TAX LAW

Types
of
Custom Duties

Submitted By:
Shikhar Agarwal

INDEX
1. Background of Customs Law.3
1.1 Customs Tariff Act.3
1.2 Growth in Revenue.4
1.3 Scope and Coverage of Customs Law4
1.4 Overview of Customs Act..5
2. Nature of Customs Duty.7
2.1 Taxable Event for Import Duty..8
2.2 Taxable Event in case of Warehoused Goods9
2.3 Taxable Event when goods cross customer barrier..10
3. Types of Custom Duties.......................................................................................................11
3.1 Basic Customs Duty.................................................................................................11
3.2 Additional Customs Duty u/s 3(1) (CVD)...............................................................11
3.3. Education cess on Customs Duty............................................................................14
3.4 Additional Duty u/s 3(3)..........................................................................................14
3.5 Additional Duty imposed u/s 3(5)............................................................................15
3.6 Anti- Dumping Duty................................................................................................16
3.7 Safeguard Duty........................................................................................................25
3.8 NCCD of Customs...................................................................................................26
3.9 Export Duty..............................................................................................................27
3.10. Cess.......................................................................................................................27
3.11 Special Additional Duty of Customs......................................................................28
4. Bibliography.........................................................................................................................29

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Background of Customs Law

Customs duty is on import into India and export out of India. As per ancient custom, a
merchant entering a kingdom with his goods had to make a suitable gift to the King. In the
course of time, this custom was formalised into Customs Duty. This is collected on
imports. The word Customary is derived from customs, which indicates that it is a very
old tax. Taxes on goods were levied on various goods right from the Veda period.
Customs Duty as we understand today has its origin in British period. British established its
first Board of Revenue in 1786 at Calcutta. New Board of Trade was established in 1808. A
uniform Tariff Act was introduced in 1859 all over India. General rate of import duty was
10%, which was reduced to 7.5% in 1864. Customs duty in India is linked with history of
textile industry. British manufacturers wanted to export their products to India and due to
their presence, duty on coarser varieties of cotton goods was abolished in 1877. In the
meanwhile, Sea Customs Act was passed in 1878. In 1882, all import duties were abolished,
but re-introduced in 1894 at general rate of 5%. Indian Tariff Act was passed in 1894. At the
same time, excise duty on Indian cotton goods was imposed, which was bitterly resented in
India and it was finally abolished in 1925. General rate of customs duty was later increased to
7.5%. Land Customs Act was passed in 1924. After independence, manufacturing industry
grew and trade expanded. Customs Act, 1962 was passed to consolidate Sea Customs Act,
Land Customs Act and provisions for air customs.

Customs Tariff Act

Indian Tariff Act, 1934 was found to be inadequate to meet the needs of expansion of trade
and industry. Tariff Revision Committee was formed, which recommended adoption of
Brussels Trade Nomenclature of Customs Cooperation Council (CCCN), with modifications

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to suit Indian conditions. Accordingly Customs Tariff Act, 1975 was replaced with a new
schedule, based on HSN.

Growth in Revenue
Customs duty started with 5%. After independence, need arose to reduce imports as foreign
exchange became scarce and to protect Indian industry from foreign competition. Customs
duty rates were increased. Auxiliary duty and Countervailing duty was introduced. The total
duty burden was over 100% and in some cases, even more than 200% or 300%. Revenue
from customs duty was Rs. 524 crores in 70.71 and Rs. 3350 crores in 80-81.This rose to Rs.
25500 crores in 92-93, which was 32.5% of tax revenue of Central Government.

Scope and coverage of Customs Law

Section 12(1) of Customs Act is the charging section, which provides for levy of duty on
imports as well as exports. The rate of duty is as prescribed in Customs Tariff Act, 1975, read
with relevant exemption notifications. Import duty is levied on almost all items, while export
duty is levied only on a few limited products, where Indian goods are in commanding
position.
Section 12(2) of Customs Act makes it clear that customs duty is payable by Government
also. Thus, there is no general exemption to goods imported by Government. However,
various exemption notifications have been issued and Imports by Indian Navy, specific
equipment required by Police, Ministry of Defence, Coastal Guard etc. are fully exempt from
customs duty. However, if there is no such exemption notification, duty will be payable even
if goods are imported by Central/State Government.

