SHOW CAUSE NOTICE, DEMAND AND ADJUDICATION

   

SCOPE OF SECTION 28
TIME LIMIT FOR ISSUE OF DEMAND NOTICE
COMPUTATION OF TIME LIMIT
SHOW CAUSE/ DEMAND NOTICE
          INTEREST LIABILITY ON DUTY DEMAND:  
SECTION 28 AA 
SECTION 28 AB
SCOPE OF SECTION 124  
CONFISCATION OF IMPROPERLY IMPORTED GOODS AND PENALTY
PENALTY FOR ATTEMPT TO EXPORT GOODS IMPROPERLY
PENALTY FOR NON ACCOUNTING GOODS       
CONFISCATION OF CONVEYANCES
CONFISCATION OF GOODS USED FOR CONCEALING SMUGGLED GOODS
CONFISCATION OF SMUGGLED GOODS NOTWITHSTANDING CHANGE IN FORM
CONFISCATION OF SALE PROCEEDS
OPTION TO PAY FINE IN LIEU OF CONFISCATION
AUTHORITIES COMPETENT TO ADJUDICATE THE CASES
IMPORTANT REFERENCES
LEGISLATIVE REFERENCES

 

Scope of Section 28 :

Assessment of duty is a quasi-judicial function wherein the assessing officers decide the classification, rate of duty, applicability of exemption etc. Subsequently, when errors prejudicial to Revenue are found, show cause notices are issued under Section 28 of the Act. On the side of the Importers refund claims are filed for recovery of allegedly excess duties paid, under Section 27.

The provision of Section 28 applies to demand of both duties and interest. Under following circumstances, duty can be demanded.

(i)         A case of short-levy

(ii)        A case of non-levy

    iii.            A case of erroneous refund of duty or interest.  

   

Time Limit for Issue of Demand Notice

1.       If the importer is an individual who uses goods personally, or is a government, or a research or educational institution, or charitable institution, or hospital, a notice under this section has to be issued within a year.

2.       In all other cases of imports or exports, this limitation is six months.

3.       In case where there has been collusion, willful mis-statement or suppression of facts by the importer or the exporter or their agents or employees, the period of limitation will be five years, instead of six months or one year  

 

 

Computation Of Time Limit:

1.       In cases of non-levy or non-charge from the date of order of clearance

2.       In case of provisional assessment, from the date of adjustment of duty after final assessment

3.       In case of erroneous refunds, the date of refund

4.       In all other cases, date of payment of duty or interest  

 

 

 

Show Cause/ Demand Notice.

The show cause notice must clearly specify the amount of duty or interest demanded. The amount confirmed after adjudication cannot exceed this amount. The notice must specifically require the person to show cause why the duty or interest should not be demanded from him. It is essential that the show cause notice must clearly state the departmentís case against the affected person. Where extended period of limitation is sought to be invoked, the notice must clearly make such allegations as collusion, or willful mis-statement or suppression of facts etc Where the amount of duty has not been levied or short-levied or erroneously refunded, or interest payable has not been paid or erroneously refunded up to Rs.1 crore or less, a notice shall be served by the Commissioner of Customs or with his approval by any officers subordinate to him. Similarly, if the amount is more than 1 crore the same shall be issued only with the prior approval of Chief Commissioner of Customs.

The adjudicating authority is bound to grant hearing to the affected person before confirming the demand. After confirmation of demand, the person is bound to pay it, subject to the provisions of appeal against the order.

   

Interest liability on duty demand:

 

Section 28 AA :

            If a person chargeable to duty determined under Sub Section 2 of Section 28 and fails to pay such a duty within 3 months from the date of such determination, he shall liable to pay interest at such rate not below 10% and not exceeding 30% per annum, as for the time being fixed by the Board (presently 24%), on such duty from the date immediately after the expiry of the said period of 3 months till the date of payment of such duty under Section 28AA of the Customs Act 1962.

