DEFERRED PAYMENT OF CUSTOMS DUTY – A TRADE FACILITY MEASURES

By, Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.), D.M.M., LL.B, ADVOCATE & TAX CONSULTANT

The deferred payment of Customs duty means delinking duty payment and Customs clearance. It is based on the principle ‘Clear first-pay later’. The aim is to have a seamless wharf to warehouse transit in order to facilitate just-in-time manufacturing as a part of the ease of doing business. It is a trade facilitation move wherein benefits are extended to the importers who have demonstrated strong internal control systems and willingness to comply the deferred payment.

Section 47 of the Customs Act 1962 prescribes clearance of goods for home consumption and where the proper officer is satisfied that importer has paid import duty on goods meant for clearance. Accordingly, a proviso was inserted in Section 47 that the Government may permit a class of importers to make deferred payment of the import duty. Accordingly, The Government had introduced the ‘Deferred Payment of Import Duty Rules, 2016’ vide Notification Nos.134/2016-Cus. (N.T.) and 135/2016-Cus. (N.T.) both dated 2^nd November, 2016.This scheme is in force w.e.f. 16^th November, 2016. The scheme was as part of ‘Turant Customs’ reforms which envisages a faceless, contactless and paperless Customs environment for enhancing ease of doing business, increasing efficiency and improvement in turnaround time.

The highlights of the Deferred Payment of Import Duty Rules, 2016’ as under:

1. Applicability : Only applicable to eligible importer who have been notified under the proviso to sub-section (1) of Section 47 of the Act, 1962.
2. Intimation : The eligible importer, who intends to make deferred payment, or his authorised representative, shall indicate the same using flag “D” in the Payment Method column of each Bill of Entry filed. In his/her ICEGATE login, the AEO Nodal person will be able to acknowledge such intent of availing the facility of deferred duty payment by authenticating using One Time Password (OTP) sent to his registered e-mail address. The Nodal person would be able to authenticate multiple Bills of Entry at one go. Only on such authentication by the AEO, Customs clearance would be provided for the consignment under deferred payment of duty Rules. The Concerned authority after verifying the eligibility permits the facility of deferred payment of Customs duty.
3. Payment of duty : The eligible importer shall pay the duty by the dates specified hereunder inclusive of the period (excluding holidays) as mentioned in sub-section (2) of Section 47 of the Customs Act, 1962, the importer will pay Customs duty on imports in the manner as summarised in the below table.

4. Manner of payment : The eligible importer shall pay the duty electronically :

Provided that the Assistant Commissioner or the Deputy Commissioner of Customs, as the case may be, for reasons to be recorded in writing, may allow payment of duty by any mode other than electronic payment.

5. Deferred payment not to apply in certain cases :An eligible importer who fails to pay duty in full by due date more than once in a period of three consecutive months shall not be permitted to make deferred payment :

Provided, that the facility of deferred payment shall not be restored unless the eligible importer has paid the duty in full along with the interest.

6. Exemption in respect of certain goods : Nothing contained in these rules shall apply to the goods which have not been assessed or not declared by the importer in the entry made under the Act.

C.B.E. & C. Circular :

