Customs act, 1962: A critical analysis

This article on ‘Customs act, 1962: A critical analysis‘ was written by Deeksha Kushwaha, an intern at Legal Upanishad.

Introduction

Travelers or merchants, when traveling from one country to another country, need to pay some taxes on their luggage or goods is called customs tax. Every country gives customs tax according to their rules and regulations. If a person comes to India from another country on his goods, an Indian tax will be applied to him. All taxes will be applied to travelers according to the regulations which are regulating in our country. In India, all customs taxes are governed by the act of Indian Customs Act, 1962. This act provides the legal status of custom tax on the export and import of goods. This article will provide a critical analysis of the act.

Purpose of the Act

The main object of this act is to control customs tax activity and take a reasonable or restrictive tax on goods which is carried by export travelers or merchants. Also, this act provides penalties and fines for breaking the rules and statutes given in the act. In ancient times there were no strict laws regarding the tax on the import and export of goods. The kings of a dynasty make laws according to themselves. Some of it was just an oral order by the king Which creates disbalance in society. After independence, there was a need for a law, felt by legislators. Then it established a base of the Custom tax act.

The Indian Customs Act of 1962

The Indian Customs Act of 1962, enacted on 13 December 1962, was a fifty-two enactment of the year. This act applies to the whole of India. It is also applicable to every citizen of India who commits an offense outside of India or by any person. It has 161 sections and seventeen chapters.

The explanations of the chapters are given here –

The first chapter deals with the applicability of this act and there are some important definitions that are given in this chapter.
The second chapter deals with customs officers which are required to do tax-related work. This chapter also tells about the powers and functions of tax officers.
The third chapter talks about the appointment of customs ports, and airports. It also deals with the establishment of boarding stations, and the power to approve landscape for the port.
Its fourth chapter talks about the prohibition of the importance and importance of goods. It has three subchapters including the Forth chapter.
Its fifth chapter talks about the levy of, exemption from, and customs duties. It also has two subchapters.
Its sixth chapter has a provision relating to carrying imported and exported goods.
Its seventh chapter tells about the clearance of imported goods and exported goods.
Its eighth chapter tells about transit goods.
The nine chapter talks about warehouses, private warehouses, and public warehouses. It’s licensed and how to get registered and how to get cancellations.
Its tenth chapter talks about drawbacks.
Its eleventh and other chapter talks about special provisions and miscellaneous.

These all were the provisions given in this act, which need more improvement and will be discussed here. Apart from this, it has a schedule also which talks about repeals.

Amendment

A big issue that has been identified by the legal world in recent times. The amendment has taken place in section 104 of The Indian Customs Act 1962 by the Finance Act, 2013. It has been in the headlines in recent times. As is the opinion of many reputed jurists, and lawmakers, These amendments are not good in the eyes of law.

Section 104 of the Indian Customs act 1962 tells about the power of arrest related to the offense which is given in this act. Provisions related to non-cognizable and bailable offenses are also given in this section. There have made two amendments to The Indian Customs Act 1962 through the finance act 2012 and the finance act 2013.

According to the first amendment – It is provided in section 104, subsection (4), by the finance act 2012, Now Any offense relating to –

forbidden goods
Theft or attempt to theft of goods or money of more than fifty lakhs rupees shall be cognizable.

Which has been provided in section 135, CRPC 1973, are punishable.

According to the second amendment – It is provided in section 104, subsection (6), by the finance act 2013, Now Any offense relating to

Attempt to theft or theft of more than fifty lakhs
Forbidden goods are given in section 11, which has been notified in clause (i), sub-clause (c).
Whichever import or export has not been announced in this act acceptably, and which is a market value of more than one crore.
Whatever is given in this act related to drawback or attempt to drawback, if it is more than fifty lakhs shall be non-bailable.

In the case of Om Prakash v Union of India, It was held that Due to the non-cognizable nature of the offenses, which are given in section 104, were bailable. To reach this conclusion, the scope of the offenses provided in the Customs Act of 1962 was equated with the provisions of the Central Excise Act of 1944.

As discussed above these issues have been identified –

The effect of the amendment should not be retrospective.
That the amendments don’t really rationally characterise duty tax dodgers.
The provision might have increased the likelihood of making an arrest without appropriate duty evaluation.

Suggestions

After analysing the issues, according to the situations, The following criterion must be considered in order to calculate customs duty as a percentage or ratio of imports to punish heavy-duty evaders-

Goods are classified into various categories.
Industry pattern.
The number of goods brought into the country.
The financial crisis at the time of importation as well as at the time of duty tax levied.

To avoid ambiguity, an amendment must make it abundantly clear that an ‘officer of customs’ must be a ‘proper officer’ who has formed the evaluation for the given instance. In addition, an assessment must be made as an essential prerequisite for forming a “reason to believe,” as defined in Section 104 of the Customs Act of 1962. Before any prosecution can be initiated against the taxpayer, the ‘proper officer’ in this case must have completed the assessment and the assessment must be final. Such changes are required when duty evaders are to be classified and evasion beyond a certain threshold is to be severely punished.

Conclusion

The latest amendment is bound to increase the number of cases handled by these forums and broaden the revenue departments’ ability to unfairly punish marginal/non-duty evaders. The amendment was introduced in order to punish unreasonably high-duty evasions. However, the legislature appears to have acted in haste, without considering the consequences of such a law.

Given the predicted impacts of the Finance Act 2013 amendment to the Customs Act, 1962, it is reasonable to conclude that the amendment is unlawful and should be repealed. The legislature’s goal of severely punishing high-level duty avoidance is admirable. However, it must be done while taking into account some critical factors that are required and essential in calculating such a duty.

References

Om Prakash v Union of India,(AIR 2011 SC 321).

The Indian Customs Act of 1962, India, Available at: https://www.indiacode.nic.in/bitstream/123456789/15359/1/the_customs_act,_1962.pdf.

K. Prasanna, Analysis of the Amendments to Section 104 of The Customs Act, 1962, lawoctopus,(2015): https://www.lawctopus.com/academike/analysis-amendments-section-104-customs-act-1962/#_edn7 (Last Modified January 30, 2015)