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Overview of Customs Act

Raising revenue for Central Government is the main but not the only purpose of Customs
Act. Customs Act is used to (a) regulate imports and exports (b) protect Indian industry from
dumping (c) collect revenue of customs duty. In addition, provisions of Customs Act are used
for other Acts like Foreign Trade (Development and Regulation) Act, Foreign Exchange
Management Act (FEMA) etc. Customs Law is covered under various Acts, rules, regulations
and notifications, as follows:
Customs Act, 1962- This is the main Act, which provides for levy and collection of duty,
import/export procedures, prohibitions on importation and exportation of goods, penalties,
offences, etc.
Customs Tariff Act, 1975- The Act contains two schedules- Schedule 1 gives classification
and rate of duties for imports, while schedule 2 gives classification and rates of duties for
exports. In addition, the CTA (Customs Tariff Act) makes provisions for duties like
additional duty(CVD), preferential duty, anti-dumping duty, protective duties etc.
Rules under Customs Act- Under section 156 of Customs Act, 1962, Central Government
has been empowered to make rules, consistent with provisions of the Act, to carry out the
purposes of the Act. Various rules have been framed under these powers. Major among these
are: Customs Valuation Rules, 1988: for valuation of imported goods for calculating duty
payable; Customs and Central Excise Duties Drawback Rules, 1995: mode of calculating
rates of duty drawback on exports; Baggage Rules, 1998: rules and allowances for bringing in
baggage from abroad by Indian and tourists; Customs (Import of Goods of Concessional Rate
of Duty for Manufacture of Excisable Goods) Rules, 1996: provides procedure to be followed
when goods are imported for export purposes; Other rules are: Rules regarding notified

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goods, specified goods, determination of additional duty for dumping, determination of origin
of goods etc.
Regulations under Customs Act: Under section 157 of Customs Act, 1962, Board
(CBE&C) has been empowered to make regulations, consistent with provisions of the Act, to
carry out the purposes of the Act. Various regulations have been framed under these powers.
Major among these: Project Import Regulations, 1986: procedures for project imports;
Customs House Agents Licensing Regulations: Regulations of CHA. Other regulations
regarding transhipment of goods, Import and Export report, Import and Export manifest,
manufacture in warehouse, shipping bill and bill of export etc. have been made.
In Sukhdev Singh v. Bhagatram Sardar Singh1, it was held that regulations framed under
statutory provisions would have the force of law.
Notifications under Customs Act- Various sections authorise Central Government to issue
notifications. The main are: section 25(1) to grant or full exemption from duty and section 11
to prohibit import or export of goods.
Board Circulars- CBE&C is empowered u/s 151A of Customs Act to issue, for purpose of
uniformity in classification of goods or with respect to the levy of duty thereon, issue such
instructions and directions to officers of customs and they are required to observed and
follow such orders, instructions and directors of Board. CBE&C issues circulars giving
various instructions/prescribing various procedures etc. Normally, these instructions should
be allowed.
Customs Manual, 2001- Customs Manual, 2001 was released by CBE&C in September,
2001. The Manual gives an overview of Customs Law and Procedures. It is not stated that the

(1975) 1 SCC 421

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Customs Manual is issued under any provision of Customs Act or Rules. However, normally,
instructions in Customs Manual, 2001 should be followed.
Public Notices- Often, Commissioners of Customs issue Public Notices. Often they just
forward the Board circulars, but sometimes, public notices for local requirements are also
issued.

Nature of Customs Duty

Entry 83 to List I- (Union List) of Seventh Schedule to Constitution reads Duties of customs
including export duties. Thus, import and export duty is a Union subject and power to levy is
derived from Constitution. Section 12 of Customs Act, often called charging section,
provides that duties of customs shall be levied at such rates as may be specified under The
Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported
into, or exported from, India. Section 3 of Customs Tariff Act has also been held as charging
section for levy of CVD.2
Customs duty is payable on replacement of parts provided free of cost during warranty period
even if duty was paid on parts originally supplied.3
Free replacements during warranty period are exempt under notification 80/70- Cus dated 298-1970, if the articles are private personal property of importer. This exemption is not
available to imports of free replacements during warranty of commercial purpose.4

Jain Brothers v. UOI, AIR 1999 SC 2550

New Video Ltd. v. CC, (1996) 87 ELT 509
4
Echjay Industries v. UOI, 1994 (52) ECR 366
3

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Taxable Event for Import Duty

Goods become liable to import duty or export duty when there is import into, or export from
India. As per section 2(18), export with its grammatical variations and cognate
expressions, means taking out of India to a place outside India.
As per section 2(23), import with its grammatical variations and cognate expressions,
means bringing into India from a place outside India. In Gramophone Company of India v.
Birendra Bahadur Pandey5, it was held that import included goods imported for transit
across to Nepal.
In Indian Airlines v. CC6, Indian Airlines had international flights. After return from
international flight, the fuel (ATF) was used for domestic run. It was held that fuel left in the
fuel tank after termination of international run is import and liable to customs duty.
Section 2(27) of Customs Act defines India as inclusive of territorial waters. Hence, it was
thought that import is complete as soon as goods enter territorial water. Similarly, export is
complete only when goods cross territorial waters. There were conflicting judgments of High
Courts.
Finally, in Kiran Spinning Mills v. CC7, it has been held that import is completed only when
goods cross the customs barrier. The taxable event is the day of crossing of customs barrier
and not on the date when goods landed in India or had entered territorial waters. In the case
of goods which are in the warehouse the customs barrier would be crossed when they are
sought to be taken out of the customs and brought to the mass of goods in the country.

