SPECIAL ADDITIONAL DUTY OF CUSTOMS

Customs duty

Customs duty is the duty charged on goods on their importation into India or exportation out of India.

Different types of rates of duties of Customs:There are two types of rates of duty of Customs:

  1. Ad valorem rate i.e., the duty is charged on the basis of value. 2. Specific rate i.e., on the basis of quantity/number/ volume/ weight.

Different kinds of duties of customs levied on imported goods Basic Customs Duty Surcharge  Additional duty of customs Special additional duties Additional levies like Countervailing duty, Anti

dumping duty, Safe guard duty etc. In addition, Cess duty is levable on certain

goods.

  Section 12 of the Customs Act, 1962 authorities the Customs Officers to levy and collect these duties.

Special additional duty of customs Special additional duty is specified

under Section 3A of the Customs Tariff Act, 1975. The amount of Special Additional duty is computed by applying this rate on value, which is equal to the total of the assessable value.

When importer imports certain goods from abroad importer have to pay 30% of tax to the Indian Government.

Contd…..

In that case importer pay 4% of additional tax duty to the government.

This 4% additional duty is paid on certain product category such as furniture.

Government provides importer with 1year time period to sell that imported goods in domestic market.

After completion of 1year government refund that extra additional duty to importer by depositing certain documents.

Documents required for SAD refund  a) TR6 challan for evidencing payment of special additional

duty. b) Original BOE on which SAD paid & corresponding purchase invoices, purchase order and packing list.c) Sale invoice of imported goods in respect of which refund is claimed. d) VAT Payment challans for evidencing payment of appropriate VAT on imported goods. e) Signed working sheet for the refund amount claimed. f) Certificate from CA who must be statutory auditor or VAT auditor of applicant. g) In case of sale through consignment agents/stock broker, copy of consignment sale agreement required. h) Self declaration/Affidavit to ensure fulfillment of doctrine of unjust enrichment. i) Any other document considered necessary for the claim such as Annexure A, Annexure B, Annexure C, CD for sales invoice, import invoice.

How to compute the duty amount in respect of imported goods Under the Custom Tariff Act, 1975 and

other laws, there are various types of duties, which are leviable. As a first step, the following three types of customs duties have to computed:-

Basic Customs Duty

Duty which is specified against each Heading or Sub-Heading in the First Schedule to the Customs Tariff Act, 1975. This is usually referred to as Basic Customs Duty.

The duty may be a percentage of the value of the goods ( in such cases it is called ad valorem duty) or at a specific rate, which is based on unit of measurement which is specified in the tariff entry.

The rate of duty in percentage (in the case of advalorem duties) has to be applied on the Cost Insurance and Freight.

Additional duty of customs

Additional duty of customs equal to the, excise duty leviable on like goods produced or manufactured in India. This is levied under Section 3 of Customs Tariff Act, 1975.

This is usually referred to as "countervailing duty" (CVD). However, the correct description of this duty is Additional Duty of Customs.

The value for the purpose of computing additional duties of  Customs is the total of the assessable value (generally the transaction value - roughly equal to the c.i.f. value) and the basic customs duty.

If you are a manufacturer, importing goods to be used as inputs for manufacture of other goods, you would be generally eligible for obtaining credit (called CENVAT credit) equal to the additional duty of customs paid on the imported goods.

This duty amount is eligible for credit under input duty Central Excise Rules, 1944. This credit can be used for paying central excise duties on your manufacture.

Surcharge

Surcharge  at the rate of 10% of the Basic Customs Duty is leviable on imported goods under Section 90 of the Finance Act, 2000 ( unless exempted by a notification).

How to compute the duty amount in respect of imported goods? Assuming the product X has the

following value & chargeable to following duty:a) Value of goods under section 14 of Customs Act 1962 = Rs. 100b) Basic Customs Duty = 35%c) Surcharge = 10%d) Additional Duty = 16%e) SAD = 4%

Contd….

