Customs and trade newsletter
September 2022
Policy updates, notifications and instructions
1. Foreign Trade Policy 2015–2020 extended up to 31 March 20231
The Director General of Foreign Trade (DGFT) has extended the validity period of existing Foreign Trade Policy (FTP) 2015–2020 and Handbook of Procedures (HBP) 2015–2020, from 30 September 2022 to 31 March 2023.
2. CBIC notifies new IGCR Rules2
The Central Board of Indirect Taxes & Customs (CBIC) has notified the new Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (IGCR Rules) in supersession to the earlier IGCR Rules, 2017, with immediate effect.
The coverage of new IGCR Rules has been expanded to cover cases, where the intended purpose is for putting the imported goods to a specified end use, along with those pertaining to manufacturing of any commodity or provision of output service.
While the new IGCR Rules follow a similar overall scheme to the earlier IGCR Rules, some major changes are as follows:
- Introduction of Form IGCR-3A, which can be filed at any point with details of goods imported, consumed, re-exported, pending for use etc., for immediate recredit of the bond value.
- Time limit for consumption or re-export of unutilised or defective goods will be as follows:
• as specified in the corresponding customs notification;
• if not specified, the time period of six months will be applicable; and
• for goods imported for intended purpose under the IGCR Rules within six months, which can be further extended by another three months where the importer furnishes sufficient reason(s) which were beyond its control.
- Forms IGCR-1 and IGCR-3 have been amended to include the different intended purposes of the imported goods, such as manufacturing, import for specified end use, export of goods using goods imported and supply to end use recipient or for provision of output service.
3. The CBIC has introduced following products to the specified list3 of goods covered under
exemption notification to widen its scope in relation to petroleum operations or coal bed methane operations effective from 28 September 20224
Sl. No. Change in Existing provisions Proposed change
2 Heading/ Tariff Item 8413 or 8414 Substituted with heading ‘8413, 8414 or 8481’
14 Heading/ Tariff Item 2710, 3811, 3824, 3905, 3104.20.00
Inserted with heading ‘2915’
1 Notification No. 37/2015-2020 dated 29 September 2022 and Public Notice No. 26/2015-2020 dated 29 September 2022
2 Notification No. 74/2022-Customs dated 9 September 2022 and Circular No. 18/2022-Customs dated 10 September 2022
3 List 33 to S. No. 404 of Notification No. 50/2017-Customs dated 30 June 2017
4 Notification No. 50/2022-Customs dated 27 September 2022
Sl. No. Change in Existing provisions Proposed change
14 Description Oil and gas wells, specific cement additives
Oil and gas wells, specific cement additives and caesium formate
4. The Central Government has amended the export schedule of Custom Tariff Act, 1975, to introduce export duty on following products with effect from 9 September 20225
Sl. No. ITC HS code Description Rate of duty
6A. 1006 10 Rice in the husk (paddy or rough) 20%
6B. 1006 20 Husked (brown) rice 20%
7A. 1006 30 90 Semi-milled or wholly milled rice, whether or not polished or glazed (other than parboiled rice and basmati rice)
20%
5. Amendment in export policy of broken rice under CTH 1006.40.006
The DGFT has revised the export policy of broken rice (CTH 1006.40.00) from ‘Free’ to ‘Prohibited’ with effect from 9 September 2022. However, for a smooth implementation of the new policy during the period from 9 September 2022 till 15 October 2022, the following consignments of broken rice will be allowed to be exported:
- where loading of broken rice on the ship has commenced before this notification;
- where the shipping bill is filed and vessels have already berthed or arrived and anchored in Indian ports, and their rotation number has been allocated before this notification; and
- where broken rice consignment has been handed over to the customs before this notification and is registered in their system.
6. The DGFT amends the import policy of PET flakes (Chapter 39)7
The import of PET flakes classifiable under CTH 3907.61.10 and 3907.69.30 of the Customs Tariff is
‘Prohibited’. Now, the DGFT has permitted such imports by introducing an additional requirement of obtaining an authorisation from the DGFT and an ‘No Objection Certificate’ from the Ministry of Environment, Forest and Climate Change subject to the following conditions:
- Importer has used domestic waste (at least 70% of the capacity) in the previous year.
