Customs Act, 1962 Section 135 — Evasion of duty or prohibitions
Customs Act, 1962 · Evasion of duty or prohibitions
Plain-English Explanation
Overview
Section 135 of the Customs Act, 1962, outlines the penalties for evading customs duties or prohibitions. This section is crucial for maintaining the integrity of international trade and ensuring that applicable duties and regulations are complied with, deterring fraudulent activities.
Who Does This Apply To?
This section applies to any person (including individuals, companies, or other entities) who is knowingly involved in the evasion of customs duties or prohibitions. This includes importers, exporters, customs brokers, and any other party involved in the import or export of goods. It also extends to those dealing with goods they know or have reason to believe are liable to confiscation.
How It Works
Section 135 outlines several scenarios considered offences punishable under the Customs Act:
- Misdeclaration & Fraudulent Evasion: Knowingly misdeclaring the value of goods or engaging in fraudulent activities to evade customs duties or circumvent prohibitions. This includes attempted evasion.
- Dealing with Confiscated Goods: Acquiring, carrying, removing, depositing, harboring, concealing, selling, purchasing, or otherwise dealing with goods that the person knows or has reason to believe are liable to confiscation under Section 111 (relating to goods improperly imported) or Section 113 (relating to goods improperly exported).
- Attempting to Export Confiscated Goods: Attempting to export goods that the person knows or has reason to believe are liable to confiscation under Section 113.
- Fraudulent Drawback/Exemption: Fraudulently claiming or attempting to claim drawback or exemptions from duty related to the export of goods.
- Obtaining Instrument by Fraud: Obtaining an instrument (as defined in Explanation 1 to section 28AAA) from any authority through fraud, collusion, wilful misstatement or suppression of facts, where such instrument is subsequently used.
The punishment varies depending on the severity of the offence:
- Serious Offences (Category (i)): If the market price of the goods exceeds ₹1 crore, the evasion of duty exceeds ₹50 lakh, the goods are prohibited goods specified by the Central Government, or the fraudulently availed drawback/exemption exceeds ₹50 lakh, or the duty relatable to utilization of the instrument obtained by fraud exceeds ₹50 lakh, the offender can face imprisonment up to 7 years, along with a fine. A minimum imprisonment of 1 year is generally required unless there are special and adequate reasons recorded by the court.
- Other Offences (Category (ii)): In all other cases, the offender can face imprisonment up to 3 years, or a fine, or both.
- Repeat Offences (Subsection (2)): If a person is convicted under Section 135 or subsection (1) of Section 136 and subsequently commits another offence under Section 135, the punishment for the second and subsequent offences can be imprisonment up to 7 years with a fine. A minimum imprisonment of 1 year is generally required, absent special circumstances.
Important Conditions & Exceptions
- Knowledge or Reason to Believe: The section emphasizes that the offender must know or have reason to believe that the goods are liable to confiscation. This element of knowledge is crucial for establishing culpability.
- Special and Adequate Reasons: The court must record special and adequate reasons if it imposes a sentence of imprisonment less than one year for serious offenses.
- Factors Not Considered Adequate: Subsection (3) specifies that certain factors, such as being a first-time offender, having paid a penalty in other proceedings, or being a secondary party to the offense, are not considered sufficient reasons for awarding a sentence of imprisonment less than one year.
- Instrument Definition: The term "instrument" is defined as per Explanation 1 to section 28AAA.
Practical Example
A textile exporter, ABC Ltd., consistently undervalues its exports to evade paying the correct export duties. Over a period of six months, the total evaded duty amounts to ₹60 lakh. After an investigation by customs officials, it is found that the actual market price of the exported goods far exceeded the declared value, indicating a deliberate attempt to evade duty. As the evasion exceeds ₹50 lakh, ABC Ltd., and its directors involved, could face imprisonment up to 7 years and a fine under Section 135(1)(i)(B) of the Customs Act, 1962.
Key Amendments
No major amendments since enactment significantly altering the core principle of the section. However, amendments to duty rates and penalty amounts occur periodically.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
What constitutes 'evasion of duty or prohibitions' under Section 135 of the Customs Act, 1962?
Section 135 broadly covers actions like misdeclaration of value, fraudulent evasion of duty or prohibitions, dealing with goods liable to confiscation (under Section 111 or 113), fraudulent availment of drawback or exemption, and obtaining instruments through fraud to evade duty. These actions, when knowingly committed, trigger penalties under this section.
What are the penalties for evading customs duty under Section 135 of the Customs Act, 1962?
The penalties vary depending on the amount of duty evaded or the value of goods involved. If the market price of goods exceeds ₹1 crore, or the duty evaded exceeds ₹50 lakh, or involves specified prohibited goods, the imprisonment can extend to seven years with a fine. In other cases, imprisonment may extend to three years, or with a fine, or both. Minimum imprisonment of one year applies unless the court records special reasons to the contrary. For repeat offenses under Section 135 or Section 136(1), the imprisonment can extend to seven years, with a fine, and a minimum imprisonment of one year applies, barring special and adequate reasons recorded by the court.
If a person is merely a carrier of goods involved in duty evasion, are they still liable under Section 135 of the Customs Act?
Yes, even if a person is merely a carrier or a secondary party to the commission of the offence, they can still be held liable under Section 135(1)(b) if they knowingly dealt with goods they had reason to believe are liable for confiscation. While this might be considered during sentencing, Section 135(3)(iii) specifically states that being a carrier or secondary party is *not* a special and adequate reason to award a sentence of imprisonment for a term of less than one year.
