Introduction to Customs Law Including Constitutional Aspects, Levy of and
Exemptions from Customs Duties, Types of Customs Duties, Import and
Export Procedures
1. Introduction to Customs Law
Customs law in India governs the import and export of goods to and from the country. The
legal framework for customs duties is primarily outlined in the Customs Act, 1962, which
regulates the movement of goods across borders while ensuring compliance with trade
policies, safeguarding domestic industries, and generating revenue.
Introduction to Customs Law and Constitutional Aspects
What is Customs Law?
Customs law regulates the import and export of goods to ensure compliance with trade
policies, protect domestic industries, and generate revenue for the government. The Customs
Act, 1962, governs customs duty and import-export procedures in India.
Constitutional Aspects of Customs Law
The Constitution of India grants the Central Government exclusive power to levy and
collect customs duties under Entry 83 of the Union List (Seventh Schedule). This means
that:
Only the Central Government can impose customs duties, and state governments do
not have authority over it.
The Customs Tariff Act, 1975, prescribes the applicable rates and classifications of
imported/exported goods.
The Central Board of Indirect Taxes and Customs (CBIC) enforces customs
regulations and policies.
Objectives of Customs Law
1. Revenue Generation – Customs duties contribute significantly to government
revenue.
2. Trade Regulation – Ensures smooth and legal import/export activities.
3. Domestic Industry Protection – Protects local manufacturers from unfair foreign
competition.
4. Prevention of Smuggling – Controls illegal imports and exports.
5. Implementation of Trade Agreements – Ensures compliance with global trade
policies like WTO agreements.
2. Levy of Customs Duties
The levy of customs duty arises when goods are imported into or exported out of India. The
taxable event for customs duty is when goods cross the customs barriers and a Bill of
Entry or Shipping Bill is filed.
Circumstances of Levy:
Import of Goods: Customs duty is levied when goods enter the Indian customs
territory.
Export of Goods: Customs duty is imposed when goods are cleared for export by the
customs officer.
Special Cases: In certain circumstances (such as bonded warehouses), duty may be
deferred until goods are removed for domestic consumption.
Duty Liability in Special Cases
Pilferage (Section 13 of the Customs Act, 1962): If goods are pilfered before
customs clearance, no duty is levied.
Damaged or Deteriorated Goods (Section 22): Duty abatement is allowed based on
the extent of damage.
Lost or Destroyed Goods (Section 23): No duty is payable if goods are lost before
clearance.
3. Exemptions from Customs Duties
Customs duty exemptions are provided under specific conditions to promote trade, industry,
and national interest.
Types of Exemptions:
1. General Exemptions: Issued via government notifications for broad categories of
goods (e.g., essential commodities, defense goods).
2. Special Exemptions: Provided on a case-by-case basis for specific goods (e.g., relief
materials for disasters).
3. Duty-Free Imports: Goods imported under Free Trade Agreements (FTAs) or
Special Economic Zones (SEZs) are eligible for duty waivers.
4. Types of Customs Duties
The Customs Tariff Act, 1975 classifies duties into Basic, Additional, Special, and
Protective duties. These include:
Type of Duty Description
Levied on imports under Section 12 of the Customs Act, 1962
Basic Customs Duty (BCD) at rates specified in the First Schedule of the Customs Tariff
Act, 1975.
Replaced Countervailing Duty (CVD) and Special
Integrated Goods and
Additional Duty (SAD) under GST to ensure a seamless tax
Services Tax (IGST)
structure.
Imposed on goods imported at below fair market price,
Anti-Dumping Duty
causing harm to domestic industries.
Temporary duty to protect domestic industries from a sudden
Safeguard Duty
surge in imports.
Countervailing Duty (CVD) Imposed when foreign goods receive unfair subsidies in the
on Subsidized Goods exporting country.
Type of Duty Description
Levied on certain exported goods, primarily raw materials
Export Duty
(e.g., iron ore).
5. Import and Export Procedures
Customs procedures ensure proper documentation, valuation, and duty payment before goods
are cleared for import/export.
Import Procedure
1. Arrival of Goods: Goods arrive at the port, and an Import General Manifest (IGM)
is filed.
2. Bill of Entry Filing: Importer submits a Bill of Entry electronically, classifying
goods and declaring their value.
3. Customs Examination & Duty Payment:
o Customs authorities assess the goods for classification, valuation, and
applicable duties.
o Importer pays customs duty based on the assessable value.
4. Customs Clearance & Delivery:
o Once duties are paid, and compliance checks are completed, goods are cleared.
o If stored in a bonded warehouse, duty payment is deferred until clearance for
consumption.
Export Procedure
1. Export General Manifest (EGM): Filed by the shipping agent to declare outgoing
cargo.
2. Shipping Bill Filing: Exporter files a Shipping Bill, providing product details and
export value.
3. Customs Examination & Duty Drawback:
o Goods are examined, and if applicable, duty drawback (refund of duties paid
on imported inputs) is granted.
4. Clearance & Shipment:
o Once approved, customs grants Let Export Order (LEO), and goods are
loaded onto the carrier.
Special Provisions
Duty Drawback (Section 74 & 75): Refunds import duties paid on goods that are
re-exported.
Special Economic Zones (SEZs): Goods imported into SEZs are exempt from
duties until brought into the domestic market.
