Indirect Tax Laws and Practice · Remission of Duties

Section 28AAA Customs Act: Recovery of Duties in Certain Cases

Updated 11 October 2026 · Fact-checked

Section 28AAA lets customs recover duty from the person to whom an instrument (scrip, licence, authorisation, certificate) was issued, when it was obtained by collusion, wilful mis-statement or suppression of facts and was then used by someone else. The duty is deemed never exempted or debited. You also pay interest from the date of utilisation, after a show cause notice.

Understand Recovery of Duties in Certain Cases (Section 28AAA)

Under export promotion schemes, the government issues instruments such as scrips, authorisations, licences or certificates. An importer can use them to pay duty or to claim exemption. Sometimes the instrument is obtained dishonestly. Section 28AAA deals with this.

The section applies when two conditions are met. First, the instrument was obtained by collusion, wilful mis-statement or suppression of facts. Second, it was utilised under the Customs Act, its rules, regulations or notifications by a person other than the person to whom it was issued. The fraud can be for the purposes of this Act, the Foreign Trade (Development and Regulation) Act, 1992, or any other law or Central Government scheme. The fraud can be by the holder, or by his agent or employee.

The result is that the duty relating to that utilisation is deemed never to have been exempted or debited. It is recovered from the person to whom the instrument was issued, not from the user. The user-importer can still be proceeded against under section 28 separately. The proviso says recovery under 28AAA is without prejudice to action against the importer under section 28.

Instrument is defined widely. It means any scrip, authorisation, licence, certificate or similar document, by whatever name called, issued under the FT(D&R) Act, 1992, or duty credit issued under section 51B, relating to a reward, incentive, duty exemption, duty remission or similar scheme giving financial or fiscal benefits, which can be utilised under the Customs Act, its rules or notifications.

The person liable also pays interest at the rate fixed by the Central Government under section 28AA. Interest runs from the date of utilisation of the instrument till the date of recovery of the duty. Recovery follows a show cause notice and a hearing.

To protect revenue, section 28BA allows provisional attachment. While a proceeding under section 28, 28AAA or 28B is pending, the proper officer may, if he thinks it necessary to protect revenue, attach provisionally any property belonging to the person on whom the notice is served. He needs the previous approval of the Principal Commissioner of Customs or Commissioner of Customs and must pass a written order. The attachment ceases to have effect after six months from the date of the order. The Principal Chief Commissioner of Customs or Chief Commissioner of Customs may extend it, for reasons recorded in writing, but the total extension cannot exceed two years. So the outer limit is six months plus two years.

Key rules to remember

Conditions for applying section 28AAA: Instrument obtained by collusion / wilful mis-statement / suppression of facts + utilised by a person other than the person to whom it was issued; Both limbs are needed. The fraud may be by the person, his agent or employee.
Who pays: Duty recovered from the person to whom the instrument was issued; The duty is deemed never exempted or debited. Action against the importer under section 28 is not barred.
Interest: Interest at the rate fixed under section 28AA, from date of utilisation of the instrument to date of recovery of duty; Interest is payable in addition to duty. The show cause is for the duty amount specified in the notice (excluding interest). The order may determine duty, interest or both, not exceeding the amount in the notice.
Show cause notice and reply: Notice by proper officer; 30 days from receipt of notice to show cause; hearing; order not exceeding the amount in the notice; Duty and interest are determined after considering the reply.
Repayment: Repay within 30 days of receipt of the order, with interest due; If not repaid, recovery is under section 142(1).
Bar where section 28 order exists: Order determining duty under section 28 passed ⇒ no order to recover that duty under 28AAA; This prevents double recovery of the same duty.
Provisional attachment (section 28BA): Proper officer, with previous approval of Principal Commissioner/Commissioner, by written order; ceases after 6 months; Principal Chief Commissioner/Chief Commissioner may extend for reasons recorded in writing, total extension not exceeding 2 years (so at most 6 months + 2 years); Available during pendency of proceedings under section 28, 28AAA or 28B, against any property belonging to the person on whom the notice is served.

How to solve Recovery of Duties in Certain Cases (Section 28AAA) questions

Use this order for any problem on recovery of duty on a misused instrument.

1Identify the instrument: scrip, authorisation, licence, certificate or section 51B duty credit under a reward, incentive or exemption scheme.
2Check how it was obtained: collusion, wilful mis-statement or suppression of facts, by the holder, agent or employee.
3Check who utilised it. Section 28AAA needs utilisation by a person other than the one to whom it was issued.
4Name the person liable: the person to whom the instrument was issued. Add that the importer can face section 28 action separately.
5Compute duty relating to the utilisation, then interest at the section 28AA rate from the date of utilisation to the date of recovery.
6Describe the procedure: show cause notice, 30 days to reply, hearing, order not above the notice amount, repay within 30 days, else section 142(1).
7Check for any section 28 order on the same duty. If it exists, 28AAA recovery is barred.
8Mention section 28BA attachment if the question asks how revenue is protected.

Quickest way: Four-check method for 28AAA questions

When to use it: Use for MCQs and short case scenarios where you must decide whether 28AAA applies and who pays.