What does 'instrument' mean in the context of Section 135(1)(e) of the Customs Act, 1962, regarding evasion of duty?
According to Explanation to Section 135, the expression 'instrument' carries the same meaning as defined in Explanation 1 to section 28AAA. This generally includes licenses, certificates, permits, and other similar documents that facilitate fraudulent evasion of duty.
What are some examples of actions that could lead to prosecution under Section 135 of the Customs Act?
Examples include knowingly misdeclaring the value of imported goods to reduce customs duty, attempting to export prohibited items, fraudulently claiming duty drawbacks on exports, or obtaining a license through forged documents to import restricted goods. All of these would be considered offenses under the relevant clauses of Section 135.
Is there a time limit for initiating prosecution under Section 135 of the Customs Act for evasion of duty?
The Customs Act does not specify a limitation period for initiating prosecution under Section 135. However, general principles of criminal law and potential delays in investigation may influence the feasibility of prosecution after a significant time lapse. Courts may consider the reasons for the delay and its impact on the fairness of the trial.
How does Section 135 interact with other sections of the Customs Act, particularly Sections 111 and 113?
Section 135 is closely linked to Sections 111 (Confiscation of improperly imported goods) and 113 (Confiscation of improperly exported goods) because Section 135(1)(b) and (c) specifically address actions related to goods liable to confiscation under those sections. If a person deals with goods they know or have reason to believe are liable for confiscation under Section 111 or attempts to export goods knowing they are liable for confiscation under Section 113, they can be prosecuted under Section 135.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Misdeclaration/Evasion of Duty or Prohibition | Knowingly involved in misdeclaration of value, fraudulent evasion of duty, or violation of prohibitions under the Customs Act or other applicable laws. |
| Dealing with Confiscated Goods | Acquiring, carrying, removing, depositing, concealing, selling, purchasing, or dealing with goods known or believed to be liable to confiscation under Sections 111 or 113. |
| Attempt to Export Confiscated Goods | Attempting to export goods known or believed to be liable to confiscation under Section 113. |
| Fraudulent Drawback/Exemption | Fraudulently availing or attempting to avail of drawback or any exemption from duty related to export of goods. |
| Instrument Obtained by Fraud | Obtaining an instrument from any authority by fraud, collusion, willful misstatement, or suppression of facts and the instrument has been utilized. |
| High Value Offenses (Market Price/Duty Exceeding Threshold) | Offenses relating to goods with a market price exceeding one crore rupees, or evasion/attempted evasion of duty exceeding fifty lakh rupees, certain prohibited goods, or fraudulent drawback/exemption exceeding fifty lakh rupees. |
| Penalties for High Value Offenses | Imprisonment up to seven years and fine for high-value offenses as defined in Section 135(1)(i). Minimum imprisonment of one year applies unless special reasons exist. |
| Penalties for Other Offenses | Imprisonment up to three years, or with fine, or with both, for offenses not covered under high-value offenses as defined in Section 135(1)(i). |
Amendment History
Substituted by the Finance Act, 2007 (22 of 2007), sec. 112, for sub-section (1) (w.e.f. 11.5.2007). Earlier section 135 was renumbered as sub-section (1) thereof by Act 36 of 1973, sec. 5 and amended by sec. 5(i) (w.e.f. 1.9.1973) and was amended by Act 25 of 1978, sec. 16 (w.e.f. 1.7.1978), by Act 40 of 1989, sec. 3 (w.e.f. 26.10.1989) and by Act 32 of 2003, sec. 124 (w.e.f. 14.5.2003). Sub-section (1), before substitution by Act 22 of 2007, stood as under: "(1) Without prejudice to any action that may be taken under this Act, if any person - (a) is in relation to any goods in any way knowingly concerned in misdeclaration of value or in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods, or (b) acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111 or Section 113, as the case may be, or (c) attempts to export any goods which he knows or has reason to believe are liable to confiscation under Section 113, shall be punishable, - (i) in the case of an offence relating to any of the goods to which section 123 applies and the market price whereof exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine: Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than three years; (ii) in any other case with imprisonment for a term which may extend to three years, or with fine, or with both."
Substituted (w.e.f. 1-8-2019) s. 79 (i) (a) of the Finance (No.2) Act, 2019 (23 of 2019).
Inserted (w.e.f. 1-8-2019) s. 79 (i) (b) of the Finance (No.2) Act, 2019 (23 of 2019).
Substituted by the Finance Act, 2013 (17 of 2013), sec. 78, for "thirty lakh" (w.e.f. 10.05.2013).
Substituted (w.e.f. 1-8-2019) s. 79 (i) (c) (I) of the Finance (No.2) Act, 2019 (23 of 2019).
Inserted (w.e.f. 1-8-2019) s. 79 (i) (c) (II) of the Finance (No.2) Act, 2019 (23 of 2019).
Inserted by the Customs, Gold (Control) and Central Excises and Salt (Amendment) Act, 1973 (36 of 1973), sec. 5(ii) (w.e.f. 1.9.1973).
Substituted by the Customs, Central Excises and Salt and Central Boards of Revenue (Amendment) Act, 1978 (25 of 1978), sec. 16, for"six months" (w.e.f. 1.7.1978).
Inserted (w.e.f. 1-8-2019) s. 79 (ii) of the Finance (No.2) Act, 2019 (23 of 2019).