Budget 2012 – Important changes in respect of Custom Duty

1. Rate structure:

1.1 There is no change in the peak rate of basic customs duty of 10% applicable to non­agricultural goods with few exceptions which are separately discussed. The rates below the peak are also being retained. Notification no. 21/2002-Customs dated 1.3.2002 prescribing the general effective rates is being superceded by Notification No. 12/2012-Customs dated 17.3.2012.

2.          Computation of Customs Duties:

19.1 The method of computation of Education Cess and Secondary & Higher Education cess on imported goods is being simplified. Currently, these cesses are first charged on the CVD portion of customs duty and thereafter on the aggregate of customs duties (excluding special CVD). The portion of cesses leviable on the CVD portion of customs duty is being exempted so as to avoid computation of such cesses twice.

Illustration:

		Present	Proposed
A	Assessable value (CIF + Landing Charges)	100	100
B	Basic customs duty (BCD) 10%	10.00	10.00
C	Value for CVD (A+B)	110.00	110.00
D	CV D equivalent to central excise duty 10%	11.00	11.00
E	Educational Cess on CVD 2%	0.22	0
F	Sec. and Higher Educational Cess 1%	0.11	0
G	Customs duty for calculation of Cess	21.33	21
H	Customs Educational cess 2%	0.43	0.42
I	Customs Secondary and higher educational cess 1%	0.21	0.21
J	Value for SAD	121.97	121.64
K	SAD @ 4%	4.88	4.865
	Total Duty	26.85	26.495

3. Special Additional Duty:

3.1 Notification Nos. 20/2006-Customs dated 1.3.2006 and 29/2010-Customs dated 27.2.2010 are being superceded by notification no.21/2012-Customs dated 17.3.2012 which prescribes the effective rates of SAD.

3.2       Brass scrap, wood in the rough, dredgers and equipments for setting up of solar thermal projects are being fully exempted from SAD.

3.3      The existing exemption from special additional duty of customs (SAD) currently available to CRGO steel is being restricted to prime quality of such steel.

3.4 A condition is being inserted in Notification No.21/2012-Customs dated 17^th March, 2012 requiring the importer of specified goods to declare the State of destination where the goods are intended to be sold for the first time after import and the VAT registration number. This condition would apply to such goods imported on or after 1^st May, 2012.

3.5 As mentioned above, CENVAT Credit Rules are being amended to permit transfer of unutilized credit of SAD lying in balance at the end of each quarter to other registered premises of the same manufacturer. This change would come into effect from 1.4.2012. [Notification No.21/2012 –CE (NT) dated 17^th March, 2012 refers]

4. Baggage Allowance: The duty-free allowance under the Baggage Rules is being increased from ` 25000 to ` 35000 for passengers of Indian origin and from ` 12000 to ` 15000 for children upto 10 years of age.

5.         Rate changes on Specific Items:

5.1       Increases:

5.2.      The basic customs duty/CVD is being increased on the following items:

• From 60% to 75% on Completely Built Units (CBUs) of large cars/ MUVs/ SUVs permitted for import without type approval (value exceeding US$40,000 and engine capacity exceeding 3000cc for petrol and 2500cc for diesel)
• from 5% to 7.5% on boric acid
• From Nil to 10% on Digital Still Cameras of certain specifications.
• From 5% to 7.5% on flat rolled products (HR and CR) of non-alloy steel is being increased
• From 2% to 4% on standard gold bars and platinum bars
• From 5% to 10% on non-standard gold
• From 1% to 2% on gold ore/concentrate and dore bars for refining(CVD)
• Basic customs duty of 2% is being imposed on cut and polished coloured gemstones.

[Notification No. 12/2012-Customs dated 17^th March, 2012 has been issued for this purpose].

• From 10% to 30% on bicycles and from 10% to 20%. on parts of bicycles [Clause 127]

As the said clause has been declared under the Provisional Collection of Taxes Act, 1931, this increase in duty would take effect immediately- from the midnight of 16^th/17^th March, 2012.

6. Textile Machinery:

6.1 Full Basic Customs Duty exemption has been provided to shuttle less looms, parts/components of shuttle less looms by actual users for manufacture, specified silk machinery viz. Automatic reeling/ dupion reeling machines and their accessories including cocoon assorting machines, cocoon peeling machines, vacuum permeation machine, cocoon cooking machine, reeled silk humidifier, bale press and raw silk testing equipments. The exemption is available only to new machinery.

