Customs law: background, levy, ports and warehouses, exemption, assessment, clearance, baggage, post and transit

1. Legislative background

Customs law before 1962 rested principally on the Sea Customs Act, 1878 and the Land Customs Act, 1924. The Customs Act, 1962 (52 of 1962) consolidated and amended the law. It came into force on 1 February 1963. Constitutional competence is List I Entry 83 (duties of customs including export duties).

The Act provides the machinery: levy, assessment, collection, clearance, prohibitions, powers of officers, confiscation, penalties and appeals. The rates are in the Customs Tariff Act, 1975: the First Schedule (import tariff, by HS classification) and the Second Schedule (export duties). That Act also provides for additional duties: the IGST on imports (section 3(7)), safeguard duty, countervailing duty on subsidised imports (section 9), and anti-dumping duty (section 9A). Since July 2017, the old additional customs duties (CVD and SAD) have been replaced by IGST and the GST compensation cess on imports.

2. The levy: section 12

Except as otherwise provided, duties of customs shall be levied at the rates specified under the Customs Tariff Act, 1975 or any other law, on goods imported into, or exported from, India (section 12(1)). Goods belonging to the Government are equally liable (section 12(2)).

Taxable event. In Garden Silk Mills Ltd. v. Union of India, 1999 INSC 446, (1999) 8 SCC 744, the Court held that import is not complete when goods merely enter Indian territorial waters; it is complete when the goods cross the customs barrier and become part of the mass of goods in the country. For goods cleared for home consumption, the rate is fixed by section 15 by reference to the date of presentation of the bill of entry (or the date of entry inward of the vessel, if later). For warehoused goods it is the date of removal from the warehouse.

Valuation (section 14): duty is levied on the transaction value, the price actually paid or payable for the goods when sold for export to India, where buyer and seller are not related and price is the sole consideration, including costs and services specified in the Valuation Rules (freight, insurance, commissions, royalties). The Board may fix tariff values for certain goods.

3. Ports, airports and customs areas

• Section 7: the Board appoints customs ports, customs airports, inland container depots, land customs stations and routes for import and export.
• Section 8: the Commissioner may approve places for loading and unloading and specify the limits of a customs area. Goods may be loaded or unloaded only at approved places.
• Section 10: boarding stations, where officers board vessels.

4. Warehouses: Chapter IX, sections 57 to 73A

Warehousing lets an importer store goods without paying duty until he clears them, so that duty is paid only when the goods are needed, or not at all if they are re-exported.

• Public warehouses (section 57) and private warehouses (section 58) are licensed by the Principal Commissioner or Commissioner; special warehouses under section 58A for specified goods.
• The importer files a bill of entry for warehousing and executes a warehousing bond for three times the duty assessed (section 59); the officer permits deposit (section 60).
• Period (section 61): for capital goods and other goods for use in export oriented undertakings and warehouses permitted to manufacture under section 65, till clearance or consumption; for other goods, one year from the order permitting deposit, extendable by the Commissioner by not more than one year at a time.
• The owner may inspect and deal with the goods (section 64); manufacture and other operations may be permitted in the warehouse (section 65).
• Clearance for home consumption on payment of duty, interest and charges (section 68), or for export without duty (section 69). Goods improperly removed are liable to duty and penalty (section 72).

5. Exemption from duty: section 25

• Section 25(1): if the Central Government is satisfied that it is necessary in the public interest, it may by notification exempt goods of any specified description, generally, absolutely or subject to conditions, from the whole or any part of the duty.
• Section 25(2): by special order in each case, in circumstances of an exceptional nature stated in the order, exempt particular goods (for example relief supplies or gifts to a public institution).
• Section 25(2A): an explanation may be inserted within one year to clarify the scope of a notification, and operates as if always part of it.
• Other reliefs: abatement for goods damaged before clearance (section 22); remission for goods lost or destroyed before clearance (section 23); re-importation of goods exported (section 20).

Exemption notifications are construed strictly: the importer must bring himself squarely within the terms; once he does, the notification is given full effect.

