Legal Framework of Customs in India

Legal Framework of Customs in India

In India, Article 265 of Indian constitution lays down, “no tax shall be levied or collected except by authority of law.” In India, CBEC has the power for levying and collecting customs duties in compliance with Customs Act, 1962. The laws related to the Customs Act are passed by the parliament by exercising exclusive power mentioned under Article 246 of Indian constitution.

Power of the Central Government

As per Foreign Trade Act 1992, the central government has the power to make various provisions related to import and exports. The powers of the central government related to customs are as follows:

• The central government ensures the development and regulation of foreign trade.
  
  
• It has the power to restrain, hinder, and regulate the goods for the purpose of export or imports. The government can also exempt duty and taxes on certain goods.
  
  
• It has the power to formulate the Export Import (EXIM) policy and amend it from time to time.
  
  
• It has a right to appoint a Director General of Foreign Trade. He/she is appointed for advising in the formulation and implementation of the policy.

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Customs Authorities and Administration

In India, CBEC, established in 1855, is the customs authority under the Ministry of Finance, Government of India. CBEC is responsible for formulating policies and collecting customs and excise duties. It further prevents smuggling and manages customs, central excise, service tax, and narcotics in India. CBEC is responsible for implementing and exercising customs laws in India. Indian Revenue Service (IRS) officers head CBEC.

CBEC controls the functioning of the following agencies:

Directorate of Revenue Intelligence

It is an Indian intelligence agency controlled by officers under CBEC. Its objective is to eradicate the smuggling of gold, drugs, currency, etc.

Directorate General of Central Excise Intelligence

It is the agency responsible for detecting tax evasion in India. With the help of its intelligence network, it disseminates information and finds the latest trends in tax evasion. This agency was earlier known as the Directorate General of Anti-Evasion.

Financial Intelligence Unit – India (FIU-IND)

Established in 2004, FIU-IND was established by the Government of India for the purpose of receiving, processing, analysing, and distributing information related to financial transactions. It coordinates the efforts of national and international intelligence for global efforts against crimes such as money laundering.

Directorate General of Inspection of Customs & Central Excise (DGICCE)

Established in 1939, DGICCE conducts periodical inspection in customs areas and advises CBEC on technical issues. DGICCE is headed by the Director General. It is necessary to inspect customs areas at least once a year. The inspections are done to verify that the staff is adequate, work is equitable, rules and regulations are followed, etc.

National Academy of Customs Excise and Narcotics (NACEN)

NACEN is the agency built in the field of indirect taxation. It provides training to officers in the fields of customs, drug laws, and environmental protection.

Central Economic Intelligence Bureau

This agency was set up in 1985 for gathering information and monitoring the financial sector. It also has a responsibility to control issues such as frauds, tax evasion, and money laundering.

Directorate General of Vigilance

This agency is set up by CBEC to monitor vigilance cases against customs officers. It maintains proper surveillance on officers and maintains the connection with Central Bureau of Investigation (CBI) for ensuring programmes on vigilance and anti-corruption.

Directorate General of Audit

This was set up in 1977 in the Union Territory of Delhi. It conducts audits for units paying central excise tax and service tax. It also ranks the performance of Central Excise and Service Tax officers on the basis of their performance.

Directorate General of Export Promotion (DG-EP)

On the behalf of CBEC, DG-EP interacts with export promotion councils for sorting difficulties, examines efficiency of provisions/rules, conducts post audit of duty-free imports, and ensures that exporters get the benefit of export schemes.

Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)

This agency was constituted in 1982 with an aim to hear appeals against orders passed by Customs Act 1964 and other acts. It hears appeals against the orders passed with regard to anti-dumping duties under the Customs Act. CESTAT’s objective is to close appeals in a short time period and deliver a solution as early as possible.

Directorate General of Service Tax (DGST)

It was established in 1997 to ease of the increasing workload of taxes. Its functions are to maintain a database of the service tax collected, inspect the commissionerates, and analyse revenue collection.

Economic Intelligence Council

This council was set up in 1990 as an apex forum consisting of 18 regional economic intelligence committees. Its aim is to coordinate among different customs agencies and control offences such as smuggling, tax evasion and fraud.