6.2 The concessional 5% duty available to specified textile machinery under erstwhile Notification. No. 21/2002-Customs dated 1.3.2002, superseded by Notification no.12/12- Customs dated 17^th March,2012 is being restricted only to the new textile machinery. Consequently second hand machinery would attract 7.5%. basic customs duty.

7. Relief Measures:

7.1.        Full exemption from basic customs duty is being provided to certain items as under:

• Initial setting up and substantial expansion of fertilizer projects. The exemption would be valid till 31.03.2015.
• Steam coal. CVD is also being reduced from 5% to 1% on such coal. This dispensation would be valid upto 31 .3.2014.
• Natural gas/Liquified Natural Gas imported for power generation by a power generation company.
• Uranium concentrate, sintered natural uranium dioxide, sintered uranium dioxide pellets for generation of nuclear power.
• Steel tube & wire, cobalt chromium tube, Hayness Alloy-25 and polypropylene mesh for the manufacture of coronary stents/coronary stent systems and artificial heart valves subject to actual user condition.
• Equipment imported for road construction projects awarded by Metropolitan Development Authorities along with Nil CVD and Nil SAD
• Tunnel excavation and specified lining equipment along with Nil CVD and Nil SAD
• Coal mining projects
• New and retreaded aircraft tyres along with Nil CVD.
• Parts of aircraft and testing equipment for maintenance and repair of aircraft imported by third-party Maintenance, Repair and Overhaul (MRO) units.
• Tunnel boring machines for hydel and road projects for all infrastructure projects. The exemption is also being provided to parts required for assembly of such machines.
• Tri- band phosphor
• Waster paper
• Lithium ion batteries for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers along with 6% CVD and Nil SAD

7.2 The basic customs duty is being reduced on the following items:

(i) From 30%/15% to 10% on,-

• Isolated soya protein and soya protein concentrate
• Probiotics.

(ii) From 10% to 7.5% on,-

• Railway safety (Train Protection and Warning System) equipment and railway track laying machines
• Machinery and instruments for surveying and prospecting of mines
• Titanium Dioxide

(iii)From 10%/ 7.5% to 5%, on-

• Specified coffee plantation and processing machinery. The concessional duty would be available upto 31.3.2014.
• Coffee brewing and vending machines (commercial type). The concessional duty would be available upto 31.3.2014.
• Specified soluble fertilizers and liquid fertilizers, other than urea.
• Raw materials for the manufacture of intermediates, parts and sub-parts of blades for rotors for wind energy generators.
• Six specified life saving drugs/vaccines and their bulk drugs is being reduced from 10% to 5% with Nil CVD by way of excise duty exemption
• Iodine.

(iv) From 7.5% /5% to 2.5%, on-

• Sugarcane planter, root or tuber crop harvesting machine and rotary tiller & weeder, parts & components for their manufacture.
• Parts required for manufacture of such coffee vending and brewing machines (commercial type).
• Specified raw materials for the manufacture of syringes, needles, catheters, cannulae along with Nil SAD and 6% CVD subject to actual user condition
• Parts and components for the manufacture of blood pressure monitors and blood glucose monitoring systems (Gluco-meters) along with Nil SAD and 6% CVD.
• Capital goods, plant and equipment imported for setting up or substantial expansion of iron ore pellet plants or iron ore beneficiation plants
• Specified soluble fertilizers and liquid fertilizers, other than urea.

8. Other Project Imports:

8.1 At present, project import status is available to installation of Mechanized Handling Systems & Pallet Racking Systems in mandis or warehouses for food grains and sugar, with concessional rate of basic customs duty of 5% with full exemption from additional duty of customs (CVD) and special additional duty of customs (SAD). This exemption is being extended to such systems installed for handling horticultural produce.

8.2       Project imports status with 5% BCD is being granted to the green houses set up for protected cultivation of horticulture and floriculture produce.

[Notification No. 17 /2012-Customs and Notification No. 12/2012 –Customs both dated 17^th March, 2012 has been issued for this purpose].

