Goods As per Section12 of the India Customs Act, Custom Duty is imposed on Goods, belonging to Government as well as goods

not belonging to Government. Section 2(22), gives inclusive definition of goods' as - 'Goods' includes:

Vessels, aircrafts and vehicles Stores Baggage Currency and negotiable instruments and Any other kind of movable property. .1 Bonds are basically two types ,i.e. surety and security. Under a surety bond another person stands as surety to guarantee the performance on the part of obligor. The surety should be for the full value of the bond and the person standing as surety should be solvent to the extent of the bond amount. Under the Contract Act the liability of the surety is co-extensive with that of the principal debtor and hence the department is at liberty to enforce the recovery of the dues either from the obligor or from the surety. 2.2 The following are the types of bonds, which are presently in vogue : a. b. c. d. e. B-1 Surety / Security (General Bond) - for export of goods without payment of duty under Rule 19; B-2 Bond Surety / Security(General Bond) for provisional assessment; B-3 Bond Surety / Security) - to obtain matches Central Excise stamp on credit; B-4 Bond Surety/Security for provisional release of seized goods (provided in this Manual by instruction); and B-17 Bond (General) Surety / Security -composite bond for EPZ/ 100% EOUs for assessment, export, accounting and disposal of excisable goods obtained free of duty [continuation of the Format as specified under the erstwhileCentral Excise Rules, 1944].

The terms "Prohibited Goods" have been defined in sub-section 33 of Section 2 of the Customs Act as meaning "any goods the import or export of which is subject to any prohibition under the Customs Act or any other law for the time being in force". Under section 11 of the Customs Act, the Central Government has the power to issue Notification under which export or import of any goods can be declared as prohibited. The prohibition can either be absolute or conditional. The specified purposes for which a notification under section 11 can be issued are maintenance of the security of India, prevention and shortage of goods in the country, conservation of Foreign Exchange, safeguarding balance of payments etc. The Central Govt. has issued many notifications to prohibit import of sensitive goods such as coins, obscene books, printed waste paper containing pages of any holy books, armored guard, fictitious stamps, explosives, narcotic drugs, rock salt, saccharine, etc.

Seizure 2. An officer of Customs can seize any goods, if he has reason to believe that the same are liable to confiscation, under the Customs Act. The proper officer may also seize any document or things that may be relevant to any proceedings under the Custom Act. However, the person from whom these documents are seized is entitled to make copies of the same. 3. The person from whom the goods are seized is issued a show cause notice, usually within six months. However, the Commissioner of Customs, on sufficient cause being shown, can extend the time period for issue of Show cause notice, by a further six months. 4. In case the seized goods are perishable or hazardous in nature or is prone to depreciate in value over time or for reasons of constraints in space, the government can notify these goods and these goods can be disposed off before the conclusion of the proceedings eg. All electronic goods, Currency, Liquors, P&P medicine, Gold, Silver etc. Confiscation 5. The word confiscation implies appropriation consequential to seizure. The essence and the concept of confiscation is that after confiscation, the property of the confiscated goods vests with the Central Government. 6. The adjudicating authority makes the decision regarding confiscation of goods. The specific/ different categories of violations under which the import or export goods are liable to confiscation, are enumerated in Section 111 and 113 of the Customs Act. In general, the goods that are attempted to be smuggled into or out of the country, by route other than land routes or is attempted to be cleared by way of misdeclaration in quantity, description or value etc are liable to be confiscated. The import or exported goods are also liable to confiscation if there is an intention to evade Customs duty or to fraudulently avail the benefits available under various export promotion schemes, such as duty drawback, DEPB, 100%EOU etc.

The person involved in omission or commission under the Customs Act, in relation to any goods which renders such goods liable to confiscation under section 111, or abets the same, or acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with

a.

b. c.

d.

e.

any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable to penalties as follows :in the case of goods in respect of which any prohibition is in force under the Customs Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater; in the case of dutiable goods, other than prohibited goods, the person shall be liable to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater; in the case of goods or baggage in respect of which misdeclaration of value has been done, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater; in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest; in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest.

Valuation of excisable goods is relevant in the context of goods, which are chargeable to ad valorem levies. The relevant provisions are: # Valuation under section 4 of the Central Excise Act, 1944 based on transaction value # Valuation based on Retail Sale Price (RSP) under section 4A of the Central Excise Act, 1944, which is applicable to excisable goods that are notified by the Central Govt. However, this does not apply tariff values fixed under section 3(2) of the Central Excise Act, 1944 # Value under Section 4 of the Central Excise Act, 1944. The new Section 4 of Central Excise Act as substituted by section 94 of the Finance Act, 2000 (No. 10/2000) came into force from 1st day of July, 2000. For applicability of transaction value in a given case, for assessment purposes, the following requirements should be satisfied: 1. The goods are sold by an assessee for delivery at the time and place of removal. The term ?place of removal? includes factory, warehouse, depot or premises of a consignment agent 2. The assessee and the buyer of the goods is not related 3. The price is the sole consideration for the sale. If any one of the above requirements is not satisfied, then the transaction value shall not be the assessable value and value in such case has to be arrived at under the valuation rules. # Transaction value includes receipts/recoveries or charges incurred or expenses provided for in connection with the manufacturing, marketing, selling of the excisable goods to be part of the price payable for the goods sold. It would be seen from the definition of transaction value that any amount which is paid or payable by the buyer to or on behalf of the assessee, on account of the factum or sale of goods, then such amount cannot be claimed to be not part of the transaction value. In other words, if, for example, an assessee recovers advertising charges or publicity charges from his

