Customs Act, 1962 Section 28aaa — Recovery of duties in certain cases
Customs Act, 1962 · Recovery of duties in certain cases
Plain-English Explanation
Overview
Section 28AAA of the Customs Act, 1962, addresses situations where customs duties are sought to be evaded by misuse of instruments (like licenses, certificates, or duty credit scrips) obtained through collusion, wilful misstatement, or suppression of facts. It allows for the recovery of duties from the person who originally obtained the instrument improperly, even if someone else ultimately used it. This section acts as a safeguard against fraudulent availment of benefits under various schemes related to customs duties.
Who Does This Apply To?
This section primarily applies to:
- Individuals or entities who obtain instruments (licenses, scrips, authorisations, etc.) through collusion, wilful misstatement, or suppression of facts, intending to utilize them under the Customs Act or related laws.
- Importers utilizing instruments obtained under various schemes for duty exemptions or remissions.
- Customs officers responsible for recovering evaded duties.
How It Works
Section 28AAA operates through the following steps:
- Instrument Obtained Improperly: A person obtains an instrument (defined in Explanation 1 of the section) by means of collusion, wilful misstatement, or suppression of facts. This instrument could be issued under the Foreign Trade (Development and Regulation) Act, 1992, or any other law or scheme related to duty exemptions, rewards, or incentives.
- Instrument Utilized by Another: The instrument obtained improperly is then utilized under the Customs Act by someone other than the person who obtained it. This could involve using the instrument to claim duty exemptions or reductions on imported goods.
- Duty Recovery: The duty that was exempted or debited due to the utilization of the instrument is deemed never to have been exempted. The customs authorities can then recover this duty from the person who originally obtained the instrument improperly. Note that this action is without prejudice to any action under Section 28 against the importer (the person who actually used the instrument for customs clearance).
- Notice and Opportunity: Before recovering the duty, the proper officer serves a show cause notice to the person who obtained the instrument, allowing them 30 days to explain why the amount should not be recovered. After considering their representation and giving them a hearing, the officer determines the final amount of duty and interest to be recovered.
- Interest: In addition to the duty, the person is also liable to pay interest at the rate fixed by the Central Government under Section 28AA, calculated from the date of utilization of the instrument until the date of recovery.
- Order and Payment: An order is passed specifying the amount of duty and interest to be recovered. The person must repay the amount within 30 days of receiving the order.
- Recovery Mechanism: If the person fails to repay the amount within 30 days, it will be recovered as per the provisions of Section 142(1) of the Customs Act.
Important Conditions & Exceptions
- Condition 1: The instrument must be utilized under the provisions of the Customs Act, rules, regulations, or notifications issued thereunder.
- Condition 2: The provisions of this section apply to any utilization of instruments obtained improperly on or after the date the Finance Bill, 2012 received presidential assent, regardless of when the instrument was initially issued.
- Exception: If an order determining the duty has already been passed under Section 28, no separate order to recover that duty will be passed under Section 28AAA. This prevents double recovery of the same duty.
Practical Example
Suppose "ABC Exporters" obtained an export license fraudulently by misrepresenting their export performance. This license entitled them to a duty credit scrip worth ₹50 lakhs. They sold this scrip to "XYZ Importers," who used it to import goods, thereby evading customs duties of ₹50 lakhs. Even though XYZ Importers used the scrip, under Section 28AAA, the Customs Department can recover the ₹50 lakhs duty from ABC Exporters, along with applicable interest, because they were the ones who obtained the license through fraudulent means. This is in addition to any potential action against XYZ Importers under Section 28 for incorrect availment of the duty exemption.
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 purpose of Section 28AAA of the Customs Act, 1962?
Section 28AAA aims to recover customs duties when an 'instrument' (like a license or scrip) used for duty exemption or reduction has been obtained through collusion, wilful misstatement, or suppression of facts by the person to whom it was issued, and is subsequently used by another person. It ensures that the duty, which was initially exempted or debited due to the fraudulent instrument, is recovered from the original recipient of the instrument.