Enforcement Directorate(ED)

Established in 1956, ED is responsible for enforcing Foreign Exchange Management Act, 1999 and various provisions related to the prevention of economic offences. It also undertakes surveys, arrests prosecution cases, and provides legal assistance in various cases.

Central Bureau of Narcotics (CBN)

It is headed by the Narcotics Commissioner of India to supervise the over licit cultivation of opium poppy in India. Its main aim is to stop the opium trade and issue licenses for producing drugs.

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Seizures, Searches, Confiscation, and Appeals

Seizures, searches and confiscation are procedures related to the customs law under which authorities search for a person’s property and other details if he/she has committed a crime. This requires a search warrant before engaging in search and seizure.

Appeals can be defined as legal proceedings by which a case is brought before a high court for reviewing the decisions of a lower court. Appeals can be registered against the issues of destroying goods and customs actions. The power of making appeals against orders by customs lies with Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

It should be noted that appeals do not lie in the case of the following situations:

• Any goods imported or exported as baggage
  
  
• Any goods loaded in conveyance for importation in India but not unloaded in India at the specific place
  
  
• In case the value of goods is less than ₹50000, the tribunal can refuse to admit appeal

As per chapter XIII of the Customs Act, 1962, Searches, Seizure, and Arrest involve the following:

Section 106. Power to Stop and Search Conveyances

Where the proper officer has reason to believe that any aircraft, vehicle or animal in India or any vessel in India or within the Indian customs waters has been, is being, or is about to be, used in the smuggling of any goods or in the carriage of any goods which have been smuggled, he may at any time stop any such vehicle, animal or vessel or, in the case of an aircraft, compel it to land, and –

• Where the proper officer has reason to believe that any aircraft, vehicle or animal in India or any vessel in India or within the Indian customs waters has been, is being, or is about to be, used in the smuggling of any goods or in the carriage of any goods which have been smuggled, he may at any time stop any such vehicle, animal or vessel or, in the case of an aircraft, compel it to land, and –
  
  
  • rummage and search any part of the aircraft, vehicle or vessel;
    
    
  • examine and search any goods in the aircraft, vehicle or vessel or on the animal;
    
    
  • break open the lock of any door or package for exercising the powers conferred by clauses (a) and (b), if the keys are withheld.
    
    
• Where for the purposes of sub-section (1) –
  
  
  • it becomes necessary to stop any vessel or compel any aircraft to land, it shall be lawful for any vessel or aircraft in the service of the Government while flying her proper flag and any authority authorised in this behalf by the Central Government to summon such vessel to stop or the aircraft to land, by means of an international signal, code or other recognized means, and thereupon, such vessel shall forthwith stop or such aircraft shall forthwith land; and if it fails to do so, chase may be given thereto by any vessel or aircraft as aforesaid and if after a gun is fired as a signal the vessel fails to stop or the aircraft fails to land, it may be fired upon;
    
    
  • it becomes necessary to stop any vehicle or animal, the proper officer may use all lawful means for stopping it, and where such means fail, the vehicle or animal may be fired upon.

Section 106A. Power to Inspect

Any proper officer authorised in this behalf by the Commissioner of Customs may, for the purpose of ascertaining whether or not the requirements of this Act have been complied with, at any reasonable time, enter any place intimated under Chapter IVA or Chapter IVB, as the case may be, and inspect the goods kept or stored therein and require any person found therein, who is for the time being in charge thereof, to produce to him for his inspection the accounts maintained under the said Chapter IVA or Chapter IVB, as the case may be, and to furnish to him such other information as he may reasonably require for the purpose of ascertaining whether or not such goods have been illegally imported, exported or are likely to be illegally exported.

Section 107. Power to Examine Persons

Any officer of customs empowered in this behalf by general or special order of the Commissioner of Customs may, during the course of any enquiry in connection with the smuggling of any goods, –

• require any person to produce or deliver any document or thing relevant to the enquiry;
  
  
• examine any person acquainted with the facts and circumstances of the case.

Section 108. Power to Summon Persons to Give Evidence and Produce Documents

• Any Gazetted Officer of customs shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under this Act.
  
  
• A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.
  
  
• All persons so summoned shall be bound to attend either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents and other things as may be required:
  
  Provided that the exemption under section 132 of the Code of Civil Procedure, 1908 (5 of 1908), shall be applicable to any requisition for attendance under this section
  
  
• Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code, 1860 (45 of 1860).