AIR 1984 SC 667

2005 (180) ELT 502
7
1999 (113) ELT 753
6

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In Garden Silk Mills Ltd. v. UOI8, it was held that import of goods in India commences when
they enter into territorial waters but continues and is completed when the goods become part
of the mass of goods within the country. The taxable event is reached at the time when the
goods reach customs barrier and bill of entry for home consumption is filled.
Thus, it can be said that mixing up with mass of goods in the country after crossing customs
barrier is the taxable event for customs duty on imports.

Taxable event in case of warehoused goods

In case of warehoused goods, the goods continue to be in customs bond. Hence, import
takes place only when goods are cleared from the warehouse. 9 In Kiran Spinning Mills v.
CC10, it was held that taxable event occurs when goods cross customs barrier and not when
goods land in India or enter territorial waters.
This was followed in LML v. CCE11. In this case, there was no Special Additional Duty
(SAD) when goods were imported, but SAD was imposed later. It was held that SAD is
payable when goods are cleared from customs bonded warehouse as removal from customs
bonded warehouse is the taxable event and rate of duty as applicable on that day applies.
This was also followed in Mangalore Refinery v. CCE12, where it was held that customs duty
is payable only on the quantity which is cleared from warehouse and not the quantity which
had entered the territorial waters.
In State Trading Corporation v. State of Tamil Nadu13, it was held that if documents of title
of goods are transferred before clearance of goods from customs bonded warehouse, it is

1999 AIR SCW 4150

UOI v. Apar P. Ltd., 1999 AIR SCW 2676
10
1999 (113) ELT 753
11
2002 (142) ELT 273
12
2002 (141) ELT 247
9

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sale during import and hence exempt from sales tax, as sale takes place before goods cross
frontier of India.

Taxable event when goods cross customer barrier

In CC v. HPCL14, it was held that the bulk liquid cargo would be considered to have crossed
customs barrier only when they are pumped into shore tanks. That being the taxable event,
duty is leviable only on that quantity. The view has been accepted by the department. It has
been confirmed that the duty will be payable on the basis of shore tank receipt i.e. dip
measurement in tanks on shore into which oil is pumped from tanker; and not on the basis of
usage survey report i.e. usage quantity at the port of discharge on board the vessel, as
determined by independent surveyors in presence of customs officers.

13
14

2003 (129) STC 294 (Mad HC DB).

2000 (121) ELT 109.

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Types of Custom Duties

Basic Customs Duty
Basic customs duty is levied under Section 12 of Customs Act. Normally, it is levied as a
percentage of Value as determined under section 14(1). The rates vary for different items, but
general rate on non-agricultural goods at present is 12.5% w.e.f. 1-3-2006. To protect Indian
agriculture and Indian automobile sector, duties on some articles is higher. Duty on liquor is
also high.

Additional Customs Duty u/s 3(1) (CVD)

Additional Customs Duty is often called Countervailing Duty(CVD). Additional duty is
levied under section 3(1) of Customs Tariff Act. Thus, it is not a duty under the Customs
Act.15 However, it is duty of customs.16 It was also held that additional customs duty is
not called as Countervailing duty though it may result in serving such purpose for
manufacture of such articles in India.
As per section 3(7) of the Customs Tariff Act, this duty is in addition to any other duty
imposed under Customs Act or any other law. As per section 3(8), all provisions of Customs
Act and Rules, including those relating to drawbacks, refunds and exemptions will apply to
this duty.
Calculation of CVD
CVD is equal to excise duty levied on a like product manufactured or produced in India. If
like article is not produced or manufactured in India, the excise duty that would be leviable
on that article had it been produced in India as the base. If the product is leviable with

15
16

CC v. Indian Organic Chemicals, 2000 AIR SCW 1633

CC v. Presto Industries, 2001 AIR SCW 828

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different rates, then highest rate among those rates is to be considered. The duty is leviable on
value of goods plus customs duty payable.
Mode of calculation of CVD
CVD is payable on assessable value (as determined u/s 14(1) of Customs Act or tariff value
fixed u/s 14(2) of Customs Act) plus basic customs duty chargeable u/s 12 of Customs Act
plus any other sum chargeable on that article under any law in addition to, and in the same
manner as duty of customs.
However, while calculating CVD, following duties are not to be considered- Safeguard duty
u/ss 8B and 8C of Customs Tariff Act, Countervailing duty, if any, u/s 9 of Customs Tariff
Act, Anti dumping duty payable u/s 9A of Customs Tariff Act, Customs portion of education
cess on imported goods, CVD itself which is payable u/s 3(1) Additional Duty payable u/s
3(3) and 3(5) of Customs Tariff Act.
In other words, CVD is payable on assessable value plus basic customs duty plus NCCD of
customs. While calculating CVD, Anti Dumping Duty, education cess of customs and
safeguard duty is not required to be considered.
As per notification No. 77/2003-Cus dated 14-5-2003, while calculating CVD, NCCD of
excise is not required to be considered. In other words, while calculating CVD, only basic
excise duty and education cess of excise should be considered and not NCCD of Central
Excise.

