By Deoki Nandan Muchhal

EXEMPTION from levy of Additional Customs Duty under section 3(5) of Customs Tariff Act, 1975 has been granted vide Notification No. 20/2006-Cus dated 01.03.2006. Serial No. 1 of the said notification exempts “All Goods” from levy of Additional Customs Duty under section 3(5) on fulfillment of conditions prescribed. Once such condition is :-

“All goods which are exempt from whole of customs duty and additional duty under section 3(1) ”

What happens to clearance of imported consignment under Duty Exemption Schemes of Foreign Trade Polciy viz., DEPB, DFCEC, KRISHI Licenses, TARGET PLUS License, ADVANCE Licenses etc. when importers present their Bill of Entry by claiming exemption available in respective exemption notification issued under Customs law?

When importers are presenting Bill of Entry by claiming exemption under notification no. 41/2005-Cus dated 09.05.2005 (which exempts customs duty on presenting KRISHI Licenses) or under notification no. 89/2005-Cus dated 04.10.2005 (which exempts customs duty on presenting DEPB Licenses), stated customs duties, i.e. Basic Customs duty and Additional Customs Duty under section 3(1) of the Customs Tariff Act are exempt. By virtue of this exemption “goods are exempt from whole of customs duty and additional customs duty under section 3(1)”. Accordingly, entry in Serial No. 1 Notification No. 20/2006-Cus dated 01.03.2006 gets attracted resulting into exemption from levy of Additional Customs Duty under section 3(5). Same will hold true for clearance under other Duty Exemption Schemes.

It is learnt that Customs Department across India is not treating clearance under DEPB, DFCEC, KRISHI Licenses etc. as exemption. They are plainly disregarding the fact that under such scenario the customs duties are not payable and are EXEMPT only by virtue of “exemption notifications”. Because of this bizarre inference of department, benefit available through entry in Serial No. 1 of Notification No. 20/2006-Cus dated 01.03.2006 is not being granted by Customs.

This approach of department is bound to lead to unnecessary litigation. To my mind and even to common man the interpretation under consideration is plain and unambiguous. Notwithstanding limitations of understanding at junior level, even officers are disregarding the clarification issued by CBEC vide circular no. 76/98 dated October 12, 1998 (though not required) wherein CBEC clearly stated that “Notification No. 34/97 dated 7.4.97 (erstwhile exemption notification for clearance under DEPB) is an ‘exemption notification’ which ‘fully exempts’ goods imported against a DEPB scrip from the whole of basic customs duty and / or additional customs duty. This exemption is operated by making a debit of duty leviable in the DEPB scrip”.

If the language of exemption notification are clear and CBEC had already issued clarification years back (under almost similar circumstance) then what Customs Department are upto. Trade is baffled with this approach of Customs.

It is imperative that CBEC issues another educative direction to their officers to put this issue to rest once and for all until the Duty Exemption schemes and the existing notifications are altered to fit in this weird analogy.

(The author works with a well known MNC)