Power of Customs Officers

Customs authorities have been given various powers to ensure that there is no evasion of customs duty and duty is correctly recovered. These powers are similar to powers of Central Excise Officers, with suitable modifications to meet requirements of Customs.

Power of Customs Officers to inspect - Under section 106A, Customs officers have powers to inspect the premises intimated as storage places of ‘notified goods’ or ‘specified goods’. The inspection can be at any reasonable time, with or without notice. The officers can check the records and inspect the goods. The person in charge of premises is required to produce accounts required to be maintained by ‘notified goods’ or ‘specified goods’. Places other than those intimated under provisions of ‘notified goods’ or ‘specified goods’ cannot be inspected under this section. (Since now there are no ‘notified goods’ or ‘specified goods’, these powers are redundant.)

Power to stop and inspect conveyance - Customs Officer is empowered under section 106 to stop any aircraft, vessel, vehicle or animal and to examine and search the aircraft, vehicle or vessel. He can break open any lock of door or package, if key is withheld. If the vessel, aircraft etc. does not stop or land after giving signals, it may be chased. If it refuses to stop after firing a signal, the vehicle may be fired upon.

Power of Customs Officers of search - Customs Officer can search a person if he has reason to believe that smuggled goods or documents relating thereto are secreted in his person (section 100). Such search may be of (a) any person who has landed from or is about to board or is on board of a vessel or foreign going aircraft or vehicle arrived from or going to any place out of India (b) any person who has entered or is about to leave India (c) any person in Customs area. Before the search, at least two persons should be called to attend and witness the search. Search should be made in presence of them and list of things seized should be signed by the witnesses. [section 102(4)]. A female can be searched only by a female. The person being searched can request that the search may be carried out before a Gazetted Officer or magistrate. If such requisition is made, search must be carried out before Gazetted Officer of customs or magistrate. [section 102(2)]

Power to search other persons - The aforesaid powers of search under section 100 are in respect of people in customs area or people entering or leaving India only. However, as per section 101 of Customs Act, an Officer of Customs empowered by special order of Commissioner of Customs can search any person (anywhere in India), if he has reason to believe that such person is carrying gold, diamonds, manufacture of gold and diamonds or watches, which are liable to confiscation. Before the search, two or more persons should be called to attend and witness the search. Search should be made in presence of them and list of things seized should be signed by the witnesses [section 102(4)]. A female can be searched only by a female. The person being searched can request that the search may be carried out before a Gazetted Officer or magistrate. If such requisition is made, search must be carried out before Gazetted Officer of customs or magistrate [section 102(2)]

Search of premises - Under section 105 of Customs Act, Assistant Commissioner of Customs, who has reasons to believe that any goods liable to confiscation or any document or thing relevant to any proceeding under Customs Act are secreted in any place, can authorise any Customs Officer or he may himself search for such goods, documents or things. Search should be as per provisions of Criminal Procedure Code, with the difference that report of search is to be submitted to Commissioner of Customs and not to Magistrate.

Vexatious search/arrest by Customs Officer - Section 136(2) of Customs Act provides that in case of vexatious search and seizure, the officer is punishable with imprisonment upto six months or fine upto Rs. 1,000 or both. Vexatious search means (a) searching a person or place without any ‘reason to believe’ (b) arresting a person without reason to believe. This punishment can be imposed only by Court of Law.

Power of Customs Officers to X ray bodies - Section 103 provide that if Customs Officer has reasons to believe that any person coming to India or leaving from India or any person in customs area has secreted inside his body any goods liable to confiscation, he can detain and take him to nearest magistrate. If the Magistrate is satisfied that reasonable grounds exist, he can order that body of such person may be X-rayed. The X-rays will be taken by a qualified radiologist and his report may be given to Magistrate. If the report indicates that goods are secreted inside, he may direct that suitable action may be taken to take out goods as per advise of qualified doctor. Magistrate can order that the person may be kept in custody. If the person himself admits that the goods are secreted inside his body and voluntarily submits for action to bringing out the goods, X-ray etc. may not be taken.

