CUSTOM ACT - PENALTIES | DETAILS, TYPES,
LIABILITY , ETC

Customs Act Penalties Are Described Below ,And Details For
Penalties On Custom's Act Is Given below :

Provisions of penalties and offences are quite similar to Excise La
Excise, Customs Law envisages two types of punishments i.e. (
Liability : Penalty for violation of statutory provisions involving a pen
money and confiscation of goods. (b) Criminal Liability : Criminal puni
is of imprisonment and fine; which can be granted only in a criminal
after prosecution. Both penalty and punishment can be imposed for
offence.
Penalties are imposed on any person who, in relation to any goods, d
omits to do an act which renders such goods liable for confiscation. He
is necessary to first understand what are goods liable for confis
Broadly, goods are liable for confiscation in case of improperly importing
or improperly attempting to export goods. Section 111 provides goods lia
confiscation for improper imports while section 113 contains details of
liable for confiscation for attempt of improper export.
Smuggling - Smuggling, in relation to any goods, means any act or o
which will render such goods liable for confiscation under section 111
[section 2(39)].

Thus, * improper importation * attempting improper importation or * atte
improper export will amount to ‘smuggling’. Thus, ‘smuggling’ is much
term than we normally understand . Since ‘smuggling’ has been spec
defined, normal or dictionary meaning is not applicable. - N K Bapna v
1992 (60) ELT 13 (SC) = (1992) 75 Comp. Cas. 745 (SC).
Improper imports - As per section 111, goods improperly brought in India
place outside India are liable to confiscation. In brief, importing or atte
to import prohibited goods, avoiding duty payment, mis-declaring go
violating rules regarding movement, storage, unloading or use of i
goods will make them liable for confiscation under section 111.
This is c
in the definition of ‘smuggling’.
PROHIBITED GOODS - Section 2(33) of Customs Act defines - 'pro
goods means any goods the import or export of which is prohibited
Customs Act or any other law for the time being in force, but does not i
any such goods in respect of which the conditions subject to which the
are permitted to be imported or exported have been complied with.
Improper exports - As per section 113, ‘goods attempted to be imp
exported’ are liable to confiscation. In brief, attempting to export go
violation of law, mis-declaring goods, export under false claim o
drawback or violating rules regarding movement, storage or loading of
goods will make them liable for confiscation under section 113.

This
covered in the definition of ‘smuggling’.
NON-DUTIABLE AND NON-PROHIBTED GOODS CAN ALSO BE CONFISCA
Section 113 earlier provided for confiscation only in case of ‘dutia
prohibited’ goods. Now these words have been deleted w.e.f. 14-
Hence, attempt to export any goods illegally or mis-declaring any
(whether dutiable or prohibited or not) shall be liable to confiscation.
Over Invoicing / mis-declaration for export - Some times, exports are m
inflated prices to avail export benefits.
In Om Prakash Bhatia v. CC 2001(127) ELT 81 (CEGAT 5 member ben
was held that over invoicing for export is an offence under Custom

[Appeal of importer admitted by SC, but no stay. – (2002) 141 ELT A278
Persons who can be penalised - Customs authorities are empowered to i
( a ) monetary penalty ( b) confiscation of goods, conveyance etc. The
separately provided as, if, the smuggled goods are abandoned, smuggl
not be traceable. In such cases, it is not possible to impose penal
goods can be confiscated. Penalty can be imposed for improper import
as attempt to improperly export.

PENALTY FOR IMPROPER IMPORT - Section 112 of Customs Act provi
penalty can be imposed on any person : ( a ) who does or omits to do a
which act or omission would render such goods liable for confiscation
section 111 of Customs Act or who abets in doing or omission of such
who acquires possession of or is in any way concerned in carrying, re
depositing, harbouring, keeping, concealing, selling or purchasing, or
other manner dealing with any goods which he knows or has reason to
are liable to confiscation under section 111.
Liability of Ship Owner/Airlines - If goods are unloaded without inclu
‘Import manifest’ or loaded without entering in ‘export manifest’, the shi
liable. The ‘mens rea’ is not relevant. Thus, when five packages wer
to New York without entering in ‘Export manifest’, penalty was imposed
India ’.