Section 109. Power to Require Production of Order Permitting Clearance of Goods Imported by Land

Any officer of customs appointed for any area adjoining the land frontier of India and empowered in this behalf by general or special order of the Board, may require any person in possession of any goods which such officer has reason to believe to have been imported into India by land, to produce the order made under section 47 permitting clearance of the goods:

Provided that nothing in this section shall apply to any imported goods passing from a land frontier to a land customs station by a route appointed under clause (c) of section 7.

Section 110. Seizure of Goods, Documents and Things

• If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods:
  
  Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.
  
  
  • The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification in the Official Gazette, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (1), be disposed of by the proper officer in such manner as the Central Government may, from time to time, determine after following the procedure hereinafter specified.
    
    (1B) Where any goods, being goods specified under sub-section (1A), have been seized by a proper officer under sub-section (1), he shall prepare an inventory of such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceedings under this Act and shall make an application to a Magistrate for the purpose of –
    
    
    • certifying the correctness of the inventory so prepared; or
      
      
    • taking, in the presence of the Magistrate, photographs of such goods, and certifying such photographs as true; or
      
      
    • allowing to draw representative samples of such goods, in the presence of the Magistrate, and certifying the correctness of any list of samples so drawn.
      
      
  • Where an application is made under sub-section (1B), the Magistrate shall, as soon as may be, allow the application.
    
    
• Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:
  
  Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.
  
  
• The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act.
  
  
• The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extracts there from in the presence of an officer of customs.

In case of confiscation, CHAPTER XIV of the Customs Act 1962 states:

Confiscation of Improperly Imported Goods, Etc.

The following goods brought from a place outside India shall be liable to confiscation: –

• any goods imported by sea or air which are unloaded or attempted to be unloaded at any place other than a customs port or customs airport appointed under clause (a) of section 7 for the unloading of such goods;
  
  
• any goods imported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the import of such goods;
  
  
• any dutiable or prohibited goods brought into any bay, gulf, creek or tidal river for the purpose of being landed at a place other than a customs port;
  
  
• any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;
  
  
• any dutiable or prohibited goods found concealed in any manner in any conveyance;
  
  
• any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which is not so mentioned;
  
  
• any dutiable or prohibited goods which are unloaded from a conveyance in contravention of the provisions of section 32, other than goods inadvertently unloaded but included in the record kept under sub-section (2) of section 45;
  
  
• any dutiable or prohibited goods unloaded or attempted to be unloaded in contravention of the provisions of section 33 or section 34;
  
  
• any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof;
  
  
• any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission;
  
  
• any dutiable or prohibited goods imported by land in respect of which the order permitting clearance of the goods required to be produced under section 109 is not produced or which do not correspond in any material particular with the specification contained therein;
  
  
• any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;
  
  
• any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54;
  
  
• any dutiable or prohibited goods transited with or without transhipment or attempted to be so transited in contravention of the provisions of Chapter VIII;
  
  
• any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;
  
  
• any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened.

In case of appeals, chapter XV of the Customs Act, 1962 (52 of 1962) gives the following:

Section 128. Appeals to Commissioner (Appeals)

• Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a Commissioner of Customs may appeal to the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order:
  
  Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days.
  
  
  • The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:
    
    Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.
    
    
• Every appeal under this section, shall be in such form and shall be verified in such manner as may be specified by rules made in this behalf

Section 128A. Procedure in Appeal

• The Commissioner (Appeals) shall give an opportunity to the appellant to be heard if he so desires.
  
  
• The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission of that ground from the grounds of appeal was not wilful or unreasonable.
  
  
• The Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against:
  
  Provided that an order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order:
  
  Provided further that where the Commissioner (Appeals) is of opinion that any duty has not been levied or has been short-levied or erroneously refunded, no order requiring the appellant to pay any duty not levied, short-levied or erroneously refunded shall be passed unless the appellant is given notice within the timelimit specified in section 28 to show cause against the proposed order.
  
  
• The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.
  
  
  • The Commissioner (Appeals) shall, where it is possible to do so, hear and decide every appeal within a period of six months from the date on which it is filed.
    
    
• On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order passed by him to the appellant, the adjudicating authority, the Chief Commissioner of Customs and the Commissioner of Customs.