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

Sunrise Traders Pvt Ltd of Surat imported machinery and, by reason of a wilful mis-statement of facts, paid less customs duty. The proper officer determined the short-levied duty at Rs 8,00,000 under section 28(8) and communicated the order. The company pays the duty, the interest payable on it, and the reduced penalty within thirty days of the communication. What penalty under section 114A is payable, assuming the duty is not changed on appeal?

The penalty is Rs 2,00,000. Section 114A normally imposes a penalty equal to the duty where there is wilful mis-statement, but if the duty, interest and reduced penalty are paid within thirty days of the order, the penalty is only 25% of the Rs 8,00,000 duty.

  1. ARs 2,00,000Correct
  2. BRs 8,00,000
  3. CRs 4,00,000
  4. DRs 1,00,000

Explanation

Section 114A imposes a penalty equal to the duty determined where there is collusion or wilful mis-statement or suppression of facts. If the duty, the interest and the reduced penalty are all paid within thirty days of the communication of the order, the penalty is 25% of the duty. 25% of Rs 8,00,000 is Rs 2,00,000. Rs 8,00,000 is wrong because it ignores the thirty-day concession.

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