Preferential Area Exemption Notifications - Whether exemption applies to all duties of customs or only BCD?
GOVERNMENT has issued various notifications granting exemption of customs duties for importing specified goods from ‘preferential areas' like Singapore, ASEAN, SAFTA etc subject to the fulfillment of conditions pertaining to Rules of Origin.
For example Notification No. 152/2009-Cus., dated December 31, 2009 as amended pertains to imports from Republic of Korea, Notification No. 153/2009-Cus., dated December 31, 2009 as amended pertains to imports from ASEAN countries, Notification No. 10/2008-Cus., January 15, 2008 pertains to imports from Singapore, Notification No. 72/2005-Cus., dated July 22, 2005 pertains to areas covered by Asia Pacific Trade agreement (formerly known as Bangkok agreement).
As regards countries under SAFTA there are two notifications viz., Notification No. 67/2006-Cus., dated June 30, 2006 as amended and Notification No. 107/2008-Cus., dated October 6, 2008 (which applies only to countries other than Islamic Republic of Pakistan and Republic of Sri Lanka).
In Notification Nos. 10/2008-Cus., 152/2009-Cus., and 153/2009-Cus., the preamble of the said notifications mentions that the exemption applies to ‘duties of customs' without any specific reference to BCD or CVD or SAD or E Cesses etc. The relevant text in the said notifications reads as follows:
'from so much of the duty of customs leviable thereon as is in excess of the amount calculated at the rate specified in the corresponding entry in column …. of the ….Table…'
The tables annexed to the said notifications lists out the applicable rates of duty. For e.g. in Notification No. 152/2009-Cus the rates range from 3% to 9.63% to 23.5% etc.
Compare this with the text in a general exemption notification viz., 21/2002-Cus., dated March 01, 2002 which reads as follows:
‘(a) From so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table;
(b) From so much of the additional duty leviable thereon under sub-section (1) of section 3 of the said Customs Tariff Act, as is in excess of the rate specified in the corresponding entry in column (5) of the said Table…'
Now, a Netizen has raised a point, “The moot point is whether the phrase ‘duties of customs' as mentioned in the above referred preferential area notifications applies only to BCD i.e. basic customs duty or it covers all the customs duties viz., BCD, CVD, SAD and ECesses and also other Cesses/duties if any, applicable to such imported goods.”
And he answers it,
“In my view, the phrase ‘duties of customs' should cover the entire gamut of customs duties leviable on the specified goods listed in such notifications and is not restricted only to the ‘basic customs duty' as is generally understood. This view is also reinforced by the fact that the rates mentioned in the tables annexed therein are in some instances more than the tariff rate of ‘basic customs duty' applicable to such goods. For e.g. in Notification No. 152/2009-Cus., dated 31.12.2009 as amended, for various goods of chapter 84, the rates are varying from 9.38 to 10.63 whereas the tariff rate prescribed for a majority of the goods under Chapter 84 is 7.5%.
If the phrase ‘duties of customs' is read to mean only ‘basic customs duty' then the said notification may become redundant for import of such products where the rate in the exemption notification indicates a higher number than that is mentioned in the tariff. It may also be noted that the rates mentioned in the said notification has decimals which do not readily refer to ‘basic customs duty' as specified in the tariff.
We also checked with reliable sources in the Customs regarding this aspect and it was found that there is some confusion on this front, though some are in agreement with the above viewpoint. It was mentioned to us that due to confusion prevailing in EDI software regarding this aspect, the importers who are opting to avail the benefit of these notifications are guided to opt for some other beneficial notifications thereby side stepping the problem. In view of this confusion, the Board should issue a detailed clarification at the earliest.
Another aspect (which is not related to the above issue) is with regard to notifications pertaining to SAFTA countries. While Notification No. 67/2006-Cus applies to SAFTA countries (all countries including Islamic Republic of Pakistan and Republic of Sri Lanka) providing exemption from ‘duties of customs', Notification No. 107/2008-Cus., (applies to countries other than Islamic Republic of Pakistan and Republic of Sri Lanka) provides for concession in the form of application of a ‘percentage of applied rate of duty'. Since there is an overlapping of goods, the importers may avail the notification which is more beneficial to them. However, it would be appropriate if the Board gives a suitable clarification in this regard.”
Incidentally, the notification does not mention duties of Customs, but refers to only duty of customs.