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Nature of CVD
In S. K. Pattnaik v. State of Orissa17, it was observed that countervailing duty is imposed
when excisable articles are imported, in order to counter balance the excise duty, which is
leviable on similar goods if manufactured within the State. This statement was further
approved in the case of Aristrocrat Agencies v. Excise Superintendent18. In Shroff & Co. v.
Municipal Corporation19, it was observed that CVD is imposed so as to place the home
producer on an equal footing with the importer of foreign goods.
In Hyderabad Industries Ltd. v. UOI20, it has been held that section 3(1) is the charging
section for levy of additional customs duty (CVD). It was also held that this duty is levied to
counter balance the excise duty leviable on a like article manufactured or produced in India,
to provide for a level playing field for present or future manufacturers in India. In Jain
Brothers v. UOI21, both section 3(1) and 3(2) have been held as charging sections.
Rationale behind CVD is to safeguard interests of manufacturers in India and to provide level
playing field to indigenous producers or manufacturers22.
CVD is leviable under section 3(1) Customs Tariff Act, while customs duty is levied u/s 12
of Customs Act. Thus, there are two separate independent duties under different statutes.
However, u/s 3(8) of Customs Tariff Act, the provisions of Customs Act regarding recovery,
payment, drawbacks, exemption, refunds, appeals etc. are applicable to Additonal Customs
Duty (CVD). Though excise duty is considered for measurement or quantifying CVD
payable, it is not excise duty.23

17

2000 AIR SCW 41: AIR 2000 SC 612: 115 ELT 9: 2001(1) SCC 413
2000 AIR SCW 4454
19
(1989) 72 STC 150(SC)
20
AIR SCW 1449: AIR 1999 SC 1847: 1999(5) SCC 15: 108 ELT 321
21
112 ELT 5: AIR 1999 SC 2550: 1999 AIR SCW 2718
22
TTK-LIG Ltd. v. CC, 2006(193) ELT 169
23
Mohd. Zackria v. State of Tamil Nadu, (1999) 115 STC 697
18

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Additional duty is charged on value plus basic customs duty. Thus, effectively, duty is
charged on duty. Validity of this provision has been upheld in Jain Brothers v. UOI24.

Education Cess on customs duty

An education cess of customs has been imposed on imported goods w.e.f. 9-7-2004. The cess
will be 2% of the aggregate duty of customs. However, education cess will not be payable on
(a) Special CVD payable u/s 3(5) of Customs Tariff Act (aa) Safeguard duty under sections
8B and 8C (b) Countervailing duty under section 9 and (c) Anti Dumping Duty under section
9A of the Customs Tariff Act and (d) Education cess on imported goods.
Section 94 of Finance (No. 2) Act, 2004 states that education cess on customs duty is a duty
of customs. As per section 94(3) of Finance (No. 2) Act, 2004, all provisions of Customs
Act, and rules and regulations made under that Act will apply to education cess on imported
goods, including those relating to refund, exemption from duty and imposition of penalty.

Additional duty under Section 3(3)

In addition to Additional Duty under section 3(1) of Customs Tariff Act which is chargeable
on all goods, further additional duty can be levied by Central Government to counter-balance
excise duty leviable on raw materials, components etc. similar to those used in production of
such article.
As per section 3(7) of Customs Tariff Act, this duty is in addition to any other duty imposed
under Customs Act or any other law. As per section 3(8), all provisions of Customs Act and
Rules, including those relating to drawbacks, refunds and exemptions will apply to this duty.
This levy has use when goods manufactured indigenously is exempt from excise duty. In
such case, the indigenous manufacturer will be loser to the extent of duty paid on inputs. This
24

112 ELT 5

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duty paid on his inputs is lost as final product is exempt from duty. This becomes additional
cost to indigenous manufacturer. On the other hand, the imported goods do not have to pay
CVD as the product is exempt from duty. The foreign supplier has not paid any excise duty
on his inputs. He gets cost advantage to that extent. Section 3(3) is intended to offset such
cost advantage to foreign supplier.

Additional duty imposed under Section 3(5)

Section 3(5) of the Customs Tariff Act empowers Central Government to impose additional
duty. This is in addition to Additional Duty leviable u/s 3(1) and 3(5) and Customs Tariff
Act. Provision for this duty has been made w.e.f. 1-3-2005. As per section 3(7) of the
Customs Tariff Act, this duty is in addition to any other duty imposed under Customs Act or
any other law. As per section 3(8), all provisions of Customs Act and Rules, including those
relating to drawbacks, refunds and exemptions will apply to this duty. The additional duty u/s
3(5) can be imposed by issuing a notification. Such tax cannot exceed 4% of value of that
Article.
Purpose of the Additional Duty is to counter-balance sales tax, VAT local tax or other
charges leviable on articles on its sale, purchase or transaction in India. The obvious intention
is to provide level field to manufacturers in India who are manufacturing similar goods.
Hence, it is termed as Special CVD or SAD (Special Additional Duty).
Explanation to section 3(5) makes it clear that even if imported article was not sold in India,
tax will be leviable on the basis of sales tax, VAT or other tax that would have been payable
if the goods were sold, purchased or transported in India.
As per section 3(6) of Customs Tariff Act, value of Article for purpose of levy of this
Additional Duty is aggregate of- (i) Assessable Value determined u/s 14(1) of Customs Act

