Customs Act, 1962 Section 28 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
Customs Act, 1962 · Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
Plain-English Explanation
Overview
Section 28 of the Customs Act, 1962, deals with the recovery of customs duties that were not levied, paid, or were short-levied/paid, or erroneously refunded. It empowers customs officers to issue notices demanding the unpaid duty, along with interest and potential penalties, from the person liable. This section ensures the government collects its rightful revenue and addresses situations of underpayment or incorrect refunds.
Who Does This Apply To?
This section applies to:
- Importers: Individuals or entities importing goods into India.
- Exporters: Individuals or entities exporting goods from India.
- Agents/Employees: Individuals acting on behalf of importers or exporters (e.g., customs brokers).
- Customs Officers (Proper Officer): Designated officers responsible for assessing and collecting customs duties.
How It Works
Here's a step-by-step breakdown of the process:
- Identification of Underpayment/Erroneous Refund: The proper officer identifies a case where duty was not levied, not paid, short-levied, short-paid, or erroneously refunded.
- Pre-Notice Consultation (New Provision): Before issuing a notice, the proper officer shall hold pre-notice consultation with the person chargeable with duty or interest, as per the prescribed manner.
- Issuance of Show Cause Notice (SCN):
- Normal Cases: If the underpayment/erroneous refund isn't due to collusion, willful misstatement, or suppression of facts, the officer has two years from the relevant date to issue a SCN demanding the unpaid duty/refunded amount, plus interest. Minimum amount involved for issuing SCN is rupees one hundred.
- Cases Involving Collusion/Fraud: If the underpayment/erroneous refund is due to collusion, willful misstatement, or suppression of facts, the officer has five years from the relevant date to issue the SCN.
- Voluntary Payment Before SCN: The person liable can voluntarily pay the duty/interest (either self-assessed or as ascertained by the proper officer) before receiving a notice.
- If payment is made before the SCN is issued, and the proper officer is informed in writing, no SCN is issued for that amount, and no penalty will be levied.
- Payment After SCN (with Collusion/Fraud): If collusion/fraud is involved, the recipient of the notice can pay the duty, interest, and a penalty equal to 15% of the duty specified in the notice, within 30 days of receiving the notice.
- Adjudication and Recovery: If the recipient doesn't pay or contests the SCN, the officer adjudicates the matter and issues an order determining the duty payable. Recovery action is then initiated if the duty remains unpaid.
Important Conditions & Exceptions
- Relevant Date: This is a crucial factor in determining the limitation period. It varies depending on the situation (e.g., the date of entry of goods, the date of payment of duty).
- Stay Orders: The period during which a court or tribunal has stayed the payment of duty is excluded when calculating the limitation period of two years or five years.
- Full Payment After SCN (Normal Cases): If a notice is served and the amount of duty with interest is paid within 30 days from the date of receipt of the notice, no penalty shall be levied, and the proceedings are deemed concluded.
- Supplementary Notice: The proper officer may issue a supplementary notice.
Practical Example
XYZ Corp imports machinery and initially pays ₹100,000 in customs duty. Six months later, a customs audit reveals the machinery was incorrectly classified, and the correct duty should have been ₹150,000. This underpayment of ₹50,000 was due to an unintentional error.
Since it was an honest mistake, the proper officer has two years from the relevant date to issue a SCN to XYZ Corp demanding the ₹50,000, plus applicable interest. If, however, the underpayment was due to XYZ Corp deliberately misclassifying the machinery, the officer would have five years to issue the notice.
If XYZ Corp received the SCN, they would have 30 days to make the payment to avoid penalties.
Key Amendments
No major amendments since enactment.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
What is the scope of Section 28 of the Customs Act, 1962, and when is it applicable?
Section 28 deals with the recovery of customs duties not levied, not paid, short-levied, short-paid, or erroneously refunded. It applies when there's a discrepancy in duty payment, either due to oversight or intentional actions like collusion or misrepresentation by the importer/exporter.
What is the time limit for issuing a show cause notice under Section 28 of the Customs Act, 1962?
The time limit for issuing a show cause notice (SCN) varies. For cases *not* involving collusion, willful misstatement, or suppression of facts, the proper officer must issue the SCN within two years from the relevant date (Section 28(1)(a)). However, if collusion, willful misstatement, or suppression of facts are involved, the time limit extends to five years from the relevant date (Section 28(4)).
What constitutes 'collusion', 'wilful misstatement', or 'suppression of facts' under Section 28 of the Customs Act, 1962?
'Collusion' implies a secret agreement or conspiracy to defraud the government. 'Wilful misstatement' means intentionally providing false information. 'Suppression of facts' involves deliberately concealing information with the intent to evade duty payment. These elements result in a longer period of limitation for the issuance of notice, and increase exposure to penalty.
