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CA Final · Indirect Tax Laws · Types of Duty

Meridian Tech Ltd imported machinery on 10 June and sought provisional assessment under section 18 of the Customs Act, 1962, furnishing security. It paid duty of ₹8,00,000 provisionally. The final assessment order was made later, fixing duty at ₹9,20,000. Which statement is correct?

Meridian must pay the ₹1,20,000 deficiency plus interest. Section 18(3) charges interest from the first day of the month in which duty was provisionally assessed until payment, at the rate fixed under section 28AA. It does not start from the final order date.

  1. AMeridian must pay the deficiency of ₹1,20,000 and is liable to interest on it under section 18(3) from the first day of the month in which duty was provisionally assessed till paymentCorrect
  2. BMeridian pays the deficiency of ₹1,20,000 with interest running only from the date of the final assessment order
  3. CMeridian pays the deficiency of ₹1,20,000 without interest, as the security covers it
  4. DMeridian pays the deficiency of ₹1,20,000 with interest from the date of the bill of entry's clearance, whichever date it is

Explanation

Section 18(2)(a) requires the importer to pay the deficiency between duty paid and duty finally assessed: 9,20,000 - 8,00,000 = 1,20,000. Section 18(3) makes interest payable at the rate fixed under section 28AA from the first day of the month in which duty was provisionally assessed (June) till payment. Interest from the order date or no interest is wrong.

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