What constitutes an 'instrument' under Section 28AAA of the Customs Act, 1962?
As per Explanation 1 of Section 28AAA, an 'instrument' includes any scrip, authorization, license, certificate, or similar document issued under the Foreign Trade (Development and Regulation) Act, 1992, or duty credit issued under section 51B. It essentially encompasses any document that bestows financial or fiscal benefits, such as those related to reward, incentive, duty exemption, or duty remission schemes, that can be utilized under the Customs Act.
If duty is recoverable under Section 28AAA, what additional charges apply?
Besides the recoverable duty, the person from whom the duty is recovered is also liable to pay interest, as per Section 28AAA(2). The interest rate is determined by the Central Government under Section 28AA, and it's calculated from the date the instrument was utilized until the date the duty is recovered.
What is the procedure for recovery of duties under Section 28AAA of the Customs Act, 1962?
The proper officer must serve a show cause notice on the person to whom the instrument was issued, providing them 30 days to explain why the specified amount (excluding interest) should not be recovered, as per Section 28AAA(3). After considering their representation and providing a hearing, the officer determines the amount to be recovered and issues an order, specifying a 30-day repayment period, including interest.
Does Section 28AAA apply if a duty demand has already been determined under Section 28?
No, Section 28AAA(4) explicitly states that if an order determining the duty has already been passed under Section 28 (general provision for recovery of duty), no order to recover that duty can be passed under Section 28AAA. This prevents duplicate recovery actions for the same duty amount.
What happens if the person fails to repay the amount determined under Section 28AAA within the specified time?
According to Section 28AAA(5), if the person fails to repay the amount within 30 days as specified in the recovery order, the amount will be recovered in the manner laid down in Section 142(1) of the Customs Act, 1962. This refers to methods like attachment and sale of property to recover the dues.
When did Section 28AAA come into effect, and does it apply retrospectively?
Explanation 2 of Section 28AAA specifies that the provisions apply to any utilization of instruments obtained fraudulently on or after the date the Finance Bill, 2012 received presidential assent, regardless of whether the instrument was issued before or after that date. This means the section has retrospective applicability to the utilization of fraudulently obtained instruments.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Instrument obtained by collusion, misstatement, or suppression | If an instrument (e.g., scrip, license) was obtained by collusion, wilful misstatement, or suppression of facts, and is utilized by another party, the duty is recoverable. |
| Recovery from instrument recipient, not the importer | The duty is recovered from the person who originally obtained the instrument through illicit means, even if another person utilized the instrument. |
| Applicable from Finance Bill 2012 assent date | This section applies to instrument utilizations occurring on or after the date the Finance Bill, 2012 received presidential assent, regardless of when the instrument was issued. |
| Interest payable on recovered duty | In addition to the recoverable duty, interest at a rate fixed by the Central Government under section 28AA is payable from the date of utilization until the date of recovery. |
| Show cause notice and opportunity to be heard | The proper officer must issue a show cause notice giving 30 days to respond and an opportunity to be heard before recovering the duty and interest. |
| Repayment period after order | The person to whom the instrument was issued must repay the amount specified in the order, along with interest, within 30 days of receiving the order. |
| Section 28 action is preserved | Action against the instrument holder does not preclude separate action under Section 28 against the importer. |
| No recovery order if duty determined under Section 28 | If an order determining the duty has already been passed under section 28, no separate recovery order can be issued under this section. |
Amendment History
Substituted by the Finance Act, 2012 (23 of 2012), section 122 (w.e.f. 28-5-2012)
Substituted (w.e.f. 27-3-2020) s.109 (a) of Finance Act 2020 (12 of 2020)
Inserted (w.e.f. 27-3-2020) s. 109 (b) of Finance Act 2020 (12 of 2020)
Substituted (w.e.f. 27-3-2020) s. 109 (c) of Finance Act 2020 (12 of 2020)