Changes in Customs Law  made vide Finance Act, 2021

Introduction

Nirmala Sitharaman, Minister of Finance, Government of India, presented Budget 2021-22 on 1-2-2021 at 11.00 AM.  Finance Bill, 2021 was also presented. The Finance Bill, 2021 has been passed by both houses of Parliament. The provisions will be effective when the Bill receives assent of President (expected on or before 31-3-2021)

Changes made by Finance Act, 2021

The changes in Customs Act and Customs Tariff Act are as follows.

Commissioner (Appeals) can exercise only certain powers – Commissioner of Customs (Appeals), shall exercise powers only under Chapter XI [baggage, goods imported by post, courier], section 108 [power to summon persons to give evidence and produce documents] and 110(1D) [dispose of seized gold] – section 5(3) of Customs Act amended w.e.f. March, 2021.

Common Customs Electronic Portal – CBI&C may notify a common portal, to be called the Common Customs Electronic Portal, for facilitating registration, filing of bills of entry, shipping bills, other documents and forms prescribed under Customs Act or under any other law for the time being in force or the rules or regulations made thereunder, payment of duty and for such other purposes, as the CBI&C may, by notification, specify – Sections 154C and 2(7B) of Customs Act inserted w.e.f. March, 2021.

Sunset clause to any conditional customs exemption notification – Any conditional customs exemption notification issued under section 25(1) of Customs Act will have sunset clause. Unless otherwise specified, varied or rescinded, it will be valid only upto 31st March falling immediately after two years from date such grant or variation – section 25(4A) of Customs Act inserted w.e.f. March, 2021.

The notifications existing on 1-2-2021 and those which will be issued till passing of Finance Act, 2021 will cease on 31-3-2023 – proviso to section 25(4A) of Customs Act inserted w.e.f. March, 2021.

Time limit for issue of show cause notice under sections 28(1) or 28(4) – Any inquiry or investigation under Customs Act culminating in the issuance of a notice under section 28(1) or 28(4) of Customs Act shall be completed by issuing such notice, within a period of two years from the date of initiation of audit, search, seizure or summons, as the case may be – section 28BB(1) of Customs Act inserted w.e.f. March, 2021.

The Principle Commissioner or Commissioner of Customs can extend the period by further one year  – proviso to section 28BB(1) of Customs Act inserted w.e.f. March, 2021.

For computing the period under section 28BB(1), the period during which stay was granted by an order of a court or tribunal, or the period for seeking information from an overseas authority through a legal process, shall be excluded –  section 28BB(2) of Customs Act inserted w.e.f. March, 2021.

Nothing contained in section 28BB shall apply to any such proceeding initiated before the date on which the Finance Bill, 2021 receives the assent of the President  –  explanation to section 28BB(1) of Customs Act inserted w.e.f. March, 2021.

The two year limit is not for completing the adjudication but only for issue of show cause notice. Then, adjudication can be done anytime.

Bill of Entry to be presented before end of day (including holidays) preceding the day on which vehicle, aircraft or vessel arrives – Bill of Entry should be presented before end of day (including holidays) preceding the day on which vehicle, aircraft or vessel arrives –section 46(3) of Customs Act amended w.e.f. March, 2021.

CBI&C can prescribe different time limits for presentation of Bill of Entry, which shall not be later than the end of the day of such arrival – – first proviso to section 46(3) of Customs Act inserted w.e.f. March, 2021.

The Bill of Entry can be presented upto 30 days prior to expected arrival of aircraft or vessel by which goods have been shipped for importation into India – second proviso to section 46(3) of Customs Act, renumbered w.e.f. March, 2021.

If Bill of Entry is not filed in time, charges are payable – third proviso to section 46(3) of Customs Act, renumbered w.e.f. March, 2021.

Easy way of increasing revenue.

Commissioner (Appeals) can approve disposal of gold seized  – Jurisdictional Commissioner (Appeals) can approve disposal of gold seized under section 110(1) of Customs Act [presently, details have to be submitted to Magistrate] – insertion of section 110(1D), amendment to section 5(3) and amendment to explanation to section 139 of Customs Act w.e.f. March, 2021.

Reducing work of department.

Confiscation of goods entered for exportation for wrongful claim if remission or refund of tax – The following goods shall be liable for confiscation –  any goods entered for exportation under claim of remission or refund of any duty or tax or levy to make a wrongful claim in contravention of the provisions of Customs Act or any other law for the time being in force – section 113(ja) of Customs Act inserted w.e.f. March, 2021.

