It has been a big talking point in this Budget that self-assessment in Customs has been introduced. Several economists have hailed it as path breaking . The idea of writing this treatise is to exactly pin point what has actually has been done and what really needs to the done. It is not to debunk the move which is in the right direction.
First let us see what self assessment means for customs and for central excise. In central excise, clearance of goods manufactured in a factory are allowed to be cleared without any signature of the excise officer. It was introduced nearly 50 years back and it is working well. Then why has it taken 50 years for venturing the same initiative for customs? There must be some basic differences between customs and central excise which have made this difference. They are that in the case of customs, the goods are often imported by companies which are paper companies and secondly once released or exported, they cannot be examined or brought back. So extra precaution had to be taken for ensuring that the goods are same as declared and that the companies are good enough to pay the short levied duty. These are the reasons why a lot of relaxation has taken place in customs in the shape of green channel and EDI (Electronic Data Interface ) which have brought the clearances by established companies nearer to some liberalised system but that is no where near self-assessment. Self assessment in customs if far more risky than in excise.
What has now been claimed by the Government in the Budget is the the new system would provide a basis for progressive reduction in the level of customs interaction with the importers and exporters in the act of clearing the cargo. For this purpose the amendments made are in sections 2,17,18,46,50 and 157of the Customs Act . But these are only the empowering sections which have now been passed in the Parliament. What follows now will determine what really will be the shape of the self assessment.
There will be a set of issues which will have to be determined now. They are the following.
a. Classification-It is not entirely left to the importer or exporter to classify and take the goods away. Section 17 which deals with assessment of duty has been amended to provide legal backing self-assessment but at the same time the amendment authorises the customs officer to verify the assessment and have the goods tested or examined physically before they are cleared. The customs officer call also ask for documents to prove the assessment. So this shows that the self assessment is subject to verification by customs before clearance and thus it is not the self-assessment which importers and analysts are thinking of. Any time any consignment can be called away for verification and so it is not like in Central Excise that goods are cleared without any intervention by officers and only later the documents are placed for scrutiny to the Department.
b. misdeclaration of classification will be taken as an offence or not — It has not been made clear if the charge of misdeclaration of classification will be made against the importer /exporter if Revenue does not agree to the importerRs s declaration. It is very important to clarify this matter since the importers will not venture self-assessment for the fear of making a mistake which will be called misdeclaration.
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c. Concurrent audit — Now there is a system of concurrent audit. It is not clarified so far what will happen to that. If it continues, then self-assessment has no meaning. If it is discontinued, then post audit will come back and that is a big drag on customs administration.
d. Examination of goods — There is no decision about the percentage of physical examination of goods. If it is random, it takes the sense out of self-assessment.
The conclusion is that by the very nature of customs, self-assessment will not be total as in Central Excise. The issues raised by me have to be solved first before the system is introduced. It is better to allow this to some established importers and exporters in totality than to allow half to all.
Sukumar Mukhopadhyay is a Former Member CBEC