On assessable value of Rs. 100 the goods would be leviable to:Basic Customs Duty@ 35% =Surcharge @ 10% =Total Basic Duty + Surcharge (35+3.5) =

Rs.35Rs.3.5

Rs.38.5

Value for the purpose of calculation of additional duty under section3 of CTA, 1975(100+38.5) =

Rs.138.5

Additional Duty of Customs (16% of 138.5)= Rs.22.160

Special Additional Duty under section 3A of CTA, 1975 (100+38.5+22.160) =

Rs.160.660

Special Additional Duty (4% of 160.660) = Rs.6.426

Total duty payable (35+3.5+22.160+6.426) = Rs.67.086

Duty required to be paid (50% of 67.086) = Rs.33.543

Manner of calculation of Excise Duty on clearance effected by EOU/EPZ units in the domestic tariff area

Assuming value of goods under Section 14 of Customs Act,1962 = 1000

Basic Customs Duty = 100% Auxiliary Duty = 50% Ad

valorem Additional Duty = 20%

Contd…. (Method A)

Basic Customs Duty (50% of 1000) =

Rs.500

Auxiliary Duty (25% of 1000) =

Rs.250

Total basic + Auxiliary (500+250) =

Rs.750

Value for the purpose of calculation of additional duty under section3 of CTA, 1975 (1000+750) =

Rs.1750

Additional Duty (10% of 1750) =

Rs.175

Duty required to be paid (750+175) =

Rs.925

Contd…..(Method B)

Basic Customs Duty @100% = Rs.1000

Auxiliary Duty @50% = Rs.500

Total basic + Auxiliary = Rs.1500

Value for the purpose of calculation of Additional Duty under Section3 of CTA 75 (1000+1500) =

Rs.2500

Additional Duty @20% (20% of 2500) =

Rs.500

Total Duty (1500+500) = Rs.2000

Duty required to be paid (50% of 2000)

Rs.1000

Illustration 1

Suppose product X is liable for only a tariff rate of basic customs duty of 25% but under an exemption is liable for basic customs duty of 15% (surcharge1.5%) & additional duty of customs of 16%, then the computation of excise duty payable on the DTA clearance of X product under notification no.2/95-CE will be as follows:Maximum excise duty payable in terms of provision to section 3(1) =

15%

Aggregate of customs duties leviable under the Customs Act or under any other law in force [0.5*(15+1.5+1.165*16)] = 17.57%

Excise duty payable under the amended notification no. 2/95-CE [min(15%,17.57%)] 15%

Illustration 2

Suppose effective rate of basic customs duty on the product X above is 25% (surcharge 2.5%) then the computation will be as follows:Maximum excise duty payable in terms of provision to section 3(1) =

25%

Aggregate of customs duties leviable under the Customs Act or under any other law in force [0.5*(25+2.5+(1.275*16)] = 23.95%

Excise duty payable under the amended notification no.2/95-CE [min (25%,23.95%)] =

23.95%

 PROCEDUREA. GENERAL REFUND

a)Refund Application:CBEC has prescribed a format for applying refund and connected documents and declaration.

 

Contd…..

b)Required Documents for processing of refund claims

  1.Refund Application (Part-A, B & C) as per Public Notice No.91/95 dated 06.06.95 and proper Performa with declaration

 2. Duplicate Bill of Entry (Importer’s Original Copy) with copies of invoice and Bills of Lading

 3.Original TR-6 challan for payment of Customs duty.

4.Calculation / Worksheet

5.Non availment CENVAT credit from the concerned Central Excise Authorities wherever required.

 6.Order of reassessment in cases where the original assessment has been challenged to qualify for refund. Order of Commissioner (Appeal), CESTAT/High Court, wherever applicable.

  7.Original Chartered Accountant Certificate for not passing on the burden to others

8.All relevant documents to substantiate their claim for “Unjust enrichment” like Balance Sheet, Schedule etc

Contd……

c)Processing of Claims  The refund claims are covered under

Section 27 of Customs Act, 1962, which dwells in detail as to how the refund claims are to be considered for sanctioning to the claimants.

 

The Important points for considering the sanction of refundI. Limitation

  This point taken care of application of section which mandates that every refund claim has to be filed within 06 months from the date of payment. Refund Claims received after the statutory period of 06 months are not entertained as it is barred by limitation.

 

II. Eligibility

  The eligibility of the refund of an assessed document is studied whether the assessed documents is re-assessed for claiming the benefit of notification, different rate of duties, revising the valuation, changing the classification and revising the duty calculation.