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or Tariff Value determined u/s 14(2) of Customs Act (ii-a) Basic customs duty payable u/s 12
of Customs Act and (ii-b) Any sum chargeable on that article in the same manner as duty of
customs.
However, value will not include following- (a) Additional Duty payable u/s 3(5), (b)
Safeguard duty payable u/ss 8B and 8C, (c) Countervailing duty payable u/s 9 and (d) Anti
dumping duty u/s 9A of Customs Tariff Act.
Countervailing duty on subsidized goods
If a country or territory pays any subsidy to its exporters for exporting goods to India, Central
Government can impose countervailing duty upto the amount of such subsidy under Section 9
of Customs Tariff Act. If the amount of subsidy cannot be ascertained, provisional duty can
be collected and after final determination, difference may be refunded. Such imposition
should be by way of a notification.

Anti Dumping Duty

Often, large manufacturers from abroad may export goods at very low prices compared to
prices in his domestic market. Such dumping may be with intention to cripple domestic
industry or to dispose of their excess stock. This is called dumping and is an unfair trade
practice. In order to avoid such dumping and protect domestic industry, Central Government
can impose, under section 9A of Customs Tariff Act, anti dumping duty, if the goods are
being sold at less than its normal value. Levy of such anti-dumping duty is permissible as per
WTO agreement. Anti dumping action can be taken only when there is an Indian industry
producing like articles.

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In Shenyang Mastusushita v. Exide Batteries25, it was observed, Principle behind antidumping laws is to protect the domestic industry from being adversely affected by import of
goods at export prices which are below the normal value of the goods in the domestic market
of the exporter. The duty is calculated on the margin of dumping which is the difference
between the export price and the normal value.
However, in Reliance Industries Ltd. v. Designated Authority26, it was observed that the
concept of anti-dumping is founded on the basis that a foreign manufacturer sells below the
normal value in order to destabilize domestic manufacturers. Dumping, in short term, may
give some transitory benefits to local customers on account of lower priced goods, but in the
long run, destroys the local industries and may have a drastic effect on prices in the long run.
In the last para of the judgment Supreme Court observed that national aim must be to create
India as a modern, highly industrialized, powerful State. Anti dumping law is a salutary
measure which prevents destruction of our industries.
In SS Enterprise v. Designated Authority27, it was held that purpose being imposition of antidumping duty is to curb unfair trade practices resorted to by exporters of a particular country
of flooding the domestic markets at rates which are lower than the rate at which the exporters
normally sell the same or like goods in their own countries, so as to cause or be likely to
cause injury to domestic market. The levy of dumping duty is a method recognized by WTO
which seeks to remedy the injury and at the same time balances the rights f exporters from
other countries to sell their products within the country with the interest of domestic markets.
Thus the factors to constitute dumping is (i) an import at prices which are lower than the
normal value of goods in exporting country, (ii) the exports must be sufficient to cause injury

25

2005 (181) ELT 320

2006 (202) ELT 23
27
AIR 2005 SC 1527
26

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to domestic industry. However, negligible quantity of imports would not be sufficient to

cause such injury.
Provisional anti-dumping duty
Pending determination of margin of dumping, duty can be imposed on provisional basis.
After dumping duty is finally determined, Central Government can reduce such duty and
refund duty extra collected than that finally calculated. Such duty can be imposed upto 90
days prior to date of notification, if there is history of dumping which importer was aware or
where serious injury is caused due to dumping.
In Nitco Tiles Ltd. v. Designated Authority28, validity of provisional duty had expired. Later,
definitive anti-dumping duty was imposed with retrospective effect. It was held that antidumping is payable in respect of imports during the intermediate period. It was also observed
that provisional duty is not a provisional deposit, but is a duty imposed on provisional
estimate of normal value and margin of dumping.
Anti-dumping duty and Safeguard Duty is not required to be considered while calculating
CVD. Education cess is not payable on anti-dumping duty. Anti-dumping duty is not
applicable for imports by EOU or SEZ units, unless it is specifically made applicable in the
notification imposing anti-dumping duty.
Margin of Dumping
Margin of dumping means the difference between normal value and export price (i.e. the
price at which these goods are exported). [section 9A(1)(a)].
Normal Value means comparable price in ordinary course in trade, for like article, when
destined for consumption in the exporting country or territory. If such price is not available or
28