 

 

Section 28 AB

            If any duty has not been collected or short levied or erroneously refunded by reason of collusion or suppression of facts, the person who is liable to pay duty as determined under Section 28 of the Act, in addition to duty, be liable to pay interest at such rate not below 10% and not exceeding 30% per annum, as for the time being fixed by the Board (presently 24%), from the first day of the month succeeding the month in which duty ought to have been paid or from the date of such erroneous refund is made, till the date of payment of duty under Section 28 AB of the Customs Act 1962.  

Scope of Section 124

            Section 124 of the Act deals with the confiscation and imposition of the penalty. The provisions relating to the seizure of the goods and those relating to the confiscation of the goods or imposition of penalty stand on different footing. Section 124 of the act does not lay down any period within which the notice required by it has to be given. Notice under Section 124 of the Customs Act must necessarily be given in respect of the acts already done and can never be in respect of any act to be done in future. At the time when the notice is issued the act complained of must necessarily have been completed. Section 124 (a) provides for issue of a notice to appear before the adjudicating authority. The law requires that such notice must contained grounds on which it is proposed to confiscate the goods or to impose penalty.

If the proper officer has reason to believe that any goods are liable to confiscation under Section 111 (a to p) and Section 113 (a to l) of the Customs Act 1962 he may seize such goods and

a.      a notice should be served under Section 124 of the Customs Act 1962 on him in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty.

b.      He may give an opportunity of making representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein.

c.       He may give a reasonable opportunity of being heard in the matter;

Provided that if the persons concerned requested that no notice and personal

hearing is required, the same shall considered be oral.

 

Section 111 & 112

CONFISCATION OF IMPROPERLY IMPORTED GOODS AND PENALTY

a.      Any person who in relation to any goods does or omits to do which act or omission would render such goods which are liable to confiscation under Section 111 of the act or abets the doing or omission of such an act is liable for penalty under Section 112 of the Customs Act 1962.

b.      Any person who acquires possession of or is anyway concerned in carrying, removing, depositing, harboring, keeping, concealing, selling or purchasing or has reason to believe or liable to confiscation under Section 111 is also liable for penalty under Section 112 of the act.

The scale of penalty amount is as follows:

                                i.            In the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding five time the value of the goods or one thousand rupees whichever is the greater;

                              ii.            In the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five time the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater;

                            iii.            In the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either cases hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding five time the difference between the declared value and the value thereof or one thousand rupees, whichever is the greater;

                             iv.            In the case of goods falling both under clauses i. And iii, to a penalty not exceeding five times the value of goods or five times the difference between the declared value and the value thereof or one thousand rupees whichever is the highest;

                               v.            In the case of goods falling both under clauses ii and iii to a penalty not exceeding five times the duty sought to be evaded on such goods or five times the difference between the declared value and the value thereof or one thousand rupees whichever is the highest.

            In case of short levy or non levy of duty or the interest has not been charged or paid or has been part paid or erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts a penalty equal to the duty or interest so determined can be imposed on the person under Section 114 (A) of the Customs Act 1962.

 

Section 113 & 114 

PENALTY FOR ATTEMPT TO EXPORT GOODS IMPROPERLY

              Any person who in relation to any goods does or omits to do any act or omission would rendered such goods liable to confiscation under Section 113, he shall be liable for penalty under Section 114 of the Customs Act 1962, and the scale of penalty also is prescribed in Section 114 (i to iii) of the Customs Law Manual which can be reproduced.

Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (2) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined.

 

 

Section 116 & 117

PENALTY FOR NON ACCOUNTING GOODS

            If any goods loaded in a conveyance for importation in to India are not unloaded at their place of destination in India or if the quantity unloaded is short of the quantity to be unloaded or the deficiency is not accounted for to the satisfaction of the Asst. /Deputy Commissioner, the person in charge of the conveyance shall be liable for penalty not exceeding twice the amount of duty that could have been chargeable on the goods not unloaded under Section 116 of the Customs Act 1962. In case of coastal goods a penalty of not exceeding twice the amount of export duty that would have been charged can be imposed.

            If any person contravenes any provision of the Customs Act or abets any such contravention or fails to comply any provision of the act where no express penalty is elsewhere provided for such contravention or failure also liable for penalty not exceeding Rs.10000/- (Rupees Ten Thousand) under Sec. 117 of the Customs Act, 1962.