6. Assessment and collection

• Self-assessment (section 17(1)): the importer filing a bill of entry, or the exporter filing a shipping bill, self-assesses the duty.
• Verification (section 17(2) to (4)): the proper officer may verify the entries and the self-assessment, examine or test the goods, and call for documents; selection for verification is primarily on the basis of risk evaluation. If the self-assessment is wrong he may re-assess, and if the importer does not accept it, he must pass a speaking order within fifteen days (section 17(5)).
• Provisional assessment (section 18): where the importer cannot make the self-assessment for want of documents or information, or testing is needed, duty may be assessed provisionally on a bond, and finalised later.
• Recovery of duty not levied, short-levied or erroneously refunded (section 28): within two years in ordinary cases, five years where there is collusion, wilful misstatement or suppression; interest under section 28AA.
• Refund (section 27) on application within one year, subject to the bar of unjust enrichment.

7. Clearance of goods from the port

Imports. The importer presents the bill of entry electronically on the customs automated system for home consumption or warehousing (section 46(1)), before the end of the day preceding arrival. Where the officer is satisfied that the goods are not prohibited and the duty and charges have been paid, he makes an order permitting clearance for home consumption (section 47(1)), which may be made electronically on risk evaluation. Duty is payable on the date of presentation of the bill in a self-assessment case, or within one day of the bill being returned for payment after assessment, failing which interest is charged (section 47(2)). Goods not cleared within thirty days of unloading may be sold by the custodian after notice (section 48).

Exports. The exporter presents a shipping bill (section 50); the officer permits clearance and loading if the goods are not prohibited and export duty is paid (section 51).

8. Baggage: sections 77 to 81

• The owner of baggage must make a declaration of its contents to the proper officer (section 77). Passengers with nothing dutiable walk through the green channel; others use the red channel.
• Rate and value are those in force on the date of the declaration (section 78).
• Bona fide baggage is passed free of duty (section 79): articles in use for the minimum period specified, and articles for the use of the passenger or his family or bona fide gifts or souvenirs, within the value limits set by the Rules.
• Dutiable or prohibited articles truly declared may be detained at the passenger’s request and returned when he leaves India (section 80).

The Baggage Rules, 2026 (Notification No. 14/2026-Customs (N.T.), 1 February 2026) replaced the Baggage Rules, 2016 from 2 February 2026, together with the Customs Baggage (Declaration and Processing) Regulations, 2026. According to the CBIC’s official FAQs, used personal effects are always duty-free, and the general free allowance (excluding restricted articles such as firearms, gold or silver other than ornaments, excess cigarettes and liquor) is ₹75,000 for residents, tourists of Indian origin and foreigners on non-tourist visas arriving otherwise than by land, and ₹25,000 for foreign tourists. Separate allowances exist for jewellery and transfer of residence.

9. Postal goods, stores and goods in transit

• Post and courier (sections 83 and 84): the rate and value for postal articles are those in force on the date the postal authorities present a list of such goods to customs; the Board makes regulations for clearance of goods imported or exported by post or courier.
• Stores (sections 85 to 90): stores on a vessel or aircraft may be warehoused without assessment, transhipped, or consumed on board a foreign-going vessel without duty; stores for the Navy enjoy concessions.
• Transit and transhipment (sections 53 to 56): goods mentioned in the import manifest as for transit to a place outside India, or for transhipment to another port, may be allowed to pass without payment of duty, subject to conditions.

How this is examined

February 2025 Q. 5(a): provisions relating to clearance of imported goods; alternative Q. 5(a): assessment of duties; Q. 5(b): powers to grant exemption from duty. January 2026 (80-mark) Q. 5(b): note on baggage. The syllabus also names ports, warehouses, levy and collection, and goods imported or exported by post and stores in transit.

For clearance, write sections 46, 17, 47 and 48 in that order. For assessment, sections 17 and 18 with the speaking order requirement. For baggage, sections 77 to 80 and the figures from the 2026 Rules.