2006 (193) ELT 17

Page | 17

not comparable (a) comparable representative price of like article exported from exporting
country or territory to appropriate third country or (b) cost of production plus reasonable
profit, can be considered. [section 9A(1)(c) of Customs Tariff Act]. The normal value is to
be determined as per rules.
In Reliance Industries Ltd. v. Designated Authority29, it was held that normal value are not
exporter specific but exporting country specific. Once dumping of specific goods from a
country is established, dumping duty can be imposed on all exports of those goods from that
country in India, irrespective of the exporter. Rate of duty may vary from exporter to exporter
depending upon the export price.
Export Price means the price at which goods are exported. If the export price is unreliable
due to association or compensatory arrangement between exporter and importer or a third
party, export price can be constructed on the basis of price at which the imported articles are
first sole to independent buyer or according to rules made for determining margin of
dumping.
Margin of dumping is determined on the basis of weighted average of normal value and the
export price of product under consideration.
In Volznsky Pipe Plant v. Designated Authority30, it was held that domestic price of foreign
exporter in his country should be considered, provided it is not below per unit cost of
production plus administrative selling and general cost.
In case of non-market economy countries, normal value can be determined on basis of price
in a market economy third country, price paid in India for a like product or any other
reasonable basis.

29
30

2006 (202) ELT 23

2001 (129) ELT 208

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As per para 8 of Annexure I to Anti-Dumping Duty Rules, non-market economy means any
country which the designated authority determines as not operating on market principles of
cost or pricing structure, so that the sales in such country do not reflect the fair value of
merchandise. Designated Authority will consider various aspects to determine whether the
country is a market economy.
In Exide Industries v. Designated Authority31, it was held that in case of units in non-market
economy, they have to establish that they are run according to market principles.
In Amijal Chemicals v. Designated Authority32, it was held that domestic price in China
cannot be considered as Chine PR is not having a free economy. It was also held that cost of
production cannot be calculated at 100% capacity utilization, as no domestic industry can
survive if its 100% production is sold at cost price.
In Universal Chemicals v. Designated Authority33, it was held that if the foreign exporter
does not provide full and reliable data, he should be treated as non-cooperating exporter and
normal value should be determined by designated authority in terms of norms applicable to
no-cooperating exporters.
In Birla Ericson Ltd. v. Designated Authority34, it was held that there can be different normal
values in relation to different producers in the same country.
In Pig Iron Manufacturers Association v. Designated Authority35, it was held that antidumping duty is exporter specific and hence duty can vary from exporter to exporter,
depending on dumping margin. It was also observed that cost accounts maintained by

31

2003 (155) ELT 35

2000 (119) ELT 338
33
2002 (146) ELT 449
34
2001 (127) ELT 363
35
2000 (116) ELT 67
32

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exporters from China do not satisfy the generally accepted accounting principles and do not
clearly show correct costs of various elements. The prices are not economic market prices.
In Jai Corp. Ltd. v. Designated Authority36, it was held that anti-dumping duty being
manufacturer specific, normal value for one manufacturer cannot be based on information
supplied by other cooperative exporters.
In Oswal Woollen Mills v. Designated Authority37, it was held that since anti-dumping duty is
exporter specific, it can be imposed even if goods imported through a trading house,
depending on original producer abroad.
It should be noted that dumping is with respect to domestic price in exporting country and
not the importing country e.g. if goods are imported in India from Japan, price ruling in
Japan of that product will be relevant and not price of similar product ruling in India. Thus, if
prices are high in India due to inefficiency or other reasons, dumping duty cannot be imposed
simply because manufacturers in Japan are more competent and efficient and can produce
goods at lower costs.38
In SS Enterprise v. Designated Authority39, it was held that if it is found that if price
difference between export price and its normal value is less than 2% or when the volume of
dumped imports is less than 3% of total imports of like article, the de miniimus rule applies
and anti-dumping duty cannot be imposed.
The anti-dumping duty will be dumping margin or injury margin, whichever is lower. Injury
margin means difference between fair selling price of domestic industry and landed cost of
imported product. The landed cost will include landing charges of 1% and basic customs

36

2000 (116) ELT 356

2000 (118) ELT 275
38
H&R Johnson (India) Ltd. v. UOI, 2004 (177) ELT 22
39
AIR 2005 SC 1527
37

Page | 20

duty. Thus, only anti-dumping duty enough to remove injury to domestic industry can be
levied.
In Reliance Industries Ltd. Designated Authority40, it was held that non-injurious price has to
be calculated for domestic industry as a whole and not in respect of any particular company
or enterprise. Hence, even if product is captively consumed by Indian manufacturer, transfer
price of inputs is to be considered and not actual cost of captive consumption. It was
observed that there has to be a single NIP for a product and not several NIP for the same
product. NIP is not exporter specific.
In Alkali Manufacturers Association on India v. Designated Authority41, Designated
Authority had calculated domestic price on basis of profit of 22% of investment. It was held
that this is reasonable.
In Puneet Resins v. Designated Authority42, it was held that landed value will be on the basis
of actual duty payable i.e. by excluding duties exempted by various notifications.
In Korea Kunho Petrochemical v. Designated Authority43, it was held that while deciding
injury margin, a sound appreciation based on relevant criteria, volume effect and price effect
of dumped imports are of vital importance.
In Lubrizol (India) v. Designated Authority44, imposition of anti-dumping duty was upheld
when landed price of imported goods was below non-injurious price.
In Puneet Resins v. Designated Authority45, it was observed, There are three forms of fixing
anti-dumping duty- (i) Fixed Duty- difference between normal value and export price or

