Indian Customs process on Short Levied Duty, Non Levied Duty, Short Paid Duty and None paid duty
Chapter 13 of Indian Customs Law 2023 - Procedure for Less Charge Demand
The importers or exporters are required to pay non levied duty paid, short levied duty paid, short paid or non paid duty amount, if such levied duty or paid duty found to be lesser than what is actually due to be paid.
In such cases, what are the Legal provisions, Provisions for voluntary compliance, Proper Officer for the sections 17 and Section 28 of Customs Act 1962, Demand Show Cause Notice and Adjudication proceedings. Chapter 13 of Indian Customs Manual 2023 explains about Procedure for Less Charge Demand explaining in detail.
Please find below extract of chapter 13 of Indian Customs Manual 2023:
Legal provisions
Provisions for voluntary compliance
Proper Officer for the sections 17 and Section 28 of Customs Act 1962
Demand Show Cause Notice
Adjudication proceedings
Chapter 13: Procedure for Less Charge Demand
1. Introduction:
1.1 The Customs Act, 1962 mandates filing of correct declaration by importers or exporters in respect
of imported / export goods with regard to value, description of goods, classification, exemption
notifications having bearing on assessment of Customs duty etc. The Customs duty is determined
in terms of Section 15 or section 16 of the Customs Act, 1962 in respect of imported or export
goods respectively. If the duty paid / levied is found to be less than what is due to be paid to the
Government, the importer or exporter is required to pay the short levied / non levied or short paid
/ non paid amount of duty. In this regard, the Customs Act, 1962 empowers officers to issue a
demand cum Show Cause notice for recovery of amount of duty short levied/ non levied from the
importer/exporter.
2. Legal provisions:
2.1 Section 28 of the Customs Act, 1962 provides for recovery of any duty which has not been levied
or has been short levied or erroneously refunded or if any interest payable has not been paid, part
paid or erroneously refunded provided a notice demanding such duties/interests is issued within
the time limit specified in that Section.
2.2 Where the short levy is by reason of collusion or any wilful misstatements or suppression of facts
by the importer the period for issuing the demand notice is five years from the relevant date
specified in Sub-section (4) of Section 28.
2.3 Other notices are to be issued within two years from the relevant date, as provided under Section
28(1).
2.4 In terms of the provisions of Section 28(8), the proper officer shall, after allowing the concerned
person an opportunity of being heard and considering the representation, made by such person,
determine the amount of duty or interest from such person limited to the amount specified in the
notice.
2.5 In terms of the provisions of Section 28(9), such determination of duty or interest under section
28(8) is to be completed within a period of six months and one year from the date of the notice in
respect of cases falling under section 28(1) and section 28(4) respectively.
2.6 However, any officer senior in the rank to the proper officer may, having regard to the
circumstances which prevented the proper officer from determination of the amount of duty or
interest within such time period prescribed under section 28(8), extend the period specified for a
further period of six months and one year in respect of cases falling under section 28(1) and
section 28(4) respectively.
2.7 Further in terms of the provisions of Section 28BB any inquiry or investigation under this Act,
culminating in the issuance of a notice under sub-section (1) or sub-section (4) of section 28 shall
be completed by issuing such notice, within a period of two years from the date of initiation of
audit, search, seizure or summons, as the case be, or such extended period of further one year.
2.8 In terms of the provisions of Section 110AA, where in pursuance of any proceedings, in
accordance with Chapter XIIA or XIII, if an officer of customs has reasons to believe that-
(a) any duty has been short-levied, not levied, short-paid or not paid in a case where
assessment has already been made;
(b) any duty has been erroneously refunded;
(c) any drawback has been erroneously allowed; or
(d) any interest has been short-levied, not levied, short-paid or not paid, or erroneously
refunded,
then such officer of customs shall, after causing inquiry, investigation, or as the case may be, audit,
transfer the relevant documents, along with a report in writing--,
(i) to the proper officer having jurisdiction, as assigned under section 5 in respect of
assessment of such duty, or to the officer who allowed such refund or drawback; or
(ii) in case of multiple jurisdictions, to an officer of customs to whom such matter is assigned by
the Board, in exercise of the powers conferred under section 5,
and thereupon, power exercisable under Section 28, 28AAA or Chapter X, shall be exercised by
such proper officer or by an officer to whom the proper officer is subordinate in accordance with
sub-section (2) of Section 5.
3. Provisions for voluntary compliance:
3.1 The person chargeable with duty or interest, may pay before service of notice, either on the basis
of his own ascertainment of such duty or the duty ascertained by the proper officer, the amount of
duty along with the interest payable thereon under Section 28AA or the amount of interest which
has not been so paid or part-paid.