- Imports are capped at 15% of actual capacity utilised (20% for FY 2022-23).
- Additional imports of 10% may be considered based on the exports of the products.
- Units will be eligible for import after at least one year of production.
5 Notification No. 49/2022-Customs dated 8 September 2022
6 Notification No. 31/2015-2020 dated 8 September 2022 read with Notification No. 35/2015-2020 dated 27 September 2022
7 Notification No. 32/2015-20 dated 14 September 2022
7. Modifications in the procedure to apply for Export Obligation Discharge certificate in case of deemed exports8
With an intent to simplify the procedure and reduce compliance burden for applying redemption against an advance authorisation in case of deemed exports, the DGFT has modified the guidelines for applicants under ANF-4F.
With respect to supplies made to EOU/ EHTP/ STP/ BTP, the said guidelines provided that the applicant furnish a copy of CT-3 or ARE-3 duly signed by jurisdictional excise or GST authorities certifying the item, value, date and quantity of such supply in lieu of the excise or GST attested invoice or statement of invoices.
The above requirement has been replaced9 with a copy of Form A along with a copy of the tax invoice duly endorsed by the recipient, which will be considered as a proof of deemed export supplies.
8. Amendment in provisions related to EPCG Scheme10
The DGFT has extended the last date for filing of annual returns in relation to the fulfilment of export obligation under Export Promotion Capital Goods (EPCG) scheme11 for the FY 2022-2023 from 30 September 2022 until 31 December 2022.
9. Clarification regarding FSSAI requirement of AGMARK certification in case of imported food products12
The CBIC has clarified regarding Food Safety and Standards Authority of India (FSSAI’s) requirement of AGMARK certification in case of imported food consignments wherein the FSSAI has decided to keep the requirement of AGMARK certification on hold till further orders. This measure has been taken since the Directorate of Marketing and Inspection, Ministry of Agriculture is not providing foreign country or overseas certification under the Agricultural Produce (Grading and Marking) Act, 1937.
10. Recovery proceedings against a transferee under RoDTEP and RoSCTL has been amended13 The manner of issuing duty credit for goods exported under the Remission of Duties and Taxes on Exported Products (RoDTEP) and Rebate of State & Central Taxes and Levies (RoSCTL) scheme has been amended by the CBIC wherein the provisions relating to initiating recovery proceedings by a proper officer under section 142 of the Customs Act, 1962, against a transferee have been deleted under the following scenarios:
- where the amount of duty credit has been allowed in excess; and - where export proceeds have not been realised.
11. Amendment in Electronic Duty Credit Ledger Regulations, 202114
The CBIC has extended the validity of e-scrips issued under the Electronic Duty Credit Ledger Regulations, 2021, from one year to two years from the date of its generation. Consequential amendments have been made under RoDTEP and RoSCTL schemes.
8 Corrigendum dated 12 September 2022 to Public Notice No. 11/2015-20 dated 7 June 2022
9 In alignment with Circular No. 14/14 /2017 - GST dated 6 June 2017
10 Public Notice No. 27/2015-20 dated 29 September 2022
11 As per the para 5.15 of HBP 2015-20
12 Instruction No. 23/2022-Customs dated 9 September 2022
13 Notification No. 75/2022-Customs (N.T.) dated 14 September 2022 and Notification No. 76/2022-Customs (N.T.) dated 14 September 2022
14 Notification No. 79/2022-Customs (N.T.) dated 15 September 2022 read with Circular No. 21/2022-Customs dated 26 September 2022 and Circular No. 22/2022-Customs dated 26 September 2022
12. Important parameters for classification of goods undertaking lifting, handling and having mobility functions15
With an intent to clarify regarding the classification of goods referred to as Truck Cranes (CTH 8705) or All Terrain Cranes (CTH 8426), the CBIC has examined the relevant section notes, chapter notes and
explanatory notes of CTH 8426 and CTH 8705 that guide the classification of mobile machines and has come up with the following important aspects which will serve as a base for deciding classification:
- movement under road;
- location of propelling and control elements;
- number of engines; and
- integration of the working machine with the chasis.