 

 

Section 115

CONFISCATION OF CONVEYANCES

            If any conveyance or animal used as a means of transport in the smuggling of any goods or in the carriage of any smuggled goods shall be liable for confiscation under Section 115 of the Customs Act 1962. Unless the owner of the conveyance or animal proves that it was so used without the knowledge or connivance of the owner himself.

Section 118

Where Any goods imported in the packages are liable for confiscation, the packages and any other goods in that package shall also be liable for confiscation.

Similarly, then goods meant for export are liable for confiscation. The packages and any other goods contained therein shall also be liable for confiscation.  

 

Section 119

CONFISCATION OF GOODS USED FOR CONCEALING SMUGGLED GOODS

            Any goods used for concealing smuggled goods shall also be liable for confiscation under Section 119 of the Customs Act 1962.

 

 

 

Section 120

CONFISCATION OF SMUGGLED GOODS NOTWITHSTANDING CHANGE IN FORM

Section 120 provides that Smuggled goods may be confiscated notwithstanding any change in their form This provision is made to meet such cases as smuggled gold being converted into ornaments, or where the smuggled go0ods are inextricably mixed with other goods. The combined goods shall be liable to confiscation. However, an innocent owner who proves that any part of the seized goods has not been smuggled is not deprived of that part of goods.

 

 

Section 121

CONFISCATION OF SALE PROCEEDS

Where any smuggled goods are sold by a person having knowledge or reason to believe that goods are smuggled goods, the sale proceeds thereof shall also be liable for confiscation. The intention is that when it is found that the smuggled goods have already been found, the sale proceeds in the hands of smuggler or his accomplice can be seized and confiscated.

 

Section 125

OPTION TO PAY FINE IN LIEU OF CONFISCATION

            Whenever confiscation is done under the Customs Act, the officer adjudging the case may give to the owner of the goods an option to pay in lieu of confiscation such fine has the said officer thinks fit under Section 125 of the Customs Act 1962. Such fine shall not exceed the market price of the goods confiscated less in the case of imported goods the duty chargeable thereon.

 

 

Authorities competent to adjudicate the cases.

If any goods is liable to confiscation or any person is liable to a penalty for the act or omission on his part, such confiscation or penalty may be adjudicated under Section 122 of the Customs Act 1962.

a.      without limit by Commissioner of Customs.

b.      Additional Collectors may adjudicate cases involving cases whose value does not exceed Rs.10 lakhs.

c.       that in cases invoking extended period of limitation and value involved is Rs.5 lakhs, the Additional Commissioners of Customs may issue notices.

d.      where the value of the goods liable to confiscation does not exceed Rs.50,000/- by an Assistant Commissioner of Customs

e.      where the value of the goods liable to confiscation does not exceed Rs.2,500/- by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs.  

Important References:

Board Circular No.8/95-Cus, dated 23.1.1995

Board Circular No.122/95-Cus, dated 28.11.95

Board Circular No.47/97Cus, dated 6.10.1997

Board Circular No.41/98-Cus, dated 11.6.98

Board Circular No.4/99-Cus, dated 23.1.1995

Board Circular No.21/95-Cus, dated 10.3.1995

Board Circular No.64/95-Cus, dated 12.6.1995

 

Legislative References:

Section 28 of the Customs Act, 1962.

Section 28 AA of the Customs Act, 1962.

Section 28 AB of the Customs Act, 1962.

Section 111 of the Customs Act, 1962.

Section 112 of the Customs Act, 1962.

Section 113 of the Customs Act, 1962.

Section 114 of the Customs Act, 1962

Section 114 A of the Customs Act, 1962.

Section 115 of the Customs Act, 1962.

Section 116 of the Customs Act, 1962.

Section 117 of the Customs Act, 1962.

Section 119 of the Customs Act, 1962.

Section 118 of the Customs Act, 1962.

Section 120 of the Customs Act, 1962.

Section 121 of the Customs Act, 1962

Section 142 of the Customs Act, 1962

Section 122 of the Customs Act, 1962.

Section 124 of the Customs Act, 1962.

Section 125 of the Customs Act, 1962