This article has been written by Surabhi Gupta, pursuing a Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho and edited by Shashwat Kaushik.
It has been published by Rachit Garg.
Table of Contents
Introduction
The entry and exit of commodities and passengers into and out of the country are governed by law, in compliance with international practice. The Customs Act of 1962 is the foundational law that rules and regulates the entry and exit of various types of vessels, crafts, products, persons, and other items into and out of the country. The Department of Customs strives to ensure compliance with a variety of additional national and international rules and regulations in addition to the Customs Act. Customs is responsible for efficiently and effectively handling international traffic while ensuring that all goods and passengers crossing national borders are in compliance with the laws of the state.
Essentially, all goods brought into or taken out of the country must pass through authorised entry/exit points and be reported to Customs, and importers/exporters must comply with the legal and procedural requirements set forth in the Customs Act of 1962 and related laws, including payment of any applicable duties. As a result, the Customs Act spells out in detail rules for dealing with illegal acts and omissions, as well as penalties that can be imposed by departmental authorities and penalties that can be imposed by courts of law. The statute also gives customs officers the authority to conduct searches, make arrests, and prosecute people who commit such crimes. The impositions of various provisions related to penalties in cases of violations require certain procedural requirements to be followed to ensure that legal processes are followed before action against offenders, offending goods, and conveyances involved in violations is taken.
Punishments mentioned in the Customs Act
There are two types of punishments mentioned in Customs Act-
- Civil liability- Penalty for violating enacted provisions, which can include monetary fines and the confiscation of goods as applied by departmental authorities. The Customs Act’s Chapter XIV (Sections 111 to 127) deals with the seizure of goods and conveyances, as well as the enforcement of penalties.
- Criminal liability- A criminal sentence consists of a period of jail and a monetary fine, which can only be imposed following a trial in a criminal court. For the same offence, both a penalty and a punishment might be applied. Other violations under the Act are dealt with in Chapter XVI (Sections 132 to 140A).
Penalties for violation of customs
Punishments for improper imports of goods are laid down in Section 112 of the 1962 Customs Act. The nature of punishment depends upon the gravity of the offence.
- When any prohibited goods under Customs Act or any other law in force presently are imported, the penalty imposed shall be Rs. 5000/- or not exceeding the value of goods, whichever is greater.
- The penalty for the import of dutiable goods other than prohibited goods is not exceeding the duty to be evaded on such dutiable goods or Rs. 5000/- whichever is greater.
- In case of the import of those goods for which the declared value is greater than the value thereof, the penalty should not be more than or exceed the difference between the declared value and the value thereof or Rs. 5,000, whichever is greater.
- If the sanctions for the import of goods fall under the categories of (a) and (c), then the punishment should not be more than the value of the goods or the difference between the declared value and the value thereof, or Rs. 5000/-, whichever is greater.
- When it comes to the import of goods that fall under (b) and (c), then the sanction should not exceed the duty that is to be avoided in case of such goods or the difference between the declared value and the value thereof or Rs. 5,000/-, whichever is the highest.
Punishments for improper export of goods are mentioned under Section 114 of the Customs Act of 1962
- When any prohibited goods under Customs Act or any other law in force presently are exported, the punishment imposed shall not exceed three times the value of the goods declared by the exporter or the value as determined under the Act, whichever is greater
- The penalty for the export of dutiable goods other than prohibited goods shall not exceed the duty that is supposed to be evaded on such goods or Rs. 5,000/-, whichever is greater.
- In case of the export of any other kinds of goods, the penalty imposed is not to exceed the value of the goods as declared by the exporter or the value as determined under the Customs Act, whichever is greater.
In the case of both Sections 112 and 114 of the 1962 Customs Act, an amendment has been made by inserting a new clause that states that a penalty shall be imposed, which is up to ten percent of the duty that is to be evaded or Rs. 5000/-, whichever is greater as per the Finance Act, 2015.
The imposition of penalties on evasions of the service tax and central excise duty through fraud and other means has also been rationalised by the ministry. If the central excise duty is knowingly evaded, then the penalty payable shall be equal to the duty evaded, and if the central excise duty is avoided, then the penalty charged or levied shall be 100 percent of the amount of service tax. If the service tax, interest and reduced penalty are paid within 30 days of the service notice in this regard, then a reduced penalty equal to 15 percent of the amount of service tax is to be paid. And if those amounts combined with interest are paid within 30 days of the issuance of show cause notice, then no penalty will be imposed upon the assessee.