15 Circular No. 20/2022-Customs dated 22 September 2022
Key judgments
1. The terms MIMO and LTE products in the exemption notification16 means products that work on both, MIMO technology and LTE standard17
The instant case involves import of Wireless Access Points (WAP), whereby the importer classified the same under CTH 8517.62.90 of the Customs Tariff as ‘other apparatus for transmission’. The importer also availed concessional rate of duty under the exemption notification, as amended. The Directorate Revenue of Intelligence issued a show cause notice denying the benefit of the exemption on the grounds that
‘Multiple Input/ Multiple Output’ (MIMO) or ‘Long-Term Evolution’ (LTE) products are excluded from the scope of the exemption notification.
The Delhi bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) on assessment held that the exclusion clause (iv) under Serial No. 13 of notification covers MIMO and LTE products i.e., a product that has only MIMO technology would not be covered by this exclusion clause, and thus cannot be excluded from the scope of the exemption notification. The product under consideration – i.e., WAP – works on MIMO technology but does not support LTE standard. As the scope of the exclusion clause is restricted to those products having both MIMO technology and LTE standards, the importer is justified is claiming the exemption.
2. Power Tillers are classifiable under CTH 84.32, and thus eligible for concessional customs duty rate18
The instant case pertains to the classification of power tillers, wherein the competing entries were CTH 8432 covering ‘agricultural machinery’ and CTH 8701 that covers ‘tractors’.
The Kolkata bench of the CESTAT noted that the primary function of a power tiller is a modified rotary tiller, which is inbuilt with an engine as source of power. Reference was made to international literature of branded power tillers, wherein it is evident that rotary tillers and power tillers are self-same goods. Thus, it would be appropriately classifiable as agricultural machinery and not as tractors, as the essential function of a power tiller is not transportation. CTH 8432.80.20 specifically covers rotary tillers under sub-heading
‘other machinery’ (8432.80). Therefore, the ‘power tillers’ under consideration are appropriately classifiable as agricultural machinery under CTH 8432.
3. Router line cards are classifiable under CTH 8517.70.10 of the Customs Tariff as parts or components of a router or apparatus of heading 85.1719
The instant case pertains to the classification of ‘router line cards’. While the taxpayer sought classification under CTH 8517.70.90 of the Customs Tariff, as ‘parts of router’, the Revenue sought to classify the same under CTH 8517.69.90, as ‘other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network’.
The Delhi bench of the CESTAT noted that these line cards cannot perform their function on a stand-alone basis. These cards must be inserted into the dedicated slots into the chassis of the router to perform such function. Thus, it was concluded that the line cards are ‘parts of router’, applying the rationale mentioned in section note 2 (b) of the Customs Tariff, which specifies that parts suitable for use solely or principally with a particular kind of machine are to be classified under the heading of the same machine i.e., the router in the instant case.
For classification of router line cards as parts at the eight-digit level, the Delhi bench of the CESTAT held that, as the same are populated printed circuit boards mounted with various active and passive electronic elements, the same will be classified under CTH 8517.70.10, as ‘populated, loaded, or stuffed printed circuit boards’.
16 Notification No. 24/2005-Customs dated 1 March 2005
17 2022-VIL-684-CESTAT-DEL-CU
18 2022-VIL-640-CESTAT-KOL-CU
19 2022-VIL-696-CESTAT-DEL-CU
4. Data projectors are correctly classifiable under CTH 8528 69 00 of the Customs Tariff and any add- on features do not take away from the principal function of working with the ADPM20
The instant case pertains to a classification dispute involving imported ‘data projectors’ from China. The importer classified the goods under CTH 8528.61.00 of the Customs Tariff (before 1-1-2017) as ‘projectors of a kind solely or principally used in an automatic data processing system (ADPS)’ and CTH 8528.62.00 of the Customs Tariff (post 1-1-2017) as ‘projectors capable of and designed for direct connection with automatic data processing machine [ADPM]’. However, Customs sought classification under CTH 8528.69.00 of the Customs Tariff as ‘other projectors’.