 

III.Scrutiny of claims with respect to the issue of unjust enrichment

  As per the judgment of the Hon’ble Supreme Court in the case of Sahkari Khand Udyog Vs Collector of Central Excise 2005(181) ELT 328 (SC) on the issue of unjust enrichment, all the refund claims have to be studied from the point of view whether the provisions of unjust enrichment get attracted. Further, as per Section 27, 28(c) & 28(d), the Importer has to prove that duty burden has not been passed on to any customer/others either directly or indirectly and the onus is on the importer/claimant in this case.

 B. REFUND OF SAD

Organizational Structure in JNCH for SAD refunds.  To streamline the SAD refund sanction, JNCH has

created a Central Refund Cell. In view of the substantial work load the cell is further expanded by bifurcating to handle the claim pertaining to the groups mentioned against as conveyed vide PN No.3/2009 dated 29.01.2009.

  CRC IIA : Gr.I to Gr.III

CRC IIB : Gr.IV to VI Claims pertaining to Group 7B, 7D, 7G, 7H, 7I and 7R

would be handled by the respective section depending upon the chapter under which the goods are classifiable.

Contd…

Refund Application

  CBEC has prescribed a format for applying SAD refund and connected documents and declaration. These are as under

Required Documents for 4% SAD refund

  1.Refund Application (Part-A, B & C) as per Public Notice No.91/95 dated 06.06.95 and proper Performa with declaration

  2.Duplicate Bill of Entry (Importer’s Original Copy) with copies of invoice and Bills of Lading

3.Original TR-6 challan for payment of Customs duty.

  4.Original Sales Invoices, along with list containing Invoice No., Date, Amount of ST/VAT paid on imported goods for which Refund is claimed.

  5.Calculation / Worksheet (Annexure-A) as per Public Notice No.43/2008 dated 06.06.2008

 

Contd….

6.Self Declaration (Annexure-B) as per Public Notice No.43/2008 dated 06.06.2008

  7.All original challans evidencing payment of Sales Tax /VAT with detail of invoices-(Annexure-C) as per Public Notice No.43/2008 dated 06.06.2008

  8.Original Chartered Accountant Certificate (Annexure-D) as per Public Notice No.43/2008 dated 06.06.2008 and 04/2009 dated 02.02.2009.

  9.All relevant documents to substantiate their claim for “Unjust enrichment”.

  10.All documents as per Public Notice No.40/2008, 43/2008, and 04/2009 as applicable

 

How to apply

  The refund application has to be filed within one year from the date of payment of Customs duty i.e. within one year of TR 6 Challan date. Only one refund application for one importer in a month is permitted. The application filled in all respects has to be submitted to TA/CRC-II of JNCH and obtain a dated acknowledgement.

 

Processing

The TA/STA of CRC IIA/B receives the refund application and registers the refund claim and allots one unique number for the same.

He submits the refund file on the same/subsequent day to AC for his perusal.

After the AC/CRC, signs as a token of having seen the refund claim, the refund claim is scrutinized by the STA/EO for any deficiency of documents.

If they notice any deficiency, the deficiency memo is issued.

Contd….

If the refund application is in order, the same is taken up for processing as per the turn.

Refunds amounts of less than Rs.50,000/- are processed by the EO and other claims of refund amount more than 50,000/-are processed by the AO.

They will prepare the brief facts and submit the same to AC for approval. AC will scrutinize the submitted documents and approve the brief facts, if everything is in order. Otherwise necessary query will be raised for clarification.

Once the AC approves the brief facts, O-I-O number is obtained and O-I-O is issued.

Then NOC from Groups/other sections is obtained.

Contd….

Then Refund order is prepared by AO/Superintendent and issued to party for signature verification/bank endorsement.

If the refund amount is more than Rs. 5 lakhs then file is forwarded to audit section for pre-audit.

After receipt of file from audit, file is forwarded to CAO for preparation of cheque. CAO will verify non payment of any refund against the said B’s/E and also verifies the genuineness of TR6 Challans and prepares the cheque, if everything is in order.

Then the cheque is handed over to the authorized representative of the Importer