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AN INTRODUCTION TO THE LAW AND PRACTICE OF CUSTOMS
- Mrinal satish - Sonali mohapatra
- Juhi mehta - Divya bharati sharma
The Customs Act was passed with the objective of curbing
large-scale smuggling. The Land Customs Act and the Sea Customs Act
had become too obsolete to deal with such problems and many other
aspects related to customs. It was also necessary to regulate air
customs specifically, as opposed to the old approach of governance
of air customs by way of rules made under the Indian Aircraft Act,
1911.
IMPORTANT DEFINITIONS
1. Assessment [Section 2(2)]: the definition of assessment is an
inclusive one. In the context of Income Tax, the Supreme Court has
opined that assessment could mean all proceedings for raising money
by the exercise of the power of taxationi. In the context of
customs, the word assessment would mean the computation and
fixation of the duty payable on a particular good, in accordance
with the procedures laid down under the Act.
2. Baggage [Section 2(3)]: the term baggage has been inclusively
defined under the Act to include unaccompanied baggage. The
provisions of Chapter IX of the Baggage Rules, 1978, as framed
under Section 79 by Notification No. 101-Cus., dated 16.5.78,
further state that articles imported by a passenger with her/him on
person or in their accompanied baggage fall under the category of
baggage.
3. Goods [Section 2(22)] are defined as inclusive of vessels,
aircrafts, vehicles, stores, baggage, currency, negotiable
instruments, and other kinds of movable property.
4. Dutiable goods [Section 2(14)] are defined to mean any goods
on which duty is payable under the Act and the same has not been
paid.
5. Export [Section 2(18): simply speaking export means the act
of taking goods from India to a place outside India. The question
that then arises is what is meant by taking the goods outside
India. It is a well-settled principle now that goods are said to be
exported when they are actually taken out beyond the territorial
limits of India. However for the goods to have been lawfully
exported outside India, the procedure laid down under the Customs
Act must have been followed. Unlawful taking out of the goods
amounts to smuggling under the Act.
artTitle AN INTRODUCTION TO THE LAW AND PRACTICE OF CUSTOMS
artAuthor SATISH artAuthor SONALI artAuthorJUHI MEHTA
artAuthorDIVYA BHARATI SHARMA:1artLaws Customs artSubmissionDate
19/08/2000
Final Year, B.A. LL.B. (Hons), National Law School of India
University.
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6. Import [Section 2(23) : Import means the act of bringing into
India from a place outside India. Since under Section 2(27), India
is said to include the territorial waters of India, the act of
import can be said to have been completed only when the goods are
brought within the territorial waters of India. Here also import is
said to have taken place when the goods have been imported in
accordance with the provisions of the Customs Act.
CHAPTER II
Chapter II (Sections 3-6) of the Act deals with officers of
Customs. The Chapter specifies the classes of officers concerned,
manner of their appointment and their powers.
CHAPTER III
APPOINTMENT OF CUSTOMS PORTS, AIRPORTS, WAREHOUSING STATIONS,
ETC.
S.7: APPOINTMENT OF CUSTOMS PORTS, AIRPORTS, ETC.:
This section gives the power of appointment of customs ports and
airports to the central government for the unloading of imported
goods and the loading of export goods or any class of such goods.
Further specific powers have been given to notify coastal ports for
the carrying on of trade in coastal goods. A distinction therefore
has been made between coastal and customs ports and the latter
phrase no longer apply to ports, which handle coastal goods
only.
S.8 POWER TO APPROVE LANDING SPACE AND SPECIFY LIMITS OF CUSTOMS
AREA:
The Board under the previous Act exercised this power. The
revised section however provides that the Collector of Customs
shall exercise this power.
CHAPTER IV
SECTION 11
Under S.11, the central Government is given the power to
prohibit or restrict, the importation and/or the export of the
goods which are specified by it. Prohibition/restriction, and the
goods to which the same applies have to be notified in the official
gazette by the central government , and such
restriction/prohibition has to be for the purposes within those
specified in sub-section 2.There is a voluminous list of
prohibitory/regulatory orders under this section both for export
and import
OTHER STATUTES
This section has to be read with certain other statutes:
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1) Imports and Exports (Control) Act,1947, and the orders made
thereunder, as these are deemed to be prohibitory orders under
S.11.(This Act has now been repealed.The orders under it are now
deemed the orders under S.4 of the Foreign Trade (Development and
Regulation )Act,1992.Though an order made under S.3(1) of the
Imports and Exports (Control ) Act is deemed to be an order under
S.11, this does not mean that such an order is restricted to the
purposes mentioned in Section 11(2) of the Customs Act.( Hoare
Miller & Co. Ltd v. Asst Collector of Customs AIR 1935 Cal 440,
at pp.443,444)
2) Foreign Trade (Development and Regulation )Act,1992- Scetions
3(2) and 3(3), and the orders made thereunder, which are deemed to
be orders under S.11.
3) Rule 55 of the Aircraft Rules, 1937, which states that no
person in any aircraft entering or departing from India shall carry
or allow to be carried in the aircraft any goods of which the
import or export by sea or by land is prohibited by or under any
law
4) Livestock Importation Act, 1898- Under S.3, the central
Government may , by notification in the official gazette regulate,
restrict or prohibit the importation of any livestock which may be
liable to be affected by infectious or contagious disorders, and
also the import of any material appertaining to/in contact with
such livestock.(The list of such infectious and contagious
disorders has been notified by the Government by notification dated
29 July 1950).This section has be read with notification dated 19
December, 1951and Notification dated 10th December , 1959( as
amended on 31st July, 1961 and 5th September, 1962) by which the
central Government has prohibited the import of certain livestock
to places other than a few places and also from certain places.
CONSEQUENCES:
Violation of prohibition/restriction under this section makes
the goods liable to confiscation under under S.111 and the offender
subject to penalties under S.112.Where the charge had been unlawful
import and the unlawful importers were not detected, the penalty of
confiscation was held imposable in whosoevers possession the goods
were found. ( Kanungo and Co. v. Collector of Customs AIR 1965 Cal
248)Penalties for contravention are applicable even where the
customs authorities permitted clearance by mistake. It is the
importers duty to obey the law.(Collector of Customs and Central
Excise v. Hindustan Motors AIR 1975 Cal 368, Best and Co.
v.Additional Collector of Customs AIR 1965 Cal 478) SCOPE:
The Government is empowered only to prohibit or restrict
import/export of specified articles or things and it is not
sufficient to describe the different commodities ejudsem generis
under a vague description ( see Karl Ettlinger and Co v Chagandas
and Co AIR 1915 Bom 232.)
WHAT AMOUNTS TO CONTRAVENTION:
Contravention of S.3(1)( of the Imports and Exports Control Act
, 1947 , S.3 of the Import Control Order, 1955 and S.11 of the
Customs Act, 1962 would have arisen only if the importers had
presented the Bill of Entry and made all the arrangements for the
clearance of the goods with
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the willful intention of importing wrong goods .which is not the
case here.(Uma Textiles v. Collector of Customs 1990(480 E.L.T 433
( Tribunal)). Mere possession of prohibited goods does not attract
the conclusion of unlawful import; the customs authorities must
prove the breach of the prohibition.
ASSEMBLED PARTS:
Whereas particular part is capable of being a component of more
than one item, and only one of such items is banned from being
imported, import of the part is legal.(Wire Melting Stores v. Union
of India 1964 Punj L.R.(Supp)132)But where a part has no other use
than as a component of an article whose import is prohibited,
import of the part is illegal since the importers cannot be
permitted to do indirectly what they cannot do directly.(Giridhar
Lal Bansidhar.v. Union of India AIR 1964 SC 1519 at p.1521)
FERA:
All restrictions with regard to the articled dealt by the FERA ,
howsoever imported, shall be deemed to be under S.11.Notification
under S.8(1) , FERA, is deemed to be a notification under
S.11.Though currency is not a good, export of currency in violation
of S.8 is a violation of S.11 and invokes consequent penalties
under the Customs Act.(Aggarwal Trading Corporation v. Asst
Collector of Customs, Calcutta AIR 1972 SC 648) INDIAN MERCHANDISE
MARKS ACT,1889
The Customs Act and this Act have to be ead together in certain
instances and action may be taken under S.11 to prevent import of
goods bearing fraudulent trademark.(Imperial Tobaco Co v. Albert
Bonann AIR 1928 Cal 1)
CLASSIFICATION OF GOODS
It is the import control authority, i.e the Government which,
primarily is to determine the head or the entry under which a
particular commodity falls, but the court has the competence to
interfere in cases of perverse classification. The court cannot,
however, set aside a classification only because another
classification which was more favourable to the importer was
possible (Collector of Customs v. Ganga Setty AIR 1963 SC 1319,
K.Ganga Setty v. Collector of Customs AIR 1957 Mad 19).