Mandatory penalty
Section 114A of the Customs Act, 1962, states that a compulsory penalty shall be imposed in the following circumstances-
- non levy of duty or
- short levy of duty or
- interest has not been charged, has been partially paid or
- Duty or interest has been mistakenly refunded due to conspiracy involved, misrepresentation, or suppression of facts by the said person, as envisaged therein.
It has been stated that such duty or interest would be as per Section 28(2) of the Act, as mentioned in Section 114A of the Customs Act of 1962, that an individual who is under obligation to pay duty or interest shall be obligated to pay a penalty equal to the duty or interest as determined. However, if such an amount, along with interest and penalties, is given within a period of 30 days, the penalty gets reduced to 15% of the duty or interest, according to the recent amendment. However, there was confusion regarding whether the penalty imposed under Section 114A of the Act would be equal to the amount of duty or it would be equal to duty plus interest due to the use of the conjunction “or” that tends to create confusion. Hence, for this, the board has consulted the Ministry of Law, which stated that for understanding and interpreting the conjunctions ‘or’ and ‘and’,’ Maxwell interpretation of the Statutes shall be considered.
To solve this confusion, two most important cases were considered that is The State of Bombay vs. R. M. D. Chamarbaugwala (1957) and Tilkayat Shri Govindlalji … vs. The State of Rajasthan and Ors. (1963), in which the Supreme Court observed that ‘or’ and ‘and’ must be used one for another to understand the clear intention of the legislature.
Keeping in mind the above observation made by the Supreme Court in both cases, it was clarified that the penalty under Section 114A of the Customs Act, 1962, should be equivalent to both duty and interest.
In cases where such an amount combined with interest and penalty is paid within a period of 30 days, there is a reduction in the duty or interest by 25 percent.
One more important thing is that no penalty shall be charged under Section 112 or 114 of the Act if the penalty has already been charged under section 114A of the Act
Penalty for purposely using wrong material
In the performance of any business for the purposes of this Act, a person who knowingly or purposely uses false and wrong material shall be liable to a penalty not exceeding five times the value of the goods, according to Section 114AA of the Customs Act, 1962.
The Finance Minister has reduced the penalty by ten percent in situations of fraud in customs duty.
Punishments on individual in charge of conveyance
If any goods loaded in a conveyance for being imported into India, or goods shipped under the provisions of the said Act, are not unloaded at their place of terminus in India, or if the quantity unloaded is less than the quantity to be unloaded at that terminus, and if the failure to unload or the deficiency is not accounted for to the satisfaction of the Assistant/Deputy Commissioner of Customs, the person in charge of the conveyance is liable to the penalty, which should not be more than twice the duty that would have been levied on the goods not unloaded or the substandard goods if such goods were imported. And when it comes to coastal goods, then the penalty should not exceed the export duty that would have been levied on the unloaded or substandard goods if such goods were exported.
Penalty for those provisions for which there is no prescription or express penalty
Section 117 of the Customs Act of 1962 is a blanket clause that states that the person guilty can be fined up to one lakh rupees for any other violation of the Customs Act for which no express punishment has been given elsewhere.
Conclusion
In conclusion, the primary law that controls the importation and exportation of products and people into and out of the country is the Customs Act of 1962. Compliance with this law and other national and international laws is the responsibility of the Department of Customs. All merchandise entering or leaving the country must do so through authorised entry/exit ports, report to Customs, and follow all applicable laws and regulations, including paying any customs that may be due. Infractions are also subject to civil and criminal fines, according to the Customs Act. Criminal liability can result in incarceration and financial penalties, while civil liability can result in monetary fines and the seizure of property. The nature of the punishment depends on the gravity of the offence, with penalties for improper import or export of goods outlined in Sections 112 and 114 of the Customs Act. Overall, the Customs Act plays a crucial role in regulating international traffic and ensuring compliance with national laws.
References
- http://www.eximguru.com/exim/indian-customs/customs-manual/offences-penal-provisions.aspx#Mandatory_Penalty_for_Short-levy_or_Non-levy_of_duty_in_certain_cases_(_Section_114_A)
- https://timesofindia.indiatimes.com/business/india-business/govt-reduces-penalty-for-customs-duty-fraud-by-10/articleshow/47785729.cms#:~:text=Sections%20112%20and%20114%20of,according%20to%20Finance%20Act%2C%202015
- https://taxguru.in/custom-duty/levy-penalty-section-114a-customs-act-1962-clarification-reg.html
- https://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7779
- https://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7779
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:
Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.