Seizure by Customs Officers - If, during search, some goods are found, which are liable for confiscation, the same can be seized by Customs Officers under section 110. Customs Officer is empowered to seize the goods if he has reasons to believe that such goods are liable to confiscation under Customs Act. If the goods are bulky, they can be kept in possession of the owner himself and a notice be served on him that he should not remove or in any way deal with the goods. [section 110(1)].

Immediate sale of seized goods - Penalty proceedings for confiscating goods etc. may take time and goods may get deteriorated. Hence, under section 110(1A), Central Government can notify some goods considering if the goods are perishable or hazardous or if storage space is not adequate or if the goods depreciate fast. Such goods can be disposed of immediately by Customs Officers as per prescribed procedure. However, before disposing them of, full inventory will be taken and application will be made by Customs Officer to Magistrate to (a) certify correctness of inventory (b) certify photographs of goods (c) take samples and certify its correctness. The goods covered under this section are : liquor, photographic films, medicines, battery cells, wrist watches, zip fasteners, electronic goods, Gold, Silver, dangerous drugs, vehicles, man-made yarn and fabrics and bulk drugs and chemicals. However if finally, after adjudication, goods are not confiscated or if the confiscation is set side by appellate authority, sale proceeds must be refunded to owner of goods.

Seizure of documents - Documents relevant to proceedings under the Customs Act can also be seized. The person from whom the documents are seized is entitled to take extracts therefrom in presence of Customs Officer [section 110(4)].

Return of seized goods within 6 months if no SCN - If seized goods are felt to be liable for confiscation, a show cause notice has to be served giving him grounds for confiscation, asking his representation and giving him opportunity of personal hearing as per section 124 of Customs Act. If no show cause notice is issued within six months of seizure, the goods shall be returned to person from whose possession they were seized [section 110(2)]. This aspect has been discussed under Central Excise.

Other Powers of Customs Officers - Other powers of Customs Officers are summarised below.

Power to call for documents and examine a person - Under section 107, an officer of Customs, empowered by Commissioner, during enquiry in connection with smuggled goods, may require any person to produce relevant document or examine any person acquainted with the facts of the case.

Power to summons - Section 108 of Customs Act authorises all Gazetted Officers of customs to issue summons to any person for inquiry in connection with smuggling of goods. He can require a person to produce any document relevant to enquiry and examine a person. The provisions are similar to section 14 of CEA. These are discussed under 'Central Excise'.

Power to arrest - In case of customs, as per section 104 of Customs Act, an officer of customs who has been empowered by Commissioner of Customs by general or special order, can arrest a person whom they have ‘reason to believe’ to be liable to be punished under section 135 - i.e. for evasion of duty or importing prohibited goods or dealing in goods liable to confiscation. - - The officer can arrest him and inform him ground of arrest. The person arrested has to be forwarded to the Magistrate. He must be produced before a magistrate within 24 hours. The magistrate may grant the bail on bond or refuse the bail and remand him to custody. Bail is at the total discretion of Court. Offences under Customs Act are non-cognizable. The Customs Officer can himself release the person on bail.  - - These are discussed under 'Central Excise'.

powers under FEMA - In respect of following,  powers of Enforcement have been conferred on customs /excise officers. – (a) Offenses u/s 6(3)(g) of FEMA. This section related restrictions / prohibitions on export, import or holding of currency or currency notes (2) Offenses u/s 7(1)(a) of FEMA. This section relates to furnishing of export value of goods exported. – MF(DR) Order No. SO 1156(E) dated 5.1.2001.

Prohibitions on Imports and Export

Collecting revenue for Central Government by was of Customs duty is, of course, a major purpose of Customs Act. However, another major purpose is to prohibit or restrict illegal imports and exports. Section 11 of the Customs Act, 1962, empowers Central Government to prohibit the import or export of goods of any specified description. Such prohibition may be absolute or conditional. The conditions for prohibitions may be required to be fulfilled before or after clearance. (e.g. there may be condition that after imports, goods should be used only for production purposes and not for trading). Such prohibition can be made by issuing a notification.

