Customs Act, 1962 Section 127d — Power of Settlement Commission to order provisional attachment to protect revenue

Overview

Section 127D of the Customs Act, 1962, empowers the Settlement Commission (and, starting April 1, 2025, the Interim Board) to provisionally attach a taxpayer's property during pending proceedings. This allows the government to safeguard potential revenue that may be determined to be owed, ensuring the recovery of dues. It’s a critical tool for protecting government revenue during dispute resolution.

Who Does This Apply To?

This section applies to any applicant undergoing proceedings before the Settlement Commission. This includes importers, exporters, and other individuals or entities involved in customs-related disputes seeking resolution through the Settlement Commission mechanism. Post-April 1, 2025, this will extend to proceedings before the Interim Board. The key factor is that a case is actively being considered by the Settlement Commission (or Interim Board).

How It Works

• Initiation: The Settlement Commission (or Interim Board, from April 1, 2025) must form an opinion during the pendency of proceedings that a provisional attachment is necessary to protect the government’s revenue interests. This is a discretionary power based on the specific circumstances of the case.

• Provisional Attachment Order: If the Commission/Board deems it necessary, it can issue an order for the provisional attachment of any property belonging to the applicant. The order will specify the manner of attachment, which will be determined according to the rules.

• Attachment Procedure: The attachment is carried out according to the rules specified under the Customs Act. This could involve attaching bank accounts, movable property (like goods), or immovable property (like land or buildings).

• Cessation of Attachment: The provisional attachment automatically ceases to have effect once the applicant discharges the sums due to the Central Government for which the attachment was made. Evidence of this discharge must be submitted to the Settlement Commission (or Interim Board). This evidence typically includes proof of payment, such as bank statements and challans.

Important Conditions & Exceptions

• Condition 1: The attachment is provisional. It's not a final seizure of property; it's a temporary measure to secure potential revenue.
• Condition 2: The attachment is directly linked to the sums due to the Central Government which are the subject of the proceedings before the Settlement Commission.
• Exception: If the applicant provides an adequate security or guarantee for the outstanding amount, the Settlement Commission may refrain from issuing a provisional attachment order. This is at the Commission’s/Board’s discretion.

Practical Example

ABC Importers is undergoing settlement proceedings with the Settlement Commission for alleged under-valuation of imported goods. The disputed duty amount is ₹50 lakhs. During the proceedings, the Commission learns that ABC Importers is planning to sell a factory building worth ₹1 crore. Believing that ABC Importers might try to dispose of assets to avoid paying the duty, the Commission issues a provisional attachment order on the factory building. ABC Importers then pays the ₹50 lakhs in full and submits proof of payment. The provisional attachment on the factory building is immediately lifted.

Key Amendments

The amendment bringing the Interim Board into the section effective April 1, 2025, is significant. Before that, the power resided solely with the Settlement Commission. This change reflects adjustments in the administrative structure for dispute resolution under the Customs Act.