3.2 Before issuing notice under section28(1), the proper officer shall hold pre-notice consultation with
the persons chargeable to duty or interest except in cases falling under section 28(4) or 28AAA;
3.3 The person who has paid the duty along with the interest or amount of interest under section
28(1)(b) shall inform the proper officer of such payment in writing, who on receipt of such
information, shall not serve any notice in respect of the duty or interest so paid or any penalty
leviable under the provisions of the Act or the rules made thereunder.
3.4 In terms of the provisions of Section 114A, where duty or interest, as the case may be, as
determined under section 28(8) and the interest payable thereon under section 28AA is paid within
30 days from the date of communication of the order of the proper officer determining such duty,
the amount of penalty liable to be paid by such person shall be twenty percent of the duty or
interest, as the case may be, so determined.
3.5 Sub-section (5) of Section 28 of the Customs Act, 1962 provides that the importer or the exporter
or the agent or employee of the importer or exporter, to whom a notice is served under the Subsection (4) of Section 28 of the said Act pays the duty in full or in part as may be accepted by him,
and the interest payable thereon under Section 28AA of the said Act and penalty equal to 25% of
the duty specified in the notice or the duty so accepted by such person within 30 days of the receipt
of the notice. In such case –
(i) if such person has paid the duty in full together with interest and penalty, the proceedings
in respect of such person and other persons to whom notice is served shall, without
prejudice to the provisions of Sections 135, 135A and 140 of the said Act, be deemed to
be conclusive as to the matters stated therein.
(ii) However, if the duty with interest and penalty that has been paid falls short of the amount
actually payable, then, the proper officer shall proceed to issue the notice as provided for
in clause (a) of sub-section (1) in respect of such amount which falls short within two years
from the date of receipt of information under sub-section (5) of section 28 of the said Act.
4. Proper Officer for the sections 17 and Section 28 of Customs Act 1962
4.1. To address the issue of validity of Show Cause Notices issued by the DRI, which were impacted
by the judgement of the Hon’ble Supreme Court in the case of Canon India Private Limited vs
Commissioner of Customs, Section 97 of the Finance Act, 2022. Also, certain provisions of the
Customs Act have been amended & inserted as mentioned below:
(i) Sub-Section (34) of Section 2 had been amended to specifically state that assignment of
functions to an officer of Customs by the Board or the Principal Commissioner/
Commissioner of Customs shall be done under the newly inserted sub-sections (1A) and
(1B) of Section 5 of the Customs Act, 1962.
(ii) Section 3 had been amended to specifically include the officers of DRI, Audit and Preventive
formation in the class of Officers, so as to remove the ambiguity as regards the class of
officers of Customs.
(iii) Sub-section (1A) and (1B) have been inserted in section 5 of the Act to explicitly provide
power of assignment of function to officers of Customs by the Board or as the case may be,
by the principal Commissioner of Customs or Commissioner of Customs. The amendment
has been necessitated to correct the infirmity observed by the Courts in recent judgements
that the Act required explicit provisions conferring powers for the assignment of function to
officers of Customs as proper officers for the purpose of the Act, besides definition clause
(34) in section 2 of the Customs Act.
(iv) Sub-section (4) to section 5 is inserted to delineate the criteria which the Board may adopt
while imposing limitations or conditions under sub-section (1) or while assigning functions
under sub-section (1A) to the officers of Customs. For instance, one of the
limitations/conditions that the Board currently imposes on officers of customs is that they
are required to operate within a specified territorial jurisdiction. However, with the launch of
faceless assessments and other trade facilitation initiatives wherein, for instance, a need is
felt for the development of industry-specific expertise in assessments the Board may need
to confine jurisdiction to certain goods or class of goods.
(v) Sub-section (5) to section 5 is inserted to ensure that wherever necessary, for the proper
management of work, two or more officers of Customs, can concurrently exercise powers
and functions (as in the case of faceless assessment).
(vi) Section 110AA is inserted with a view to affirm the principle that, wherever, an original
function duly exercised by an officer of competent jurisdiction, is the subject matter of a
subsequent inquiry, investigation, audit or any other specified purpose by any other officer
of customs, then, notwithstanding, such inquiry, investigation, audit or any other purpose,
the officer, who originally exercised such jurisdiction shall have the sole authority to exercise
jurisdiction for further action like reassessment, adjudications, etc. consequent to the
completion of such inquiry, investigation, audit or any other purpose.
4.2. In alignment with the above provisions, the Proper Officer for issue of demand has been notified
under Section 5(1A) vide notification 26/2022-Customs (N.T.) dated 31.03.2022.
