JULY 09, 2009

Exemption from additional duty of customs on components and accessories of mobile handsets – CN 79/2009 – appears redundant

By J M Kishore

CUSTOMS Notification 79/2009 Dt. 07.07.2009 provides for exemption of the whole of the “additional duty of customs” – 4% [under 3(5) of the Customs Tariff Act, 1975] on parts, components and accessories of mobile handsets including cellular phones , subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.

History of Section 3(5) the Customs Tariff Act, 1975:

Vide Finance Act 2005, the Central Government proposed an amendment to the Section 3 of the Customs Tariff Act,1975 and for the first time, introduced a new levy on imported goods – “the additional duty of Customs” at a rate not exceeding four percent of the value . This new levy is to counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India.

Levy and exemptions of Customs duties for “parts, components and accessories of mobile handsets including cellular phones” :

During the Budget 2005, vide Customs Notification 19/2005 Dt. 01.03.2005, certain specified goods, were subjected to the levy of 4% of additional duty of Customs (under Section 3(5) of the Customs Tariff ACT,1975) for the first time. As per the notification 19/2005, the goods specified in CN 21/2005 Dt.01.03.2005 (parts, components and accessories of mobile handsets including cellular phones were exempted from payment of BCD and CVD vide this notification) were to be subjected to levy of 4% of additional duty. Thus, in view of both the notifications CN 2/2005 and CN 19/2005, parts, components and accessories of mobile handsets including cellular phones were fully exempted from payment of BCD and CVD but were liable for payment of Additional duty of Customs 4%.

During May 2005, within two months, another notification - CN 39/2005 Dt. 02/05/2005 was issued, exempting the 4% Additional duty of Customs on parts, components and accessories of mobile handsets including cellular phones subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.

The validity was initially given up to 30-04-2007 but later, extended till 30-06-2009.

During the budget 2006, vide CN 19/2006 Dt.01.03.2006 , the earlier Notification 19/2005 Dt.01.03.2005 was rescinded and the levy of 4% additional duty of Customs was extended to all goods specified under the First Schedule to the Customs Tariff Act,1975. Simultaneously, exemption from this levy was also provided to certain specified goods vide CN 20/2006 Dt.01.03.2006 . As provided at SL.No. 1 in this notification, “ All goods which are exempt from both Basic Customs Duty and CVD “ are also exempted from the 4% Levy.

Summary :

The point:

++  CN 39/2005 Dt.01.03.2005 is reproduced below:  

CUS NTF NO. 39/2005 DATE 02/05/2005

Exempts parts, components and accessories of mobile handsets including cellular phones, from the whole of the additional duty of customs

In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts parts, components and accessories of mobile handsets including cellular phones, from the whole of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975), subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.

2. This notification shall be effective upto and inclusive of the 30th day of June, 2009 .

[F.No B-1/4/2005- TRU]

When the above notification is already available, what is the requirement of giving a fresh notification vide CN 79/2009 Dt.07.07.2009 ? Instead, CN 39/2005 could have been amended by extending the time limit mentioned in para 2 of the notification with retrospective effect from 01.07.2009 till 06.07.2010. Further, in view of the fact that CN 20/2006 Dt.01.03.2006 at Sl.No. 1 provided for exemption of the 4% , issue of 79/2009 Dt. 07.07.2009 itself appears not a technical necessity.

(The views expressed are personal of the author)