g. ultimate
123
use based exemption.
&. +rinciple who gets goods covered under
chapter &1, &% and &= of CET$
manufactured on job:wor3 basis.
>. +rinciple who gets jewllery and other
articles of precious metals manufactured on
job:wor3 basis.
consumer
&. +ersons carrying out manufacture of
goods covered under chapter &1, &%, &= of
CET$ as well as jewllery and other articles
of previous metals.
0ection ): .rovisions related to tobacco
Every person willing to cultivate tobacco for commercial purpose or to store tobacco for commercial
purpose in commercial 1uantity is re1uired to be registered under the $ct and he shall be bound to
comply with the relevant provisions of the $ct and 5ules made in that regard.
0ection ': .enalty
Bffences covered under this section are
,a- Contravention of any of the provisions related to section .
,b- Evasion of duty
,bb- 5emoval of goods in clandestine manner
,bbb- $c1uiring, buying, selling, concealing or transporting the goods 3nowingly that those are the
goods on which duty has been evaded
,bbbb- Contravention of any of the provisions of the $ct or any 5ules or 5egulations made under
the $ct
,c- 2ailure to furnish information
,d- $ttempting to commit any offence under the $ct
In case of first offence P
,a- where the amount of duty involved does not exceed 5upees thirty lac P imprisonment upto three
years
,b- where the amount of duty involved exceeds 5upees thirty lac P imprisonment upto seven years
2or any subse1uent offence, imprisonment may extent upto seven years.
Ghere the imprisonment exceeds three years as well as for any subse1uent offence the imprisonment
shall not be less than six months unless the court is having special reasons to be recorded in writing.
The following shall not be considered to be special reasons for awarding less imprisonment P
,a- 2irst offence of the assessee
,b- 2act that he is acting on the instructions of another person
,c- 2act that the goods have already been confiscated
,d- $ge of the person.
0ection 'A: Com6oundin:
124
$ny person who has committed any offence under the $ct may, before or after the commencement of
the prosecution, apply for compounding of offence to the Chief Commissioner of Central Excise
under whose jurisdiction offence has been committed with a view to get relief against any prosecution
and penalty for the offence in future.
0ection 'AA: @ffences by Com6anies
2or the purpose of this $ct company includes partnership and <irector includes a partner.
Ghere any offence is committed by a company, the company as well as the officer in:charge of the
affairs of the company shall be punishable.
The <irector or manager or secretary because of whose negligence or connivance the offence is
committed is said to be guilty of offence but where any director or manager or secretary proves that
the offence has been committed without his 3nowledge or that he has ta3en all the care to ensure that
the offence is not committed, then he shall not be punishable.
0ection '": .ublication of name etc9
Ghere any person is convicted for an offence under this $ct by the Court, the Court trying the offence
may order for publication of name and address of the person, offence committed and the punishment
inflicted in the newspaper as may be directed by the court.
$ny such punishment shall not be ordered unless the time limit for filing the appeal has expired and
the appeal has not been filed.
Ghere any such publication is made, the expenses of any such publication shall be recovered from the
person concerned as if it is amount due to be recovered from him under the $ct.
0ection 'C: Cul6able mental state
Ghere any offence under the $ct re1uires culpable mental state, unless otherwise proved that the
person who has committed the offence is deemed to have committed the offence with the culpable
mental state.
0ection 'D: +elevance of a statement
(nless the court is satisfied otherwise, where any statement is made by any person before the Central
Excise officer and it is signed by him then the statement shall be acceptable as an evidence even if
such person is not available later on due to any reason.
0ection &-: Aorfeiture of container% mac8ine etc9
Ghere any person is convicted for an offence under the $ct and goods are confiscated, the court
trying the offence may also order for forfeiture of containers in which goods are 3ept as well as
machinery and e1uipments used for manufacture of such goods.
0ection &&: +ecovery
125
+rovisions of this section are applicable for recovery of all the sums due from any person
under the $ct.
$ny amount due from the assessee may be recovered from the assessee by way of adjustment
against any amount refundable to him and also by confiscation of excisable goods.
Ghere amount cannot recovered as above, the Central Excise Bfficer may issue a certificate
of the amount due to the 5ecovery Bfficer who is the <istrict Collector having jurisdiction
over the place where assessee carries on business or resides and the recovery officer is ma3e
recovery as arrears of land revenue.
Ghere assessee has transferred ownership of the business before any such recovery
proceedings commence, then the transferee shall also be e1ually liable to pay the amount due
from the assessee.
0ection &&A9 +ecovery of duties not levied or not 6aid or s8ort2levied or s8ort26aid or
erroneously refunded9V
Note 1 - +rovisions of this section are not applicable where assessee has opted for compounded
levy scheme under rule 1' of the Central Excise 5ules, %66% as well as for the assessee who is
re1uired to pay duty on installed capacity of production.
Note 1 K +rovisions of this section are e1ually applicable for recovery of interest amount also.
.rovisions
5easons for non:levy, short levy, non:payment, short payment or erroneous refund can be divided
in three categories
,a- @ista3e
,b- 2raud, misrepresentation, suppression of facts, collusion or contravention of provisions
,c- Entries are discovered in the assessee"s records during the course of excise audit or special
audit or inspection etc.
5ista1e
If it is discovered by the assessee on his own or it is brought to his notice by the officer that any
amount of duty has not been paid or short paid or not levied or short levied or erroneously
refunded to him he may pay the duty $it8 interest% as 6er section &&AA% voluntarily. If assessee
ma3es any such payment he shall intimate the superintendent.
If the assessee has discharged full liability then show cause notice will not be issued under this
section. 9owever, if any amount is remaining, show cause notice can be issued only of that
amount. The C7 can be issued within one year from the relevant date. 9ere it is important to note
that where issue of show cause notice is prohibited by any order of court then the period for which
such order is in force, that period during which such prohibition order is in force is to be excluded.
2or the purpose of this section relevant date means P
,i- in the case of excisable goods on which duty of excise has not been levied or paid or
has been short:levied or short:paid, and no periodical return as re1uired by the
126
provisions of this $ct has been filed, the last date on which such return is re1uired to be
filed under this $ct and the rules made thereunderH
,ii- in the case of excisable goods on which duty of excise has not been levied or paid or
has been short:levied or short:paid and the return has been filed on due date, the date on
which such return has been filedH
,iii- in any other case, the date on which duty of excise is re1uired to be paid under this
$ct or the rules made thereunderH
,ivin a case where duty of excise is provisionally assessed under this $ct or the rules
made thereunder, the date of adjustment of duty after the final assessment thereofH
,v- in the case of excisable goods on which duty of excise has been erroneously
refunded, the date of such refundH
<uty liability of assessee shall be determined by the officer after giving opportunity to the assessee
within a period f six months since issue of notice and that amount shall be paid by assessee with
interest and penalty under section 11$C. The duty liability determined by the officer cannot
exceed the amount indicated in the C7.
$ccording to section 11$C, if amount of duty is paid by the assessee within =6 days since order is
communicated to him then the penalty shall be %'C of the duty provided this amount is paid
within the same period of =6 days otherwise it shall be e1ual to the amount of duty.
If duty liability is reduced in appeal then interest and penalty shall be payable on reduced amount.
If duty liability of the assessee is modified in appeal then time for payment of duty and interest
shall be counted from the date of order passed in appeal.
Araud% misre6resentation% su66ression of facts% collusion or intentional contravention of
6rovisions etc9
In any such case, the central excise officer may issue a show cause notice to the assessee
concerned re1uiring him to show cause why he should not pay the amount specified in the notice
along with interest payable thereon under section 11$$ and a penalty e1uivalent to the duty
specified in the notice.
If assessee accepts nay liability against the C7 and pays it along with interest as per section
11$$ within =6 days of receiving the notice then penalty shall be %'C of the liability accepted
and paid. If full amount is paid by the assessee at this stage full then there are no further
proceedings and if full amount is not paid, then proceedings will continue and final liability of the
assessee shall be determined by the officer within one year since issue of notice after giving
opportunity of being heard to the assessee. The duty liability of the assessee so determined shall
not exceed the amount indicated in the C7.
$s per section 11$C, in such case, the penalty shall be e1ual to the amount of duty liability.
Entries are discovered in t8e assesseeCs records durin: t8e course of excise audit or s6ecial
audit or ins6ection etc9
127
In any such case the officer can issue C7 within fie years since relevant date but the department
will have to justify that it is a case of fraud or misrepresentation etc,. If department cannot justify
it to be a case of 2raud etc, then C7 continues to be valid only for one year preceding the date of
issue of notification.
The assessee is authorised to ma3e payment of duty voluntarily with interest as per section 11$$
together with penalty E 1C of the amount of duty for every month but not exceeding %'C. Ghen
any such payment is made by the assessee, he shall inform the officer.
If full liability is discharged by the assessee then C7 cannot be issued and if full liability is not
discharged then C7 can be issued only for balance amount. If C7 is issued, final liability of the
assessee shall be determined by the officer, within one year, after giving opportunity of being
heard to the assessee.
Ghere duty liability is determined by the officer, as per section 11$C, the assessee shall be liable
to penalty e1ual to '6C of the duty liability.

&&AA9 Interest on delayed 6ayment of duty9V
ub:section ,1- says that notwithstanding anything contained in any judgment, decree, order or
direction of the $ppellate Tribunal or any court or in any other provision of this $ct or the rules
made thereunder, the person, who is liable to pay duty, shall, in addition to the duty, be liable to
pay interest also for the period of delay whether such payment is made voluntarily or after
determination of the amount of duty under section 11$.
ub:section ,%- provides that interest shall be payable at the rate fixed by the Central )overnment
between 16C p.a. to =&C p.a. ,at present 1.C p.a.- since due date until payment is actually made.
ub:section ,=- provides that no interest shall be payable where,K
,a- the duty becomes payable conse1uent to the issue of an order, instruction or direction by
the ;oard under section =>;H and
,b- such amount of duty is voluntarily paid in full, within forty:five days from the date of
issue of such order, instruction or direction, without reserving any right to appeal against the
said payment at any subse1uent stage of such payment.
%

&&AC9 .enalty for s8ort2levy or non2levy of duty in certain cases9V
The amount of penalty for non:levy or short:levy or non:payment or short payment or erroneous
refund shall be as under
Ghere any duty of excise has not been levied or
paid or short:levied or short:paid or erroneously
refunded, by reason of fraud or collusion or any
wilful mis:statement or suppression of facts, or
contravention of any of the provisions of this
$ct or of the rules made thereunder with intent
Ghere details of any transaction available in the
specified records, reveal that any duty of excise
has not been levied or paid or short:levied or
short:paid or erroneously refunded as referred to
in sub:section ,'- of section 11$,
2
2ubstituted !ide Finance Act, 2011, %'e'f' 8-4-2011
128
to evade payment of duty
+enalty is e1ual to the amount of duty
determined under sub:section ,16- of section
11$ by the officer.
+enalty e1ual to fifty per cent of the duty
determined under sub:section ,16- of section
11$ by the officer.
Ghere any duty as determined under sub:
section ,16- of section 11$ and the interest
payable thereon under section 11$$ in respect
of transactions referred to in clause ,b- is paid
within thirty days of the date of communication
of order of the Central Excise Bfficer who has
determined such duty, the amount of penalty
liable to be paid by such person shall be twenty:
five per cent of the duty so determinedH
Note - 2or the removal of doubts, it is hereby
declared that in a case where a notice has been
served under sub:section ,/- of section 11$ and
subse1uent to issue of such notice, the Central
Excise Bfficer is of the opinion that the
transactions in respect of which notice was
issued have been recorded in specified records
and the case falls under sub:section ,'-, penalty
e1ual to fifty per cent of the duty shall be
leviable.
Ghere the appellate authority or tribunal or court modifies the amount of duty of excise determined
by the Central Excise Bfficer under sub:section ,16- of section 11$, then, the amount of penalties
and interest payable shall stand modified accordingly and after ta3ing into account the amount of
duty of excise so modified, the person who is liable to pay duty as determined under sub:section ,16-
of section 11$ shall also be liable to pay such amount of penalty or interest so modified.
Ghere the amount as modified by the appellate authority or tribunal or court is more than the amount
determined under sub:section ,16- of section 11$ by the Central Excise Bfficer, the time within
which the interest or penalty is payable under this $ct shall be counted from the date of the order of
the appellate authority or tribunal or court in respect of such increased amount.
=

0ection &&": +efund
+rovisions of refund relate to any amount repayable under the $ct to the assessee or to any other
person e.g. rebate on export, excess payment in case of duty paid under provisional assessment,
excess credit under +*$, refund of Cenvat Credit in cash etc.
Except where an order is passed during the appeal, no refund will be allowed unless an application
has been made and the application for refund shall be made within one year from the relevant date.
Every such application shall be made along with the documentary evidence in support of the
3

129
application to the effect that the applicant is entitled for refund and that he has not passed on burden
of duty to any other person.
The application shall be made to the $C#<C and refund amount shall be transferred to the consumer
welfare fund except where refund relates to P
a. 5efund of excess credit in +*$
b. 5efund of cenvat credit in cash ,only in case of export-
c. ;urden of excess duty which has not been transferred to the customer
In the above referred three cases, the refund will always be given to the assessee. It is also important
to note that the time limit of ma3ing application for refund does not apply in case of refund of excess
balance in +*$ as well as in case of refund of CE78$T Credit in cash.
+elevant date
a. In case of export by air#water P the date on which goods have crossed Indian territorial waters
b. In case of export by road P the day on which goods have crossed custom barriers
c. In case of export by post P the date on which goods have been sent outside India.
d. In case of goods returned in factory P the day on which goods are entered in the factory.
e. In case of provisional assessment P the date of finali?ation of provisional assessment
f. In case of application by the customer P the date of purchase.
0ection &&"": Interest on refund
Ghere a valid refund application is made within the prescribed time limit and the refund is not
granted within three months since submission of application then the <epartment is liable to pay
interest E &C per annum for the period of delay exceeding three months.
0ection &&C: .o$er of t8e C/ not to recover duties
Ghere duty is not being levied or it is being levied at a rate lower than the actual rate applicable due
to any practice prevailing in any area, the central government may grant exemption from recovery of
any such amount of duty by issuing a notification in the official ga?ette.
Ghere any assessee has already paid duty before issue of exemption ,waiver- notification, the excess
duty so paid becomes refundable.
In respect of such refundable amount of duty a public notice is issued and anybody claiming refund
may apply within next six months.
0ection &&D: .ayment of any amount collected by assessee as duty to :overnment
+rovisions of this section become applicable in following two cases P
a- $ny person has collected amount of excise duty from customer in excess of his actual
liability
b- $ny person collects excise duty from the customer when he himself is not liable to
pay any duty.
130
This section re1uires that the amount so collected by a person in the name of duty from the customer
shall be immediately paid to the credit of central government and as long as it is so paid,
responsibility of the person under this section is fully discharged.
If the amount re1uired to be paid to the central government is not paid, a C7 can be issued re1uiring
him to explain why he shall not pay duty amount as shown in the notice along with interest. +lease
note that any time limit has not been fixed within which C7 can be issued under this section.
Ghere C7 is issued under this section, final liability of the person will be determined after giving
him opportunity of being heard. (nli3e section 11$, under this section no time limit is given within
which this liability shall be determined by the officer.
The amount so determined by officer shall be paid by the person concerned and out of amount paid by
him, his liability will be adjusted and balance amount becomes refundable.
In respect of refundable amount public notice will be issued and any person claiming refund may
apply within six months.

0ection &&DD: Interest
Ghere any amount becomes payable by an assessee under section 11< and it is not payable
immediately, interest E referred under section 11; shall also become payable.
0ection &&DDA: Attac8ment of 6ro6erty
Ghere any proceeding under section 11$ or 11< is pending before the adjudicating authority may,
with the intention to protect the interest of revenue and with the prior approval of the Commissioner,
he may attach any immovable of the property of the assessee for a period not exceeding six months.
9owever, if re1uired, the Chief Commissioner may extend the attachment upto two years.
0ection &&E9 #iability under Act to be first c8ar:e9V
7otwithstanding anything to the contrary contained in any Central $ct or tate $ct, any amount of
duty, penalty, interest, or any other sum payable by an assessee or any other person under this $ct or
the rules made thereunder shall, save as otherwise provided in section '%4$ of the Companies $ct,
14'&, ,1 of 14'&- the 5ecovery of <ebts <ue to ;an3s and the 2inancial Institutions $ct, 144= ,'1
of 144=- and the ecuritisation and 5econstruction of 2inancial $ssets and the Enforcement of
ecurity Interest $ct, %66%, ,'/ of %66%- be the first charge on the property of the assessee or the
person, as the case may be.

0ection &,9 A66lication of t8e 6rovisions of Act No9*, of &'D, to Central Excise Duties92
The Central )overnment may, by notification in the Bfficial )a?ette, declare that any of the
provisions of the Customs $ct, 14&% ,'% of 14&%- relating to the levy of and exemption from
customs duties, drawbac3 of duty, warehousing, offences and penalties, confiscation, and procedure
relating to offences and appeals shall, with such modifications and alterations as it may consider
necessary or desirable to adapt them to the circumstances, be applicable in regard to li3e matters in
respect of the duties imposed by section = and section =$.
131
.rovided that the provisions of the Customs $ct, 14&% ,'% of 14&%- relating to offences and
penalties shall not apply for the matters covered by section =$ for the period beginning on the 16th
day of @ay, %66. and ending immediately before the day on which the 2inance ;ill, %611 receives
the assent of the +resident.
0ection &,A: Amount of duty to be indicated se6arately
$mount of duty is re1uired to be indicated separately on all the documents related to assessment such
as invoice or challan.
0ection &,": .resum6tion
(nless otherwise shown, it is presumed that the burden of duty has already been passed on by the
assessee to the customer.
0ection &,C: Consumer $elfare fund
The Central )overnment shall constitute a fund to be 3nown as consumer welfare fund and in this
fund all the monies which become refundable shall be transferred to this fund. 2urther, any income
accruing on the investments made out of this fund shall also be credited to this fund.
0ection &,D: Jtilisation of consumer $elfare fund
The Central government is empowered to ma3e rules so as to prescribe for utili?ation of Consumer
Gelfare fund.
0ection &,E: .o$ers of t8e Central Excise @fficer
Every Central Excise Bfficer is empowered to exercise the powers given to him under the under and
also the powers of his sub ordinates but the Commissioner ,$ppeals- cannot exercise the powers of
adjudicating authority except the powers given under section 1/.
0ection &,A: .o$er of searc8 and seiRure
(& Ghere the Aoint Commissioner of Central Excise or $dditional Commissioner of Central Excise
or such other Central Excise Bfficer as may be notified by the ;oard has reasons to believe that any
goods liable to confiscation or any documents or boo3s or things, which in his opinion shall be
useful for or relevant to any proceedings under this $ct, are secreted in any place, he may authorise
in writing any Central Excise Bfficer to search and sei?e or may himself search and sei?e such
documents or boo3s or things.
,%- The provisions of the Code of Criminal +rocedure, 14>= ,% of 14>/- relating to search and
sei?ure, shall, so far as may be, apply to search and sei?ure under this section as they apply to search
and sei?ure under that Code.

132
0ection &3: .o$er to arrest
Every Central Excise officer, not below the ran3 of inspector may, with the prior approval of the
Commissioner, arrest any person who is liable to be punished for an offence under this $ct.
0ection &(: .o$er to summon any 6erson
In connection with any proceeding pending before a central excise officer, if he deems it necessary, he
may re1uire any person to be present personally or to provide any such information or document or
record as may be in his possession.
Ghenever any such re1uirement is made, the person concerned is under statutory obligation to be
present personally or to provide information or document or record as may be in his possession.
0ection &(A: 06ecial Audit for valuation
Ghenever $C#<C is of the opinion that the value of the goods as declared by the assessee is not
correct, he may, with the prior approval of the Chief Commissioner, order for special audit to be
carried out. This audit shall be independent of any cost audit or statutory audit of the assessee.
The audit shall be carried out by a chartered accountant or a cost accountant already empanelled with
the Chief Commissioner.
The report of special audit is re1uired to be submitted within the time stipulated in the order and on
case to case basis extensions may also be allowed but not exceeding 1.6 days.
$fter receiving report of special audit, any action shall not be ta3en against the assessee unless he has
been given an opportunity of being heard.
0ection &(AA: 06ecial Audit for Cenvat Credit
Ghenever the commissioner of Central Excise forms an opinion that any assessee has made misuse of
the provisions related to cenvat credit he may ma3e an order for special audit to be carried out. This
audit shall be independent of any cost audit or statutory audit of the assessee.
The audit shall be carried out by a chartered accountant or a cost accountant already empanelled with
the Chief Commissioner.
The report of special audit is re1uired to be submitted within the time stipulated in the order and on
case to case basis extensions may also be allowed.
$fter receiving report of special audit, any action shall not be ta3en against the assessee unless he has
been given an opportunity of being heard.
0ection &*: duty of ot8er officer
$ll officers of the Central )overnment, tate )overnment and village officers engaged in collection
of the revenue are under statutory obligation to assist a central oexcise officer in discharge of his
duties.
133
0ection &): 0earc8es and arrests 8o$ to be made
$ll searches made under this $ct or any rules made thereunder and all arrests made under this $ct
shall be carried out in accordance with the provisions of the Code of Criminal +rocedure, 1.4. ,' of
1.4.-, relating respectively to searches and arrests made under that Code.
0ection &': Dis6osal of 6ersons arrested
Every person arrested under this $ct shall be forwarded without delay to the nearest Central Excise
Bfficer empowered to send persons so arrested to a @agistrate, or, if there is no such Central Excise
Bfficer within a reasonable distance, to the officer:in:charge of the nearest police station.
0ection ,-: .rocedure to be follo$ed by officer2in2c8ar:e of 6olice station
The officer:in:charge of a police station to whom any person is forwarded under section 14 shall
either admit him to bail to appear before the @agistrate having jurisdiction, or in default of bail
forward him in custody to such @agistrate.
0ection ,&: InOuiry 8o$ to be made by Central Excise @fficers a:ainst arrested 6ersons
for$arded to t8em under section &'
Ghenever any person is arrested under the $ct, the Central Excise Bfficer may exercise the same
powers and shall be subject to the same provisions as the officer:in:charge of a police station may,
exercise and is subject to under the Code of Criminal +rocedure, 1.4. ,' of 1.4.-.
If the Central Excise Bfficer is of opinion that there is sufficient evidence or reasonable ground of
suspicion against the accused person, he shall either admit him to bail to appear before a @agistrate
having jurisdiction in the case, or forward him in custody to such @agistrateH
If it appears to the Central Excise Bfficer that there is not sufficient evidence or reasonable ground of
suspicion against the accused person, he shall release the accused person on his executing a bond,
with or without sureties as the Central Excise Bfficer may direct, to appear, if and when so re1uired,
before the @agistrate having jurisdiction, and shall ma3e a full report of all the particulars of the case
to his official superior.
0ection ,,: Vexatious searc8% seiRure% etc9% by Central Excise @fficer
Ghere any central excise officer vexatiously carries out searches or causes to be searched any house,
boat or placeH or unnecessarily detains, searches or arrests any personH or unnecessarily sei?es the
movable property of any person, on pretence of sei?ing or searching for any article liable to
confiscation under this $ct or commits any other act to the injury of any person, without having
reason to believe that such act is re1uired for the execution of his dutyH the officer shall be punishable
with fine which may extend to two thousand rupees.
$ny person wilfully and maliciously giving false information and so causing an arrest or a search to
be made under this $ct shall be punishable with fine which may extend to two thousand rupees or
with imprisonment for a term which may extend to two years or with both.
134
0ection ,3: Aailure of Central Excise @fficer in duty
$ny Central Excise Bfficer who ceases or refuses to perform or withdraws himself from the duties of
his office, unless he has obtained the express written permission of the Commissioner of Central
Excise, or has given to his superior officer two monthsO notice in writing of his intention or has other
lawful excuse, shall on conviction before a @agistrate be punishable with imprisonment for a term
which may extend to three months, or with fine which may extend to three monthsO pay, or with both.
Advanced +ulin:s
<0ection ,3A2,37=
Concept - $dvanced rulings means determination of a 1uestion of law or facts in relation to proposed
activity of the application which may affect his tax liability, by a competent authority having binding
effect on the assessee as well as adjudicating authority.
-!$2ect matters K 2ollowing are on which advanced rulings may be obtained are P
Ghether the proposed activity would amount to manufacture
Ghat will the principles of classification for his goods
Ghat will be the principles of valuation for his goods
Ghether he will be entitled for any exemption notification already issued
Ghat will be the availability of cenvat credit
"pplicants - $pplication for advanced ruling can be made by P
$ non:resident setting up a project in India either alone or a joint venture with a
resident
$ resident setting up a joint venture with a non:resident
$ wholly owned subsidiary of a foreign company
$ny other person authorised by the Central government in that behalf ,+ublic sector
underta3ings-
Lit#dra4al of application - $n application for advanced ruling can be withdrawn within =6 days.
No advanced r!lings - $dvanced rulings will not be given if P
,a- ame subject matter has already been decided by the Court
,b- ubject matter of the assessee is pending before the adjudicating authority
(nless specific re1uest is made for representation before $dvanced 5ulings are given,
chance of hearing may not be given.
$dvanced 5ulings are announced within 46 days since application is received.
The advanced rulings are having binding effect on the applicant as well as on the adjudicating
authority on the subject matter until law is amended or advanced rulings are withdrawn.
$dvanced rulings can be withdrawn where it is brought into the notice of $uthority for
$dvanced 5ulings that the $dvanced 5ulings were obtained by fraud or by misrepresentation.
135
Ghere $dvanced 5ulings are withdrawn that the adjudicating authority may proceed as if
advanced rulings were never given.
0ettlement of cases
<0ection 3, to 3,.=
ettlement is a procedure for reducing the adjudication and appellate proceedings. Ghere an
adjudication proceeding against the assessee is pending before the adjudicating authority, the assessee
may apply for settlement of the case to the ettlement Commission, provided the case pending before
the adjudicating authority is not a case which has been referred bac3 to the adjudicating authority for
fresh#re:assessment by $ppellate Tribunal or ettlement Commission or the court.
$n assessee may apply for settlement of the case if P
a. $ show cause notice has already been issued to the assessee
b. $gainst the C7, the assessee is accepting is liability which is not less than rupees three lacs
c. The assessee has maintained all the records and all relevant returns have been files
d. Continuation of the offence has been stopped.
e. Ghere records of the assessee have been sei?ed by the Central Excise Bfficer, at least 1.6
days passed
9ere it is to be noted that all the aforementioned conditions are cumulative. It means, there is no
settlement unless a C7 has been issued and that there is no settlement for the goods in respect of
which records have not been maintained by the assessee.
;efore ma3ing an application for settlement the assessee shall also 3eep in mind that ,a- an
application for settlement once made, cannot be withdrawn by the assesseeH and ,b- there is no appeal
against settlement order.
;efore submission of application for settlement, the assessee is re1uired to deposit the duty for which
he is accepting his liability, together with interest and in the application he is re1uired to provide full
explanation for the basis on which he has calculated his liability and he shall also disclose all those
fact which he has not disclosed before the adjudicating authority.
$fter receiving the application, the Commission may issue a notice to the applicant, within next seven
days, to justify why his application shall be proceeded with and if such a notice is not issued, the
application is deemed to have been accepted.
Ghere a notice is issued, as aforesaid, after receiving reply but within 1/ days since notice is issued,
the commission shall ma3e an order for accepting or rejecting the application and if no such order is
made, the application is deemed to have been accepted.
The Commission re1uired the Commissioner of Central Excise to furnish all the records of the
proceedings under which assessee has applied for settlement and the commissioner shall furnish the
records within =6 days, however, the commission may proceed with the settlement even if records are
not received from the Commissioner.
Bn receiving records from the commissioner, if commission forms an opinion that any subject matter
is re1uired to be investigated, it may re1uire the Commissioner ,Investigation- to carry out
136
investigation and to submit a report within 46 days, however, the commission is empowered to
proceed with the settlement proceedings even without receiving any investigation report.
Bn examination of the application, if the commission is of the opinion that the liability already
accepted by the assessee is lower than his actual liability, the commission may attach any of the
immovable properties of the assessee and this attachment gets vacated as soon as the assessee has paid
full amount for which liability is determined by the commission and a proof of that is filed with the
ettlement Commission.
<uring the course of settlement proceedings, if settlement commission forms an opinion that the
assessee is not co:operating in the settlement proceedings, it refer the matter bac3 to the adjudicating
authority and then the adjudicating authority may proceed as if application for settlement was never
made and he can also use the information furnished by the assessee to the settlement commission.
The settlement proceedings, if not completed within 4 months since submission of application, the
proceedings will get abated automatically.
If settlement is arrived at, a consent order is passed against which any appeal cannot be filed.
Ghere commission is of the opinion that assessee has fully co:operated during the proceedings, it may
grant conditional immunity against any further prosecution and penalty for the offence but where,
condition subject to which immunity is granted is violated, the immunity granted stands withdrawn.
A66eals
De6artmental revie$ 0ection 3*" and 3*E
@rder 6assed by +evie$ed by
$C#<C Commissioner
Commissioner Committee of at least two Chief commissioners constituted by
C)
Commissioner ,$ppeals- Committee of at least two Commissioners constituted by the
C).
$ny such review can be made within three months since the order is passed and review is
discretionary. The purpose of review is to examine the propriety of the order. I+roprietyJ means
appropriateness of the order in the given situation and as per law applicable.
Ghere order is found to be lac3ing propriety, the reviewing authority may ma3e an order for ma3ing a
reference to
T8e order revie$ed $as 6assed by +eference to
$C#<C Commissioner ,$ppeals-
Commissioner# Commissioner ,$ppeals- $ppellate Tribunal
$ny such reference shall be made within one month since reference order is passed and the reference
shall be treated as an appeal $ t#e 9epartment.
137
De6osit before filin: a66eal 0ection 3*A
;efore any appeal is filed, the assessee is re1uired to deposit the amount of duty, interest and penalty
against which appeal is being filed. 9owever, the appellate authority is empowered to reduce or
completely waive off the re1uirement of advance deposit where it finds that there is any prima facie
error in the order and that enforcing advance deposit on the assessee will cause undue hardship on the
assessee.
$n application is re1uired to be made separately for see3ing waiver or reduction of advance deposit
and any such application shall be disposed off by the appellate authority within =6 days.
*nterest on ref!nd &-ection 31,,' K Ghere an appeal is decided in favour of the assessee and
conse1uently amount deposited by him under section ='2 becomes refundable, if the refund is not
given within three months, the $djudicating authority shall be liable to pay interest for the period
exceeding three months since the order of refund is communicated, at the rate specified under section
11;;.
A66eal before Commissioner (A66eals 0ection 3* and 3*A
Ghere any order is passed by $C#<C, an appeal can be filed before the Commissioner within &6 days
since order is communicated and on reasonable cause being shown, the Commissioner ,$ppeals- may
extend the time for another =6 days.
)enerally the appeal shall relate to the subject matters of the order but the Commissioner may allow
raising of new grounds where he is satisfied that P
,a- those grounds where presented by the assessee before the adjudicating authority also but
those were rejected without nay reasonable cause or neglectedH or
,b- those are new discoveries by the assessee himselfH or
,c- the assessee was prevented earlier due to some reasons from presenting those grounds earlier.
The Commissioner ,$ppeals- shall not allow more than three adjournments to each party during the
course of hearing and the appeal shall be disposed off within six months since the date of filing. In
case of delay, the commissioner ,$- is re1uired to record the reasons for delay in writing.
Ghere liability of assess is li3ely to increase or his entitlement for refund is to be reduced, any such
order shall not be passed unless an opportunity of being heard has been given to the assessee.
Ghere liability of the assessee is increased or reduced or where amount of refund is increased or
refund, the interest and penalty shall also be applicable with reference to such increased or reduced
amount, as the case may be.
A66eals before t8e A66ellate Tribunal 0ection 3*" and 3*C
The $ppellate Tribunal does not have jurisdiction to entertain any appeal on the following subjects P
,a- *oss of goods during transit
,b- 5emission of duty
138
,c- 5ebate in case of export
,d- (tilisation of Cenvat Credit
Bn these subject a revision application can be filed before the central government within three months
since the order is communicated.
The Tribunal may, in its discretion, not entertain an appeal where amount of duty or interest or
penalty does not exceed 5s. '6,666.
$n appeal before the $T is re1uired to be filed within 46 days since the order is communicated and
the $T is empowered to allow extension, without any time limit, where a reasonable cause is shown
for the delay.
The commission shall forward a copy of the appeal to the opposite party and the opposite party shall
file a memorandum of cross ob?ections within /' days. 9owever, the $T may accept @oC even
after expiry of /' days on reasonable cause being shown.
)enerally the appeal shall relate to the subject matters of the order but the $T may allow raising of
new grounds where he is satisfied that P
,d- those grounds where presented by the assessee before the adjudicating authority also but
those were rejected without nay reasonable cause or neglectedH or
,e- those are new discoveries by the assessee himselfH or
,f- the assessee was prevented earlier due to some reasons from presenting those grounds earlier.
The $T shall not allow more than three adjournments to each party during the course of hearing and
the appeal shall be disposed off within three years since the date of filing. 9owever, where $T has
granted against recovery, the appeal shall be disposed off within 1.6 days.
Ghere liability of assess is li3ely to increase or his entitlement for refund is to be reduced, any such
order shall not be passed unless an opportunity of being heard has been given to the assessee.
Ghere liability of the assessee is increased or reduced or where amount of refund is increased or
refund, the interest and penalty shall also be applicable with reference to such increased or reduced
amount, as the case may be.
+evie$ by t8e Central /overnment 0ection 3*EE
Ghere order of the Commissioner,$ppeals- or the Commissioner relates to any subject on which the
$ppellate Tribunal does not have jurisdiction, the <epartment as well the assessee may file a review
application before the Central )overnment. 9owever the Central )overnment may refuse to admit
any such application where it finds that the amount of duty or interest or penalty to which the order
relates does not exceed 5s. ',666.
$pplication before the Central )overnment shall be made within = months from the date of order
concerned. 9owever, the Central government may allow an extension upto = months.
The Central )overnment may also ta3e up any order for revision on its own also.
The C) is empowered to confirm or modify or annul the order reviewed. The amount of duty or
interest or penalty cannot be increased unless specific opportunity to ma3e a representation has been
given.
139
2urther, where C) comes to 3now that there have been a case of non:payment or short payment or
non:levy or short levy, it cannot pass an order in respect of any such amount unless a C7 has been
issued under section 11$.
A66eal before t8e 7i:8 Court 0ection 3*/
$n appeal against the order of $ppellate Tribunal can be filed before the 9igh Court only if the
subject matter involves a substantial 1uestion of law. 7o appeal can be filed only on facts. @oreover
no appeal can be filed before the 9C on the 1uestion of classification or valuation.
$n appeal before the 9C shall be filed within 1.6 days after the date of order against which appeal is
filed and the 9C may accept an appeal even after expiry of 1.6 days if is satisfied that there have
been sufficient reasons for the delay.
The 9C shall formulate a 1uestion of law on the basis of facts presented before and the appeal shall be
heard only on that 1uestion of law.
The appeal shall be heard by atleast two judges and the decision shall be by majority. In case of
difference of opinion the point of difference shall be referred to other judges of the 9C and then
opinion of majority of judges who have heard the case shall prevail.
0ection 3*+9 A66eal not to be filed in certain cases9V
(& The Central ;oard of Excise and Customs may, from time to time, issue orders or instructions or
directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of
appeal, application, revision or reference by the Central Excise Bfficer under the provisions of this
Chapter.
,%- Ghere, in pursuance of the orders or instructions or directions, issued under sub:section ,1-, the
Central Excise Bfficer has not filed an appeal, application, revision or reference against any decision
or order passed under the provisions of this $ct, it shall not preclude such Central Excise Bfficer
from filing appeal, application, revision or reference in any other case involving the same or similar
issues or 1uestions of law.
,=- 7otwithstanding the fact that no appeal, application, revision or reference has been filed by the
Central Excise Bfficer pursuant to the orders or instructions or directions issued under sub:section
,1-, no person, being a party in appeal, application, revision or reference shall contend that the
Central Excise Bfficer has ac1uiesced in the decision on the disputed issue by not filing appeal,
application, revision or reference.
,/- The $ppellate Tribunal or court hearing such appeal, application, revision or reference shall have
regard to the circumstances under which appeal, application, revision or reference was not filed by
the Central Excise Bfficer in pursuance of the orders or instructions or directions issued under sub:
section ,1-.
140
,'- Every order or instruction or direction issued by the Central ;oard of Excise and Customs on or
after the %6th day of Bctober, %616, but before the date on which the 2inance ;ill, %611 receives the
assent of the +resident, fixing monetary limits for filing of appeal, application, revision or reference
shall be deemed to have been issued under sub:section ,1- and the provisions of sub:sections ,%-, ,=-
and ,/- shall apply accordingly.