Penalty for fraudulent utilisation of input tax credit for claiming refund on goods entered for export – Where any person has obtained any invoice by fraud, collusion, willful misstatement or suppression of facts to utilise input tax credit on the basis of such invoice for discharging any duty or tax on goods that are entered for exportation under claim of refund of such duty or tax, such person shall be liable for penalty not exceeding five times the refund claimed – section 114AC of Customs Act inserted w.e.f. March, 2021.

For the purposes of section 114AC of Customs Act, the expression “input tax credit” shall have the same meaning as assigned to it in section 2(63) of the Central Goods and Services Tax Act, 2017 – explanation to  section 114AC of Customs Act inserted w.e.f. March, 2021.

Amendment to export or import documents by importer or exporter himself – Presently, section 149 of Customs Act empowers proper officer to amend export or import document.

Now, such amendment may also be done electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria – second proviso to section 149 of Customs Act inserted w.e.f. March, 2021.

Such amendments, as may be specified by CBI&C, may be done by the importer or exporter on the common portal – third proviso to section 149 of Customs Act inserted w.e.f. March, 2021.

Good step towards ease of doing business.

Notice, order, summons, decision can be communicated through common portal – Any notice, order, summons, decision can be communicated by making it available on common portal – section 153(1)(ca) of Customs Act inserted w.e.f. March, 2021.

Safeguard duty if EOU and SEZ clears goods in DTA or if specifically made applicable – Provisions of safeguard duty will not apply to imports by EOU or SEZ, unless specifically made applicable to such undertaking or unit or if EOU/SECZ unit clears the goods as such in DTA, in which case, safeguard measures shall be applied on the portion of the article so cleared or used, as was applicable when it was imported into India – section 8B(6) of Customs Tariff Act The word ‘or’ is inserted w.e.f. March, 2021. [This is to correct drafting mistake].

Safeguard measures – Safeguard measures means safeguard duty or tariff rate quota or such other measures imposed under section 8B(1) of Customs Tariff Act – rule 2(fa) inserted w.e.f. 1-2-2021. The ‘Customs Tariff (Identification and Assessment of Safeguard Duty) Rule, 1997 have been amended making changes relating to determination of serious injury or threat of injury and refunds.

Anti-circumvention provision – Countervailing duty on other articles if description or country of origin changed can be levied from date of initiation of enquiry – Often, when countervailing duty on subsidized articles is imposed, description of imported goods is changed or goods are imported in unassembled or dis-assembled condition or country of origin is changed or some other way is adopted to render the countervailing duty ineffective. In such case, countervailing duty can be imposed on such article also from such date, not earlier than the date of initiation of the inquiry, as the Central Government may, by notification in the Official Gazette, specify – section 9(1A) of Customs Tariff Act. The words in italics inserted w.e.f. March, 2021.

Increase in Countervailing duty on subsidized articles, if export price was decreased by exporter in foreign country – If Countervailing duty on subsidized articles is imposed in India, it is possible that the exporter in foreign country may decrease his selling price and sale price in India may remain unchanged. In such case, Countervailing dutyon subsidized articles may be modified in India to counter effect of such decrease.

The statutory provision is as follows –

Where the Central Government, on such inquiry as it considers necessary, is of the opinion that absorption of countervailing duty imposed under section 9(1) has taken place whereby the countervailing duty so imposed is rendered ineffective, it may modify such duty to counter the effect of such absorption, from such date, not earlier than the date of initiation of the inquiry, as the Central Government may, by notification in the Official Gazette, specify – section 9(1B) of Customs Tariff Act inserted w.e.f. March, 2021.

For the purposes of section 9(1B), “Absorption of countervailing duty” is said to have taken place – (a) if there is a decrease in the export price of an article without any commensurate change in the resale price in India of such article imported from the exporting country or territory; or (b) under such other circumstances as may be provided by rules – explanation to section 9(1B) of Customs Tariff Act inserted w.e.f. March, 2021.

Countervailing duty on subsidized articles if EOU and SEZ clears goods in DTA or if specifically made applicable – Provisions of Countervailing duty on subsidized articles will not apply to imports by EOU or SEZ, unless specifically made applicable to such undertaking or unit or if EOU/SEZ unit clears the goods as such in DTA, in which case, Countervailing duty on subsidized articles shall be applied on the portion of the article so cleared or used, as was applicable when it was imported into India – section 9(2A) of Customs Tariff Act inserted w.e.f. March, 2021.