40

2006 (202) ELT 23

2006 (194) ELT 161
42
(2004) 170 ELT 274
43
2003 (155) ELT 265
44
2005 (187) ELT 402
45
(2004) 170 ELT 274
41

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difference between the non-injurious price and landed cost of the article, whichever is lower
(ii) Ad valorem duty- Expressed as percentage of CIF value of imported goods and (iii)
Variable duty- Based on reference price which will be export price during period of
investment plus customs duty plus the fixed duty as determined. The anti-dumping duty
payable on any consignment will be the difference between reference price so determined
and the landed value of the consignment in question. Anti-dumping duty can be levied by
adopting any one of the form.
Dumping duty for WTO countries
Section 9B of Customs Tariff Act provides restrictions on imposing duties in case of imports
from WTO countries or countries given Most Favoured Nation by an agreement. Dumping
duty can be levied on import from such countries, only if central Government declares that
import of such articles in India causes mater injury to industry established in India or
materially retards establishment of industry in India.
Injury to domestic industry will be considered on basis of volume effect and price effect on
Indian industry. There must be causal link between material injury being suffered by dumped
articles and the dumped imports.
In SS Enterprise v. Designated Authority46, it was held that it is found that if the volume of
dumped imports is less than 3% of total imports of like article, the de miniimus rule applies
and anti-dumping duty cannot be imposed.
In Nippon Zeon Co. Ltd. v. Designated Authority47, it was held that when material injury is
caused to domestic industry and causal link between dumping and material injury to Indian
domestic industry established, imposition of anti-dumping duty is justified.

46

AIR 2005 SC 1527

Page | 22

In Birla Periclase v. Designated Authority48, it was held that as per rule 11 of Anti Dumping
Rules, it is a pre-requirement that import of such article in India causes or threatens material
injury to any established industry in India or retards establishment of any industry in India. In
absence of material injury to industry in India and casual link with imports, anti-dumping
duty is not permissible.
In Indian Spinners Association v. Designated Authority49, it was held that injury to domestic
industry can be considered as preliminary issue. If there was no injury to domestic industry,
other aspects need not be gone into, as dumping duty cannot be imposed in such cases.
In Rishiroop Polymers Pvt. Ltd. v. Designated Authority50, it was held that imports from all
countries should be cumulated together to determine the injury to domestic industry, as is
permissible under Determination of Injury Rules.
If certain grade of goods is not manufactured in India, there is no justification for imposing
anti-dumping duty on such goods. Imposition of minimum anti-dumping duty is not
permissible in law.51
Gains to other sections not considered
In India, only injury to concerned local industry is considered, and protection is given to
them, but gains to other industry and economy in general due to availability of imports at
lower prices are not considered, i.e. welfare of society at large is not taken into account. This
principle is adopted in Europe and in certain cases, dumping duties were not imposed, even
when dumping was established, considering that public at large is being benefited.

47

1997 (96) ELT 126

2000 (116) ELT 336
49
2004 (170) ELT 144
50
2000 (119) ELT 157
51
2000 (118) ELT 275
48

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Imports at lower prices not necessarily against public interest

In Haridas Exports v. All India Float Glass Mfrs. Association52, it was held that Public
interest does not necessarily mean interest of only the industry. Indian importer obtaining
goods at a lower price does not contravene any law. He has obtained a good bargain. Indian
industry has to gear up so as to meet the challenges from abroad.
In Reliance Industries Ltd. v. Designated Authority53, it was observed that the concept of antidumping is founded on the basis that a foreign manufacturer sells below the normal value in
order to destabilize domestic manufacturers. Dumping, in short term, may give some
transitory benefits to local customers on account of lower priced goods, but in the long run,
destroys the local industries and may have a drastic effect on prices in the long run. In the last
para of the judgment Supreme Court observed that national aim must be to create Indian as a
modern, highly industrialized, powerful State. Anti dumping law is a salutary measure which
prevents destruction of our industries.