The Delhi bench of the CESTAT held that the data projectors are primarily meant for use with an ADPS and are designed for projection of data in places like conference rooms, auditorium or lecture halls and
classrooms. Addition of multiple ports in the goods will not take away the basic nature of the goods, which is to work in conjunction with ADPS.
Thus, the data projectors being principally used with ADPS would merit classification under CTH 8528.61.00 prior to 1 January 2017 and under CTH 8628.62.00 w.e.f. 1 January 2017.
5. Test of appropriateness for the purpose of classification of goods is the responsibility of the assessing authority21
The instant case pertains to the classification of ‘printed circuit boards’ intended for use in manufacturing of lamps. The taxpayer sought classification as ‘printed circuits’ under CTH 8534.00.00 of the Customs Tariff.
However, Revenue sought to classify the same as ‘lamps and lighting fittings’ under CTH 9405.99.00 on the ground that ‘circuit boards’ were to be used in manufacturing of lamps.
The Mumbai bench of the CESTAT stated that that the end use is not determinative of classification of product. If the authorities intend to change the classification, they must produce proper evidence and discharge the burden of proof, as the test of appropriateness is the responsibility of the assessing authority.
Therefore, the classification adopted by assessing authority is not sustainable.
6. Customs cannot ignore judicial precedents or add conditions not specified in the DFIA licence22 The instant case involves imports of melamine under the Duty-Free Import Authorisation (DFIA) scheme.
However, the DFIA licence only permitted import of synthetic tanning agent (syntan) used in leather processing.
Customs confirmed a demand of differential duty based on expert opinion and rejected the stand of the importer that melamine is a syntan.
The Delhi bench of the CESTAT held that there already exist judicial precedents that melamine is a syntan, which has been incorrectly ignored by the customs. The expert opinion produced by customs was disputed by the importer through the technical literature and no cross-examination of the expert was given to the importer in violation to the principles of natural justice.
The Delhi bench of the CESTAT further explained that the benefit cannot be denied to the importer just because melamine and syntan have separate Harmonised System codes in the Customs Tariff. It was stated that, as the Harmonised System codes are not specified in the licence and only the materials are indicated, customs cannot add conditions to the licence and insist that the inputs must fall under a particular Harmonised System of Nomenclature.
7. Limitation period for seeking refund of customs duty is to be calculated from the date of amendment of bill of entry as opposed to from the date of filing of bill of entry23
The matter pertains to rejection of a refund claimed by the importer, on grounds of limitation of one year for filing refund application as provided under section 27 of the Customs Act.
20 2022-VIL-678-CESTAT-DEL-CU
21 2022-VIL-702-CESTAT-MUM-CU
22 2022-VIL-669-CESTAT-DEL-CU
23 2022-TIOL-836-CESTAT-AHM
In the instant case, the importer approached the customs for amendment of bill of entry under section 149 of the Customs Act, and thereafter applied for a refund. For the purpose of refund, the customs calculated the period of one year from the date of actual payment of duty and not from the date of amendment of bill of entry as considered by the importer.
The Ahmedabad bench of the CESTAT held that the date of calculation of the limitation period will be from the date of amendment of bill of entry and not from the date of payment as the refund arises only after the amendment of bills of entry. It was further clarified that it is a settled principle in both cases – reassessment and amendment of bill of entry – that the limitation period is calculated as one year from the date of
reassessment or amendment of bill of entry.
8. No recovery proceedings can be carried out by the customs authorities, including encashing of bank guarantees for the balance amount demanded during the pendency of appeal, if the pre- deposit amount is paid24
In the instant case, the customs authorities encashed the bank guarantees, as the validity of the same was not extended. The matter against which the bank guarantees were provided was in appeal and a pre- deposit had already been made. The importer sought refund against encashment of bank guarantee and the same was declined by the authorities.
The Delhi High Court held that, once a pre-deposit of the requisite amount is made, a stay becomes applicable and no recovery proceedings can be carried out during the pendency of the appeal. The authorities can recover the demand raised only if the importer fails in the appeal or any other proceeding before a superior forum. On this basis, the customs authorities were directed to refund the amount encashed from the bank guarantees.
