MAY 05, 2021

By Lakshmi Menon, Srinidhi Ganeshan & Tridipa Banerjee, Advocates, Lakshmikumaran & Sridharan

1. FACED with grave shortage of oxygen in the Country, the Government of India is trying everything to over-come this situation. One of the measures rolled out is augmenting oxygen in various forms through import. The present article deals with oxygen concentrators.

Classification & Import Duty

2. Oxygen concentrators are classified under Tariff Item 90192090 of the Customs Tariff (if imported through Cargo mode, or if imported for non-personal use through Courier or Post) or under Tariff Item 98049000 (if imported for personal use through Courier or Post).

3. The rate of import duty has been rationalised and now both these headings are subject to the same rate of import duty. Basic Customs Duty and Health cess have been completely exempted on oxygen concentrators. The following table captures the duty rate applicable on import of the goods:

4. If imported free of cost, by authorised agencies for giving as donations, the IGST on oxygen concentrators is completely exempt till 30.6.2021, subject to conditions. ³

5. Goods can be classified under Heading 98.04 only if it is for 'personal use' and if it is imported by post/courier.

6. 'Personal Use' has not been defined in Customs Tariff. However, Customs Circular No. 14/2018-Cus dt. 4.6.2018 has equated "personal import" with "personal use" and has advised adopting the understanding for 'personal import' given in the Handbook of Procedures 2015-2020 ⁴ (Handbook) for determining eligibility for classification under Heading 98.04. Under the Handbook 'Personal Import' is understood as "Persons importing or exporting goods for personal use not connected with trade or manufacture or agriculture".

7. Thus, individuals can certainly import oxygen concentrators for their personal use and classify the same under Heading 98.04.

8. It will not be so when Organisations/Companies import oxygen concentrators for use by their employees. It can be argued that the same is not for trade and thus must be classified as import for "personal use". However, jurisprudence for such an interpretation is divided.

9. As far as oxygen concentrators are concerned, the rate of duty being the same wherever it is classified, Companies must err on the side of caution and classify the oxygen concentrators under Heading 90.19 when imported for use by their employees etc. Otherwise, there may be a possibility of customs holding on to the concentrators on account of "mis-declaration of Tariff Item in the Bill of Entry".

10. The above discussion on classification applies to oxygen concentrators when imported through Cargo Mode, Courier, or Post.

Import by Baggage

11. Oxygen concentrators can also be imported through baggage ⁵. In such cases, the concentrators will be classified under Tariff Item 98030000. When imported as part of baggage, there is a duty free allowance of Rs. 50000 ⁶ (if the passenger is an Indian resident or a foreigner residing in India ) or 15000 (If the passenger is a tourist of Indian origin) ⁷. On the value of the baggage over and beyond the duty free allowance, duty will have to be discharged as follows:

Import as Gifts

12. The Foreign Trade Policy of 2015-2020 (FTP) ⁹ has been amended to remove the prohibition and allow import of oxygen concentrators for personal use (when imported through post or courier) as 'gifts'. This relaxation is valid till 31.07.2021. It is important to note that oxygen concentrators were always freely importable under the FTP, as long as their clearance (when imported through post or courier) was not sought as gifts and exemption available to gifts was not availed. ¹⁰ Thus, the amendment now made effectively permits these imports to avail benefit of Sl. No 608A of Notification 50/2017-Cus (under which BCD and IGST are both fully exempted).

13. However, Sl. No 608A of Notification 50/2017-Cus can only be availed by goods whose CIF value is Rs. 5000/- or lesser. Similarly, under the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 (CIER) ¹¹ import of bona fide gifts of value only upto Rs. 10000 is permitted. Thus, it is unclear how this benefit can be availed by oxygen concentrators, as the values of these devices are significantly higher than Rs. 5000 / 10000.

Need for import License under Drugs & Cosmetics Act, 1940 / Medical Devices Rules, 2017.

14. Vide Notification No. S.O. 648(E) dt. 11.2.2020, inter-alia all apparatus for treatment or alleviation of any disease or disorder; and all apparatus for supporting or sustaining life have been notified to be 'Drugs' under clause (b) of section 3 of the Drugs and Cosmetics Act, 1940, with effect from 1.4.2020. Thus, oxygen concentrators too will be regarded to be drugs. By extension, these goods are 'Medical Devices' under Medical Devices Rules, 2017 ¹². oxygen concentrators have been notified to be a Class B Medical Device. ¹³ Thus, Import License ¹⁴ is required for import of an Oxygen Concentrator (for commercial use) and an Import Permission ¹⁵ is required for import for personal use. However, at present, it appears that such licenses/permission are not being insisted upon by the Customs Department, in the light of the CBIC's Instruction No.07/2021-Customs dt. 24.4.2021.

