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CA Final · Indirect Tax Laws · Levy of and Exemptions from Customs Duty

Gangotri Exports Ltd imported machinery. The proper officer determined short-levied duty of Rs 8,00,000 under section 28(8) of the Customs Act, 1962, because of wilful mis-statement of facts by the importer. The order was communicated on 1 June. The importer paid the duty, the interest due under the Act and the reduced penalty, all on 20 June. What penalty did it pay under section 114A?

The penalty is Rs 2,00,000. Section 114A normally imposes a penalty equal to the duty, but where duty, interest and the penalty are paid within thirty days of communication of the order, the penalty is only twenty-five per cent of the Rs 8,00,000 duty determined.

  1. ARs 8,00,000, being 100% of the duty
  2. BRs 2,00,000, being 25% of the dutyCorrect
  3. CRs 4,00,000, being 50% of the duty
  4. DNil, because the duty was paid within 30 days

Explanation

Section 114A applies where short-levy results from collusion or wilful mis-statement or suppression of facts. The penalty equals the duty determined, i.e. Rs 8,00,000. If duty, interest and the reduced penalty are all paid within 30 days of communication of the order, the penalty falls to 25% of the duty, i.e. Rs 2,00,000. Payment on 20 June is within 30 days. The 100% figure ignores the first proviso, and no provision waives the penalty entirely.

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