9. Important Legislative Amendments:

9.1 Barring legislative amendments involving an increase in the rate of duty for which a suitable declaration has been made under the Provisional Collection of Taxes Act, all amendments would come into effect on the date of enactment of the Finance Bill, 2012 i.e. the date on which the Bill receives the assent of the President. The legislative amendments relating to Customs Act and Customs Tariff Act have been explained in the Explanatory Memorandum to the Finance Bill, 2012. The important ones are discussed/ highlighted below:

9.2       Sections 2 and 7 are being amended to include ^„airfreight stations^‟ [Clause 114 and 115]

9.3 A new section 28AAA is being inserted to provide for recovery of duties, from the person to whom the instrument such as duty credit scrips was issued, where the instrument was obtained by means of collusion or wilful mis-statement or suppression of facts by the such person without prejudice to any action that may be taken against the importer. [Clause 116]. Section 28BA is being amended to make the provisions relating to provisional attachment of property applicable to the proposed Section 28AAA [Clause 116].

9.4 Section 47 is being amended to insert a new proviso therein to provide that the Central Government may, by notification in the official gazette, specify the class or classes of importers who shall pay customs duty electronical ly.[Clause1 18]

9.5 Section 104 is being amended to provide that notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under the Act (except an offence punishable with term of imprisonment of three years or more under section 135) shall be non-cognizable and bailable. It also provides that all offences punishable with a term of imprisonment of three years or more under section 135 shall be cognizable.[Clause 120].

9.6 Section 104A is being inserted to provide that bail in the case of offences punishable with a term of imprisonment of three years or more under section 135 shall not be granted by a Court or Magistrate without an opportunity being given to the Public Prosecutor to present his case. However in the case of minors, infirm and women the Magistrate may grant bail. It also excludes the jurisdiction of police officers to initiate investigation in cases under the Customs Act, unless authorized in this behalf by the Central Government by a special or general order [Clause 121]

9.7 Section 122 is being amended to enhance the monetary limits for adjudication of cases involving confiscation of goods and imposition of penalty from Rupees two lakh to Rupees five lakh for Deputy! Assistant Commissioners and from ` 10,000 to ` 50,000 for Gazetted officer lower in rank to Assistant! Deputy Commissioner. [Clause 122]

9.8 Section 138 deals with summary trial of offences. This section is being amended to exclude offences punishable with term of imprisonment of three years or more under section 135 since it is being proposed that such offences shall be cognizable. [Clause 123]

9.9       Section 153 is being amended to bring ^„courier services^‟ within its ambit for the purpose
of serving any order!decision!summons!notice by the Commissioner. [Clause 124]

10. Amendments in the First Schedule and Second Schedule to the Customs Tariff Act.

10.1     The First schedule to the Customs Tariff Act is being amended to,-

• revise the length of the lowest slab of both filter and non-filter cigarettes of length not exceeding 60 millimetres or exceeding 60 millimetres to length exceeding or not exceeding 65 millimetres
• revise the description of tariff items 2601 11 10 to 2601 11 90 dealing with iron ore and concentrates based on Fe content
• insert Note 13 in Chapter 48 to provide that notwithstanding anything contained in Note 12, if the paper and paper products of heading 4811, 4816 or 4820 are printed with any character, name, logo, motif or format they shall remain classified under Chapter 48 as long as such products are intended to be used for further printing. This would prevent classification disputes.
• align the entries relating to copper scrap, brass scrap, nickel scrap, aluminium scrap, lead scrap and zinc scrap with the revised ISRI classification. [Clause 127]

10.2 The Second Schedule to the Customs Tariff Act is being amended to enhance the rate of export duty on chromium ore from ` 3000 per tonne to 30% ad valorem. [Clause 128] This change will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

11 .    Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996

11.1 The Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 is being amended to further liberalize and simplify the procedure. The important changes are as under:

•  Eligibility Certificate can be obtained for a period not exceeding a year instead of consignment wise or quarterly certificate at present;

• Permitting re-export of unused! rejected goods imported at concessional duty under the said Rules with the prior permission of the jurisdictional Assistant Commissioner of Deputy Commissioner of Central Excise, as the case may be, subject to the condition that-

• Such re-export takes place within six months from the date of importation
• The re-export value should not be less than the value of the imports.

·  Maintenance of separate accounts for these rules should not be insisted upon as long as the records maintained by the importer contain the requisite information.

 Courtesy:- Tax Guru