Indirect Tax: Budget on customs could have been more positive

The indirect tax Budget of 2018-19 was not expected to devote any time to GST. So the officers had all the time to achieve a meaningful improvement in the customs tariff. Only the sufferers know that the customs tariff has got 19 rates of duty like 150, 100, 85, 70, 65, 60, 50, 40, 35, 30, 25, 15, 10, 7.5, 5, 3, 2.5, nil & some specific duties. Then there are hundreds of exemptions and conditions and lists which make customs duty classifications quite complicated. There has been no move in removing the exemptions in a big way in customs which would have given a lot of extra revenue. A few cases of 2.5 per cent rate of duty have been added. If a difference of 2.5 per cent had been removed, a large percentage of exemptions would have gone. The Indian economy is strong enough to withstand a difference of 2.5 per cent of duty. Such simple methods of simplification have not been thought out and implemented. The rates could be combined at 150, 100, 50, 25, 15, 10 & 5. There could be more of self-declaration rather than bonds and certifications. On the other hand, what has been done is only to increase or decrease some rates in a very routine manner without any sign of simplification. Some increases are for protection and some for higher revenue which is justified.

A highly retrograde measure has been proposed in the Section 125 of the Customs Act. This section is being amended so as to insert sub-section (3) to provide that where redemption fine has not been paid within a period of 120 days from the date of option given under sub-section (1), then such option shall become void, except in cases where any appeal against such order is pending. If this law is passed, there will be huge amount of accumulation of goods, which have not been cleared (redeemed) in the port trust. 

For all these past years, the procedure which we have been following is that if the goods are not cleared or appeal has not been filed, we used to initiate the process of auctioning the goods. In the meantime if the importer comes up with the money to redeem the goods, we used to give it to them. Now if we start saying that we will not give it to him because 120 days are over, the net result will be accumulation of goods in the port trust and the Indian industry will suffer. The port trust is already jammed with goods not disposed of. Anybody who has put up this change for being passed into a law just does not understand the ground reality of customs administration. I hope the Finance Minister will act in time to stop this retrograde amendment.

Another very retrograde proposal is that Section 128A is being amended to allow Commissioner (Appeals) to remand back the matters to original adjudicating authority where an order of decision has been passed without following principles of natural justice. There are two other reasons also. There is a background to the whole story. It is very easy for the Commissioner to say that natural justice has been denied. So whenever there is a difficult issue, they were remanding cases back to the original authority. This became a scandalous problem because of which the law had been changed to stop the Commissioner from remanding cases. Therefore this proposed change will bring back the bad old days.

The name Central Board of Excise and Customs (CBEC) is proposed to be changed with the roll out of GST, to Central Board of Indirect Taxes and Customs (CBIC). There are two clear mistakes in this proposal. First, the abbreviation comes to CBITC and not CBIC. Secondly, Customs need not be separately mentioned as it is an indirect tax. The correct name should be CBIT (Central Board of Indirect Taxes). This matches with CBDT.

The conclusion is that the rates of duty have been changed for correct reasons but there could have been a rationalisation of the tariff which has not been done. The administrative changes have not been well thought out. The changes proposed will make the system more rigid rather than customer- friendly.

The writer is member, Central Board of Excise & Customs (retired)

Email: smukher2000@yahoo.com