.ublication of name by C/ 0ection 34E
Ghere any penalty is imposed on any person under the $ct by the $djudicating authority, the Central
)overnment may, in public interest, order publication of name, address, offence and penalty in the
newspaper in such manner as may be directed by it but any such publication shall not be made until
expiry of time limit for filing the appeal without appeal having been filed.
0ection 3)9 .ublication of rules and notifications and layin: of rules before .arliament92
,1- $ll rules made and notifications issued under this $ct shall be published in the Bfficial )a?ette.
,%- Every rule made under this $ct, every notification issued under section =$, section /$, sub:
section ,1- of section '$, section ';

and section 11C and every order made under sub:section ,%- of
section '$, other than an order relating to goods of strategic, secret, individual or personal nature,
shall be laid, as soon as may be after it is made or issued, before each 9ouse of +arliament, while it
is in session, for a total period of thirty days which may be comprised in one session, or in two or
more successive sessions, and if, before the expiry of the session immediately following the session
or the successive sessions aforesaid, both 9ouses agree in ma3ing any modification in the rule or
notification or order, or both 9ouses agree that the rule should not be made or notification or order
should not be issued or made, the rule or notification or order shall thereafter have effect only in
such modified form or be of no effect, as the case may beH so, however, that any such modification
or annulment shall be without prejudice to the validity of anything previously done under that rule
or notification or order.
141
T8e Customs Act% &'D,

0ection Title
ection : 661 hort title, extent and commencement
ection : 66% <efinitions.
ection : 66= Classes of officers of customs.
ection : 66/ $ppointment of officers of customs.
ection : 66' +owers of officers of customs
ection : 66& Entrustment of functions of ;oard and customs officers on certain other
officers
ection : 66> $ppointment of customs ports, airports, etc
ection : 66. +ower to approve landing places and specify limits of customs area
ection : 664 +ower to declare places to be warehousing stations
ection : 616 $ppointment of boarding stations
ection : 611 +ower to prohibit importation or exportation of goods
ection : 611$ <efinitions
ection : 611; +ower of Central )overnment to notify goods
ection : 611C +ersons possessing notified goods to intimate the place of storage, etc
ection : 611< +recautions to be ta3en by persons ac1uiring notified goods
ection : 611E +ersons possessing notified goods to maintain accounts
ection : 6112 ale, etc., of notified goods to be evidenced by vouchers
ection : 611) ections 11C, 11E and 112 not to apply to goods in personal use
ection : 6119 <efinitions
ection : 611I +ower of Central )overnment to specify goods
ection : 611A +ersons possessing specified goods to intimate the place of storage, etc
ection : 611Q Transport of specified goods to be covered by vouchers
ection : 611* +ersons possessing specified goods to maintain accounts
ection : 611@ teps to be ta3en by persons selling or transferring any specified goods
ection : 6117 +ower to exempt.
ection : 61% <utiable goods
ection : 61= <uty on pilfered goods
ection : 61/ 8aluation of goods.
ection : 61' <ate for determination of rate of duty and tariff valuation of imported goods
ection : 61& <ate for determination of rate of duty and tariff valuation of export goods
ection : 61> $ssessment of duty
ection : 61. +rovisional assessment of duty
ection : 614 <etermination of duty where goods consist of articles liable to different rates
of duty
ection : 6%6 5e:importation of goods
ection : 6%1 )oods derelict, wrec3, etc
ection : 6%% $batement of duty on damaged or deteriorated goods
ection : 6%= 5emission of duty on lost, destroyed or abandoned goods
ection : 6%/ +ower to ma3e rules for denaturing or mutilation of goods
ection : 6%' +ower to grant exemption from duty
ection : 6%& 5efund of export duty in certain cases

ection : 6%&$ 5efund of import duty in certain cases.
ection : 6%> Claim for refund of duty.
ection : 6%>$ Interest on delayed refunds
ection : 6%. 5ecovery of duties not levied or short:levied or erroneously refunded
142
ection : 6%.$ +ower not to recover duties not levied or short:levied as a result of general
practice.
ection : 6%.$$ Interest on delayed payment of duty
ection : 6%.$$$ 5ecovery of duties in certain cases
ection : 6%.$; Interest on delayed payment of duty in special cases : Bmitted
ection : 6%.; <uties collected from the buyer to be deposited with the Central )overnment
ection : 6%.;$ +rovisional attachment to protect revenue in certain cases
ection : 6%.C +rice of goods to indicate the amount of duty paid thereon
ection : 6%.< +resumption that incidence of duty has been passed on to the buyer
ection : 6%.E <efinitions
ection : 6%.2 $uthority for advance rulings
ection : 6%.) 8acancies, etc., not to invalidate proceedings
ection : 6%.9 $pplication for advance ruling
ection : 6%.I +rocedure on receipt of application
ection : 6%.A $pplicability of advance ruling
ection : 6%.Q $dvance ruling to be void in certain circumstances
ection : 6%.* +owers of $uthority
ection : 6%.@ +rocedure of $uthority
ection : 6%4 $rrival of vessels and aircrafts in India
ection : 6=6 <elivery of import manifest or import report
ection : 6=1 Imported goods not to be unloaded from vessel until entry inwards granted
ection : 6=% Imported goods not to be unloaded unless mentioned in import manifest or
import report
ection : 6== (nloading and loading of goods at approved places only
ection : 6=/ )oods not to be unloaded or loaded except under supervision of customs
officer
ection : 6=' 5estrictions on goods being water:borne
ection : 6=& 5estrictions on unloading and loading of goods on holidays, etc
ection : 6=> +ower to board conveyances
ection : 6=. +ower to re1uire production of documents and as3 1uestions
ection : 6=4 Export goods not to be loaded on vessel until entry:outwards granted
ection : 6/6 Export goods not to be loaded unless duly passed by proper officer
ection : 6/1 <elivery of export manifest or export report
ection : 6/% 7o conveyance to leave without written order
ection : 6/= Exemption of certain classes of conveyances from certain provisions of this
Chapter
ection : 6// Chapter not to apply to baggage and postal articles
ection : 6/' 5estrictions on custody and removal of imported goods
ection : 6/& Entry of goods on importation
ection : 6/> Clearance of goods for home consumption
ection : 6/. +rocedure in case of goods not cleared, warehoused, or transhipped within
thirty days after unloading
ection : 6/4 torage of imported goods in warehouse pending clearance
ection : 6'6 Entry of goods for exportation
ection : 6'1 Clearance of goods for exportation
ection : 6'% Chapter not to apply to baggage, postal articles and stores
ection : 6'= Transit of certain goods without payment of duty
ection : 6'/ Transhipment of certain goods without payment of duty
143
ection : 6'' *iability of duty on goods transited under section '= or transhipped under
section '/
ection : 6'& Transport of certain classes of goods subject to prescribed conditions
ection : 6'> $ppointing of public warehouses
ection : 6'. *icensing of private warehouses
ection : 6'4 Garehousing bond
ection : 6&6 +ermission for deposit of goods in a warehouse
ection : 6&1 +eriod for which goods may remain warehoused
ection : 6&% Control over warehoused goods
ection : 6&= +ayment of rent and warehouse charges
ection : 6&/ Bwner"s right to deal with warehoused goods
ection : 6&' @anufacture and other operations in relation to goods in a warehouse
ection : 6&& +ower to exempt imported materials used in the manufacture of goods in
warehouse
ection : 6&> 5emoval of goods from one warehouse to another
ection : 6&. Clearance of warehoused goods for home consumption
ection : 6&4 Clearance of warehoused goods for exportation
ection : 6>6 $llowance in case of volatile goods
ection : 6>1 )oods not to be ta3en out of warehouse except as provided by this $ct
ection : 6>% )oods improperly removed from warehouse, etc
ection : 6>= Cancellation and return of warehousing bond
ection : 6>/ <rawbac3 allowable on re:export of duty:paid goods
ection : 6>' <rawbac3 on imported materials used in the manufacture of goods which are
exported
ection : 6>'$ Interest on drawbac3
ection : 6>& +rohibition and regulation of drawbac3 in certain cases
ection : 6>> <eclaration by owner of baggage
ection : 6>. <etermination of rate of duty and tariff valuation in respect of baggage
ection : 6>4 ;ona fide baggage exempted from duty
ection : 6.6 Temporary detention of baggage
ection : 6.1 5egulations in respect of baggage
ection : 6.% *abel or declaration accompanying goods to be treated as entry
ection : 6.= 5ate of duty and tariff valuation in respect of goods imported or exported by
post
ection : 6./ 5egulations regarding goods imported or to be exported by post
ection : 6.' tores may be allowed to be warehoused without assessment to duty
ection : 6.& Transit and transhipment of stores
ection : 6.> Imported stores may be consumed on board a foreign:going vessel or aircraft
ection : 6.. $pplication of section &4 and Chapter M to stores
ection : 6.4 tores to be free of export duty
ection : 646 Concessions in respect of imported stores for the 7avy
ection : 641 Chapter not to apply to baggage and stores
ection : 64% Entry of coastal goods
ection : 64= Coastal goods not to be loaded until bill relating thereto is passed, etc
ection : 64/ Clearance of coastal goods at destination
ection : 64' @aster of a coasting vessel to carry an advice boo3
ection : 64& *oading and unloading of coastal goods at customs port or coastal port only
ection : 64> 7o coasting vessel to leave without written order
ection : 64. $pplication of certain provisions of this $ct to coastal goods, etc
144
ection : 64.$ +ower to relax
ection : 644 +ower to ma3e rules in respect of coastal goods and coasting vessels
ection : 166 +ower to search suspected persons entering or leaving India, etc.
ection : 161 +ower to search suspected persons in certain other cases
ection : 16% +ersons to be searched may re1uire to be ta3en before ga?etted officer of
customs or magistrate
ection : 16= +ower to screen or M:ray bodies of suspected persons for detecting secreted
goods
ection : 16/ +ower to arrest
ection : 16' +ower to search premises
ection : 16& +ower to stop and search conveyances
ection : 16&$ +ower to inspect
ection : 16> +ower to examine persons
ection : 16. +ower to summon persons to give evidence and produce documents
ection : 164 +ower to re1uire production of order permitting clearance of goods imported
by land
ection : 116 ei?ure of goods, documents and things
ection : 116$ +rovisional release of goods, documents and things sei?ed pending
adjudication
ection : 111 Confiscation of improperly imported goods, etc
ection : 11% +enalty for improper importation of goods, etc
ection : 11= Confiscation of goods attempted to be improperly exported, etc
ection : 11/ +enalty for attempt to export goods improperly, etc
ection : 11/$ +enalty for short:levy or non:levy of duty in certain cases
ection : 11/$$ +enalty for use of false and incorrect material
ection : 11' Confiscation of conveyances
ection : 11& +enalty for not accounting for goods
ection : 11> +enalties for contravention, etc., not expressly mentioned
ection : 11. Confiscation of pac3ages and their contents
ection : 114 Confiscation of goods used for concealing smuggled goods
ection : 1%6 Confiscation of smuggled goods notwithstanding any change in form, etc
ection : 1%1 Confiscation of sale:proceeds of smuggled goods
ection : 1%% $djudication of confiscations and penalties
ection : 1%%$ $djudication +rocedure
ection : 1%= ;urden of proof in certain cases
ection : 1%/ Issue of show cause notice before confiscation of goods, etc
ection : 1%' Bption to pay fine in lieu of confiscation
ection : 1%& Bn confiscation, property to vest in Central )overnment
ection : 1%> $ward of confiscation or penalty by customs officers not to interfere with
other punishments
ection : 1%>$ <efinitions
ection : 1%>; $pplication for settlement of cases
ection : 1%>C +rocedure on receipt of application under section 1%>;
ection : 1%>< +ower of ettlement Commission to order provisional attachment to protect
revenue
ection : 1%>E +ower of ettlement Commission to reopen completed proceedings
ection : 1%>2 +ower and procedure of ettlement Commission
ection : 1%>) Inspection, etc., of reports
145
ection : 1%>9 +ower of ettlement Commission to grant immunity from prosecution and
penalty
ection : 1%>I +ower of ettlement Commission to send a case bac3 to the proper officer
ection : 1%>A Brder of settlement to be conclusive
ection : 1%>Q 5ecovery of sums due under order of settlement
ection : 1%>* ;ar on subse1uent application for settlement in certain cases
ection : 1%>@ +roceedings before ettlement Commission to be judicial proceedings
ection : 1%>@$ Certain persons who have filed appeals to the $ppellate Tribunal entitled to
ma3e applications to the ettlement Commission
ection : 1%>7 $pplications of certain provisions of Central Excise $ct
ection : 1%. $ppeals to Commissioner ,$ppeals-
ection : 1%.$ +rocedure in appeal
ection : 1%4 $ppellate Tribunal
ection : 1%4$ $ppeals to the $ppellate Tribunal
ection : 1%4; Brders of $ppellate Tribunal
ection : 1%4C +rocedure of $ppellate Tribunal
ection : 1%4< +owers of Committee of Chief Commissioners of Customs or Commissioner
of Customs to pass certain orders
ection : 1%4<$ +owers of revision of ;oard or Commissioner of Customs in certain cases
ection : 1%4<< 5evision by Central )overnment
ection : 1%4E <eposit, pending appeal, of duty and interest demanded or penalty levied
ection : 1%4EE Interest on delayed refund of amount deposited under the proviso to section
1%4E
ection : 1=6 $ppeal to 9igh Court
ection : 1=6$ $pplication to 9igh Court
ection : 1=6; +ower of 9igh Court or upreme Court to re1uire statement to be amended
ection : 1=6C Case before 9igh Court to be heard by not less than two judges
ection : 1=6< <ecision of 9igh Court or upreme Court on the case stated
ection : 1=6E $ppeal to upreme Court
ection : 1=62 9earing before upreme Court
ection : 1=1 ums due to be paid notwithstanding reference, etc
ection : 1=1$ Exclusion of time ta3en for copy
ection : 1=1; Transfer of certain pending proceedings and transitional provisions
ection : 1=1;$ $ppeal not to be filed in certain cases.
ection : 1=1C <efinitions
ection : 1=% 2alse declaration, false documents
ection : 1== Bbstruction of officer of customs
ection : 1=/ 5efusal to be M:rayed
ection : 1=' Evasion of duty or prohibitions
ection : 1='$ +reparation
ection : 1='; +ower of court to publish name, place of business, etc., of persons convicted
under the $ct
ection : 1=& Bffences by officers of customs
ection : 1=> Cogni?ance of offences
ection : 1=. Bffences to be tried summarily
ection : 1=.$ +resumption of culpable mental state
ection : 1=.; 5elevancy of statements under certain circumstances
ection : 1=.C $dmissibility of micro films, facsimile copies of documents and computer
print outs as documents and as evidence
146
ection : 1=4 +resumption as to documents in certain cases
ection : 1/6 Bffences by companies
ection : 1/6$ $pplication of section '&% of the Code of Criminal +rocedure, 1.4., and of
the +robation of Bffenders $ct, 14'.
ection : 1/1 Conveyances and goods in a customs area subject to control of officers of
customs
ection : 1/% 5ecovery of sums due to )overnment
ection : 1/%$ *iability under $ct to be first charge
ection : 1/= +ower to allow import or export on execution of bonds in certain cases
ection : 1/=$ Bmitted
ection : 1// +ower to ta3e samples
ection : 1/' Bwner, etc., to perform operations incidental to compliance with customs law
ection : 1/& *icence for customs bro3ers.
ection : 1/&$ $ppearance by authorised representative
ection : 1/> *iability of principal and agent
ection : 1/. *iability of agent appointed by the person in charge of a conveyance
ection : 1/4 $mendment of documents
ection : 1'6 +rocedure for sale of goods and application of sale proceeds
ection : 1'1 Certain officers re1uired to assist officers of customs
ection : 1'1$ Instructions to officers of customs
ection : 1'% <elegation of powers
ection : 1'= ervice of order, decision, etc
ection : 1'/ Correction of clerical errors, etc
ection : 1'/$ 5ounding off of duty, etc
ection : 1'/; +ublication of information respecting persons in certain cases
ection : 1'' +rotection of action ta3en under the $ct
ection : 1'& )eneral power to ma3e rules
ection : 1'> )eneral power to ma3e regulations
ection : 1'. +rovisions with respect to rules and regulations
ection : 1'4 5ules, certain notifications and orders to be laid before +arliament
ection : 1'4$ Effect of amendments, etc., of rules, regulations, notifications or orders
ection : 1&6 5epeal and savings
ection : 1&1 5emoval of difficulties
147

T8e Custom Act% &'D,
This $ct deals with import of goods into India and Export of goods from India. ;efore we go into the
details we need to understand meaning of the following words ::
a. India
b. )oods
c. Import
d. Export
India
2or the purpose of Custom $ct, 14&%, India P
means land mass of India but excluding 166C EB(s, EV units, E+V, T+, 9T+
Extends upto %66 nautical miles from the coast line of India
,-- Nautical 5iles
2irst 1% nautical miles are 3nown as Indian Territorial Gaters and all the provisions of the
$ct are applicable in this area.
7ext 1% nautical miles are referred as Indian Custom Gaters. In this area, the custom officer
is authorised to search, sei?e and arrest. Bther provisions of the $ct are not applicable
5emaining 1>& nautical miles is referred as Exclusive Indian Economic Vone. In this area,
provisions of the $ct are not applicable.
Indian Custom waters and Exclusive Indian Economic Vone, together are referred as 2ree
Transit Vone for international shipment.
/oods
2or the purpose of import and export, )oods means P
a. $ircraft, vehicle and vessel
b. ;aggage Uection>> to .1L
c. tores Uection.' to 46L
d. 7egotiable Instruments
e. $ny other movables. UCommon provisionsL
"ir craft/ vessel and ve#icles - will be treated as goods only if brought to India for being used in
India. In other words, if these are brought to India only for loading of goods and#or embar3ing or
disembar3ing of passengers then those will not be treated as goods.
If treated as goods then those are subject to duty otherwise not.
Caggage K means belongings of the passenger for personal use but not in commercial 1uantity. It
includes unaccompanied baggage but does not include motor vehicles.
$ccompanied baggage means baggage brought to India when passenger comes to India and
unaccompanied baggage means the baggage brought to India before or after the arrival of the
passenger.
148
Time gap between the arrival of the passenger and his baggage upto one month is generally
permitted but in a special circumstances extension upto one year may be allowed.
(nder ection>4, the central government has fully exempted bonafide baggage from duty.
The central government is also empowered to exempted baggage uto any limit in addition to
bonafide baggage. These exemption limits are given under the ;aggage 5ules and those are
important to remember.
Entire baggage, in addition to exemptions allowed under ection>4, shall be subject to duty at
the rate prevailing on the date on which declaration is made by the passenger under
ection>.. $t present this rate is ='C F EC F 9EC.
-tores K means all spares, accessories, consumables including fuel on board any vessel or aircraft
for being used on the same vessel or aircraft either immediately or late.
tores brought to India on board on any Iforeign going vessel or aircraftJ is exempt from duty
even if it is consumed within Indian territory.
Im6ort
Import begins when goods originating from a place beyond %66 nautical miles from Indian
sea cost enter into Indian Territorial water.
It continues as long as goods are removed for 9B@E CB7(@+TIB7 on payment of
appropriate duty.
Import is complete when goods are allowed to be removed by the custom officer for 9B@E
B7(@+TIB7.
If goods originating from a place beyond %66 nautical miles are brought to any place within
%66 nautical miles for being used therein then it is also an import for the purpose of duty.
Ex6ort
Export, for the purpose of this $ct begins when the goods are brought to the custom
port#airport for export and export documents are presented to the officer to obtain the
permission to export the goods and to get the permission to load the goods.
The goods are said to be under export as long as goods are within the Indian Territorial
waters.
2or the purpose of <uty <rawbac3 Export is complete when goods are ta3en out of Indian
Territorial waters.
2or every purpose export is complete when the goods have been sent outside Indian
Territorial waters permanently. UThe goods shall also be delivered abroadL
If goods are ta3en to a place outside ITG but remain within %66 nautical miles, then it is not
an export for any purpose.
0ection ,: Definitions
149
In this $ct, unless the context otherwise re1uires.
(& Sad?udicatin: aut8orityS means any authority competent to pass any order or decision under
this $ct, but does not include the ;oard, Commissioner ,$ppeals- or $ppellate TribunalH
(&A SaircraftS has the same meaning as in the $ircraft $ct, 14=/ ,%% of 14=/-H
(&" SA66ellate TribunalS means the Customs, Excise and ervice Tax $ppellate Tribunal
constituted under ection1%4H
(, assessment! includes provisional assessment, self:assessment, re:assessment and any
assessment in which the duty assessed is nilH
(3 Sba::a:eS includes unaccompanied baggage but does not include motor vehiclesH
(( Sbill of entryS means a bill of entry referred to in ection/&H
(* Sbill of ex6ortS means a bill of export referred to in ection'6H
(D S"oardS means the Central ;oard of Excise and Customs constituted under the Central ;oards
of 5evenue $ct, 14&= ,'/ of 14&=-H
(4 Scoastal :oodsS means goods, other than imported goods, transported in a vessel from one port
in India to anotherH
(4A SCommissioner (A66ealsS means a person appointed to be a Commissioner of Customs
,$ppeals- under sub:ection,1- of ection/H
() SCommissioner of CustomsS, except for the purposes of Chapter M8, includes an $dditional
Commissioner of CustomsH
(' SconveyanceS includes a vessel, an aircraft and a vehicleH
(&- Scustoms air6ortS means any airport appointed under clause ,a- of ection> to be a customs
airport, and includes a place appointed under clause ,aa- of that ectionto be an air freight stationH
(&& Scustoms areaS means the area of a customs station and includes any area in which imported
goods or export goods are ordinarily 3ept before clearance by Customs $uthoritiesH
(&, Scustoms 6ortS means any port appointed under clause ,a- of ection> to be a customs port
and includes a place appointed under clause ,aa- of that ectionto be an inland container depotH
(&3 Scustoms stationS means any customs port, customs airport or land customs stationH
(&( Sdutiable :oodsS means any goods which are chargeable to duty and on which duty has not
been paidH
(&* SdutyS means a duty of customs leviable under this $ctH
(&D SentryS in relation to goods means an entry made in a bill of entry, shipping bill or bill of
export and includes in the case of goods imported or to be exported by post, the entry referred to in
ection.% or the entry made under the regulations made under ection./H
(&4 SexaminationS, in relation to any goods, includes measurement and weighment thereofH
(&) Sex6ortS, with its grammatical variations and cognate expressions, means ta3ing out of India
to a place outside IndiaH
(&' Sex6ort :oodsS means any goods which are to be ta3en out of India to a place outside IndiaH
150
(,- Sex6orterS, 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 exporterH
(,& Sforei:n2:oin: vessel or aircraftS means any vessel or aircraft for the time being engaged in
the carriage of goods or passengers between any port or airport in India and any port or airport
outside India, whether touching any intermediate port or airport in India or not, and includes :
,i- any naval vessel of a foreign )overnment ta3ing part in any naval exercisesH
,ii- any vessel engaged in fishing or any other operations outside the territorial waters of
IndiaH
,iii- any vessel or aircraft proceeding to a place outside India for any purpose whatsoeverH
(,&A SAundS means the Consumer Gelfare 2und established under ection1%C of the Central
Excises and alt $ct, 14// ,1 of 14//-H
(,, S:oodsS includes :
,a- vessels, aircrafts and vehiclesH
,b- storesH
,c- baggageH
,d- currency and negotiable instrumentsH and
,e- any other 3ind of movable propertyH
(,3 Sim6ortS, with its grammatical variations and cognate expressions, means bringing into India
from a place outside IndiaH
(,( Sim6ort manifestS or Sim6ort re6ortS means the manifest or report re1uired to be delivered
under ection=6H
(,* Sim6orted :oodsS means any goods brought into India from a place outside India but does
not include goods which have been cleared for home consumptionH
(,D Sim6orterS, 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 importerH
(,4 SIndiaS includes the territorial waters of IndiaH
(,) SIndian customs $atersS means the waters extending into the sea up to the limit of
contiguous ?one of India under ection' of the Territorial Gaters, Continental helf, Exclusive
Economic Vone and other @aritime Vones $ct, 14>& ,.6 of 14>&- and includes any bay, gulf,
harbour, cree3 or tidal riverH
(,' Sland customs stationS means any place appointed under clause ,b- of ection> to be a land
customs stationH
(3- Smar1et 6riceS, in relation to any goods, means the wholesale price of the goods in the
ordinary course of trade in IndiaH
(3-A SNational Tax TribunalS means the 7ational Tax Tribunal established under ection= of
the 7ational Tax Tribunal $ct, %66',
(3& S6erson2in2c8ar:eS means, :
,a- in relation to a vessel, the master of the vesselH
151
,b- in relation to an aircraft, the commander or pilot:in:charge of the aircraftH
,c- in relation to a railway train, the conductor, guard or other person having the chief
direction of the trainH
,d- in relation to any other conveyance, the driver or other person:in:charge of the
conveyanceH
(3, S6rescribedS means prescribed by regulations made under this $ctH
(33 S6ro8ibited :oodsS means any goods the import or export of which is subject to any
prohibition under this $ct or any other law for the time being in force but does not include any
such goods in respect of which the conditions subject to which the goods are permitted to be
imported or exported have been complied withH
(3( S6ro6er officerS, in relation to any functions to be performed under this $ct, means the
officer of customs who is assigned those functions by the ;oard or the Commissioner of CustomsH
(3* Sre:ulationsS means the regulations made by the ;oard under any provision of this $ctH
(3D SrulesS means the rules made by the Central )overnment under any provision of this $ctH
(34 Ss8i66in: billS means a shipping bill referred to in ection'6H
(3) SstoresS means goods for use in a vessel or aircraft and includes fuel and spare parts and
other articles of e1uipment, whether or not for immediate fittingH
(3' Ssmu::lin:S, in relation to any goods, means any act or omission which will render such
goods liable to confiscation under ection111 or ection11=H
((- Stariff valueS, in relation to any goods, means the tariff value fixed in respect thereof under
sub:ection,%- of ection1/H
((& SvalueS, in relation to any goods, means the value thereof determined in accordance with the
provisions of sub:ection,1- or sub:ection,=- of ection1/H
((, Sve8icleS means conveyance of any 3ind used on land and includes a railway vehicleH
((3 S$are8ouseS means a public warehouse appointed under ection'> or a private warehouse
licensed under ection'.H
((( S$are8oused :oodsS means goods deposited in a warehouseH
((* S$are8ousin: stationS means a place declared as a warehousing station under ection4.
@fficers <0ection3 to D=
0ection 3: Classes of custom officers 2ollowing are the classes of custom officers P
a. Chief Commissioner
b. Commissioner
c. Commissioner ,$ppeals-
d. Aoint commissioner
e. <eputy Commissioner
f. $ssistant Commissioner
152
g. uch other classes of officers as may be appointed for discharging various functions under the
$ct
0ection (: A66ointment 2 $ll the officers not below the ran3 of $C#<C are to be appointed by the
Central ;oard and the ;oard may authorise the officers not below the ran3 of $C#<C to appoint other
junior officers.
0ection *: .o$ers of t8e @fficers 2 $ll the custom officers are authorised to exercise the powers
given to them under the $ct and also the powers of their subordinate officers but the Commissioner
,$ppeals- cannot exercise the powers of $djudicating $uthority except the powers given under
ection16..
0ection D: Entrustin: t8e 6o$ers 2 The Central )overnment may entrust any of the functions of the
Central ;oard or a custom officer to any officers of the Central )overnment or tate )overnment or
local authority and the officer to whom powers are so entrusted shall be a custom officer while he is
exercising the powers entrusted to him.
A66ointment of various 6laces <0ection4 to &-=
0ection 4: A66ointment of custom 6ort etc 2 The Central ;oard is empowered to appoint P
,a- the ports and airports which alone shall be customs ports or customs airports for the
unloading of imported goods and the loading of export goods or any class of such goodsH
,aa- the places which alone shall be inland container depots or air freight stations for the
unloading of imported goods and the loading of export goods or any class of such goodsH
,b- the places which alone shall be land customs stations for the clearance of goods imported or
to be exported by land or inland water or any class of such goodsH
,c- the routes by which alone goods or any class of goods specified in the notification may pass
by land or inland water into or out of India, or to or from any land customs station from or to
any land frontierH
,d- the ports which alone shall be coastal ports for the carrying on of trade in coastal goods or
any class of such goods with all or any specified ports in India.
0ection ): Custom area The Commissioner of Customs may, K
,a- approve proper places in any customs port or customs airport or coastal port for the
unloading and loading of goods or for any class of goodsH
,b- specify the limits of any customs area.
+elevance
$ll the goods imported to India or to be exported from India shall remain in custom area
unless an order for removal has been passed by the custom officer and loading.
(nloading or loading of import:export cargo shall also ta3e place within the custom area
only.
0ection ': Eare8ousin: station
;y issuing a notification the C;EC may appoint any city or town or village as a warehousing station.
Garehousing station is the appointed place where warehouses can be established for the purpose of
this $ct.
153
Eare8ousin: P
It is a facility given to the importer so that he can store the imported goods in a bonded
warehouse and postpone time of payment of duty.
If there is any change in the rate of duty applicable while the goods are in the ware then at the
removal of those goods the duty shall be payable at the changed rate. U5efer ection1'L
0ection &-: "oardin: 6laces 2 The Commissioner of Customs may, by notification in the Bfficial
)a?ette, appoint, in or near any customs port, a boarding station for the purpose of boarding of, or
disembar3ation from, vessels by officers of customs.
+eferences of various ty6es of :oods
&9 Im6orted :oods P These are the goods brought to India from a place outside India
on which applicable duty has not been paid.
,9 Eare8oused :oods P These are the imported goods deposited in the warehouse.
39 .ro8ibited :oods P (nder ection11, the Central )overnment may prohibit import
or export or both of any articles for various reason given therein. If any article is so prohibited,
it is referred as prohibited
(9 Notified /oods P (nder ection11;, the Central )overnment may declare certain
goods which are li3ely to be smuggled into India. uch goods are referred as notified goods.
*9 06ecified /oods P (nder ection11I, the Central )overnment may declare that
certain goods are li3ely to be smuggled out of India. uch goods are referred as pecified
)oods.
D9 Transit :oods P These are the goods brought to India on board on any vessel or
aircraft but those are not unloaded at the place of arrival.#
49 Trans8i6ment :oods P These are the goods unloaded at the place of arrival but
those are sent to some other place without payment of duty. uch other place may be in India or
aborad.
)9 Coastal :oods P $ll goods other than imported goods which are sent from one
coastal port to another within India.
.ro8ibited /oods <0ection&&=
0ection &&: .ro8ibited :oods 2 The Central )overnment may, by issuing a notification in the official
ga?ette, prohibit import or export or both of any article either conditionally or unconditionally, either
partly or fully, due to any of the following reasons P
,a- the maintenance of the security of IndiaH
,b- the maintenance of public order and standards of decency or moralityH
,c- the prevention of smugglingH
154
,d- the prevention of shortage of goods of any descriptionH
,e- the conservation of foreign exchange and the safeguarding of balance of paymentsH
,f- the prevention of injury to the economy of the country by the uncontrolled import or export
of gold or silverH
,g- the prevention of surplus of any agricultural product or the product of fisheriesH
,h- the maintenance of standards for the classification, grading or mar3eting of goods in
international tradeH
,i- the establishment of any industryH
,j- the prevention of serious injury to domestic production of goods of any descriptionH
,3- the protection of human, animal or plant life or healthH
,l- the protection of national treasures of artistic, historic or archaeological valueH
,m- the conservation of exhaustible natural resourcesH
,n- the protection of patents, trade mar3s
&
Ucopyrights, designs and geographical indicationsLH
,o- the prevention of deceptive practicesH
,p- the carrying on of foreign trade in any goods by the tate, or by a Corporation owned or
controlled by the tate to the exclusion, complete or partial, of citi?ens of IndiaH
,1- the fulfilment of obligations under the Charter of the (nited 7ations for the maintenance of
international peace and securityH
,r- the implementation of any treaty, agreement or convention with any countryH
,s- the compliance of imported goods with any laws which are applicable to similar goods
produced or manufactured in IndiaH
,t- the prevention of dissemination of documents containing any matter which is li3ely to
prejudicially affect friendly relations with any foreign tate or is derogatory to national
prestigeH
,u- the prevention of the contravention of any law for the time being in forceH and
,v- any other purpose conducive to the interests of the general public.

Notified /oods <0ection&&A &&/=
(nder ection11;, the Central )overnment may notify certain goods which are
li3ely to be smuggled into India.
+rovisions have been made with a view to ensure easy identification of goods
smuggled into India and to prevent circulation thereof.
$ccording to ection11C, since issue of notification under ection11;, any person in
possession of notified goods for commercial purpose, shall, within seven days, intimate
description, 1uality of goods and place of storage to the custom officer and thereafter the
goods shall not be transferred to another place unless prior intimation thereof has been given
to the officer.
The person referred under ection11C, shall, before ma3ing any further ac1uisition of
the goods, shall give prior information to the officer and after ac1uiring, furnish details to the
officer.
$ccording to ection11<, any person shall not ac1uire notified goods unless he
ensures that the goods he is ac1uiring are not the illegally imported goods. The ac1uirer"s
155
responsibility is fulfilled if he ac1uired the goods along with proper invoice of goods or
goods showing custom clearance of the goods.
ection11E provides that any person referred under ection11C shall maintain
complete record of all the goods ac1uired and sold or otherwise transferred including the
name and address of the persons concerned.
(nder ection112, during the course of transit from one place to another, the notified
goods shall always with the documents so as to establish that those are not the smuggled
goods. Even if goods are being transferred by the person referred under ection11C himself,
he shall issue a transfer challan of the goods.
$ccording to ection11), provisions of ection11C, 11E and 112 are not applicable
where goods are held in a residential premises for personal use.
ection11) further provides that that even when notified goods are gifted, the donor
shall prepare a memorandum of gift containing description of goods and name and address of
the donor and donee, both.
06ecified :oods <0ection&&7 &&5=
pecified goods are which are declared by the Central )overnment as the goods which
are li3ely to be smuggled out of India.
+rovisions related to specified goods are applicable only within 166 Q@ width along the
coast line.
+rovisions are not attracted where the value of the goods does not exceed 5s. 1',666#:
156
Im6ort 6rocedure
1. $rrival and unloading P Uection%4 to =.L
%. Custody and removal P Uection// to /4L
=. $ssessment provisions P Uection1% to %&L
/. Types of duties P Uection% to 4$$ of Custom Tariff $ctL
'. 8aluation Uection1/ and 8aluation 5ulesL
Arrival
0ection ,' Arrival of vessels or aircrafts in India
This ectiondeals with arrival of vessel or aircraft in India from outside India in two types of
situations
/enerally 2 It is the duty of person in:charge of every vessel and air craft coming to India out from
outside India to ensure that the vessel or vehicle arrives only at a port or airport appointed under
ection>. 2urther, as long as it is carrying any passenger or goods brought to India from outside India,
it shall continue to arrive at a custom port or custom airport appointed under ection>.
Emer:ency Emergency provisions become applicable in case of any accident, stress or weather or
other unavoidable causes.
In any such case, the vessel or aircraft may arrive at any place it will be duty to the person:in:charge
to P
i. Inform the nearest police officer#custom officer
ii. 2ollow the instruction given by the police officer#custom officer
iii. 7ot to allow any person to leave vicinity of such place or any of the goods to be removed
therefrom unless it is necessary for safety of life#goods.
0ection 3- filin: of I/5;I/+ <a66lies to ve8icle% vessel and aircraft=
These documents contain a complete summary of all the persons and goods on board the 8ehicle or
vessel or aircraft.
I)@ ,Import )eneral @anifest- is re1uired in case of vessel and aircraft and and I)5 ,Import
)eneral 5eport- is meant for vehicles. Contents of I)@ and I)5 are broadly same. Those are divided
into two parts
+ersons )oods
+assengers
Crew members
,;oth of these categories are subdivided into two
a. )oods for unloading at the place of
arrival
157
categories i.e. disembar3ing and transit-
b. Transit goods
c. Transhipment goods
d. ;aggage
e. tores
f. pecific declaration for the following
goods P
$tomic material
$rms and $mmunition
)old and silver
$ny dangerous material
In case of 8essel and aircraft, it is re1uired to be filed, on behalf of the person:in:charge, by an
authorised person, before arrival of the vessel or aircraft Unot more than 1/ days beforeL. These
documents shall be filed electronically unless otherwise authorised by the
Commissioner. The person filing this document is re1uired to sign a declaration regarding correctness
of the information given therein.
In case of a vehicle, it is re1uired to be filed within 1% hours after the arrival of the vehicle at the
custom a station and unless there is any valid reason for delay, it punishable with fine upto 5s. '6,666.
If the proper officer is satisfied that the import manifest or import report is in any way incorrect or
incomplete, and that there was no fraudulent intention, he may permit it to be amended or
supplemented.
Jnloadin:
0ection 3&2 Entry In$ard <a66lies only in case of vessels=
It is the duty of the master of the vessel to ensure that any of the goods are not unloaded from the
vessel unless permission is granted by proper officer who had granted Bentry in$ardC to the vessel.
$n order under this ectionshall not be made unless I)@ has been filed but the proper officer may
allow it otherwise also if he is satisfied that there was sufficient cause for not delivering it.
+rovisions of this ectionare not applicable for unloading of baggage accompanying a passenger or
a member of the crew, mail bags, animals, perishable goods and ha?ardous goods.
0ection 3, 2 Im6orted :oods not to be unloaded unless mentioned in im6ort manifest or im6ort
re6ort
This ectionprovides that !no imported goods re1uired to be mentioned under the regulations in an
import manifest or import report shall, except with the permission of the proper officer, be unloaded
158
at any customs station unless they are specified in such manifest or report for being unloaded at that
customs station."
0ection 33 unloadin: and loadin: at a66roved 6laces only Except with the permission of the
proper officer, no imported goods shall be unloaded, and no export goods shall be loaded, at any place
other than a place approved under clause ,a- of ection. for the unloading or loading of such goods.
0ection 3( #oadin: of and unloadin: under su6ervision of custom officer This
ectionprovides that the imported goods shall not be unloaded from, and export goods shall not be
loaded on, any conveyance except under the supervision of the proper officer.
9owever, the ;oard may, by notification in the Bfficial )a?ette, give general permission and the
proper officer may in any particular case give special permission, for any goods or class of goods to
be unloaded or loaded without the supervision of the proper officer.
0ection 3* +estriction on :oods bein: $ater borne any of the imported or export goods shall
not be water borne unless those goods are accompanied with a boat note.
9owever, the ;oard may, by notification in the Bfficial )a?ette, give general permission, and
the proper officer may in any particular case give special permission, for any goods or any class of
goods to be water:borne without being accompanied by a boat:note.
Note This concept is used when the main vessel does not arrive at the port and goods are to be
brought from such vessel to the port or goods are to be delivered from the port to the vessel through
other vessel or boat.
0ection 3D #oadin:;unloadin: only on $or1in: days durin: $or1in: 8ours $ny
imported#export goods shall be loaded#unloaded only on a wor3ing day during wor3ing hours,
however, services of the custom officer shall be available on all days on prior intimation being given
and on payment of prescribed fee.
7o fees shall be levied for the unloading and loading of baggage accompanying a passenger or a
member of the crew, and mail bags.
0ection 34 .o$er to "oard Conveyance 2 The proper officer may, at any time, board any
conveyance carrying imported goods or export goods and may remain on such conveyance for such
period as he considers necessary.
0ection 3)9 .o$er to reOuire 6roduction of documents and as1 Ouestions9 P 2or the purposes of
carrying out the provisions of this $ct, the proper officer may re1uire the person:in:charge of any
conveyance or animal carrying imported goods or export goods to produce any document and to
answer any 1uestions and thereupon such person shall produce such documents and answer such
1uestions.
Ex6ort 6rocedure
0ection 3': Ex6ort :oods not to be loaded on vessel until entry2out$ards :ranted9 2 It is the duty
of the master of a vessel to ensure that any of the export goods, other than baggage and mail bags, are
not loaded on the vessel unless entry outward has been granted.
159
0ECTI@N (-9 Ex6ort :oods not to be loaded unless duly 6assed by 6ro6er officer9 The
person:in:charge of a conveyance shall not permit the loading at a customs station :
,a- of export goods, other than baggage and mail bags, unless a shipping bill or bill of export or a
bill of transhipment, as the case may be, duly passed by the proper officer, has been handed over to
him by the exporterH
,b- of baggage and mail bags, unless their export has been duly permitted by the proper officer.
0ection (&: Ailin: of E/5;E/+ 2 ;efore the departure of any conveyance from the custom station,
the person:in:charge of the conveyance shall deliver to the proper officer in the case of a vessel or
aircraft, an export manifest, and in the case of a vehicle, an export report, in the prescribed form along
with the declaration as to the truth of its contents.
The officer may allow incorrect or incomplete manifest or report to be amended or supplemented if
he is satisfied that there was no fraudulent intention.
0ection (,: No conveyance to leave $it8out $ritten order
$ny conveyance which has brought imported goods or on which export goods have been loaded shall
not leave the custom station unless a written permission has been given by the proper officer.
uch permission will be given when relevant export goods have been loaded after filing of proper
documents and applicable duty, if any, has been paid, E)@#E)5 has been filed, and person:in:charge
has answered all the 1uestions.
0ection (3: Exem6tion of certain classes of conveyances from 0ection3-% (& and (,
These provisions shall not apply to a vehicle which is not carrying any goods other than the luggage
of its occupants.
The Central )overnment may, by notification in the Bfficial )a?ette, exempt ::
,a- conveyances belonging to the )overnment or any foreign )overnmentH
,b- vessels and aircraft which temporarily enter India by reason of any emergency.
from all or any of the provisions of this Chapter.
Custody and removal of im6orted :oods <0ection((2('=
Custody
0ection ((: C8a6ter not to a66ly to ba::a:e and 6ostal articles9 The provisions of this Chapter
shall not apply to ,a- baggage, and ,b- goods imported or to be exported by post.
0ection (*9 +estrictions on custody and removal of im6orted :oods 2 $ll the imported goods
unloaded in custom area shall remain in the custody of the custodians appointed by the Commissioner
until an order for removal for home consumption or warehousing or transshipment has been passed by
the officer.
The custodians are re1uired to maintain a complete record of all the goods received and removed from
the custom area and it is his duty to ensure that any of the goods received in custom area are not
removed without a proper order for removal.
160
$ccording to sub:ection,=- if any imported goods are pilferred after unloading thereof in a customs
area while in the custody of a person appointed under sub:ection,1-, that person shall be liable to pay
duty on such goods at the rate prevailing on the date of delivery of an import manifest# import report
to the proper officer under ection=6.
0ection &3: .ilfera:e of :oods
If any of the goods are pilfered after unloading in India but before any order is passed under
ection/> or ection&6 for removal of the goods, the importer shall not be liable to pay duty
unless the goods are restored to him.
+emoval
0ECTI@N (D9 Entry of :oods on im6ortation9 2or the purpose of removal of goods for 9B@E
CB7(@+TIB7 or for G$5E9B(7), the importer shall present a ;ill of Entry electronically
along with maximum possible documentary evidences in support of identity and value of the goods.
Ghere all documents cannot be furnished by the importer, the officer may allow him to inspect the
goods or allow removal of goods for being deposited in the warehouse.
.rior Entry2 The ;ill of entry may be presented even before the arrival of goods in India but not
more than =6 days before. It is referred as +5IB5 E7T5S.
Ghile presenting a bill of entry the importer shall also ma3e a declaration regarding truth of the
contents of bill of entry.
0ubstitution $ccording to sub:ection,'- provides that where the proper officer is satisfied that the
interests of revenue are not prejudicially affected and that there was no fraudulent intention, he may
permit substitution of a bill of entry for home consumption for a bill of entry for warehousing or )ice
)ersa.
0ection (49 Clearance of :oods for 8ome consum6tion9 Ghere the officer is satisfied that the
goods for which importer has filed bill of entry are not the prohibited goods and that the importer has
paid the import duty, if any, assessed thereon and any charges payable under this $ct in respect of the
same, the proper officer may ma3e an order permitting clearance of the goods for home consumption.
It is to be noted that the importer shall pay the duty within two days since assesses ;oE is returned to
him. The central government is empowered to notify certain categories of importers who are re1uired
to pay duty electronically.
In case of delay he shall also pay interest at the rate prescribed by the Central )overnment between
16C per annum to =&C per annum, on such duty till the date of payment of the said duty. 9owever,
if the ;oard is satisfied that it is necessary in the public interest so to do, it may, by order for reasons
to be recorded, waive the whole or part of any interest payable under this section.
0ection ()9 .rocedure in case of :oods not cleared% $are8oused% or trans8i66ed $it8in t8irty
days after unloadin:9 P If any goods brought into India from a place outside India are not cleared for
home consumption or warehoused or transhipped within thirty days from the date of the unloading
thereof at a customs station or within such further time as the proper officer may allow or if the title to
any imported goods is relin1uished, such goods may, after notice to the importer and with the
permission of the proper officer be sold by the person having the custody thereof 0
161
+rovided that :
,a- animals, perishable goods and ha?ardous goods, may, with the permission of the proper
officer, be sold at any timeH
,b- arms and ammunition may be sold at such time and place and in such manner as the
Central )overnment may direct.
0ECTI@N ('9 0tora:e of im6orted :oods in $are8ouse 6endin: clearance9 ($are8ousin:
$it8out $are8ousin: Ghere an importer has filed a ;ill of Entry for home consumption, the
$C#<C is satisfied on the application of the importer that the goods cannot be cleared within a
reasonable time, the goods may, pending clearance, be permitted to be stored in a public warehouse
for a period not exceeding =6 days, or in a private warehouse if facilities for deposit in a public
warehouse are not availableH for a period not exceeding =6 days, but such goods shall not be deemed
to be warehoused goods for the purposes of this $ct, and accordingly the provisions of Chapter IM
,i.e. warehousing- shall not apply to such goods.