Countervailing duty on subsidized goods can continue upto five years – Presently, Countervailing duty on subsidized articles continues for five years. Now, it is provided that it can continue upto five years  – section 9(6) of Customs Tariff Act amended w.e.f. March, 2021.

It is also provided that if Countervailing duty on subsidized articles is revoked temporarily, such revocation shall not exceed one year at a time – third proviso section 9(6) of Customs Tariff Act inserted w.e.f. March, 2021.

Proviso to rule 28(2) and 24(4) Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for determination of Injury) Rules, 1995 as inserted w.e.f. 1-7-2021 provide that review shall be completed at least three months prior to expiry of duty under review.

Anti-circumvention provision – Anti dumping duty on other articles if description or country of origin changed can be levied from date of initiation of enquiry – Often, when anti-dumping duty is imposed, description or name or composition of imported goods is changed or goods are imported in unassembled or dis-assembled condition or country of origin is changed or some other way is adopted to render the anti-dumping duty ineffective. In such cases, anti-dumping duty can be imposed on such article originating in or exported from such country, as the case may be, from such date, not earlier than the date of initiation of the inquiry, as the Central Government may, by notification in the Official Gazette, specify – section 9A(1A) of Customs Tariff Act. The words in italics inserted w.e.f. March, 2021.

Rule 26(4A) of Customs Tariff (Identification, Assessment and Collection of Anti-dumping duty on Dumped Articles and for determination of Injury) Rules, 1995 has been inserted enabling Central Government to resort to provisional assessment till decision is taken.

Increase in Anti dumping duty, if export price was decreased by exporter in foreign country – If anti-dumping duty is imposed in India, it is possible that the exporter in foreign country may decrease his selling price and sale price in India may remain unchanged. In such case, anti-dumping duty may be modified in India to counter the effect of such decrease.

The statutory provision is as follows –

Where the Central Government, on such inquiry as it may consider necessary, is of the opinion that absorption of anti-dumping duty imposed under section 9A(1) has taken place whereby the anti-dumping duty so imposed is rendered ineffective, it may modify such duty to counter the effect of such absorption, from such date, not earlier than the date of initiation of the inquiry, as the Central Government may, by notification in the Official Gazette, specify – section 9A(1B) of Customs Tariff Act inserted w.e.f. March, 2021.

For the purposes of section 9A(1B), “Absorption of anti-dumping duty” is said to have taken place,– (a) if there is a decrease in the export price of an article without any commensurate change in the cost of production of such article or export price of such article to countries other than India or resale price in India of such article imported from the exporting country or territory; or (b) under such other circumstances as may be provided by rules –  explanation to section 9A(1B) of Customs Tariff Act inserted w.e.f. March, 2021.

No anti dumping duty in case of imports by EOU and SEZ, unless such goods are cleared in DTA – Anti-dumping duty is not applicable for imports by EOU or SEZ units, unless (i) it is specifically made applicable in the notification imposing anti-dumping duty or (ii) such article is either cleared as such into the domestic tariff area or used in the manufacture of any goods that are cleared into the domestic tariff area, in which case, antidumping duty shall be imposed on that portion of the article so cleared or used, as was applicable when it was imported into India. [section 9A(2A) of Customs Tariff Act as substituted w.e.f. March, 2021.].

Discontinuation of anti-dumping duty i.e. sunset review and extension of anti-dumping duty – Anti dumping duty ceases on the expiry of five years from date of imposition. However, Central Government can extend the anti-dumping duty for a further period upto five years, if it is of the opinion that cessation is likely to lead to continuation or recurrence of dumping and injury. If the review was initiated before expiry of five years, anti-dumping duty may continue to remain in force pending outcome of such review for a further period of one year. If the anti-dumping duty is revoked temporarily, the period of such revocation shall not exceed one year at a time – section 9A(5) of Customs Tariff Act, amended w.e.f. March, 2021.

Proviso to rule 28(2) and 23(2) of Customs Tariff (Identification, Assessment and Collection of Anti-dumping duty on Dumped Articles and for determination of Injury) Rules, 1995 as inserted w.e.f. 1-7-2021 provides that review shall be completed at least three months prior to expiry of duty under review.

Agriculture Infrastructure and Development Cess (AIDC) – An Agriculture Infrastructure and Development Cess (AIDC) has been imposed on some specified products w.e.f. 2-2-2021, vide clause 115 of Finance Bill, 2021. It is ‘duty of customs’. The purpose is to finance agriculture infrastructure and other development expenditure. AIDC rate can be upto rate of customs duty as specified in First Schedule to Customs Tariff Act.