Classification under Import Trade Control Policy and the Tarriff
Act should be the same ,each being complementary to the other. It
is good fiscal policy not to put the people in doubt over their
liability to duty , and thus when a particular product known to
trade and commerce in this country as well as abroad is imported,
it would have been better if the article had been properly
classified to avoid controversy.(Dunlop India v. Union of India AIR
1977 SC 597).While in a case where the notification is clear, the
interpretation put upon it y a customs Officer of the rank of
Assistant Collector can estop the Government from claiming
afterwards that the interpretation was wrong, in other
circumstances, interpretation by such officer can be used as an
indication of what the notification means , and can in certain
cases be binding upon the Government (Collector of Customs , Madras
v. Lala GopiKissen Gokuldas AIR1955 Mad 187)
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POWERS OF CUSTOMS AUTHORITIES
The Act confers wide discretionary powers of confiscation and
fine on the Customs Authorities. The fact that proceedings with
respect to smuggling have been instituted before the magistrate
does not mean that acquittal by the magistrate entitles the
claimant to recovery of the property- it can be held by he customs
authorities until duty and discretionary penalty consequent to
their own adjudication under the Act have been paid. Authorities
can even proceed independently without instituting proceedings
before the magistrate.(Asst Collector of Customs and Excise v.
Krishna Pillai AIR 1956 Mad 42 at p.43) .The offending goods may be
confiscated b without proceeding personally against any person and
without coming to a finding as to who was the smuggler.(Sherrnal
Jain v. Collector of Central Excise AIR 1956 Cal 621)But the
confiscation was held to be unjustified where the appellant had
purchased the goods from a third party without knowing that they
were smuggled. Kamrup Industries v. Collector of Customs and
Central Excise 1990 (48) ELT 271(Tribunal))
NATURAL JUSTICE
Though procedure of courts need not be followed, principles of
natural justice must be observed. A notice must be served to the
person against whom [proceedings for confiscation are sought to be
initiated, whether or not the statute provides for the same,
disclosing the circumstances of initiation of proceedings(East
India Commercial Company. v. Collector of Customs AIR 1962 SC
1893).But a person not interested in the importation of goods is
not entitled to a notice about the confiscation of goods.(Collector
of Customs v. Calcutta Cycle Syndicate AIR 1964 Cal 225).The
customs authority (in this case the collector of customs) passing
an order of confiscation is a quasi- judicial authority against
whom a writ of certiorari could be issued by the High Court.(
Satyendra Kumar Pal v. Collector of Customs and Excise AIR 1960
Assam 150)
CHAPTER IV-A
DETECTION OF ILLEGALLY IMPORTED GOODS AND PREVENTION OF THE
DISPOSAL THEREOF
The President issued a Customs (Amendment) Ordinance in January
1969 to deal with the increase in the smuggling of silver out of
the country and various consumer articles into the country.
Chapters IV-A, IV-B and IV-C later replaced by the provisions of
this ordinance as introduced by Act 12 of 1969.
S.11-A: DEFINITIONS
This section defines the following expressions used in this
chapter: a) Illegal import b) Intimated place c) Notified date d)
Notified goods
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Illegal import has been defined as import of any goods in
contravention of the provisions of this act or any other law in
force for the time being. A false denial or the credibility of a
particular story [Isardas Daulat Ram v. Union of India, (1962)
Supp. 1 SCR 358.] of a story can be treated as a relevant piece of
evidence.
S.11-B: POWER OF CENTRAL GOVERNMENT TO NOTIFY GOODS
This section empowers the Central Government to notify goods to
which these provisions will apply (see S.11-A(d) for definition of
notified goods) if it is satisfied that the magnitude of smuggling
in the such goods is such that it is expedient to take special
measures. Where any goods have been so notified under this section,
the onus to prove the illicit character is upon the Department.
Mere foreign origin of goods does not indicate that the goods have
been smuggled [Premji Electronics v. Collector of Customs, New
Delhi, 1988 (16) ECR 534 at 535 (CEGAT)].
S. 11-C: PERSONS POSSESSING NOTIFIED GOODS TO INTIMATE THE PLACE
OF STORAGE, ETC.
This section primarily provides for the following: All persons
possessing notified goods on the notified date have to deliver a
statement within
seven days to the proper officer of customs indicating the place
of storage and such particulars of the goods as may be specified
under the rules.
Those acquiring such goods afterwards for the first time also
have to furnish similar information, the intimation in respect of
the place of storage being delivered to the customs officer in
advance and the particulars of the goods being furnished
immediately on acquisition.
The transport of such goods from one place to another shall
either be under cover of a voucher referred to in S.11-F, or by a
transport voucher.
S.11-D: PRECAUTIONS TO BE TAKEN BY PERSONS ACQUIRING NOTIFIED
GOODS
This section provides that no person shall acquire, except by
gift or succession, any notified goods unless a sale voucher or
evidence of clearance through customs accompanies them. Where the
purchase is made from a person not having a fixed place of business
the purchaser is also required to take such steps as specified by
the rules so as to ensure that the goods acquired are not smuggled
goods.
S.11-E: PERSONS POSSESSING NOTIFIED GOODS TO MAINTAIN
ACCOUNTS
Where notified goods are found within the premises of a shop,
accounts for the same have to be maintained immaterial of the fact
whether they are for sale or not. The Act categorically provides
that person owning, possession or having control of the notified
goods in the shop premises have to maintain accounts in the
prescribed manner [Abedali Rehmatali Mulwalla v. Collector of
Customs and Central Excise, 1988 (37) E.L.T. 597 (Tribunal)].
This section, however, does not apply to repairers of notified
goods. The repairers are, however, required to issue maintain a
booklet showing the articles received for repairs. They are
further
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required to issue receipts in duplicate, the original to be
given to the person who gives the goods for repairs and the
duplicate to be maintained [Ratan Ahuja v. Collector of Customs
(Appeals), Bombay, 1988 (33) E.L.T. 622 (Tribunal)].
S.11-F: SALE, ETC. OF NOTIFIED GOODS TO BE EVIDENCED BY
VOUCHERS.
S.11-G SECTIONS 11-C, 11-E AND 11-F: NOT TO APPLY TO GOODS IN
PERSONAL USE.
The regulatory provisions of Sections 11-C, 11-E and 11-F do not
apply to goods in personal use or goods kept in residential
premises for personal use. But if such goods are sold, a sale memo
has to be issued. Where the memorandum of transfer of goods is not
issued the goods are liable to confiscation [Mani Ram Gupta v.
Collector of Customs, 1989 (40) E.L.T. 161 (Tribunal)].
CHAPTER IV-B
PREVENTION OR DETENTION OF ILLEGAL EXPORT OF GOODS
S. 11-H: DEFINITIONS
Sub-clause (c) defines specified area as such area as may be
identified by the Central Government but such area shall not exceed
one hundred kilometers from any coast or other border of India.
However, if any part of village, town or city falls within a
specified area, the whole of such village, town or city shall be
deemed to be included in the specified area, not withstanding that
the whole of it is not within the abovementioned limit of one
hundred kilometers.
S. 11-I: POWER OF CENTRAL GOVERNMENT TO SPECIFY GOODS.
S.11-J: PERSONS POSSESSING SPECIFIED GOODS TO INTIMATE THE PLACE
OF STORAGE, ETC.
This section applies only to goods the market price of which
exceeds Rs. 15,000/-
S.11-K: TRANSPORT OF SPECIFIED GOODS TO BE COVERED BY
VOUCHERS
This section has been introduced to ensure that where the time,
place, mode, etc. of transport is suspicious the customs officer
should know beforehand about such transport. The section provides
that whenever any specified goods are transported from, into and
within any specified area, they shall be accompanied by a transfer
voucher prepared by the person owning, possessing, controlling or
selling such goods. This voucher however is not necessary where the
market price of the goods does not exceed Rs. 1000/-. In certain
circumstances the Central government has been empowered to specify
that in certain circumstances it may specify that transport
vouchers of goods of a market price exceeding a specified sum shall
have to be countersigned by the proper officer of the customs.
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S.11-L: PERSON POSSESSING SPECIFIED GOODS TO MAINTAIN
ACCOUNT
This section provides that any person possessing notified goods
of market pricing Rs. 15,000/- shall maintain accounts in the
prescribed manner. There is also a rebuttable presumption that when
the stock of goods is less than the balance shown in the books the
shortfall is due to goods having being smuggled out.
A firm is required to enter every transaction in the notified
goods into his books. Where however the proprietor was not present
at the time the consignment was received and within 15 minutes of
the receipt of the goods (in this case, silver) the customs officer
visited the premises of the shop for verification but no other
transaction had taken place between the receipt of the goods and
the arrival of the customs officer, it cannot be said that there
has been a violation of S.11-L [Shah Champaklal Balubhai v.
Additional Collector of Customs, Ahmedabad, 1988 (16) E.C.R.
1.]
NATURE OF SS. 11-J, 11-K AND 11-L
These provisions are in the nature of prohibitions and not mere
regulations, which will entail confiscation of goods under S.113
(1). This becomes clear when one considers that the object behind
introduction of Chapter IV-B is the prevention and detection of
illegal export of goods. However, the prohibitions under this
chapter cannot be considered to be prohibitions with regard to
acts, which are preparatory to export. In such cases even the
contravention of such prohibitions will only entail confiscation
under the Act. Although the definition of smuggled goods has been
extended to goods which are not properly the subject matter of
exportation, the prosecution has to prove that the person charged
with the commission of an offence under S.135 of the Act knowingly
concerned himself in any fraudulent evasion or attempt at evasion
of any prohibition. Whether or not there is in fact any such
fraudulent evasion or attempt at evasion of any prohibition will
have to be determined in a given case in the light of the facts and
circumstances and the nature of the accusation contained in the
complaint [State of Maharastra v. Union of India (1974) 76 Bom.L.R
738].
S.11-M: STEPS TO BE TAKEN BY PERSON SELLING OR TRANSFERRING ANY
SPECIFIED GOODS
This section has been introduced to ensure that people do not
account for smuggled goods by drawing up factitious sales accounts.
