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Notice for payment of duties, interest etc. [Section 28]

Notice for payment of duties, interest etc. [Section 28]: 

In accordance with the principles of natural justice the customs law rightly provides that before any action is taken against an assessee he must be given reasonable opportunity of presenting his case. One such situation would be that relating to the demand of duty not paid, short paid or erroneously refunded.

The show cause notice is invariably issued if the department contemplates any action prejudicial to the assessee. Thus, if on account of an infraction of the provisions of the customs law it is considered appropriate to penalise the defaulter, it is necessary to first issue a show cause notice. The show cause notice would detail the provisions of law allegedly violated and ask the noticee to show cause why action should not be initiated against him. Thus, a show cause notice gives the noticee the opportunity to present his case.

The provisions of section 28 are discussed as under:-

(1) Cases other than collusion, willful-misstatement etc.

Where any duty:-

(a) has not been levied

(b) has been short-levied

(c) has been erroneously refunded

OR

Where any interest payable:-

(a) has not been paid

(b) has been part-paid

(c) has been erroneously refunded

for any reason other than the reasons of-

  •  collusion
  •  any wilful mis-statement
  •  suppression of facts,

the following provisions become applicable:-

(a) Issuance of show cause notice (SCN) within ONE year*: The proper officer shall, within one year* from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice [Clause (a) of sub-section (1)].

*Period of stay to be excluded: In computing the period of one year, the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded [Sub-section (7)].

Minimum amount for issue of SCN: Show cause notice will not be served if the amount involved is less than ` 100. In other words, there would be no recovery of the customs duty if the amount of customs duty involved is less than ` 100.

(b) Voluntary payment of duty or interest before issue of SCN: The person chargeable with the duty or interest, may pay before service of show cause notice under clause (a) on the basis of,—

(i) his own ascertainment of such duty; or

(ii) 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 [Clause (b) of sub-section (1)].

(c) Written intimation to the proper officer of such voluntary payment : The person who has paid the duty along with interest or amount of interest voluntarily, shall inform the proper officer of such payment in writing.

(d) No SCN would be issued if amount paid in full: The proper officer, on receipt of such information, shall not serve any show cause notice in respect of the duty or interest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest [Sub-section (2)].

However, where notice under section 28(1)(a) has been served (non-fraud cases), penalty will not be imposed if the proper officer is of the opinion that amount of duty along with interest leviable under section 28AA or the amount of interest, as the case may be, as specified in the notice, has been paid in full within 30 days from the date of receipt of the notice. The proceedings in respect of such person or other persons to whom the notice is served will be deemed to be concluded.

(e) SCN may be issued for recovery if amount is short paid: Where the proper officer is of the opinion that the amount so paid falls short of the amount actually payable, then, he shall proceed to issue the notice in respect of such amount which falls short of the amount actually payable in the manner specified under sub-section (1) and the period of one year shall be computed from the date of receipt of information (i.e. written intimation sent by the person making voluntary payment) [Sub-section (3)].

(2) Cases of collusion, willful-misstatement etc.

Where any duty:-

(a) has not been levied

(b) has been short-levied

(c) has been erroneously refunded

OR

Where any interest payable:-

(a) has not been paid

(b) has been part-paid

(c) has been erroneously refunded

by reason of-

  •  collusion
  •  any wilful mis-statement
  •  suppression of facts

by the importer or the exporter or the agent or employee of the importer or exporter, the following provisions become applicable:-

(a) Issuance of show cause notice within FIVE years*: The proper officer shall, within five years* from the relevant date, serve notice on the person chargeable with duty or interest which has not been so levied or which has been so short -levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice [Sub-section (4)].

*Period of stay to be excluded: In computing the period of five years, the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded [Sub-section (7)].

(b) Penalty reduced to 15% of duty if duty, interest and penalty paid within 30 days of the notice: If the person to whom the SCN has been issued under sub-section (4) pays the duty in full or in part, as may be accepted by him, and the applicable interest within 30 days of the receipt of the notice and inform the proper officer of such payment in writing, the penalty would be reduced to 15% of the duty specified in the notice or the duty so accepted by that person only if such reduced penalty is also paid by him along with the duty and interest [Sub-section (5)].

(c) Determination of duty or interest by the proper officer: Where the duty, interest and penalty have been paid under sub-section (5), the proper officer shall determine the amount of duty or interest and take either of the two actions discussed below depending upon the circumstances:

(i) Conclude the proceedings if amount paid in full: If duty, interest and penalty has been paid in full, then, the proceedings in respect of such person or other persons to whom the notice is served under sub-section (1) or sub-section (4), shall, without prejudice to the provisions of sections 135, 135A and 140 will stand concluded [Sub-section (6)(i)].

(ii) Issue SCN for recovery if amount is short paid: If the duty, interest and penalty that has been paid falls short of the amount actually payable, then, show cause notice will be issued in respect of such amount which falls short of the amount actually payable in the manner specified under sub-section (1) and the period of one year shall be computed from the date of receipt of information under subsection (5).

The important terms used here are fraud, collusion, willful mis-statement, suppression of fact and ‘with an intent of evading the payment of duty‘.

Fraud may be defined as “Deceit, imposture, criminal deception done with the intention of gaining an advantage”.

Collusion may be defined as “to act in concert especially in fraud; a secret agreement to deceive”.

Willful mis-statement may be explained as “stating wrongly or falsely deliberately”.

Suppression of facts may also be explained as “to hold back the facts”.

(3) Determination of amount of duty or interest after giving an opportunity of being heard to the concerned person: The proper officer shall, after allowing the concerned person, an opportunity of being heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice [Sub-section (8)].

(4) Time-limit for determination of amount of duty: The proper officer, where it is possible to do so, determine the amount of duty/interest under sub-section (8) as per the time schedule given below [Sub-section (9)]:

Particulars Time Limit (from the date of notice)
Cases involving willful suppression etc. [Sub-section (4)] One year
Cases other than the above [Clause (a) of sub-section (1)] Six months

(5) Payment of interest mandatory even if not specified in the order determining duty (passed under this section): Where an order determining the duty of excise is passed by the proper officer under this section, the person liable to pay the said duty shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately [Sub-section (10)].

Relevant date [Explanation 1 to section 28]

Event Relevant date
Non-levy of duty or non-charging of interest Date on which the proper officer makes an order for the clearance of goods
Provisional assessment of duty under section 18 Date of adjustment of duty after the final assessment thereof or re-assessment, as the case may be
Erroneous refund of duty or interest Date of refund
Any other case Date of payment of duty or interest

Adjudication of cases where show cause notices are issued under sect ion 28

Level of Adjudication officer Nature of cases Amount of duty involved
Customs Principal Commissioner/Commissioner All cases Without limit
Additional Commissioner/Joint Commissioner All cases Upto ` 50 lakhs
Assistant Commissioner/Deputy Commissioner All cases Upto ` 5 lakhs

 

Mohit Sharma
Mohit Sharma

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