DEMAND, RECOVERY AND REFUND OF DUTY

I. DEMAND

1. When can the department demand duty

   Show cause notice (SCN) shall be issued for recovery of duty in cases where duty on goods has not been levied or not paid or short levied or short paid or refunded erroneously or any interest has not been paid or part paid or refunded erroneously within the specified time limits³².

2. Time limit to issue SCN under Section 28

• Meaning of “Relevant date:

  Relevant date means:

3. Power to issue Supplementary Notice

   Proper Officer may issue a supplementary notice in addition to show cause notice issued under 28(1)(a) or 28(4), under the prescribed circumstances and in prescribed manner.

4. SCN will not be issued if the disputed amount of duty or interest is paid voluntarily in full before issuance of SCN and intimate the proper officer in writing [Sec. 28(1)(b) read with Sec. 28 (2)]

   If the person chargeable with duty or interest pays duty voluntarily alongwith interest on the basis of—

   • his own ascertainment of such duty; or
   • duty as ascertained by the proper officer,

   and informs the proper officer of such payment in writing, then on receipt of such information, proper officer shall not serve any SCN in respect of the duty or interest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest.

   Further, in bona fide cases (SCN u/s. 28 (1) (a)), penalty will not be imposed if the proper officer is of the opinion that duty along with interest, as specified in notice, has been paid in full within 30 days from the date of receipt of the notice. The proceedings in respect of such person or other person to whom the notice is served will be deemed to be concluded.

5. The proceedings will be considered to be concluded in following cases
   1. Demand under Section 28(1) i.e. bona fidecases:
      1. In case the amount of duty along with interest has been paid by any person either on his own ascertainment of such duty or on duty ascertainment by the proper officer and the same has been informed to proper officer in writing prior to issuance of SCN.
      2. In case where SCN has been served and the amount of duty along with interest has been paid within 30 days from date of receipt of notice. However, no penalty is payable by Noticee in such cases.
   2. Demand under Section 28 (4) i.e. the demand has been made on account of collusion, wilful mis-statement and suppression of facts (Mala fide cases):

      If Noticee has paid amount of duty accepted by him along with interest and penalty within 30 days of receipt of notice and informed Proper Officer in writing. In such cases, the quantum of penalty payable shall be reduced to 15% of amount of duty accepted by him. If Proper Officer is satisfied that the entire amount with interest and 15% penalty is paid, proceedings are deemed to be concluded. However, proceedings for balance amount of duty, if any, will continue.

6. Reduction in penalty in mala fidecases

   As per first proviso to Section 114(A), if the duty is payable on account of fraud, collusion misstatement or willful misstatement and the duty, interest is paid within 30 days from the date of communication of the order, penalty amount shall be reduced to 25% of the duty and interest determined in the order. However, the benefit of reduction in penalty is available only when the penalty amount is also paid within the period of 30 days.

7. Time limit for adjudication

   In bona fide cases, the adjudication shall be completed within 6 months from the date of notice. Extension is available for further 6 months subject to approval from senior officer.

   In mala fide cases, the adjudication shall be completed within 1 year from the date of notice. Extension is available for further 1 year subject to approval from senior officer.

   In case, Proper Officer fails to determine within such extended period, such proceedings are deemed to have been concluded as if no notice is issued.

II. Refunds

Any Person claiming refund of any duty or interest paid by him or borne by him may make an application for refund to the Customs officer within 1 year from the date of such payment³⁴. The date of payment of duty or interest for persons other than an importer shall mean ‘the date of purchase of goods’ by such person. The period of 1 year does not apply to cases where the duty or interest has been paid under protest. On verification of the refund application, the officer, if is satisfied that the amount is, in fact, refundable, an order granting refund will be passed.

Further, refund of duty is granted to a person only when he is able to substantiate that the burden of such customs duty levied and paid under Customs Act has not been passed on to any other person (principle of unjust enrichment) and the claimant has complied with all the provisions of Section 27 of the Customs Act. Proviso to Section 27(2) provides exception to the principle of unjust enrichment such as export duty, duty drawback, duty paid by individual on import for his personal use, duty paid in excess before order permitting clearance of goods for home consumption is made and same is evident from bill of entry, etc. In such cases, the amount is refunded to claimant instead of crediting the refund amount to consumer welfare fund.