Thus, unless a seller/transferor receives payment by cheque drawn
by the purchaser, he shall obtain on his copy of the sales voucher,
the signature and full postal address of the purchaser/transferee
and shall also take such reasonable steps as specified by the
rules. If on investigation the purchaser/transferee is either
discovered to be fictitious or is not easily traceable, there is a
presumption that such goods have been illegally exported. This
presumption, however, is rebuttable and fair and adequate
opportunity has to be given to the accused to rebut the same
[Manilal Bhanabhai Patel v. Union of India, (1992) 38 E.C.C.
113].
CHAPTER IV-C
Chapter IV C of the Customs Act contains only one section, S.11
N. The section empowers the Central Government to exempt certain
goods from the provisions of Chapters IV A and IV B
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CHAPTER V
SECTION 12: DUTIABLE GOODS
Customs duties are levied at rates specified under The Customs
and Tariff Act, 1975. Duties are levied on both import and export
of goods. Amendments to the rates are made every year by the Annual
Finance Act. In order to decide the quantum of duty payable the
present Section has to be read along with the Customs and Tariff
Act and the amendments thereto.
Section 12 is the charging section of the Act. Judicial
decisions under the Section have tried to distinguish between
chargeability and assessment. It has been observed by the courts of
law that chargeability is an issue that has to be decided under the
section, since this section lays down the rates of duty that are to
be levied on the goods. Thus once the goods are charged under the
Section the question of assessment of the amount of the duty
payable would ariseii The time of occurrence of the taxable event
is crucial to the issue of chargeability. A taxable event is said
to have occurred when the goods enter into the territorial waters
of India. This is evident from a joint reading of the definition of
import contained in Section 2(23) and Section 12(1). The liability
to pay import duty, however, attaches the moment the good are
brought into the territory of India, irrespective of whether they
have been unloaded from the ship or no. Case law has also
reiterated such a position.
In the case of export duty, duty becomes chargeable when goods
are to be exported from the landmass of India. Since it would be an
impossibility to collect duty when the goods are actually taken out
of the territorial waters of India, for the sake of administrative
convenience the export duty is to be collected before the goods
leave the landmass of India.
SECTION 13: DUTY ON PILFERED GOODS
The purpose of the Section is to ensure that an importer is not
made to pay duty on the goods that have been pilfered. The Section
clearly states that imported goods pilfered after an order for
clearance for home consumption/deposit in a warehouse of the same
has been made, shall be liable to payment of duty by the importer
unless the goods are restored to the importer.
SECTION 14:VALUATION OF GOODS FOR PURPOSES OF ASSESSMENT
This Section lays down the following parameters on whose basis
goods are to be valued for the purpose of assessment-:
1. The price at which the imported/exported goods are offered
for sale; 2. The price offered for delivery at the time and place
of importation or exportation; 3. Price quoted in the ordinary
course of international trade, where the seller and the buyer
have no interest in the business of each other and where the
price is the sole consideration for the sale or the offer for
sale.
As such the value of the goods to be ascertained above, is a
deemed value of the goods. It would thus follow that even if the
prices of the goods have been commercially negotiated the value of
the goods can be ascertained in accordance with the price of the
goods concerned in the ordinary course of business. Case law has
recognized this principle.
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The section clearly lays down that the price of the goods is to
be ascertained in accordance with the rates of exchange in force at
the time the bill of entry is presented under Section 46, or the
rates prevailing at the time of the presentment of the shipping
bill or bill of export, as under Section 50.
The Customs authorities are usually supposed to go by the
invoice price of the good in ascertaining their value. However, if
the price quoted in the invoice is too low, or if the authorities
are satisfied that the invoice itself is a false document, the
contract in question is not a genuine one, the authorities may go
against the invoice price and ascertain the price of the goods in
accordance with the prevailing price at which goods of similar
quality, characteristic, origin etc are offered for sale. The onus
of proving under invoicing, low pricing or misdeclaration is upon
the Department.
The following are included as part of the price of the goods for
the purpose of valuation-:
1. Expenses such as landing charges can be included as part of
the price of the goods. This is because, goods cannot be sold
without payment of these charges and because they are paid prior to
the unloading of the goods. This principle was laid down in a
number of cases.
2. It has further been laid down that all payments made in due
course up to the stage of unloading are to be treated as part of
the price of the goods. In cases where machinery is sold on the
assurance that the seller would install the same also, the costs of
installation shall also form part of the cost/price of the
machinery. This was laid down in Aarkeyees Imports Corporation, New
Delhi v. Collector of Customs, New Delhiiii. As a corollary to this
principle it has further been observed that dismantling charges, if
they form part of the contract of sale are also to be included
while computing the price of the goods in question.
The following reductions are permitted-: 1. Depreciation in case
old goods are being traded in are also permitted while arriving at
the
price of the goods for the purpose of valuation. 2. Discounts
made by the seller to the buyer are also deducted. Special
discounts made to a
buyer are however not permitted to be excluded from the price of
the goods.
The relevant date for the levy of duty under this Section is the
date the goods entered the territorial waters of India. Thus duty
would be levied on goods even if at the date of levy the goods are
exempt from payment of duty, in case duty was leviable on the goods
on the date they entered the territorial waters of India.
SECTION 15: DATE FOR DETERMINATION OF RATE OF DUTY AND TARIFF
VALUATION OF IMPORTED GOODS
Rate of duty and tariff valuation on imported goods is to be
paid at the following rate and valuation-:
1. In respect of goods entered for home consumption under
Section 46 on the date of the bill of entry in respect of the goods
in question. Thus the date at which the goods entered into the
territorial waters of India has no relevance to the rate of duty to
be levied on the goods, except the fact that as sated under Section
12, such a date is relevant to ascertain the time of occurrence of
the taxable event. Furthermore the delivery of the bill of entry is
deemed to
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have been delivered on the date on which an order is given under
Section 57 for the entry of the vessel inwards.
2. In case of goods cleared from a warehouse under Section 68,
on the date on which the goods are removed form the warehouse. Thus
if the between the time the goods were put into the warehouse and
the time that they were taken out from the warehouse, the duty is
increased, the duty leviable on the goods would on the basis on the
rates prevailing at the time the goods were taken out from the
warehouse.
3. In case of any other goods, on the date of payment of
duty.
The decisive date as far as chargeability of duty is concerned
is the date of filing of the bill if entry. Therefore duty is
leviable as per the rates prevailing on the date of entry inwards
of the vessel. This principle was laid down in M/S Shah Devchand
and Company v. Union of Indiaiv, Northern Corporation v. Union of
India.v.
SECTION 16: DATE FOR DETERMINATION OF RATE OF DUTY AND TARIFF
VALUATION OF EXPORT GOODS
Rate of duty and tariff valuation on export goods is to be paid
at the following rate and valuation-:
1. In case of goods entered for export under Section 50, on the
date on which an order permitting clearance and loafing of the
goods is made (Such orders are made under Section 37 of the Act).
This basically means that the relevant date in case of export goods
as far as valuation of rate of duty payable would be the date of
entry outwards of the vessel, irrespective of the date of filing of
the shipping bill, as the shipping bill may have been filed prior
to the date of entry outwards. On such date of entry the shipping
bill must have been duly passed by a proper officer and obligations
such as examination and testing of the goods intended for export
must have also been complied with. ;
2. In any other case on the date of the payment of the duty.
As far as exports by land are concerned the relevant rate is the
rate and valuation prevalent at the time the application for permit
to export is filed. This was laid down in Anant Atmaram Wara
Wadekar v. Land Customs Officer-in-Chargevi.
SECTION 17:ASSESSMENT OF DUTY
This Section lays down the procedure to be followed as regards
assessment of duty.
SECTION 18: PROVISIONAL ASSESSMENT OF DUTY
Section 18(1) (a), (b) and (c) clearly spell out the conditions
under which provisional assessments can be made, manner of
adjustment of provisional assessments against final assessments
etc.
SECTION 19: DETERMINATION OF DUTY WHERE GOODS CONSIST OF
ARTICLES LIABLE TO DIFFERENT RATES OF DUTY
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SECTION 20: RE-IMPORTATION OF GOODS PRODUCED OR MANUFACTURED IN
INDIA
The exemptions listed under the Section are available only if
the goods re-imported are essentially the same as the goods that
had been exported initially.
SECTION 21: GOODS DERELICT, WRECK, ETC
SECTION 22: ABATEMENT OF DUTY ON DAMAGED OR DETERIORATED
GOODS
This Section lays down the manner and proportion in which duty
is to be payable on damaged or deteriorated goods.
SECTION 23: REMISSION OF DUTY ON LOST, DESTROYED OR ABANDONED
GOODS
Under this Section, if it is proved that the goods had been
damaged/lost/destroyed before they were cleared but subsequent to
the passing of an order for clearance, the duty payable on such
goods shall be remitted. It has been held by way of judicial
decisions that lost in the context of Section 23 means loss by way
of natural causes and it does not include loss of goods by theft,
since theft is not a natural cause.
SECTION 24: POWER TO MAKE RULES FOR DENATURING OR MUTILATION OF
GOODS
SECTION 25: POWER TO GRANT EXEMPTION FROM DUTY
Section 25(1) empowers the Central Government to exempt either
absolutely or conditionally any category of goods from the levy of
duty, in whole or in part.
Section 25(2) empowers the government to issue exemption orders
with respect to goods selected from a category. The reasons for
such exemption are to be exceptional, required in public interest.