Assessment
0ection &,: C8ar:in: of duty
(nless exempted, all goods imported into or to be exported from India are liable to duty as per
schedule I and II of the Custom Tariff $ct, 14>'.
The <uty shall be e1ually chargeable even if import#export is by the government.
<uty on imports is referred as import duty and duty on exports is referred as export duty. Commonly
both the duties are referred as Custom duties.
Note P +ower to grant exemption is given to the Central )overnment under ection%' of the $ct.
0ection ,*: .o$er of t8e Central /overnment to :rant exem6tion
The Central )overnment is empowered to grant exemptions either conditionally or unconditionally
and the exemption may be partial or full.
"y issue is notification "y order
7otifications can be issued in public interest Brders can be passed under special circumstances
uch exemptions are automatically available to
every eligible person
uch exemptions are available only to the person
for whom order is passed
(nless otherwise specified, the exemption is
applicable from the date of issue of notification
uch exemptions are available from the date
specified in the order.
The Central )overnment is also empowered to add any clarification to the notification or order within
one year since issue and such clarification shall have effect as if it was a part of the original
notification or order.

0ection &3: .ilfera:e of :oods
162
The word 6ilfera:e refers to any theft is small 1uantity. ;ut this ectionis applicable for theft,
whether small or not.
If any of the goods are pilfered after unloading in India but before any order is passed under
ection/> or ection&6 for removal of the goods from custom area, the importer shall not be liable to
pay duty unless the goods are restored to him.
0ection &(: Valuation
2or the purpose of charging duty, the assessable value of the goods my be either the assessable value
determined under sub:ection,1- or tariff value fixed by the central government under sub:ection,%-.
$ccording to sub:ection,1-, the value of goods shall be the transaction value of the goods at the time
and place of import or export of goods, as the case may be, where price is the sole consideration for
the goods and price is the sole consideration for import#export.
2or the purpose of assessable value of imported goods, the transaction value shall be adjusted in
accordance with the prescribed rules.
The rules shall also prescribe when the parties can be said to be related.
Exc#ange 8ate - The foreign exchange shall be converted at the exchange rate prescribed by the
C;EC and prevailing on the date of presentation of ;ill of Entry under ection/&.
.ariff +al!e - $ccording to ection1/,%-, the C;EC may fix tariff value of certain articles for the
purpose of charging of duty and where tariff value has been fixed, nothing applicable in relation to
transaction value shall be applicable.
0ection &*: +ate of im6ort duty
Except in the case where goods are imported as baggage or by post, the rate of duty shall be the rate
applicable P
a. as on the date of presentation of ;ill of Entry for 9ome Consumption or date of grant of entry
inward, whichever is later
b. in any other case, as on the date of payment of duty.
0ection &D: +ate of duty in case of ex6ort
The duty shall be payable at the rate prevailing on the date when a ;ill of Export is presented under
ection'6. ,7ot applicable in case of export by post-
0ection &4: Assessment
,1- $n importer entering any imported goods under ection/&, or an exporter entering any export
goods under ection'6, shall, save as otherwise provided in ection.', self:assess the duty, if any,
leviable on such goods.
,%- The proper officer may verify the self:assessment of such goods and for this purpose, examine or
test any imported goods or export goods or such part thereof as may be necessary.
,=- 2or verification of self:assessment under sub:ection,%-, the proper officer may re1uire the
importer, exporter or any other person to produce any contract, bro3er"s note, insurance policy,
163
catalogue or other document, whereby the duty leviable on the imported goods or export goods, as the
case may be, can be ascertained, and to furnish any information re1uired for such ascertainment which
is in his power to produce or furnish, and thereupon, the importer, exporter or such other person shall
produce such document or furnish such information.
,/- Ghere it is found on verification, examination or testing of the goods or otherwise that the self
assessment is not done correctly, the proper officer may, without prejudice to any other action which
may be ta3en under this $ct, re:assess the duty leviable on such goods.
,'- Ghere any re:assessment done under sub:ection,/- is contrary to the self:assessment done by the
importer or exporter regarding valuation of goods, classification, exemption or concessions of duty
availed conse1uent to any notification issued therefor under this $ct and in cases other than those
where the importer or exporter, as the case may be, confirms his acceptance of the said re:assessment
in writing, the proper officer shall pass a spea3ing order on the re:assessment, within fifteen days
from the date of re:assessment of the bill of entry or the shipping bill, as the case may be.
,&- Ghere re:assessment has not been done or a spea3ing order has not been passed on re:assessment,
the proper officer may audit the assessment of duty of the imported goods or export goods at his
office or at the premises of the importer or exporter, as may be expedient, in such manner as may be
prescribed.
Ex6lanation.K 2or the removal of doubts, it is hereby declared that in cases where an importer has
entered any imported goods under ection/& or an exporter has entered any export goods under
ection'6 before the date on which the 2inance ;ill, %611 receives the assent of the +resident, such
imported goods or export goods shall continue to be governed by the provisions of ection1> as it
stood immediately before the date on which such assent is received.J
0ECTI@N &)9 .rovisional assessment of duty9
,1- 7otwithstanding anything contained in this $ct but without prejudice to the provisions of
ection/&,K
,a- where the importer or exporter is unable to ma3e self:assessment under sub:ection,1- of
ection1> and ma3es a re1uest in writing to the proper officer for assessmentH or
,b- where the proper officer deems it necessary to subject any imported goods or export
goods to any chemical or other testH or
,c- where the importer or exporter has produced all the necessary documents and furnished
full information but the proper officer deems it necessary to ma3e further en1uiryH or

,d- where necessary documents have not been produced or information has not been
furnished and the proper officer deems it necessary to ma3e further en1uiry, the proper
officer may direct that the duty leviable on such goods be assessed provisionally if the
importer or the exporter, as the case may be, furnishes such security as the proper officer
164
deems fit for the payment of the deficiency, if any, between the duty as may be finally
assessed or re:assessed, as the case may be and the duty provisionally assessed.
,%- Ghen the duty leviable on such goods is assessed finally or re:assessed by the proper officer in
accordance with the provisions of this $ct, then:
,a- in the case of goods cleared for home consumption or exportation, the amount paid shall
be adjusted against the duty finally assessed or re:assessed, as the case may be and if the
amount so paid falls short of, or is in excess of the duty finally assessed or re:assessed, as
the case may be, the importer or the exporter of the goods shall pay the deficiency or be
entitled to a refund, as the case may beH
,b- in the case of warehoused goods, the proper officer may, where the duty finally assessed
or re:assessed, as the case may be is in excess of the duty provisionally assessed, re1uire
the importer to execute a bond, binding himself in a sum e1ual to twice the amount of the
excess duty.
,=- The importer or exporter shall be liable to pay interest, on any amount payable to the Central
)overnment, conse1uent to the final assessment order or re:assessment order under sub:ection,%-, at
the rate fixed by the Central )overnment under ection%.$; from the first day of the month in which
the duty is provisionally assessed till the date of payment thereof.
,/- ubject the sub:ection,'-, if any refundable amount referred to in clause ,a- of sub:ection,%- is
not refunded under that sub:ectionwithin three months from the date of assessment of duty finally or
re:assessment of duty, as the case may be, there shall be paid an interest on such unrefunded amount
at such rate fixed by the Central )overnment under ection%>$ till the date of refund of such amount.
,'- The amount of duty refundable under sub:ection,%- and the interest under sub:ection,/-, if any,
shall, instead of being credited to the 2und, be paid to the importer or the exporter, as the case may be,
if such amount is relatable to :
,a- the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the
case may be, if he had not passed on the incidence of such duty and interest, if any, paid
on such duty to any other personH
,b- the duty and interest, if any, paid on such duty on imports made by an individual for his
personal useH
,c- the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on
the incidence of such duty and interest, if any, paid on such duty to any other personH
,d- the export duty as specified in ection%&H
,e- drawbac3 of duty payable under sections >/ and >'.
0ection &': Assessment of :oods im6orted in sets
165
Ghere goods are imported in sets, the goods are divided into two categories for the purpose of
charging duty i.e. P
a. goods liable to specific dutyH and
b. goods liable to ad:valorem duty
$ll the goods liable to ad:valorem duty shall be liable to duty at the highest rate applicable of any of
those articles and the goods which are otherwise liable to nil rate of duty or exempt, shall also be
liable to duty.
Ghere parts and accessories are also supplied with the goods, then such parts and accessories, to the
extent those are compulsorily supplied along with the goods are classifiable under the heading of the
goods with which those are going to be used.
0ection ,-: /oods re2im6orted
If goods exported from India are re:imported, such goods shall be treated at par with any other
imported goods for the purpose of duty.
-pecial =rovisions K
a. If goods are brought bac3 otherwise than resale than the
amount of duty chargeable shall not exceed the amount of duty drawbac3, if any, claimed by
the exporter. It means, if the exporter has not claimed duty drawbac3, no import duty will be
chargeable on such goods on being brought bac3 in India. uch goods will be treated as if
those goods were never exported.
b. If goods exported from India are brought bac3 only for t8e
6ur6ose of re6airs and maintenance and the importer executes a bond that the goods will be
re:exported after repairs or maintenance within one year since brought bac3 to India, then
duty will not be chargeable on such goods. 9owever, if goods are not re:exported within the
given time limit, the importer will be liable to pay duty along with interest.
0ection ,&: Metsam% floatsam% derelict and $rec1a:e
Metsam means the goods which are intentionally thrown in the sea with a view to protect the vessel
in bad weather conditions.
Aloatsam means the goods that remain afloat even when the vessel has sun3
Derelict $ny vessel or boat or barge left in the sea unattended
Erec1a:e It means bro3en parts of any vessel or boat etc.
If any of these goods reach India and any person claims titles for these goods, he shall be liable to pay
duty as if he has imported those goods.
0ection ,,: Abatement of duty
Ghere any of the goods are damaged at any time before removal for home consumption i.e.
a. ;efore unloading in IndiaH or
b. <uring unloading in IndiaH or
c. Ghile the goods are in the custody of custodianH or
d. <uring transit to warehouseH or
e. <uring warehousing
166
resulting into devaluation of goods, without any act or omission on the part of importer or any of his
agent, then the duty liability on such goods shall be reduced in proportion of devaluation of the goods.
2or the purposes of this section, the value of damaged or deteriorated goods may be ascertained by
either of the following methods at the option of the owner0:
,a- the value of such goods may be ascertained by the proper officer, or
,b- such goods may be sold by the proper officer by public auction or by tender, or with the
consent of the owner in any other manner, and the gross sale proceeds shall be deemed to be
the value of such goods.
0ection ,3: +emission of duty
8emission K It means waiver of duty
.rovisions
There are two situations in which remission of duty will be allowed.
-it!ation 1 - Ghere any of the imported goods ,)oods are referred as imported only until duty is paid
thereon- are destroyed due to any accident including natural calamity at anytime before removal for
home consumption i.e.
a. ;efore unloading in IndiaH or
b. <uring unloading in IndiaH or
c. Ghile the goods are in the custody of custodianH or
d. <uring transit to warehouseH or
e. <uring warehousing
5emission of duty will be allowed for all the duty#duties chargeable on such goods. 5emission will be
allowed even if such accident is caused due to any act or omission on the part of importer or his agent.
-it!ation 2 - imilarly, where importer transfer title of the goods in writing in favour of the
commissioner, before an order is passed under ection/> or under ection&6 for removal of goods
from the custom area then the importer shall not be liable to pay duty on such goods.
It is also to be noted that any of the goods in relation to which any offence has been committed either
under this $ct or under any other law, cannot be transferred in favour of the commissioner.
0ection ,(: Denaturin: of :oods
Ghere any imported article is classifiable under various heading depending upon multiple uses of the
goods, the duty shall be paid at the highest rate applicable e.g. +ure $lcohol
The Central government is authorised to ma3e the rules for denaturing of such goods. The 5ules for
denaturing provide that on an application of the importer the custom officer shall mix prescribed
substance in prescribed 1uantity in imported goods. ;y such mixing, the imported goods will not
capable of certain uses. ince this changes the nature of the goods, it is called denaturing.
$fter denaturing of the goods, the duty shall be liable to be paid as if denatured goods have been
imported.
0ection ,D: +efund of ex6ort duty
Ghere goods are exported on payment of export duty and such goods are returned to India otherwise
than by way of sale within one year since export then any export duty paid on such goods shall be
refunded.
167
Ty6es of Duties
"asic Custom Duty (Im6ort Duty 0ection , of Custom Tariff Act
$ccording to ection1% of the Custom $ct, duty shall be levied as per the rates specified under the
Custom Tariff $ct and ection% of the Custom $ct provides that the ;asic Custom <uty ,;C<- shall
be levied at the rate specified under schedule I of the Custom Tariff $ct.
9ifferential rates of d!t - Two types of rates are given in the tariff i.e. preferential rates and standard
rates. +referential rates are applicable only when goods are imported from a country declared by the
Central government as a favoured nation#preferred country. In all other cases, duty is chargeable at the
standard 5ates. ,5ates are applicable as per ection1'-
Additional custom Duty or countervailin: duty 0ection 3(& of CTA
This duty can be levied only if the goods imported are the excisable goods within the meaning of
ection%,d- of the Central Excise $ct, 14// and those goods have been manufactured abroad within
the meaning of ection%,f- of the CE$, 14//.
9!t is eH!al to excise d!t - The rate of this duty is e1ual to excise duty chargeable on manufacture
of same goods in India. It means if the goods manufactured in India attract excise duty E 16C, $C<
will also be chargeable at the rate of 16C. If there is any exemption under central excise then such
exemption is applicable for calculation of $C< also.
9!t on liH!or for #!man cons!mption - In case of li1uor for human consumption is imported the
Central )overnment may, by notification in the Bfficial )a?ette, specify the rate of additional duty
having regard to the excise duty for the time being leviable on a li3e alcoholic li1uor produced or
manufactured in different tates.
+al!e K L#ere goods are assessed on transaction val!e K 2or the purpose of calculation of this duty,
value shall be aggregate of assessable value of the imported goods, ;asic Custom <uty and +rotective
duty, if any under ection& of CT$.
+al!e - 4#ere goods are assessed on 8-= $ased val!e -
,a- in relation to which it is re1uired, under the provisions of the *egal @etrology $ct, %66% or
the rules made thereunder or under any other law for the time being in force, to declare on
the pac3age thereof the retail sale price of such articleH and
,b- where the li3e article produced or manufactured in India, or in case where such li3e article
is not so produced or manufactured, then, the class or description of articles to which the
imported article belongs, isK
,i- the goods specified by notification in the Bfficial )a?ette under sub:ection,1- of
ection/$ of the Central Excise $ct, 14// ,1 of 14//-, the value of the imported
article shall be deemed to be the retail sale price declared on the imported article less
such amount of abatement, if any, from such retail sale price as the Central
)overnment may, by notification in the Bfficial )a?ette, allow in respect of such li3e
article under sub:ection,%- of ection/$ of that $ctH or
,ii- the goods specified by notification in the Bfficial )a?ette under ection= read with
168
clause ,1- of Explanation III of the chedule to the @edicinal and Toilet +reparations
,Excise <uties- $ct, 14'' ,1& of 14''-, the value of the imported article shall be
deemed to be the retail sale price declared on the imported article less such amount
of abatement, if any, from such retail sale price as the Central )overnment may, by
notification in the Bfficial )a?ette, allow in respect of such li3e article under clause
,%- of the said Explanation.
Explanation. V Ghere on any imported article more than one retail sale price is declared, the
maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this
section.
Explanation. K Ghere on any imported article more than one retail sale price is declared, the
maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this
section.
+al!e K 4#ere goods are assessed on .ariff +al!e K If the imported article is an article for which
Central )overnment has fixed Tariff 8alue under ection=,%- of the Central Excise $ct, then such
tariff value shall be assessable value for the purpose of $C<.
06ecial Additional Custom Duty 0ection 3(* of CTA
This duty is chargeable on all goods imported into India unless exempted otherwise.
This duty is charged to counter:balance the sales tax, value added tax, local tax or any other charges
for the time being leviable on a li3e article on its sale, purchase or transportation in India.
The duty is chargeable E /C on aggregate of assessable value, ;asic Custom <uty, +rotective <uty,
if any, $dditional Custom <uty, education cess on ;C< D $C< and 9EC on ;C< D $C<.
.rotective Duty 0ection D of CTA
,1- Ghere the Central )overnment, upon a recommendation made to it in this behalf by the Tariff
Commission established under the Tariff Commission $ct, 14'1 ,'6 of 14'1-, is satisfied that
circumstances exist which render it necessary to ta3e immediate action to provide for the protection of
the interests of any industry established in India, the Central )overnment may, by notification in the
Bfficial )a?ette, impose on any goods imported into India in respect of which the said
recommendation is made, a duty of customs of such amount, not exceeding the amount proposed in
the said recommendation, as it thin3s fit.
,%- Every duty imposed on any goods under sub:ection,1- shall, for the purposes of this $ct, be
deemed to have been specified in the 2irst chedule as the duty leviable in respect of such goods.
,=- Ghere a notification has been issued under sub:ection,1-, the Central )overnment shall, unless
the notification is in the meantime rescinded, have a ;ill introduced in +arliament, as soon as may be,
but in any case during the next session of +arliament following the date of the issue of the notification
to give effect to the proposals in regard to the continuance of a protective duty of customs on the
goods to which the notification relates, and the notification shall cease to have effect when such ;ill
becomes law, whether with or without modifications, but without prejudice to the validity of anything
previously done thereunder 0
169
.rovided that if the notification under sub:ection,1- is issued when +arliament is in session, such a
;ill shall be introduced in +arliament during that session 0
.rovided further that where, for any reason, a ;ill as aforesaid does not become law within six
months from the date of its introduction in +arliament, the notification shall cease to have effect on
the expiration of the said period of six months, but without prejudice to the validity of anything
previously done thereunder.
0afe:uard Duty 0ection )" -f CTA
If the Central )overnment, after conducting such en1uiry as it deems fit, is satisfied that any article is
imported into India in such increased 1uantities and under such conditions so as to cause or
threatening to cause serious injury to domestic industry, then, it may, by notification in the Bfficial
)a?ette, impose a safeguard duty on that article 0
.rovided that no such duty shall be imposed on an article originating from a developing country so
long as the share of imports of that article from that country does not exceed three per cent or where
the article is originating from more than one developing countries, then, so long as the aggregate of
the imports from developing Countries each with less than three per cent. import share ta3en together
does not exceed nine per cent of the total imports of that article into India 0
.rovisional Collection 22 The Central )overnment may, pending the in1uiry under sub:ection,1-,
impose a provisional safeguard duty under this sub:ectionon the basis of a preliminary determination
that increased imports have caused or threatened to cause serious injury to a domestic industry but
where where, on final determination, the Central )overnment is of the opinion that increased imports
have not caused or threatened to cause serious injury to a domestic industry, it shall refund the duty so
collected 0
Validity 2 The provisional safeguard duty shall not remain in force for more than two hundred days
from the date on which it was imposed.
The duty imposed under this ectionshall, unless revo3ed earlier, cease to have effect on the expiry of
four years from the date of such imposition however, this duty may be extended from year to year
basis upto maximum of 16 years.
Idomestic industryJ means the producers :
,i- as a whole of the li3e article or a directly competitive article in IndiaH or
,ii- whose collective output of the li3e article or a directly competitive article in India
constitutes a major share of the total production of the said article in IndiaH
06ecific .rotective Duty a:ainst im6ort of s6ecific articles from C8ina 0ection)C of CTA
,ame as under ection.;-
Duty a:ainst subsidy 0ection ' of CTA
Ghere any country or territory pays, bestows, directly or indirectly, any subsidy upon the
manufacture or production therein or the exportation therefrom of any article including any subsidy
on transportation of such article, then, upon the importation of any such article into India, whether the
same is imported directly from the country of manufacture, production or otherwise, and whether it is
imported in the same condition as when exported from the country of manufacture or production or
170
has been changed in condition by manufacture, production or otherwise, the Central )overnment
may, by notification in the Bfficial )a?ette, impose a countervailing duty not exceeding the amount
of such subsidy.
Explanation. - 2or the purposes of this section, a subsidy shall be deemed to exist if :
,a- there is financial contribution by a )overnment, or any public body in the exporting or
producing country or territory, that is, where :
,i- a )overnment practice involves a direct transfer of funds ,including grants, loans
and e1uity infusion-, or potential direct transfer of funds or liabilities, or bothH
,ii- )overnment revenue that is otherwise due is foregone or not collected ,including
fiscal incentives-H
,iii- a )overnment provides goods or services other than general infrastructure or
purchases goodsH
,iv- a )overnment ma3es payments to a funding mechanism, or entrusts or directs a
private body to carry out one or more of the type of functions specified in clauses
,i- to ,iii- above which would normally be vested in the )overnment and the
practice in, no real sense, differs from practices normally followed by
)overnmentsH or
,b- a )overnment grants or maintains any form of income or price support, which operates
directly or indirectly to increase export of any article from, or to reduce import of any
article into, its territory, and a benefit is thereby conferred.
=rovisional collection K (ntil en1uiry is completed this duty may be collected provisionally. $fter
conclusion of en1uiry if subsidy is confirmed, the duty collected provisionally will be adjusted against
it. If subsidy is found to be less then duty will be reduced and the amount collected will be come
refundable subject to doctrine of unjust enrichment.
8etrospective effect K This duty may also be imposed with retrospective effect upto 46 days prior to
the date of issue of notification.
+alidit K (nless revo3ed earlier, this duty shall cease to have effect after expiry of ' years. 9owever,
it may be extended for another period of another ' years.
Anti dum6in: Duty 0ection 'A and 'AA
Ghere any article is exported by an exporter or producer from any country or territory ,hereinafter in
this ection 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 )overnment may, by notification in
the Bfficial )a?ette, impose an anti:dumping duty not exceeding the margin of dumping in relation to
such article.
=rovisional collection K (ntil en1uiry is completed this duty may be collected provisionally. $fter
conclusion of en1uiry if dumping is confirmed, the duty collected provisionally will be adjusted
against it. If dumping margin is found to be less then duty will be reduced and the amount collected
will be come refundable subject to doctrine of unjust enrichment.
8etrospective effect K This duty may also be imposed with retrospective effect upto 46 days prior to
the date of issue of notification.
+alidit K (nless revo3ed earlier, this duty shall cease to have effect after expiry of ' years. 9owever,
it may be extended for another period of another ' years.
171
No anti dum6in: duty 2 7o article shall be subjected to both countervailing duty and anti:dumping
duty to compensate for the same situation of dumping or export subsidi?ation.
0ection 'AA9 +efund of anti2dum6in: duty in certain cases9 2 ,1- Ghere an importer proves to
the satisfaction of the Central )overnment that he has paid any anti:dumping duty imposed under
sub:ection,1- of ection4$ on any article, in excess of the actual margin of dumping in relation to
such article, he shall be entitled to refund of such excess duty.

Valuation <0ection &( and Valuation +ules=
CJ0T@50 VA#JATI@N (DETE+5INATI@N @A VA#JE @A I5.@+TED /@@D0
+J#E0% ,--4

