Territorial waters fix customs chargeability; total exemption on import bars later basic duty despite withdrawal.

Goods from outside India are treated as imported goods when they enter India's territorial waters, and customs duty liability arises at that stage under the charging scheme. Section 15 governs the applicable rate and tariff valuation after chargeability is established, so a later withdrawal of an exemption does not revive basic customs duty if the goods were wholly exempt on the date of entry. A total exemption on import therefore bars subsequent levy of basic customs duty, even though additional or countervailing duty may be separately relevant. Partial exemption may still leave the goods chargeable at the rate applicable at the relevant clearance stage.

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Issues: (i) When does importation occur under the Customs Act, 1962 and when do goods become liable to customs duty; (ii) whether the rate of customs duty is determined with reference to the date of import or the date of clearance from the warehouse, especially where an exemption notification is withdrawn before clearance; (iii) whether total exemption from basic customs duty on the date of import prevents levy of basic duty even if additional or countervailing duty is separately leviable or the exemption is later withdrawn.

Issue (i): When does importation occur under the Customs Act, 1962 and when do goods become liable to customs duty

Analysis: The charging provision was held to be Section 12, read with the statutory definitions of "import", "India" and "imported goods". Since "India" includes territorial waters, goods brought from outside India enter India when they cross into territorial waters. The scheme of the Act, including provisions on pilferage, warehousing, transit, unloading, custody and clearance, supported the view that goods acquire the character of imported goods upon entry into territorial waters and remain so until cleared for home consumption. Chargeability was distinguished from valuation and collection.

Conclusion: Importation occurs when goods from outside India enter the territorial waters of India, and they become liable to customs duty at that stage.

Issue (ii): Whether the rate of customs duty is determined with reference to the date of import or the date of clearance from the warehouse, especially where an exemption notification is withdrawn before clearance

Analysis: Section 15 was held to govern the rate and tariff valuation once goods are chargeable to duty under Section 12. If the goods are dutiable on the date they enter territorial waters, the relevant rate depends on whether they are cleared for home consumption immediately or after warehousing. Where a notification under Section 25(1) wholly exempted the goods on the date of import, no duty could be levied later merely because the exemption was withdrawn before clearance. Where only partial exemption existed, the rate applicable at the relevant clearance stage could apply because the goods remained chargeable to duty.

Conclusion: The rate under Section 15 applies only where the goods were not wholly exempt on the date of entry into territorial waters; total exemption on that date prevents later levy despite subsequent withdrawal.

Issue (iii): Whether total exemption from basic customs duty on the date of import prevents levy of basic duty even if additional or countervailing duty is separately leviable or the exemption is later withdrawn

Analysis: Basic customs duty under Section 12 was treated as distinct from countervailing duty under Section 2A of the Indian Tariff Act, 1934 and additional duty under Section 3 of the Customs Tariff Act, 1975. An exemption under Section 25(1) could operate only to the extent specifically granted. If basic customs duty was wholly exempt when the goods entered territorial waters, later withdrawal did not revive basic duty. The existence or withdrawal of additional or countervailing duty did not alter that position with respect to basic customs duty.

Conclusion: Total exemption from basic customs duty on the date of import bars later levy of basic customs duty, even if additional or countervailing duty is independently relevant.

Final Conclusion: The reference was answered by holding that importation under the Customs Act occurs on entry into territorial waters, that chargeability is fixed at that stage, and that a later withdrawal of a total exemption cannot revive basic customs duty already excluded on the date of import.

Ratio Decidendi: Under the Customs Act, goods from outside India become imported goods and attract the charging provision when they enter territorial waters, while Section 15 governs only the rate and quantification of duty after chargeability is established.

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