Charging section [Section 12] :
1. This section is the charging section of the Act. Except as provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into and exported from India [Sub-section (1)].
2. The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government.
Hence, there is no general exemption to goods imported by Government. But imports by Indian Navy, specific equipment required by police, Ministry of Defence, Costal Guard etc. are fully exempt from customs duty by virtue of specific notifications subject to fulfillment of conditions and/or procedure set out in the notification.
The following propositions arise from the above provisions:-
1. Duties of customs shall be levied on goods. However, it may be noted that this levy is subject to other sections in the Act. For instance:
Section 13 – no duty on pilfered goods
Section 22 – reduced duty on damaged goods
Section 23 – remission of duty on destroyed goods.
2. The goods shall be such as are imported or exported to or from India;
3. The duty shall be charged at such rates as may be specified under the Customs Tariff Act, 1975.
4. Government goods shall be treated at par with non-Governmental goods for the purposes of levy of customs duty.
Analysis of section 12
(a) Charge on goods
The charge of customs duty is considered to be on the goods and not on the person importing them or paying the duty. Being such, it is expected to be passed on to the buyer.
(b) Taxable event-Import of goods into India/export of goods from India
Section 12 makes it abundantly clear that importation or exportation of goods into or out of India is the taxable event for payment of the duty of customs.
Earlier, a lot of problems were faced in determining the point at which the importation or exportation takes place. The root cause of the problem was the definition of “India” given by section 2(27). Under the said section, India includes territorial waters of India. Consequently, even an innocent entry of a vessel into the territorial waters of India would result in import of goods. Further, it was almost impossible to determine when exactly the vessel crossed the territorial waters limit. But this matter is no longer resintegra.
Relevant judgments regarding the determination of taxable event
The main test for determining the taxable event is the happening of the event on which the charge is affixed.
I. Imports
(a) In case of goods cleared for home consumption
The Supreme Court observed that import of goods will commence when they cross the territorial waters, but continues and is completed when they become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and bill of entry for home consumption is filed.
[Garden Silk Mills v. UOI 1999 (113) E.L.T. 358 (S.C.)]
(b) In case of goods cleared for warehousing
In case of warehoused goods, the custom barriers would be crossed when they are sought to be taken out of customs and brought to the mass of goods in the country.
[Kiran Spinning Mills v. Collector of Customs 1999 (113) E.L.T. 753 (S.C.)]
II. Exports
Export of goods is complete when the goods cross the territorial waters of India.