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  • Rajesh Audithyan

How to make short levied/short paid Customs duty & interest payment without higher penalty ?

In a particular import consignment, the customs department observed that the goods imported by the appellant were not Malaysian origin but were imported from China, which attract levy of Anti Dumping Duty. ( Kindly refer The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 wef 21.09.2020 and origin criteria prescribed in the respective Rules of Origin should be proved by importers  )


Based on pre consultation from Customs, the importer has paid Anti Dumping Duty (ADD) with interest before issuance of SCN.


Since the department has accepted such facts, that as per the provisions of sub-section(5) of Section 28 the appellant was required to be issued with the show cause notice only for deposit of the penalty amount of 15% of the short levy duty. However, instead of issuing the show cause notice for recovery of the 15% amount of penalty, the department had proceeded against the importer for confirmation of the 100% penalty in respect of the short paid amount of duty. Is this 100% penalty tenable ?


No. In this case, importer has paid difference in duty with interest without getting Show cause notice.


Section 28(5) reproduced below;

Recovery of [duties not levied or not paid or short-levied or short-paid] or erroneously refunded

“ Where any [duty has not been levied or not paid or has been short-levied or short-paid] 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 the employee of the importer or the exporter, to whom a notice has been served under sub-section (4) by the proper officer, such person may pay the duty in full or in part, as may be accepted by him, and the interest payable thereon under section 28AA and the penalty equal to[fifteen per cent.] of the duty specified in the notice or the duty so accepted by that  person, within thirty days of the receipt of the notice and inform the proper officer of such payment in writing”


Show cause notice had confirmed that the importer had deposited the entire amount of Anti Dumping Duty along with interest before issuance of the show cause notice. Since the department has accepted such facts, that as per the provisions of sub-section(5) of Section 28 the appellant was required to be issued with the show cause notice only for deposit of the penalty amount of 15% of the short levy duty.


Since, there is no ambiguity in interpretation of the provisions of sub-section (5) of Section 28, with regard to the quantum of penalty to be deposited, the benefit of lower penalty of 15% should be available to the appellant.


The appellant should liable to pay penalty of 15% of the adjudged amount of duty confirmed/paid by it before initiation of the show cause.


Remarks: When Importer is not 100% confident on his lesser duty claim with strong precedent cases, based on Customs pre consultation  letter,  it  is advisable to pay the difference in duty with interest PLUS 15% towards penalty to avoid further legal consequences and higher penalty.


ATIONS SPECIALITY CHEMICAL VERSUS COMMISSIONER OF CUSTOMS, NHAVA SHEVA - V,  CESTAT MUMBAI decided on 05.03.2020


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