Transit, Transhipment and Fishing Operations

In one line

Chapter VIII lets goods pass through India, or change conveyance in India, without paying duty, because they are not entering the country's consumption. Precisely: section 52 excludes baggage, postal articles and stores; section 53 permits transit without payment of duty; section 54 governs transhipment; section 55 fixes liability where transited or transhipped goods are diverted; section 56 empowers the Board to prescribe conditions for the transport of certain classes of goods; and section 56A makes special provision for fishing and fishing related activities.

Why goods passing through are not taxed

Because the charge is on goods brought into India, and goods in transit are not brought here in the sense the levy contemplates. They are on their way somewhere else. Taxing them would not protect any Indian industry, would raise no revenue in substance because the trade would simply route elsewhere, and would destroy the business of being a transhipment hub.

The commercial stake is large and worth a sentence in an answer. A port that can move a container from one ship to another without a duty event attracts the traffic of a whole region. Chapter VIII is the legal basis of that business for Indian ports, and the counterpart of the definition in section 2(23), which requires goods to be brought into India, and of the exclusion of transit goods from the requirement of a bill of entry in section 46(1).

The risk the chapter must control is diversion. Goods admitted duty-free because they are going elsewhere may quietly be sold in India instead. Everything in sections 53 to 56 is machinery against that risk, and section 55 is the provision that makes diversion expensive.

The provisions

Section 52 provides that the provisions of Chapter VIII shall not apply to baggage, goods imported by post and stores, which have their own chapters.

Section 53, transit of certain goods without payment of duty. Subject to the provisions of section 11, where any goods imported into a customs station are mentioned in the arrival manifest or import manifest or the import report, as the case may be, as for transit in the same conveyance to any place outside India, or to any customs station, the proper officer may allow the goods and the conveyance to transit without payment of duty, subject to such conditions as may be prescribed.

Three features define transit. The goods stay on the same conveyance. Their transit destination is stated in the manifest itself, so no separate application is needed. And the permission is subject to section 11, so a prohibition on import or export still bites: a country cannot be used as a corridor for goods it forbids.