Monetary Penalty in Customs - The Customs Act provides for fol
monetary penalties.
IMPROPER IMPORTS - Section 112 provides penalties for improper im
( i ) Not exceeding the value of goods or Rs 5,000 whichever is greater, if
are prohibited for imports under Customs Act or any other law ( i
exceeding the duty sought to be evaded in case of dutiable goods, whi
not prohibited goods or Rs 5,000 whichever is greater ( iii ) If actual v
higher than the value declared in Bill of Entry or declaration of cont
baggage, not exceeding the difference in actual value and declared valu
5,000 whichever is greater ( iv) If the goods are prohibited and the v
mis-declared, penalty not exceeding the value of goods or the diff
between actual value and declared value, or Rs 5,000, whichever is hig
If the goods are not prohibited but duty is sought to be evaded and th
is mis-declared, penalty not exceeding the duty sought to be evade
difference between actual value and declared value, or Rs 5,000 which
higher .
In each case, minimum penalty is Rs. 5,000/-.

ATTEMPT TO IMPROPERLY EXPORT - Section 114 provides for pena
attempt to improper export ( i ) If goods are prohibited for export under a
not exceeding the value of goods or Rs 5,000 whichever is higher ( ii ) if
are liable to export duty but not prohibited goods, penalty not exceedin
sought to be evaded or Rs 5,000 whichever is higher ( iii ) In case of
goods, penalty not exceeding the value of goods, as declared by expor
as value determined under Customs Act, whichever is greater.
The last clause i.e. (iii) is amended w.e.f. 14-5-2003, to cover cases
export value is inflated. The export value is inflated, so that exporter is
to higher export benefits. [The excess amount collected in invoice is sen
through havala ]. - - In case of (i) or (ii), minimum penalty is Rs. 5,000.
RESIDUAL PENALTY - Section 117 of Customs Act provide general pen
a person who contravenes any provision of the Act or abets in contra
and if no penalty has been prescribed, the penalty would be upto Rs. 10,0

PENALTY IS MANDATORY - Sections 112, 114 and 117 use the words 's
liable to penalty'. In Indo-China Steam Navigation v. Jasjit Singh1983(1
1392 = 1984 ECR 467 (SC), it was held that if the word used is 'shall',
penalty must be imposed, though amount can be lower if there are exte
circumstances. - followed in CC v. Swastik Woollen Mills - 1999(112) E
(CEGAT).
Procedure for imposing penalty - Section 124 of Customs Act provid
before imposing a penalty, show cause notice must be issued to the
informing grounds for confiscation and he should be given opportunity to
representation and being heard. Such notice and representation can be
the request of the person concerned. [This provision has been made to sp
the clearing process].

Penalty for short landing - If the goods were loaded for importation in In
they were not unloaded in India - partly or fully - the Shipping Agent
explain the reason for deficiency. If it is not satisfactorily explained, As
Commissioner can impose penalty upto twice the amount of duty n
payable on the imported goods, under section 116. The penalty is paya
the 'person in charge of conveyance' i.e. carrier of goods. This provisio
make sure that carrier unloads goods at authorised places only and tha
is no smuggling with connivance of the carrier.
Confiscation of Goods
In addition to penalty on the person liable, some goods can be confis
‘Confiscation’ means the goods become property of Governmen
Government can deal with it as it wants. On the other hand ‘seizure’
goods are in custody of Government, but the property of goods remai
the owner.

Goods that can be confiscated - Goods improperly imported - (Goods lia
confiscation under section 111 of Customs Act) and goods attempted
improperly exported (Goods liable for confiscation under section 113 C
Act) can be confiscated. In addition, following can be confiscate
conveyance for transport of smuggled goods * packages * Goods us
concealing * sale proceeds of contravening goods. The proceedi
confiscation are in rem against goods. Procedure for confiscation, eff
wrong confiscation and provisions of redemption fine in lieu of confiscati
identical to provisions under Central Excise Act. These aspects are
discussed under Central Excise.
Confiscation of goods after clearance from port - It is permissible to take
under section 28 of Customs Act and confiscate the goods, even after
are cleared from customs. This can be done by issuing a show cause
cum demand.

