Basic customs duty turns on the date goods enter territorial waters; later withdrawal of exemption does not revive liability.

Basic customs duty liability was determined by the position when goods entered the territorial waters of India. Because the goods were wholly exempt from basic customs duty at that stage, withdrawal of the exemption under Section 25(1) of the Customs Act before clearance for home consumption did not revive liability to that duty. The existence of countervailing or additional duty did not change the position for basic customs duty. As a result, basic customs duty was not leviable and the assessment sustaining that levy could not stand; the refund direction in favour of the importer remained undisturbed.

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Issues: Whether basic customs duty could be levied on goods which had entered the territorial waters of India when the relevant exemption was in force, but which were cleared after the exemption was withdrawn.

Analysis: The governing principle was that liability to basic customs duty is determined with reference to the position when the goods enter the territorial waters of India. Where the goods were wholly exempt from basic customs duty at that stage, withdrawal of the exemption under Section 25(1) of the Customs Act, 1962 before clearance for home consumption did not revive liability to basic duty. The existence of countervailing or additional duty did not alter that position for the purpose of basic customs duty.

Conclusion: Basic customs duty was not leviable, and the assessment sustaining that levy could not stand.

Final Conclusion: The challenge to the assessment failed, and the refund direction in favour of the importer remained undisturbed.

Ratio Decidendi: For basic customs duty, the material date is when the goods enter the territorial waters of India; if they are wholly exempt at that point, subsequent withdrawal of the exemption before clearance does not make basic customs duty leviable.

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