The reasons have to be mentioned in the exemption order passed by
the Government.
The difference between Section 25(1) and (2), is that while no
duty is leviable on goods falling under categories mentioned in
clause (1), goods covered under Clause (2) are such that normally
duty is liable to be paid on them, but not in the cases falling
under the said clause due to specific exemptions being granted to
the importer in question. This power can be exercised at any point
of time. The exemption may be granted before the levy of the duty,
after the levy of the duty but before its collection, and even
after the collection since an order for refund of the same can be
made. This was laid down in M.R.F. Ltd. v. Union of Indiaviiand M.S
Shawhney v .M/S Sylvania Laxman Ltdviii.
In this context a lot of judicial controversy has focused on
whether the plea of promissory Estelle is available against the
government. Generally speaking the plea of promissory estoppel is
not available against a statute. The government has the power to
levy duties and the alter the rates fixed as and when it is thought
fit. Thus the mere fact that the duties have been altered to
the
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disadvantage of a party does not mean that the power under
Section 25 has been exercised arbitrarily. This principle is
accepted by majority of cases, though there are some contrary
decisions also.
It has also been held that in case of ambiguities in the
exemption notifications, the matter \should be resolved in favour
of the taxpayer. This principle is a well settled one in the
context of interpretation of fiscal legislations. Moreover the
exemptions granted must be given effect to by the authorities.
These principles were laid down Tamil Nadu Newsprint and Papers
Ltd., Madras v. Appraiser, Madras Customsix and Haryana Plywood
Industries v. Collector of Customsx.
SECTION 26: REFUND OF EXPORT DUTY IN CERTAIN CASES
The section clearly lays down the conditions under which refund
of export duty paid may be asked for.
SECTION 27: CLAIM FOR REFUND OF DUTY
An application for refund can be made only within six months of
the date of payment of the duty. The effect of this provision like
any other provision relating to limitation is that it bars a
persons remedy to claim refund of duty after a certain point of
time, but does not extinguish such a right.
The right to refund arises only when duty has been paid under a
legal obligation. It has been observed by way of case law that when
duty is paid in pursuance of orders of authorities that lack
jurisdiction, the provisions of Section 27 are not. This was laid
down in Atul Products v. Union of Indiaxi and East Angila Plastics
(I) Ltd. v. Asst. Collector Of Customsxii.
The application for refund can be made only within 6 months of
the from the date of payment of the duty in normal circumstances,
or within 1 year in case the duty had been paid under protest. It
has been held that the limitation period so prescribed is not
liable to be extended or condoned. In other words the Customs
authorities are said to be devoid of the power to condone delays in
filing applications for refund of duty. This was laid down in
Andhra Pradesh State Electricity Board Vidyut Soudha v. Government
of India, Ministry of Finance (Department of Revenue
Insurance)xiii, (1989) 30 E.l.T. 641(1) (SC), Randip Shipping and
Transport Company Limited. v. Collector of Customsxiv.
SECTION 28: NOTICE FOR PAYMENT OF DUTIES NOT LEVIED,
SHORT-LEVIED OR ERRONEOUSLY REFUNDED
Under this Section, Customs authorities may issue notice for
payment of duties not levied, short levied or erroneously refunded.
The person is required to show cause why they should not pay such
duty back to the Customs authorities. The notice under this Section
is to be issued within 6 months of the date of non-levy, short levy
or erroneous refund. In G.F. Industries v. Union of Indiaxv, it was
observed that a notice for reclaiming refunds which were
erroneously made must be made within 6 months of the making of such
a refund.
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The applicability of this Section is said to be limited only to
final assessments. The Section therefore does not apply to
provisional assessments.xvi The notice of refund is to be made to
the owner of the concerned business. Notice to agents can also be
made if the Customs authorities are satisfied that the same can be
recovered from the owner, importer or exporter.xvii This principle
is in line with the normal principles of agency which lay down that
the agent cannot have more powers that those of her/his
principal.
It has been observed in a number of cases that the requirement
of giving notice under this Section is a principle of natural
justice and in the event of non-observance of the same liability
for repayment cannot be imposed upon an individual.
SECTION 28-A: POWER NOT TO RECOVER DUTIES NOT LEVIED OR SHORT
LEVIED AS A RESULT OF GENERAL PRACTICE
This Section empowers the Central Government to recover duties
lower than what would normally be levied on goods or not to recover
duties on such goods, in case the normal practice is that no duties
to duties lower than normal duties are recovered in respect of such
goods. Furthermore, duties if any paid may be refunded to the
person concerned under Section 27(2), in case they have been paid
in respect of goods for which no duty is leviable or lower duties
are leviable by virtue of a notification under this Section.
SECTION 28-B: DUTIES COLLECTED FROM THE BUYER TO BE DEPOSITED
WITH THE CENTRAL GOVERNMENT
Any duties collected from buyers, by any person, are required to
be deposited with the Central Government. This amount is later
liable to be adjusted against the duty to be paid by the person
under a final assessment order. Excess amounts can either be
credited to the fund or can be refunded to the person
concerned.
CHAPTER V-A INDICATING AMOUNT OF DUTY IN THE PRICE OF GOODS,
ETC., FOR
PURPOSE OR REFUND
S.28-C AND S. 28-D
These sections provide that where a person who is liable to pay
duty in goods shall at the time of clearance of goods prominently
indicate in all documents relating to assessment, sales invoice,
etc, the amount of such duty which will form part of the price at
which such goods are t o be sold. They also raise a presumption
that every person who has paid a duty under this act, unless the
contrary is proved, has passed on the full incidence of such duty
to the buyer of such goods.
SECTION 29
Section 29 provides that any vessel or aircraft entering India
for the first time has to land only at a customs airport or Customs
port. Customs Airport and Customs Port refer to ports and airports
duly notified under S.7
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SECTION 30
This section requires the submission of an Import manifest or an
Import report within 24 hours of a vessel, aircraft or vehicle
arriving at a customs station. Customs station refers to Customs
ports, Customs Airports and Land Customs stations which have been
notified under S.7 Imported Goods have been defined in S.2(25) as
any goods brought into India from a place outside India, but does
not include goods which have been cleared for house consumption.
The definition of import and imported goods does not imply
requirement of intention of knowledge or intention on part of the
person in-charge of the conveyance. Thus, although the prohibited
goods may have been carried in the vessel without the knowledge of
the person in charge of the vessel, the fact that the goods arrived
in India from a place outside India makes them imported goods . The
responsibility to submit a correct return or suffer the
consequences of an incorrect return is a strict liability of the
master of the vessel. The safeguard provided is that he would be
given a chance to amend the manifest a discovery.(B-218, James
David Crighton v. S.K.Srivastava AIR 1969 Cal 260). However, only
legitimate goods and not contraband are to be included in the
manifest; penalty is not imposable for non-amendment of the
manifest by inclusion of contraband after its seizure in absence of
fraudulent intention. The import manifest s amendable in case of
accidental slip or omission to include
IMPORT MANIFEST
In case if a vessel, it is open to submit the manifest before
the arrival of the vessel at the port. Submission does not
necessarily or inevitably add up to the probability that the ship
ha entered into the territorial waters of India.( National Textile
Corporation Ltd. v. Collector of Customs , Madras 1986(26) E.L.T
275 (Tribunal))
S.30 has to be read with the Import Manifest (Vessels)
Regulations,1971, the Import Manifest (Aircraft) Regulations, 1976
and the Import Report (Form) Regulations, 1976. Goods are liable
for confiscation of the import manifest id found to be forged.
(J.B. Trading Corporation v. Union of India 1990 (45) E.L.T 9
(Mad)).This is under S.111(f). Penalty is prescribed in
S.112(a).
PENALTY
Where incorrect declaration was made by the Chief Purser on
behalf of the master, it is the master who is liable for penalty
under S.112 and the chief Purser is liable for abetment under
S.112(be). It is the person in charge of the conveyance and not his
agent who is made responsible.(Ramesh Amritlal Shah v. Collector of
Customs , Bombay 1986(26) E.L.T 795(Tribunal)). Where there is a
shortage in goods as per import manifest under S.30, imposition of
penalty for short-loading of goods under S.116, Customs Act is
justified. (Savitri & Company. v. Government of India 1983
E.L.T 900 (A.P).Since the Customs Act provides for the extension of
the 24 hour tie limit for submission of the import manifest/report
in certain cases, S.10 of the General Clauses Act cannot be
invoked.( National Textile Corporation v. Collector of Customs ,
Bombay 1987(14) E.C.C.T-449 at pp.T-450,451(A.T))
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SECTION 31
This section provides that unloading of goods from a vessel can
commence only upon entry inwards order being made by he proper
officer which order is to be made only after the submission of
import manifest. Grant of entry inwards depends upon the
availability of berthing accommodation and there is no duty upon
the proper officer to grant the entry inwards forthwith upon the
submission of manifest. (Devpal Dhir v.B.V.Kumar, Collector of
Customs 1987 (32) E.L.T 459 (Bom))
Though the importer may present the Bill of Entry (see S.46)
before the entry inwards is granted, the Bill of Entry shall be
deemed to have been presented only on the date of such grant.
Therefore, the rate of duty has to be ascertained and assessed with
respect to the date of entry inwards.( Anantpur Textile Ltd. v.