1. C.B.E. & C. vide its Circular No. 52/2016-Cus., dated 15-11-2016 [2016 (341) E.L.T. (T37)] was clarified that  Importers  certified under Authorised Economic Operator Programme as AEO (Tier-Two) and AEO (Tier-Three) to make deferred payment of duty of Customs.
2. Every importer certified as AEO-T2/ AEO-T3 shall obtain ICEGATE Login which is essential to avail benefits envisaged in the AEO Programme. Further, in order to avail the facility of deferred payment, every AEO-T2/ AEO-T3 is advised to nominate a nodal person borne on their establishment who would be responsible for authenticating all the Customs related transaction on behalf of the AEO. Since the option of deferred payment has been extended only to AEO (Tier-Two) and AEO (Tier-Three) , it is important for the AEO to exercise due caution in nominating the AEO nodal person to prevent misuse of facility of deferred payment. The contact details of AEO nodal person shall also be provided in ICEGATE login to ensure that the information reaches in time at their registered mail for authentication.
3. As per Rule 4 of the Deferred Payment of Import Duty Rules, an eligible importer who intends to avail the benefit of deferred payment shall intimate to the Principal Commissioner of Customs or the Commissioner of Customs, as the case may be, having jurisdiction over the port of clearance, his intention to avail the said benefit. An Intimation addressed to the AEO Programme Manager with a copy to the Principal Commissioner(s) of Customs or the Commissioner (s) of Customs, as the case may be, having jurisdiction over the port(s) of clearance shall be considered as an intimation by an eligible importer of his intention to avail the said benefit.
4. The eligible importer who intends to make deferred payment shall indicate the same using flag “D” in the Payment Method column of Bill of Entry filed. In order to ensure that the facility of deferred payment is availed only by the eligible importer, option has been provided in ICEGATE Login for AEO Nodal person to acknowledge such intent and authenticate using One Time Password (OTP) sent to his registered e-mail address. The Nodal person would be able to authenticate multiple Bills of Entry at once. Only on such authentication by the eligible AEO importer, Customs clearance would be provided for the consignment under deferred payment of duty Rules.
5. The due dates for deferred payment of import duty by eligible importers are specified in Rule 6 of the said Rules. The eligible importer also has an option to select the challans belonging to the deferred period and pay at any time, even before the due date at their convenience.
6. Reports regarding availing of deferred payment at each port are made available in ICES. The Principal Commissioner / Commissioner of Customs may monitor the same for their jurisdiction.

C.B.I. & C. Circular :

