Origins
When the Inland Customs Line was first conceived, British India was governed by the East India Company. This situation lasted until 1858 when the responsibility for government of the colony was transferred to the Crown following the events of the Indian Mutiny of 1857. By 1780 Warren Hastings, the Company's Governor-General of India, had brought all salt manufacture in the Bengal Presidency under Company control. This allowed him to increase the ancient salt tax in Bengal from 0.3 rupees per maund (37 kg) to 3.25 rupees per maund by 1788, a rate that it remained at until 1879. This brought in a huge amount of revenue for the company, amounting to 6,257,470 rupees for the 1784–85 financial year, at the cost of the Indian consumer, who would have to expend around 2 rupees per year (2 months' income for a labourer) to provide salt for his family. There were taxes on salt in the other British India territories but the tax in Bengal was the highest, with the other taxes at less than a third of the Bengal tax rate.
It was possible to avoid paying the salt tax by making it illegally in salt pans, stealing it from warehouses or smuggling salt from the princely states which remained outside of direct British rule. The latter was the greatest threat to the company's salt revenues. Much of the smuggled salt came into Bengal from the west and the company decided to act to prevent this trade. In 1803 a series of customs houses and barriers were constructed across major roads and rivers in Bengal to collect the tax on traded salt as well as duties on tobacco and other imports. These customs houses were backed up by "preventative customs houses" located near salt works and the coast in Bengal to collect the tax at source.
These customs houses alone did little to prevent the mass avoidance of the salt tax. This was due to the lack of a continuous barrier, corruption within the customs staff and the westward expansion of Bengal towards salt-rich states. In 1823 the Commissioner of Customs for Agra, George Saunders, installed a line of customs posts along the Ganges and Yamuna rivers from Mirzapur to Allahabad that would eventually evolve into the Inland Customs Line. The main aim was to prevent salt from being smuggled from the south and west but there was also a secondary line running from Allahabad to Nepal to prevent smuggling from the Northwest frontier. The annexation of Sindh and the Punjab allowed the line to be extended north-west by G. H. Smith, who had become Commissioner of Customs in 1834. Smith exempted items such as tobacco and iron from taxation to concentrate on salt and was responsible for expanding and improving the line, increasing its budget to 790,000 rupees per year and the staff to 6,600 men. Under Smith's leadership the line saw many reforms and was officially named the Inland Customs Line in 1843.
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