Collector of Customs 1988 (33) E.L.T 12 (Cal)) The customs officer
has no jurisdiction to assess the Bill of Entry prior to this date,
and even if this is done, it cannot be treated as completed
assessment. (Devpal Dhir v.B.V.Kumar, Collector of Customs 1987
(32) E.L.T 459 (Bom))
Change of berthing of the vessel within the same port does not
make a higher rate of duty prevailing on date of such change
applicable.( Kailash Chander Kapur v. Collector of Customs 1990
(45) E.L.T 586 , at p.589 (Tribunal))
SECTION 32
This Section prevents the unauthorized landing of goods.
Imported goods not specified in the import manifest cannot be
unloaded at a customs station unless specific permission of the
proper officer is taken.
Proper officer under this section and the previous sections
means ( as defined in Section 2(34) ) the officer of customs who is
assigned to the functions in question by the Central Board of
Excise and Customs or the Collector of customs.
SECTION 33
Under this Section, loading and unloading of goods is to take
place only at places approved under S.8(a). S.8(a) gives the
Collector of Customs the power to approve proper places in any
Customs port, airport or coastal port for the unloading and loading
of goods or class of goods. However, loading/unloading may be at
any other place provided the proper officer had permitted the
same.
SECTION 34
It is required that unloading/loading must be only under the
supervision of the proper officer unless permitted by the board (
by way of general permission) or the proper officer (In specific
cases) to load/unload without supervision. Where the port trust has
been given the authority to give direct delivery of bulk cargo to
the importers , weightment certificate given by the authority has
to be respected by the Customs authorities to ascertain shortage in
terms of the proviso to this section.
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SECTION 35
The section lays own the requirement that goods must be
accompanied by a boat- note when they are water- borne for being
landed/shipped. In case of goods for export, this is required only
when no shipping Bill accompanies the goods. This provision must be
read with Boat note Regulations, 1976, (issued by notification
dated 23-10-1976, as amended by notification dated 22-10-1977)
which specifies the form and other details of the boat- note.
SECTION 39
There is no difference between the words entry outwards of the
vessel used in S.16, and the words entry outwards to the vessel
used in this section.(Gangadhar Narsingdas v. Asst. Collector of
Customs AIR 1968 Goa 105). Baggage includes any unaccompanied
baggage, but does not include motor- vehicles (S.2(23))
SECTION 40
No action can be taken under this section where provisional
assessment has been made and the assessee has consented to pay the
balance amount after the final assessment has been completed.(B.W.
Maltazan v. Collector of Customs AIR 1958 A.P.122)
SECTION 41
The section requires delivery of export- manifest/export-report
before a vessel, aircraft or other vehicle leaves a customs port ,
airport oor land- customs station. This has to be read with the
Export Manifest (Vessels) Regulations, 1976 and the Export Report
(Form ) Regulations, 1976.
SECTION 42
This section delays the departing of a conveyance from a Customs
station until all the requirements under the Act have been
satisfied. Deposit of amount or execution of bond under this
section is independent of deposit under S.129-E. The two are
mutually exclusive.(Shaw Wallace & Company. Ltd. v. Collector
of Customs, Bombay 1987 (27) E.L.T 489, at pp.491-92
(Tribunal))
CHAPTER VII
Chapter VII of the Act deals with clearance of imported and
exported goodS. It consists of 8 sections, 44-51.
The Chapter does not apply to baggage and postal articlesxviii.
S.45 of the act deals with restriction on custody and removal of
improved goodS. It mandates that goods unloaded in a customs area,
shall remain in the custody of such person as may be approved by
the Collector of Customs, until they are cleared for home
consumption or are warehoused or are transhipped. The person having
custody of any imported goods in a customs area is expected
firstly, to keep a record of such goods and a copy of thereof to
the proper officer and secondly, he is under an obligation not to
permit
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such goods to be removed from the customs area or otherwise deal
with, except under and in accordance with the permission in writing
of the proper officer.
S.46 of the Act deals with the entry of goods on importation. It
says that the importer of any goods, other than goods intended for
transit or transshipment shall make entry thereof, by presenting to
the proper officer, a bill of entry for home consumption or
warehousing in the prescribed form. However, if the importer makes
and subscribes to a declaration before the proper officer, to the
effect that the he / she is unable to furnish all the particulars
of goods required under the subsection for want of full
information, the proper officer, has been empowered, pending the
production of such information, to permit the importer, previous to
the entry thereof, to examine the goods in the presence of an
officer of customs or deposit the goods in a public warehouse,
appointed under S.57, without warehousing the same.
With respect to the contents of the bill of entry, the section
says that it shall include all the goods mentioned in the bill of
lading or any other receipt given by the carrier to the
consignor.
The bill of entry may be present at any time after the delivery
of the import manifest or import report, as the case may be.
However, the collector of customs is empowered, under special
circumstances, to permit a bill of entry to be presented before the
delivery of such report. Further, the bill of entry may be
presented even before the delivery of such manifest, if the vessel
by which the goods have been shipped for importation to India is
expected to arrive within a week from the date of such
presentation.
The importer, while presenting the bill of entry has to declare
on the Bill of Entry (BoE) that the contents of the BoE are true
ands support this declaration has to produce to the proper officer,
the invoice if any, relating to the imported goodS.
If the proper officer, is satisfied that the interests of
revenue are not prejudicially affected and there was no fraudulent
intention, he may permit substitution of a bill of entry for home
consumption for a bill of entry for warehousing and vice versa.
S. 46 along with S.15 quantify the liability for payment of duty
on imported goodS. The crucial date for this purpose is the date on
which the BoE is presented. The Bill of Entry, thus given the value
of the goods and the importer has to declare this value in the BoE.
If the real value of the goods is higher than the value declared in
the BoE, it amounts to evading payment of the proper customs duty.
In such a case, the importer would be liable for punishmentxix
The issue here is whetherS.46 is mandatory or directory. This
arose in the case of Chowgule and Co. v. Union of India xx. The
Court in this case ruled that the use of the word shall in S.46
makes it appear mandatory. However, this does not appear to be
correct when it is read with S. 48 of the Act. The essence of the
provision is the making of the entry of the imported goods, the
manner in which the entry is made being only an issue of procedure.
The presentation of the Bill of Entry is a pure procedural aspect
of the making of the entry of imported goodS. The legislature did
not wish to make Section 4 mandatory and the section is merely
directory as regards the requirement of presentation of the Bill of
Entry in the prescribed form.
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Filing of the BoE is merely to facilate assesment of duty and by
itself does not create liability. This is by virtue of S.12. It has
been held in S.P.A and A.R Chockalingam Chettar Firm v. National
Steamship Co., Bombayxxi that declarations made under S.29, Sea
customs Act, which corresponds to this section cannot be said to be
conclusive.
CLEARENCE OF GOODS FOR HOME CONSUMPTION [S. 47]
If the proper officer is satisfied that any goods entered for
home consumption are nor prohibited goods and their importer has
paid the import duty, if any assessed thereon and any charges
payable under the Act in respect of the same, the proper officer
may make an order permitting clearance of the goods for home
consumption.
Where the importer fails to pay import duty under S. 57 (1)
within seven days from the date on which the BoE is returned to him
for payment of duty, he has to pay interest at the rate fixed by
the board, which will not be less than 20% and not greater than
30%, on the duty till date of payment of such duty.
The section contains a provision which states that where the
bill of entry is returned for payment of duty before the
commencement of the Customs (Amendment) Act, 1991 ands the importer
has not paid such duty before such commencement, the date of return
of such bill of entry to him shall be deemed to be the date of such
commencement for the purpose of the section.
Once the goods have been cleared after verification and check
under S. 47, there is no scope for issuing a show-cause notice. The
section attracts finality to the decision of the officer and this
cannot be disturbed unless the department is able to prove that
there was fraud or deliberate suppression.
The role of the officer, as per this section, is to examine
whether the goods are prohibitted or not and whether the import
duty and other charges under the Act have been paid. If he / she is
satisfied that the above conditions are met, he / she is empowered
to clear the goodS. Once cleared, the only option available to the
Department is Revision under S. 130.
S. 48 lays down the procedure in case of goods that are not
cleared, warehoused or transhipped within 30 days or such time as
the power officer may allow after unloading or if the title to any
such imported goods is relinquished, such goods may be sold by the
person having the custody thereof. Prior to such sale, the
permission of the proper officer has to be taken and notice of the
same has to be given to the importer.
The section contains a proviso to the effect that animals,
perishable goods and hazardous goods may be sold at any time, with
the permission of the proper officer and in case the goods are arms
and ammunition, as defined in the Arms Act, 1959, they can be sold
at such time, place and manner as the central government may
direct.
S. 49 provides for storage of imported goods in a public or
private warehouse pending clearance. The section states that in
case of any imported goods, whether dutiable or not, entered for
home consumption, the Assistant Collector of Customs is satisfied
on the application of the importer, that the goods cannot be
cleared within a reasonable time, the goods may pending clearance
be
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permitted to be stored in a public warehouse or in a private
warehouse. If facilities for deposit in a public warehouse are not
available. But, such goods for the purposes of this Act, and
accordingly, the provisions of chapter IX shall not apply to such
goods.
CLEARANCE OF EXPORT GOODS
Sections 50 and 51 deal with the clearance of export goodS.
S. 50 states that the exporter of any goods shall make entry
thereof presenting to the proper officer in the case of goods to be
exported in a vessel or aircraft, a shipping bill, and in the case
of goods to be exported by land, a bill of export in the prescribed
form. The exporter, while presenting such a shipping bill or bill
of export has to make and subscribe to a declaration as to the
truth of its contents.
