Derraaye per Durustaaye !!

By TIOL News Service

NEW DELHI, MAR 20, 2012: LIKE other Budgets, this one also highlights the effort of the Department to plug in ‘revenue leakage avenues' resulting from judicial pronouncements. And we are not referring to the mega “Vodafoneepisode” here.

One of our columnists (then with the DRI) had written an article titled “ Black Coloured Crimes” on recovery of customs duty in case of DEPB frauds. The article had highlighted that in the absence of specific provisions under customs law, it was left to the interpretation of the judiciary, which had two views on the same.

As on date, Section 28 of the Customs Act, 1962 is the mechanism providing for recovery of customs duties not levied, short levied etc. Amongst other legislative amendments, a new section 28AAA is proposed to be introduced to provide for recovery of duties from a person who has obtained instruments such as Advance Authorization, DFIA, DEPB, SFIS etc ( generally issued under the provisions of Foreign Trade Policy ) by means of collusion or willful mis-statement or suppression of facts.

Going forward, if the instrument has been utilised by a person other than those to whom the said instrument was issued (would apply in case of benefits which are transferable under provision of Foreign Trade Policy), the proposed section provides for recovery of duty alongwith interest from the person to whom the said instrument was issued, in case the instrument has been obtained by means of collusion , mis-statement or suppression of facts and such recovery of duty would be to the extent of utilization of the corresponding instrument.

It has also been provided that action under Section 28AAA against the person to whom the said instrument was issued shall be independent of the action under Section 28 of the Customs Act against the importer who has utilised the said instrument for clearances.

Show Cause Notice would need to be issued for recovery of duties under the proposed Section 28AAA. Interestingly, no time limit has been prescribed for such notices to be issued as per this section.

The provisions of the new section would apply only to such instruments which are utilised on or after the date of enactment of the Finance Bill, 2012. Even if the instrument has been issued prior to the enactment of the Finance Bill, the same would come under the ambit of this provision unless the utilization thereof has been completely done with before the said date.

Section 28AB is proposed to be simultaneously amended, so as to make the provisions related to provisional attachment of property applicable to the proposed Section 28AAA.

One would say , more teeth to the Department !!! Time will tell…