Customs duty paid days after clearance: s.28(4) "wilful suppression" claim rejected; s.114A penalty and confiscation set aside

Invocation of s.28(4) Customs Act and consequent mandatory penalty under s.114A was in issue where duty and interest were paid shortly after clearance, but the department alleged wilful misstatement/suppression to deny "deemed conclusion" and sustain confiscation/penalties. The Tribunal held that mere lapse of a few days between "out of charge" and payment, absent corroborative evidence, does not establish collusion, wilful misstatement, or suppression, particularly when delayed payment attracted interest, no undue gain was shown, and system changes in ICES contributed to delayed capture of duty. Resort to s.28(4) was unjustified and disproportionate; penalties and confiscation were set aside and the appeal was allowed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether invocation of section 28(4) of the Customs Act, 1962 (collusion/wilful mis-statement/suppression) was sustainable where the importer paid the differential duty and applicable interest within a few days after clearance, in a scenario where the electronic system did not auto-compute the newly-imposed levy at the time of self-assessment.

(ii) Whether, consequent upon failure to sustain section 28(4), the mandatory penalty under section 114A and the related penalties/confiscation founded on the impugned order could be allowed to stand.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of invoking section 28(4) despite post-clearance payment with interest

Legal framework: The Court considered that section 28(4) is premised on specific culpable ingredients-collusion, wilful mis-statement, or suppression of facts-and that its invocation carries an enhanced burden on the Department to establish those ingredients. It also noted the context of self-assessment and clearance ("out of charge"), alongside payment of duty with interest shortly thereafter.

Interpretation and reasoning: The Court held that, because section 28(4) excludes the ordinary consequence of proceedings being treated as concluded upon payment and triggers harsher consequences, the facts relied upon must clearly establish the requisite mens rea elements. Merely showing a short time-gap between clearance and payment, even if marginally longer than at other ports, did not by itself establish wilful mis-statement or suppression, particularly when no other evidence was brought to support those allegations. The Court also found no identifiable "gain" to the importer from postponing payment because interest became payable, and it found no evidence that investigation had established the importer as responsible for the delay or that the delay was actuated by the ingredients of section 28(4). The Court treated it as undisputed that the customs administration took substantial time to implement changes in the electronic system to capture the new duty liability, and that payments were being made through a stop-gap manual reassessment mechanism within a few days of clearance.

Conclusion: Invocation of section 28(4) was held not tenable in the absence of particular evidence of collusion, wilful mis-statement, or suppression of facts, especially in the admitted circumstances of system non-availability for automatic computation and prompt post-clearance payment with interest.

Issue (ii): Sustainability of penalties and confiscation based on the impugned invocation

Legal framework: The Court treated the penalty under section 114A as appendant to the invocation of section 28(4) and noted the harsh consequence of mandatory penalty once section 28(4) is applied. It also examined the continuation of penalties and confiscation imposed in the impugned order as consequential to the sustained allegation of culpable conduct.

Interpretation and reasoning: Having found section 28(4) unjustified and disproportionate on the evidence, the Court held that the consequential imposition of mandatory penalty and continuation of penalties and confiscation could not be sustained. The Court emphasized that the severity of consequences required justification that was absent on the record, especially where duty and interest were paid within days of clearance and system constraints were acknowledged.

Conclusion: The penalties and confiscation were set aside; the impugned order was reversed and the appeals were allowed.

---