S. 51 deals with the clearance of goods for exportation. As per
the Section, where the proper officer is satisfied that any goods
entered for export are not prohibited goods and the exporter has
paid the duty, if any, assessed thereon and any charges payable
under the Act in respect of the same, the proper officer may make
an order permitting clearance and loading for the goods for
exportation.
CHAPTER VIII
GOODS IN TRANSIT
Sections 52-56 deal with goods in transit. The basic principle
underlying these Sections is that goods in transit are not liable
to be subjected to any customs duty. This exemption is applicable
to goods imported by vessels or aircrafts and which are mentioned
in the import manifest as meant transit goods (Section 53). Under
Section 54 a bill of transshipment is required to be presented in
respect of goods which are meant to be transshipped.
Imported goods, under Section 56 may be transported without
payment of any duty form one land customs station to another,
either through any part of India or any other foreign territory,
without the payment of any duty in respect of such goods.
CHAPTER IX
WAREHOUSING
S.57: APPOINTING OF PUBLIC WAREHOUSES
The power to appoint public warehouses now rests with the Asst.
Collector of Customs.
S. 58: LICENSING OF PRIVATE WAREHOUSES
This section has introduced the following amendments: The asst.
collector of customs has been granted the power to license private
warehouses It has been specifically provided that in private
warehouses, ordinarily only the goods
belonging to the licensee shall be kept
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There are comprehensive grounds on which the license can be
cancelled There is also a provision for suspension of license
pending enquiry.
Cancellation of license and refusal to renew the same: Licensees
of private bonded warehouses cannot be refused a renewal of their
licenses or their license cancelled on the simple ground that
public warehouses have been constructed and the same shall be used.
Every application for issuance or renewal of license for a private
warehouse has to be considered on its merit [Pesticides Limited v.
Assistant collector of Central Excise & Customs, Udaipur, 1987
(30) E.L.T. 651]. It has also, however been observed that it may be
sound policy not to grant a license under this section in any
warehousing station in case a public warehouse under the previous
section has already been at that warehousing station [Bajaj Plastic
Limited v. Collector of Central Excise, Nagpur, 1987 (32) E.L.T.
383].
S.59: WAREHOUSING BOND
This section introduces the following amendments: Goods imported
by land are allowed to be warehoused. It enables an importer to
enter into a general bond for the warehousing of goods to be
imported by him within a specified future period. It provides
that even if the goods are transferred to another person, the bond
executed by the
seller shall remain in force, but if the transferee executes a
fresh bond in respect of the purchased goods, the bond executed by
the transferor shall be deemed to be reduced to the extent of the
amount for which the transferee executes the bond.
Where the Shipping Corporation of India corrected a freight
bill, the customs authorities are under an obligation to proceed on
the basis of the corrected freight. Where any assessment has
already been made as per the incorrect freight, such assessment has
to be redone on the basis of corrected freight. Where no assessment
has been made, such assessment shall be made strictly in accordance
with the corrected freight as shown by Shipping Corporation of
India [Hindustan Products v. Collector of Customs, 1988 (34) E.L.T.
13]
With regard to interest, the words together with interest in
S.59 (b) are sufficient to show that interest is linked with duty.
The liability to pay interest cannot be delinked from the liability
to pay duty. The importers liability to pay duty arises at the time
of clearance of goods from the warehouse. There is no obligation to
pay while the goods are in the warehouse. Thus, where the duty on
the goods are lifted before clearance, there is no duty to pay
interest [Thengubhandra Fibres Limited v. Union of India, 1990 (30)
E.C.C. 388].
S. 59-A: CONDITIONS FOR WAREHOUSING OF CERTAIN GOODS
S.60: PERMISSION FOR DEPOSIT OF GOODS IN A WAREHOUSE
S. 61: PERIOD FOR WHICH GOODS MAY REMAIN WAREHOUSED
An application for the extension of warehousing period need not
necessarily be made before the expiry of the original warehousing
period. The authorities are bound to consider an application for
extension, unless they have already initiated coercive steps to
recover customs duty and
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warehousing and other charges [Sunil Jugalkishore Gupta v. Union
of India, 1987 (14) E.C.C. 165]. Interpretation of non-consumable
stores- non-consumable stores in S. 61 (1) (a) has been interpreted
to mean only the non-consumable stores for use in a vessel or
aircraft as the term stores has been defined in S. 2 (38) as goods
for use in a vessel or aircraft [Collector of Central Excise,
Jaipur v. Rajasthan Spinning and Weaving Mills 1987 (12) E.C.R.
1015].
S. 61(2)- this section contemplates collection of interest on
amount of duty on the warehoused goods from the period of expiry of
three months till the date of clearance of goods from warehouse
[Hindustan Zinc Limited v. Collector of Customs, 1990 (49) E.L.T.
419]
Prospective effect of the Amendment- it is a well-accepted
principle of law that fiscal legislation imposing liability is
generally prospective in nature. In this amendment, there is
nothing to show that it is meant to operate retrospectively and
neither is there any implied inference in this regard. Keeping
these considerations in mind, the tribunal has decided that the
amendment is applicable prospectively [Collector of Customs and
Central Excise v. J.K. Synthetics Ltd. 1991 (56) E.L.T. 236].
S.62: CONTROL OVER WAREHOUSED GOODS
S.63: PAYMENT OF RENT AND WAREHOUSE CHARGES
Charges for storage and upkeep of goods- where goods are seized
from the premises of a person and kept in places other than a
warehouse, the Customs department cannot claim the expenses
incurred by it in storing the goods in different places from the
petitioners, as it is up to the department to make arrangements for
the upkeep of the confiscated goods. [Biramani Sahu v. Collector,
Customs and Excise, Sambalpur, 1980 Cr. L. J. 54]
S.64: OWNERS RIGHT TO DEAL WITH WAREHOUSED GOODS
S. 65:MANUFACTURE AND OTHER OPERATIONS IN RELATION TO GOODS IN A
WAREHOUSE
This section permits the destruction of any refuse or surplus
goods from any operations and allows the remission of duty thereof
only on such portion of the refuse as has resulted from an
operation connected with goods, which are exported. Where the
manufactured goods are cleared for home consumption, duty on the
refuse which has resulted from the manufacture of such goods shall
not be remitted. This is so because refuse in manufacture is not a
loss to the manufacturer and the cost of wasted material is added
to the cost of production. Thus, where the product is consumed in
India, duty has to be paid on the waste material.
Notification No. 163/Cus., dated 16th Oct. 1965- this
notification exempts any ocean going vessel manufactured in the
warehouse from customs duty leviable thereon at the time of
clearance. Imported parts or accessories are not exempted from
customs duty under this notification [Cochin Shipyard Limited,
Cochin v. Collector of Customs, Cochin, 1987 (27) E.L.T. 286].
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S.66: POWER TO EXEMPT IMPORTED MATERIALS USED IN THE MANUFACTURE
OF GOODS IN WAREHOUSE
S.67: REMOVAL OF GOODS FROM ONE WAREHOUSE TO ANOTHER
S.68: CLEARANCE OF WAREHOUSE GOODS FOR HOME CONSUMPTION
Clearance of goods- warehoused goods can be cleared for home
consumption only after assessment and payment of duty. Where the
petitioners clear after filing proper bills of entry, unless it is
positively shown that the clearance was allowed on provisional
assessment, it stands to reason that clearance was made only on
assessment [International Computes Indian Manufacturers Ltd. v.
Union of India, 1981 E.C.R. 403].
Rate of duty on actual removal of goods- if a party discharges
its liability by complying with the requirement of law, and
presents papers for clearance of goods, the revenue authorities are
obliged to pass the order immediately. If the authorities either
refuse to pass the order on some erroneous or imaginary ground or
due to misconception of law they cannot take advantage of their
mistake and demand a higher rate of duty from the importer
[Priyanka Overseas Pvt. Ltd. v. Union of India, 1991 (51) E.L.T.
185]. Where goods have been passed for delivery, they cannot be
detained on the basis of internal instructions- the petitioners
were refused to allow the goods from the warehouse even though the
bills of entry had been endorsed as passed out of customs charge as
they approached the warehouse superintendent at 4 p.m. on the
grounds that he had been instructed by the Asst. Collector of
Customs not to allow withdrawal after 4 p.m. the next day the
petitioners were asked to pay increased duties which had come into
effect that day. It was held that such internal instructions did
not bind the citizens and therefore the department was unjustified
in its demand [Harish Silk Mills Pvt. Ltd. v. Union of India, 1989
(43) E.L.T. 614].
S. 69: CLEARANCE OF WAREHOUSED GOODS FOR EXPORT
S. 70: ALLOWANCE IN CASE OF VOLATILE GOODS
This section amended the older provisions to the extent that the
concessions that ere available to wine, spirit and beer in casks
and salt have now been extended to other volatile goods. Duty is
now remitted on the quantity genuinely deficient due to natural
loss without fixing any statutory maximum limit.
The scope of the section is still limited in the sense that it
covers only losses due to storage and not those due to transfer
[Bharat Petroleum Corporation Ltd. v. Collector of Customs, 1988
(33) E.L.T. 563]. Whereas this section deals with loss due to
natural causes, S.23 deals with loss due to other reasons (except
pilferage).
S. 71: GOODS NOT TO BE TAKEN OUT OF WAREHOUSE EXCEPT AS PROVIDED
BY THIS ACT.