Various notifications have been issued by Government of India from time to time, the earliest one being of 1898. Some items prohibited are (a) labels impressed with designs of currency notes (b) dummy pistols (c) explosives (d) dead or alive animals and birds (e) narcotic drugs (f) monkeys from yellow fever areas (g) arms and ammunition (h) Counterfeit currency notes etc. Various offensive books and periodicals have been banned for import. Similarly, exports of some items is restricted and is subject to permission from prescribed authority e.g. quartz, obscene books, monkeys, jewellery etc. Some items are not allowed to be exported unless they are graded by appropriate authorities e.g. wool, goat hair, tea, fruit products, black pepper, chilies, vegetable oils, tendu leaves, ginger, turmeric, onions, garlic, potatoes etc.

Prohibitions under other Acts - Besides prohibitions placed under Customs Act itself, other Acts also place prohibitions on export/imports and provisions of Customs Act are used to enforce or implement these prohibitions. Some of these Acts are as follows :

Foreign Trade (Development and Regulation) Act, 1992 - This Act has replaced Import and Export (Control) Act, 1947. Section 3(3) of the Act specify that any order by Government under the Act restricting the imports and exports of any goods shall be deemed to be in respect of goods import or export of which is restricted or prohibited under section 11 of Customs Act and all provisions of Customs Act shall apply if the order is violated. Customs authorities are authorised to implement the prohibitions. In fact, Import restrictions are always scrutinised by customs officers before import is allowed by Customs. Similarly, export is permitted only if it confirms to Export (Control) Order. (It may be noted that the import/export policy is looked after by Commerce Ministry while Customs and Central Excise are under Finance Ministry).

Ancient monuments and antiques - Ancient Monument Prevention Act authorises Central Government to prohibit or restrict removal of any antiquities. Antiques and Art Treasures Act also authorises Central Government to restrict exports of art treasures and antiquities. Export of the antiquities and art treasures prohibited under order issued under these Acts is deemed to have been prohibited under section 11 of Customs Act. - - As per Ancient Monument Prevention Act, an antique includes any coin, sculpture, manuscript, epigraph or other work of arts or craftsmanship. It should be in existence for at least 100 years.

Arms Act - Arms and ammunition cannot be imported or exported without a licence.

Narcotics, Psychotropic Substances Act - Narcotics like Gard, opium etc. are becoming a big danger to new generation. The Act authorises Customs and Excise officers to search, seize, recover and confiscate any narcotic, psychotropic substance or its derivatives.

Coffee Act - The Act imposes Customs Duty on export of Coffee. Coffee can be exported only with authorisation from Coffee Board.

Coir Industry Act - Coir fibre, coir yarn or coir products can be exported only under licence from Coir Board.

Tea Act - Tea can be exported only against a licence from Tea Board.

Thus, Customs Act and administrative machinery developed under the Act is used for multifarious activities and collection of revenue is only one of the activities, though major one.

Warehousing

After the goods are imported, the importer can keep the goods in warehouse without payment of customs duty. He can pay customs duty and clear imported goods from the warehouse as and when needed. This facility is available to traders as well as direct importers.

Goods are cleared from customs port under bond and kept in the warehouse. Procedure for removal of goods from port for warehousing has already been discussed in earlier chapter. The goods kept in warehouse are then cleared on payment of duty when needed.

A trader can import goods and keep in warehouse. He can supply the goods to buyers from warehouse, after paying customs duty. Thus, small importers, duty free shops etc. can procure goods from bonded warehouse without actually importing the goods.

Even duty free clearances can be made from bonded warehouse, if buyer is otherwise eligible for obtaining goods duty free, as confirmed vide MF(DR) circular No. 79/2000-Cus dated 22-9-2000.

The facility is useful to direct importers also, in following cases -

(a) Importer has to plan his purchases well in advance. He also has to maintain some stocks to ensure that there is no loss of production if a shipment of imported raw materials is delayed. Thus, when the goods arrive in the port, the importer may not immediately require the goods as he may be having stock.

