This provision prompted a few manufacturer-importers at Mumbai Custom House to claim that the particular consignment was meant for trading purpose. The Tariff Unit (TRU) at the Central Board of Excise and Customs (CBEC) has directed in its clarification issued on June 1, that if the importers claim that the goods imported are for trading purpose, the declaration has to be accepted prima facie.

This enabled a few of the importers to claim immunity from the new levy while seeking clearances of their respective consignments. However, a lot of confusion prevailed at the custom house as the provisions of newly inserted section 3A in the Customs Tariff Act,1975, are not available. The non-Modvatable duty is to be recovered as per the provision of this section.

In the absence of the provisions of section 3A, which had not reached the Mumbai Custom House field formation till Friday evening, confusion prevailed over the recovery of the duty.

The explanatory notes on Budget said that the new section has been inserted in the CTA to impose special additional duty of customs on imported goods barring goods intended for trading, gold and silver, goods which are exempted from basic customs duty as well as additional customs duty, newsprint, glazed newsprint and light weight coated paper up to 51 gsm imported by actual users for printing magazines, crude petroleum, goods imported under advance licensing scheme, fertiliser projects, coal mining projects, specified goods imported for setting up of a crude petroleum refinery, specified telecom equipment and goods subjected to additional excise duty (in lieu of Sales Tax).

Among these exempted imports is the provisionof exemption for goods imported under advance licensing scheme which surprised customs field formations as several items imported under the scheme are cleared subject to payment of countervailing duty (CVD) which is recovered as Modvatable levy and is equivalent to excise duty on like products manufactured domestically.

Sources claimed that the non-Modvatable duty could have been recovered from clearances of at least those items imported under the advance licensing scheme where CVD was recovered.

The in-built contradiction in the exemption provisions from the eight per cent levy is that it is also extended to goods which are exempted from basic custom duty as well as additional customs duty. As mentioned earlier, on several items imported under the advance licensing scheme, the latter is recovered and in such cases the eight per cent levy stood recoverable.

However, all imports including the ones on which CVD is recovered as additional customs are also exempted which makes the matter complicated,sources claimed.

While imports under the advance licensing scheme have been exempted, a similar export oriented scheme, the Duty Exemption Pass Book (DEPB) scheme is the first casualty of the new levy as clearances under the DEPB is liable for the payment of new levy for clearance.

Though finance minister Yashwant Sinha has announced that the non-Modvatable additional duty will be levied at the rate of 8 per cent, customs sources in Mumbai indicated that in reality the duty incidental works out between 9 to 14 per cent depending on the leviable rates of basic duty and other additional duties.

This is because as explained in the explanatory notes on budget, the duty will be computed on the aggregate of the assessable value of the imports on which basic customs duty and additional duties are levied. Over the total aggregate of the three, the non-Modvatable duty will be recovered. No drawback claims of this new duty will be admissible, the notes said.

Among the major beneficiaries of the exemptioninclude the canalising agency involved in imports of crude oil at chapter heading 27, importer of projects for fertilisers, coal mining and power generation besides importers of specified goods for setting up of a crude petroleum refinery and telecom equipment.

There are some textile related products on imports of which additional excise duty is recovered on lieu of sales tax will also benefit from the exemption, custom sources said.