Customs Act, 1962 Section 28aa — Interest on delayed payment of duty
Customs Act, 1962 · Interest on delayed payment of duty
Plain-English Explanation
Overview
Section 28AA of the Customs Act, 1962, mandates the payment of interest on delayed customs duty payments. This section ensures timely revenue collection by penalizing importers and exporters who fail to remit customs duties within the stipulated timeframe. It is applicable regardless of whether the duty is paid voluntarily or after a formal determination by customs authorities.
Who Does This Apply To?
This section applies to any person liable to pay duty under Section 28 of the Customs Act, 1962. This includes importers, exporters, and any other individuals or entities obligated to pay customs duties on goods. This liability exists whether the delay is due to their own oversight, disputes regarding valuation, classification or any other reason leading to short payment.
How It Works
The mechanism for calculating and levying interest under Section 28AA is as follows:
- Trigger: If customs duty payment is delayed, the person liable must pay interest in addition to the principal duty amount.
- Interest Rate: The interest rate is determined by the Central Government through official notifications but must be within the range of 10% to 36% per annum. The applicable rate at the time of default is the legally enforced rate.
- Calculation Period: Interest is calculated from the first day of the month succeeding the month in which the duty should have been paid. It continues to accrue until the actual date of payment. For instance, if duty was due in January and is paid in March, interest is calculated from February 1st to the date in March when the duty is paid.
- Applicability: This section applies whether the delayed payment is voluntary (the taxpayer realizes and pays) or involuntary (the tax is demanded via Section 28).
- Erroneous Refund: Interest is also applicable from the date of an erroneous refund up to the date of recovery.
Important Conditions & Exceptions
- Condition 1: The liability to pay interest arises regardless of any judicial pronouncements to the contrary, solidifying the applicability of Section 28AA.
- Condition 2: The Central Government has the power to set the interest rate within the specified range (10%-36%). The rate may vary based on government policy and economic conditions.
- Exception: No interest is payable under the following specific conditions:
- (a) The duty becomes payable solely because of an order, instruction, or direction issued by the Board under Section 151A.
- (b) The full amount of the duty, resulting from the Section 151A order, is voluntarily paid within 45 days from the date of issue of that order, instruction, or direction, without reserving any right to appeal the payment later.
Practical Example
Imagine an importer, "Global Traders," was required to pay customs duty of ₹500,000 on imported goods in January. However, due to a disagreement over valuation, the duty was paid only in March. Assuming the applicable interest rate is 12% per annum, the interest calculation would be:
Interest is calculated from February 1st to the date in March when the duty is paid. Let's assume that the payment was done on 20th March.
Approximate number of months = 2 months
Interest = (₹500,000 * 12% * 2/12) = ₹10,000
Therefore, Global Traders would need to pay the original duty of ₹500,000 plus interest of ₹10,000.
Key Amendments
No major amendments since enactment.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
When does interest become applicable on delayed customs duty payments under Section 28AA of the Customs Act, 1962?
Interest becomes applicable under Section 28AA when a person liable to pay duty according to Section 28 fails to pay it on time, regardless of whether the payment is voluntary or after duty determination. The interest applies in addition to the actual duty amount owed, from the month following the month the duty should have been paid.
What is the rate of interest applicable on delayed customs duty payments under Section 28AA, and how is it calculated?
The rate of interest on delayed customs duty payments under Section 28AA is determined by the Central Government via notification, and it must fall between 10% and 36% per annum. Interest is calculated from the first day of the month succeeding the month in which the duty ought to have been paid or from the date of erroneous refund, until the date of actual payment.
Are there any circumstances under which interest is *not* levied on delayed customs duty under Section 28AA?
Yes, according to Section 28AA(3), interest is *not* payable if the duty becomes payable due to an order, instruction, or direction issued by the Board under Section 151A, *and* the full amount of duty is voluntarily paid within 45 days from the date of that order, instruction, or direction without reserving the right to appeal the payment.
Does Section 28AA override any court orders or previous rulings regarding interest on delayed customs duty?
Yes, Section 28AA explicitly states that its provisions apply notwithstanding any judgment, decree, order, or direction from any court, Appellate Tribunal, or authority. This means that Section 28AA takes precedence over conflicting rulings on interest related to delayed customs duty payments.