(b) The importer may be intending to clear the goods without payment of duty under Advance Licence or DEPB scheme. However, the licence / DEPB may not be in hands when imported goods have arrived at the docks.

(c) The importer may not be having adequate ready funds to pay customs duty.

(d) Importer would like to store the imported goods without payment of customs duty as far as possible and pay duty only when goods are required for his immediate use, so that his funds are not blocked.

Warehousing by traders - EXIM policy permits keeping imported goods in bonded warehouse without payment of duty. These can be cleared later on payment of duty. Even goods under negative list can be imported by traders and kept in warehouse. These can later be supplied on payment of duty against specific licence.

Warehousing to avoid demurrage and pilferage - If the goods are not cleared from port, heavy demurrage is payable to port authorities. Provision for heavy demurrage has been made to discourage delays in clearance of goods from port. There is shortage of space in ports. Port authorities have to make sure that ports are not cluttered with goods and space is available to store new incoming goods. Thus, importer has to clear goods from ports as quickly as possible.

Heavy Pilferage in the ports - Goods lying in port area are susceptible to pilferage and hence importer is interested in taking out goods as soon as possible.

Warehouse to store imported goods without payment of duty - Provision of warehousing has been made in Customs Act to enable importer to store goods in warehouse without payment of duty and clear goods from warehouse only when these are actually required by him. Importer only has to pay warehousing charges. Thus, he can delay payment of customs duty. Both public and private warehouses are available all over India where goods can be stored.

Public/Private Bonded warehouses – Warehouse can be opened at places declared as ‘warehousing station’. Power to declare a place as warehousing station have been delegated to Chief Commissioner. - Chapter 10 Para 2 of CBE&C’s Customs Manual, 2001.

Warehouses can be public or private.

Warehousing period - Section 61 of Customs Act prescribes warehousing period. If goods are not removed within the prescribed period, Customs Officer can sell the goods after notice to owner as much quantity as he deems fit.

Normal warehousing for One year - Section 61(1)(b) provides warehousing period as one year from the date of issue of order by Customs Officer permitting deposit of goods in a warehouse. The period of one year can be reduced by Commissioner if goods are likely to deteriorate. This period can be increased by Commissioner upto 6 months and by Chief Commissioner of Customs without any limit of period.

Five years warehousing for capital goods for EOU - The warehousing period can be upto five years in case of capital goods intended for use in EOU unit, as per section 61(1)(a) of Customs Act. This period can be reduced by Commissioner if goods are likely to deteriorate. The period can be extended without any upper limit.

However, if goods are stored beyond a period of five years, interest is payable for storing goods beyond the period of five years in the warehouse. The interest is payable on the basis of duty payable at the time of clearance (and not duty assessed when goods were warehoused). [section 61(2)(i)].

Interest payable beyond warehousing period - In case of goods allowed to be warehoused, interest is payable at prescribed rate.  - - In case of EOU, interest is payable if warehousing is beyond three years in case of inputs/consumables/spares and five years in case of capital goods. - - Presently, the interest rate is 15% [Notification No. 18/2003-Customs (NT) dated 1-3-2003]. Earlier, the interest rate was 24%.

In case of normal warehousing (other than EOU), interest is payable if goods are warehoused beyond 90 days. [section 61(2)(ii)].

Interest should be payable upto and including the date of payment of duty. – MF(DR) circular No. 48/2002-Cus dated 9-8-2002.

Waiver of interest – Provision of interest @ 15% after just 90 days has made the provision of warehousing slightly unattractive. [Now, warehousing will be beneficial only when goods can be cleared later without payment of duty against advance license etc.]

Manufacture in bonded warehouse - With sanction of Assistant Commissioner, manufacturing or other operations can be carried out in the warehouse (section 65 of Customs Act). The facility is useful if final products are to be exported after manufacture (though final products can be cleared for home consumption too). After manufacture, the produced goods may either be exported without payment of customs duty or cleared for home consumption on payment of duty.

These provisions are applicable to EOU, STP or EHTP units who have to manufacture goods under customs bond. They have to obtain license from customs.