1. C.B.I. & C. vide its Circular No. 37/2020-Cus. Dated 19.08.2020 [2020 (373) E.L.T. (175)] has clarified that the Extension of Deferred payment of Customs duty benefit to ‘Authorised Public Undertakings’. The facility shall be made available to eligible  APUs and further clarified that :
2. The facility of deferred payment of Customs import duty shall be governed by the Deferred payment of Import Duty Rules, 2016, as amended. It is expected that the extension of this facility to the Authorised Public Undertakings shall expedite the Customs clearance of their imported goods at the Ports/ Airports/ ICSs.
3. The facility of deferred payment of Customs import duty shall be available to Public Undertakings of Central and / or State Government which satisfy the following criterion :
   1. Must be a Government Company as defined in the Companies Act, 2013 or a statutory Corporation, a department or an autonomous body owned and / or controlled by the Central Government and / or State Government.
   2. Must   possess a valid Importer-Exporter Code (IEC).
   3. Must be recommended for availing the said facility by an officer not below the rank of the Deputy Secretary to the Government of India or an officer of equivalent rank in the State Government.
   4. Must undertake to comply with the provisions of the Deferred Payment of Import Duty Rules, 2016.
   5. Must adhere to legal compliance requirements as per Section 3.2 of revised AEO programme as per Circular No. 33/2016-Cus., dated 22^nd July, 2016 [2016 (338) E.L.T. (T6)], as follows :
      1. There should be no show cause notice issued to them during last three financial years involving fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax/ GST has been collected from customers but not deposited to the Government.
      2. There should be no case wherein prosecution has been launched or is being contemplated against the applicant or its senior management.
      3. If the ratio of disputed duty demanded or drawback demanded or sought to be denied, in all the show cause notices issued under the Customs Act, 1962 [other than those mentioned in Para 3(v)(a) and 3(v)(b)] during the last three financial years, to the total duty paid and drawback claimed during the said period in more than ten per cent, a review would be taken of the nature of cases and decision would be taken on issue or continuance of AEO status by AEO Programme Manager. Explanation : for para 3(v)(a), 3(v)(b) and 3(v)(c) above, the cases where the show cause notices have been dropped or decided in favour of the applicant by the adjudicating or appellate authorities will not be considered.
      4. The eligible Public Undertaking desiring to avail the facility of deferred payment of Customs import duty shall apply to the Principal Commissioner / Commissioner, Directorate of International Customs (DIC), CBIC in the form as per Annexure-I. After careful scrutiny of the application and satisfying himself that the applicant satisfies the eligible conditions, the Principal Commissioner/ Commissioner, DIC, CBIC shall approve the applicant as an ‘Authorised Public Undertaking’ eligible for availing the benefit of deferred payment of Customs import duty. The facility shall in the first instance be available for a period of 2 years, extendable for a further period not exceeding 2 years at a time. Further, at the time of granting approval, the Principal Commissioner / Commissioner, DIC, CBIC shall update the details in the Customs Automated System to enable the facility of deferred payment of duty. No further action will be required by the APU in order to avail the facility.
      5. Upon approval by the Principal Commissioner / Commissioner, DIC, CBIC, the nodal person appointed /authorized by the APU shall obtain ICEGATE login following the procedure laid down in Advisory on www.icegate.gov.in. The same is available on the following link https://www.icegate.gov.in/Download/v1.2_Advisory_Registration_APPROVED. The contact details of such nodal person shall be provided in the ICEGATE login to ensure that the information reaches their registered e-mail/ contact number on time for due verification and authentication. The nodal person shall be responsible for authenticating all the Customs related transactions on behalf of the Authorised Public Undettaking.
      6. The eligible APU intending to make deferred payment of Customs import duty shall indicate the same using flag “D” in the Payment Method Column of the Bill of Entry filed. In order to ensure that the facility of deferred payment of Customs duty is availed only by the eligible importer, an option has been provided in ICEGATE login for the nodal person on behalf of the APU, to acknowledge such intent and authenticating it using One Time Password (OTP) sent to his registered e-mail address/ contact number. The nodal person would be able to authenticate multiple Bills of Entry at once. Only on such authentication, the Customs clearance would be provided for the subject consignment under the Deferred Payment of Import Duty Rules, 2016.
      7. The due dates for making the deferred payment of Customs import duty are specified in Rule 5 of the said Rules, are reproduced for reference as follows :
         • For goods corresponding to Bill of Entry returned for payment from 1^st day to 15^th day of any month, the duty shall be paid by the 16^th day of that month;
         • For goods corresponding to Bill of Entry returned for payment from 16^th day till the last day of any month other than March the duty shall be paid by the 1^st day of the following month; and
         • For goods corresponding to Bill of Entry returned for payment from 16^th day till the 31^st day of March, the duty shall be paid by the 31^st March.
      8. The eligible Authorised Public Undertaking has an option select the challans belonging to the deferred period and pay the Customs import duty anytime, even before the due date, at his convenience.
      9. Reports regarding availment of deferred payment of Customs import duty at each Customs station of import are available to the Principal Commissioner/ Commissioner of Customs in ICES in their standard reports and Commissioner dashboards. The Principal Commissioner / Commissioner of Customs may monitor the same for imports pertaining to his jurisdiction and ensure timely payment of the Customs import duty as per the said Rules. Instances of non-payment may be brought to the notice of the Principal Commissioner / Commissioner, DIC, CBIC. Further the Principal Commissioner / Commissioner, DIC, CBIC may revoke such approval granted under para 3 of this circular, if the APU becomes ineligible for the facility of deferred payment of Customs import duty at any point in time.
      10. In this regard attention is also drawn to the omission of Rule 4 of the Deferred Payment of Import Duty Rules, 2016. The implication of this omission is that henceforth the approved AEO Tier 2/3 or approved APU shall not be required to send any intimation regarding the intent to avail the facility of deferred payment of Customs import duty to the Principal Commissioner / Commissioner, DIC and / or the Principal Commissioner / Commissioner having jurisdiction over the port(s) of clearance. Accordingly, para 3 of Circular No. 52/2016-Cus., dated 15-11-2016 stands deleted.

Conclusion

The scheme deferred payment of Customs duty was launched in 2016 as part of ‘Turant Customs’ reforms which envisages a faceless, contactless and paperless Customs environment for enhancing ease of doing business, increasing efficiency and improvement in turnaround time. The provision of deferred payment of Customs duty on imported goods is a major compliance relief to the trade and industry. This trade facility has been enhancing the manufacturing facilities across the country on account of imported goods and mitigating financial crunch at the time of emergency situation like COVID pandemic. Consequently, by this scheme of deferred of Customs duty, the transaction cost of the importer is diminishing and increasing financial efficiency of the importer. It is a positive step of the Government towards trade facilitation and improving ease doing of business of India.

By, Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.), D.M.M., LL.B, ADVOCATE & TAX CONSULTANT