Additional duty of customs [Section 3(1) and 3(3) of the Customs Tariff Act]

Additional duty of customs [Section 3(1) and 3(3) of the Customs Tariff Act] :

This duty is popularly referred to as countervailing duty (CVD).

1. CVD under section 3(1)
It is the duty equal to	· Duty of excise for the time being in force leviable on a like article produced or manufactured in India. · If a like article is not so produced or manufactured, duty which would be leviable on the class/description of articles to which the imported article belongs. · Where such duty is leviable at different rates, the highest duty.
Leviable on	Any imported goods
Rate of duty	In case the imported goods are	Rate of CVD
	(i) Alcoholic liquor for human consumption	Rate of CVD will be determined by the Central Government by issuing a notification, having regard to the excise duty leviable on like alcoholic liquor in different States.
	2. Any other goods	Rate of excise duty
2. CVD under section 3(3)
It is the duty equal to	Duty of excise leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of any article imported into India.
Leviable on	Any imported article
Rate of duty	Such portion of the excise duty leviable on such raw materials, components and ingredients as, in either case, may be determined by rules made by the Central Government in this behalf.
3. Assessable value for computing CVD under section 3(1) and 3(3)
In case the duty is charged on the like article produced/ manufactured in India	Assessable value
(i) On ad-valorem basis	Value under section 14(1) /tariff value determined section 14(2).		xxx
	Add: Basic custom duty		xxx
	Assessable value		xxx
(ii) On the basis of the tariff value fixed under 3(2) of the Central Excise Act, 1944	Such tariff value
(iii) On the basis of MRP under section 4A [including goods notified under section 3 read with clause (1) of Explanation III of the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955]	Retail sale price on the imported article			xxx
	Less: Abatement notified by Government for like article			xxx
	Assessable value of the imported article			Xxx
4. The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act.

Statutory Provisions: Provisions of sub-section (1) to (4) and sub-section (7) and (8) of section 3 of the Customs Tariff Act relating to CVD are enumerated as follows:-

Additional duty equivalent to excise duty leviable on like article manufactured in India: Any article which is imported into India is also liable to a duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. This duty is called as additional duty. If the excise duty is leviable at a percentage of the value of the goods, the additional duty will also be calculated at that percentage of the value of the imported article.

Rate of additional duty in case of alcoholic liquor: In case of any alcoholic liquor for human consumption imported into India, the Central Government may notify the rate of additional duty having regard to the excise duty for the time being leviable on like alcoholic liquor produced or manufactured in different States. In case if the like alcoholic liquor is not produced or manufactured in any State, then, the excise duty which would be leviable for the time being in different States on the class or description of alcoholic liquor to which such imported alcoholic liquor belongs would be the applicable rate [Sub-section (1)].

Meaning of “excise duty for the time being leviable on a like article if produced or manufactured in India”

“Excise duty for the time being leviable on a like article if produced or manufactured in India” means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or man ufactured, which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty [Explanation to sub-section (1)].

Valuation for additional duty: Sub-section (2) of section 3 prescribes the manner for computing the value of imported articles for the purpose of levying additional duty in different circumstances. If the additional duty leviable under sub-sections (1) and (3) is chargeable as a percentage of the value of the imported article, the value of the imported article will be the aggregate of—

(i) the value of the imported article determined under section 14(1) of the Customs Act, 1962 or the tariff value of such article fixed under 14(2) and

(ii) any customs duty chargeable under section 12 of the Customs Act, 1962 plus any other sum chargeable on that article under any law for the time being in force as an addition to, but does not include—

(a) the additional duty leviable under sub-sections (1), (3) and (5);

(b) the safeguard duty referred to in sections 8B and 8C;

(d) the anti-dumping duty referred to in section 9A

Valuation for articles covered under retail sale price (RSP) provisions: In case of an article imported into India,—

(a) in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 to declare on the package thereof the retail sale price (RSP) and

(b) where the like article manufactured in India, or in case where such like article is not so manufactured, then, the class or description of articles to which the imported article belongs, is—

the goods notified under section 4A(1) of the Central Excise Act, 1944, the value of the imported article will be deemed to be the RSP declared on the imported article less the abatement as notified by the Central Government. Valuation for articles covered under Medicinal and Toilet Preparations (Excise Duties) Act, 1955: In case of an article imported into India,—

(a) in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 to declare on the package thereof the retail sale price (RSP) and

(b) where the like article manufactured in India, or in case where such like article is not so manufactured, then, the class or description of articles to which the imported article belongs, is—

the goods notified under section 3 read with clause (1) of Explanation III of the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, the value of the imported article will be deemed to be the RSP declared on the imported article less the abatement as notified by the Central Government.

Imported article having more than one RSP: Where on any imported article more than one retail sale price is declared, the maximum of such retail sale price will be deemed to be the retail sale price for the purposes of this section.

Valuation for articles covered under tariff value provisions: In case of an article imported into India, where the Central Government has fixed a tariff value for the like article produced or manufactured in India under section 3(2) of the Central Excise Act, 1944, the value of the imported article will be deemed to be such tariff value.

Countervailing duty under section 3(3): Special additional duty under sub-section (3) is levied to counter balance the excise duty leviable on raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of the imported article. The Central Government can levy such duty if it is satisfied that it is necessary in the public interest to do so even if such article is liable to additional duty leviable under sub-section (1). The quantum of additional duty will be determined as per the rules made in this behalf [Sub-section (3)].

The Central Government, while making such rules will have regard to the average quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article (4).

Provisions of Customs Act apply to additional duty: The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act [Sub-section (8)].

The duty chargeable under this section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force [Sub-section (7)].

Propositions drawn from some relevant judgments:-

1. Hyderabad Industries Ltd. v. UOI 1999 (108) ELT 321 (SC) The Supreme Court held that section 3 of the Customs Tariff Act is an independent charging section.

The Supreme Court also held that additional duty could be levied only if the article is such that could be manufactured or produced in India. If the article cannot be subjected to excise levy because it is not produced or manufactured, then on the import of like articles, additional duty cannot be levied.

2. Shroff & Co. v. Municipal Corporation of Greater Bombay 1988 (38) E.L.T. 243 (S.C.)

The countervailing duty is imposed so as to place the home producer on an equal footing with the importer of foreign goods.

3. CCus. v. Malwa Industries Ltd (2009) 235 ELT 214 (SC)

The object of levy of CVD is that importer should not be placed at some more advantageous position vis-a-vis purchasers/manufacturers of similar goods in India.

4. Motiram Tolaram v. UOI 1999 (112) E.L.T. 749 (S.C.)

If an excise exemption notification has been issued reducing the effective rate of excise duty, the rate of CVD would be such reduced rate only.

5. Goodyear India Ltd. v. CCus. 1997 (90) ELT 7 (SC)

Explanation to section 3(1) clarifies that where excise duty is leviable at different rates, the highest duty would be considered for calculation of CVD. It was held that this explanation is applicable only where goods of exactly same description attract different rate of duty.

Point to be noted

Following duties would not be included while computing the assessable value for computation of CVD:-

(a) CVD [Sections 3(1) and (3)]

(b) Special CVD [Section 3(5)]

(d) Countervailing duty [Section 9]

(e) Anti-dumping duty [Section 9A]

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