Clearance from bonded warehouse - Goods stored in warehouse can be cleared in one of the following ways.

Removal for home consumption - Under section 68, goods stored in warehouse can be removed on payment of duty. Importer has to submit bill of entry in prescribed form. Duty, penalties, rent and interest is payable as per rules. Goods are then allowed to be cleared by Customs Officer. Separate form of bill of entry has been prescribed for this purpose. It may be remembered that as per section 15(1)(b), rate of duty as prevalent on date of presentation of Bill of Entry for home consumption for clearance from warehouse is applicable and not rate prevalent when goods were removed from customs port. -

Transfer to other bonded warehouse - Section 67 permit removal to other warehouse under bond. Transit bond for customs duty involved  backed by bank guarantee / security should be furnished. In the case of EOU, bank guarantee for transfer of goods is not required. - Chapter 10 Para 13 of CBE&C’s Customs Manual, 2001.

Clearance against advance license / DEPB - Goods stored in a customs bonded warehouse can be cleared against advance license. These can also be cleared by adjusting customs duty in a DEPB scrip. Clearance against DEPB scrip is available only at ports where TRA (Telegraphic Release Advice) facility is available. - CBE&C circular No. 16/99-Cus dated 7-4-1999

Clearance for export - Warehoused goods can be exported without payment of duty, vide section 69 of Customs Act. A shipping bill has to be presented. Export duty, penalties, rent, interest etc. is payable as applicable and then goods are allowed to be exported.

Reassessment can not be made at warehouse  – The department has clarified as follows – ‘Insofar as value for assessment of duty is concerned, it is not required to be re-determined and it is the original value as determined at the time of filing of into Bond Bill of Entry and assessments before warehousing’. - Chapter 10 Para 15 of CBE&C’s Customs Manual, 2001.

This is the policy normally followed in warehouses. - - The declaration to be given by importer on Green Bill of Entry (which is required to be submitted at the time of clearance from warehouse) also indicates the intention that there will be no assessment of goods (for classification and value) at the time of clearance from warehouse. The declaration on Green Bill of Entry is significantly different from declaration required to be given on Bill of Entry which is required to be submitted at the time of clearance from the port/airport. The declaration on Green Bill of Entry does not contain declarations related to classification or valuation.

Storage without warehousing - The warehousing we have seen above is after goods are assessed to duty. However, occasionally, it may happen that assessment of duty may take time for want of some clarification/reports etc. In such cases, goods lying in docks may incur heavy demurrage. There is a provision that Customs department can issue ‘detention certificate’ and on the basis of such certificate, port trust authorities may remit demurrage. However, chances of pilferage or loss are high if goods lie at docks. Hence, if assessment is likely to be delayed, section 49 allows that goods can be stored in public warehouse. However, such goods are not to be treated as ‘warehoused goods’ for purposes of Customs Act as the goods are not assessed. Hence, it is called ‘storage without warehousing’ or ‘warehousing without warehousing’. The goods are cleared from the warehouse after duty is assessed and paid.

Containers and Inland Container Depots

Conventional mode of shipment was to pack the goods in cases. Such cases can be of varying sizes and weights, due to which their handling and storage in ships is difficult. Hence, modern trend in sea or air freight is to use containers. These containers are usually quite big - upto size of a truck. Goods are stuffed in the container and then the whole container is loaded/unloaded with the help of crane. This also reduces chances of damage during handling of cargo. [Reader will be able to such big containers loaded in trucks on a Highway or on railway wagons.]

Inland Container Depot / Container Freight Station - Importer would like to take delivery of the goods from near his place. Similarly, exporter would like to stuff the goods in container itself at his factory so that whole container can be sent for export. Hence, section 7(aa) of Customs Act make provision for approving ‘Inland Container Depots’ for unloading of imported goods and loading of export goods. Under these powers, ICDs have been appointed at various places.

ICD / CFS essentially function like a dry port. ICD / CFS functions as common user facility offering all services for customs clearance like any other port. It has facilities for handling and temporary storage of imported / export goods and empty containers. These are carried to / from ICD under customs transit by any mode of transport. All activities related to clearance of goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export, transshipment, take place from such stations. - Chapter 23 Para 2 of CBE&C’s Customs Manual, 2001.