9. CBIC circulars are binding only on the original authorities while the appellate authorities are permitted to take varying stands25
The instant case pertains to classification of ‘TV tuners’. Customs had placed reliance on a Central Board of Excise and Customs (CBEC) (now CBIC) circular26 to arrive at the classification.
The Mumbai bench of the CESTAT clarified that, as per section 151A of the Customs Act, the CBEC is empowered to issue circulars for the purpose of uniformity in the classification of goods. However, the proviso to the said section also places an embargo on instructions that have the effect of interference with the discretion of Commissioner of Customs (Appeals) in the exercise of appellate function.
Thus, it was held that the CBEC circulars are binding only on the original authorities while permitting the appellate authorities under the administrative control of CBEC to take varying stands. Therefore, reliance placed by the adjudicating authorities on such circular is not acceptable.
10. Withdrawal of BCD exemption on aircraft for operating non-scheduled services when such aircraft is used for chartering within the DGCA’s given permit – not maintainable27
The instant case pertains to eligibility of basic customs duty (BCD) exemption on import of aircraft for operating non-scheduled (passenger) services on the basis of the Directorate General of Civil Aviation (DGCA’s) permission. Customs denied the exemption on the ground that the appellant had chartered the aircraft to another entity (providing passenger transport service).
The Delhi bench of the CESTAT noted that the exemption is eligible subject to the condition contained in the exemption notification28 i.e., aircraft should be imported by an approved operator for providing non- scheduled (passenger) services. There is no prohibition against providing charter services of aircraft within the ambit of non-schedule (passenger) services. As the appellant had not used aircraft as a private aircraft, there was no violation of the DGCA permit and, accordingly, a customs exemption should be eligible.
24 2022-TIOL-1162-HC-DEL-CUS
25 2022-TIOL-799-CESTAT-MUM
26 Circular No. 52/2011-Cus dated 11 November 2011
27 2022-VIL-674-CESTAT-DEL-CU and 2022-VIL-725-CESTAT-DEL-CU
28 Condition No. 104 of Notification No. 61/2007 dated 3 May 2007
11. Imported goods seized by customs may be provisionally released to only the rightful owner of the imported goods29
The instant case pertains an appeal against an approval for provisional release of goods under section 110A of the Customs Act. The application for provisional release was denied on the ground that the importer could not produce any evidence on record regarding ownership of the goods.
The Bombay High Court held that the imported goods seized by the customs authorities may be
provisionally released under section 110A of the Customs Act to the rightful owner of the imported goods only. The mere fact that a show cause notice has been issued in the name of the importer does not necessarily imply that it is to be treated as an owner of the goods seized. In the instant case, as the importer had failed to prove the ownership over the goods in question, the same will not be provisionally released.
12. Demand for differential duty can only be made against the importer and not against third parties30 The instant case pertains to rejection of declared value of goods on grounds of undervaluation. On the basis of investigation, customs issued a show cause notice to the Customs Broker (i.e., a party other than the importer-on-record) alleging undervaluation of goods.
The Delhi bench of the CESTAT held that it is incorrect on the part of customs to issue a show cause notice against a third party for demand of differential duty and/ or penalties, as all import documents, including bill of entry, bill of lading, invoice, import general manifest etc., and payment of duty have been made in the name of the importer. Thus, the notice issued to the Customs Broker is illegal and not sustainable in law.
13. Issuing notification rescinding countervailing duty in absence of any recommendation by designated authority– not justified31
The matter involved a question on whether the Central Government through CBIC can straightway issue notification rescinding countervailing duty in absence of any recommendation by designated authority.
The Gujarat High Court held that recommendation of designated authority is a necessary pre-condition for Central Government to either impose or modify or withdraw countervailing duty. It is not permissible for the Central Government to issue notification rescinding countervailing duty in absence of any recommendatory exercise by the designated authority.
29 2022-VIL-642-BOM-CU
30 2022-VIL-662-CESTAT-DEL-CU
31 2022-VIL-651-GUJ- CUS
Data Classification: DC0 (Public)
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