Safeguard Duty
Central Government is empowered to impose safeguard duty on specified imported goods if
Central Government is satisfied that the goods are being imported in large quantities and
under such conditions that they are causing or threatening to cause serious injury to domestic
industry. Such duty is permissible under WTO agreement. The only condition under WTO is
that it should not discriminate between imports from different countries having Most
Favoured Nation (MFN) status.
Safeguard duty is a step in providing a need based protection to domestic industry for a
limited period, with ultimate objective of restoring free and fair competition. Safeguard duty
52
53

2002 AIR SCW 3077

2006 (202) ELT 23

Page | 24

is targeted at remedying or preventing serious injury to domestic industry with a view to

making it competitive and to enable it to stand on its own.
Government has to conduct an enquiry and then issue a notification. The duty, once imposed,
is valid for four years, unless revoked earlier. This can be extended by Central Government,
but total period of safeguard duty cannot be more than ten years. The duty is in addition to
any other customs duty being imposed on the goods.
In case of imports from any developing country, safeguard duty can be imposed if imports
from that country exceeds 3%. If the Article originates from more than one developing
countries and if imports from each developing country is less than 3%, safeguard duty can be
imposed if imports from all such developing countries taken together exceeds 9% of total
imports of that Article in India.
In United Phosphorous v. Director General (Safeguard)54, it was held that even if Director
General finds serious domestic injury and casual link with imports, he is not bound to
recommend imposing safeguard duty, as he has to consider other factors.
Safeguard duty is not applicable for imports by EOU or SEZ units, unless it is specifically
made applicable in the notification imposing anti-dumping duty. Education cess is not
payable on safeguard duty payable u/s 8B.

NCCD of Customs
A National Calamity Contingent Duty (NCCD) of customs has been imposed vide section
134 of Finance Act, 2003, on pan masala, chewing tobacco and cigarettes. Further, NCCD of
customs of 1% has been imposed on PFY, motor cars, multi utility vehicles and two
wheelers. NCCD of Rs.50 per ton is imposed on domestic crude oil. For purpose of
54

2000 (118) ELT 326 (Del DB)

Page | 25

calculation on NCCD, value will be same as calculated for purpose of CVD u/s 3(2) of
Customs Tariff Act.
As per notification No. 77/2003- Cus dated 14-5-2003, while calculating CVD, NCCD of
excise is not required to be considered. In other words, while calculating CVD, only basic
excise duty and education cess of excise should be considered and not NCCD.

Export Duty
Since Government actively encourages export, there is export duty on very few products.
Articles on which export duty is leviable are given in second schedule to Customs Tariff. At
present, 25% export duty is imposed on luggage leather, 15% Export Duty is levied only on
hides, skins and leather, and duty of 10% is levied on snake skins and lamb skins. There is no
export duty on any other product.
Section 8 of Customs Tariff Act empowers Central Government to amend second schedule to
Customs Tariff and increase or impose export duty on any product, by issue of a notification.
Such notification should be placed before Parliament within 15 days after it assembles.

Cess
Education cess is levied on all imported goods. Similarly, is cess is leviable on goods
manufactured or produced in India, corresponding cess will be payable if similar goods are
imported. Besides, cess is leviable on export of some specific goods.
Distinction between cess and duty is that cess is a charge levied and collected for specified
purposes, while duty is for general revenue of Government. Duty is for general revenue
pruposes, while cess is for a definite purpose. Cess may be on production of goods or on
export of goods.

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Cess on export of tobacco (under Tobacco Cess Act), coffee (under Coffee Act), agricultural
products (under Agricultural & Processed Foods Export Cess Act, 1985), cess on marine
products (under Marine Products Export Development Authority Act) ans spices (under
Spices Cess Act) has been abolished w.e.f. 1-6-2006 vide Cess Laws (Repealing and
Amending) Act, 2006. Cess on these products was collected as duty of Customs. This was
hindering smooth flow of exports and making Indian products costly in international market.
Cess is levied on indigenous manufactured goods like sugar, tea, jute, beedis, automobiles,
tobacco, coffee, rubber, paper and paper board, iron ore, limestone and dolomite, manganese
ore, chrome ore and coking and non-coking coal. This is recoverable as excise duty. If these
are imported, corresponding cess will be payable.55

Special Additional Duty of Customs

A special additional duty (SAD) @ 4% was payable vide section 3A of Customs Tariff Act.
The duty was introduced w.e.f. 2nd June 98, but has been completely withdrawn w.e.f. 9-12004 vide notification no. 6/2004- Cus dated 8-1-2004. The section 3A of Customs Tariff Act
has been omitted w.e.f. 13-5-2005.

55

TTK-LIG Ltd. v. CC, 2006 (193) ELT 169

Page | 27

BIBLIOGRAPHY
Books referred:
V.S. Datey, Elements of Central Excise and Customs Law, Taxmann Publications.
V.S. Datey, Customs Law: Practice and Procedures, 4th Edition, Taxmann
Publications.
V.S. Datey, Indirect Taxes: Law and Practice, 27th Edition, Taxmann Publications.

Websites referred:
http://www.custom-duty.com/types_custom_duties.html
http://business.gov.in/taxation/types_customsduties.php
http://wirc-icai.org/wirc_referencer/indirect%20tax/Customs%20Act.htm

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