S.72: GOODS IMPROPERLY REMOVED FROM WAREHOUSE, ETC.
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In case: Goods are removed in contravention of S. 71 They are
not removed from the warehouse at the expiration of period
prescribed under S.61 Warehoused goods have been taken under S. 64
as samples without payment of duty Goods in respect of which bond
has been executed under S. 59 or S, 59-A and which have
not been cleared fir home consumption or exportation are not
duly accounted for to the satisfaction of the proper officer
The owner of such goods is bound to pay the full amount of duty
chargeable on account of such goods together with all penalties,
rent, interest and other charges payable on such goods. If the
owner fails to pay the abovementioned amount, the proper officer
may, without prejudice to other remedies, cause to be detained and
sold after giving notice to the owner, notwithstanding any transfer
of the goods, such portion of his goods, if any, in the warehouse,
as the officer may select.
S. 73: CANCELLATION AND RETURN OF WAREHOUSING BOND
CHAPTER X
SECTION 74
Drawback refers to refund of import duty. This section provides
that in case of goods capable of being easily identified, where
imported goods are exported within two years of being imported, a
refund of import duty may be claimed. This has to be read along
with the Re-export of Imported Goods (Drawback of Customs Duties )
Rules, 1995 , which prescribes the form and procedure for claiming
drawback.
The words capable of being identified refer to the nature of the
goods( H.S.Mehra v. Union of India AIR 1968 Del 142, at p.143)
The Section also has to be read with the notification which
deems certain goods not easily identifiable,( dated 10-6-1881 (No.
1117) and the notification which prescribes drawback rates in
respect of goods taken into use after importation.(dated 6-2-1965,
as amended on 8-11-1969 and 2-5-1970)
SECTION 75
This Section relates to the drawback of export goods in the
manufacture of which imported goods have been used. Such drawback
would be allowed in respect of those classes or descriptions of
goods in respect of which the central government has issued a
notification in the official gazette.( see Notification dated
30-5-1997 , as amended on 10-9-97 and 17-10-97- this specifies
all-industry drawback rates subject to the general notes mentioned
therein.)
However, where the value of the export goods is less than the
value of the imported goods, or less than a particular percentage
of the value of the imported goods, if such percentage be specified
by the Central Government, no drawback would be available.
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Drawback proceeds would be recovered as per the procedure in
Rule 16A of the Customs and Central Excise Duty Drawback Rules,
1995 in case of export proceeds are not realised within the period
allowed by FERA (and from 1-6-2000, under FEMA).These rules also
lay down procedures for claiming and grant of drawback under
S.75.Thse repeal the 1971 rules. Where the whole of the imported
goods have not been used in the manufacture of the export goods,
then the quantity of imported goods which has actually been used in
the manufacture would be deemed to be the imported goods upon which
the drawback upon the Central Government declaring the same.( The
notification dated 30-5-1991, as amended on 1-6-1992 and 1-9-1998
gives a list of goods in respect of which the central government
has made such declaration.)The requirement of export under this
section is satisfied by the taking of goods outside the territorial
waters of India, and the fct that the ship was brought back to
India because of damages in the ship does not affect the position.(
Collector of Customs, Calcutta v. Sun Industries 1988(17)E.C.C ,at
p.73 (S.C))
SECTION 76
This section restricts the operation of Sections 4 and 75, and
provdes that drawbak shall not be allowed in the following
circumstances:
1) When the market price of the goods is lesser than the
drawback due on them 2) When the drawback due is less than Rs.50 3)
When the Central Government notifies that no drawback shall be
allowed in respect of
particular goods due to the likelihood of those goods being
smuggled back into India. The Government has notified such
prohibitions in notification dated 1-2-1963, as amended on
29-10-1968 and notification dated 1-10-1977, as amended on
10-12-1987, 27-6-1988, 3-3-1994 and 4-1-1995)
CHAPTER XI
SPECIAL PROVISIONS REGARDING BAGAGE, GOODS IMPORTED OR EXPORTED
BY POST AND STORES
Chapter XI of the customs Act provides for special provisions
regarding baggage, goods imported or exported by post and stores.
It is pertinent to note that these are excluded by the preceding
chapters.
S. 77 states that the owner of any baggage shall, for the
purpose of clearing it, make a declaration of its contents to the
proper officer.
The definition of the term baggage is not provided in the act,
but it is included in the definition of goods under S. 2(22) of the
Act. The definition of goods is an inclusive definition and
includes any other kind of morable property in addition to baggage.
Hence, any item of movable property or any article which may be
goods can be part of or contained in baggage.
What is required to be done by a passenger, by virtue of S. 77,
is that he/she the owner of any baggage has to declare its contents
to the proper officer, for the purpose of clearing it.
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S. 78 deals with the determination of rate of duty and tariff
valuation in respect of baggage. It say s that such rate of duty or
tariff valuation would be that which has in force when the
declaration was made in respect of such baggage under S. 77.
S. 79 of the Act exempts bona fide baggage from duty. Under this
section the proper officer is empowered, subject to rules made by
the central government, to pass free of duty, any article in the
baggage of a passenger or a member of the crew, in respect of
which, the officer is satisfied that it has been in use for such
minimum period as specified in the ruleS. He/she is also empowered
to pass free of duty any article in the baggage of a passenger in
respect of which, he/she is satisfied that it is for the use of the
passenger or his/her family or is a bona fide gift or souvenier,
provided that the value of each such article and the total value of
all such articles does not exceed such limits as is specified
The central Government is empowered, under this section, to make
rules for the purpose of carrying out the provisions of the
section. The rules so made may specify the minimum period for which
any article needs to be used by a passenger or crew for it to be
exempted from duty, the maximum value of any individual article and
the maximum total value of all articles which may be passed free of
duty and the conditions subject to which any baggage may be passed
free of duty. The Central Government is further empowered to make
different rules for different classes of persons.
S. 80 provides for temporary detention of baggage. It states
that where the baggage of a passenger contains any article which is
dutiable or the import of which is prohibited and in respect of
which a true declaration has been made under S. 77, the proper
officer may, at the request of the passenger, detain such article
for the purpose of being returned to him/her on his/her leaving
India.
S. 81 of the Act empowers the board to make regulations
providing for the manner of declaring the contents of any baggage;
providing for the custody, examination, assessment to duty and
clearance of the baggage; providing for the transit or
transshipment of baggage from one customs station to another or to
a place outside India.
S.113
This section provides for confiscation of goods attempted to be
improperly exported. It states that goods shall be liable to
confiscation if:
1. The goods are attempted to be exported by sea or by air from
a place other than a customs port or customs airport appointed for
the loading of such goodS.
2. The goods are attempted to be exported by land or inland
water through any route other than a route specified in a
notification issued under S. 7 (c) of the Act, for the export of
such goods.
3. If any dutiable goods or prohibited goods are brought near
the land frontier or the coast of India or near any bay, gulf,
creek or tidal river for the purpose of being exported from a place
other than a customs station or port, appointed for the loading of
such goods.
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4. If any prohibited goods are attempted to be exported and for
this purpose are brought within the limits of any customs area.
5. Any dutiable or prohibited goods are found concealed in a
package, which is brought within the limits of a customs port for
the purpose of exportation.
6. Any dutiable goods or prohibited goods are loaded or
attempted to be loaded in contravention of the provision of
sections 33 or 34 i.e. if loading takes place without customs
supervision or at a place other than an approved loading place.
7. Dutiable or prohibited goods are loaded or attempted to be
loaded on any conveyance, or water-borne or attempted to be water
borne for being loaded on any vessel, the eventual destination of
which is a place outside India, without the permission of the
proper officer.
8. Any dutiable or prohibition goods are not included or are in
excess of those included in the entry mode under the Act or in the
case of baggage, in the declaration made under S. 77.
9. Any dutiable or prohibited goods or goods entered for
exportation under claim for drawback do not correspond in any
material particular with the entry made under the Act or in the
case of baggage, with the declaration under S. 77 in respect
thereof.
10. Any goods entered for exportation under claim for drawback
do not correspond in any material particular with any information
furnished by the exporter or manufacturer under the Act, in
relation to the fixation of rate of drawback under S. 75.
11. The goods are those on which import duty has not been paid
and which are entered for exportation under a claim for drawback
under S. 74.
12. The goods are those, which are cleared for exportation under
a claim for drawback, but are not loaded for exportation on account
of any willful act, negligence order fault of the exporter, his
agent or employee. The goods are liable to be confiscated even if
they are unloaded after having been loaded for exportation, without
the permission of the proper officer.
13. The goods are specified goods in relation to which any
provisions of chapter IV-B or of any rule made under the Act for
carrying out the purposes of that chapter are contravened.
CHAPTER XII PROVISIONS RELATING TO COASTAL GOODS AND VESSELS
CARRYING
COASTAL GOODS
SECTION 91:CHAPTER NOT TO APPLY TO BAGGAGE AND STORES
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SECTION 92: ENTRY OF COASTAL GOODS
Consignors are required to make entries of coastal goods by
presenting a bill of coastal goods to the proper officer, in the
prescribed format. Such a bill is to contain a declaration by the
consignor about the truth of the contents of the consignment.
SECTION 93: COASTAL GOODS NOT TO BE LOADED UNTIL BILL RELATING
THERETO IS PASSES ETC.
This Section imposes an obligation on the master of the ship to
disallow loading of the goods, unless a bill relating to such goods
has been passed by the proper officer and has been delivered by the
consignor to the master.