How does Section 28AA affect voluntary duty payments made after a delay?
Section 28AA stipulates that interest applies even when duty is paid voluntarily after the due date. Therefore, even if a taxpayer self-assesses and pays the duty late, they are still liable for interest as per the rate notified by the Central Government.
If there's an erroneous refund of customs duty, when does the interest clock start ticking under Section 28AA?
In the case of an erroneous refund, Section 28AA(2) specifies that the interest calculation starts from the date of the erroneous refund itself, and continues until the date the duty is repaid. This contrasts with regular delayed duty payments, where the interest clock starts the month *after* the due date.
What's the practical implication of Section 28AA for importers and exporters?
Section 28AA emphasizes the importance of timely customs duty payments. Importers and exporters must ensure accurate assessment and prompt payment of duties to avoid incurring potentially significant interest charges, which can range from 10% to 36% per annum based on government notifications. Careful attention to payment deadlines is crucial for financial planning and compliance.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Liability for Interest | Person liable to pay duty under Section 28 must also pay interest on delayed payments, regardless of voluntary payment or duty determination. |
| Interest Rate Range | Interest rate is determined by the Central Government, ranging from 10% to 36% per annum, as notified in the Official Gazette. |
| Interest Calculation Period | Interest is calculated from the first day of the month following the month when duty was due, up to the date of actual payment. |
| Exemption: Board Order (Section 151A) | No interest is payable if duty becomes payable due to a Board order under Section 151A. |
| Exemption: Voluntary Payment within 45 days | The exemption is applicable only if the duty is voluntarily paid in full within 45 days of the Board's order, instruction, or direction. |
| Exemption Condition: No Appeal Reserved | To avail exemption, the payment must be made without reserving any right to appeal against the payment at a later time. |
Amendment History
Substituted by Finance Act, 2011 (8 of 2011), section 43, for section 28AA and section 28AB (w.e.f. 08-04-2011). Earlier Section 28AA was inserted by Act 22 of 1995, section 57 (w.e.f 26-5-1995) and was amended by Act 33 of 1996, section 61(w.e.f. 28-07-1996), by Act 10 of 2000, section 80 (w.e.f 12-5-2000), by Act 14 of 2001, section 104 (w.ef 11-5-2001), by Act 20 of 2002, section 120 (w.e.f. 11-5-2002) and by Act 49 of 2005, section 30 and Schedule, Part V(w.e.f.28-12-2005). Section 28 AB was inserted Act 33 of 1996, section 32(w.e.f. 28 -9-1996) and was amended by Act 10 of 2000, section 81(w.e.f.12-5-2000), by Act 14 of 2001, section 105(w.e.f. 11-5-2001), by Act 20 of 2002, section 121(w.e.f.11.5.2002), and by Act 49 of 2005, section 30 and Schedule VI-5(w.e.f. 28-12-2005). Sections 28AA and 28 AB, before substitution by Act 8 of 2011, stood as under: "28AA. Interest on delayed payment of duty.- (1) Subject to the provisions contained in section 28AB, where a person, chargeable with the duty determined under sub-section (2) of section 28, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty : Provided that where a person, chargeable with duty determined under sub-section (2) of section 28 before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty. Explanation
- Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal, the National Tax Tribunal or, as the case may be, the court, the date of such determination shall be the date on which an amount of duty is first determined to be payable. Explanation
- Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal or, the National Tax Tribunal or, as the case may be, the court, the date of such determination shall be,- (a) for the amount of duty first determined to be payable, the date on which the duty is so determined; (b) for the amount of increased duty, the date of order by which the increased amount of duty is first determined to be payable; (c) for the amount of further increase of duty, the date of order on which the duty is so further increased. (2) The provisions of sub-section (1) shall not apply to cases where the duty or the interest becomes payable or ought to be paid on and after the date on which the Finance Bill, 2001 receives the assent of the President. 28-AB. Interest on delayed payment of duty in special cases.- (1) Where any duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of section 28, shall, in addition to the duty, be liable to pay interest at such rate not below ten per cent. and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first day of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 28, till the date of payment of such duty: Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 151A, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid. (2) The provisions of sub-section (1) shall not apply to cases where the duty or 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. Explanation
- Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the interest shall be payable on such reduced amount of duty. Explanation 2.- Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the interest shall be payable on such increased or further increased amount of duty.".