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

Veda Imports Pvt Ltd, Chennai, was held by an order under section 28(8) of the Customs Act, 1962 to have short-paid duty of Rs 8,00,000 by reason of wilful mis-statement of facts. No penalty under section 112 or 114 has been imposed. Veda pays the duty, the interest due under section 28AA and the penalty determined, all within thirty days of the communication of the order. What is the penalty payable under section 114A?

The penalty is Rs 2,00,000. Section 114A normally imposes a penalty equal to the duty determined where there is wilful mis-statement or suppression. If duty, interest and the penalty are paid within thirty days of the order's communication, the penalty reduces to 25% of the duty, which is 25% of Rs 8,00,000.

  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 no penalty arises if duty is paid within thirty days

Explanation

Section 114A provides for a penalty equal to the duty determined. Under the first proviso, if the duty, interest and the penalty are paid within thirty days of 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 proviso benefit.

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