SECTION 94: CLEARANCE OF COASTAL GOODS AT DESTINATION
The master of the vessel is to submit all bills relating to the
goods at the port where the goods are intended to be unloaded.
SECTION 95: MASTER OF A COASTING VESSEL TO CARRY AN ADVICE
BOOK
The advice book delivered by the Customs authorities to the
master of the ship is to be carried by the master. At each port of
call, a proper officer may make entries with respect to goods
loaded. At each port of call the master is obliged to deliver the
advice book to a proper officer for inspection.
SECTION 96: LOADING AND UNLOADING OF COASTAL GOODS AT CUSTOMS OR
COASTAL PORT ONLY
Ports for the purpose of loading and unloading of coastal goods
are notified under Section 7 of the Act. As such loading and
unloading of coastal goods can be undertaken only at such
prescribed ports.
SECTION 97: NO COASTING VESSEL TO LEAVE WITHOUT WRITTEN
ORDER
This Section disallows the master from permitting departure of a
ship from a loading/unloading port, unless a written order to that
effect has been obtained. The order is to be made by the proper
officer after compliance with Sub-section 2 has been ensured.
SECTION 98: APPLICATION OF CERTAIN PROVISIONS OF THIS ACT TO
COASTAL GOODS, ETC.
SECTION 99: POWER TO MAKE RULES IN RESPECT OF COASTAL GOODS AND
COASTING VESSEL
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CHAPTER XIII SEARCHES, SEIZURE AND ARREST
S.100: POWER TO SEARCH SUSPECTED PERSONS ENTERING OR LEAVING
INDIA, ETC.
The power of search under this section can be exercised if a
person is suspected to have secreted about his person any documents
relating to goods liable to confiscation as such documents may
provide clues and can also be tendered as evidence. Maintenance of
diary not required- there is no provision in this Act which
requires that diaries are to be maintained and neither have the
provisions of the Code of Criminal Procedure been made applicable.
The customs officers are not primarily concerned with the detection
or punishment of crime. Their prime interest lies in smuggled goods
and not the smugglers.
S. 101: POWER TO SEARCH SUSPECTED PERSONS IN CERTAIN OTHER
CASES
This provision enabled the empowered officers to search
suspected persons anywhere in India if they are suspected to have
secreted about their persons gold, precious stones, watches and
other notified articles liable to confiscation.
S. 102: PERSONS TO BE SEARCHED MAY REQUIRE TO BE TAKEN BEFORE
GAZETTED OFFICER OF CUSTOMS OR MAGISTRATE
Witness of the search- signing of the search list is not an
obligation imposed by the written order nor is the refusal to sign
such a list made punishable under this section
Income Tax authorities cannot issue a warrant to seize the money
in the possession of the Customs authorities- when the cash is in
possession of the Customs authorities and not the petitioner no
warrant can be issued by the Income Tax authorities to get hold of
the money under S. 132 of the Income-Tax Act [Tarsem Kumar v.
Commissioner, Income Tax, Haryana, Himachal Pradesh, Delhi, (1975)
Cencus, Vol. III, 72].
S. 103: POWER TO SCREEN OR X-RAY BODIES OF SUSPECTED PERSONS FOR
DETECTING SECRETED GOODS
This section has to be read with S. 134 which makes the refusal
to co-operate in the process of screening and x-ray punishable.
S. 24 of the Indian Evidence Act- S. 24 of the Evidence Act will
be applicable only if: It appears to the court to have been caused
by any inducement, threat or promise The said inducement, threat or
promise must have reference to the charge against the
accused person It shall proceed from a person in authority
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The court shall be of the opinion that the said inducement,
threat or promise is sufficient to give the accused person grounds
which would appear to him reasonable in supposing that he would
gain an advantage or avoid an evil of a temporal nature in
reference to the proceedings against him.
Thus, section 24 would be applicable where customs authorities
can be taken to persons in authority.
S. 104: POWER TO ARREST
Unlike the old Act, this section provides that for the purpose
of releasing a person arrested under Sub-section (1) on bail, the
officer shall have the same powers and be subject to the same
provisions as an officer in-charge of s police station as under the
Code of Criminal Procedure. Also, Sub-section (4) specifically
states that all offences under this Act are not cognizable and
therefore automatically excludes the power of the police to
investigate into any offence under this Act.
Scope- the officer before arresting a person under this section
should have reason to believe that the person is guilty of an
offence punishable under S. 135. However, by merely informing such
person of the ground of his arrest, the officer does not formally
accuse him of an offence. Until a complaint is filed in compliance
with S.137, the person does not stand in the position of an
accused. The customs officer, even under this Act continues to be a
revenue officer. He is not a police officers and the information
conveyed by him, when a person is guilty of contravening the law
make the person an accused. It has been held in Soni Vallabhdas
Liladhar v. Assistant Collector of Customs, Jamngar, AIR 1965 SC
481 that a customs officer is not a police officer and S. 25 of
Code of Criminal Procedure is not applicable to statements made to
them [See Also Raja Ram v. State of Bihar, AIR 1964 SC 828]. Also,
he has no power to submit your charge sheet under S.173 Code of
Criminal Procedure [Asst. Collector of Customs, New Delhi v. Tilak
Raj Shiv Dayal, AIR 1969 Delhi 301].
Arrest and Custody- What amounts to arrest is laid down by the
legislature in express terms in S.46 of the Code of Criminal
Procedure, whereas the words in custody which are to be found in
certain sections of the Evidence Act only denote surveillance or
restriction on the movements of the person concerned, which may be
complete or partial. The two cannot be equated [Harsbansingh Sardar
Lenasingh v. State, AIR 1970 Bom. 79].
Power to remand-S 4(2) of the Code of Criminal Procedure
provides that all offences under any law shall be investigated and
tried as per the Code but where a particular enactment provides a
particular procedure, that procedure would take precedence over the
provisions of the Code. Chapter XXXIII of the code is applicable to
offences under the Act because provisions with regard to bails and
bonds have no place in the Act at all. Going by this logic, S. 437
of the code becomes applicable to the Act. Thus, where there is an
express power to refuse bail, there is necessarily a power to
retain or place a person in custody as a consequence of that
refusal [Dalam Chand Baid v. Union of India, 1982 Cr. L. J. 747,
Dave N. H. v. Mohmed Akhtar Hussain, (1982) 2 G.L.R. 792].
Furthermore it is a statutory obligation to record reasons while
granting or refusing bail.
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Producing the person arrested before the Magistrate- Art. 22(2)
of the Constitution of India mandates that arrestee has to be
produced before the magistrate within 24 hours. This is applicable
to the Customs Act, too [Roshan Beevi v. Joint Secretary to
Government of Tamil Nadu, 1984 Cr. L. J. 134].
Jurisdiction of the High Court under Art. 226- all that the High
Court could consider while dealing with a Habeas Corpus writ
petition under Art. 226 was whether there was sufficient material
on record to justify the detention. The Court is not to function as
an appellate authority and cannot be called upon to decide the
correctness of the allegations of the parties against each other
[Rajendra Prasad v. State of Uttar Pradesh, 1984 A. Cr. R.
237].
S. 105: POWER TO SEARCH PREMISES
Constitutionality of the Code of Criminal Procedure provisions
regarding search- searches under or pursuant to a warrant under S.
93 of the Code of Criminal Procedure did not involve any violation
of protection against testimonial compulsion guaranteed by the
Constitution under Art. 20 (3) or the fundamental right of
acquiring, holding or disposing property under S. 19 (1) (f) as it
is only a temporary restriction for the limited purpose of
investigation [M.D. Sharma v. Satish Chandra, AIR 1954 SC 300].
Formalities to be observed while conducting a search- the
following formalities have to be observed by a customs officer
while conducting a search:
1. The person of the officials and search witnesses must be
searched before they are allowed to enter premises so as to avoid
any suspicion that any member of the search party had planted the
thing recovered surreptitiously in the premises.
2. The customs officer shall call upon at least two respectable
inhabitants of the locality to be search witnesses. A respectable
person is one who is impartial and on whom the owner of the owner
of the place can prima facie rely. Persons living more than a mile
away cannot said to be persons of he locality [Mahtway, In re, 1925
(26) Cr.L.J.827]. The fact that the search witnesses are not
respectable people does not vitiate the legality of the proceedings
but affects the weightage of the evidence.
3. The search shall be made in the presence of the search
witnesses and a list of all the things seized and the place in
which they were found shall be prepared by the officer. The list
need not contain details of how the things were found
4. The witnesses shall sign the said list. 5. The occupant of
the place searched or some other person on his behalf shall be
permitted to
attend the search. The absence of any such person would vitiate
the legality of the search [Ramesh Chandra v. Emperor of India,
I.L.R. 41Cal. 350].
6. The copy of the list prepared and signed by the witness shall
be delivered to the occupant.
When there is a reasonable suspicion that somebody might be
hiding something on his person, such person can be searched. In
case a woman has to be searched, it shall be done by a woman with
strict regard to decency.
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Under S. 47 (2) the customs officer is allowed to break open any
outer or inner door or window of any place, of accused or any other
person, if upon notification of his authority and purpose he is
still denied access. If such place is occupied by a zanana, the
police officer shall give her adequate opportunity to withdraw
before entering the place.
In Gopi Kishen Agarwal v. R.N. Sen, AIR 1967 SC 1298, it was
held that the procedure prescribed under S. 165 (1) of the Code of
Criminal Proced