Exporter has to submit shipping bill at the container depot. Export containers can be sealed at the depot. Normally, the containers will not be examined at the gateway port. However, checking may be done if seal is damaged or there is some information or doubt.

Import cargo is brought to the ICD by road / rail from sea-port / airport. Importer can take delivery from ICD on submitting bill of entry and making payment of duty.

These containers are moved from ICDs to ports/airports by way of railway wagons/trucks.

De-stuffing of containers - In view of economy achieved in sending goods by containers, international transport agencies often collect small parcels and stuff them in a container. Since all parcels in a container may not be for same destination, these are often de-stuffed at another port and transshipped to another container for shipment to another country.

Transport of Containers containing export cargo - Normally, transport of the containers will be by rail. However, in case rail facilities are not available, containers containing export cargo can be sent by road by executing a bond equal to value of goods as a revenue safeguard. - Detailed procedure has been prescribed, vide CBE&C circular No. 57/98-Cus dated 4-8-1998.

Transport of Containers containing imported cargo - Containers containing imported cargo can be sent by road from gateway port to CFS / ICD. Bond should be executed by custodian of cargo. - Detailed procedure has been prescribed, vide CBE&C circular No. 69/99-Cus dated 6-10-1999.

Container Freight Station – ICD is normally located outside port towns, whereas no site restrictions apply to CFS. The CFS is treated as extension of a port / ICD / air cargo complex. An ICD may have CFS attached to it. An ICD is a place where containers are aggregated for onward movement to and from ports, whereas CFS is a place where containers are stuffed, un-stuffed and aggregation / segregation of cargo takes place. - Chapter 23 Para 4 of CBE&C’s Customs Manual, 2001.

Consolidation / reworking of cargo at gateway port - Cargo brought from ICD / CFS may be to different destinations / different shipping lines. Hence, it is necessary to consolidate and re-work the cargo received from various ICD / CFSs and them send it directly to various destinations. Facility of congregation / assimilation of LCL (LCL – Loose Container Load – FCL means Full Container Load) cargo at the inland ICDs / CFSs, movement of this cargo to HUB points for further re-working and export to destination ports is permitted. Prescribed procedure should be followed. - CBE&C circular No. 55/2000-Cus dated 30-6-2000. – see Chapter 11 of CBE&C’s Customs Manual, 2001 for detailed procedure.

Customs House Agent

An importer or exporter can himself transact business of imports and exports. However, generally, it is not possible for an individual to complete customs formalities and obtain clearance from ports. Hence, appointment of Customs House Agent (CHA) is necessary. An importer can appoint or change CHA at his will. 'No objection Certificate' from previous CHA is not necessary. - CC, New Delhi PN 32/97 dated 5.4.1997.

In order to ensure that only authorised persons are permitted to work as CHA, section 146 provide for licence to persons to carry on business as an agent relating to import or export of goods or entry/departure of conveyance. Board is authorised to make regulations for this purpose.

Appeals under Customs

Except for change in section numbers and some words which are relevant only to customs; provision of appeal are identical in Excise and Customs. In fact, the Appellate Tribunal [CESTAT] is same. Under section 128 of Customs Act, appeal against decision or order passed under the Act by any officer lower than rank of Commissioner, lies with Commissioner (Appeals).

Appeal against order of Commissioner of Customs as adjudicating authority or Commissioner (Appeals) lies with Tribunal. [section 129A(1) of Customs Act] Appeal does not lie in respect of (a) Any goods imported or exported as baggage (b) any goods loaded in conveyance for importation in India but not unloaded at place of destination in India (c) payment of duty drawback. Tribunal can also refuse to admit an appeal if the value of goods or difference of duty or penalty/fine is less than Rs. 50,000. Revision application lies with Central Government under section 129DD in respect of matters where appeals does not lie with Tribunal i.e. in respect of baggage, drawback and goods loaded for importation in India but not unloaded in India.