&9 08ort title% commencement and a66lication9 K ,1- These rules may be called the Customs
8aluation ,<etermination of 8alue of Imported )oods- 5ules, %66>.
,%- They shall come into force on the 16th day of Bctober, %66>.
,=- They shall apply to imported goods.
,9 Definitions9 K ,1- In these rules, unless the context otherwise re1uires, :
,a- Icomputed valueJ means the value of imported goods determined in accordance with rule
..
,b- Ideductive valueJ means the value determined in accordance with rule >.
,c- Igoods of the same class or 3indJ, means imported goods that are within a group or range
of imported goods produced by a particular industry or industrial sector and includes
identical goods or similar goodsH
,d- Iidentical goodsJ means imported goods :
,i- which are same in all respects, including physical characteristics, 1uality and
reputation as the goods being valued except for minor differences in appearance that
do not affect the value of the goods,
,ii- produced in the country in which the goods being valued were produced, and
,iii- produced by the same person who produced the goods, or where no such goods are
available, goods produced by a different person,
but shall not include imported goods where engineering, development wor3, art wor3,
design wor3, plan or s3etch underta3en in India were completed directly or indirectly by
the buyer on these imported goods free of charge or at a reduced cost for use in
connection with the production and sale for export of these imported goodsH
,e- IproducedJ includes grown, manufactured and minedH
,f- Isimilar goodsJ means imported goods :
,i- which although not ali3e in all respects, have li3e characteristics and li3e component
materials which enable them to perform the same functions and to be commercially
interchangeable with the goods being valued having regard to the 1uality, reputation
and the existence of trade mar3H
,ii- produced in the country in which the goods being valued were producedH and
172
,iii- produced by the same person who produced the goods being valued, or where no
such goods are available, goods produced by a different person,
but shall not include imported goods where engineering, development wor3, art wor3,
design wor3, plan or s3etch underta3en in India were completed directly or indirectly by
the buyer on these imported goods free of charge or at a reduced cost for use in
connection with the production and sale for export of these imported goodsH
,g- Itransaction valueJ means the value referred to in sub:ection,1- of ection1/ of the
Customs $ct, 14&%H
,%- 2or the purpose of these rules, persons shall be deemed to be IrelatedJ only if :
,i- they are officers or directors of one another"s businessesH
,ii- they are legally recognised partners in businessH
,iii- they are employer and employeeH
,iv- any person directly or indirectly owns, controls or holds five per cent or more of the
outstanding voting stoc3 or shares of both of themH
,v- one of them directly or indirectly controls the otherH
,vi- both of them are directly or indirectly controlled by a third personH
,vii- together they directly or indirectly control a third personH or
,viii- they are members of the same family.
Explanation I. : The term IpersonJ also includes legal persons.
Explanation II. : +ersons who are associated in the business of one another in that one is the
sole agent or sole distributor or sole concessionaire, howsoever described, of the other shall be
deemed to be related for the purpose of these rules, if they fall within the criteria of this sub:rule.
39 Determination of t8e met8od of valuation9 K ,1- ubject to rule 1%, the value of imported goods
shall be the transaction value adjusted in accordance with provisions of rule 16H
,%- 8alue of imported goods under sub:rule ,1- shall be accepted 0
+rovided that :
,a- there are no restrictions as to the disposition or use of the goods by the buyer other than
restrictions which :
,i- are imposed or re1uired by law or by the public authorities in IndiaH or
,ii- limit the geographical area in which the goods may be resoldH or
,iii- do not substantially affect the value of the goodsH
,b- the sale or price is not subject to some condition or consideration for which a value
cannot be determined in respect of the goods being valuedH
,c- no part of the proceeds of any subse1uent resale, disposal or use of the goods by the buyer
will accrue directly or indirectly to the seller, unless an appropriate adjustment can be
made in accordance with the provisions of rule 16 of these rulesH and
,d- the buyer and seller are not related, or where the buyer and seller are related, that
transaction value is acceptable for customs purposes under the provisions of sub:rule ,=-
below.
,=- ,a- Ghere the buyer and seller are related, the transaction value shall be accepted provided
that the examination of the circumstances of the sale of the imported goods indicate that the
relationship did not influence the price.
173
,b- In a sale between related persons, the transaction value shall be accepted, whenever the
importer demonstrates that the declared value of the goods being valued, closely approximates to
one of the following values ascertained at or about the same time.
,i- the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in
IndiaH
,ii- the deductive value for identical goods or similar goodsH
,iii- the computed value for identical goods or similar goods 0
+rovided that in applying the values used for comparison, due account shall be ta3en of
demonstrated difference in commercial levels, 1uantity levels, adjustments in accordance
with the provisions of rule 16 and cost incurred by the seller in sales in which he and the
buyer are not relatedH
,c- substitute values shall not be established under the provisions of clause ,b- of this sub:
rule.
,/- If the value cannot be determined under the provisions of sub:rule ,1-, the value shall be
determined by proceeding se1uentially through rule / to 4.
(9 Transaction value of identical :oods9 K
,1-,a- ubject to the provisions of rule =, the value of imported goods shall be the transaction
value of identical goods sold for export to India and imported at or about the same time as
the goods being valued 0
+rovided that such transaction value shall not be the value of the goods provisionally
assessed under ection1. of the Customs $ct, 14&%.
,b- In applying this rule, the transaction value of identical goods in a sale at the same
commercial level and in substantially the same 1uantity as the goods being valued shall
be used to determine the value of imported goods.
,c- Ghere no sale referred to in clause ,b- of sub:rule ,1-, is found, the transaction value of
identical goods sold at a different commercial level or in different 1uantities or both,
adjusted to ta3e account of the difference attributable to commercial level or to the
1uantity or both, shall be used, provided that such adjustments shall be made on the basis
of demonstrated evidence which clearly establishes the reasonableness and accuracy of
the adjustments, whether such adjustment leads to an increase or decrease in the value.
,%- Ghere the costs and charges referred to in sub:rule ,%- of rule 16 of these rules are
included in the transaction value of identical goods, an adjustment shall be made, if there are
significant differences in such costs and charges between the goods being valued and the identical
goods in 1uestion arising from differences in distances and means of transport.
,=- In applying this rule, if more than one transaction value of identical goods is found, the
lowest such value shall be used to determine the value of imported goods.
*9 Transaction value of similar :oods9 K ,1 -ubject to the provisions of rule =, the value of
imported goods shall be the transaction value of similar goods sold for export to India and imported at
or about the same time as the goods being valued 0
+rovided that such transaction value shall not be the value of the goods provisionally assessed
under ection1. of the Customs $ct, 14&%.
,%- The provisions of clauses ,b- and ,c- of sub:rule ,1-, sub:rule ,%- and sub:rule ,=-, of rule / shall,
mutatis mutandis, also apply in respect of similar goods.
174
D9 Determination of value $8ere value can not be determined under rules 3% ( and *9 K If the
value of imported goods cannot be determined under the provisions of rules =, / and ', the value shall
be determined under the provisions of rule > or, when the value cannot be determined under that rule,
under rule . 0
+rovided that at the re1uest of the importer, and with the approval of the proper officer, the
order of application of rules > and . shall be reversed.
49 Deductive value9 K ,1- ubject to the provisions of rule =, if the goods being valued or identical or
similar imported goods are sold in India, in the condition as imported at or about the time at which the
declaration for determination of value is presented, the value of imported goods shall be based on the
unit price at which the imported goods or identical or similar imported goods are sold in the greatest
aggregate 1uantity to persons who are not related to the sellers in India, subject to the following
deductions 0 K
,i- either the commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported goods of the
same class or 3indH
,ii- the usual costs of transport and insurance and associated costs incurred within IndiaH
,iii- the customs duties and other taxes payable in India by reason of importation or sale of the
goods.
,%- If neither the imported goods nor identical nor similar imported goods are sold at or about the
same time of importation of the goods being valued, the value of imported goods shall, subject
otherwise to the provisions of sub:rule ,1-, be based on the unit price at which the imported goods or
identical or similar imported goods are sold in India, at the earliest date after importation but before
the expiry of ninety days after such importation.
,=- ,a- If neither the imported goods nor identical nor similar imported goods are sold in India
in the condition as imported, then, the value shall be based on the unit price at which the
imported goods, after further processing, are sold in the greatest aggregate 1uantity to persons
who are not related to the seller in India.
,b- In such determination, due allowance shall be made for the value added by processing
and the deductions provided for in items ,i- to ,iii- of sub:rule ,1-.
)9 Com6uted value9 K ubject to the provisions of rule =, the value of imported goods shall be based
on a computed value, which shall consist of the sum of0:
,a- the cost or value of materials and fabrication or other processing employed in producing
the imported goodsH
,b- an amount for profit and general expenses e1ual to that usually reflected in sales of goods
of the same class or 3ind as the goods being valued which are made by producers in the
country of exportation for export to India 0
,c- the cost or value of all other expenses under sub:rule ,%- of rule 16.
'9 +esidual met8od9 K ,1- ubject to the provisions of rule =, where the value of imported goods
cannot be determined under the provisions of any of the preceding rules, the value shall be determined
using reasonable means consistent with the principles and general provisions of these rules and on the
basis of data available in India 0
+rovided that the value so determined shall not exceed the price at which such or li3e goods are
ordinarily sold or offered for sale for delivery at the time and place of importation in the course of
international trade, when the seller or buyer has no interest in the business of other and price is the
175
sole consideration for the sale or offer for sale.
,%- 7o value shall be determined under the provisions of this rule on the basis of 0:
,i- the selling price in India of the goods produced in IndiaH
,ii- a system which provides for the acceptance for customs purposes of the highest of the
two alternative valuesH
,iii- the price of the goods on the domestic mar3et of the country of exportationH
,iv- the cost of production other than computed values which have been determined for
identical or similar goods in accordance with the provisions of rule .H
,v- the price of the goods for the export to a country other than IndiaH
,vi- minimum customs valuesH or
,vii- arbitrary or fictitious values.
&-9 Cost and services9 K ,1- In determining the transaction value, there shall be added to the price
actually paid or payable for the imported goods, K
,a- the following to the extent they are incurred by the buyer but are not included in the price
actually paid or payable for the imported goods, namely0:
,i- commissions and bro3erage, except buying commissionsH
,ii- the cost of containers which are treated as being one for customs purposes with the
goods in 1uestionH
,iii- the cost of pac3ing whether for labour or materialsH
,b- The value, apportioned as appropriate, of the following goods and services where
supplied directly or indirectly by the buyer free of charge or at reduced cost for use in
connection with the production and sale for export of imported goods, to the extent that
such value has not been included in the price actually paid or payable, namely 0:
,i- materials, components, parts and similar items incorporated in the imported goodsH
,ii- tools, dies, moulds and similar items used in the production of the imported goodsH
,iii- materials consumed in the production of the imported goodsH
,iv- engineering, development, art wor3, design wor3, and plans and s3etches
underta3en elsewhere than in India and necessary for the production of the imported
goodsH
,c- royalties and licence fees related to the imported goods that the buyer is re1uired to pay,
directly or indirectly, as a condition of the sale of the goods being valued, to the extent
that such royalties and fees are not included in the price actually paid or payableH
,d- The value of any part of the proceeds of any subse1uent resale, disposal or use of the
imported goods that accrues, directly or indirectly, to the sellerH
,e- all other payments actually made or to be made as a condition of sale of the imported
goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of
the seller to the extent that such payments are not included in the price actually paid or
payable.
Explanation. K Ghere the royalty, licence fee or any other payment for a process,
whether patented or otherwise, is includible referred to in clauses ,c- and ,e-, such
charges shall be added to the price actually paid or payable for the imported goods,
notwithstanding the fact that such goods may be subjected to the said process after
176
importation of such goods.
,%- 2or the purposes of sub:ection,1- of ection1/ of the Customs $ct, 14&% ,'% of 14&%- and these
rules, the value of the imported goods shall be the value of such goods, for delivery at the time and
place of importation and shall include :
,a- the cost of transport of the imported goods to the place of importationH
,b- loading, unloading and handling charges associated with the delivery of the imported
goods at the place of importationH and
,c- the cost of insurance 0
+rovided that K
,i- where the cost of transport referred to in clause ,a- is not ascertainable, such cost shall be
twenty per cent of the free on board value of the goodsH
,ii- the charges referred to in clause ,b- shall be one per cent of the free on board value of the
goods plus the cost of transport referred to in clause ,a- plus the cost of insurance referred
to in clause ,c-H
,iii- where the cost referred to in clause ,c- is not ascertainable, such cost shall be 1.1%'C of
free on board value of the goodsH
+rovided further that in the case of goods imported by air, where the cost referred to in clause
,a- is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods 0
+rovided also that where the free on board value of the goods is not ascertainable, the costs
referred to in clause ,a- shall be twenty per cent of the free on board value of the goods plus cost of
insurance for clause ,i- above and the cost referred to in clause ,c- shall be 1.1%'C of the free on
board value of the goods plus cost of transport for clause ,iii-.
+rovided also that in case of goods imported by sea stuffed in a container for clearance at an
Inland Container <epot or Container 2reight tation, the cost of freight incurred in the movement of
container from the port of entry to the Inland Container <epot or Container 2reight tation shall not
be included in the cost of transport referred to in clause ,a-.
Explanation. : The cost of transport of the imported goods referred to in clause ,a- includes the
ship demurrage charges on charted vessels, lighterage or barge charges.
,=- $dditions to the price actually paid or payable shall be made under this rule on the basis of
objective and 1uantifiable data.
,/- 7o addition shall be made to the price actually paid or payable in determining the value of the
imported goods except as provided for in this rule.
&&9 Declaration by t8e im6orter9 K ,1- The importer or his agent shall furnish :
,a- a declaration disclosing full and accurate details relating to the value of imported goodsH
and
,b- any other statement, information or document including an invoice of the manufacturer or
producer of the imported goods where the goods are imported from or through a person
other than the manufacturer or producer, as considered necessary by the proper officer for
determination of the value of imported goods under these rules.
,%- 7othing contained in these rules shall be construed as restricting or calling into 1uestion the right
of the proper officer of customs to satisfy himself as to the truth or accuracy of any statement,
information, document or declaration presented for valuation purposes.
,=- The provisions of the Customs $ct, 14&% ,'% of 14&%- relating to confiscation, penalty and
177
prosecution shall apply to cases where wrong declaration, information, statement or documents are
furnished under these rules.
&,9 +e?ection of declared value9 K ,1- Ghen the proper officer has reason to doubt the truth or
accuracy of the value declared in relation to any imported goods, he may as3 the importer of such
goods to furnish further information including documents or other evidence and if, after receiving
such further information, or in the absence of a response of such importer, the proper officer still has
reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the
transaction value of such imported goods cannot be determined under the provisions of sub:rule ,1- of
rule =.
,%- $t the re1uest of an importer, the proper officer, shall intimate the importer in writing the grounds
for doubting the truth or accuracy of the value declared in relation to goods imported by such importer
and provide a reasonable opportunity of being heard, before ta3ing a final decision under sub:rule ,1-.
Explanation. : ,1- 2or the removal of doubts, it is hereby declared that 0:
,i- This rule by itself does not provide a method for determination of value, it provides a
mechanism and procedure for rejection of declared value in cases where there is
reasonable doubt that the declared value does not represent the transaction valueH where
the declared value is rejected, the value shall be determined by proceeding se1uentially in
accordance with rules / to 4.
,ii- The declared value shall be accepted where the proper officer is satisfied about the truth
and accuracy of the declared value after the said en1uiry in consultation with the
importers.
,iii- The proper officer shall have the powers to raise doubts on the truth or accuracy of the
declared value based on certain reasons which may include :
,a- the significantly higher value at which identical or similar goods imported at or
about the same time in comparable 1uantities in a comparable commercial
transaction were assessedH
,b- the sale involves an abnormal discount or abnormal reduction from the ordinary
competitive priceH
,c- the sale involves special discounts limited to exclusive agentsH
,d- the misdeclaration of goods in parameters such as description, 1uality, 1uantity,
country of origin, year of manufacture or productionH
,e- the non declaration of parameters such as brand, grade, specifications that have
relevance to valueH
,f- the fraudulent or manipulated documents.
.ractical .roblems
=ro$lem 1A 8rom the following particulars, determine the assessable )alue of the imported
equipment gi)ing explanation for each item5
@. 8?7 cost of equipment Mapanese Ren! /,00,000 Ren
/. 8reight charges in Mapanese Ren /0,000 Ren
#. 4harges for de)elopment connected to equipment paid in India Ns. F0,000
L. Insurance charge paid in India for transportation from Mapan Ns. @E,000
E. 4ommission payable to agent in India Ns. @E,000
178
Exchange rate as per N7I is @ Ren S Ns. 0.LE
Exchange rate as per 47E4 is @ Ren S Ns. 0.E0
-anding charges5 one percent of 4I8 cost
=ro$lem 2A 'hat would be the )alue for the purpose of customs, if a consignment imported by air has
a 4I8 price of +3 T /,E00 including freight +3 T100 and insurance +3 T A0U Che exchange rate
notified by the 9o)ernment of India under 3ection@L of the 4ustoms %ct, @AF/ is Ns.LE.E0.
=ro$lem 3A % consignment is imported by air. 4I8 price is +3T @/,E00. 8reight is +3T /,LE0 and
insurance cost is +3T #00. ?n the date of presentation of 7ill of Entry, N7I floor rate was +3T S
Ns.L1.$0 and rate notified by 9o)ernment of India was Ns.L1.1E. 8ind the )alue of the consignment
for customs purposes.
=ro$lem 4A % material was imported by air at 4I8 price of E,000 +3T. 8reight paid was @,E00
+3T and insurance cost was E00 +3T. Che ban*er realiOed the payment from importer at the
exchange rate of Ns.LE per dollar. 4entral 7oard of Excise and 4ustoms notified the exchange
rate as Ns.LL.E0 per +3T. 8ind the )alue of the material for the purpose of le)ying duty.
=ro$lem 1A QRK Industries -td., has imported certain equipment from Mapan at an 8?7 cost of
/,00,000 Ren Mapanese!. Che other expenses incurred by >Bs. QRK Industries in this connection are
as follows5
i! 8reight from Mapan to India Hort /0,000 Ren
ii! Insurance paid to Insurer in India Ns.@0,000
iii! Designing charges paid to 4onsultancy firm in Mapan #0,000 Ren
i)! >Bs. QRK Industries had expended Ns.@,00,000 in India for certain de)elopment
acti)ities with respect to the imported equipment
)! QRK Industries had incurred road transport cost from >umbai port to their factory in
Iarnata*a Ns. #0,000
)i! Che 4entral 7oard of Excise and 4ustoms had notified for purpose of 3ection@L#!P of the
4ustoms %ct, @AF/ exchange rate of @ Ren S Ns.0.#AL$. Che inter ban* rate was @ Ren S
Ns.0.L0
)ii! >Bs QRK Industries had effected payment to the 7an* based on exchange rate @ Ren S Ns.
0.L@E0
)iii! Che commission payable to the agent in India was EV of 8?7 cost of the equipment in Indian
Nupees 8?7 cost of the equipment in Indian Nupees
%rri)e at the assessable )alue for purposes of customs duty under the 4ustoms %ct, @AF/ pro)iding
brief notes where)er required with appropriate assumptions.
=ro$lem %A 8rom the following particulars, calculate assessable )alue and total custom duty
payable5
i! Date of presentation of bill of entry 5 /0.F./00F .Nate of 74D /EV; Exchange Nate 5
Ns.L#.F0 and rate notified by 47E4 Ns.L#.$02.
ii! Date of arri)al of goods in India 5 #0.F./00F .Nate of 74D /0V; Exchange Nate5
Ns.L#.A0 and rate notified by 47E4 Ns.LL.002.
iii! Nate of %dditional 4ustoms Duty 5 @F.L$V.
i)! 4I8 )alue /,000 +3 Dollars; %ir 8reight E00 +3 Dollars, Insurance cost @00 +3 Dollars
.-anding charges not ascertainable2.
)! Education cess applicable #V.
179
)i! %ssume there is no special 4,D. F >ar*s!
=ro$lem 7A >Bs %garwal Industries imported by %ir from +3% certain goods at 4I8 )alue TF,E00. %ir
freight +3T @,L00 and insurance charges +3T@00 were also paid. 7ill of Entry was presented on
/$.0/.0F, but the Entry Inwards was granted on @0.0#.0F. ?ther rela)ant information is as follows5
%s on /$.0/.0F %s on @0.0#.0F
Nate of Exchange5
%s announced by 47E4 +3 T@S Ns. LF.$0 Ns. LF.F0
%s announced by N7I +3 T@S Ns. LF.10 Ns. LF.E0
Nate of 4ustom Duty
7asic 4ustoms Duty /EV /0V
%dditional 4ustoms Duty uBs #@! @FV @FV
%dditional 4ustoms Duty uBs #E! Jil Jil
Che same goods are exempt from excise duty in India, if manufactured without the aid of power.
4ompute the %ssessable )alue and gi)e the rates of 7asic and %dditional Duty to be adopted in this
case, as also the basis for arri)ing at the 7asic and %dditional Duty %ctual duty calculations need
not be gi)en!.
=ro$lem 0A %n importer has imported a machine from +I at 8?7 cost of @0,000 +I Hounds.
?ther details are as follows5
i! 8reight from +I to Indian port was 100 pounds.
ii! Insurance was paid to insurer in India5 Ns.F,000.
iii! Design and de)elopment charges of /,000 +I pounds were paid to a consultancy firm
in +I.
i)! Che importer also spent an amount of Ns.E0,000 in India for de)elopment wor*
connected with the machinery.
)! Ns.@0,000 were spent in transporting the machinery from Indian port to the factory of
importer.
)i! Nate of Exchange as announced by N7I was Ns.F$.$/ S one +I pound.
)ii! Nate of exchange as announced by 47E=4 7oard! by notification under 3ection@L#!
a!i!5 Ns.F$.10 S one +I pound.
)iii! Nate at which ban* reco)ered the amount from importer Ns.F$.#E S one +I pound.
ix! 8oreign exporters ha)e an agent in India. 4ommission is payable to the agent in Indian
Nupees W EV of 8?7 price.
4ustoms duty payable was /EV. If similar goods were produced in India, excise duty payable
as per tariff is /LV. Chere is an excise exemption notification which exempts the duty as is in
excess of @FV. 8ind 4ustoms duty payable if
a! Importer is manufacturer using the goods himself,
b! Importer is a trader who has imported goods for subsequent sale in India.
=ro$lem 9A >Bs. Hremium Industries -td., has imported a machine from Mapan at an 8.?.7. cost of
@,00,000 Ren Mapanese!. Che other expenses incurred were as follows5
i! 8reight from Mapan to Indian Hort @0,000 Ren;
ii! Insurance paid to insurer in India Ns. E,000;
180
iii! Designing 4harges paid to consultancy firm in Mapan @E,000 Ren;
i)! >Bs Hremium Industries -td. spent Ns. E0,000 in India for de)elopment wor* connected
with the machine,
)! Cransportation cost from Indian port to 8actory Ns. @E,000;
)i! 4entral 9o)ernment has announced exchange rate of @ Ren S Ne. 0.L0 by notification
under 3ection@L#!. Gowe)er the exchange rate pre)ailing in the mar*et was @ Ren S Ne.
0.L0E/
)ii! >Bs Hremium Industries -td. made payment to the ban* based on exchange rate of @ Ren S
Ne. 0.L@E0,
)iii! Che commission payable to the agent in India was W EV of 8.?.7. price in Indian Nupees.
Che rate of custom duty is /0V. 3imilar goods are sub:ect to @FV excise in India.
8ind the custom duty and other duties payable 5
@! If the importer >Bs Hremium Industries -td. is importing goods for capti)e
consumption
/! If the importer >Bs Hremium Industries -td. is a trader and imported goods for the
purpose of trading.
=ro$lem 10A Infotech -imited has imported a machine from Mapan at 8?7 cost of E0,000 Ren
Mapanese!. Che other expenses incurred are as follows -
i! 8reight from Mapan to Indian port E000 Ren.
ii! Insurance paid to insurer in India Ns. /E00
iii! Designing charges paid to consultancy firm in Mapan 1E00 Ren
i)! >Bs Infotech spent Ns. /E,000 in India for de)elopment wor* connected with the machine.
)! Cransportation cost from Indian port to factory Ns. 1E00.
)i! 4entral 9o)ernment has announced exchange rate of @ Ren S Ns. 0.L0 by notification
under 3ection@L#! of the 4ustoms %ct, @AF/. Che exchange rate pre)ailing on that day in
the mar*et was @ Ren S Ns. 0.L0E/.
)ii! >Bs Infotech made payment to the ban* based on the exchange rate of @ Ren S Ns. 0.L@E0.
)iii! Che commission payable to the agent in India was at EV of the 8?7 price in Indian
rupees.
Che rate of 4ustom duty is #EV. 3imilar goods are sub:ect to @EV Excise Duty in India.
4learly show your wor*ing to arri)e at the total assessable )alue in rupees for purposes of le)y of
custom duty.
=ro$lem 11A Determine the assessable )alue and customs duty amount from the following data 5
@. Jame of the raw material Q
/. 8?7 )alue Euro @ million
#. ?cean freight %ctual data not a)ailable
L. ?cean Insurance %ctual data not a)ailable
E. 8reight from sea port to godown paid in India Ns.@0,000
F. Cransit insurance in India Ns./,000
1. 3elling commission paid to agent in India EV
$. Noyalty on manufacture and sale of final product
payable to foreign collaborator EV
A. Interest payable on raw material imported at
181
@$0 days credit on 8?7 )alue! @/V p.a
@0. Di)idend paid to the foreign supplier of raw material Ns./ per share on @ million
on their equity participation for the year 0@-0/ shares of face )alue Ns.@0B
a. Importer supplied design and drawings worth Euro @0,000 to the foreign raw material supplier.
b. -anding charges as per 4ustoms pro)isions
c. 4ustoms duty rates5 74D - #0V, 4,D 6 @F.L$V
d. Exchange rate5 @ Euro S Ns.L/.
XXXXXXXXXXXX
182
+efund% Demand etc9
0ection,DA: +efund of im6ort duty 2 Ghere any of the imported goods already removed for home
consumption are found to be P
a. damaged or
b. unsuitable for the purpose or
c. not as per the specification, and if
,i- such goods are returned or
,ii- transferred in favour of the commissioner or
,iii- rendered valueless in presence of a custom officer, within =6 days since goods are
removed for home consumption then import duty paid thereon shall be refunded
provided
the goods are identifiable
$ny duty drawbac3 or cenvat credit is not claimed
)oods have not been used in India except to the extent it is essential to
discover that the goods are damaged or unfit for use or not as per the
specification.
0ECTI@N,4 Claim for refund of duty9 P
.ime ?imit for ma)ing application - $ny person claiming refund of any duty or interest,K
,a- paid by himH or
,b- borne by him,
may ma3e an application in such form and manner as may be prescribed for such refund to the
$ssistant Commissioner of Customs or <eputy Commissioner of Customs, before the expiry of one
year, from the date of payment of such duty or interest. ;ut it is to be noted that the limitation of one
year shall not apply where any duty or interest has been paid under protest.
Ex6lanation.K 2or the purposes of this sub:section, Ithe date of payment of duty or interestOO in
relation to a person, other than the importer, shall be construed as Ithe date of purchase of goodsJ by
such person.
Comp!tation of time limit - ave as otherwise provided in this section, the period of limitation of one
year shall be computed in the following manner, namely0K
,a- in the case of goods which are exempt from payment of duty by a special order issued under
sub:ection,%- of ection%', the limitation of one year shall be computed from the date of
issue of such orderH
183
,b- where the duty becomes refundable as a conse1uence of any judgment, decree, order or
direction of the appellate authority, $ppellate Tribunal or any court, the limitation of one
year shall be computed from the date of such judgment, decree, order or directionH
,c- where any duty is paid provisionally under ection1., the limitation of one year shall be
computed from the date of adjustment of duty after the final assessment thereof or in case of
re:assessment, from the date of such re:assessment.L
"pplication - The application under sub:ection,1- shall be accompanied by such documentary or
other evidence ,including the documents referred to in ection%.C- as the applicant may furnish to
establish that the amount of duty or interest, in relation to which such refund is claimed was collected
from, or paid by, him and the incidence of such duty or interest, has not been passed on by him to any
other person.
8ef!nd - If, on receipt of any such application, the $ssistant Commissioner of Customs or <eputy
Commissioner of Customs is satisfied that the whole or any part of the duty and interest, if any, paid
on such duty paid by the applicant is refundable, he may ma3e an order accordingly and the amount
so determined shall be credited to the 2und 0
Cases in 4#ic# ref!nd is given to applicant onl - The amount of duty and interest, if any, paid on
such duty as determined by the $ssistant Commissioner of Customs or <eputy Commissioner of
Customs shall, instead of being credited to the 2und, be paid to the applicant, if such amount is
relatable to :
,a- the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the
case may be if he had not passed on the incidence of such duty and interest, if any, paid on
such duty to any other personH
,b- the duty and interest, if any, paid on such duty on imports made by an individual for his
personal useH
,c- the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on
the incidence of such duty and interest, if any, paid on such duty to any other personH
,d- the export duty as specified in ection%&H
,e- drawbac3 of duty payable under sections >/ and >'H
,f- the duty and interest, if any, paid on such duty borne by any other such class of applicants
as the Central )overnment may, by notification in the Bfficial )a?ette, specify.
7otification under this clause can be issued only when the Central )overnment is
satisfied that the applicant has not passed on the burden of duty or interest to any
other person
Every notification issued under this clause shall be placed before the +arliament
and +arliament may rescind or amend the notification
The Central )overnment is always empowered to any notification issued under
this clause.
8ef!nd onl on application - 7otwithstanding anything to the contrary contained in any judgment,
decree, order or direction of the $ppellate Tribunal , 7ational Tax Tribunal or any Court or in any
184
other provision of this $ct or the regulations made thereunder or any other law for the time being in
force, no refund shall be made except as provided in sub:ection,%-.

0ection,4A9 Interest on delayed refunds9
If any duty ordered to be refunded under sub:ection,%- of ection%> to an applicant is not refunded
within three months from the date of receipt of application under sub:ection,1- of that section, there
shall be paid to that applicant interest at such rate, not below five per cent and not exceeding thirty per
cent per annum as is for the time being fixed by the Central )overnment by 7otification in the
Bfficial )a?ette, on such duty from the date immediately after the expiry of three months from the
date of receipt of such application till the date of refund of such duty 0
Explanation9 K Ghere any order of refund is made by the Commissioner ,$ppeals-, $ppellate
Tribunal , 7ational Tax Tribunal or any court against an order of the $ssistant Commissioner of
Customs or <eputy Commissioner of Customs under sub:ection,%- of ection%>, the order passed by
the Commissioner ,$ppeals-, $ppellate Tribunal 7ational Tax Tribunal or as the case may be, by the
court shall be deemed to be an order passed under that sub:ectionfor the purposes of this section.

0ection,): Demand 2 Ghere any duty or interest has not been levied or short levied or erroneously
refunded and if the person pays such amount of duty on his own or on being informed by the officer,
along with interest, he shall inform the officer. C7 cannot be issued to the extent of amount of duty
already so paid.
If the duty is not paid by the person concerned, a C7 can be issued within one year since relevant
date to show cause why he should not pay the duty or interest as shown in the notice.
uch a C7 can be issued within ' years if such non:levy or non:payment or refund has been due to
any fraud or misrepresentation or suppression of facts by the person concerned.
If any stay has been granted by the court against issue of show cause notice than the time for which
stay is applicable shall be excluded for computation of the time limit.
This time period begins to run since P
a. 2inalisation of provisional assessment
b. 5efund of duty
c. <ate of payment
d. <ate of refund, as the case may be.
Ghere C7 is issued on the basis of fraud, misrepresentation etc, and the person to whom notice has
been issued pays the amount in C7 either in part or full within =6 days since receiving the notice
than proceedings against him shall abate to the extent he has already paid provided he also pays
penalty of %'C of the amount for which he has accepted liability against issue of show cause notice.
185
2inal liability of the person concerned shall be determined by the officer within P
a. ix months P in cases other than fraud, misrepresentation etc
b. Bne year P in any case of fraud, misrepresentation etc.
0ection,)A: .o$er not to levy;demand duty or interest 2 Ghere duty is not being levied or it is
being levied at a rate lower than the rate actually applicable due to some practice prevailing in any
area, the central government may, by issuing a notification in the official ga?ette, waive off recovery
of any such duty.
Ghere any such notification is issued and if any person has already paid such duty before the issue of
notification, the duty so paid becomes refundable for which an application is re1uired to be made
within six months since issue of notification.
0ection,)AA9 Interest on delayed 6ayment of duty9
,1- 7otwithstanding anything contained in any judgment, decree, order or direction of any court,
$ppellate Tribunal or any authority or in any other provision of this $ct or the rules made
thereunder, the person, who is liable to pay duty in accordance with the provisions of ection%., shall,
in addition to such duty, be liable to pay interest, if any, at the rate fixed under sub:ection,%-,
whether such payment is made voluntarily or after determination of the duty under that section.
,%- Interest at such rate not below ten per cent. and not exceeding thirty:six per cent. per annum, as
the Central )overnment may, by notification in the Bfficial )a?ette, fix, shall be paid by the person
liable to pay duty in terms of ection%. and such interest shall be calculated from the first day of the
month succeeding the month in which the duty ought to have been paid or from the date of such
erroneous refund, as the case may be, up to the date of payment of such duty.
,=- 7otwithstanding anything contained in sub:ection,1-, no interest shall be payable where,K
,a- the duty becomes payable conse1uent to the issue of an order, instruction or direction by the
;oard under ection1'1$H and
,b- such amount of duty is voluntarily paid in full, within forty:five days from the date of issue of
such order, instruction or direction, without reserving any right to appeal against the said payment at
any subse1uent stage of such payment.
0ection,)AAA9 +ecovery of duties in certain cases9 (Ne$ 0ectiona66licable for 5ay &3 exam
(& Ghere an instrument issued to a person has been obtained by him by means ofK
,a- collusionH or
,b- wilful misstatementH or
,c- suppression of facts,
for the purposes of this $ct or the 2oreign Trade ,<evelopment and 5egulation- $ct, 144%, $ct
of %% of 144%. by such person or his agent or employee and such instrument is utilised under the
186
provisions of this $ct or the rules made or notifications issued thereunder, by a person other than the
person to whom the instrument was issued, the duty relatable to such utilisation of instrument shall be
deemed never to have been exempted or debited and such duty shall be recovered from the person to
whom the said instrument was issued0
.rovided that the action relating to recovery of duty under this ectionagainst the person to
whom the instrument was issued shall be without prejudice to an action against the importer under
ection%..
Explanation &9V 2or the purposes of this sub:section, NinstrumentN means any scrip or
authorisation or licence or certificate or such other document, by whatever name called, issued under
the 2oreign Trade ,<evelopment and 5egulation- $ct, 144%, ,%% of 144%- with respect to a reward or
incentive scheme or duty exemption scheme or duty remission scheme or such other scheme
bestowing financial or fiscal benefits, which may be utilised under the provisions of this $ct or the
rules made or notifications issued thereunder.
Explanation ,9The provisions of this sub:ectionshall apply to any utilisation of
instrument so obtained by the person referred to in this sub:ectionon or after the date on which the
2inance ;ill, %61% receives the assent of the +resident, whether or not such instrument is issued to
him prior to the date of the assent.
,%- Ghere the duty becomes recoverable in accordance with the provisions of sub:ection,1-, the
person from whom such duty is to be recovered, shall, in addition to such duty, be liable to pay
interest at the rate fixed by the Central )overnment under ection%. $$ and the amount of such
interest shall be calculated for the period beginning from the date of utilisation of the instrument till
the date of recovery of such duty.
,=- 2or the purposes of recovery under sub:ection,%-, the proper officer shall serve notice on the
person to whom the instrument was issued re1uiring him to show cause, within a period of thirty days
from the date of receipt of the notice, as to why the amount specified in the notice ,excluding the
interest- should not be recovered from him, and after giving that person an opportunity of being heard,
and after considering the representation, if any, made by such person, determine the amount of duty or
interest or both to be recovered from such person, not being in excess of the amount specified in the
notice, and pass order to recover the amount of duty or interest or both and the person to whom the
instrument was issued shall repay the amount so specified in the notice within a period of thirty days
from the date of receipt of the said order, along with the interest due on such amount, whether or not
the amount of interest is specified separately.
,/- Ghere an order determining the duty has been passed under ection%., no order to recover that
duty shall be passed under this section. ,'- Ghere the person referred to in sub:ection,=- fails to
repay the amount within the period of thirty days specified therein, it shall be recovered in the manner
laid down in sub:ection,1- of ection1/%.=
0ection,)A": Interest 2 Ghere any duty is determined on issue of C7 under ection%., the person
concerned is liable, in addition to duty, to pay interest E 1=C p.a. since the first day of the month
187
after the end of month in which duty should have been paid, in addition to the amount of duty until it
is paid.
Ghere any duty becomes payable due to any direction issued by the Central ;oard under
ection1'1$, and such duty is paid in full within /' days since issue of notification, without reserving
any right to file an appeal then no interest shall be payable.
0ection,)": Any collected as duty is to be de6osited $it8 t8e /overnment2 Ghere any person has
collected any amount from the customer in the name of duty and the duty so collected is in excess of
his actual liability, he shall pay any such amount immediately to the credit of the Central )overnment.
If he fails to pay any such amount, a C7 can be issued for the same. $fter representation by the
person concerned his liability is determined by the officer and than such shall pay the duty.
$fter determination of his liability, the amount already credited to the Central )overnment is adjusted
against his liability and the balance amount becomes refundable to the person from whom such duty
was collected.
2or the purpose of refund an application is to be made within six months since a public notice is
issued in this regard. If there is no valid application within the prescribed time limit, this amount will
be credited to the consumer welfare fund.
0ection,)"A: .rovisional attac8ment of immovable 6ro6erty 2 Ghen any proceeding is pending
under ection%. or %.$$$ or %.; before the adjudicating authority and the officer is opinion that,
with a view to protect the interest of the revenue, it is necessary to attach any immovable property of
the person to whom any notice has been served under ection%., %.$$$ or %.;, he may attach any
such property with the prior approval of the Commissioner, for a period not exceeding six months.
If re1uired the Chief commissioner, may extend the time of attachment upto a maximum period of
two years.
+ending adjudication proceedings, if an application is made under ection1%>; for settlement before
the ettlement Commission, the time for which application was pending before the ettlement
Commission i.e. until order is passed by the settlement commission under ection1%>C, shall be
excluded for computation of time limit of attachment.
0ection,)C: .rice of :oods to indicate t8e amount of duty 6aid t8ereon92 7otwithstanding
anything contained in this $ct or any other law for the time being in force, the amount of duty paid on
the goods is re1uired to be shown prominently on every document relating to assessment as well as
sales. The amount of duty forms part of selling price.

0ection,)D: .resum6tion t8at incidence of duty 8as been 6assed on to t8e buyer9 2 (nless
proved otherwise, the person who has paid the duty is deemed to have passed on the full incidence of
such duty to the buyer of such goods.
188
Advanced +ulin:s
Uection%.E:%.@L
$dvanced rulings means determination of a 1uestion of law or facts, in relation an activity
proposed to be ta3en up by the applicant, which may affect tax liability of the applicant, by a
competent authority ,$uthority for $dvanced 5ulings- having binding effect on the assessee
as well as adjudicating authority.
ubject matters on which advanced rulings may be obtained are P
,a- classification of goods under the Customs Tariff $ct, 14>' ,'1 of 14>'-H
,b- applicability of a notification issued under sub:ection,1- of ection%', having a
bearing on the rate of dutyH
,c- the principles to be adopted for the purposes of determination of value of the goods
under the provisions of this $ct.
,d- applicability of notifications issued in respect of duties under this $ct, the Customs
Tariff $ct, 14>' ,'1 of 14>'- and any duty chargeable under any other law for the
time being in force in the same manner as duty of customs leviable under this $ct.
,e- determination of origin of the goods in terms of the rules notified under the Customs
Tariff $ct, 14>' ,'1 of 14>'- and matters relating thereto.
$pplication for advanced ruling can be made by P
$ non:resident setting up a project in India either alone or a joint venture with a
resident
$ resident setting up a joint venture with a non:resident
$ wholly owned subsidiary of a foreign company
$ny other person authorised by the Central government in that behalf ,+ublic sector
underta3ings-
$n application for advanced ruling can be withdrawn within =6 days.
$dvanced rulings will not be given if P
,a- ame subject matter has already been decided by the Court
,b- ubject matter of the assessee is pending before the adjudicating authority
(nless specific re1uest is made for representation before $dvanced 5ulings are given,
chance of hearing may not be given.
$dvanced 5ulings are announced within 46 days since application is received. $ copy of
every order made under sub:ection,%- by the $uthority for $dvanced 5ulings shall be sent
to the applicant and to the Commissioner of Customs.
The advanced rulings are having binding effect on the applicant as well as on the adjudicating
authority on the subject matter until law is amended or advanced rulings are withdrawn.
$dvanced rulings can be withdrawn where it is brought into the notice of $uthority for
$dvanced 5ulings that the $dvanced 5ulings were obtained by fraud or by misrepresentation.
Ghere $dvanced 5ulings are withdrawn that the adjudicating authority may proceed as if
advanced rulings were never given.
189
Transit and Trans2s8i6ment
<0ection*,2*D=
Non-applica$ilit - +rovisions regarding transit and transshipment are not applicable in relation to
baggage and goods imported by post.
.ransit - In case of transit, goods are not unloaded at the place of arrival. Therefore, it is enough if
complete reference of goods is given in the arrival as well as departure report.
.rans#ipment - Transhipment of goods may ta3e place within India or outside India. Githin India, it
will be allowed only if destination itself is a custom station.
2or the purpose of transshipment P
a. If it is on behalf of the government, the government shall file a declaration
b. If it is by some other person, he shall file a ;ill of Transshipment.
If transshipment is within India, the amount of duty is assesses, the importer is re1uired to execute a
bond for double the amount of duty assessed and then he is allowed to ta3e the goods to another
custom station without paying duty.
+rocedure for removal of goods shall be followed at the destination custom station.
Eare8ousin:
<0ection*4 to 43=
0ection*4: .ublic Eare8ouse 2 +ublic warehouses can be established for public use at the
warehousing stations appointed by the C;EC under ection4, with the permission of $C#<C. uch
warehouses are owned and managed by the )overnment#)overnment ;ody.
0ection*): .rivate $are8ouses 2 +rivate warehouses can be of two types P
a. 2or public use
b. 2or private use
2or public use, private warehouses can be established at those warehousing stations where public
warehouses have not been established and# or to provide facilities not available in public warehouses.
+rivate warehouses for private can be established anywhere with the prior approval of the custom
officer. Uall 166C EB(s are private warehouses under the Customs $ctL
*icenses to operate private warehouses is based on financial strength of the applicant and safe
infrastructure and it is also subject to condition that the license holder will comply with the provisions
of the $ct, rules, regulations etc as well as directions issued by the officers from time to time.
In case of any contravention by the licensee, a show cause notice may be given to justify why his
license shall not be cancelled and until the final decision, license may be suspended.
If license is cancelled, all the goods deposited in the warehouse, shall either be shifted to another
warehouse or removed for home consumption, within > days.
0ection*': Eare8ousin: "ond 2 2or the purpose of depositing the goods in a warehouse, licensed
under ection'>#'., the importer is re1uired to execute a ;ond for double the amount of duty already
190
assessed and this bond is valid until goods are removed from the warehouse either for home
consumption or warehousing.
Ghile the goods are in the warehouse, those may be transferred to another person and in that case, the
transferee is re1uired to execute another bond. The importer"s bond will be cancelled and returned
only when transferee"s bond has been accepted.
0ectionD-: +emoval of :oods from custom area 2 )oods shall not be removed from custom area
unless an order for removal of the goods has been passed by the proper officer.
0ectionD&: Duration of $are8ousin:
Im6orter is &--L E@J Any ot8er im6orter
Capital )oods Bther )oods $ll )oods
(pto ' years (pto = years (pto 1 year out of which first 46 days are
without interest and from 41
st
day until removal
interest is chargeable at the prescribed rate.
The commissioner may allow extension up to any
extent.
The Commissioner may allow extension upto &
months and any further extension can be allowed
only by the Chief commissioner.
If the goods begins to deteriorate, the Commissioner is empowered to reduce the period of
warehousing for anyone.
0ectionD,: Control over $are8oused :oods 2 The proper officer having jurisdiction over the
warehouse shall have access to all parts of the warehouse and he may 3eep the warehouse loc3ed.
ince all the goods deposited in a warehouse are under the control of the proper officer having
jurisdiction over the warehouse, any person shall not enter the warehouse and#or remove any of the
goods from the warehouse without the permission given by the proper officer.
0ectionD3: +i:8ts of $are8ouse 1ee6er 2 The warehouse 3eeper is entitled to receive the rental and
maintenance charges of the warehouse as fixed from time to time by the Central )overnment or by
the Commissioner.
If these charges are not received within 16 days since due, with the prior approval of the proper
officer, the warehouse 3eeper is entitled to dispose of such 1uantity of goods as is sufficient to cover
his dues and duty on those goods.
0ectionD(: @$nerCs ri:8t to deal $it8 t8e $are8oused :oods 2 Gith the sanction of the proper
officer and on payment of the prescribed fees, the owner of any goods may either before or after
warehousing the same :
,a- inspect the goodsH
,b- separate damaged or deteriorated goods from the restH
,c- sort the goods or change their containers for the purpose of preservation, sale, export or
disposal of the goodsH
,d- deal with the goods and their containers in such manner as may be necessary to prevent
191
loss or deterioration or damage to the goodsH
,e- show the goods for saleH or
,f- ta3e samples of goods without entry for home consumption, and if the proper officer so
permits, without payment of duty on such samples.
0ectionD*: 5anufacture in t8e $are8ouse 2 Gith the prior approval of $C#<C, manufacturing
operations or other process may be carried out in the warehouse
Ainis8ed /oods Easte and 0cra6
Ex6orted "rou:8t to DTA Ex6orted DTA
7o duty Custom duty is
chargeable as if finished
goods have been
imported
7o duty Custom duty is
chargeable as if G D
has been imported
Note: Gith the prior approval of $C#<C, the waste and scrap may be destroyed upto a
point of no recovery and in that case no duty will be payable on G D .

