CMA Final · Indirect Tax Laws and Practice

Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017: formula sheet

Full chapter guide

Key formulas

Full name of the current rules: Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022; These are the current rules. Use this title in answers. An earlier set was titled Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.
When the rules apply: Notification grants concessional rate + condition of specified end use + notification invokes the rules; No end-use condition means the procedure is not needed.
Core idea: Concession now, compliance later; The importer gets the lower rate on clearance and must prove the end use afterwards.
Bond power in the Act (Section 143): Deputy/Assistant Commissioner may allow import or clearance on a bond, with surety or security, for doing the thing within the time specified; If done in time, the bond is cancelled and no penalty arises. If not done, the officer can proceed upon the bond in accordance with law.
Sequence of the procedure: Registration → Intimation → Declaration at import → Use as per notification → Records and certificates; Remember it as five stages. Questions usually test one missed stage.
Core condition: Concessional rate allowed only if the notification's conditions are met AND the procedure under the 2017 Rules is followed; Both must be satisfied. Meeting only the notification condition is not enough.
Consequence of failure: Breach of condition or procedure → concession lost → duty recoverable with interest; Details are in the topic on non-compliance, duty recovery and interest.
Section 26A refund (contrast): Refund of duty on defective imports: application within six months from the relevant date; action (export, abandonment or destruction) within thirty days of the order under section 47, extendable by up to three months for sufficient cause; Section 26A does not apply to goods regarding which an offence appears to have been committed. It is not a concessional-rate procedure.
Stock reconciliation of imported goods: Opening stock + Quantity received − Quantity consumed − Wastage or scrap (as permitted) = Closing stock; Your records and return must tie to this. A gap means unexplained goods, which can be treated as not used for the declared purpose.
Duty foregone on default: Duty foregone = Duty at normal rate − Duty paid at concessional rate; This is the base for recovery if the end-use condition fails. Interest and any penalty are added as the law provides.
Warehousing bond amount (Section 59(1), Customs Act): Bond = 3 × duty assessed on the goods; Given in the Act text for warehoused goods. Do not apply it to the concessional duty bond. The Rules have their own bond terms.
Bond on excess duty after provisional assessment of warehoused goods (Section 18(2)(b)): Bond = 2 × excess of final duty over provisional duty; The proper officer may require this when final duty exceeds provisional duty on warehoused goods.
Duty foregone (differential duty): Differential duty = Duty at full rate − Duty paid at concessional rate; Compute both on the same assessable value. Include every component of duty the question gives.
Interest on differential duty: Interest = Differential duty × Rate ÷ 100 × Months ÷ 12; Use the rate and the period (start date to payment date) given in the question. The rate and start date depend on the rule under which the duty is recovered. If the question gives no start date, state your assumption.
Penalty on dutiable, non-prohibited goods (section 112(ii)): Maximum penalty = higher of (10% of duty sought to be evaded) and ₹5,000; It is a ceiling, not a fixed amount. It is subject to section 114A. Only where the duty is determined under section 28(8): if that duty and the interest under section 28AA are paid within thirty days from the date of communication of the order, the penalty is 25% of the penalty so determined.
Penalty on prohibited goods (section 112(i)): Maximum penalty = higher of (value of goods) and ₹5,000; Use only if the goods are prohibited under the Act or any other law.
Penalty where declared value is higher than the value of the goods (section 112(iii)): Maximum penalty = higher of (declared value − value of goods) and ₹5,000; Clauses (iv) and (v) apply when goods fall under two clauses at once. See the next entry.
Combined cases (section 112(iv) and 112(v)): 112(iv), goods under (i) and (iii): maximum = highest of (value of goods), (declared value − value of goods) and ₹5,000. 112(v), goods under (ii) and (iii): maximum = highest of (duty sought to be evaded), (declared value − value of goods) and ₹5,000; Under 112(v) the figure is the duty sought to be evaded itself, not 10% of it. The 10% figure applies only to clause (ii) used alone.
Total outflow on breach: Total = Differential duty + Interest + Penalty; Confiscation and redemption fine are separate. Do not add them unless the question gives the figures.
Section 83(1): imports by post or courier: Rate and tariff value = those in force on the date the postal authorities or authorised courier present the list of goods to the proper officer; If goods come by vessel and the list is presented before arrival, the date of arrival is deemed the date of presentation.
Section 83(2): exports by post or courier: Rate and tariff value = those in force on the date the exporter delivers the goods to the postal authorities or authorised courier; Not the date of the order permitting clearance and loading.
Section 19(b): mixed value-based articles: Same rate for all: that rate. Different rates: highest of the rates; Applies to a set of articles liable to duty with reference to value.
Section 19(a) and (c): Quantity-based articles: their own duty. Articles not liable to duty: rate applicable under clause (b); Applies unless another law provides otherwise.
Section 19 provisos: Accessories and spares: same rate as the main article if the rule conditions are met. Separate value evidence: article charged at its own rate; Evidence may be produced by the importer or already be available.
Section 15(2): Section 15 does not apply to baggage and goods imported by post; This is why Section 83 is needed for post goods.

