Customs self-assessment regime introduced

The budget 2011-12 which introduced significant customs related changes also brought about one significant change relating to the assessment of goods under the Customs Act, 1962. The new Section 17 of the Customs Act mandates self-assessment of goods which may be re-assessed by the department for correctness of classification in doubtful cases. This re-assessment shall be done selectively on the basis of the Risk Management Model/System (RMS) targeting mainly the high-risk consignments. The provision for provisional assessment has however, been retained with certain consequential modifications. It must be also noted that the importers or exporters, as the case may be, must at the time of presenting the Bill of Entry, make a declaration about the correctness of the statements regarding the classification and applicable rate of duty, its value, benefit of exemption under Notifications etc.

According to the Finance Minister customs self-assessment is introduced to “ensure that there is no disruption in the assessment work and clearance of imported/export goods continues smoothly”. The Department of Revenue also issued a Circular No. 17/2011 regarding the implementation of self-assessment in customs expressing concerns over the implementation of this new regime in customs laws and fixating on the necessity for the new provisions to be studied carefully and applied correctly to ensure that there is no disruption in the assessment work and that the clearance of imported/export goods continues smoothly. 

 

Highlights of the law: As is apparent from the very nature of the self-assessment regime, the requirement of manual assessment has been completely done away with. The new section 46 codifies this change by mandating electronic presentation of the Bill of Entry by the importers/exporters to the proper officer. The Circular 17/2011 in Para 3 however, cautions that such a manual filing must not be allowed in a routine manner and the Commissioner concerned must ensure that it is done only in rare and deserving cases. The Circular, however, is silent on what can possibly be a deserving case in this context. The Circular also notes that in order to get the best out of the new self-assessment regime, consequential amendments are made out in Electronic Declaration Regulations in accordance with the requirements stipulated under ICES 1.5. 

Too late in the day?: The introduction of self-assessment in the customs law is not an overnight phenomenon. This change has taken place after five decades since the introduction of the Customs Act in 1962. Comparatively, self-assessment under the excise laws was introduced almost a decade back. For a quick reference, goods under the excise laws are self-assessed by manufacturers and goods manufactured in the factory can be cleared without the signature and verification of the Assessing Officer. One might wonder the reason behind the late introduction of self-assessment in the customs law although the concept is fairly old and is doing miracles in the developed and other Asian countries. Various scholars working on this field have voiced varied opinions on this issue but the bottom-line is that the self-assessment regime under the customs law is far more dangerous than under the excise laws. Certainly, this tempted the Ministry to put off the requisite changes in the customs assessment laws depriving importers/exporters the long-held due they deserved.

Self-assessment a misnomer?: As has been discussed, the Department has the power under the law to examine the correctness of the assessment by seeking a re-assessment. Re-assessment of goods will stall the smooth flow of import and export and defeat the purpose for which self-assessment was introduced in the customs law in the first place. The retention of re-assessment in the customs law and its application based on the Risk Management System is also contrary to fair trade norms as it targets only potential high risk traders and guarantees smooth clearance to established routine dealers. It also does not make any distinction between first time importers/exporters and routine ones and puts both the categories under the same umbrella. While routine dealers have the tax-literacy to assess their goods in accordance with the laws, recently established smaller dealers will have to face the undue harassment at the time of re-assessment. These complications will give rise to a scenario where cases of provisional assessment will become rife which again defeats the objective behind implementation of self-assessment. Not only this, but inexperienced dealers will swim in litigation fighting against charges of mis-declaration since there is no provision for rectification of mistakes under the assessment laws in the Act.

Implementation problems: An interaction with the customs officers revealed that self-assessment is not practiced anywhere even after 3-4 months of its coming into force. This lack of implementation will certainly open a can of worms for the following reason. Under the new section 17, verification by the customs officers will be deemed to be a re-assessment of the goods i.e. if customs official assessment is still in practice it shall be termed as re-assessment once the officers put their stamp and seal on the Bill of Entry. This is because the law as it stands today does not endorse official assessment and stipulates only self-assessment which may be re-assessed by officers in doubtful cases. Therefore, in such cases, the nature of assessment itself comes into question i.e. whether it is a self-assessment or a re-assessment? Only after answering the above question, can the pending confusions regarding relief provisions under the Act can be addressed.

Ashish Goel also blogs at Breaking the Code of Criminal Procedure, and can be reached at ashish.nujs@gmail.com