0ECTI@NDD: .o$er to exem6t im6orted materials used in t8e manufacture of :oods in
$are8ouse 2 If any imported materials are used in accordance with the provisions of ection&' for the
manufacture of any goods and the rate of duty leviable on the imported materials exceeds the rate of
duty leviable on such goods, the Central )overnment, if satisfied that in the interests of the
establishment or development of any domestic industry it is necessary so to do, may, by notification
in the Bfficial )a?ette, exempt the imported materials from the whole or part of the excess rate of
duty.
+emoval of /oods from $are8ouse
0ectionD4: s8iftin: to anot8er $are8ouse 2 The owner of warehoused goods may shift the goods
deposited in a warehouse to another with the permission of proper officer subject to such terms and
conditions as may be prescribed.
0ectionD): +emoval of :oods for 8ome consum6tion 2 The importer of any warehoused goods may
clear them for home consumption, if :
,a- a bill of entry for home consumption in respect of such goods has been presented in the
prescribed formH
,b- the import duty leviable on such goods and all penalties, rent, interest and other charges
payable in respect of such goods have been paidH and
,c- an order for clearance of such goods for home consumption has been made by the proper
officer.
+elinOuis8in: t8e title 2 The owner of any warehoused goods may, at any time before an order for
clearance of goods for home consumption has been made in respect of such goods, relin1uish his title
192
to the goods upon payment of rent, interest, other charges and penalties that may be payable in respect
of the goods and upon such relin1uishment, he shall not be liable to pay duty thereon. ;ut, any of the
goods in relation to which any offence has been committed under this $ct or under any other law,
cannot be transferred in favour of the commissioner.
0ectionD': +emoval of /oods for ex6ort 2 $ny warehoused goods may be exported to a place
outside India without payment of import duty if :
,a- a shipping bill or a bill of export has been presented in respect of such goods in the
prescribed formH
,b- the export duty, penalties, rent, interest and other charges payable in respect of such
goods have been paidH and
,c- an order for clearance of such goods for exportation has been made by the proper officer.
0ection4-: Allo$ance in case of volatile :oods 2 The Central )overnment may specify certain
goods which are to be considered to be of volatile nature. If such goods are found to be deficient in
1uantity at the time of removal from the warehouse due to nature of the goods or natural loss, the
$C#<C may allow remission of duty on the 1uantity so lost.
0ection4&: /oods not to be ta1en out of $are8ouse exce6t as 6rovided by t8is Act9 P 7o
warehoused goods shall be ta3en out of a warehouse except on clearance for home consumption or re:
exportation, or for removal to another warehouse, or as otherwise provided by this $ct.
0ection4,: /oods im6ro6erly removed from $are8ouse% etc9 ,1- In any of the following cases,
that is to say, :
,a- where any warehoused goods are removed from a warehouse in contravention of
ection>1H
,b- where any warehoused goods have not been removed from a warehouse at the expiration
of the period during which such goods are permitted under ection&1 to remain in a
warehouseH
,c- where any warehoused goods have been ta3en under ection&/ as samples without
payment of dutyH
,d- where any goods in respect of which a bond has been executed and which have not been
cleared for home consumption under ection'4 or exportation are not duly accounted for
to the satisfaction of the proper officer,
the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of
duty chargeable on account of such goods together with all penalties, rent, interest and other charges
payable in respect of such goods.
,%- If any owner fails to pay any amount demanded under sub:ection,1-, the proper officer may,
without prejudice to any other remedy, cause to be detained and sold, after notice to the owner ,any
transfer of the goods notwithstanding- such sufficient portion of his goods, if any, in the warehouse,
as the said officer may select.
0ection43: Cancellation and return of $are8ousin: bond
Ghen the whole of the goods covered by any bond executed under ection'4 have been
a. cleared for home consumption or
b. exported or
c. Title of the goods is transferred to another person and he has executed another bond
193
d. are otherwise duly accounted for, and
e. when all amounts due on account of such goods have been paid, the proper officer shall
cancel the bond as discharged in full, and shall on demand deliver it, so cancelled, to the
person who has executed or is entitled to receive it.
Duty Dra$bac1
0ection4( 2 4D
0ection4D: E8en duty dra$bac1 is not allo$ed <:eneral 6ro8ibition=
Al$ays 6ro8ibited Conditional 6ro8ibition
if P
the mar3et:price of which is less than the
amount of drawbac3 due thereonH or
where the drawbac3 due in respect of any
goods is less than fifty rupees.
If the Central government is of the opinion that
certain goods on which duty drawbac3 is allowed
are li3ely to be smuggled bac3 into India, it may
prohibit duty drawbac3 on such goods or it may
be allowed subject to such restrictions and
conditions as may be prescribed.

0ection4(: Duty Dra$bac1 on ex6ort;return of same :oods 2 <uty drawbac3 under this ectionis
allowed only if the imported goods, already removed for 9ome consumption, on payment of duty, are
returned or exported.
9!t 9ra4$ac) is not allo4ed - <uty drawbac3 under this ectionwill not be allowed if P
a. Those goods have been declared as non:identifiable by the Central )overnmentH or
b. CE78$T Credit has already been claimed for the dutyH or
c. 5ebate of duty has been claimed under 5ule 1. of the Central Excise 5ules, %66%
d. The goods are exported within two years since the date of payment of duty unless extension
of time has been allowed by the Commissioner.
<axim!m rate of d!t dra4$ac) - @aximum rate of duty drawbac3 under this ectionis 4.C
provided those goods have not been used in India.
If those goods are used in India, then the rate of duty drawbac3 gets reduced at the rate fixed by the
Central )overnment.
+ate of duty dra$bac1 in case of motor ve8icles and :oods im6orted for 6ersonal use
Sear +eriod C of reduction of duty
drawbac3 out of 166C
1 Every = months or part /C
% Every = months or part =C
194
= Every = months or part %.'C
/ Every = months or part %C
7ote0 $fter two years duty drawbac3 can be allowed only if extension of time has been allowed by the
Commissioner.
+ate of duty dra$bac1 in case of :oods im6orted for commercial use
2irst = months or part 4'C
7ext three months or part .'C
7ext three months or part >'C
7ext three months or part >6C
7ext three months or part &'C
7ext three months or part &6C
7ote0 7o duty drawbac3 will be allowed if goods are exported after more than 1. months.
0ection4*: duty dra$bac1 on :oods manufactured in India usin: im6orted :oods
=ro#i$ition - (nder this ectionduty drawbac3 will not be allowed if the export value of the goods is
less than the value of imported goods used in those goods.
8ates of d!t dra4$ac) - <epending upon input:output data collected from the industry the central
government may fix the rate of duty drawbac3 in terms of percentage of value of export goods. These
rates can be of three types P
a. $ll Industry 5ates
b. ;rand 5ates
c. pecial ;rand 5ates
All2Industry +ates These rates are prescribed for all the goods which are exported from India
generally. These rates are fixed annually after the budget is approved by the +arliament. These rates
are effective from 1
st
Aune to =1
st
@ay.
"rand +ates If an article is exported from India for which all industry rates have not been
prescribed by the Central )overnment, the exporter shall apply to the <irectorate of <uty <rawbac3
for fixation of rates of duty drawbac3 for his goods. $pplication shall be made within & months after
the goods have been exported.
06ecial "rand +ates Ghere all industry rates have been prescribed for an article by the central
government but an exporter claims duty drawbac3 much higher than all Industry rates and his claim
exceeds $ll Industry 5ates by atleast %6C, he can apply for fixation of pecial ;rand 5ate of duty
drawbac3 for the consignment.
<uty drawbac3 cam be claimed by the exporter as soon as goods have been exported but where the
exporter fails to realise the export proceeds within the time limit prescribed under 2E@$, the amount
of duty drawbac3 will be recovered along with interest.
195
0ection4*A9 Interest on dra$bac1
,1- Ghere any drawbac3 payable to a claimant under ection>/ or ection>' is not paid within a
period of one month from the date of filing a claim for payment of such drawbac3, there shall be paid
to that claimant in addition to the amount of drawbac3, interest at the rate fixed under ection%>$
from the date after the expiry of the said period of one month till the date of payment of such
drawbac3.
,%- Ghere any drawbac3 has been paid to the claimant erroneously or it becomes otherwise
recoverable under this $ct or the rules made thereunder, the claimant shall, within a period of two
months from the date of demand, pay in addition to the said amount of drawbac3, interest at the rate
fixed under ection%.$; and the amount of interest shall be calculated for the period beginning from
the date of payment of such drawbac3 to the claimant till the date of recovery of such drawbac3.
;aggage
Uection>> to .1L
0ection44: Declaration of ba::a:e by t8e 6assen:er 2 Every passenger, coming to or leaving India,
shall ma3e a declaration to the +roper officer regarding contents of the baggage so that dutiability
thereof can be determined.
0ection4): +ate of duty a66licable on ba::a:e 2 The rate of duty applicable for the baggage shall
be the rate prevailing on the date on which a declaration is made by the passenger under ection>>.
,$t present rate applicable is ='C F ECF9E X =&.6'C-
0ection4': .o$er of t8e Central /overnment to allo$ exem6tions 2 In accordance with the rules
made by the Central )overnment made in that behalf, the proper officer may allow baggage of the
passenger#crew members to be removed without payment of duty. DConafide CaggageE
The passenger is also entitled for removal of additional baggage upto the limit specified by the
Central )overnment, without payment of duty provided the officer is satisfied that the goods are for
the use of the passenger or his family or is a bona fide gift or souvenir.
the Central )overnment may ma3e rules for the purpose of carrying out the provisions of this
ectionand, in particular, such rules may specify :
,a- the minimum period for which any article has been used by a passenger or a member of
the crew for the purpose of clause ,a- of sub:ection,1-H
,b- the maximum value of any individual article and the maximum total value of all the
articles which may be passed free of duty under clause ,b- of sub:ection,1-H
,c- the conditions ,to be fulfilled before or after clearance- subject to which any baggage may be
passed free of duty.
0ection)-: Tem6orary detention of ba::a:e 2 Ghere a passenger ma3es a true declaration under
ection>> and if he is carrying any of the prohibited or dutiable goods, on re1uest of the passenger
such goods may be detained by the proper officer. uch goods are returned to the passenger when
passenger goes bac3. $rrangements can also be made for the good being delivered to him if he
returning from any other port or airport.
0ection)&: .o$er of t8e C"EC to ma1e rules 2 The ;oard may ma3e regulations, :
,a- providing for the manner of declaring the contents of any baggageH
196
,b- providing for the custody, examination, assessment to duty and clearance of baggageH
,c- providing for the transit or transhipment of baggage from one customs station to another
or to a place outside India.
"a::a:e +ules% &'')
+ule &9 08ort title and commencement9 2 (i These rules may be called the ;aggage 5ules, 144..
,ii- They shall come into force on the date of their publication in the Bfficial )a?ette.
+ule ,9 Definitions9 : In these rules, unless the context otherwise re1uires,:
,i- NappendixN means an $ppendix to these rulesH
,ii- NresidentN means a person holding a valid passport issued under the +assports $ct, 14&> ,1' of
14&>- and normally residing in IndiaH
,iii- NtouristN means a person not normally resident in India, who enters India for a stay of not
more than six months in the course of any twelve months period for legitimate non:immigrant
purposes, such as touring, recreation, sports, health, family reasons, study, religious pilgrimage or
businessH
,iv- NfamilyN includes all persons who are residing in the same house and form part of the same
domestic establishmentH
,v- N6rofessional eOui6mentN means such portable e1uipments, instruments, apparatus and
appliances as are re1uired in his profession, by a carpenter, a plumber, a welder, a mason, and the
li3e and shall not include items of common use such as cameras, cassette recorders, dictaphones,
personal computers, typewriters, and other similar articles.
197
+ule 39 .assen:ers returnin: from countries ot8er t8an Ne6al% "8utan% 5yanmar or C8ina. :
$n Indian resident or a foreigner residing in India, returning from any country other than 7epal,
;hutan, @yanmar or China, shall be allowed clearance free of duty articles in his bona fide baggage
to the extent mentioned in column ,%- of $ppendix $.
U+rovided that such Indian resident or such foreigner coming by land route as specified in $nnexure
I8, shall be allowed clearance free of duty articles in his bona fide baggage to the extent mentioned in
column ,%- of $ppendix O;O.L
A..ENDIP A
(&
Articles allo$ed free of duty
(,
,a- $ll passengers of and
above U16 yearsL of age and
returning after stay abroad of
more than three days.
,i- (sed personal effects, excluding jewellery, re1uired for satisfying
daily necessities of life.
,ii- $rticles other than those mentioned in $nnex. I up to a value of 5s.
=',666 if these are carried on the person or in the accompanied baggage
of the passenger.
,b- $ll passengers of and
above U16 yearsL of age and
returning after stay abroad of
three days or less.
,ii- $rticles other than those mentioned in $nnex. I upto a value of

5s.
1',666 if these are carried on the person or in the accompanied baggage
of the passenger.
,c- $ll passengers upto U16
yearsL of age and returning
after stay abroad of more
than three days.
,ii- $rticles other than those mentioned in $nnex. I upto a value of

5s.
1',666 if these are carried on the person or in the accompanied baggage
of the passenger.
,d- $ll passengers upto U16
yearsL of age and returning
after stay abroad of three
days or less.
,ii- $rticles other than those mentioned in $nnex. I upto a value of 5s.
=,666 if these are carried on the person or in the accompanied baggage of
the passenger.
Explanation. : The free allowance under this rule shall not be allowed to be pooled with the free
allowance of any other passenger.
198
+ule (9 .assen:ers returnin: from Ne6al% "8utan% 5yanmar or C8ina. : $n Indian resident or a
foreigner residing in India, returning from 7epal, ;hutan, @yanmar or China, other than by land
route, shall be allowed clearance free of duty articles in his bona fide baggage to the extent
mentioned in column ,%- of $ppendix ;.
A..ENDIP "
(& (,
,i- +assengers of and above U16 yearsL
of age and returning after stay abroad
of more than three days.
,i- (sed personal effects, excluding jewellery, re1uired
for satisfying daily necessities of life.
,ii- U$rticles other than those mentioned in $nnex. I
upto a valueL of U5s. &,666L if these are carried on the
person or in the accompanied baggage of the passenger.
,ii- +assengers upto U16 yearsL of age
and Ureturning after stay abroad of
more than three daysL.
,i- (sed personal effects, excluding jewellery, re1uired
for satisfying daily necessities of life.
,ii- U$rticles other than those mentioned in $nnex. I
upto a valueL of U5s.1, '66L if these are carried on the
person or in the accompanied baggage of the passenger.
Explanation. : The free allowance under this rule shall not be allowed to be pooled with the free
allowance of any other passenger.
+ule *9 .rofessionals returnin: to India. : $n Indian passenger who was engaged in his
profession abroad shall on his return to India be allowed clearance free of duty, in addition to what he
is allowed under rule = or, as the case may be, under rule /, articles in his bona fide baggage to the
extent mentioned in column ,%- of $ppendix C.
A..ENDIP C
(& Articles allo$ed free of duty (,
,a- Indian passenger returning after at
least = months.
,i- (sed household articles upto an aggregate value of 5s.
1%,666.
,ii- +rofessional e1uipment upto a value of 5s. %6,666.
,b- Indian passenger returning after at
least & months
,i- (sed household articles upto an aggregate value of 5s.
1%,666.
199
,ii- +rofessional e1uipment upto a value of 5s. /6,666.
,c- Indian passenger returning after a stay of
minimum =&' days during the preceding % years
on termination of his wor3, and who has not
availed this concession in the preceding three
years.
,i- (sed household articles and personal effects, ,which
have been in the possession and use abroad of the passenger
or his family for at least six months-, and which are not
mentioned in $nnex. I, $nnexure II or $nnexure III upto an
aggregate value of 5s. >',666.
+J#E D9 Me$ellery. : $ passenger returning to India shall be allowed clearance free of duty
jewellery in his bona fide baggage to the extent mentoned in column ,%- of $ppendix <.
A..ENDIP D
(& (, Me$ellery
Indian passenger who has been residing
abroad for over one year.
,i- Aewellery upto an aggregate value of 5s. 16,666 by
a gentleman passenger, or
,ii- (pto an aggregate value of 5s. %6,666 by a lady
passenger.
+J#E 49 Tourists. : $ tourist arriving in India shall be allowed clearance free of duty articles in his
bona fide baggage to the extent mentioned in column ,%- of $ppendix E.
A..ENDIP E
(& (,
,a- Tourists of Indian origin coming
to India other than tourists of Indian
origin coming by land routes as
specified in $nnexure I8H
,i- used personal effects and travel souvenirs, if :
,a- these goods are for personal use of the tourist, and
,b- these goods, other than those consumed during the stay
in India, are re:exported when the tourist leaves India for a
foreign destination.
,ii- articles as allowed to be cleared under rule = or rule /.
,b- Tourists of foreign origin, other
than those of +a3istani origin coming
from +a3istan, coming to India by
air.
,i- used personal effects
,ii- articles other than those mentioned in $nnexure I upto
a value of .666 for personal use of the tourist or as gifts
and travel souvenirs if these are carried on the person or in
the accompanied baggage of the passenger.
200
,c- Tourists P ,i- of +a3istani origin
coming from +a3istan other than by
land routesH
,ii- of +a3istani origin or foreign
tourists coming by land routes as
specified in $nnexure I8H
,iii- of Indian origin coming by land
routes as specified in $nnexure I8.
,i- used personal effects
,ii- articles other than those mentioned in $nnexure I upto
a value of &666 for personal use of the tourist or as gifts
and travel souvenirs if these are carried on the person or in
the accompanied baggage of the passenger.J

201
+J#E )9 Transfer of residence. : ,1- $ person who is transferring his residence to India shall be
allowed clearance free of duty, in addition to what he is allowed under rule = or, as the case may be,
under rule /, articles in his bona fide baggage to the extent mentioned in column ,1- of $ppendix 2,
subject to the conditions, if any, mentioned in the corresponding entry in column ,%- of the said
$ppendix.
,%- The conditions may be relexed to the extent mentioned in column ,=- of the said $ppendix.
A..ENDIP A (0ee rule )
Articles allo$ed free of duty Conditions +elaxation t8at may be
considered
,a- (sed personal and
household articles, other than
those listed at $nnex. I or
$nnex. II, but including Uthe
article listed at $nnexure III
andL jewellery upto ten
thousand rupees by a gentleman
passenger or rupees twenty
thousand by a lady passenger.
,1- @inimum stay of two
years abroad,
immediately preceding
the date of his arrival on
T5,
,a- 2or condition ,1- hortfall of
upto % months in stay abroad can
be condoned by U$ssistant
Commissioner of Customs or
<eputy Commissioner of
CustomsL if the early return is
on account of 0

,%- total stay in India on
short visit during the %
preceding years should
not exceed & months, and
,=- passenger has not
availed this concession in
the preceding three years.
,i- terminal leave or vacation
being availed of by the
passengerH or
,ii- any other special
circumstances.

,b- 2or condition ,%-
Commissioner of Customs may
condone short visits in excess of
& months in deserving cases.
,c- 2or condition ,=-
No relaxation
,b- Aewellery ta3en out earlier
by the passenger or by a
member of his family from
India.
atisfaction of the $sstt.
Commissioner of
Customs regarding the
jewellery having been
ta3en out earlier from

202
India.
+ule '9 2 .rovisions re:ardin: unaccom6anied ba::a:e P
,1- +rovisions of these 5ules are also extended to unaccompanied baggage except where they have
been specifically excluded.
,%- The unaccompanied baggage had been in the possession abroad of the passenger and is despatched
within one month of his arrival in India or within such further period as the $ssistant Commissioner
of Customs or <eputy Commissioner of Customs may allow.
,=- The unaccompanied baggage may land in India upto % months before the arrival of the passenger
or within such period, not exceeding one year, as the $ssistant Commissioner of Customs or <eputy
Commissioner of Customs may allow, for reasons to be recorded, if he is satisfied that the passenger
was prevented from arriving in India within the period of two months due to circumstances beyond
his control such as sudden illness of the passenger or a member of his family, or natural calamities or
disturbed conditions or disruption of the transport or travel arrangements in the country or countries
concerned or any other reasons, which necessitated a change in the travel schedule of the passenger.
+ule &-9 A66lication of t8ese +ules to members of t8e cre$9 2 U,1-L The provisions of these 5ules
shall apply in respect of members of the crew engaged in a foreign going vessel for importation of
their baggage at the time of final pay off on termination of their engagement.
+rovided that except as specified in this sub:rule, a crew member of a vessel shall be allowed to bring
items li3e chocolates, cheese, cosmetics and other petty gift items for their personal or family use
which shall not exceed the value of rupees six hundred.
,%- 7otwithstanding anything contained in these rules a crew member of an aircraft shall be allowed
to bring items gifts li3e chocolates, cheese, cosmetics and other petty gift items at the time of the
returning of the aircraft from foreign journey for their personal or family use which shall not exceed
the value of rupees six hundred.
XXXXXXXXXXXXX
203
Im6ort;Ex6ort by 6ost
0ection),2)(
0ection), Declaration 2 Every article imported or to be exported by post shall be accompanied by a
declaration made by the consignor regarding identity and valuation of the goods. uch declaration
shall be treated as ;ill of Entry or ;ill of Export for every purpose.
0ection)3 +ate of Duty
Im6ort Ex6ort
The rate of duty shall be the rate prevailing when
list of imported articles is submitted by the postal
authorities to the custom authorities for
determination of <utiability of the goods.
The rate of duty shall be the rate prevailing when
articles are handed over by the consignor to the
postal authorities.

0ection)( .o$er of t8e "oard to ma1e +ules 2 The ;oard may ma3e regulations providing for :
,a- the form and manner in which an entry may be made in respect of any specified class of
goods imported or to be exported by post, other than goods which are accompanied by a
label or declaration containing the description, 1uantity and value thereofH
,b- the examination, assessment to duty, and clearance of goods imported or to be exported
by postH
,c- the transit or transhipment of goods imported by post, from one customs station to
another or to a place outside India.
-tores
0ection)*2'-
0ection)*9 0tores may be allo$ed to be $are8oused $it8out assessment to duty9 P Ghere an
importer files a ;ill of Entry under ection/& for warehousing and ma3es a declaration that the
imported goods are to be supplied as stores to the !foreign going vessels or aircrafts" then such goods
are allowed to be deposited in the warehouse without assessment.
Aorei:n /oin: Vessel or Aircraft
It means It includes
$ny vessel or aircraft
generally engaged in
travel of passengers or
transportation of
goods or both between
India and a place
outside India.
$ny vessel belonging to a foreign government and ta3ing part in
naval exercise in India.
$ny vessel engaged in fishing outside Indian Territorial Gaters
$ny vessel or aircraft leaving any port or airport in India for its
destination outside India irrespective of the fact that such vessel or
aircraft will touch another port or airport in India or not before
leaving India.
0ection )D9 Transit and trans8i6ment of stores 2 $ll the goods brought to India on board any vessel
or aircraft, as stores, are allowed to remain on board the vessel or aircraft without any duty. Gith the
prior permission of the proper officer, such stores may also be transferred to another vessel or aircraft
204
for being consumed as stores.
0ection )49 Im6orted stores may be consumed on board a forei:n2:oin: vessel or aircraft9 P $ny
imported stores on board a vessel or aircraft ,other than stores to which ection46 applies- may, without
payment of duty, be consumed thereon, while such vessel or aircraft is within Indian Territory, as stores
during the period such vessel or aircraft is a foreign:going vessel or aircraft.
0ection ))9 A66lication of 0ectionD' and C8a6ter P to stores9 P If imported goods already
cleared for home consumption on payment of duty are supplied to the foreign going vessels or aircraft
as stores then instead of 4.C, 166C duty drawbac3 is allowed.
0ection )'9 0tores to be free of ex6ort duty 2)oods produced or manufactured in India and re1uired
as stores on any foreign:going vessel or aircraft may be exported free of d!t in such 1uantities as the
proper officer may determine, having regard to the si?e of the vessel or aircraft, the number of
passengers and crew and the length of the voyage or journey on which the vessel or aircraft is about to
depart.
0ection '-9 Concessions in res6ect of im6orted stores for t8e Navy
7oods imported - If any of the goods are imported for being supplied to the Indian navy vessels as
stores then such goods shall be exempt from import duty.
7oods man!fact!red in *ndia - If goods manufactured or produced in India are supplied to the Indian
navy vessel as stores then 166C duty drawbac3 shall be allowed.

205
@t8er .rovisions of t8e Custom Act% &'D,
C7A.TE+ PII
.+@VI0I@N0 +E#ATIN/ T@ C@A0TA# /@@D0 AND VE00E#0 CA++QIN/ C@A0TA#
/@@D0
0ection '&9 C8a6ter not to a66ly to ba::a:e and stores9 2 The provi: sions of this Chapter shall not
apply to baggage and stores.
0ection ',9 Entry of coastal :oods9 2 ,1- The consignor of any coastal goods shall ma3e an entry
thereof by presenting to the proper officer a bill of coastal goods in the prescribed form.
,%- Every such consignor while presenting a bill of coastal goods shall, at the foot thereof, ma3e and
subscribe to a declaration as to the truth of the contents of such bill.
0ection '39 Coastal :oods not to be loaded until bill relatin: t8ereto is 6assed% etc9 2 The master of
a vessel shall not permit the loading of any coastal goods on the vessel until a bill relating to such
goods presented under ection4% has been passed by the proper officer and has been delivered to the
master by the consignor.
0ection '(9 Clearance of coastal :oods at destination9 2 ,1- The master of a vessel carrying any
coastal goods shall carry on board the vessel all bills relating to such goods delivered to him under
ection4= and shall, immediately on arrival of the vessel at any customs or coastal port, deliver to the
proper officer of that port all bills relating to the goods which are to be unloaded at that port.
,%- Ghere any coastal goods are unloaded at any port, the proper officer shall permit clearance thereof
if he is satisfied that they are entered in a bill of coastal goods delivered to him under sub:ection,1-.
0ection '*9 5aster of a coastin: vessel to carry an advice boo19 :,1- The master of every vessel
carrying coastal goods shall be supplied by the Customs authorities with a boo3 to be called the
Nadvice boo3N.
,%- The proper officer at each port of call by such vessel shall ma3e such entries in the advice boo3 as
he deems fit, relating to the goods loaded on the vessel at that port.
,=- The master of every such vessel shall carry the advice boo3 on board the vessel and shall on
arrival at each port of call deliver it to the proper officer at that port for his inspection.
0ection 'D9 #oadin: and unloadin: of coastal :oods at customs 6ort or coastal 6ort only9 2 7o
coastal goods shall be loaded on, or unloaded from, any vessel at any port other than a customs port or
a coastal port appointed under ection> for the loading or unloading of such goods.
0ection '49 No coastin: vessel to leave $it8out $ritten order9 2 ,1- The master of a vessel which
has brought or loaded any coastal goods at a customs or coastal port shall not cause or permit the
vessel to depart from such port until a written order to that effect has been given by the proper officer.
,%- 7o such order shall be given until :
,a- the master of the vessel has answered the 1uestions put to him under ection=.H
206
,b- all charges and penalties due in respect of that vessel or from the master thereof have been paid or
the payment secured by such guarantee or deposit of such amount as the proper officer may directH
,c- the master of the vessel has satisfied the proper officer that no penalty is leviable on him under
ection11& or the payment of any penalty that may be levied upon him under that ectionhas been
secured by such guarantee or deposit of such amount as the proper officer may directH
,d- the provisions of this Chapter and any rules and regulations relating to coastal goods and vessels
carrying coastal goods have been complied with.
0ection ')9 A66lication of certain 6rovisions of t8is Act to coastal :oods% etc9 2 ,1- ections ==, =/
and =& shall, so far as may be, apply to coastal goods as they apply to imported goods or export
goods.
,%- ections => and =. shall, so far as may be, apply to vessels carrying coastal goods as they apply to
vessels carrying imported goods or export goods.
,=- The Central )overnment may, by notification in the Bfficial )a?ette, direct that all or any of the
other provisions of Chapter 8I and the provisions of ection/' shall apply to coastal goods or vessels
carrying coastal goods subject to such exceptions and modifications as may be specified in the
notification.
0ection ')A9 .o$er to relax9 V If the Central )overnment is satisfied that it is necessary in the
public interest so to do it may, by notification in the Bfficial )a?ette, exempt generally, either
absolutely or subject to such conditions as may be specified in the notification, coastal goods or
vessels carrying coastal goods from all or any of the provisions of this Chapter.
0ection ''9 .o$er to ma1e rules in res6ect of coastal :oods and coastin: vessels9 2 The Central
)overnment may ma3e rules for :
,a- preventing the ta3ing out of India of any coastal goods the export of which is dutiable or
prohibited under this $ct or any other law for the time being in forceH
,b- preventing, in the case of a vessel carrying coastal goods as well as imported or export goods, the
substitution of imported or export goods by coastal goods.
C7A.TE+ PIII
0EA+C7E0% 0EIKJ+E AND A++E0T
0ection &--9 .o$er to searc8 sus6ected 6ersons enterin: or leavin: India% etc9 2 ,1- If the proper
officer has reason to believe that any person to whom this ectionapplies has secreted about his
person, any goods liable to confiscation or any documents relating thereto, he may search that person.
,%- This ectionapplies to the following persons, namely 0 :
,a- any person who has landed from or is about to board, or is on board any vessel within the Indian
customs watersH
,b- any person who has landed from or is about to board, or is on board a foreign:going aircraftH
,c- any person who has got out of, or is about to get into, or is in, a vehicle, which has arrived from, or
is to proceed to any place outside IndiaH
,d- any person not included in clauses ,a-, ,b- or ,c- who has entered or is about to leave IndiaH
,e- any person in a customs area.
207
0ection &-&9 .o$er to searc8 sus6ected 6ersons in certain ot8er cases9 2 ,1- Githout prejudice to
the provisions of ection166, if an officer of customs empowered in this behalf by general or special
order of the Commissioner of Customs, has reason to believe that any person has secreted about his
person any goods of the description specified in sub:ection,%- which are liable to confiscation, or
documents relating thereto, he may search that person.
,%- The goods referred to in sub:ection,1- are the following 0 :
,a- goldH
,b- diamondsH
,c- manufactures of gold or diamondsH
,d- watchesH
,e- any other class of goods which the Central )overnment may, by notification in the Bfficial
)a?ette, specify.
0ection &-,9 .ersons to be searc8ed may reOuire to be ta1en before :aRetted officer of customs
or ma:istrate9 2 ,1- Ghen any officer of customs is about to search any person under the provisions
of ection166 or ection161, the officer of customs shall, if such person so re1uires, ta3e him without
unnecessary delay to the nearest ga?etted officer of customs or magistrate.
,%- If such re1uisition is made, the officer of customs may detain the person ma3ing it until he can
bring him before the ga?etted officer of customs or the magistrate.
,=- The ga?etted officer of customs or the magistrate before whom any such person is brought shall, if
he sees no reasonable ground for search, forthwith discharge the person but otherwise shall direct that
search be made.
,/- ;efore ma3ing a search under the provisions of ection166 or ection161, the officer of customs
shall call upon two or more persons to attend and witness the search and may issue an order in writing
to them or any of them so to doH and the search shall be made in the presence of such persons and a
list of all things sei?ed in the course of such search shall be prepared by such officer or other person
and signed by such witnesses.
,'- 7o female shall be searched by any one excepting a female.
0ection &-39 .o$er to screen or P2ray bodies of sus6ected 6ersons for detectin: secreted :oods9 2
,1- Ghere the proper officer has reason to believe that any person referred to in sub:ection,%- of
ection166 has any goods liable to confiscation secreted inside his body, he may detain such person
and produce him without unnecessary delay before the nearest magistrate.
,%- $ magistrate before whom any person is brought under sub:ection,1- shall, if he sees no
reasonable ground for believing that such person has any such goods secreted inside his body,
forthwith discharge such person.
,=- Ghere any such magistrate has reasonable ground for believing that such person has any such
goods secreted inside his body and the magistrate is satisfied that for the purpose of discovering such
goods it is necessary to have the body of such person screened or M:rayed, he may ma3e an order to
that effect.
,/- Ghere a magistrate has made any order under sub:ection,=-, in relation to any person, the proper
officer shall, as soon as practicable, ta3e such person before a radiologist possessing 1ualifications
recogni?ed by the Central )overnment for the purpose of this section, and such person shall allow the
radiologist to screen or M:ray his body.
208
,'- $ radiologist before whom any person is brought under sub:ection,/- shall, after screening or M:
raying the body of such person, forward his report, together with any M:ray pictures ta3en by him, to
the magistrate without unnecessary delay.
,&- Ghere on receipt of a report from a radiologist under sub:ection,'- or otherwise, the magistrate
is satisfied that any person has any goods liable to confiscation secreted inside his body, he may direct
that suitable action for bringing out such goods be ta3en on the advice and under the supervision of a
registered medical practitioner and such person shall be bound to comply with such direction 0
+rovided that in the case of a female no such action shall be ta3en except on the advice and under the
supervision of a female registered medical practitioner.
,>- Ghere any person is brought before a magistrate under this section, such magistrate may for the
purpose of enforcing the provisions of this ectionorder such person to be 3ept in such custody and
for such period as he may direct.
,.- 7othing in this ectionshall apply to any person referred to in sub:ection,1-, who admits that
goods liable to confiscation are secreted inside his body, and who voluntarily submits himself for
suitable action being ta3en for bringing out such goods.
Explanation. : 2or the purposes of this section, the expression Nregistered medical practitionerN
means any person who holds a 1ualification granted by an authority specified in the chedule to the
Indian @edical <egrees $ct, 141& ,> of 141&-, or notified under ection= of that $ct, or by an
authority specified in any of the chedules to the Indian @edical Council $ct, 14'& ,16% of 14'&-.
0ection &-(9 .o$er to arrest9 2 ,1- If an officer of Customs empowered in this behalf by general or
special order of the Commissioner of Customs has reason to believe that any person in India or within
the Indian customs waters has committed an offence punishable under ection1=% or ection1== or
ection1=' or ection1='$ or ection1=&, he may arrest such person and shall, as soon as may be,
inform him of the grounds for such arrest.
,%- Every person arrested under sub:ection,1- shall, without unnecessary delay, be ta3en to a
magistrate.
,=- Ghere an officer of customs has arrested any person under sub:ection,1-, he shall, for the
purpose of releasing such person on bail or otherwise, have the same powers and be subject to the
same provisions as the officer:in:charge of a police:station has and is subject to under the Code of
Criminal +rocedure, 1.4. ,' of 1.4.-.
,/- 7otwithstanding anything contained in the Code of Criminal +rocedure, 1.4. ,' of 1.4.-, an
offence under this $ct shall not be cogni?able.
0ection &-*9 .o$er to searc8 6remises9 2 ,1- If the $ssistant Commissioner of Customs or <eputy
Commissioner of Customs, or in any area adjoining the land frontier or the coast of India an officer of
customs specially empowered by name in this behalf by the ;oard, has reason to believe that any
goods liable to confiscation, or any documents or things which in his opinion will be useful for or
relevant to any proceeding under this $ct, are secreted in any place, he may authorise any officer of
customs to search or may himself search for such goods, documents or things.
,%- The provisions of the Code of Criminal +rocedure, 1.4. ,' of 1.4.-, relating to searches shall, so
far as may be, apply to searches under this ectionsubject to the modification that sub:ection,'- of
ection1&' of the said Code shall have effect as if for the word N@agistrateN, wherever it occurs, the
words Commissioner of Customs were substituted.
0ection &-D9 .o$er to sto6 and searc8 conveyances9 2 ,1- Ghere the proper officer has reason to
believe that any aircraft, vehicle or animal in India or any vessel in India or within the Indian customs
209
waters has been, is being, or is about to be, used in the smuggling of any goods or in the carriage of
any goods which have been smuggled, he may at any time stop any such vehicle, animal or vessel or,
in the case of an aircraft, compel it to land, and :
,a- rummage and search any part of the aircraft, vehicle or vesselH
,b- examine and search any goods in the aircraft, vehicle or vessel or on the animalH
,c- brea3 open the loc3 of any door or pac3age for exercising the powers conferred by clauses ,a- and
,b-, if the 3eys are withheld.
,%- Ghere for the purposes of sub:ection,1- :
,a- it becomes necessary to stop any vessel or compel any aircraft to land, it shall be lawful for any
vessel or aircraft in the service of the )overnment while flying her proper flag and any authority
authorised in this behalf by the Central )overnment to summon such vessel to stop or the aircraft to
land, by means of an international signal, code or other recogni?ed means, and thereupon, such vessel
shall forthwith stop or such aircraft shall forthwith landH and if it fails to do so, chase may be given
thereto by any vessel or aircraft as aforesaid and if after a gun is fired as a signal the vessel fails to
stop or the aircraft fails to land, it may be fired uponH
,b- it becomes necessary to stop any vehicle or animal, the proper officer may use all lawful means
for stopping it, and where such means fail, the vehicle or animal may be fired upon.
0ection &-DA9 .o$er to ins6ect9 2 $ny proper officer authorised in this behalf by the Commissioner
of Customs may, for the purpose of ascertaining whether or not the re1uirements of this $ct have
been complied with, at any reasonable time, enter any place intimated under Chapter I8$ or Chapter
I8;, as the case may be, and inspect the goods 3ept or stored therein and re1uire any person found
therein, who is for the time being in charge thereof, to produce to him for his inspection the accounts
maintained under the said Chapter I8$ or Chapter I8;, as the case may be, and to furnish to him
such other information as he may reasonably re1uire for the purpose of ascertaining whether or not
such goods have been illegally imported, exported or are li3ely to be illegally exported.
0ection &-49 .o$er to examine 6ersons9 2 $ny officer of customs empowered in this behalf by
general or special order of the Commissioner of Customs may, during the course of any en1uiry in
connection with the smuggling of any goods, :
,a- re1uire any person to produce or deliver any document or thing relevant to the en1uiry H
,b- examine any person ac1uainted with the facts and circumstances of the case.
0ection &-)9 .o$er to summon 6ersons to :ive evidence and 6roduce documents9 2 ,1- $ny
)a?etted officer of Customs
&
UYYYYYYYL shall have power to summon any person whose attendance he
considers necessary either to give evidence or to produce a document or any other thing in any in1uiry
which such officer is ma3ing under this $ct.
,%- $ summons to produce documents or other things may be for the production of certain specified
documents or things or for the production of all documents or things of a certain description in the
possession or under the control of the person summoned.
,=- $ll persons so summoned shall be bound to attend either in person or by an authorised agent, as
such officer may directH and all persons so summoned shall be bound to state the truth upon any
subject respecting which they are examined or ma3e statements and produce such documents and
other things as may be re1uired 0
+rovided that the exemption under ection1=% of the Code of Civil +rocedure, 146. ,' of 146.-, shall
be applicable to any re1uisition for attendance under this section.
210
,/- Every such in1uiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of
ection14= and ection%%. of the Indian +enal Code, 1.&6 ,/' of 1.&6-.
0ection &-'9 .o$er to reOuire 6roduction of order 6ermittin: clearance of :oods im6orted by
land9 2 $ny officer of customs appointed for any area adjoining the land frontier of India and
empowered in this behalf by general or special order of the ;oard, may re1uire any person in
possession of any goods which such officer has reason to believe to have been imported into India by
land, to produce the order made under ection/> permitting clearance of the goods 0
+rovided that nothing in this ectionshall apply to any imported goods passing from a land frontier to
a land customs station by a route appointed under clause ,c- of ection>.
0ection &&-9 0eiRure of :oods% documents and t8in:s9 2 ,1- If the proper officer has reason to
believe that any goods are liable to confiscation under this $ct, he may sei?e such goods 0
+rovided that where it is not practicable to sei?e any such goods, the proper officer may serve on the
owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods
except with the previous permission of such officer.
,1$- The Central )overnment may, having regard to the perishable or ha?ardous nature of any goods,
depreciation in the value of the goods with the passage of time, constraints of storage space for the
goods or any other relevant considerations, by notification in the Bfficial )a?ette, specify the goods
or class of goods which shall, as soon as may be after its sei?ure under sub:ection,1-, be disposed of
by the proper officer in such manner as the Central )overnment may, from time to time, determine
after following the procedure hereinafter specified.
,1;- Ghere any goods, being goods specified under sub:ection,1$-, have been sei?ed by a proper
officer under sub:ection,1-, he shall prepare an inventory of such goods containing such details
relating to their description, 1uality, 1uantity, mar3, numbers, country of origin and other particulars
as the proper officer may consider relevant to the identity of the goods in any proceedings under this
$ct and shall ma3e an application to a @agistrate for the purpose of :
,a- certifying the correctness of the inventory so preparedH or
,b- ta3ing, in the presence of the @agistrate, photographs of such goods, and certifying such
photographs as trueH or
,c- allowing to draw representative samples of such goods, in the presence of the @agistrate, and
certifying the correctness of any list of samples so drawn.
,1C- Ghere an application is made under sub:ection,1;-, the @agistrate shall, as soon as may be,
allow the application.
,%- Ghere any goods are sei?ed under sub:ection,1- and no notice in respect thereof is given under
clause ,a- of ection1%/ within six months of the sei?ure of the goods, the goods shall be returned to
the person from whose possession they were sei?ed 0
+rovided that the aforesaid period of six months may, on sufficient cause being shown, be extended
by the Commissioner of Customs for a period not exceeding six months.
,=- The proper officer may sei?e any documents or things which, in his opinion, will be useful for, or
relevant to, any proceeding under this $ct.
,/- The person from whose custody any documents are sei?ed under sub:ection,=- shall be entitled
to ma3e copies thereof or ta3e extracts therefrom in the presence of an officer of customs.
0ection &&-A9 .rovisional release of :oods% documents and t8in:s seiRed 6endin: ad?udication9
211
$ny goods, documents or things sei?ed under ection116, may, pending the order of the