Quick revision

The Rules apply only where a notification gives the concessional rate and refers to them.
The benefit depends on conditions, and the importer must meet them in order.
Follow the procedure at the time of import exactly as the Rules prescribe.
Keep the records and certificates the Rules require, and be ready to show them to the officer.
Use the goods only for the purpose stated in the notification.
If a condition is breached, the duty forgone becomes payable with interest.
Section 19: for a set of articles, articles liable to duty by quantity are charged by quantity.
Section 19: articles liable by value at different rates are charged at the highest of those rates.
Section 19: accessories and spare parts that meet the conditions in the rules take the same rate as the main article.
Section 28AAA: where an instrument was obtained by collusion, wilful mis-statement or suppression of facts, duty on its utilisation is recovered from the person to whom it was issued.
Section 28AAA: the show cause notice allows thirty days to reply, and repayment is due within thirty days of the order.
Section 28AAA does not apply where an order determining the duty has already been passed under Section 28.

Common mistakes

Quoting the 2017 title as the current rules. Fix: Write the 2022 rules, with their full name, as the current rules.
Applying the rules to every exempted import. Fix: The rules apply only where the notification links the concession to a specified end use and invokes them.
Assuming the notification alone gives the benefit. Fix: Always state both: notification conditions and compliance with the 2017 Rules.
Skipping registration because the goods are of a notified type. Fix: Treat registration with the jurisdictional officer as the first mandatory step.
Applying the Section 59 warehousing bond rule of three times the duty to the concessional duty bond. Fix: Treat Section 59 as the rule for warehoused goods only. For the concessional duty bond, follow the Rules and the notification.
Thinking that a certificate of use alone is enough proof. Fix: The certificate is backed by receipt, consumption and inventory records. If these do not reconcile, the certificate does not protect the importer.
Charging the full duty again instead of the differential duty. Fix: The importer has already paid duty at the concessional rate. Recover only the difference between full duty and the duty paid.
Taking the penalty under section 112(ii) as a fixed 10%. Fix: The penalty is a maximum. Write 'up to' and compute the cap as the higher of 10% of the duty and ₹5,000.
Using the bill of entry date for goods imported by post or courier. Fix: Section 15(2) excludes only baggage and goods imported by post. Section 83(1) specifically governs goods imported by post or courier, so use the date the list of goods is presented to the proper officer.
Using the date of the export order under Section 16 for goods exported by post or courier. Fix: Section 16(2) excludes baggage and goods exported by post. Section 83(2) separately fixes the date for exports by post or courier: the date the exporter delivers the goods to the postal authorities or authorised courier.

Exam tips

Write the full name of the 2022 rules and treat them as the current rules.
In MCQs, look for whether the notification has an end-use condition before choosing.
In case questions, name the importer, the end use and the officer in your answer.
Do not invent rule numbers. If unsure, describe the rule in words.
In case scenarios, scan the facts for the missing stage: registration, intimation, declaration, use or records.
Quote the notification condition and the procedural rule separately. Examiners reward both.
Do not cite a section number for the 2017 Rules unless you are sure. Name the Rules instead.
If an option mentions refund under section 26A, check whether the question is really about a concessional rate at import.