Customs Act, 1962 Section 22 — Abatement of duty on damaged or deteriorated goods
Customs Act, 1962 · Abatement of duty on damaged or deteriorated goods
Plain-English Explanation
Overview
Section 22 of the Customs Act, 1962, provides for the abatement (reduction) of customs duty on imported or warehoused goods that have been damaged or deteriorated. This section ensures that importers are not unfairly burdened with duty on the original value of goods that have lost value due to unforeseen circumstances.
Who Does This Apply To?
This section primarily applies to:
- Importers: Individuals or businesses importing goods into India.
- Owners of Warehoused Goods: Those who store imported goods in a customs bonded warehouse.
- Customs Officers: Specifically, the Assistant Commissioner of Customs or Deputy Commissioner of Customs who must be satisfied with the damage/deterioration claim.
How It Works
The process for claiming abatement of duty under Section 22 involves the following steps:
- Damage or Deterioration: The importer/owner must demonstrate to the satisfaction of the Assistant/Deputy Commissioner of Customs that the imported goods have been damaged or deteriorated.
- Timing of Damage: The damage or deterioration must have occurred either:
- Before or during the unloading of the goods in India (clause a of the section)
- After unloading, but before examination under Section 17, due to an accident not caused by the importer's/owner's negligence (clause b)
- For warehoused goods, at any time before clearance for home consumption, again, due to an accident not caused by the owner's negligence (clause c)
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Duty Calculation: If the Assistant/Deputy Commissioner of Customs is satisfied, the duty payable is reduced. It is calculated proportionally:
(Value of Damaged Goods / Value of Goods Before Damage) * Duty Chargeable on Original Goods-
Valuation of Damaged Goods: The owner of the goods has the option to choose one of two methods for determining the value of the damaged goods:
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Assessment by Proper Officer: The proper officer will assess the value of the damaged/deteriorated goods.
- Public Auction/Tender: The proper officer may sell the goods by public auction or tender (or other agreed upon method), and the gross sale proceeds will be considered the value.
Important Conditions & Exceptions
- Condition 1: The damage or deterioration must be proven to the satisfaction of the Assistant/Deputy Commissioner of Customs. Documentation such as insurance survey reports, photographs, and expert opinions can be used as evidence.
- Condition 2: The damage cannot be due to any wilful act, negligence, or default of the importer/owner, their employee, or agent. This is crucial.
- Exception: The provision 22(1)(b) explicitly excludes warehoused goods. If damage occurs after unloading but before examination under Section 17, this applies to goods that are not warehoused. If goods are in a warehouse, provision 22(1)(c) applies.
Practical Example
ABC Importers brings in a shipment of 100 high-end smartphones, originally valued at ₹20,00,000. While being unloaded from the ship, heavy rain damages 20 of the phones. The damage is documented, and ABC Importers applies for abatement under Section 22. The Assistant Commissioner is satisfied that the damage was accidental.
The Assistant Commissioner assesses the value of the damaged phones at ₹2,00,000. If the original duty chargeable on the ₹20,00,000 value was ₹4,00,000, the abated duty would be calculated as:
(₹2,00,000 / ₹20,00,000) * ₹4,00,000 = ₹40,000.
Therefore, ABC Importers would receive an abatement of ₹40,000 on their customs duty.
Key Amendments
No major amendments since enactment.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
What is Section 22 of the Customs Act, 1962 about, and when does it apply?
Section 22 of the Customs Act, 1962, provides for the abatement of customs duty on imported goods that have been damaged or deteriorated. This abatement applies if the damage or deterioration occurred before or during unloading in India, or after unloading but before examination under Section 17 due to an accident (excluding willful acts or negligence of the importer), or in the case of warehoused goods, before clearance for home consumption.
How is the abated duty calculated under Section 22 of the Customs Act, 1962?
The duty charged on damaged or deteriorated goods under Section 22(2) is calculated proportionally. The abated duty will bear the same ratio to the original duty as the value of the damaged goods bears to the original value of the goods before the damage or deterioration occurred. The resultant amount is the duty payable after abatement.
How is the value of damaged or deteriorated goods determined under Section 22 of the Customs Act, 1962?
Section 22(3) offers two options for determining the value of damaged or deteriorated goods, at the owner's choice. The value can be ascertained by the proper customs officer. Alternatively, the goods can be sold by public auction or tender (or in another mutually agreed manner) by the customs officer, and the gross sale proceeds will be considered the value.
What is the time limit to claim abatement of duty under Section 22 of the Customs Act, 1962?
While Section 22 itself doesn't specify a strict time limit, claims for abatement should be made promptly after discovering the damage or deterioration and before the goods are cleared for home consumption (in the case of warehoused goods) or before examination under Section 17. Delaying the claim could raise doubts about the timing and cause of the damage.
What if the damage to the goods was due to the importer's negligence? Can abatement still be claimed under Section 22 of the Customs Act, 1962?
No, abatement is not available under Section 22 if the damage or deterioration is due to any wilful act, negligence, or default of the importer, his employee, or agent. The damage must be the result of an accident or other cause beyond their control to qualify for duty abatement.
Who is the 'proper officer' mentioned in Section 22, and what is their role in the abatement process?
The 'proper officer' referred to in Section 22 is the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as stated in Section 22(1). They are responsible for verifying the damage or deterioration, ascertaining the value of the damaged goods (if requested by the owner), and ultimately approving the abatement of duty.
Are there any penalties for falsely claiming abatement under Section 22 of the Customs Act, 1962?
Yes, falsely claiming abatement under Section 22 can lead to penalties under other provisions of the Customs Act, 1962, such as those relating to misdeclaration or undervaluation. Additionally, potential prosecution may occur for fraudulent activities, depending on the specific circumstances and the extent of the false claim.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Goods damaged/deteriorated before/during unloading | Imported goods damaged or deteriorated at any time before or during the unloading of the goods in India are eligible for duty abatement. |
| Goods damaged after unloading, pre-examination (Section 17) | Imported goods (excluding warehoused goods) damaged after unloading but before examination under Section 17 are eligible if damage is accidental and not due to importer's fault. |
| Warehoused goods damaged before home consumption | Warehoused goods damaged before clearance for home consumption due to an accident not caused by the owner's (or their agents') wilful act, negligence, or default are covered. |
| No wilful act, negligence, or default | The damage or deterioration must not be a result of any wilful act, negligence, or default of the importer, owner (if warehoused goods), their employee, or agent to qualify for abatement. |
| Duty abatement proportional to value reduction | The duty charged is proportional to the reduced value of the damaged or deteriorated goods compared to their original value before the damage. |
| Value assessment by officer or public sale | The value of damaged goods can be ascertained by the customs officer or through sale (public auction/tender) with consent, where gross sale proceeds determine the value. |
| Satisfaction of Customs Officer required | The Assistant Commissioner of Customs or Deputy Commissioner of Customs must be satisfied that the goods were indeed damaged or deteriorated as claimed for the abatement to be granted. |
Amendment History
Substituted by Act 27 of 1999, section 100, for "Assistant Commissioner of Customs" (w.e.f. 11-5-1999). Earlier the words "Assistant Commissioner of Customs" were substituted by Act 22 of 1995, section 50, for the words "Assistant Collector of Customs (w.e.f. 26-5-1995).