adjudicating
authority, be released to the owner on ta3ing a bond from him in the proper form with such security
and conditions as the adjudicating authority may re1uire.
C7A.TE+ PIV
C@NAI0CATI@N @A /@@D0 AND C@NVEQANCE0 AND I5.@0ITI@N @A .ENA#TIE0
0ection &&&9 Confiscation of im6ro6erly im6orted :oods% etc9 2 The following goods brought from
a place outside India shall be liable to confiscation 0 :
,a- any goods imported by sea or air which are unloaded or attempted to be unloaded at any place
other than a customs port or customs airport appointed under clause ,a- of ection> for the unloading
of such goodsH
,b- any goods imported by land or inland water through any route other than a route specified in a
notification issued under clause ,c- of ection> for the import of such goodsH
,c- any dutiable or prohibited goods brought into any bay, gulf, cree3 or tidal river for the purpose of
being landed at a place other than a customs portH
,d- any goods which are imported or attempted to be imported or are brought within the Indian
customs waters for the purpose of being imported, contrary to any prohibition imposed by or under
this $ct or any other law for the time being in forceH
,e- any dutiable or prohibited goods found concealed in any manner in any conveyanceH
,f- any dutiable or prohibited goods re1uired to be mentioned under the regulations in an import
manifest or import report which are not so mentionedH
,g - any dutiable or prohibited goods which are unloaded from a conveyance in contravention of the
provisions of ection=%, other than goods inadvertently unloaded but included in the record 3ept
under sub:ection,%- of ection/'H
,h- any dutiable or prohibited goods unloaded or attempted to be unloaded in contravention of the
provisions of ection== or ection=/H
,i- any dutiable or prohibited goods found concealed in any manner in any pac3age either before or
after the unloading thereofH
,j- any dutiable or prohibited goods removed or attempted to be removed from a customs area or a
warehouse without the permission of the proper officer or contrary to the terms of such permissionH
,3- any dutiable or prohibited goods imported by land in respect of which the order permitting
clearance of the goods re1uired to be produced under ection164 is not produced or which do not
correspond in any material particular with the specification contained thereinH
,l- any dutiable or prohibited goods which are not included or are in excess of those included in the
entry made under this $ct, or in the case of baggage in the declaration made under ection>>H
,m- any goods which do not correspond in respect of value or in any other particular with the entry
made under this $ct or in the case of baggage with the declaration made under ection>> in respect
thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to
in the proviso to sub:ection,1- of ection'/H
212
,n- any dutiable or prohibited goods transitted with or without transhipment or attempted to be so
transitted in contravention of the provisions of Chapter 8IIIH
,o- any goods exempted, subject to any condition, from duty or any prohibition in respect of the
import thereof under this $ct or any other law for the time being in force, in respect of which the
condition is not observed unless the non:observance of the condition was sanctioned by the proper
officerH
,p- any notified goods in relation to which any provisions of Chapter I8$ or of any rule made under
this $ct for carrying out the purposes of that Chapter have been contravened.
0ection &&,9 .enalty for im6ro6er im6ortation of :oods% etc9 2 $ny person, :
,a- who, in relation to any goods, does or omits to do any act which act or omission would render such
goods liable to confiscation under ection111, or abets the doing or omission of such an act, or
,b- who ac1uires possession of or is in any way concerned in carrying, removing, depositing,
harbouring, 3eeping, concealing, selling or purchasing, or in any other manner dealing with any goods
which he 3nows or has reason to believe are liable to confiscation under ection111, shall be liable, :
,i- in the case of goods in respect of which any prohibition is in force under this $ct or any other law
for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees,
whichever is the greaterH
,ii- in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty
sought to be evaded on such goods or five thousand rupees, whichever is the greaterH
,iii- in the case of goods in respect of which the value stated in the entry made under this $ct or in the
case of baggage, in the declaration made under ection>> ,in either case hereafter in this
ectionreferred to as the declared value- is higher than the value thereof, to a penalty not exceeding
the difference between the declared value and the value thereof or five thousand rupees, whichever is
the greaterH
,ivin the case of goods falling both under clauses ,i- and ,iii-, to a penalty not exceeding the value of
the goods or the difference between the declared value and the value thereof or five thousand rupees,
whichever is the highestH
,v- in the case of goods falling both under clauses ,ii- and ,iii-, to a penalty not exceeding the duty
sought to be evaded on such goods or the difference between the declared value and the value thereof
or five thousand rupees, whichever is the highest.
0ection &&39 Confiscation of :oods attem6ted to be im6ro6erly ex6orted% etc9 2 The following
export goods shall be liable to confiscation 0:
,a- any goods attempted to be exported by sea or air from any place other than a customs port or a
customs airport appointed for the loading of such goodsH
,b- any goods attempted to be exported by land or inland water through any route other than a route
specified in a notification issued under clause ,c- of ection> for the export of such goodsH
,c- any goods brought near the land frontier or the coast of India or near any bay, gulf, cree3 or tidal
river for the purpose of being exported from a place other than a land customs station or a customs
port appointed for the loading of such goodsH
,d- any goods attempted to be exported or brought within the limits of any customs area for the
purpose of being exported, contrary to any prohibition imposed by or under this $ct or any other law
for the time being in forceH
213
,e- any goods found concealed in a pac3age which is brought within the limits of a customs area for
the purpose of exportationH
,f- any goods which are loaded or attempted to be loaded in contravention of the provisions of
ection== or ection=/H
,g- any goods loaded or attempted to be loaded on any conveyance, or water:borne, or attempted to be
water:borne for being loaded on any vessel, the eventual destination of which is a place outside India,
without the permission of the proper officerH
,h- any goods which are not included or are in excess of those included in the entry made under this
$ct, or in the case of baggage in the declaration made under ection>>H
,i- any goods entered for exportation which do not correspond in respect of value or in any material
particular with the entry made under this $ct or in the case of baggage with the declaration made
under ection>>H
,ii- any goods entered for exportation under claim for drawbac3 which do not correspond in any
material particular with any information furnished by the exporter or manufacturer under this $ct in
relation to the fixation of rate of drawbac3 under ection>'H
,j- any goods on which import duty has not been paid and which are entered for exportation under a
claim for drawbac3 under ection>/H
,3- any goods cleared for exportation which are not loaded for exportation on account of any wilful
act, negligence or default of the exporter, his agent or employee, or which after having been loaded
for exportation are unloaded without the permission of the proper officerH
,l- any specified goods in relation to which any provisions of Chapter I8; or of any rule made under
this $ct for carrying out the purposes of that Chapter have been contravened
0ection &&(9 .enalty for attem6t to ex6ort :oods im6ro6erly% etc9 2 $ny person who, in relation to
any goods, does or omits to do any act which act or omission would render such goods liable to
confiscation under ection11=, or abets the doing or omission of such an act, shall be liable, :
,i- in the case of goods in respect of which any prohibition is in force under this $ct or any other law
for the time being in force, to a penalty not exceeding three times the value of the goods as declared
by the exporter or the value as determined under this $ct, whichever is the greaterH
,ii- in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty
sought to be evaded or five thousand rupees, whichever is the greaterH
,iii- in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by
the exporter or the value as determined under this $ct, whichever is the greater.
0ection &&(A9 .enalty for s8ort2levy or non2levy of duty in certain cases9 2 Ghere the duty has not
been levied or has been short:levied or the interest has not been charged or paid or has xxx been part
paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis:
statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may
be, as determined under sub:ection,.- of ection%. shall also be liable to pay a penalty e1ual to the
duty or interest so determined 0
.rovided that where such duty or interest, as the case may be, as determined under sub:ection,.-
of ection%., and the interest payable thereon under ection
,
U%.$$L, is paid within thirty days from
the date of the communication of the order of the proper officer determining such duty, the amount of
penalty liable to be paid by such person under this ectionshall be twenty:five per cent of the duty or
interest, as the case may be, so determined 0
214
.rovided furt8er that the benefit of reduced penalty under the first proviso shall be available
subject to the condition that the amount of penalty so determined has also been paid within the period
of thirty days referred to in that proviso 0
.rovided also that where the duty or interest determined to be payable is reduced or increased by
the Commissioner ,$ppeals-, the $ppellate Tribunal or, as the case may be, the court, then, for the
purposes of this section, the duty or interest as reduced or increased, as the case may be, shall be ta3en
into account 0
.rovided also that in case where the duty or interest determined to be payable is increased by the
Commissioner ,$ppeals-, the $ppellate Tribunal or, as the case may be, the court, then, the benefit of
reduced penalty under the first proviso shall be available if the amount of the duty or the interest so
increased, along with the interest payable thereon under ection
,
U%.$$L, and twenty:five per cent of
the conse1uential increase in penalty have also been paid within thirty days of the communication of
the order by which such increase in the duty or interest ta3es effect 0
.rovided also that where any penalty has been levied under this section, no penalty shall be levied
under ection11% or ection11/.
Explanation. : 2or the removal of doubts, it is hereby declared that :
,i- the provisions of this ectionshall also apply to cases in which the order determining the duty
or interest under
&
Usub:ection,.- of ection%.L relates to notices issued prior to the date on which the
2inance $ct, %666 receives the assent of the +residentH
,ii- any amount paid to the credit of the Central )overnment prior to the date of communication of
the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount
due from such person.
0ection &&(AA9 .enalty for use of false and incorrect material9 2 If a person 3nowingly or
intentionally ma3es, signs or uses, or causes to be made, signed or used, any declaration, statement or
document which is false or incorrect in any material particular, in the transaction of any business for
the purposes of this $ct, shall be liable to a penalty not exceeding five times the value of goods.
0ection &&*9 Confiscation of conveyances9 2 ,1- The following conveyances shall be liable to
confiscation 0:
,a- any vessel which is or has been within the Indian customs waters, any aircraft which is or has been
in India, or any vehicle which is or has been in a customs area, while constructed, adapted, altered or
fitted in any manner for the purpose of concealing goodsH
,b- any conveyance from which the whole or any part of the goods is thrown overboard, staved or
destroyed so as to prevent sei?ure by an officer of customsH
,c- any conveyance which having been re1uired to stop or land under ection16& fails to do so, except
for good and sufficient causeH
,d- any conveyance from which any warehoused goods cleared for exportation, or any other goods
cleared for exportation under a claim for drawbac3, are unloaded, without the permission of the
proper officerH
,e- any conveyance carrying imported goods which has entered India and is afterwards found with the
whole or substantial portion of such goods missing, unless the master of the vessel or aircraft is able
to account for the loss of, or deficiency in, the goods.
,%- $ny conveyance or animal used as a means of transport in the smuggling of any goods or in the
carriage of any smuggled goods shall be liable to confiscation, unless the owner of the conveyance or
215
animal proves that it was so used without the 3nowledge or connivance of the owner himself, his
agent, if any, and the person in charge of the conveyance or animal .
+rovided that where any such conveyance is used for the carriage of goods or passengers for hire, the
owner of any conveyance shall be given an option to pay in lieu of the confiscation of the conveyance
a fine not exceeding the mar3et price of the goods which are sought to be smuggled or the smuggled
goods, as the case may be.
Explanation. : In this section, Nmar3et priceN means mar3et price at the date when the goods are
sei?ed.
0ection &&D9 .enalty for not accountin: for :oods9 2 If any goods loaded in a conveyance for
importation into India, or any goods transhipped under the provisions of this $ct or coastal goods
carried in a conveyance, are not unloaded at their place of destination in India, or if the 1uantity
unloaded is short of the 1uantity to be unloaded at that destination, and if the failure to unload or the
deficiency is not accounted for to the satisfaction of the $ssistant Commissioner of Customs or
<eputy Commissioner of Customs, the person:in:charge of the conveyance shall be liable, :
,a- in the case of goods loaded in a conveyance for importation into India or goods transhipped under
the provisions of this $ct, to a penalty not exceeding twice the amount of duty that would have been
chargeable on the goods not unloaded or the deficient goods, as the case may be, had such goods been
importedH
,b- in the case of coastal goods, to a penalty not exceeding twice the amount of export duty that would
have been chargeable on the goods not unloaded or the deficient goods, as the case may be, had such
goods been exported.
0ection &&49 .enalties for contravention% etc9% not ex6ressly mentioned9 2 $ny person who
contravenes any provision of this $ct or abets any such contravention or who fails to comply with any
provision of this $ct 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
&
Uone la3h
rupeesL.
0ection &&)9 Confiscation of 6ac1a:es and t8eir contents9 2 ,a- Ghere any goods imported in a
pac3age are liable to confiscation, the pac3age and any other goods imported in that pac3age shall
also be liable to confiscation.
,b- Ghere any goods are brought in a pac3age within the limits of a customs area for the purpose of
exportation and are liable to confiscation, the pac3age and any other goods contained therein shall
also be liable to confiscation.
0ection &&'9 Confiscation of :oods used for concealin: smu::led :oods9 2 $ny goods used for
concealing smuggled goods shall also be liable to confiscation.
Explanation. : In this section, NgoodsN does not include a conveyance used as a means of transport.
0ection &,-9 Confiscation of smu::led :oods not$it8standin: any c8an:e in form% etc9 2 ,1-
muggled goods may be confiscated notwithstanding any change in their form.
,%- Ghere smuggled goods are mixed with other goods in such manner that the smuggled goods
cannot be separated from such other goods, the whole of the goods shall be liable to confiscation 0
+rovided that where the owner of such goods proves that he had no 3nowledge or reason to believe
that they included any smuggled goods, only such part of the goods the value of which is e1ual to the
value of the smuggled goods shall be liable to confiscation.
216
0ection &,&9 Confiscation of sale26roceeds of smu::led :oods9 2 Ghere any smuggled goods are
sold by a person having 3nowledge or reason to believe that the goods are smuggled goods, the sale:
proceeds thereof shall be liable to confiscation.
0ection &,,9 Ad?udication of confiscations and 6enalties9 2 In every case under this Chapter in
which anything is liable to confiscation or any person is liable to a penalty, such confiscation or
penalty may be adjudged, :
,a- without limit, by a Commissioner of Customs or a Aoint Commissioner of CustomsH
,b- where the value of the goods liable to confiscation does not exceed two la3h rupees, by an
$ssistant Commissioner of Customs or <eputy Commissioner of CustomsH
,c- where the value of the goods liable to confiscation does not exceed, ten thousand rupees, by a
)a?etted Bfficer of Customs lower in ran3 than an $ssistant Commissioner of Customs or <eputy
Commissioner of Customs.
0ection &,,A9 Ad?udication .rocedure9 V ,1- The adjudicating authority shall, in any proceeding
under this Chapter or any other provision of this $ct, give an opportunity of being heard to a party in
a proceeding, if the party so desires.
,%- The adjudicating authority may, if sufficient cause is shown at any stage of proceeding referred to
in sub:ection,1-, grant time, from time to time, to the parties or any of them and adjourn the hearing
for reasons to be recorded in writing 0
+rovided that no such adjournment shall be granted more than three times to a party during the
proceeding.
0ection &,39 "urden of 6roof in certain cases9 2 ,1- Ghere any goods to which this ectionapplies
are sei?ed under this $ct in the reasonable belief that they are smuggled goods, the burden of proving
that they are not smuggled goods shall be :
,a- in a case where such sei?ure is made from the possession of any person, :
,i- on the person from whose possession the goods were sei?edH and
,ii- if any person, other than the person from whose possession the goods were sei?ed, claims to be the
owner thereof, also on such other personH
,b- in any other case, on the person, if any, who claims to be the owner of the goods so sei?ed.
,%- This ectionshall apply to gold, and manufactures thereof, watches, and any other class of goods
which the Central )overnment may by notification in the Bfficial )a?ette specify.
0ection &,(9 Issue of s8o$ cause notice before confiscation of :oods% etc9 2 7o order confiscating
any goods or imposing any penalty on any person shall be made under this Chapter unless the owner
of the goods or such person :
,a- is given a notice in writing with the prior approval of the officer of Customs not below the ran3 of
&
Uan $ssistant Commissioner of CustomsL, informing him of the grounds on which it is proposed to
confiscate the goods or to impose a penaltyH
,b- is given an opportunity of ma3ing a representation in writing within such reasonable time as may
be specified in the notice against the grounds of confiscation or imposition of penalty mentioned
thereinH and
,c- is given a reasonable opportunity of being heard in the matter 0
.rovided t8at the notice referred to in clause ,a- and the representation referred to in clause ,b- may,
at the re1uest of the person concerned be oral.
217
0ection &,*9 @6tion to 6ay fine in lieu of confiscation9 2 ,1- Ghenever confiscation of any goods is
authorised by this $ct, the officer adjudging it may, in the case of any goods, the importation or
exportation whereof is prohibited under this $ct or under any other law for the time being in force,
and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not
3nown, the person from whose possession or custody such goods have been sei?ed, an option to pay
in lieu of confiscation such fine as the said officer thin3s fit 0
+rovided that, without prejudice to the provisions of the proviso to sub:ection,%- of ection11', such
fine shall not exceed the mar3et price of the goods confiscated, less in the case of imported goods the
duty chargeable thereon.
,%- Ghere any fine in lieu of confiscation of goods is imposed under sub:ection,1-, the owner of
such goods or the person referred to in sub:ection,1-, shall, in addition, be liable to any duty and
charges payable in respect of such goods.
0ection &,D9 @n confiscation% 6ro6erty to vest in Central /overnment9 2 ,1- Ghen any goods are
confiscated under this $ct, such goods shall thereupon vest in the Central )overnment.
,%- The officer adjudging confiscation shall ta3e and hold possession of the confiscated goods.
0ection &,49 A$ard of confiscation or 6enalty by customs officers not to interfere $it8 ot8er
6unis8ments9 2 The award of any confiscation or penalty under this $ct by an officer of customs shall
not prevent the infliction of any punishment to which the person affected thereby is liable under the
provisions of Chapter M8I of this $ct or under any other law.
C7A.TE+ PIVA
0ETT#E5ENT @A CA0E0
0ection &,4A9 Definitions9V In this Chapter, unless the context otherwise re1uires, :
,a- N;enchN means a ;ench of the ettlement CommissionH
,b- NcaseN means any proceeding under this $ct or any other $ct for the levy, assessment and
collection of customs duty, pending before an adjudicating authority on the date on which an
application under sub:ection,1- of ection1%>; is made0
+rovided that when any proceeding is referred bac3 in any appeal or revision, as the case may be, by
any court, $ppellate Tribunal or any other authority, to the adjudicating authority for a fresh
adjudication or decision, as the case may be, then such proceeding shall not be deemed to be a
proceeding pending within the meaning of this clauseH
,c- NChairmanN means the Chairman of the ettlement CommissionH
,d- NCommissioner ,Investigation-N means an officer of the customs or a Central Excise Bfficer
appointed as such Commissioner to conduct in1uiry or investigation for the purposes of this ChapterH
,e- N@emberN means a @ember of the ettlement Commission and includes the Chairman and the
8ice:ChairmanH
,f- Nettlement CommissionN means the Customs and Central Excise ettlement Commission
constituted under ection=% of the Central Excise $ct, 14// ,1 of 14//-H and
,g- N8ice:ChairmanN means a 8ice:Chairman of the ettlement Commission.
218
0ection &,4"9 A66lication for settlement of cases9 2 ,1- $ny importer, exporter or any other person
,hereinafter referred to as the applicant in this Chapter- may, in respect of a case, relating to him ma3e
an application, before adjudication to the ettlement Commission to have the case settled, in such
form and in such manner as may be specified by rules, and containing a full and true disclosure of his
duty liability which has not been disclosed before the proper officer, the manner in which such
liability has been incurred, the additional amount of customs duty accepted to be payable by him and
such other particulars as may be specified by rules including the particulars of such dutiable goods in
respect of which he admits short levy on account of misclassification, under:valuation or
inapplicability of exemption notification
&
Uor otherwiseL and such application shall be disposed of in
the manner hereinafter provided0
+rovided that no such application shall be made unless,K
,a- the applicant has filed a bill of entry, or a shipping bill, in respect of import or export of such
goods, as the case may be, and in relation to such bill of entry or shipping bill, a show cause notice
has been issued to him by the proper officerH
,b- the additional amount of duty accepted by the applicant in his application exceeds three la3h
rupeesH and
,c- the applicant has paid the additional amount of customs duty accepted by him along with interest
due under ection%.$;0
+rovided further that no application shall be entertained by the ettlement Commission under this
sub:ectionin cases which are pending in the $ppellate Tribunal or any court0
+rovided also that no application under this sub:ectionshall be made in relation to goods to which
ection1%= applies or to goods in relation to which any offence under the 7arcotic <rugs and
+sychotropic ubstances $ct, 14.' ,&1 of 14.'- has been committed0
+rovided also that no application under this sub:ectionshall be made for the interpretation of the
classification of the goods under the Customs Tariff $ct, 14>'. ,'1 of 14>'-.
,1$- 7otwithstanding anything contained in sub:ection,1-, where an application was made under
sub:ection,1- before the 1st day of Aune, %66> but an order under sub ection,1- of ection1%>C has
not been made before the said date, the applicant shall within a period of thirty days from the 1st day
of Aune, %66> pay the accepted duty liability failing which his application shall be liable to be
rejected.
,2or sub:ection,1-, the above sub:sections has been substituted, by 2inance $ct %66> with effect
from the 1st day of Aune, %66>-
,%- Ghere any dutiable goods, boo3s of account, other documents or any sale proceeds of the goods
have been sei?ed under ection116, the applicant shall not be entitled to ma3e an application under
sub:ection,1- before the expiry of one hundred and eighty days from the date of the sei?ure.
,=- Every application made under sub:ection,1- shall be accompanied by such fees as may be
specified by rules.
,/- $n application made under sub:ection,1- shall not be allowed to be withdrawn by the applicant.
0ection &,4C9 .rocedure on recei6t of a66lication under 0ection&,4"9 : ,1- Bn receipt of an
application under ection1%>;, the ettlement Commission shall, within seven days from the date of
receipt of the application, issue a notice to the applicant to explain in writing as to why the application
made by him should be allowed to be proceeded with and after ta3ing into consideration the
explanation provided by the applicant, the ettlement Commission, shall, within a period of fourteen
days from the date of the notice, by an order, allow the application to be proceeded with or reject the
219
application, as the case may be, and the proceedings before the ettlement Commission shall abate on
the date of rejection0
+rovided that where no notice has been issued or no order has been passed within the aforesaid period
by the ettlement Commission, the application shall be deemed to have been allowed to be proceeded
with.
,%- $ copy of every order under sub:ection,1- shall be sent to the applicant and to the Commissioner
of Customs having jurisdiction.
,=- Ghere an application is allowed or deemed to have been allowed to be proceeded with under sub:
ection,1-, the ettlement Commission shall, within seven days from the date of order under sub:
ection,1-, call for a report along with the relevant records from the Commissioner of Customs
having jurisdiction and the Commissioner shall furnish the report within a period of thirty days of the
receipt of communication from the ettlement Commission0
+rovided that where the Commissioner does not furnish the report within the aforesaid period of thirty
days, the ettlement Commission shall proceed further in the matter without the report of the
Commissioner.
,/- Ghere a report of the Commissioner called for under sub:ection,=- has been furnished within the
period specified in that sub:section, the ettlement Commission may, after examination of such
report, if it is of the opinion that any further en1uiry or investigation in the matter is necessary, direct,
for reasons to be recorded in writing, the Commissioner ,Investigation- within fifteen days of the
receipt of the report, to ma3e or cause to be made such further en1uiry or investigation and furnish a
report within a period of ninety days of the receipt of the communication from the ettlement
Commission, on the matters covered by the application and any other matter relating to the case0
+rovided that where the Commissioner ,Investigation- does not furnish the report within the aforesaid
period, the ettlement Commission shall proceed to pass an order under sub:ection,'- without such
report.
,'- $fter examination of the records and the report of the Commissioner of Customs received under
sub:ection,=-, and the report, if any, of the Commissioner ,Investigation- of the ettlement
Commission under sub:ection,/-, and after giving an opportunity to the applicant and to the
Commissioner of Customs having jurisdiction to be heard, either in person or through a representative
duly authorised in this behalf, and after examining such further evidence as may be placed before it or
obtained by it, the ettlement Commission may, in accordance with the provisions of this $ct, pass
such order as it thin3s fit on the matters covered by the application and any other matter relating to the
case not covered by the application, but referred to in the report of the Commissioner of Customs and
Commissioner ,Investigation- under sub:ection,=- or sub:ection,/-.
,&- $n order under sub:ection,'- shall not be passed in respect of an application filed on or before
the =1st day of @ay, %66>, later than the %4th 2ebruary, %66. and in respect of an application made
on or after the 1st day of Aune, %66>, after nine months from the last day of the month in which the
application was made, failing which the settlement proceedings shall abate, and the adjudicating
authority before whom the proceeding at the time of ma3ing the application was pending, shall
dispose of the case in accordance with the provisions of this $ct as if no application under
ection1%>; had been made.
1
U+rovided that the period specified under this sub:ectionmay, for reasons to be recorded in writing,
be extended by the ettlement Commission for a further period not exceeding three months.L
,>- ubject to the provisions of ection=%$ of the Central Excise $ct, 14//, ,1 of 14//- the materials
brought on record before the ettlement Commission shall be considered by the @embers of the
220
concerned ;ench before passing any order under sub:ection,'- and, in relation to the passing of such
order, the provisions of ection=%< of the Central Excise $ct, 14// ,1 of 14//- shall apply.
,.- The order passed under sub:ection,'- shall provide for the terms of settlement including any
demand by way of duty, penalty or interest, the manner in which any sums due under the settlement
shall be paid and all other matters to ma3e the settlement effective and in case of rejection contain the
reasons therefor and it shall also provide that the settlement shall be void if it is subse1uently found
by the ettlement Commission that it has been obtained by fraud, or misrepresentation of facts0
+rovided that the amount of settlement ordered by the ettlement Commission, shall not be less than
the duty liability admitted by the applicant under ection1%>;.
,4- Ghere any duty, interest, fine and penalty payable in pursuance of an order under sub:ection,'-
is not paid by the applicant within thirty days of receipt of a copy of the order by him, the amount
which remains unpaid, shall be recovered along with interest due thereon, as the sums due to the
Central )overnment by the proper officer having jurisdiction over the applicant in accordance with
the provisions of ection1/%.
,16- Ghere a settlement becomes void as provided under sub:ection,.-, the proceedings with respect
to the matters covered by the settlement shall be deemed to have been revived from the stage at which
the application was allowed to be proceeded with by the ettlement Commission and the proper
officer having jurisdiction may, notwithstanding anything contained in any other provision of this
$ct, complete such proceedings at any time before the expiry of two years from the date of the receipt
of communication that the settlement became void.
0ection &,4D9 .o$er of 0ettlement Commission to order 6rovisional attac8ment to 6rotect
revenue9 2 ,1- Ghere, during the pendency of any proceeding before it, the ettlement Commission is
of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, it
may, by order, attach provisionally any property belonging to the applicant in such manner as may be
specified by rules.
,%- Every provisional attachment made by the ettlement Commission under sub:ection,1- shall
cease to have effect from the date the sums due to the Central )overnment for which such attachment
is made are discharged by the applicant and evidence to that effect is submitted to the ettlement
Commission.
0ection &,4E9 .o$er of 0ettlement Commission to reo6en com6leted 6roceedin:s9 2 If the
ettlement Commission is of the opinion ,the reasons for such opinion to be recorded by it in writing-
that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any
proceeding connected with the case but which has been completed under this $ct before application
for settlement under ection1%>; was made, it may, with the concurrence of the applicant, reopen
such proceeding and pass such order thereon as it thin3s fit, as if the case in relation to which the
application for settlement had been made by the applicant under that ectioncovered such proceeding
also 0
+rovided that no proceeding shall be reopened by the ettlement Commission under this ectionafter
the expiry of five years from the date of application under sub:ection,1- of ection1%>;.
+rovided further that no proceeding shall be reopened by the ettlement Commission under this
ectionin a case where an application under ection1%>; is made on or after the 1st day of Aune,
%66>.
0ection &,4A9 .o$er and 6rocedure of 0ettlement Commission9 2 ,1- In addition to the powers
conferred on the ettlement Commission under Chapter 8 of the Central Excise $ct, 14// ,1 of
221
14//-, it shall have all the powers which are vested in an officer of the customs under this $ct or the
rules made thereunder.
,%- Ghere an application made under ection1%>; has been allowed to be proceeded with under
ection1%>C, the ettlement Commission shall, until an order is passed under sub:ection(* of
ection1%>C, have, subject to the provisions of sub:ection(( of that section, exclusive jurisdiction
to exercise the powers and perform the functions of any officer of customs or Central Excise Bfficer
as the case may be, under this $ct or in the Central Excise $ct, 14// ,1 of 14//-, as the case may be,
in relation to the case.
,2or words N,>-N and N,&-N, the words N,'-N and N,/-N has been substituted by 2inance $ct %66> with
effect from the 1st day of Aune, %66>-
,=- In the absence of any express direction by the ettlement Commission to the contrary, nothing in
this Chapter shall affect the operation of the provisions of this $ct in so far as they relate to any
matter other than those before the ettlement Commission.
,/- The ettlement Commission shall, subject to the provisions of Chapter 8 of the Central Excise
$ct, 14// ,1 of 14//- and this Chapter, have power to regulate its own procedure and the procedure
of ;enches thereof in all matters arising out of the exercise of its powers, or of the discharge of its
functions, including the places at which the ;enches shall hold their sittings.
0ection &,4/9 Ins6ection% etc9% of re6orts9 2 7o person shall be entitled to inspect, or obtain copies
of, any report made by any officer of the Customs to the ettlement CommissionH but the ettlement
Commission may, in its discretion, furnish copies thereof to any such person on an application made
to it in this behalf and on payment of such fee as may be specified by rules 0
+rovided that, for the purpose of enabling any person whose case is under consideration to rebut any
evidence brought on record against him in any such report, the ettlement Commission shall, on an
application made in this behalf, and on payment by such person of such fee as may be specified by
rules, furnish him with a certified copy of any such report or part thereof relevant for the purpose.
0ection &,479 .o$er of 0ettlement Commission to :rant immunity from 6rosecution and
6enalty9 2 ,1- The ettlement Commission may, if it is satisfied that any person who made the
application for settlement under ection1%>; has co:operated with the ettlement Commission in the
proceedings before it and has made a full and true disclosure of his duty liability, grant to such person,
subject to such conditions as it may thin3 fit to impose, immunity from prosecution for any offence
under this $ct and also either wholly or in part from the imposition of any penalty and fine under this
$ct, with respect to the case covered by the settlement 0
+rovided that no such immunity shall be granted by the ettlement Commission in cases where the
proceedings for the prosecution for any such offence have been instituted before the date of receipt of
the application under ection1%>;.
Ex6lanation9V2or the removal of doubts, it is hereby declared that the application filed before the
ettlement Commission on or before the =1st day of @ay, %66> shall be disposed of as if the
amendment in this ectionhad not come into force.
,%- $n immunity granted to a person under sub:ection,1- shall stand withdrawn if such person fails
to pay any sum specified in the order of the settlement passed under sub:ection,'- of ection1%>C
within the time specified in such order, or fails to comply with any other condition subject to which
the immunity was granted and thereupon the provisions of this $ct shall apply as if such immunity
had not been granted.
,=- $n immunity granted to a person under sub:ection,1- may, at any time, be withdrawn by the
ettlement Commission, if it is satisfied that such person had, in the course of the settlement
222
proceedings, concealed any particulars, material to the settlement or had given false evidence, and
thereupon such person may be tried for the offence with respect to which the immunity was granted or
for any other offence of which he appears to have been guilty in connection with the settlement and
shall also become liable to the imposition of any penalty under this $ct to which such person would
have been liable, had no such immunity been granted.
0ection &,42I9 .o$er of 0ettlement Commission to send a case bac1 to t8e 6ro6er officer9 2 ,1-
The ettlement Commission may, if it is of opinion that any person who made an application for
settlement under ection1%>; has not co:operated with the ettlement Commission in the
proceedings before it, send the case bac3 to the proper officer who shall thereupon dispose of the case
in accordance with the provisions of this $ct as if no application under ection1%>; had been made.
,%- 2or the purpose of sub:ection,1-, the proper officer shall be entitled to use all the materials and
other information produced by the assessee before the ettlement Commission or the results of the
in1uiry held or evidence recorded by the ettlement Commission in the course of the proceedings
before it as if such materials, information, in1uiry and evidence had been produced before such proper
officer or held or recorded by him in the course of the proceedings before him.
,=- 2or the purposes of the time limit under ection%. and for the purposes of interest under
ection%.$$, in a case referred to in sub:ection,1-, the period commencing on and from the date of
the application to the ettlement Commission under ection1%>; and ending with the date of receipt
by the officer of customs of the order of the ettlement Commission sending the case bac3 to the
officer of customs shall be excluded.
0ection &,4M9 @rder of settlement to be conclusive9 2 Every order of settlement passed under sub:
ection(* of ection1%>C shall be conclusive as to the matters stated therein and no matter covered
by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under
this $ct or under any other law for the time being in force.
0ection &,4I9 +ecovery of sums due under order of settlement9 2 $ny sum specified in an order of
settlement passed under sub:ection,'- of ection1%>C may, subject to such conditions, if any, as
may be specified therein, be recovered, and any penalty for default in ma3ing payment of such sum
may be imposed and recovered as sums due to the Central )overnment in accordance with the
provisions of ection1/%, by the proper officer having jurisdiction over the applicant.
0ection &,4#9 "ar on subseOuent a66lication for settlement in certain cases9 2
(& Ghere, before the
&
UYYYL.:
,i- an order of settlement passed under sub:ection,>- of ection1%>C
,
Uas it stood immediately before
the commencement of ection16% of the 2inance $ct, %66> U%% of %66>.L or sub:ection,'- of
ection1%>CL provides for the imposition of a penalty on the applicant under ection1%>; for
settlement, on the ground of concealment of particulars of his duty liabilityH or
,ii- after the passing of an order of settlement under said sub:ection,>-
3
Uas it stood immediately
before the commencement of ection16% of the 2inance $ct, %66> U%% of %66>.L or sub:ection,'- of
ection1%>CL in relation to a case, such person is convicted of any offence under this $ct in relation
to that caseH or
,iii- the case of such person is sent bac3 to the proper officer by the ettlement Commission under
ection1%>:I,
then such person shall not be entitled to apply for settlement under ection1%>; in relation to any
other matter.
223
0ection &,459 .orceedin:s before 0ettlement Commission to be ?udicial 6roceedin:s9 2 $ny
proceedings under this Chapter before the ettlement Commission shall be deemed to be a judicial
proceeding within the meaning of sections 14= and %%., and for the purposes of ection14&, of the
Indian +enal Code ,/' of 1.&6-.
0ection &,4N9 A66lications of certain 6rovisions of Central Excise Act9 2 The provisions of
Chapter 8 of the Central Excise $ct, 14// ,1 of 14//- in so far as it is not inconsistent with the
provisions of this Chapter shall apply in relation to proceedings before the ettlement Commission
under this Chapter.
C7A.TE+ PV
A..EA#0 AND +EVI0I@N
0ection &,)9A66eals to Commissioner (A66eals9 2 ,1- $ny person aggrieved by any decision or
order passed under this $ct by an officer of customs lower in ran3 than a Commissioner of Customs
may appeal to the Commissioner ,$ppeals- within sixty days from the date of the communication to
him of such decision or order 0
+rovided that the Commissioner ,$ppeals- may, if he is satisfied that the appellant was prevented by
sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be
presented within a further period of thirty days.
,1$- The Commissioner ,$ppeals- may, if sufficient cause is shown at any stage of hearing of an
appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the
appeal for reasons to be recorded in writing 0
+rovided that no such adjournment shall be granted more than three times to a party during hearing of
the appeal.
,%- Every appeal under this section, shall be in such form and shall be verified in such manner as may
be specified by rules made in this behalf.
0ection &,)A9 .rocedure in a66eal9 2 ,1- The Commissioner ,$ppeals- shall give an opportunity to
the appellant to be heard if he so desires.
,%- The Commissioner ,$ppeals- may, at the hearing of an appeal, allow the appellant to go into any
ground of appeal not specified in the grounds of appeal, if the Commissioner ,$ppeals- is satisfied
that the omission of that ground from the grounds of appeal was not wilful or unreasonable.
,=- The Commissioner ,$ppeals- shall, after ma3ing such further in1uiry as may be necessary, pass
such order, as he thin3s just and proper, confirming, modifying or annulling the decision or order
appealed against 0H
+rovided that an order enhancing any penalty or fine in lieu of confiscation or confiscating goods of
greater value or reducing the amount of refund shall not be passed unless the appellant has been given
a reasonable opportunity of showing cause against the proposed order 0
+rovided further that where the Commissioner ,$ppeals- is of opinion that any duty has not been
levied or has been short:levied or erroneously refunded, no order re1uiring the appellant to pay any
duty not levied, short:levied or erroneously refunded shall be passed unless the appellant is given
notice within the time:limit specified in ection%. to show cause against the proposed order.
224
,/- The order of the Commissioner ,$ppeals- disposing of the appeal shall be in writing and shall
state the points for determination, the decision thereon and the reasons for the decision.
,/$- The Commissioner ,$ppeals- shall, where it is possible to do so, hear and decide every appeal
within a period of six months from the date on which it is filed.
,'- Bn the disposal of the appeal, the Commissioner ,$ppeals- shall communicate the order passed by
him to the appellant, the adjudicating authority , the Chief Commissioner of Customs and the
Commissioner of Customs.
0ection &,'9 A66ellate Tribunal9 2 ,1- The Central )overnment shall constitute an $ppellate
Tribunal to be called the Customs, Excise and ervice Tax $ppellate Tribunal consisting of as many
judicial and technical members as it thin3s fit to exercise the powers and discharge the functions
conferred on the $ppellate Tribunal by this $ct.
,%- $ judicial member shall be a person who has for at least ten years held a judicial office in the
territory of India or who has been a member of the Indian *egal ervice and has held a post in )rade I
of that service or any e1uivalent or higher post for at least three years, or who has been an advocate
for at least ten years.
Explanation. : 2or the purposes of this sub:section, :
,i- in computing the period during which a person has held judicial office in the territory of India,
there shall be included any period, after he has held any judicial office, during which the person has
been an advocate or has held the office of a member of a tribunal or any post, under the (nion or a
tate, re1uiring special 3nowledge of lawH
,ii- in computing the period during which a person has been an advocate, there shall be included any
period during which the person has held a judicial office, or the office of a member of a tribunal or
any post, under the (nion or a tate, re1uiring special 3nowledge of law after he became an advocate.
,%$- $ technical member shall be a person who has been a member of the Indian Customs and
Central Excise ervice, )roup $, and has held the post of Commissioner of Customs or Central
Excise or any e1uivalent or higher post for at least three years.
,=- The Central )overnment shall appoint K
,a- a person who is or has been a Audge of a 9igh CourtH or
,b- one of the members of the $ppellate Tribunal, to be the +resident thereof.
,/- The Central )overnment may appoint one or more members of the $ppellate Tribunal to be the
8ice:+resident, or, as the case may be, 8ice:+residents, thereof.
,/$- ::::::::::
,'- $ 8ice:+resident shall exercise such of the powers and perform such of the functions of the
+resident as may be delegated to him by the +resident by a general or special order in writing.
,&- Bn ceasing to hold office, the +resident, 8ice:+resident or other @ember shall not be entitled to
appear, act or plead before the $ppellate Tribunal.
0ection &,'A9 A66eals to t8e A66ellate Tribunal9 2 ,1- $ny person aggrieved by any of the
following orders may appeal to the $ppellate Tribunal against such order :
,a- a decision or order passed by the Commissioner of Customs as an adjudicating authorityH
,b- an order passed by the Commissioner ,$ppeals- under ection1%.$H
225
,c- an order passed by the ;oard or the $ppellate Commissioner of Customs under ection1%., as it
stood immediately before the appointed dayH
,d- an order passed by the ;oard or the Commissioner of Customs, either before or after the appointed
day, under ection1=6, as it stood immediately before that day 0
+rovided that no appeal shall lie to the $ppellate Tribunal and the $ppellate Tribunal shall not have
jurisdiction to decide any appeal in respect of any order referred to in clause ,b- if such order relates
to, :
,a- any goods imported or exported as baggageH
,b- any goods loaded in a conveyance for importation into India, but which are not unloaded at their
place of destination in India, or so much of the 1uantity of such goods as has not been unloaded at any
such destination if goods unloaded at such destination are short of the 1uantity re1uired to be
unloaded at that destinationH
,c- payment of drawbac3 as provided in Chapter M, and the rules made thereunder 0
+rovided further that the $ppellate Tribunal may, in its discretion, refuse to admit an appeal in respect
of an order referred to in clause ,b- or clause ,c- or clause ,d- where :
,i- the value of the goods confiscated without option having been given to the owner of the goods to
pay a fine in lieu of confiscation under ection1%'H or
,ii- in any disputed case, other than a case where the determination of any 1uestion having a relation
to the rate of duty of customs or to the value of goods for purposes of assessment is in issue or is one
of the points in issue, the difference in duty involved or the duty involvedH or
,iii- the amount of fine or penalty determined by such order, does not exceed fifty thousand rupees.
,1$- Every appeal against any order of the nature referred to in the first proviso to sub:ection,1-,
which is pending immediately before the commencement of ection/6 of the 2inance $ct, 14./,
before the $ppellate Tribunal and any matter arising out of or connected with such appeal and which
is so pending shall stand transferred on such commencement to the Central )overnment and the
Central )overnment shall deal with such appeal or matter under ection1%4<< as if such appeal or
matter were an application or a matter arising out of an application made to it under that section.
,1;- ,i- The ;oard may, by notification in the Bfficial )a?ette, constitute such Committees as may
be necessry for the purposes of this $ct.
,ii- Every Committee constituted under clause ,i- shall consist of two Chief Commissioners of
Customs or two Commissioners of Customs, as the case may be.
,%- The Committee of Commissioners of Customs may, if it is of opinion that an order passed by the
$ppellate Commissioner of Customs under ection1%., as it stood immediately before the appointed
day, or by the Commissioner ,$ppeals- under ection1%.$, is not legal or proper, direct the proper
officer to appeal on its behalf to the $ppellate Tribunal against such order.
.rovided t8at where the Committee of Commissioners of Customs differs in its opinion regarding
the appeal against the order of the Commissioner ,$ppeals-, it shall state the point or points on which
it differs and ma3e a reference to the jurisdictional Chief Commissioner of Customs who shall, after
considering the facts of the order, if is of the opinion that the order passed by the Commissioner
,$ppeals- is not legal or proper, direct the proper officer to appeal to the $ppellate Tribunal against
such order.
Explanation9V2or the purposes of this sub:section, Njurisdictional Chief CommissionerN means the
Chief Commissioner of Customs having jurisdiction over the adjudicating authority in the matter9
226
,=- Every appeal under this ectionshall be filed within three months from the date on which the order
sought to be appealed against is communicated to the Commissioner of Customs, or as the case may
be, the other party preferring the appeal.
,/- Bn receipt of notice that an appeal has been preferred under this section, the party against whom
the appeal has been preferred may, notwithstanding that he may not have appealed against such order
or any part thereof, file, within forty:five days of the receipt of the notice, a memorandum of cross:
objections verified in such manner as may be specified by rules made in this behalf against any part of
the order appealed against and such memorandum shall be disposed of by the $ppellate Tribunal as if
it were an appeal presented within the time specified in sub:ection,=-.
,'- The $ppellate Tribunal may admit an appeal or permit the filing of a memorandum of cross:
objections after the expiry of the relevant period referred to in sub:ection,=- or sub:ection,/-, if it is
satisfied that there was sufficient cause for not presenting it within that period.
,&- $n appeal to the $ppellate Tribunal shall be in such form and shall be verified in such manner as
may be specified by rules made in this behalf and shall, irrespective of the date of demand of duty
and interest or of levy of penalty in relation to which the appeal is made, be accompanied by a fee of,
K
,a- where the amount of duty and interest demanded and penalty levied by any officer of customs in
the case to which the appeal relates is five la3h rupees or less, one thousand rupeesH
,b- where the amount of duty and interest demanded and penalty levied by any officer of customs in
the case to which the appeal relates is more than five la3h rupees but not exceeding fifty la3h rupees,
five thousand rupeesH
,c- where the amount of duty and interest demanded and penalty levied by any officer of customs in
the case to which the appeal relates is more than fifty la3h rupees, ten thousand rupees 0
+rovided that no such fee shall be payable in the case of an appeal referred to in sub:ection,%- or a
memorandum of cross:objections referred to in sub:ection,/-.
,>- Every application made before the $ppellate Tribunal, K
,a- in an appeal for grant of stay or for rectification of mista3e or for any other purposeH or
,b- for restoration of an appeal or an application, shall be accompanied by a fee of five hundred rupees
0
.rovided t8at no such fee shall be payable in the case of an application filed by or on behalf of the
Commissioner of Customs under this sub:section.
0ection &,'"9 @rders of A66ellate Tribunal9 2 ,1- The $ppellate Tribunal may, after giving the
parties to the appeal, an opportunity of being heard, pass such orders thereon as it thin3s fit,
confirming, modifying or annulling the decision or order appealed against or may refer the case bac3
to the authority which passed such decision or order with such directions as the $ppellate Tribunal
may thin3 fit, for a fresh adjudication or decision, as the case may be, after ta3ing additional evidence,
if necessary.
,1$- The $ppellate Tribunal may, if sufficient cause is shown, at any stage of hearing of an appeal,
grant time to the parties or any of them and adjourn the hearing of the appeal for reasons to be
recorded in writing 0
+rovided that no such adjournment shall be granted more than three times to a party during hearing of
the appeal.
227
,%- The $ppellate Tribunal may, at any time within six months from the date of the order, with a view
to rectifying any mista3e apparent from the record, amend any order passed by it under sub:ection,1-
and shall ma3e such amendments if the mista3e is brought to its notice by the Commissioner of
Customs or the other party to the appeal 0
+rovided that an amendment which has the effect of enhancing the assessment or reducing a refund or
otherwise increasing the liability of the other party shall not be made under this sub:section, unless
the $ppellate Tribunal has given notice to him of its intention to do so and has allowed him a
reasonable opportunity of being heard.
,%$- The $ppellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a
period of three years from the date on which such appeal is filed 0
+rovided that where an order of stay is made in any proceeding relating to an appeal filed under sub:
ection,1- of ection1%4$, the $ppellate Tribunal shall dispose of the appeal within a period of one
hundred and eighty days from the date of such order 0
+rovided further that if such appeal is not disposed of within the period specified in the first proviso,
the stay order shall, on the expiry of that period, stand vacated.
,=- The $ppellate Tribunal shall send a copy of every order passed under this ectionto the
Commissioner of Customs and the other party to the appeal.
,/- ave as otherwise provided in ection1=6 or ection1=6E, orders passed by the $ppellate
Tribunal on appeal shall be final.
0ection &,'C9 .rocedure of A66ellate Tribunal9 2 ,1- The powers and functions of the $ppellate
Tribunal may be exercised and discharged by ;enches constituted by the +resident from amongst the
members thereof.
,%- ubject to the provisions contained in sub:ection,/-, a ;ench shall consist of one judicial
member and one technical member.
,=- :::::::::
,/- The +resident or any other member of the $ppellate Tribunal authorised in this behalf by the
+resident may, sitting singly, dispose of any case which has been allotted to the ;ench of which he is
a member where :
,a- the value of the goods confiscated without option having been given to the owner of the goods to
,b- in any disputed case, other than a case where the determination of any 1uestion having a relation
,c- the amount of fine or penalty involved, does not exceed ten la3hs rupees.
,'- If the members of a ;ench differ in opinion on any point, the point shall be decided according to
the opinion of the majority, if there is a majorityH but if the members are e1ually divided, they shall
state the point or points on which they differ and ma3e a reference to the +resident who shall either
hear the point or points himself or refer the case for hearing on such point or points by one or more of
the other members of the $ppellate Tribunal and such point or points shall be decided according to
the opinion of the majority of these members of the $ppellate Tribunal who have heard the case,
including those who first heard it.
,&- ubject to the provisions of this $ct, the $ppellate Tribunal shall have power to regulate its own
procedure and the procedure of the ;enches thereof in all matters arising out of the exercise of its
228
powers or of the discharge of its functions, including the places at which the ;enches shall hold their
sittings.
,>- The $ppellate Tribunal shall, for the purposes of discharging its functions, have the same powers
as are vested in a court under the Code of Civil +rocedure, 146. ,' of 146.-, when trying a suit in
respect of the following matters, namely 0:
,a- discovery and inspectionH
,b- enforcing the attendance of any person and examining him on oathH
,c- compelling the production of boo3s of account and other documentsH and
,d- issuing commissions.
,.- $ny proceeding before the $ppellate Tribunal shall be deemed to be a judicial proceeding within
the meaning of sections 14= and %%. and for the purpose of ection14& of the Indian +enal Code ,/'
of 1.&6-, and the $ppellate Tribunal shall be deemed to be a Civil Court for all the purposes of
ection14' and Chapter MM8I of the Code of Criminal +rocedure, 14>= ,% of 14>/-.
0ection &,'D9 .o$ers of Committee of C8ief Commissioners of Customs or Commissioner of
Customs to 6ass certain orders9 2
,1- The Committee of Chief Commissioners of Customs may, of its own motion, call for and examine
the record of any proceeding in which a Commissioner of Customs as an adjudicating authority has
passed any decision or order under this $ct for the purpose of satisfying itself as to the legality or
propriety of any such decision or order and may, by order, direct such Commissioner or any other
Commissioner to apply to the $ppellate Tribunal for the determination of such points arising out of
the decision or order as may be specified by the Committee of Chief Commissioners of Customs in
its order.
.rovided t8at where the Committee of Chief Commissioners of Customs differs in its opinion as to
the legality or propriety of the decision or order of the Commissioner of Customs, it shall state the
point or points on which it differs and ma3e a reference to the ;oard which, after considering the facts
of the decision or order passed by the Commissioner of Customs, if is of the opinion that the decision
or order passed by the Commissioner of Customs is not legal or proper, may, by order, direct such
Commissioner or any other Commissioner to apply to the $ppellate Tribunal for the determination of
such points arising out of the decision or order, as may be specified in its order.
,%- The Commissioner of Customs may, of his own motion, call for and examine the record of any
proceeding in which an adjudicating authority subordinate to him has passed any decision or order
under this $ct for the purpose of satisfying himself as to the legality or propriety of any such decision
or order and may, by order, direct such authority or any officer of Customs subordinate to him to
apply to the Commissioner ,$ppeals- for the determination of such points arising out of the decision
or order as may be specified by the Commissioner of Customs in his order.
,=- Every order under sub:ection,1- or sub:ection,%-, as the case may be, shall be made within a
period of three months from the date of communication of the decision or order of the adjudicating
authority.
,/- Ghere in pursuance of an order under sub:ection,1- or sub:ection,%-, the adjudicating authority
or any officer of customs authorised in this behalf by the Commissioner of Customs, ma3es an
application to the $ppellate Tribunal or the Commissioner ,$ppeals- within a period of

