The Hindu Business Line : On shore, but at sea

THE Customs Act, 1962 envisages certain specific situations and provides for remission or abatement of duty on goods lost, destroyed, damaged or pilfered before clearance from the port. Section 13 of the Act provides that if imported goods are pilfered after unloading but before order for clearance is passed by the Customs Officer for clearance for home consumption or deposit in a warehouse, duty would not be payable on the goods, unless the pilfered goods are restored to the importer.

Section 23 of the Act provides for remission of duty on imported goods lost or destroyed, if such loss or destruction occurs due to any reason, at any time before clearance of goods for home consumption. Remission of duty on goods warehoused would also be permitted under Section 23, as goods cleared for warehousing are not `goods cleared for home consumption'.

This position was confirmed by the Tribunal in the Winsome Yarn vs CCE (2001 134 ELT 686) case.

It may be noted both Sections 13 and 23 of the Customs Act contemplate loss occurring before order of clearance is made and provide for the remedy. This is based on the principle that goods are not in the control of the importer when they are in port and, hence, the importer should not be penalised for the loss. However, the position when loss occurs after the order of clearance but before physical clearance of the goods has been an area of controversy.

In Commissioner of Customs vs Saw Pipes 2001 (137 ELT 244), the Tribunal held that `clearance for home consumption' cannot be equated with order of clearance for home consumption. The Tribunal further held that physical removal of goods which is the `clearance for home consumption' can take place only after such an order is passed and such clearance, therefore, is an event distinct and separate from the order permitting clearance.

However, the Tribunal in the TNSS Steels P Ltd vs CCE 2001 (133 ELT 609) case had held that no remission of duty would be allowed if goods are lost due to fire after the order for clearance for home consumption is passed even if goods were in Customs custody at the time of fire.

While Section 23 deals with remission of duty for loss or destruction of goods, Section 22 provides for abatement of duty on damaged or deteriorated goods. Section 22 provides for reduction in duty if goods are damaged or deteriorated in any of the following cases:

Damage or deterioration of goods must have occurred anytime before or during unloading in India;

Damage or deterioration of goods must have occurred on account of any accident, after unloading in India and before the goods are examined under Section 17 of the Customs Act; and

Damage or deterioration of goods by accident should have occurred in the warehouse before clearance of goods.

Accident resulting in damage should not be due to wilful act, negligence or default of the importer, his employee or agent. Abatement would be allowed only if survey report for assessing the damage is done involving the Customs authorities and assessment of damage is done before clearance of goods. Customs duty chargeable would be in proportion to the value of damaged goods bears to the value of goods before damage or deterioration.

To illustrate, if value of goods is Rs 1,00,000, and, after damage, the value is Rs 70,000, then 70 per cent of the normal Customs duty would be payable. The value of damaged goods would be decided by the Assistant Commissioner of Customs, or if the importer agrees, the damaged goods may be auctioned and gross sale proceeds deemed to be the value of goods.

Where the imported goods are damaged beyond a point of salvage and the importer does not want to incur further loss on account of payment of Customs duty, the Customs Act provides for the right of abandonment of the imported goods.

As per Section 23(2) of the Customs Act, if the importer decides to abandon the imported goods, he would not be liable to pay duty on the goods so abandoned. To abandon the goods, the importer should relinquish title to the goods before a) an order for clearance of goods for home consumption is made, or b) before order permitting deposit of goods for warehousing is made.

Even if goods are warehoused, the importer can relinquish title to the goods anytime before order for clearance for home consumption is made. However, where the goods are abandoned in the warehouse, the importer would be required to pay the rent and other charges for warehousing the goods and penalty, if any, that may otherwise be payable.

There may be situations where the goods originally removed for export need to be taken back from the port to the factory of manufacture of goods. An exporter needs to follow certain procedures for return of export goods from the docks. An application for taking cargo back to the factory of manufacture should be presented to the authorities together with relevant duplicate copy of the shipping bill.

After scrutiny, if there are no objections, the shipping bill would be endorsed to the shed appraiser for examination of goods. The export consignment would then be physically examined to check if the particulars furnished at the time of filing the shipping bill, such as quantity, description, value, and so on, of the goods are correct. Factory stuffed and sealed containers also would be opened and subjected to checking. After satisfying that the goods are in conformity with the shipping bill, the authorities would allow the goods to be taken out of the port.

After the goods reach the factory, intimation should be given to the range superintendent about return of goods from the port. If the goods were originally removed for export under bond without payment of duty, the original entry made for the said export should be cancelled in the records.

Where the goods have been removed with payment of duty for export, Rule 16 of the Central Excise Rules, 2002 provides for the assessee to take Cenvat credit of the duty paid on the returned goods as if such goods are received as inputs under the Cenvat Credit Rules. The said amount would be allowed to be utilised according to the Cenvat Credit Rules.

(The author is a Chennai-based advocate.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Urea ready for more reforms

Great Budget expectations — Helping the economy take wings

Admin needs more than minimum attention

Truckloads of confusion

On shore, but at sea

Tax implications of software sale

In the aftermath of a disaster

Squeeze water off Chinese data, add a dash of guesswork