4.3. Cases of single jurisdictions may be adjudicated in terms of the guidelines on monetary limit for
adjudication of cases by different grades of Customs Officers. Board has decided that cases
where SCNs are issued under section 28 of the Customs Act, 1962, these will be adjudicated as
per following norms highlighted in Table 13.1.
Table 13.1
(Please refer table)
For smooth and expeditious disposal of the pending demands for adjudication, the Board has
delegated its powers conferred by clause (a) of section 152 of the Customs Act, 1962 (52 of 1962),
to the Principal Chief Commissioner or Chief Commissioner of Customs for the purposes of
assigning the cases for adjudication of show cause notices issued under the provisions of the said
Act or rules, regulations made there under, within his jurisdiction.
[Refer Notification No. 91 /2018-Customs (N.T.) dated 5th November 2018]
5. Demand Show Cause Notice:
5.1 The proper officer shall not serve demand notice, where the amount involved is less than rupees
one hundred, in terms of provisions of section 28(1)(b).
5.2 Show Cause Notice for demand of duty or interest under the provisions of Section 28, 28AA or
28AAA of the Customs Act, 1962 can be issued by such proper officer or by an officer to whom the
proper officer is subordinate in accordance with sub-section (2) of Section 5, within the time period
specified therein or such extended time period.
6. Adjudication proceedings:
6.1 After receipt of the notice, the noticee shall have to submit its reply within the time period specified
in the notice.
6.2 Upon receipt of the notice’s reply to a demand notice the matter is examined in detail and the
noticee is offered an opportunity of ‘personal hearing’ to explain his case before the adjudicating
authority. After the personal hearing, the adjudicating authority, shall examine the material placed
before him and the relevant legal provisions and come to a conclusion. Generally, the issues
involved are mis-declaration of the description of the goods resulting in wrong classification and
levy of lesser duty, misdeclaration of value, quantity and weight having a bearing on duty,
calculation error resulting in short levy of duty, non-inclusion of certain components of value in the
assessable value etc.
6.3 The adjudicating authority is required to take an independent decision as a quasi-judicial authority
and pass appropriate orders either determining the amount of short levy in terms of Section 28(8)
of the Customs Act, 1962 or dropping the proceedings where it is found that there is no short levy.
In either case an appealable order is to be issued by the adjudicating authority. Such
determination of duty/ issuing adjudication orders is to be done within the time period specified
under Sub-section 9 of Section 28. The duties, fines and penalties imposed, if any, are required
to be paid immediately, unless the party files an appeal and obtains a stay from the competent
authority.
6.4 The proper officer may keep the case pending, in case the proper officer is unable to determine
the amount of duty or interest under sub-section (8) on account of----
(a) an appeal in a similar matter of the same person or any other person is pending before the
Appellate Tribunal or the High Court or the Supreme Court; or
(b) an interim order of stay has been issued by the Appellate Tribunal or the High Court or the
Supreme Court; or
(c) the Board has, in a similar matter, issued specific direction or order to keep such matter
pending; or
(d) the Settlement Commissioner has admitted an application made by the person concerned,
Further, the proper officer shall inform the person concerned the reason for non-determination of
the amount of duty or interest under sub-section (8) and in such case, the time specified in subsection (9) shall apply from the date when such reason ceases to exist.
6.5 In case of baggage, the Additional Commissioner or Joint Commissioner shall adjudicate the
cases without limit, since such cases are covered by the offences under Chapter XIV of the
Customs Act, 1962 and it is necessary to expeditiously dispose such cases in respect of
passengers at the airport.
6.6 In other cases, such as short landing, the adjudication power will be the same as provided under
the Customs Act, 1962 or the rules/regulations made thereunder.
6.7 As regards breach of condition of a notification after availing of the exemption thereunder, the
Apex Court has held that that the obligation under a notification is a continuing one and the
Customs authorities are well within their power to recover the duty whenever it comes to their
notice that the importer has failed to fulfill the conditions. In such cases the demand can be issued
irrespective of the time factor and the amount can be recovered in terms of the provisions of the
Customs Act.
6.8 The confirmed demands are enforced and recoveries effected in accordance with the provisions
of Section 142 of Customs Act, 1962. Where it is not possible to recover the amount by adjusting
against any money which the Department owes to such persons, or by detaining and selling any
goods belonging to such persons which are under the control of the Department, action is initiated
to recover Government dues through the District Collector as if it were an arrears of land revenue.
Powers are also vested with Customs for attaching/detaining and selling movable or immovable
property belonging to or under control of such person. Refer Circular No.23/2009-Cus, dated 01.09.2009
Please read related posts in this website www.howtoexportimport.com to enhance your knowledge about import and export.