Penalty under Section 112(a)

[Muthukumar Muthunarasimhan]

Dear Experts,

Penalty imposed equilant to duty under Customs Act is right under section 112(a) when the assessee himself paid the duty and interest before adjudicate the matter after issue of Show cause Notice?

[KASTURI SETHI]

What is the date of SCN and what is the date of deposit of duty and interest ?

[Muthukumar Muthunarasimhan]

Dear Sethi Ji.

Happy New Year wishes. Sorry for the late reply. The date of duty as well as interest payment is 29.11.2019 and penalty SCN is issued on 4.12.2019.

[KASTURI SETHI]

There must be some communication gap between the date of deposit of duty with interest and date of issuance of SCN. Go through Section 28 (2) of the Customs Act, 1962 which is as follows :-

"(2) The person who has paid the duty along with interest or amount of interest under clause (b) of sub-section (1) shall inform the proper officer of such payment in writing, who, on receipt of such information, shall not serve any notice under clause (a) of that sub-section in respect of the duty or interest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest :

[Provided that where notice under clause (a) of sub-section (1) has been served and the proper officer is of the opinion that the amount of duty along with interest payable thereon under section 28AA or the amount of interest, as the case may be, as specified in the notice, has been paid in full within thirty days from the date of receipt of the notice, no penalty shall be levied and the proceedings against such person or other persons to whom the said notice is served under clause (a) of sub-section (1) shall be deemed to be concluded"

As per above, you were required to inform the proper officer in writing of payment of full duty and interest . It appears as that either you have not informed the department or you have informed late. Meanwhile, SCN was issued. Had you informed, SCN could not have been issued. Anyhow, now SCN has been issued and this case has to be adjudicated by the competent authority.

As per proviso to Section 28(2) of the Customs Act, no penalty shall be imposed and case would be concluded without imposing penalty.

If the Noticee deposits duty along with interest within thirty days from the date of issuance of SCN, penalty cannot be imposed upon. So your client is safe from both aspects..

[Muthukumar Muthunarasimhan]

Dear Sethu Ji,

There is no gap of communication and the importer had already well informed and requested to waive further SCN considering the provisions of section 28(2) of the Customs Act. Anyhow, your views are same as per my view and thanks for your quick response and pray to live longer.

[KASTURI SETHI]

O.K. The importer will not suffer monetary loss.

I am SETHI and not SETHU.

AI Summary

Penalty under customs law may be barred when duty and interest are paid and the proper officer is timely notified. Whether a penalty under Section 112(a) is barred depends on timely payment of duty and interest and written notification to the proper officer. If payment is made and the proper officer is informed as required, no notice or penalty in respect of that duty or interest may be served. The proviso provides that if the amount specified in a notice is paid in full within thirty days from receipt of the notice, no penalty shall be levied and proceedings under that notice are deemed concluded. Failure to notify before issuance may lead to adjudication, but the thirty-day cure still prevents penalty.