CBIC's Instruction No.07/2021-Customs dt. 24.4.2021

15. The instruction issued directs Customs authorities across the Country to ensure timely and speedy clearance of materials related to Covid-19 relief, including Oxygen related equipment. Accordingly, specialised Task Forces have also been set up in select ports to facilitate speedy clearance of Covid relief materials. We believe basis this Instruction, Customs authorities are not insisting on furnishing of licenses/permissions under allied laws. However, unlike Instruction No. 8/2021 dt. 27.4.2021 (which has been issued specifically for the benefit of Red Cross Society) which expressly states that " permissions/ licences/ authorizations required from other Government Department/Agencies prior to the clearance of goods, if any, would be deemed to have been given. In other words, such cases need not be referred to those agencies or the requirement may be suitably waived", no such waiver has been mentioned in Instruction No. 7/2021. Thus, this too could be a bone of contention on a later date.

Conclusion

16. The measures adopted by the Government are a breath of much needed oxygen in these difficult times. There are a few hits and misses in the measures adopted. However, the overall impact is a step in the right direction. If the few kinks highlighted are rectified, it will ensure a smoother movement of goods and shall significantly help in India's fight against Covid-19.

[The views expressed are strictly personal.]

¹See Note 3 for details of complete and conditional exemption from IGST

²This total rate of duty mentioned excludes SWS. SWS is levied as a percentage of BCD. BCD in this case being Nil, automatically SWS too will become Nil in the Customs EDI system. This is the practice currently. However, the notifications mentioned in the table above do not provide for exemption from the levy of SWS. In this context, importers must bear in mind the judgement of the Supreme Court in the case of   Unicorn Industries  v.  Union of India and Others  - 2019-TIOL-528-SC-CX-LB, which has held that exemption will not apply to duties, unless the same has been expressly specified. The Supreme Court therein was concerned with levy of education cess on excise duty, when excise duty was exempted. Education cess is levied as a percentage of excise duty and not as a percentage of the value of goods. The Court held that as no specific exemption has been provided to education cess, the same must continue to be levied on a notional value of excise duty. Thus, relying on this decision, Department could insist in future that as SWS has not been specifically exempted, SWS must be discharged on a notional value of BCD.  

³IGST on these goods is fully exempt under AD HOC EXEMPTION ORDER NO. 4/2021-CUSTOMS dt. 3.5.2021, upto 30.6.2021 provided the following conditions are satisfied. This exemption applies even to goods already imported and pending clearance.

1. The said goods are imported free of cost for the purpose of Covid relief by a State Government or, any entity, relief agency or statutory body, authorised in this regard by any State Government. 2. The said goods are received from abroad for free distribution in India for the purpose of Covid relief. 3. Before clearance of the goods, the importer produces to the Deputy or Assistant Commissioner of Customs, as the case may be, a certificate from a nodal authority, appointed by a State Government, that the imported goods are meant for free distribution for Covid relief, by the State Government, or the entity, relief agency or statutory body, as specified in such certificate. 4. The importer produces before the Deputy or Assistant Commissioner of Customs, as the case may be, at the port of import within a period of six months from the date of importation, or within such extended period not exceeding nine months from the said date as that Deputy or Assistant Commissioner of Customs may allow, a statement containing details of goods distributed free of cost duly certified by the said nodal authority of the State Government.

⁴ Para 2.07, 2.08

⁵ Import of baggage, classified under Heading 98.03 is restricted for import under the Foreign Trade Development & Regulation Act, 1994. However, vide clause 3(h) of the Foreign Trade (Exemption from Application of Rules In Certain Cases) Order, 1993 goods imported in accordance with the Baggage Rules 2016 are permitted to be imported without need of an import license issued under Foreign Trade Development & Regulation Act, 1994 or rules made thereunder. The import of oxygen concentrators is permitted under the Baggage Rules, 2016.

⁶ When the passenger is arriving from Countries other than Nepal, Bhutan, or Myanmar. Rule 3 of Baggage Rules, 2016.

⁷ Rule 3 of Baggage Rules, 2016

⁸ 

⁹ Para 2.25

¹⁰ As clarified in Circular No. 4/2020-Cus., dated 21-1-2020

¹¹ Regulation 3(g)

¹² Rule 3(zb) of Medical Devices Rules, 2017

¹³ Notice dt. 3.9.2020 issued by Drugs Controller General (I). Oxygen Concentrator is found at Sl. No. 44 in the Respiratory Category.

¹⁴ Rule 34 of Medical Devices Rules, 2017

¹⁵ Rule 43 of Medical Devices Rules, 2017