buyers, either at the time of sale of goods or even subsequently, the assessee cannot claim that such charges are not includable in the transaction value. The law recognizes such payment to be part of the transaction value that is assessable value for those particular transactions. The term place of removal has been recently redefined to include depot, premises of consignment agent etc. If, therefore, the transaction value is with reference to delivery at the time and place or removal, such transaction value will be the assessable value. In those cases where any of the three requirements mentioned in para above is missing, the assessable value shall be determined on the basis of the valuation rules. The valuation rules are notified under section 4(1)(b) by notification No. 45/2000-CE (NT), dated 30.6.2000.

Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944), and in supersession of the Central Excise (Valuation) Rules, 1975 except as respect things done or omitted to the done before such supersession, the Central Government hereby makes the following rules, namely:1. (1) These rules may be called the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. (2) They shall come into force on and from the 1st day of July,2000. CHAPTER I PRELIMINARY 2. In these rules, unless the context otherwise, requires,(a) "Act" means the Central Excise Act, 1944 (1 of 1944); (b) "normal transaction value" means the transaction value at which the greatest aggregate quantity of goods are sold; (c) "value" means the value referred to in section 4 of the Act; (d) words and expressions used in these rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act. CHAPTER II DETERMINATION OF VALUE 3. The value of any excisable goods shall, for the purposes of clause (b) of subsection (1) of section 4 of the Act, be determined in accordance with these rules. 4. The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of the removal of goods under assessment, subject, if necessary, to such adjustment on account of the difference in the dates of delivery of such goods and of the excisable goods under assessment, as may appear reasonable. 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstance in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the actual cost of transportation from the place of removal upto the place of delivery of such excisable goods provided the cost of transportation is charged to the buyer in addition to the price for the goods and shown separately in the invoice for such excisable goods.

6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Explanation,-For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely:(i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. 7. Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as "such other place") from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment. 8. Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and fifteen per cent of the cost of production or manufacture of such goods. 9. When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of the goods shall be the normal transaction value at which these are sold by the related person at the time of removal, to buyers (not being related person); or where such goods are not sold to such buyers, to buyers (being related person), who sells such goods in retail:

Provided that in a case where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in rule 8. 10. When the assessee so arranges that the excisable goods are not sold by him except to or through an inter-connected undertaking, the value of goods shall be determined in the following manner, namely:a. If the undertakings are so connected that they are also related in terms of subclauses (ii) or (iii) or (iv) of clause (b) of sub-section (3) of Section 4 of the Act or the buyers is a holding company or subsidiary company of the assessee, then the value shall be determined in the manner prescribed in the rule 9. Explanation,-In this clause "holding company" and "subsidiary company" shall have the same meanings as in the Companies Act, 1956 (1 of 1956). b. In any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of section 4.

Transit insurance not includible for excise valuation

Section 4 of the Central Excise Act provides for determination of value for charging excise duty. Essentially, value is to be derived from the price of the goods at which they are sold. This means that certain expenses are to be deducted from the price to arrive at the value for excise. Transit insurance charges from place of removal to the placeof delivery may be incurred by the assessee which may be subsequently recoveredfrom the buyer. It is doubtable whether it will be allowed as deduction on thesimilar lines of transportation charges. Though there is no departmentalclarification in this respect but it should be allowed as deduction as these chargesdoes not enrich the value of the product.

Valuation in case of sale from depot/branch

Depot price at the time of removal Subsequent sale price not relevant

Transport charges after depot Value addition done at depot

Deemed manufacture in case of MRP

In case of depot sale, duty is payable on basis of depot price prevailing at the time of removal of final product from the factory [Rule 7]. Price at which the goods are actually sold subsequently is not relevant. Differential duty is not payable even if goods are sold later at higher price from depot. Similarly, refund is not available if prices are goods are subsequently actually sold at lower price. Transport charges upto depot and depot expenses are not allowable as deduction (These are already included in depot price). Transport charges from depot onwards are not includible in assessable value. Any value addition done at depot is not includible in assessable value, if activity is not manufacture (the reason is that goods are to be assessed in the condition in which they are removed from factory). In case of products covered under MRP provisions, if packing in