Fraud? Look for collusion, wilful mis-statement or suppression.
Different user? Instrument used by someone other than the issuee.
Then the issuee pays duty plus interest from the date of utilisation.
Section 28 order already passed on that duty? Then no 28AAA order.

Common mistakes in Recovery of Duties in Certain Cases (Section 28AAA)

Recovering the duty from the person who used the instrument.
Students assume the user who got the benefit is always the one who pays.
Fix: Under 28AAA, duty is recovered from the person to whom the instrument was issued. The importer can be dealt with under section 28.
Applying 28AAA when the issuee himself used the instrument.
The fraud element is remembered but the utilisation by another person is forgotten.
Fix: Check both limbs. Utilisation must be by a person other than the person to whom it was issued.
Counting interest from the date the instrument was issued or the notice date.
Confusion with other interest provisions.
Fix: Interest runs from the date of utilisation of the instrument till the date of recovery of duty.
Confusing section 28A with 28AAA.
Both deal with not recovering or recovering duty and have similar numbers.
Fix: Section 28A lets the Central Government, by notification, not require duty to be paid where a general practice of non-levy or short-levy prevailed. Section 28AAA is recovery for misused instruments.
Issuing a 28AAA order after a section 28 order on the same duty.
Students treat the two sections as cumulative.
Fix: Where an order determining the duty has been passed under section 28, no order to recover that duty can be passed under 28AAA.
Treating the 30 days in the notice as covering interest as well.
Loose reading of the notice provision.
Fix: The notice requires cause to be shown for the amount specified, excluding interest. The order may determine duty, interest or both, and repayment is due within 30 days of the order with interest.

Worked examples

Example 1

Alpha Exports Ltd., Mumbai, obtained a duty credit scrip by suppressing facts. It transferred the scrip to Beta Traders Pvt. Ltd., Chennai, which used it on 10 June to pay customs duty of ₹8,00,000 on an import. The fraud is later detected. From whom can the duty be recovered under section 28AAA, and what else is payable?

Show the solution

Instrument: a scrip under an incentive scheme, so it qualifies as an instrument.
Obtained by suppression of facts, which is one of the three listed means.
Utilised by Beta, a person other than Alpha to whom it was issued, so both limbs are met.
The duty relating to the utilisation, ₹8,00,000, is deemed never to have been exempted or debited.
It is recovered from Alpha, the person to whom the scrip was issued.
Alpha also pays interest at the section 28AA rate from 10 June, the date of utilisation, till recovery.
Action against Beta as importer under section 28 is not barred by this recovery.

Answer: Alpha Exports Ltd. is liable for ₹8,00,000 plus interest from 10 June to the date of recovery. Beta can separately face action under section 28.

Example 2

The proper officer serves a section 28AAA notice on a licence holder. After the hearing, the officer orders recovery. The holder does not pay. Explain the procedure and consequences, including whether an earlier section 28 order matters.

Show the solution

The notice requires the person to show cause within 30 days of receipt why the specified amount (excluding interest) should not be recovered.
The officer gives a personal hearing and considers the reply.
The officer determines duty, interest or both, not exceeding the amount in the notice, and passes the order.
The person must repay within 30 days of receipt of the order, with interest due.
If the amount is not repaid in 30 days, it is recovered as laid down in section 142(1).
If an order determining the same duty had already been passed under section 28, no order to recover that duty could be passed under 28AAA.
During the proceedings, the proper officer may, with the previous approval of the Principal Commissioner or Commissioner, provisionally attach property of the noticee under section 28BA. The attachment ceases after six months. The Principal Chief Commissioner or Chief Commissioner may extend it for reasons recorded in writing, with the total extension not exceeding two years, so the outer limit is six months plus two years.

Answer: Recovery follows notice, 30-day reply, hearing and order, repayment in 30 days, then section 142(1) recovery. A prior section 28 order on the same duty bars a 28AAA order.

Exam tips

Learn the three fraud words exactly: collusion, wilful mis-statement, suppression of facts. MCQs often swap in other words such as negligence.
In case scenarios, first ask who was issued the instrument and who used it. The answer to 'who pays' follows from that.
Remember the two 30-day periods: reply to notice, and repayment after the order.
Do not name a case unless you are sure of it. A correct statement of the statutory rule scores better than a doubtful citation.
Link 28AAA with 28BA (attachment) and with the section 28 bar in sub-section (4) for full marks.

Practice questions from Remission of Duties

Recovery of Duties in Certain Cases (Section 28AAA): frequently asked questions

What is section 28AAA of the Customs Act?

It is the provision for recovering duty where an instrument such as a scrip, licence or authorisation was obtained by collusion, wilful mis-statement or suppression of facts and used by another person. The duty is recovered from the person to whom the instrument was issued, with interest.

Can duty also be recovered from the importer who used the instrument?

Yes. The proviso says that action under 28AAA against the issuee is without prejudice to action against the importer under section 28. However, once a section 28 order determines the duty, no 28AAA order can be passed for that duty.

From when is interest payable under section 28AAA?

Interest is payable at the rate fixed by the Central Government under section 28AA. It is calculated from the date of utilisation of the instrument till the date of recovery of the duty.

What happens if the person does not repay within 30 days of the order?

The amount is recovered in the manner laid down in section 142(1) of the Customs Act, 1962.