Customs Act (India): Full Course Explanation (Beginner to Advanced)
Customs Act 1962 full guide for students: clear notes on objectives, duty types, valuation, import-export steps, baggage rules, penalties, case laws & latest updates
Student-friendly and exam-ready notes
Introduction
What is the Customs Act?
The Customs Act, 1962 is a central law of India that regulates the import and export of goods, collection of customs duties, and prevents illegal trade like smuggling.
It controls what enters and leaves the country.
Purpose and Objectives
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To collect revenue for the government through customs duties.
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To protect domestic industries from unfair foreign competition.
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To prevent illegal import/export (smuggling, narcotics, weapons).
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To regulate international trade in a legal and organized way.
Who enacted it and when?
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Enacted by Parliament of India.
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Came into force in the year 1962.
Importance for India
India is one of the largest trading countries in the world. Every product that crosses the border is governed by customs.
Example: Cars imported from Japan, crude oil from UAE, gold smuggled from Dubai etc.
Historical Background
Before 1962, India followed colonial customs regulations. These laws were outdated and did not match modern trade.
Due to increasing international trade, the Government needed a clear and uniform framework, so the Customs Act, 1962 was introduced.
Key Definitions (Very Important for Exams)
| Term | Meaning | Example |
|---|---|---|
| Customs Duty | Tax charged on import/export of goods | Importing iPhone → Duty charged |
| Import | Bringing goods into India | Buying goods from China |
| Export | Sending goods outside India | Selling cotton to Europe |
| Baggage | Goods carried by passengers during travel | Clothes, gifts brought during flight |
| Customs Port | Places approved for import/export | Mumbai Port, Chennai Port |
| Warehousing | Storage of imported goods without paying duty immediately | Storing imported electronics in warehouse before sale |
Hierarchy of Customs Authorities in India
| Level | Authority | Role |
|---|---|---|
| 1 | Central Board of Indirect Taxes and Customs (CBIC) | Supervises entire customs system |
| 2 | Chief Commissioner / Commissioner | Head of customs zones |
| 3 | Additional / Joint Commissioner | Supervises major operations |
| 4 | Deputy / Assistant Commissioner | Coordinates port/airport duties |
| 5 | Superintendent / Inspector | Ground-level checks, enforcement |
| 6 | Preventive / Customs Officers | Security, examination, and prevention of smuggling |
Types of Customs Duties (Very Scoring Topic)
| Type of Duty | Meaning | Example Situation |
|---|---|---|
| Basic Customs Duty (BCD) | Standard import duty | Importing a laptop |
| Countervailing Duty (CVD) | Equalizes prices to domestic goods | Imported product gets same tax as local product |
| Anti-Dumping Duty | Protects Indian industry against underpriced foreign goods | China sells steel at very low price to capture market |
| Safeguard Duty | Temporary duty to protect Indian industries during import surge | Sudden rise in textile imports |
| Social Welfare Surcharge / Cess | Additional charge for govt welfare schemes | Charged on all duties |
Customs Valuation (How Duty is Calculated)
Formula:
Assessable Value (AV) = Cost of Goods + Insurance + Freight (CIF Value)
Customs Duty = AV × Rate of Duty
Example:
| Item | Amount |
|---|---|
| Cost of goods | ₹50,000 |
| Insurance | ₹1,000 |
| Freight | ₹4,000 |
| Assessable Value (AV) | ₹55,000 |
If BCD = 10%
Duty = 10% of 55,000 = ₹5,500
Import and Export Procedure (Step-by-Step)
Import Process
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Arrival of goods at port
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Filing Bill of Entry
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Goods inspection and valuation
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Pay customs duty
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Goods clearance & delivery
Export Process
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Prepare goods for shipment
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File Shipping Bill
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Customs inspection
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Clearance certificate issued
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Load goods for export
Warehousing
Importers may store goods in customs warehouses without paying duty immediately, then pay duty when they remove goods for sale.
Baggage Rules (Airport Travelers)
| Condition | Rule |
|---|---|
| Duty-free Allowance (Normal Passenger) | Up to ₹50,000 of personal goods allowed |
| Gold | Limited quantity free; excess taxable |
| Restricted goods | Firearms, drugs, endangered wildlife items not allowed |
Example:
An Indian returning from Dubai can bring clothes, laptop, gifts worth ₹50,000 duty-free.
Offenses and Penalties
| Offense | Explanation | Penalty |
|---|---|---|
| Smuggling | Bringing goods illegally | Seizure + Jail + Fine |
| Misdeclaration | Hiding true nature of goods | Heavy penalty + Confiscation |
| Undervaluation | Declaring lower price to avoid duty | Extra duty + Fine |
Important Case Laws (Simple)
| Case | Core Principle |
|---|---|
| Mohanlal v. Union of India | Smuggling is a serious offense, strict actions justified |
| Collector v. Sanjay | Goods can be seized without arrest |
| Bharat Surfactants v. UOI | Customs officer has quasi-judicial powers |
Latest Amendments
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Increased monitoring using digital tracking
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Strict action on gold smuggling
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Simplified online e-customs document filing
Conclusion
The Customs Act, 1962 ensures:
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Smooth trade
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Protection of Indian economy
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Prevention of illegal goods
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Revenue collection
Understanding this Act is essential for students preparing for law, taxation, customs services, and business professions.
8 Exam-Style Short Q&A
| Question | Short Answer |
|---|---|
| What is Customs Duty? | Tax on import/export of goods |
| Year of Customs Act? | 1962 |
| Meaning of Import? | Bringing goods into India |
| What is Anti-Dumping Duty? | Duty to prevent unfairly cheap foreign imports |
| Document for Import? | Bill of Entry |
| Who controls customs? | CBIC |
| What is Warehousing? | Storage without immediate duty payment |
| Aim of Customs Act? | Regulate trade and prevent smuggling |
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