MARCH 07, 2011

By J M Kishore

AS per the existing entry in the First Schedule of the Customs Tariff Act,1975, Chapter Heading 9804 covers import of goods for personal use by post or air. The wording in the heading and policy provisions are given as under:

the Foreign Trade (Regulation) Rules, 1993 provide for various aspects relating to licencing. However, The Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993 stipulates several conditions/circumstances for Exemption from the application of these Foreign Trade (Regulation) Rules, 1993.

Accordingly, in terms of the Rule 3(1)(i) of The Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993 ,

Nothing contained in the Foreign Trade (Regulation) Rules, 1993 shall apply to the import of any goods,

by any person through the post or otherwise for his personal use, or by any institution or hospital for its use except-

vegetable seeds exceeding one lb. in weight;

bees;

tea;

books, magazines, journals and literature which are not allowed to be imported under the policy for the time being in force;

goods, the import of which is canalised under the Policy;

alcoholic beverages;

fire arms and ammunition;

consumer electronic items (except hearing aids and life saving equipments, apparatus and appliances and parts thereof )

Provided that the c.i.f value of goods imported as aforesaid at any one time shall not exceed rupees two thousand .

PRESENT LEGAL POSITION

Classification & Rate of duty

++ In case of imports by post/Air which are

++ for personal use

++ which are free from prohibition under FTDR Act,1992

++ Other than baggage by a passenger

are to be classified under 9804 and attract BCD @10%.

Foreign Trade Policy provisions

++ Imports by Post are restricted if :

++ The CIF value exceeds Rs.2000 and

++ If they are the items mentioned at (a) to (h) in the clause 3(1) (i) of Foreign Trade (Exemption from Application of Rules in Certain Cases)Order, 1993

In such cases, the goods are to be confiscated and are to be adjudicated.

POSTAL IMPORTS- PRACTICAL PROBLEMS

It is stated that large number of trade goods are also being brought into India by a few importers by post and obviously these goods are not genuinely for personal use but declares as so. It is said that due to lack of sufficient Customs staff at post offices designated for such postal imports, it is noticed that that divergent practices are being followed in assessment, collection of duty and adjudication of such cases. Further, attempts are also being made to under-value the goods by splitting the consignments in parts so as to fall under the limit of Rs.2000 to get away with adjudication process. It is also said that disputes are being raised by importers regarding the eligibility of the goods under the heading 9804 when the goods are identified as not for personal use and when they are classified under respective tariff headings resulting higher rates of duty. It is believed that probably these reasons have forced the Govt . to propose amendments in the Budget 2011.

PROPOSAL FOR AMENDMENT OF ENTRY AND REVISION OF DUTY RATE

Clause 57 of the Finance Bill 2011 seeks to amend the entry in the manner as provided in the Fourth Schedule . Thus, it proposes to substitute the description against the heading 9804 as below:

'ALL DUTIABLE ARTICLES, INTENDED FOR PERSONAL USE, IMPORTED BY POST OR AIR'

Further, the tariff rate for the for the two existing entries ,i.e, Drugs and medicines (9804 10 00) & Other (9804 90 00 ) is also proposed to be enhanced to 35% from the existing rate of 10%.

Further, one entry at Sl.No. 403A in Customs Notification 21/2002 Dt.01-03-2002 is inserted where by the effective rate of BCD @ 10% for “ All goods intended for personal use, imported by post or air and exempted from any prohibition in respect of the imports thereof under the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) but excluding articles falling under heading 9803 . “

What is the effect of these amendments ??

It is explained in the TRU letter that it would obviate the need for resorting to merit assessment of goods when they are imported by this mode and the value exceeds the limits prescribed under the FT(D & R) Act. I am not able to understand this interpretation. The entry at 9804, now to be read as “ALL DUTIABLE ARTICLES, INTENDED FOR PERSONAL USE, IMPORTED BY POST OR AIR” . Interpretation whether certain goods are for personal use or otherwise is also not an easy task. The doubts that arise include:

What exactly would be the use of the amendment in wording of the entry under 9804?

If goods meant for personal use (other than those prohibited under FTDR Act) are eligible for a concessional rate of BCD @ 10% under Sl.No. 403A of CN 21/2002, then what are those goods which attract BCD 35% ?

Possible solution …

As per my understanding, the proposed amendment to the existing entry under 9804 alone may not really solve any problem. The actual problem is with the existing policy provision specifying the value limit of only Rs. 2000. If the intension of the Govt. is to discourage the import of trade goods through post, then the value limit specified there in as Rs.2000 being apparently very low, needs to be revised/enhanced to ,say Rs. 10000 . It may be reasonably logical and legal if the value limit is inserted in the notification for which the concessional rate of BCD @10% may be granted. In such a situation, for all goods of above that specified value limit, the tariff rate of BCD @ 35% may be applied. I would be happy if some one enlightens me with a different interpretation.