A Critical Evaluation of Customs Regulations in India with Special Reference to National Security

Abstract

The responsibilities cast upon the department of Customs is in a way unique, inasmuch as they are entrusted with an arduous task of maintaining a proper balance between facilitation of trade and industry in connection with international business transactions, ensuring economic sovereignty, protecting the national security of India and the interests of its citizens. The Customs acts as a frontline agency for various laws that are concerned with public safety, environmental protection and trade, in addition to taxation and national security. However, the Customs is often found to undermine the importance of the national security, in the overzealousness to enhance trade facilitation, especially, in the post liberalization era. The instant research is taken up to evaluate the effectiveness of Customs Act towards protecting the national security in India, to analyze whether the Customs Act provides for adequate punishments for serious offences such as smuggling of FICN, Arms and Ammunition, Explosives etc. and to suggest the amendments in the prevalent Customs Act to ensure adequate measures in respect of national security. The methodology consists of both doctrinal as well as empirical approaches. On the empirical front, primary data was collected through stratified random sampling method, by dividing the targets into three different clusters. The term Customs, associated with the revenue collected by the Governments on the international trade, has always been seen as a barrier for the trade. Further, the two World Wars that happened in the same century devastated the international trade. Therefore, immediately after World War – II, 23 countries across the globe pondered upon the ways and means to boost the economic recovery, and as a result, the General Agreement on Tariffs Trade (GATT) was formed, with the main goal of reducing all the barriers that hinders the growth of the trade, the first being Customs duty on the goods. The various rounds of GATT meetings from 1947 to 1994 resulted in various countries across the globe signing up the agreement and substantial reduction in Customs duties on various goods in the international trade. It was also decided to have a permanent body to take care of the interests of the international trade and in the beginning of January, 1995, the World Trade Organization was born. The concept of ‘trade facilitation’ coined by the World Trade Organization gained importance in the Customs circles in the post liberalization era. While the Customs definitely play an important role in the growth of international business, the aspect of national security is something that cannot be ignored. In order to accomplish an ideal balance between trade facilitation and enforcement, Customs administrations across the globe have been abandoning their traditional and routine checks and are now applying the principles of risk management, with varying degrees of sophistication and success. While the GATT started its discussions on reducing the barriers from 1947 onwards, in the year 1953, 17 countries constituted a study group called Customs Cooperation Council (CCC) in order to examine the issues related to Customs. In the year 1994, the CCC adopted a new name World Customs Organisation (WCO), whose members consisted of representatives of Customs administrations of member countries. The WCO concentrated on improving Customs modalities involved in the trade, and functioned in sync with the WTO. The WCO initiated streamlining the Customs procedures across the world with regard to valuation of goods, percentage of checking of goods, dwell time etc. The various declarations of WCO addressed different issues such as system of classification of goods, illicit trafficking of drugs, Electronic Data Interchange (EDI), transnational organized crime, integrity of the Customs officers, risk management etc. However, post 9/11, the Customs world over have started an introspection and various Customs administrations across the world as well as the World Customs Organisation have acknowledged the role of Customs in protecting national security and the importance of being first line of defence. Major countries such as United States of America etc. have totally revamped their Customs administration, according adequate importance to national security. The Punta Cana declaration issued by the World Customs Organisation during December 2015 identified Customs as ‘the first line of defence of a country’ and exhorted the Customs world over to accord more importance for security. The declaration also calls for better cooperation between Customs and other law enforcement agencies at the border in the larger interest of the nation. In India, the Customs regulations have evolved over a period of time. It was the British government who brought in a codified Customs law in 1878 as Sea Customs Act of 1878. Thereafter, the Land Customs Act of 1924 was also enacted to regulate the movement of goods across the land borders. The movement of goods by air, though happened rarely, was regulated by certain provisions under the Air Craft Act, 1934. The Sea Customs Act did not have provision for prosecution till it was amended during 1955. During the Amendment Act of 1955, prosecution of the accused persons was introduced as it was felt necessary to check serious cases of smuggling by way of prosecution. Immediately after the liberalization during 1991, the Customs laws were amended to align with the new policy of the Government to facilitate the trade, reposing more trust on the trade. The Customs procedures have been drastically changed to verify the goods only on risk assessment and to introduce self-assessment by the trade, on which Customs duty is to be paid. The Customs Act empowers the executive officers to adjudicate the Customs Officers to the extent of confiscating the seized goods, demanding the duty thereon and imposing the penalties on evasion of duty. In case there is a criminal angle to the offence, the offenders are arrested and thereafter prosecuted, after obtaining sanction for prosecution from the Commissioner of Customs Act. In the case of outright smuggling cases, the Act provides that the burden of proof shall lie on the person from whom the contraband goods were seized. The punishment for Customs offences extends to imprisonment for period up to seven years, depending upon the offence. Further, the adjudication of the case by the departmental officers as well as the prosecution by the judicial courts can simultaneously take place. This study of evaluation of Customs regulations in India assumes a lot of importance due to the fact that (i) there is a drastic change in the functioning of the Customs department especially after the liberalization in India, (ii) that the smuggling of Fake Indian Currency Notes (FICN) and drugs etc. which has larger ramifications beyond the scope of revenue, are on the rise post liberalization and (iii) that terrorism from across the border is on the rise, and these aspects are yet to be addressed by the Customs Act. The facilities decided by the Government to be accorded to the genuine business are many times found to be exploited by criminals and some of the unscrupulous elements in the trade. As the society evolves and as the government policies thereon changes accordingly, it becomes quite essential to amend the provisions of the law, to face the emerging challenges. The research delves into the matter in detail to find out as to whether any change is required in the Customs Act in order to strengthen the national security aspect. The research concludes that while the Customs Act is adequate to take care of offences of duty evasion, it needs to be amended to deter serious offences that could affect the national security. Further, on the executive front, the research identifies certain lacune, and proposes “the Customs – Anti Smuggling Operations Rules, 2024” to ensure that the executive actions complement the spirit of the law.