one mont8
from the date of communication of the order under sub:ection,1- or sub:ection,%- to the
adjudicating authority, such application shall be heard by the $ppellate Tribunal or the Commissioner
,$ppeals-, as the case may be, as if such application were an appeal made against the decision or
229
order of the adjudicating authority and the provisions of this $ct regarding appeals, including the
provisions of sub:ection,/- of ection1%4$ shall, so far as may be, apply to such application.
0ection &,'DD9 +evision by Central /overnment9 2 ,1- The Central )overnment may, on the
application of any person aggrieved by any order passed under ection1%.$, where the order is of the
nature referred to in the first proviso to sub:ection,1- of ection1%4$, annul or modify such order.
+rovided that the Central )overnment may in its discretion, refuse to admit an application in respect
of an order where the amount of duty or fine or penalty, determined by such order does not exceed
five thousand rupees.
Explanation. : 2or the purposes of this sub:section, Norder passed under ection1%.$N includes an
order passed under that ectionbefore the commencement of ection/6 of the 2inance $ct, 14./,
against which an appeal has not been preferred before such commencement and could have been, if
the said ectionhad not come into force, preferred after such commencement, to the $ppellate
Tribunal.
,1$- The Commissioner of Customs may, if he is of the opinion that an order passed by the
Commissioner ,$ppeals- under ection1%.$ is not legal or proper, direct the proper officer to ma3e
an application on his behalf to the Central )overnment for revision of such order.
,%- $n application under sub:ection,1- shall be made within three months from the date of the
communication to the applicant of the order against which the application is being made 0
+rovided that the Central )overnment may, if it is satisfied that the applicant was prevented by
sufficient cause from presenting the application within the aforesaid period of three months, allow it
to be presented within a further period of three months.
,=- $n application under sub:ection,1- shall be in such form and shall be verified in such manner as
may be specified by rules made in this behalf and shall be accompanied by a fee of, :
,a- two hundred rupees, where the amount of duty and interest demanded, fine or penalty levied by an
officer of customs in the case to which the application relates is one la3h rupees or lessH
,b- one thousand rupees, where the amount of duty and interest demanded, fine or penalty levied by
an officer of customs in the case to which the application relates is more than one la3h rupees 0
+rovided that no such fee shall be payable in the case of an application referred to in sub:ection,1$-.
,/- The Central )overnment may, of its own motion, annul or modify any order referred to in sub:
ection,1-.
,'- 7o order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater
value shall be passed under this section, :
,a- in any case in which an order passed under ection1%.$ has enhanced any penalty or fine in lieu
of confiscation or has confiscated goods of greater value, and
,b- in any other case, unless the person affected by the proposed order has been given notice to show
cause against it within one year from the date of the order sought to be annulled or modified.
,&- Ghere the Central )overnment is of opinion that any duty of customs has not been levied or has
been short:levied, no order levying or enhancing the duty shall be made under this ectionunless the
person affected by the proposed order is given notice to show cause against it within the time limit
specified in ection%..
0ection &,'E9 De6osit% 6endin: a66eal% of duty and interest demanded or 6enalty levied9 2 Ghere
in any appeal under this Chapter, the decision or order appealed against relates to any duty and
230
interest demanded in respect of goods which are not under the control of the customs authorities or
any penalty levied under this $ct, the person desirous of appealing against such decision or order
shall, pending the appeal, deposit with the proper officer the duty and interest demanded or the
penalty levied 0
+rovided that where in any particular case, the Commissioner ,$ppeals- or the $ppellate Tribunal is
of opinion that the deposit of duty and interest demanded or penalty levied would cause undue
hardship to such person, the Commissioner ,$ppeals- or, as the case may be, the $ppellate Tribunal
may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to
safeguard the interests of revenue 0
+rovided further that where an application is filed before the Commissioner ,$ppeals- for dispensing
with the deposit of duty and interest demanded or penalty levied under the first proviso, the
Commissioner ,$ppeals- shall, where it is possible to do so, decide such application within thirty days
from the date of its filing.
0ection &,'EE9 : Interest on delayed refund of amount de6osited under t8e 6roviso to
0ection&,'E9 Ghere an amount deposited by the appellant in pursuance of an order passed by the
Commissioner ,$ppeals- or the $ppellate Tribunal ,hereinafter referred to as appellate authority-,
under the first proviso to ection1%4E, is re1uired to be refunded conse1uent upon the order of the
appellate authority and such amount is not refunded within three months from the date of
communication of such order to the adjudicating authority, unless the operation of the order of the
appellate authority is stayed by a superior court or tribunal, there shall be paid to the appellant
interest at the rate specified in ection%>$ after the expiry of three months from the date of
communication of the order of the appellate authority, till the date of refund of such amount.
0ection &3-9 A66eal to 7i:8 Court9 2 ,1- $n appeal shall lie to the 9igh Court from every order
passed in appeal by the $ppellate Tribunal on or after the 1st day of Auly, %66= ,not being an order
relating, among other things, to the determination of any 1uestion having a relation to the rate of duty
of customs or to the value of goods for the purposes of assessment-, if the 9igh Court is satisfied that
the case involves a substantial 1uestion of law.
,%- The Commissioner of Customs or the other party aggrieved by any order passed by the $ppellate
Tribunal may file an appeal to the 9igh Court and such appeal under this sub:ectionshall be :
,a- filed within one hundred and eighty days from the date on which the order appealed against is
received by the Commissioner of Customs or the other partyH
,b- accompanied by a fee of two hundred rupees where such appeal is filed by the other partyH
,c- in the form of a memorandum of appeal precisely stating therein the substantial 1uestion of
law involved.
,%$- The 9igh Court may admit an appeal after the expiry of the period of one hundred and eighty
days referred to in clause ,a- of sub:ection,%-, if it is satisfied that there was sufficient cause for not
filing the same within that period.
,=- Ghere the 9igh Court is satisfied that a substantial 1uestion of law is involved in any case, it shall
formulate that 1uestion.
,/- The appeal shall be heard only on the 1uestion so formulated, and the respondents shall, at the
hearing of the appeal, be allowed to argue that the case does not involve such 1uestion 0
231
+rovided that nothing in this sub:ectionshall be deemed to ta3e away or abridge the power of the
Court to hear, for reasons to be recorded, the appeal on any other substantial 1uestion of law not
formulated by it, if it is satisfied that the case involves such 1uestion.
,'- The 9igh Court shall decide the 1uestion of law so formulated and deliver such judgment thereon
containing the grounds on which such decision is founded and may award such cost as it deems fit.
,&- The 9igh Court may determine any issue which :
,a- has not been determined by the $ppellate TribunalH or
,b- has been wrongly determined by the $ppellate Tribunal, by reason of a decision on such
1uestion of law as is referred to in sub:ection,1-.
,>- Ghen an appeal has been filed before the 9igh Court, it shall be heard by a bench of not less than
two Audges of the 9igh Court, and shall be decided in accordance with the opinion of such Audges or
of the majority, if any, of such Audges.
,.- Ghere there is no such majority, the Audges shall state the point of law upon which they differ and
the case shall, then, be heard upon that point only by one or more of the other Audges of the 9igh
Court and such point shall be decided according to the opinion of the majority of the Audges who have
heard the case including those who first heard it.
,4- ave as otherwise provided in this $ct, the provisions of the Code of Civil +rocedure, 146. ,' of
146.- relating to appeals to the 9igh Court shall, as far as may be, apply in the case of appeals under
this section.
0ection &3-A9 A66lication to 7i:8 Court9 2 ,1- The Commissioner of Customs or the other party
may, within one hundred and eighty days of the date upon which he is served with notice of an order
under ection1%4; passed before the 1st day of Auly, %66= ,not being an order relating, among other
things, to the determination of any 1uestion having a relation to the rate of duty of customs or to the
value of goods for purposes of assessment-, by application in the prescribed form, accompanied,
where the application is made by the other party, by a fee of two hundred rupees, apply to the 9igh
Court to direct the $ppellate Tribunal to refer to the 9igh Court any 1uestion of law arising from such
order of the Tribunal.
,%- The Commissioner of Customs or the other party applying to the 9igh Court under sub:ection,1-
shall clearly state the 1uestion of law which he see3s to be referred to the 9igh Court and shall also
specify the paragraph in the order of the $ppellate Tribunal relevant to the 1uestion sought to be
referred.
,=- Bn receipt of notice that an application has been made under sub:ection,1-, the person against
whom such application has been made, may, notwithstanding that he may not have filed such
application, file, within forty:five days of the receipt of the notice, a memorandum of cross:objections
verified in the prescribed manner against any part of the order in relation to which an application for
reference has been made and such memorandum shall be disposed of by the 9igh Court as if it were
an application presented within the time specified in sub:ection,1-.
,=$- The 9igh Court may admit an application or permit the filing of a memorandum of cross:
objections after the expiry of the relevant period referred to in sub:ection,1- or sub:ection,=-, if it is
satisfied that there was sufficient cause for not filing the same within that period.
,/- If, on an application made under sub:ection,1-, the 9igh Court directs the $ppellate Tribunal to
refer the 1uestion of law raised in the application, the $ppellate Tribunal shall, within one hundred
and twenty days of the receipt of such direction, draw up a statement of the case and refer it to the
9igh Court.
232
0ection &3-"9 .o$er of 7i:8 Court or 0u6reme Court to reOuire statement to be amended9 2 If
the 9igh Court or the upreme Court is not satisfied that the statements in a case referred to it are
sufficient to enable it to determine the 1uestions raised thereby, the Court may refer the case bac3 to
the $ppellate Tribunal for the purpose of ma3ing such additions thereto or alterations therein as it
may direct in that behalf.
0ection &3-C9 Case before 7i:8 Court to be 8eard by not less t8an t$o ?ud:es9 2 ,1- Ghen any
case has been referred to the 9igh Court under ection1=6 or ection1=6$ it shall be heard by a
;ench of not less than two judges of the 9igh Court and shall be decided in accordance with the
opinion of such judges or of the majority, if any, of such judges.
,%- Ghere there is no such majority, the judges shall state the point of law upon which they differ and
the case shall then be heard upon that point only by one or more of the other judges of the 9igh Court,
and such point shall be decided according to the opinion of the majority of the judges who have heard
the case including those who first heard it.
0ection &3-D9 Decision of 7i:8 Court or 0u6reme Court on t8e case stated9 2 ,1- The 9igh Court
or the upreme Court hearing any such case shall decide the 1uestions of law raised therein, and shall
deliver its judgment thereon containing the grounds on which such decision is founded and a copy of
the judgment shall be sent under the seal of the Court and the signature of the 5egistrar to the
$ppellate Tribunal which shall pass such orders as are necessary to dispose of the case in conformity
with such judgment.
,1$- Ghere the 9igh Court delivers a judgment in an appeal filed before it under ection1=6, effect
shall be given to the order passed on the appeal by the proper officer on the basis of a certified copy
of the judgment.
,%- The costs of any reference to the 9igh Court or an appeal to the 9igh Court or the upreme Court
as the case may be which shall not include the fee for ma3ing the reference shall be in the discretion
of the Court.
0ection &3-E9 A66eal to 0u6reme Court9 2 $n appeal shall lie to the upreme Court from :
,a- any judgment of the 9igh Court delivered :
,i- in an appeal made under ection1=6H or
,ii- on a reference made under ection1=6 by the $ppellate Tribunal before the 1st day of Auly, %66=H
,iii- on a reference made under ection1=6$,
in any case which, on its own motion or on an oral application made by or on behalf of the party
aggrieved, immediately after passing of the judgment, the 9igh Court certifies to be a fit one for
appeal to the upreme CourtH or
,b- any order passed before the establishment of the 7ational Tax Tribunal by the $ppellate Tribunal
relating, among other things, to the determination of any 1uestion having a relation to the rate of duty
of customs or to the value of goods for purposes of assessment.
0ection &3-A9 7earin: before 0u6reme Court9 2 ,1- The provisions of the Code of Civil +rocedure,
146. ,' of 146.-, relating to appeals to the upreme Court shall, so far as may be, apply in the case of
appeals under ection1=6E as they apply in the case of appeals from decrees of a 9igh Court 0
+rovided that nothing in this sub:ectionshall be deemed to affect the provisions of sub:ection,1- of
ection1=6< or ection1=1.
,%- The costs of the appeal shall be in the discretion of the upreme Court.
233
,=- Ghere the judgment of the 9igh Court is varied or reversed in the appeal, effect shall be given to
the order of the upreme Court in the manner provided in ection1=6< in the case of a judgment of
the 9igh Court.
0ection &3&9 0ums due to be 6aid not$it8standin: reference% etc9 V 7otwithstanding that a
reference has been made to the 9igh Court or the upreme Court or an appeal has been preferred to
the upreme Court, under this $ct before the commencement of the 7ational Tax Tribunal $ct, %66'
sums due to the )overnment as a result of an order passed under sub:ection,1- of ection1%4; shall
be payable in accordance with the order so passed.
0ection &3&A9 Exclusion of time ta1en for co6y9 2 In computing the period of limitation specified
for an appeal or application under this Chapter, the day on which the order complained of was served,
and if the party preferring the appeal or ma3ing the application was not furnished with a copy of the
order when the notice of the order was served upon him, the time re1uisite for obtaining a copy of
such order shall be excluded.
0ection &3&"9 Transfer of certain 6endin: 6roceedin:s and transitional 6rovisions9 2 ,1- Every
appeal which is pending immediately before the appointed day before the ;oard under ection1%., as
it stood immediately before that day, and any matter arising out of or connected with such appeal and
which is so pending shall stand transferred on that day to the $ppellate Tribunal and the $ppellate
Tribunal may proceed with such appeal or matter from the stage at which it was on that day 0
+rovided that the appellant may demand that before proceeding further with that appeal or matter, he
may be re:heard.
,%- Every proceeding which is pending immediately before the appointed day before the Central
)overnment under ection1=1, as it stood immediately before that day, and any matter arising out of
or connected with such proceeding and which is so pending shall stand transferred on that day to the
$ppellate Tribunal and the $ppellate Tribunal may proceed with such proceeding or matter from the
stage at which it was on that day as if such proceeding or matter were an appeal filed before it 0
+rovided that if any such proceeding or matter relates to an order where :
,a- the value of the goods confiscated without option having been given to the owner of the goods to
,b- in any disputed case, other than a case where the determination of any 1uestion having a relation
,c- the amount of fine or penalty determined by such order,
does not exceed ten thousand rupees, such proceeding or matter shall continue to be dealt with by the
Central )overnment as if the said ection1=1 had not been substituted 0
+rovided further that the applicant or the other party may ma3e a demand to the $ppellate Tribunal
that before proceeding further with that proceeding or matter, he may be re:heard.
,=- Every proceeding which is pending immediately before the appointed day before the ;oard or the
Commissioner of Customs under ection1=6, as it stood immediately before that day, and any matter
arising out of or connected with such proceeding and which is so pending shall continue to be dealt
with by the ;oard or the Commissioner of Customs, as the case may be, as if the said ectionhad not
been substituted.
,/- $ny person who immediately before the appointed day was authorised to appear in any appeal or
proceeding transferred under sub:ection,1- or sub:ection,%- shall, notwithstanding anything
234
contained in ection1/&$, have the right to appear before the $ppellate Tribunal in relation to such
appeal or proceeding.
0ection &3&"A9 A66eal not to be filed in certain cases9
,1- The ;oard may, from time to time, issue orders or instructions or directions fixing such monetary
limits, as it may deem fit, for the purposes of regulating the filing of appeal, application, revision or
reference by the Commissioner of Customs under the provisions of this Chapter.
,%- Ghere, in pursuance of the orders or instructions or directions, issued under sub:ection,1-, the
Commissioner of Customs has not filed an appeal, application, revision or reference against any
decision or order passed under the provisions of this $ct, it shall not preclude such Commissioner of
Customs from filing any appeal, application, revision or reference in any other case involving the
same or similar issues or 1uestions of law.
,=- 7otwithstanding the fact that no appeal, application, revision or reference has been filed by the
Commissioner of Customs pursuant to the orders or instructions or directions issued under sub:
ection,1-, no person, being a party in appeal, application, revision or reference shall contend that the
Commissioner of Customs has ac1uiesced in the decision on the disputed issue by not filing appeal,
application, revision or reference.
,/- The $ppellate Tribunal or court hearing an appeal, application, revision or reference shall have
regard to the circumstances under which the appeal, application, revision or reference was not filed by
the Commissioner of Customs in pursuance of orders or instructions or directions issued under sub:
ection,1-.
,'- Every order or instruction or direction issued by the ;oard on or after the %6th day of Bctober,
%616, but before the date on which the 2inance ;ill, %611 receives the assent of the +resident, fixing
monetary limits for filing appeal, application, revision or reference shall be deemed to have been
issued under sub:ection,1-, and the provisions of sub:sections ,%-, ,=- and ,/- shall apply
accordingly.
0ection &3&C9 Definitions9 2 In this Chapter :
,a- Nappointed dayN means the date of coming into force of the amendments to this $ct specified in
+art I of the 2ifth chedule to the 2inance ,7o. %- $ct, 14.6 ,// of 14.6- H
,b- N9igh CourtN means,:
,i- in relation to any tate, the 9igh Court for that tateH
,ii- in relation to a (nion territory to which the jurisdiction of the 9igh Court of a tate has been
extended by law, that 9igh CourtH
,iii- in relation to the (nion territories of <adra and 7agar 9aveli and <aman and <iu, the 9igh
Court at ;ombayH
,ivin relation to any other (nion territory, the highest court of civil appeal for that territory other
than the upreme Court of IndiaH
,c- N+residentN means the +resident of the $ppellate Tribunal.
C7A.TE+ PVI
@AAENCE0 AND .+@0ECJTI@N0
0ection &3,9 Aalse declaration% false documents% etc9 2 Ghoever ma3es, signs or uses, or causes to
be made, signed or used, any declaration, statement or document in the transaction of any business
235
relating to the customs, 3nowing or having reason to believe that such declaration, statement or
document is false in any material particular, shall be punishable with imprisonment for a term which
may extend to two years, or with fine, or with both.
0ection &339 @bstruction of officer of customs9 2 If any person intentionally obstructs any officer of
customs in the exercise of any powers conferred under this $ct, such person shall be punishable with
imprisonment for a term which may extend to two years, or with fine, or with both.
0ection &3(9 +efusal to be P2rayed9 2If any person:
,a- resists or refuses to allow a radiologist to screen or to ta3e M:ray picture of his body in accordance
with an order made by a @agistrate under ection16=, or
,b- resists or refuses to allow suitable action being ta3en on the advice and under the supervision of a
registered medical practitioner for bringing out goods liable to confiscation secreted inside his body,
as provided in ection16=, he shall be punishable with imprisonment for a term which may extend to
six months, or with fine, or with both.
0ection &3*9 Evasion of duty or 6ro8ibitions9 ,1- Githout prejudice to any action that may be ta3en
under this $ct, if any personK
,a- is in relation to any goods in any way 3nowingly concerned in misdeclaration of value or in any
fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the
time being imposed under this $ct or any other law for the time being in force with respect to such
goodsH or
,b- ac1uires possession of or is in any way concerned in carrying, removing, depositing, harbouring,
3eeping, concealing, selling or purchasing or in any other manner dealing with any goods which he
3nows or has reason to believe are liable to confiscation under ection111 or ection11=, as the case
may beH or
,c- attempts to export any goods which he 3nows or has reason to believe are liable to confiscation
under ection11=H or
,d- fraudulently avails of or attempts to avail of drawbac3 or any exemption from duty provided under
this $ct in connection with export of goods, he shall be punishable, K
,i- in the case of an offence relating to,K
,$- any goods the mar3et price of which exceeds one crore of rupeesH or
,;- the evasion or attempted evasion of duty exceeding thirty la3h of rupeesH or
,C- such categories of prohibited goods as the Central )overnment may, by notification in the Bfficial
)a?ette, specifyH or
,<- fraudulently availing of or attempting to avail of drawbac3 or any exemption from duty referred
to in clause ,d-, if the amount of drawbac3 or exemption from duty exceeds thirty la3h of rupees, with
imprisonment for a term which may extend to seven years and with fine0
+rovided that in the absence of special and ade1uate reasons to the contrary to be recorded in the
judgment of the court, such imprisonment shall not be for less than one yearH
,ii- in any other case, with imprisonment for a term which may extend to three years, or with fine, or
with both.
,%- If any person convicted of an offence under this ectionor under sub:ection,1- of ection1=& is
again convicted of an offence under this section, then, he shall be punishable for the second and for
236
every subse1uent offence with imprisonment for a term which may extend to seven years and with
fine 0
+rovided that in the absence of special and ade1uate reasons to the contrary to be recorded in the
judgment of the court such imprisonment shall not be for less than one year.
,=- 2or the purposes of sub:sections ,1- and ,%-, the following shall not be considered as special and
ade1uate reasons for awarding a sentence of imprisonment for a term of less than one year, namely 0:
,i- the fact that the accused has been convicted for the first time for an offence under this $ctH
,ii- the fact that in any proceeding under this $ct, other than a prosecution, the accused has been
ordered to pay a penalty or the goods which are the subject matter of such proceedings have been
ordered to be confiscated or any other action has been ta3en against him for the same act which
constitutes the offenceH
,iii- the fact that the accused was not the principal offender and was acting merely as a carrier of
goods or otherwise was a secondary party to the commission of the offenceH
,iv- the age of the accused.
0ection &3*A9 .re6aration9 2 If a person ma3es preparation to export any goods in contravention of
the provisions of this $ct, and from the circumstances of the case it may be reasonably inferred that if
not prevented by circumstances independent of his will, he is determined to carry out his intention to
commit the offence, he shall be punishable with imprisonment for a term which may extend to three
years, or with fine, or with both.
0ection &3*" .o$er of court to 6ublis8 name% 6lace of business% etc9% of 6ersons convicted under
t8e Act9 2 ,1- Ghere any person is convicted under this $ct for contravention of any of the provisions
thereof, it shall be competent for the court convicting the person to cause the name and place of
business or residence of such person, nature of the contravention, the fact that the person has been so
convicted and such other particulars as the court may consider to be appropriate in the circumstances
of the case, to be published at the expense of such person in such newspapers or in such manner as the
court may direct.
,%- 7o publication under sub:ection,1- shall be made until the period for preferring an appeal against
the orders of the court has expired without any appeal having been preferred, or such an appeal,
having been preferred, has been disposed of.
,=- The expenses of any publication under sub:ection,1- shall be recoverable from the convicted
person as if it were a fine imposed by the court.
0ection &3D9 @ffences by officers of customs9 2 ,1- If any officer of customs enters into or
ac1uiesces in any agreement to do, abstains from doing, permits, conceals or connives at any act or
thing, whereby any fraudulent export is effected or any duty of customs leviable on any goods, or any
prohibition for the time being in force under this $ct or any other law for the time being in force with
respect to any goods is or may be evaded, he shall be punishable with imprisonment for a term which
may extend to three years, or with fine, or with both.
,%- If any officer of customs, :
,a- re1uires any person to be searched for goods liable to confiscation or any document relating
thereto, without having reason to believe that he has such goods or document secreted about his
personH or
,b- arrests any person without having reason to believe that he has been guilty of an offence
punishable under ection1='H or
237
,c- searches or authorises any other officer of customs to search any place without having reason to
believe that any goods, documents or things of the nature referred to in ection16' are secreted in that
place, he shall be punishable with imprisonment for a term which may extend to six months, or with
fine which may extend to one thousand rupees, or with both.
,=- If any officer of customs, except in the discharge in good faith of his duty as such officer or in
compliance with any re1uisition made under any law for the time being in force, discloses any
particulars learnt by him in his official capacity in respect of any goods, he shall be punishable with
imprisonment for a term which may extend to six months, or with fine which may extend to one
thousand rupees, or with both.
0ection &349 Co:niRance of offences9 2 ,1- 7o court shall ta3e cogni?ance of any offence under
ection1=%, ection1==, ection1=/ or ection1=' or ection1='$, except with the previous sanction
of the Commissioner of Customs.
,%- 7o court shall ta3e cogni?ance of any offence under ection1=&, :
,a- where the offence is alleged to have been committed by an officer of customs not lower in ran3
than $ssistant Commissioner of Customs, except with the previous sanction of the Central
)overnmentH
,b- where the offence is alleged to have been committed by an officer of customs lower in ran3 than
$ssistant Commissioner of Customs except with the previous sanction of the Commissioner of
Customs.
,=- $ny offence under this Chapter may, either before or after the institution of prosecution, be
compounded by the Chief Commissioner of Customs on payment, by the person accused of the
offence to the Central )overnment, of
&
Usuch compounding amount and in such manner of
compoundingL as may be specified by rules.
,
U+rovided that nothing contained in this sub:ectionshall apply toK

,a- a person who has been allowed to compound once in respect ofany offence under sections 1='
and 1='$H

,b- a person who has been accused of committing an offence underthis $ct which is also an offence
under any of the following $cts, namely0K

,i- the 7arcotic <rugs and +sychotropic ubstances $ct, 14.' ,&1 of 14.'-H

,ii- the Chemical Geapons Convention $ct, %666 ,=/ of %666-H.

