Customs Act 1962: Levy, Valuation and Enforcement

Customs duty is levied by Parliament under Entry 83 of List I on goods imported into or exported from India. It remained outside GST, though IGST is now collected on imports along with customs duty. The Customs Act, 1962 provides the machinery of levy, assessment and enforcement, and the Customs Tariff Act, 1975 fixes the rates. This note covers levy, valuation, demands, confiscation and penalty, enforcement powers and the leading case on proper officers.

1. The Framework

Figure 1: Levy, valuation, demand and confiscation

• Levy, s.12. Duties of customs are levied on goods imported into or exported from India at the rates specified in the Customs Tariff Act, 1975.
• Valuation, s.14. The value is the transaction value, that is 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, subject to the Customs Valuation Rules.
• Duties on imports. Basic customs duty under the First Schedule to the Customs Tariff Act, IGST on imports under s.3 of that Act, and protective duties such as anti-dumping and safeguard duties where imposed.
• Assessment. Importers self assess duty in the bill of entry, subject to verification and re-assessment by the proper officer.

2. Demands, Confiscation and Penalty

• Demand, s.28. Duty not levied, short levied or erroneously refunded may be demanded by the proper officer within the prescribed period, with a longer period in cases of collusion, wilful misstatement or suppression.
• Confiscation, s.111. Improperly imported goods, such as goods imported contrary to a prohibition, not declared or misdeclared, are liable to confiscation, with an option to redeem on payment of a fine in lieu.
• Penalty, ss.112 to 114. Persons whose acts or omissions render goods liable to confiscation, or who deal with such goods knowingly, are liable to penalty.

3. Enforcement Powers

Figure 2: Search, seizure, arrest and evidence

The proper officer may seize goods liable to confiscation, arrest persons he has reason to believe have committed specified offences, and summon persons to give evidence and produce documents, with statements recorded under s.108 admissible in proceedings. For specified goods such as gold, the burden of proving that seized goods are not smuggled lies on the person from whose possession they are seized (s.123). In Radhika Agarwal v Union of India (2025), the Supreme Court applied the safeguards of criminal procedure to arrests under the Customs Act as well as GST (Topic 31).

4. The Canon India Litigation

Figure 3: Proper officer under section 28

• Canon India v Commissioner of Customs (2021). A three judge bench held that only the proper officer who did the original assessment could issue a demand notice under s.28, and that officers of the Directorate of Revenue Intelligence were not proper officers.
• Review (7 November 2024). A bench led by Chief Justice D.Y. Chandrachud allowed the Revenue's review, noting that earlier notifications and circulars had not been considered, and held that DRI and specified customs and central excise officers are proper officers who can issue notices under s.28, with directions for pending cases.

5. Frequently Asked Questions

Is IGST payable on imports?

Yes. Imports are treated as inter-State supplies, and IGST is levied and collected on imported goods along with customs duty under s.3 of the Customs Tariff Act, 1975.

Can DRI officers issue demand notices under the Customs Act?

Yes. In the review of Canon India decided on 7 November 2024, the Supreme Court held that DRI officers and specified customs and central excise officers are proper officers under s.28 and can issue show cause notices.

6. Related Topics

• Topic 3: Distribution of Taxing Powers. Entry 83 of List I.
• Topic 28: Place and Time of Supply. Imports as inter-State supply.
• Topic 31: Demand, Recovery, Offences and Arrest. Radhika Agarwal on arrest.