Is there a pre-notice consultation requirement before issuing a show cause notice under Section 28 of the Customs Act, 1962?
Yes, the proper officer is now required to hold a pre-notice consultation with the person chargeable with duty or interest before issuing a show cause notice under Section 28(1)(a). This consultation aims to provide an opportunity to clarify the issues and potentially resolve the matter before a formal notice is issued. The method of consultation is prescribed.
What are the implications of voluntarily paying the deficient duty before receiving a show cause notice under Section 28 of the Customs Act, 1962?
If the person chargeable with duty voluntarily pays the deficient duty along with applicable interest under Section 28AA, either based on their own ascertainment or the officer's determination, before receiving a notice, they should inform the proper officer in writing. If this is done, no show cause notice will be served for that amount of duty or interest, and no penalty will be levied (Section 28(2)).
What happens if the proper officer believes the amount voluntarily paid is less than the amount actually payable under Section 28 of the Customs Act, 1962?
If the proper officer believes that the voluntary payment falls short of the actual duty payable, they can still issue a show cause notice for the remaining amount (Section 28(3)). The two-year limitation period for issuing this notice will be computed from the date of receiving information regarding the voluntary payment.
Are there any monetary thresholds for issuing a show cause notice under Section 28 of the Customs Act, 1962?
Yes, the proper officer shall not serve a show cause notice where the amount involved is less than rupees one hundred (Section 28(1)).
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Recovery for non-collusion cases: Time limit of 2 years | If duty/interest is unpaid/short-paid/erroneously refunded due to reasons other than collusion, wilful misstatement or suppression of facts, the proper officer must issue a show cause notice within two years from the relevant date. |
| Pre-notice consultation required before show cause notice | Before issuing the show cause notice, the proper officer is mandated to hold a pre-notice consultation with the person chargeable with the duty or interest, in a manner prescribed by law. |
| Threshold for issuing notice: Above Rupees One Hundred | The proper officer shall not serve a show cause notice if the amount involved is less than rupees one hundred. |
| Duty payment before notice: No further action | If the person chargeable with duty pays the amount (as self-ascertained or as ascertained by the officer) along with interest before the notice is served, no notice will be issued, and no penalty will be levied. |
| Duty payment after notice: Conclusion of Proceedings | If the amount of duty with interest as specified in the notice is paid within thirty days of the notice's receipt, no penalty shall be levied, and the proceedings against the person shall be deemed concluded. |
| Recovery for collusion/fraud cases: Time limit of 5 years | If duty/interest is unpaid/short-paid/erroneously refunded due to collusion, wilful misstatement, or suppression of facts, the proper officer has five years from the relevant date to issue a show cause notice. |
| Payment with reduced penalty after collusion notice | If a notice under sub-section (4) has been served, the person can pay the duty, interest, and a penalty equal to fifteen per cent of the duty specified in the notice within thirty days of its receipt. |
Amendment History
Substituted by Finance Act, 2011 (8 of 2011), section 42, for Section 28 (w.e.f. 08-04-2011). Earlier section 28 was amended by Act 25 of 1978, section 6(w.e.f. 1-7-1978), by Act 21 of 1984, section 37 (w.ef.11-5-1984), by Act 80 of 1985, section 3 (w.e.f 27-12-1985), by Act 18 of 1992, section 109(2) (w.e.f. 14-5-1992), by Act 22 of 1995, section 56(w.e.f. 26-5-1995) by Act 10 of 2000, section 79 (w.e.f. 12-5-2000), by Act 14 of 2001, section 103(w.e.f. 11-5-2001), by Act 32 of 2003, section 109(w.e.f. 14-5-2003), by Act 29 of 2006, section 22(w.e.f. 13-7-2006). Section 28, before substitution by Act 8 of 2011, stood as under: "
Notice for payment of duties, interest, etc. - (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may,- (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short- levied or part 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: Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words 'one year' and 'six months', the words 'five years' were substituted: Explanation. -Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be. (1A) When any duty has not been levied or has been short-levied or the interest has not been charged 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 by the importer or the exporter or the agent or employee of the importer or exporter, to whom a notice is served under the proviso to sub-section (1) by the proper officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under Section 28AB and penalty equal to twenty-five per cent. of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice. (2) The proper officer, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), shall determine the amount of duty or interest due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined: Provided that if such person has paid the duty in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice is served under sub-section (1) shall, without prejudice to the provisions of Sections 135, 135A and 140, be deemed to be conclusive as to the matters stated therein: Provided further that, if such person has paid duty in part, interest and penalty under sub-section (1A), the proper officer shall determine the amount of duty or interest not being in excess of the amount partly due from such person. (2A) Where any notice has been served on a person under sub-section (1), the proper officer,- (i) in case any duty has not been levied or has been short-levied, or the interest has not been 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, where it is possible to do so, shall determine the amount of such duty or the interest, within a period of one year; and (ii) in any other case, where it is possible to do so, shall determine the amount of duty which has not been levied or has been short-levied or erroneously refunded or the interest payable which has not been paid, part paid or erroneously refunded, within a period of six months, from the date of service of the notice on the person under sub-section (1). (2B) Where any duty has not been levied or has been short-levied or erroneously refunded, or any interest payable has not been paid, part paid or erroneously refunded, the person, chargeable with the duty or the interest, may pay the amount of duty or interest before service of notice on him under sub-section (1) in respect of the duty or the interest, as the case may be, and inform the proper officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub-section (1) in respect of the duty or the interest so paid: Provided that the proper officer may determine the amount of short-payment of duty or interest, if any, which in his opinion has not been paid by such person and, then, the proper officer shall proceed to recover such amount in the manner specified in this section, and the period of 'one year' or 'six months' as the case may be, referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1.- Nothing contained in this sub- section shall apply in a case where the duty was not levied or was not paid or the interest was not paid or was part paid or the duty or interest was erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter. Explanation 2.- For the removal of doubts, it is hereby declared that the interest under Section 28AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the proper officer, but for this sub- section. (2C) The provisions of sub-section (2B) shall not apply to any case where the duty or the interest had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President. (3) For the purposes of sub-section (1), the expression 'relevant date' means, (a) in case where duty is not levied, or interest is not charged, the date on which the proper officer makes an order for the clearance of the goods; (b) in a case where duty is provisionally assessed under Section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest."
Substituted by the Finance Act, 2016 (28 of 2016), section 120 (a), for "duties not levied or short- levied". (w.e.f. 14-08-2016)
Substituted by Finance Act, 2016 (28 of 2016), section 120 (b)(i) for "duty has not been levied or has been short-levied". (w.e.f. 14-05-2016)
Substituted by the Finance Act, 2016 (28 of 2016), section 120 (b)(ii)(A), for "one year". (w.e.f. 14-05-2016).
Inserted by the Finance Act, 2016, Act 28 of 2016, section 120 (b)(ii)(B) (w.e.f. 14-05-2016)
Inserted by Finance Act, 2018 (13 of 2018), section 63 (w.e.f.29.03.2018)
Inserted by the Finance Act, 2013 (17 of 2013), section 66 (w.e.f. 10-5-2013)
Inserted by Finance Act, 2015 (20 of 2015), section 82 (a) (w.e.f. 14-5-2015)
Substituted by the Finance Act, 2016, (28 of 2016), section 120(c), for "one year" (w.e.f. 14-05-2016)
Substituted by the Finance Act, 2016, (28 of 2016), section 120(d)(i) for "levied or has been short levied" (w.e.f. 14-08-2016).
Substituted by the Finance Act, 2016, (28 of 2016), section 120(d)(ii), for "so levied"(w.e.f. 14-05-2016)
Substituted by the Finance Act, 2016, (28 of 2016), section 120(e), for "duty has not been levied or has been short- levied" (w.e.f. 14-05-2016)
Substituted by Finance Act, 2015 (20 of 2015), section 82(b), for "twenty-five percent". (w.e.f. 14-05-2015)
Substituted by the Finance Act, 2016, (28 of 2016), section 120(f), for "one year"(w.e.f. 14-05-2016)
Substituted by the Finance Act, 2016, (28 of 2016), section 120(g), for "one year"(w.e.f. 14-05-2016)
Inserted by Finance Act, 2018(13 of 2018), section 63 (w.e.f. 29.03.2018)
Omitted by Finance Act, 2018(13 of 2018), section 63 (w.e.f. 29.03.2018) the words "where it is possible to do so"
Inserted by Finance Act, 2018(13 of 2018), section 63 (w.e.f. 29.03.2018)
Inserted by Finance Act, 2018(13 of 2018), section 63 (w.e.f. 29.03.2018)
Inserted by Customs (Amendment & Validation ) Act, 2011 (14 of 2011), section 2 (w.e.f. 16-9-2011)
Substituted by the Finance Act, 2016, (28 of 2016), section 120(h), for "not levied"(w.e.f. 14-05-2016)
Inserted by Finance Act, 2015 (20 of 2015), section 82 (c) w.e.f. 14-05-2015)
Substituted (w.e.f. 29-3-2020) s.108 of Finance Act 2020 (12 of 2020)
Inserted by s. 95 of the Finance (No.7) Act, 2025.