,iii- the $rms $ct, 14'4 ,'/ of 14'4-H.

,iv- the Gild *ife ,+rotection- $ct, 14>% ,'= of 14>%-H.

,c- a person involved in smuggling of goods falling under any of thefollowing, namely0K

,i- goods specified in the list of pecial Chemicals, Brganisms,@aterials, E1uipment and
Technology in $ppendix = to chedule % ,Export +olicy- of ITC ,9- Classification of Export and
Import Items of the 2oreign Trade +olicy, as amended from time to time, issued under ection' of the
2oreign Trade ,<evelopment and 5egulation- $ct, 144% ,%% of 144%-H.

,ii- goods which are specified as prohibited items for importand export in the ITC ,9-
Classification of Export and Import Items of the 2oreign Trade +olicy, as amended from time to time,
issued under ection' of the 2oreign Trade ,<evelopment and 5egulation- $ct, 144% ,%% of 144%-H.

,iii- any other goods or documents, which are li3ely to affectfriendly relations with a foreign tate
or are derogatory to national honourH
238

,d- a person who has been allowed to compound once in respect ofany offence under this Chapter
for goods of value exceeding rupees one croreH

,e- a person who has been convicted under this $ct on or after the =6th day of <ecember, %66'.L
0ection &3)9 @ffences to be tried summarily9 2 7otwithstanding anything contained in the Code of
Criminal +rocedure, 1.4. ,' of 1.4.-, an offence under this Chapter other than an offence punishable
under clause ,i- of sub:ection,1- of ection1=' or under sub:ection,%- of that ectionmay be tried
summarily by a @agistrate.
0ection &3)A9 .resum6tion of cul6able mental state9 2 ,1- In any prosecution for an offence under
this $ct which re1uires a culpable mental state on the part of the accused, the court shall presume the
existence of such mental state but it shall be a defence for the accused to prove the fact that he had no
such mental state with respect to the act charged as an offence in that prosecution.
Explanation. : In this section, Nculpable mental stateN includes intention, motive, 3nowledge of a fact
and belief in, or reason to believe, a fact.
,%- 2or the purposes of this section, a fact is said to be proved only when the court believes it to exist
beyond reasonable doubt and not merely when its existence is established by a preponderance of
probability.
0ection &3)"9 +elevancy of statements under certain circumstances9 2 ,1- $ statement made and
signed by a person before any ga?etted officer of customs during the course of any in1uiry or
proceeding under this $ct shall be relevant, for the purpose of proving, in any prosecution for an
offence under this $ct, the truth of the facts which it contains, :
,a- when the person who made the statement is dead or cannot be found, or is incapable of giving
evidence, or is 3ept out of the way by the adverse party, or whose presence cannot be obtained
without an amount of delay or expense which, under the circumstances of the case, the court considers
unreasonableH or
,b- when the person who made the statement is examined as a witness in the case before the court and
the court is of opinion that, having regard to the circumstances of the case, the statement should be
admitted in evidence in the interests of justice.
,%- The provisions of sub:ection,1- shall, so far as may be, apply in relation to any proceeding under
this $ct, other than a proceeding before a court, as they apply in relation to a proceeding before a
court.
0ection &3)C9 Admissibility of micro films% facsimile co6ies of documents and com6uter 6rint
outs as documents and as evidence9 2 ,1- 7otwithstanding anything contained in any other law for
the time being in force, :
,a- a micro film of a document or the reproduction of the image or images embodied in such micro
film ,whether enlarged or not-H or
,b- a facsimile copy of a documentH or
,c- a statement contained in a document and included in a printed material produced by a computer
,hereinafter referred to as a Ncomputer print outN-, if the conditions mentioned in sub:ection,%- and
the other provisions contained in this ectionare satisfied in relation to the statement and the computer
in 1uestion, shall be deemed to be also a document for the purposes of this $ct and the rules made
thereunder and shall be admissible in any proceedings thereunder, without further proof or production
of the original, as evidence of any contents of the original or of any fact stated therein of which direct
evidence would be admissible.
239
,%- The conditions referred to in sub:ection,1- in respect of a computer print out shall be the
following, namely 0:
,a- the computer print out containing the statement was produced by the computer during the period
over which the computer was used regularly to store or process information for the purposes of any
activities regularly carried on over that period by the person having lawful control over the use of the
computerH
,b- during the said period, there was regularly supplied to the computer in the ordinary course of the
said activities, information of the 3ind contained in the statement or of the 3ind from which the
information so contained is derivedH
,c- throughout the material part of the said period, the computer was operating properly or, if not, then
any respect in which it was not operating properly or was out of operation during that part of that
period was not such as to affect the production of the document or the accuracy of the contentsH and
,d- the information contained in the statement reproduces or is derived from information supplied to
the computer in the ordinary course of the said activities.
,=- Ghere over any period, the function of storing or processing information for the purposes of any
activities regularly carried on over that period as mentioned in clause ,a- of sub:ection,%- was
regularly performed by computers, whether :
,a- by a combination of computers operating over that periodH or
,b- by different computers operating in succession over that periodH or
,c- by different combinations of computers operating in succession over that periodH or
,d- in any other manner involving the successive operation over that period, in whatever order, of one
or more computers and one or more combinations of computers, all the computers used for that
purpose during that period shall be treated for the purposes of this ectionas constituting a single
computerH and references in this ectionto a computer shall be construed accordingly.
,/- In any proceedings under this $ct and the rules made thereunder where it is desired to give a
statement in evidence by virtue of this section, a certificate doing any of the following things, that is
to say, :
,a- identifying the document containing the statement and describing the manner in which it was
producedH
,b- giving such particulars of any device involved in the production of that document as may be
appropriate for the purpose of showing that the document was produced by a computerH
,c- dealing with any of the matters to which the conditions mentioned in sub:ection,%- relate, and
purporting to be signed by a person occupying a responsible official position in relation to the
operation of the relevant device or the management of the relevant activities ,whichever is
appropriate- shall be evidence of any matter stated in the certificateH and for the purposes of this sub:
ectionit shall be sufficient for a matter to be stated to the best of the 3nowledge and belief of the
person stating it.
,'- 2or the purposes of this section, :
,a- information shall be ta3en to be supplied to a computer if it is supplied thereto in any appropriate
form and whether it is so supplied directly or ,with or without human intervention- by means of any
appropriate e1uipmentH
240
,b- whether in the course of activities carried on by any official, information is supplied with a view
to its being stored or processed for the purposes of those activities by a computer operated otherwise
than in the course of those activities, that information, if duly supplied to that computer, shall be ta3en
to be supplied to it in the course of those activitiesH
,c- a document shall be ta3en to have been produced by a computer whether it was produced by it
directly or ,with or without human intervention- by means of any appropriate e1uipment.
Explanation. : 2or the purposes of this section, :
,a- NcomputerN means any device that receives, stores and processes data, applying stipulated
processes to the information and supplying results of these processesH and
,b- any reference to information being derived from other information shall be a reference to its being
derived therefrom by calculation, comparison or any other process.
0ection &3'9 .resum6tion as to documents in certain cases9 2 Ghere any document :
,i- is produced by any person or has been sei?ed from the custody or control of any person, in either
case, under this $ct or under any other law, or
,ii- has been received from any place outside India in the course of investigation of any offence
alleged to have been committed by any person under this $ct, and such document is tendered by the
prosecution in evidence against him or against him and any other person who is tried jointly with him,
the court shall :
,a- presume, unless the contrary is proved, that the signature and every other part of such document
which purports to be in the handwriting of any particular person or which the court may reasonably
assume to have been signed by, or to be in the handwriting of, any particular person, is in that personOs
handwriting, and in the case of a document executed or attested, that it was executed or attested by the
person by whom it purports to have been so executed or attestedH
,b- admit the document in evidence, notwithstanding that it is not duly stamped, if such document is
otherwise admissible in evidenceH
,c- in a case falling under clause ,i- also presume, unless the contrary is proved, the truth of the
contents of such document.
Explanation. : 2or the purposes of this section, NdocumentN includes inventories, photographs and
lists certified by a @agistrate under sub:ection,1C- of ection116.
0ection &(-9 @ffences by com6anies9 2 ,1- If the person committing an offence under this Chapter is
a company, every person who, at the time the offence was committed was in charge of, and was
responsible to, the company for the conduct of business of the company, as well as the company, shall
be deemed to be guilty of the offence and shall be liable to be proceeded against and punished
accordingly 0
+rovided that nothing contained in this sub:ectionshall render any such person liable to such
punishment provided in this Chapter if he proves that the offence was committed without his
3nowledge or that he exercised all due diligence to prevent the commission of such offence.
,%- 7otwithstanding anything contained in sub:ection,1-, where an offence under this Chapter has
been committed by a company and it is proved that the offence has been committed with the consent
or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary
or other officer of the company, such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to be proceeded against and punished
accordingly.
241
Explanation. : 2or the purposes of this section, :
,a- NcompanyN means a body corporate and includes a firm or other association of individualsH and
,b- NdirectorN, in relation to a firm, means a partner in the firm.
0ection &(-A9 A66lication of 0ection *D, of t8e Code of Criminal .rocedure% &)')% and of t8e
.robation of @ffenders Act% &'*)9 2 ,1- 7othing contained in ection'&% of the Code of Criminal
+rocedure, 1.4. ,' of 1.4.-, or in the +robation of Bffenders $ct, 14'. ,%6 of 14'.-, shall apply to a
person convicted of an offence under this $ct unless that person is under eighteen years of age.
,%- The provisions of sub:ection,1- shall have effect notwithstanding anything contained in sub:
ection,=- of ection1='.
C7A.TE+ PVII
5I0CE##ANE@J0
0ection &(&9

(& Conveyances and :oods in a customs area sub?ect to control of officers of
customs9 2 $ll conveyances and goods in a customs area shall, for the purpose of enforcing the
provisions of this $ct, be subject to the control of officers of customs.
,%- The imported or export goods may be received, stored, delivered, despatched or otherwise handled
in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in
the aforesaid activities shall be such as may be prescribed.
0ection &(,9 +ecovery of sums due to /overnment9 2 ,1- Ghere any sum payable by any person
under this $ct including the amount re1uired to be paid to the credit of the Central )overnment
under ection%.; is not paid, :
,a- the proper officer may deduct or may re1uire any other officer of customs to deduct the amount so
payable from any money owing to such person which may be under the control of the proper officer
or such other officer of customsH or
,b- the $ssistant Commissioner of Customs or <eputy Commissioner of Customs may recover or may
re1uire any other officer of customs to recover the amount so payable by detaining and selling any
goods belonging to such person which are under the control of the $ssistant Commissioner of
Customs or <eputy Commissioner of Customs or such other officer of customsH or
,c- if the amount cannot be recovered from such person in the manner provided in clause ,a- or clause
,b- :
,i- the $ssistant Commissioner of Customs or <eputy Commissioner of Customs may prepare a
certificate signed by him specifying the amount due from such person and send it to the Collector of
the district in which such person owns any property or resides or carries on his business and the said
Collector on receipt of such certificate shall proceed to recover from such person the amount specified
thereunder as if it were an arrear of land revenueH or
,ii- the proper officer may, on an authorisation by Commissioner of Customs and in accordance with
the rules made in this behalf, distrain any movable or immovable property belonging to or under the
control of such person, and detain the same until the amount payable is paidH and in case, any part of
the said amount payable or of the cost of the distress or 3eeping of the property, remains unpaid for a
period of thirty days next after any such distress, may cause the said property to be sold and with the
proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining
unpaid and shall render the surplus, if any, to such person.
242
+rovided that where the person ,hereinafter referred to as predecessor-, by whom any sum payable
under this $ct including the amount re1uired to be paid to the credit of the Central )overnment under
ection%.; is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or
effects any change in the ownership thereof, in conse1uence of which he is succeeded in such
business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels,
utensils, implements and articles in the custody or possession of the person so succeeding may also be
attached and sold by the proper officer, after obtaining written approval from the Commissioner of
Customs, for the purposes of recovering the amount so payable by such predecessor at the time of
such transfer or otherwise disposal or change.
,%- Ghere the terms of any bond or other instrument executed under this $ct or any rules or
regulations made thereunder provide that any amount due under such instrument may be recovered in
the manner laid down in sub:ection,1-, the amount may, without prejudice to any other mode of
recovery, be recovered in accordance with the provisions of that sub:section.
0ection &(,A9 #iability under Act to be first c8ar:e9
7otwithstanding anything to the contrary contained in any Central $ct or tate $ct, any amount of
duty, penalty, interest or any other sum payable by an assessee or any other person under this $ct,
shall, save as otherwise provided in ection'%4$ of the Companies $ct, 14'&, ,1 of 14'& '1 of
14'&-the 5ecovery of <ebts <ue to ;an3s and the 2inancial Institutions $ct, 144= and the
ecuritisation and 5econstruction of 2inancial $ssets and the Enforcement of ecurity Interest $ct,
%66%, ,'/ of %66%.- be the first charge on the property of the assessee or the person, as the case may
be.
0ection &(39 .o$er to allo$ im6ort or ex6ort on execution of bonds in certain cases9 2 ,1- Ghere
this $ct or any other law re1uires anything to be done before a person can import or export any goods
or clear any goods from the control of officers of customs and the $ssistant Commissioner of
Customs or <eputy Commissioner of Customs is satisfied that having regard to the circumstances of
the case, such thing cannot be done before such import, export or clearance without detriment to that
person, the $ssistant Commissioner of Customs or <eputy Commissioner of Customs may,
notwithstanding anything contained in this $ct or such other law, grant leave for such import, export
or clearance on the person executing a bond in such amount, with such surety or security and subject
to such conditions as the $ssistant Commissioner of Customs or <eputy Commissioner of Customs
approves, for the doing of that thing within such time after the import, export or clearance as may be
specified in the bond.
,%- If the thing is done within the time specified in the bond, the $ssistant Commissioner of Customs
or <eputy Commissioner of Customs shall cancel the bond as discharged in full and shall, on demand,
deliver it, so cancelled, to the person who has executed or who is entitled to receive itH and in such a
case that person shall not be liable to any penalty provided in this $ct or, as the case may be, in such
other law for the contravention of the provisions thereof relating to the doing of that thing.
,=- If the thing is not done within the time specified in the bond, the $ssistant Commissioner of
Customs or <eputy Commissioner of Customs shall, without prejudice to any other action that may be
ta3en under this $ct or any other law for the time being in force, be entitled to proceed upon the bond
in accordance with law.
0ection &(3A9 Duty deferment 2 ,1- Ghen any material is imported under an import licence
belonging to the category of $dvance *icence granted under the Imports and Exports ,Control- $ct,
14/> ,1. of 14/>-, subject to an obligation to export the goods as are specified in the said *icence
within the period specified therein, the $ssistant Commissioner of Customs or <eputy Commissioner
243
of Customs may, notwithstanding anything contained in this $ct, permit clearance of such material
without payment of duty leviable thereon.
,%- The permission for clearance without payment of duty under sub:ection,1- shall be subject to the
following conditions, that is to say :
,a- the duty payable on the material imported shall be adjusted against the drawbac3 of duty payable
under this $ct or under any other law for the time being in force on the export of goods specified in
the said $dvance *icenceH and
,b- where the duty is not so adjusted either for the reason that the goods are not exported within the
period specified in the said $dvance *icence, or within such extended period not exceeding six
months as the $ssistant Commissioner of Customs or <eputy Commissioner of Customs may, on
sufficient cause being shown, allow, or for any other sufficient reason, the importer shall,
notwithstanding anything contained in ection%., be liable to pay the amount of duty not so adjusted
together with simple interest thereon at the rate of twelve per cent per annum from the date the said
permission for clearance is given to the date of payment.
,=- Ghile permitting clearance under sub:ection,1-, the $ssistant Commissioner of Customs or
<eputy Commissioner of Customs may re1uire the importer to execute a bond with such surety or
security as he thin3s fit for complying with the conditions specified in sub:ection,%-.
0ection &((9 .o$er to ta1e sam6les9 2 ,1- The proper officer may, on the entry or clearance of any
goods or at any time while such goods are being passed through the customs area, ta3e samples of
such goods in the presence of the owner thereof, for examination or testing, or for ascertaining the
value thereof, or for any other purposes of this $ct.
,%- $fter the purpose for which a sample was ta3en is carried out, such sample shall, if practicable, be
restored to the owner, but if the owner fails to ta3e delivery of the sample within three months of the
date on which the sample was ta3en, it may be disposed of in such manner as the Commissioner of
Customs may direct.
,=- 7o duty shall be chargeable on any sample of goods ta3en under this ectionwhich is consumed or
destroyed during the course of any test or examination thereof, if such duty amounts to five rupees or
more.
0ection &(*9 @$ner% etc9% to 6erform o6erations incidental to com6liance $it8 customs la$9 2 $ll
operations necessary for ma3ing any goods available for examination by the proper officer or for
facilitating such examination shall be performed by, or at the expense of, the owner, importer or
exporter of the goods, as the case may be.
0ection &(D9 Custom 7ouse a:ents to be licensed9 2 ,1- 7o person shall carry on business as an
agent relating to the entry or departure of a conveyance or the import or export of goods at any
customs:station unless such person holds a licence granted in this behalf in accordance with the
regulations.
,%- The ;oard may ma3e regulations for the purpose of carrying out the provisions of this ectionand,
in particular, such regulations may provide for :
,a- the authority by which a licence may be granted under this ectionand the period of validity of any
such licenceH
,b- the form of the licence and the fees payable thereforH
,c- the 1ualifications of persons who may apply for a licence and the 1ualifications of persons to be
employed by a licensee to assist him in his wor3 as an agentH
244
,d- the restrictions and conditions ,including the furnishing of security by the licensee- subject to
which a licence may be grantedH
,e- the circumstances in which a licence may be suspended or revo3edH and
,f- the appeals, if any, against an order of suspension or revocation of a licence, and the period within
which such appeals shall be filed.
0ection &(DA9 A66earance by aut8orised re6resentative9 2 ,1- $ny person who is entitled or
re1uired to appear before an officer of customs or the $ppellate Tribunal in connection with any
proceedings under this $ct, otherwise than when re1uired under ection16. to attend personally for
examination on oath or affirmation, may, subject to the other provisions of this section, appear by an
authorised representative.
,%- 2or the purposes of this section, Nauthorised representativeN means a person authorised by the
person referred to in sub:ection,1- to appear on his behalf, being :
,a- his relative or regular employeeH or
,b- a custom house agent licensed under ection1/&H or
,c- any legal practitioner who is entitled to practise in any civil court in IndiaH or
,d- any person who has ac1uired such 1ualifications as the Central )overnment may specify by rules
made in this behalf.
,=- 7otwithstanding anything contained in this section, no person who was a member of the Indian
Customs and Central Excise ervice : )roup $ and has retired or resigned from such ervice after
having served for not less than three years in any capacity in that ervice shall be entitled to appear as
an authorised representative in any proceedings before an officer of customs for a period of two years
from the date of his retirement or resignation, as the case may be.
,/- 7o person, :
,a- who has been dismissed or removed from )overnment serviceH or
,b- who is convicted of an offence connected with any proceeding under this $ct, the Central Excises
and alt $ct, 14// ,1 of 14//-, or the )old ,Control- $ct, 14&. ,/' of 14&.-H or
,c- who has become an insolvent, shall be 1ualified to represent any person under sub:ection,1-, for
all times in the case of a person referred to in clause ,a-, and for such time as the Commissioner of
Customs or the competent authority under the Central Excises and alt $ct, 14//, or the )old
,Control- $ct, 14&., as the case may be, may, by order, determine in the case of a person referred to
in clause ,b-, and for the period during which the insolvency continues in the case of a person referred
to in clause ,c-.
,'- If any person, :
,a- who is a legal practitioner, is found guilty of misconduct in his professional capacity by any
authority entitled to institute proceedings against him, an order passed by that authority shall have
effect in relation to his right to appear before an officer of customs or the $ppellate Tribunal as it has
in relation to his right to practise as a legal practitionerH
,b- who is not a legal practitioner, is found guilty of misconduct in connection with any proceedings
under this $ct by such authority as may be specified by rules made in this behalf, that authority may
direct that he shall thenceforth be dis1ualified to represent any person under sub:ection,1-.
,&- $ny order or direction under clause ,b- of sub:ection,/- or clause ,b- of sub:ection,'- shall be
subject to the following conditions, namely 0:
245
,a- no such order or direction shall be made in respect of any person unless he has been given a
reasonable opportunity of being heardH
,b- any person against whom any such order or direction is made may, within one month of the
ma3ing of the order or direction, appeal to the ;oard to have the order or direction cancelledH and
,c- no such order or direction shall ta3e effect until the expiration of one month from the ma3ing
thereof, or, where an appeal has been preferred, until the disposal of the appeal.
0ection &(49 #iability of 6rinci6al and a:ent9 2 ,1- Ghere this $ct re1uires anything to be done by
the owner, importer or exporter of any goods, it may be done on his behalf by his agent.
,%- $ny such thing done by an agent of the owner, importer or exporter of any goods shall, unless the
contrary is proved, be deemed to have been done with the 3nowledge and consent of such owner,
importer or exporter, so that in any proceedings under this $ct, the owner, importer or exporter of the
goods shall also be liable as if the thing had been done by himself.
,=- Ghen any person is expressly or impliedly authorised by the owner, importer or exporter of any
goods to be his agent in respect of such goods for all or any of the purposes of this $ct, such person
shall, without prejudice to the liability of the owner, importer or exporter, be deemed to be the owner,
importer or exporter of such goods for such purposes 0
+rovided that where any duty is not levied or is short:levied or erroneously refunded on account of
any reason other than any wilful act, negligence or default of the agent, such duty shall not be
recovered from the agent unless in the opinion of $ssistant Commissioner of Customs or <eputy
Commissioner of Customs the same cannot be recovered from the owner, importer or exporter.
0ection &()9 #iability of a:ent a66ointed by t8e 6erson in c8ar:e of a conveyance9 2 ,1- Ghere
this $ct re1uires anything to be done by the person in charge of a conveyance, it may be done on his
behalf by his agent.
,%- $n agent appointed by the person in charge of a conveyance and any person who represents
himself to any officer of customs as an agent of any such person in charge, and is accepted as such by
that officer, shall be liable for the fulfilment in respect of the matter in 1uestion of all obligations
imposed on such person in charge by or under this $ct or any law for the time being in force, and to
penalties and confiscations which may be incurred in respect of that matter.
0ection &('9 Amendment of documents9 2 ave as otherwise provided in sections =6 and /1, the
proper officer may, in his discretion, authorise any document, after it has been presented in the
custom house to be amended 0
+rovided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorised
to be amended after the imported goods have been cleared for home consumption or deposited in a
warehouse, or the export goods have been exported, except on the basis of documentary evidence
which was in existence at the time the goods were cleared, deposited or exported, as the case may be.
0ection &*-9 .rocedure for sale of :oods and a66lication of sale 6roceeds9
,1- Ghere any goods not being confiscated goods are to be sold under any provisions of this $ct, they
shall, after notice to the owner thereof, be sold by public auction or by tender or with the consent of
the owner in any other manner.
,%- The proceeds of any such sale shall be applied :
,a- firstly to the payment of the expenses of the sale,
,b- next to the payment of the freight and other charges, if any, payable in respect of the goods
sold, to the carrier, if notice of such charges has been given to the person having custody of the goods,
246
,c- next to the payment of the duty, if any, on the goods sold,
,d- next to the payment of the charges in respect of the goods sold due to the person having the
custody of the goods,
,e- next to the payment of any amount due from the owner of the goods to the Central
)overnment under the provisions of this $ct or any other law relating to customs, and the balance, if
any, shall be paid to the owner of the goods.
.rovided that where it is not possible to pay the balance of sale proceeds, if any, to the owner of the
goods within a period of six months from the date of sale of such goods or such further period as the
Commissioner of Customs may allow, such balance of sale proceeds shall be paid to the Central
)overnment.
0ection &*&9 Certain officers reOuired to assist officers of customs9 2 The following officers are
hereby empowered and re1uired to assist officers of customs in the execution of this $ct, namely 0:
,a- officers of the Central Excise <epartmentH
,b- officers of the 7avyH
,c- officers of +oliceH
,d- officers of the Central or tate )overnments employed at any port or airportH
,e- such other officers of the Central or tate )overnments or a local authority as are specified by the
Central )overnment in this behalf by notification in the Bfficial )a?ette.
0ection &*&A9 Instructions to officers of customs9 2 The ;oard may, if it considers it necessary or
expedient so to do for the purpose of uniformity in the classification of goods or with respect to the
levy of duty thereon or for the implementation of any other provisions of this $ct or of any other law
for the time being in force, in so far as they relate to any prohibition, restriction or procedure for
import or export of goods, issue such orders, instructions and directions to officers of customs as it
may deem fit and such officers of customs and all other persons employed in the execution of this $ct
shall observe and follow such orders, instructions and directions of the ;oard 0
.rovided t8at no such orders, instructions or directions shall be issued :
,a- so as to re1uire any such officer of customs to ma3e a particular assessment or to dispose of a
particular case in a particular mannerH or
,b- so as to interfere with the discretion of the Commissioner of Customs ,$ppeals- in the exercise
of his appellate functions.
0ection &*,9 Dele:ation of 6o$ers9 2 The Central )overnment may, by notification in the Bfficial
)a?ette, direct that subject to such conditions, if any, as may be specified in the notification :
,a- any power exercisable by the ;oard under this $ct shall be exercisable also by a Chief
Commissioner of Customs or a Commissioner of Customs empowered in this behalf by the Central
)overnmentH
,b- any power exercisable by a Commissioner of Customs under this $ct may be exercisable also by a
Aoint Commissioner of Customs or an $ssistant Commissioner of Customs or <eputy Commissioner
of Customs empowered in this behalf by the Central )overnmentH
,c- any power exercisable by a Aoint Commissioner of Customs under this $ct may be exercisable
also by an $ssistant Commissioner of Customs or <eputy Commissioner of Customs empowered in
this behalf by the Central )overnmentH
247
,d - any power exercisable by an $ssistant Commissioner of Customs or <eputy Commissioner of
Customs under this $ct may be exercisable also by a )a?etted Bfficer of Customs empowered in this
behalf by the ;oard.
0ection &*39 0ervice of order% decision% etc9 2 $ny order or decision passed or any summons or
notice issued under this $ct, shall be served :
,a- by tendering the order, decision, summons or notice or sending it by registered post to the person
for whom it is intended or to his agentH or
,b- if the order, decision, summons or notice cannot be served in the manner provided in clause ,a-, by
affixing it on the notice board of the customs house.
0ection &*(9 Correction of clerical errors% etc9 2 Clerical or arithmetical mista3es in any decision or
order passed by the Central )overnment, the ;oard or any officer of customs under this $ct, or errors
arising therein from any accidental slip or omission may, at any time, be corrected by the Central
)overnment, the ;oard or such officer of customs or the successor in office of such officer, as the
case may be.
0ection &*(A9 +oundin: off of duty% etc9 V The amount of duty, interest, penalty, fine or any other
sum payable, and the amount of refund, drawbac3 or any other sum due, under the provisions of this
$ct shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part
of a rupee consisting of paise then, if such part is fifty paise or more, it shall be increased to one rupee
and if such part is less than fifty paise it shall be ignored.
0ection &*("9 .ublication of information res6ectin: 6ersons in certain cases9 2 ,1- If the Central
)overnment is of opinion that it is necessary or expedient in the public interest to publish the names
of any person and any other particulars relating to any proceedings or prosecutions under this $ct in
respect of such person, it may cause to be published such names and particulars in such manners as it
thin3s fit.
,%- 7o publication under this ectionshall be made in relation to any penalty imposed under this $ct
until the time for presenting an appeal to the Commissioner ,$ppeals- under ection1%. or the
$ppellate Tribunal under ection1%4$, as the case may be, has expired without an appeal having
been presented or the appeal, if presented, has been disposed of.
Explanation. : In the case of a firm, company or other association of persons, the names of the
partners of the firm, directors, managing agents, secretaries and treasures or managers of the
company, or the members of the association, as the case may be, may also be published if, in the
opinion of the Central )overnment, circumstances of the case justify it.
0ection &**9 .rotection of action ta1en under t8e Act9 2 ,1- 7o suit, prosecution or other legal
proceedings shall lie against the Central )overnment or any officer of the )overnment or a local
authority for anything which is done, or intended to be done in good faith, in pursuance of this $ct or
the rules or regulations.
,%- 7o proceeding other than a suit shall be commenced against the Central )overnment or any
officer of the )overnment or a local authority for anything purporting to be done in pursuance of this
$ct without giving the Central )overnment or such officer a monthOs previous notice in writing of the
intended proceeding and of the cause thereof, or after the expiration of three months from the accrual
of such cause.
0ection &*D9 /eneral 6o$er to ma1e rules9 2 ,1- Githout prejudice to any power to ma3e rules
contained elsewhere in this $ct, the Central )overnment may ma3e rules consistent with this $ct
generally to carry out the purposes of this $ct.
248
,%- In particular and without prejudice to the generality of the foregoing power, such rules may
provide for all or any of the following matters, namely 0:
,a- the manner of determining the transaction value of the imported goods and export goods under
sub:ection,1- of ection1/H
,aa- the manner of determining the value of imported goods and export goods under sub:
ection,=- of ection1/H
,b- the conditions subject to which accessories of, and spare parts and maintenance and repairing
implements for, any article shall be chargeable at the same rate of duty as that articleH
,c- YYYYYYY
,d- the detention and confiscation of goods the importation of which is prohibited and the
conditions, if any, to be fulfilled before such detention and confiscation and the information, notices
and security to be given and the evidence re1uisite for the purposes of such detention or confiscation
and the mode of verification of such evidenceH
,e- the reimbursement by an informant to any public officer of all expenses and damages incurred
in respect of any detention of any goods made on his information and of any proceedings conse1uent
on such detentionH
,f- the information re1uired in respect of any goods mentioned in a shipping bill or bill of export
which are not exported or which are exported and are afterwards re:landedH
,g- the publication, subject to such conditions as may be specified therein, of names and other
particulars of persons who have been found guilty of contravention of any of the provisions of this
$ct or the rules.
,h- the amount to be paid for compounding and the manner of compounding under sub:ection,=-
of ection1=>.
0ection &*49 /eneral 6o$er to ma1e re:ulations9 2 ,1- Githout prejudice to any power to ma3e
regulations contained elsewhere in this $ct, the ;oard may ma3e regulations consistent with this $ct
and the rules, generally to carry out the purposes of this $ct.
,% - In particular and without prejudice to the generality of the foregoing power, such regulations may
provide for all or any of the following matters, namely 0:
,a- the form of a bill of entry, shipping bill, bill of export, import manifest, import report, export
manifest, export report, bill of transhipment, declaration for transhipment boat note and bill of coastal
goodsH
,ai- the manner of export of goods, relin1uishment of title to the goods and abandoning them to
customs and destruction or rendering of goods commercially valueless in the presence of the proper
officer under clause ,d- of sub:ection,1- of ection%&$H
,aii- the form and manner of ma3ing application for refund of duty under sub:ection,%- of
ection%&$H
,aa- the form and manner in which an application for refund shall be made under ection%>H
,b- the conditions subject to which the transhipment of all or any goods under sub:ection,=- of
ection'/, the transportation of all or any goods under ection'& and the removal of warehoused
goods from one warehouse to another under ection&>, may be allowed without payment of dutyH
,c- the conditions subject to which any manufacturing process or other operations may be carried
on in a warehouse under ection&'.
249
,d- the manner of conducting audit of the assessment of duty of the imported or export goods at
the office of the proper officer or the premises of the importer or exporter, as the case may be.
0ection &*)9 .rovisions $it8 res6ect to rules and re:ulations9 2 ,1- $ll rules and regulations made
under this $ct shall be published in the Bfficial )a?ette.
,%- $ny rule or regulation which the Central )overnment or the ;oard is empowered to ma3e under
this $ct may provide :
,i- for the levy of fees in respect of applications, amendment of documents, furnishing of duplicates of
documents, issue of certificates, and supply of statistics, and for rendering of any services by officers
of customs under this $ctH
,ii- 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 fifty thousand rupees9
0ection &*'9 +ules% certain notifications and orders to be laid before .arliament9 V Every rule
or regulation made under this $ct, every notification issued under sections 11, 11;, 119, 11:I, 11Q,
117, 1/, %', %.$, /=, &&, &4, >6, >/, >', >&, 4., 4.$, 161 and 1%= and every order made under sub:
ection,%- of ection%', other than an order relating to goods of strategic, secret, individual or
personal nature, shall be laid, as soon as may be after it is made or issued, before each 9ouse of
+arliament, while it is in session, for a total period of thirty days which may be comprised in one
session, or in two or more successive sessions, and if, before the expiry of the session immediately
following the session or the successive sessions aforesaid, both 9ouses agree in ma3ing any
modification in the rule or regulation or notification or order, or both 9ouses agree that the rule or
regulation should not be made or notification or order should not be issued or made, the rule or
regulation or notification or order shall thereafter have effect only in such modified form or be of no
effect, as the case may beH so, however, that any such modification or annulment shall be without
prejudice to the validity of anything previously done under that rule or regulation or notification or
order.
0ection &*'A9 Effect of amendments% etc9% of rules% re:ulations% notifications or orders9 V Ghere
any rule, regulation, notification or order made or issued under this $ct or any notification or order
issued under such rule or regulation, is amended, repealed, superseded or rescinded, then, unless a
different intention appears, such amendment, repeal, supersession or rescinding shall notK
,a- revive anything not in force or existing at the time at which the amendment, repeal, supersession
or rescinding ta3es effectH or
,b- affect the previous operation of any rule, regulation, notification or order so amended, repealed,
superseded or rescinded or anything duly done or suffered thereunderH or
,c- affect any right, privilege, obligation or liability ac1uired, accrued or incurred under any rule,
regulation, notification or order so amended, repealed, superseded or rescindedH or
,d- affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or
in violation of any rule, regulation, notification or order so amended, repealed, superseded or
rescindedH or
,e- affect any investigation, legal proceeding or remedy in respect of any such right, privilege,
obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal
proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or
punishment may be imposed as if the rule, regulation, notification or order, as the case may be, had
not been amended, repealed, superseded or rescinded.
250
0ection&D-9 +e6eal and savin:s9 2 ,1- The enactments specified in the chedule are hereby repealed
to the extent mentioned in the fourth column thereof.
,%- In the Indian Tariff $ct, 14=/ ,=% of 14=/- :
,a- for ection%, the following ectionshall be substituted, namely 0:
N,9 Duties s6ecified in t8e 0c8edules to be levied9 2 The rates at which duties of customs shall be
levied under the Customs $ct, 14&%, are specified in the 2irst and econd chedules.NH
,b- sections ' and & shall stand repealed.
,=- 7otwithstanding the repeal of any enactment by this section, :
,a- any notification, rule, regulation, order or notice issued or any appointment or declaration made or
any licence, permission or exemption granted for any assessment made, confiscation adjudged or any
duty levied or any penalty or fine imposed or any forfeiture, cancellation or discharge of any bond
ordered or any other thing done or any other action ta3en under any repealed enactment shall, so far as
it is not inconsistent with the provisions of this $ct, be deemed to have been done or ta3en under the
corresponding provision of this $ctH
,b- any document referring to any enactment hereby repealed shall be construed as referring to this
$ct or to the corresponding provision of this $ct.
,/- This $ct shall apply to all goods which are subject to the control of customs at the commencement
of this $ct notwithstanding that the goods were imported before such commencement.
,'- Ghere the period prescribed for any application, appeal, revision or other proceeding under any
repealed enactment had expired on or before the commencement of this $ct, nothing in this $ct shall
be construed as enabling any such application, appeal or revision to be made or a proceeding to be
instituted under this $ct by reason only of the fact that a longer period therefor is prescribed or
provision is made for extension of time in suitable cases by the appropriate authority.
,&- The provisions of ection&' shall apply to goods warehoused before the commencement of this
$ct if the operations permissible under that ectionwere carried on after such commencement.
,>- $ny duty or penalty payable under any repealed enactment may be recovered in a manner
provided under this $ct but without prejudice to any action already ta3en for the recovery of such
duty or penalty under the repealed enactment.
,.- The mention of particular matters in sub:sections ,/-, ,'-, ,&- and ,>- shall not be held to prejudice
or affect the general application of ection& of the )eneral Clauses $ct, 1.4> ,16 of 1.4>-, with
regard to the effect of repeals.
,4- 7othing in this $ct shall affect any law for the time being in force relating to the constitution and
powers of any +ort authority in a major port as defined in the Indian +orts $ct, 146. ,1' of 146.-.
0ection&D&9 +emoval of difficulties9 2 If any difficulty arises in giving effect to the provisions of this
$ct, particularly in relation to the transition from the enactments repealed by this $ct to the
provisions of this $ct, the Central )overnment may, by general or special order, do anything not
inconsistent with such provisions which appears to be necessary or expedient for the purpose of
removing the difficulty.
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