The value for purpose of AIDC is same as per section 14 of Customs Act. All provisions of Customs Act relating to assessment, levy, refund etc. will apply to AIDC.

The goods on which AIDC is leviable and rate of AICD has been specified in Notification No. 11/2021-Cus dated 1-2-2021.

AIDC is not leviable on goods imported under Advance Authorisation, EOU and FTA (Free Trade Agreements).

Gold & Silver (and their dore) imported under export promotion schemes (which is exempt under Notification No. 56/2000-Cus dated 5-5-2000 and 57/2000-Cus both dated 8-5-2000) has been exempted from Agriculture Infrastructure and Development Cess (AIDC) w.e.f. 17-2-2021.

AIDC is ‘duty of customs’ and hence has to be included while calculating Social Welfare Surcharge.

However, social welfare surcharge is not leviable on AIDC on silver (7106) and Gold (7108) – Notification No. 13/2021-Cus dated 1-2-2021.

Partial Exemption from AIDC in respect of trade agreements – Partial exemption from AIDC (the partial exemption same as applicable to basic customs duty) has been granted to goods imported under following trade agreements – (a) LDC (Least Developed Countries) – 96/2008-Cus dated 13-8-2008 (b) MERCOSUR Member States – 57/2009-Cus dated 30-5-2009 (c) Chile – 101/2007-Cus dated 11-9-2007 (d) Asia Pacific Trade Agreement APTA) – 50/2018-Cus dated 30-6-2018. All these notifications haven been amended vide Notification No. 16/2021-Cus dated 5-2-2021.

Payment of AIDC of EOU if goods or final product cleared in DTA – CBI&C, vide Circular No. 07/2021-Customs dated 22-2-2021 has clarified as follows.

As per Notification No. 11/2021- Customs dated 1-2-2021 goods imported by EOUs/EHTP units/STP units (collectively called EOUs) are exempted from the AIDC as the goods imported by these units enjoy benefit of exemption from basic customs duty under notification no. 52/2003-Cus dated 31.03.2003.

In case of EOU selling finished goods in DTA, BCD exempted on import of inputs used in such finished goods is to be paid vide Notification No. 52/2003-Customs dated 31.03.2003. Similarly, AIDC exemption under Notification no. 11/2021-Customs dated 01.2.2021 also gets denied on such inputs and same is also required to be paid by EOU.

In addition to clearance of goods in DTA there are many situations like clearance of inputs; capital goods; packing material suitable for repeated use such empty cones, bobbins, containers; left over textile fabric or textile material etc. or exit from EOU scheme. In such cases duty/tax of which exemption under Notification No. 52/2003-Customs dated 31.03.2003 was availed at the time of import is required to be paid at the time of clearance. In case of clearance of capital goods, applicable depreciation is allowed for denial of exemption. Unutilized left over textile fabric or textile material is allowed to be cleared into DTA on payment of duty leviable at the time of import but for the exemption on transaction value as if the goods have been manufactured in that unit.

Exemption of duty/tax on goods imported under Notification No. 52/2003-Customs dated 31-03-2003 is also denied on account of breach of various conditions of EOU scheme. Once EOU is required to pay back BCD for which exemption was claimed and allowed under Notification No. 52/2003-Customs dated 31.03.2003 at the time of import then exemption of AIDC, if availed, in all such situations shall also be denied.

Thus, EOU shall be required to pay AIDC in the manner of payment of BCD against the goods imported under exemption Notification No. 52/2003-Customs dated 31.03.2003 under various situations.

Social Welfare surcharge 10% on gold, silver, petrol and diesel – Social Welfare surcharge was 3% on gold, silver, petrol and diesel vide Notification No. 12/2018-Cus dated 2-2-2018. Now this notification has been rescinded and social welfare surcharge would be 10% w.e.f. 2-2-2021 on these goods.

Amendment to Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 – Following changes are made – (a) job-work of the materials allowed (except gold and jewellery and other precious metals) imported under concessional rate of duty (b) 100% out-sourcing for manufacture of goods on job-work permitted (c) imported capital goods that have been used for the specified purpose can be cleared on payment of differential duty, along with interest, on the depreciated value.

The depreciation norms on capital goods would be the same as applied to EOUs, as per Foreign Trade Policy.

Goods imported at concessional rate can be used for providing output service also.

The Amended Rules provide for intimation when goods are received for job work and quarterly return.

Presently, EOU require specific permission for job work outside. Sub-contract only upto 50% of their overall production of EOU is permitted.

General permission for sending goods for job work without restrictions is good step towards ‘ease of doing business’, good relief for EOU.