CBEC Circular on Guidelines reg. Provisional Assessment u/s 18 of the Customs Act, 1962
CBEC has rescinded “The Customs (Provisional Duty Assessment) Regulations 2011” since Section 18 itself lays down the procedure to be followed in the case of provisional assessment and has prescribed procedure for amount of security to be obtained while assessing goods provisionally, as under:
CBEC Circular No. 38/2016-Customs dt. 22 August 2016
1. The CBEC has reviewed Customs (Provisional Duty Assessment) Regulations 2011 issued under notification no. 81/2011-Customs (NT) dated 25.11.2011 in view of references from the field formations regarding guidelines on the implementation of Regulation 2(2) and Regulation 4.
2. Regulations 2(2), 3 and 4 require three elements — namely,
(a) deposit of 20% of the differential duty between “provisional duty” and duty to be “finally assessed or re-assessed”;
(b) execution of a bond; and
(c) surety or security or both, as deemed fit.
2.1 Section 18 of the Customs Act, 1962 defines the cases where provisional assessment may be resorted, as under: –
(1) Notwithstanding anything contained in this Act but without prejudice to the provisions of section 46,-
(a) where the importer or exporter is unable to make self-assessment under sub-section (1) of section 17 and makes a request in writing to the proper officer for assessment; or
(b) where the proper officer deems it necessary to subject any imported goods or export goods to any chemical or other test; or
(c) where the importer or exporter has produced all the necessary documents and furnished full information but the proper officer deems it necessary to make further enquiry; or
(d) where necessary documents have not been produced or information has not been furnished and the proper officer deems it necessary to make further enquiry,
2.2 Further, Section 18 goes on to state how a provisional assessment is to be carried out:
“the proper officer may direct that the duty leviable on such goods be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed.”
2.3 Thus, the provisions of section 18 of the Customs Act, 1962, require that in cases where goods are to be provisionally assessed:
(a) the importer binds himself for the payment of deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed; and
(b) furnishes such security as the proper officer deems fit for the payment of the deficiency.
2.4 In view of the requirement that the importer binds himself to pay the deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed, it would be necessary to obtain a bond for meeting the aforesaid condition.
2.5 Insofar as the requirement of obtaining a 20% deposit of the duty provisionally assessed, the Board has decided that this condition be dispensed, particularly, as it necessitates following the procedure of refunds in cases where final assessment is in favour of the importer. Such requirements add to the transaction costs, lead to delays in clearance and detract from the ease of doing business.
2.6 It was also noted that Regulation 4 required that the importer should furnish such surety or security or both, as deemed fit, along with the Bond. In this connection, it was felt that acceptance of a surety requires making an evaluation of the underlying asset value or of the net worth of the person executing the same. This poses difficulties to the importers as well as administrative challenges to the Department in valuing sureties. Therefore, the Board has decided that the requirement of security needs to be met by either obtaining a bank guarantee or a cash deposit, as convenient to the importer, and that no sureties shall be obtained.
2.7 In view of the aforesaid, the Board has rescinded The Customs (Provisional Duty Assessment) Regulations 2011″ vide notification no. 113/2016 — Cus (NT) dated 22nd August 2016 since section 18 itself lays down the procedure to be followed in the case of provisional assessment. The only issue which is required to be addressed is regarding the amount of security since section 18 requires the same to be obtained as “deemed fit” by the proper officer. For the sake of uniformity of practice, transparency and predictability for the tax payer, the Board has decided that the following procedure and guidelines will be followed by all Customs stations while assessing goods provisionally:
2.8 Wherever, duty is to be assessed provisionally, the importer shall:
(a) for the purposes of undertaking to pay on demand the deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed, execute a bond in the prescribed form (enclosed); and
(b) furnish such security for the payment of the duty deficiency, as indicated in para 3 below.
2.9 The security to be obtained shall be in the form of a bank guarantee or a cash deposit, as convenient to the importer.
3. The following guidelines shall be followed while obtaining security where provisional assessment under section 18 of the Customs Act is being undertaken: (refer attachment for table).
3.1 By way of a clarification, attention is also drawn to an earlier instruction of the Ministry contained in F.No. 511/7/77-Cus VI dated 09.01.1978, to the effect that the amount of security shall be determined on the basis of duty differential and not the CIF value of goods.
3.2 It is also clarified that provisional assessments under section 18 are to be carried out with respect to cases where the duty is in dispute. Cases relating to execution of a bond or undertaking specified as a condition to a notification or those requiring compliance of conditions under allied acts are not to be provisionally assessed under section 18 of the Customs Act. This position had been earlier clarified by the Ministry of Law and Justice and circulated vide Ministry F.No. 353/91/74-Cus dated 28th January 1977. … Contd…..
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