Customs Act, 1962 Section 28d — Presumption that incidence of duty has been passed on to the buyer
Customs Act, 1962 · Presumption that incidence of duty has been passed on to the buyer
Plain-English Explanation
Overview
Section 28D of the Customs Act, 1962 establishes a legal presumption. It states that anyone who has paid customs duty on imported goods is presumed to have passed on the full burden of that duty to the buyer of those goods. This presumption impacts refund claims, as it shifts the burden of proof onto the importer.
Who Does This Apply To?
This section primarily affects importers who have paid customs duty and are now seeking a refund of that duty. It applies to every person who has paid the duty, regardless of whether they are individuals, companies, or other types of entities. Customs officers also need to consider this provision when processing refund claims and determining unjust enrichment.
How It Works
The mechanism of Section 28D operates on the following principles:
- Initial Payment: An importer pays customs duty on imported goods.
- Legal Presumption: The law automatically assumes that the importer has recovered the duty amount from the buyer of the goods. This is the "presumption that incidence of duty has been passed on".
- Burden of Proof: If the importer wants a refund of the duty (for example, due to an assessment error or successful appeal), they must prove that they did not pass on the duty to the buyer. This is critical. Without proving the contrary, the refund claim is likely to be rejected on the grounds of "unjust enrichment" (the importer would be unfairly enriched by receiving both the duty from the buyer and the refund from customs).
- Evidence Required: The importer needs to provide compelling evidence to rebut the presumption. This evidence could include things like contracts with specific pricing clauses, accounting records showing a loss on the sale, or evidence of price reductions given to buyers equal to the refund amount.
Important Conditions & Exceptions
- Condition 1: The presumption applies to all goods subject to customs duty under the Customs Act, 1962.
- Condition 2: The burden of proving that the duty was not passed on to the buyer lies solely on the person claiming the refund (the importer).
- Exception: The presumption can be rebutted by providing sufficient and credible evidence to the contrary. The quality and nature of evidence is key.
Practical Example
ABC Importers imports widgets and pays INR 50,000 in customs duty. They sell these widgets to retailers. Later, a reassessment determines that the correct duty should have been only INR 40,000. ABC Importers files a claim for a refund of INR 10,000.
Under Section 28D, Customs presumes that ABC Importers already recovered the initial INR 50,000 from the retailers through the price of the widgets. To get the INR 10,000 refund, ABC Importers must prove they didn't pass on the full duty. For instance, they could show that they reduced the selling price of the widgets by INR 10,000 in response to the reassessment or that the contracts with retailers contain clauses allowing price adjustments for duty changes and they adjusted the invoices down the line to reflect the refund amount to the end customers. Without such proof, the refund will be denied.
Key Amendments
No major amendments since enactment.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
What does Section 28D of the Customs Act, 1962, actually mean for importers?
Section 28D creates a legal presumption that if you've paid customs duty on imported goods, you've already recovered that cost by charging your customers a higher price. This means if the department later determines the duty was overpaid and is seeking to refund it, you must prove you *didn't* pass on the duty to your buyer to be eligible for the refund. Otherwise, the refund will be credited to the Consumer Welfare Fund.
How can an importer prove they *didn't* pass on the customs duty to the buyer, as required by Section 28D?
Proving you haven't passed on the duty incidence requires strong documentary evidence. Acceptable evidence can include detailed pricing structures showing no increase related to the duty, contracts with fixed pricing irrespective of import duties, accounting records demonstrating the duty was absorbed as a cost, or any other concrete proof demonstrating that the incidence of duty wasn't passed to the buyer. Consult with a tax advisor to prepare the best possible evidence.
Does Section 28D apply to all types of goods and all types of importers under the Customs Act, 1962?
Yes, Section 28D applies universally to 'every person who has paid the duty on any goods' under the Customs Act, 1962. There are no explicit exemptions based on the type of goods imported or the specific nature of the importer's business. The presumption applies unless the importer proves otherwise.
What happens if an importer cannot prove they didn't pass on the duty to the buyer, and the refund is credited to the Consumer Welfare Fund?
If the importer fails to rebut the presumption under Section 28D, the refund will be credited to the Consumer Welfare Fund as per Section 28C. The importer essentially forfeits the refund amount. It's crucial to maintain thorough records to avoid this scenario.
Are there any time limits or statutes of limitations related to claiming refunds under Section 28D of the Customs Act, 1962?
While Section 28D itself doesn't specify a time limit, Section 27 of the Customs Act, 1962, generally provides a two-year limitation period from the date of payment of duty for claiming a refund. However, this period can vary based on specific circumstances. Always seek expert legal counsel to ascertain the applicable time limit in your specific case.
How does Section 28D interact with other provisions of the Customs Act, 1962, particularly regarding unjust enrichment?
Section 28D is closely linked to the principle of unjust enrichment, codified in Section 27 and 28C of the Customs Act. The government doesn't want to refund duty to an importer who has already recovered that cost from their customers. Section 28D streamlines the process by creating a presumption of passed-on incidence, placing the burden of proof on the importer to demonstrate that unjust enrichment would not occur if the refund were granted to them.
Has there been any recent case law or changes to the interpretation of Section 28D of the Customs Act, 1962?
The interpretation of Section 28D often evolves through judicial pronouncements. Recent case law frequently addresses the type and quality of evidence required to successfully rebut the presumption. It's essential to stay updated on relevant judgments from the Supreme Court and High Courts, as well as any circulars or notifications issued by the CBIC, to understand the current legal landscape surrounding Section 28D.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Duty Payment Requirement | The section applies to any person who has paid duty on goods under the Customs Act, 1962. |
| Presumption of Passing on Duty | It is presumed that the person who paid the duty has passed on the full incidence of such duty to the buyer. |
| Burden of Proof | The person who paid the duty has the burden to prove that the duty incidence was not passed on to the buyer. |
| Rebuttal of Presumption | The presumption can be rebutted by providing evidence that the incidence of duty was not passed on to the buyer. |
| Full Incidence | The presumption applies to the *full* incidence of the duty, not just a portion of it. |
| Applicability to 'Any Goods' | The presumption applies to any goods subject to duty under the Customs Act, 1962. |
Amendment History
No amendment records available for this provision.
Customs Act, 1962 Section 28d — Presumption that incidence of duty has been passed on to the buyer