Re-export of offending goods
Often it is found that goods are not eligible for import as per Import Pol
such cases, re-export of such goods is permitted as per EXIM
However, in such cases, penalty and redemption fine is p
In CC v. Elephanta Oil 2003(152) ELT 257 (SC), it was held that even if
are confiscated and goods are allowed to be re-exported, penalty
levied. Power to levy penalty u/s 112 is different from power of confi
of goods u/s 125 and giving option to pay fine in lieu of confiscation.
Permission for re-export in such cases may be given - Collector v. N
1992 (62) ELT 674 (GOI). In Kusumbhai Dahyabhai Patel v. CC (P) - 199
ELT 292 (CEGAT) also, it was held that even if goods are allowed to
exported, redemption fine can be imposed. In K&K Gems v. CC 1998(10
70 (CEGAT), it was held that fine in lieu of confiscation i.e. redemption
can be imposed.
Re-export by foreign exporter or sale to another buyer - If the Indian i
does not release the goods, the foreign exporter continues to be owner
goods and can apply for re-export or sale to other eligible buyer in India
At the time of importation, the import was legal ( b) The foreign export
not party to fraud ( c ) The Indian importer has not paid for the goods
not made arrangements for payment of goods (like letter of credit) to
exporter- UOI v. Sampat Raj Dugar - 1992 (58) ELT 163 (SC) = (1993) 8
176 = AIR 1992 SC 1417 = JT 1992 (1) SC 554 = (1992) 2 SCC 66 = 19
SCW 1420 (SC - 3 member bench) - followed in Savitri Electronics Co .
1992 (62) ELT 395 (CEGAT) * J P Electronics v. UOI 2001(133) ELT 3
RLT 609 (Bom HC DB) * Grand Prime v. CC 2001(137) ELT 795 (C
* Pacific International Traders v. UOI 2002(142) ELT 544 (Bom HC DB).
Departmental Adjudication
Monetary penalties and confiscation can be ordered by depart
authorities themselves. These are ‘ quasi-judicial ’ powers. The powers
follows : ( a ) Gazetted officer lower in rank than Assistant Commission
Appraiser) : when the goods liable to confiscation does not exceed Rs.
( b ) Assistant Commissioner / Dy Commissioner : when the goods li
confiscation does not exceed Rs. 2,00,000 ( c ) Additional Commissio
Joint Commissioner : Rs. 10 lakhs - as per Board circular ( d) Ad
Commissioner or Joint Commissioner : without limit in cases of bagga
duty drawback ( e ) Commissioner : without limit. - - All notices pertai
demands on account of collusion, wilful mis-statement or suppression o
will be issued only by Commissioner if demand is over Rs 5 lakhs,
demand is issued within six months/one year. In case of demand upt
lakhs, show cause notice for collusion, fraud, mis-statement etc. can be
by Additional Commissioner / Jt Commissioner. [CBE&C circular No 47/
dated 6.10.97]
It may be noted that as per section 122 of Customs Act, Ad
Commissioner or Joint Commissioner is authorised to adjudicate the
without any limit of amount. Restriction of Rs. 10 lakhs is only
administrative instructions. Further, as per section 28 (1) of Custom
show cause notice can be issued by ‘proper officer’ i.e. an officer of c
who is assigned the functions to be performed under Customs Act, by
or Commissioner of Customs. (Chief Commissioner, Commissioner, Ad
Commissioner, Joint Commissioner, Deputy Commissioner, As
Commissioner and Appraiser are all ‘officers of Custom’ and hence a
can be given to them by Board).
ADJUDICATING POWERS TO CUSTOMS / EXCISE OFFICERS IN SOME
MATTERS – In respect of following offences, adjudication powers hav
conferred on customs /excise officers. – (a) Offenses u/s 6(3)(g) of
This section related restrictions / prohibitions on export, import or hol
currency or currency notes (2) Offenses u/s 7(1)(a) of FEMA. This
relates to furnishing of export value of goods exported. The adjud
powers are as under – (a) Commissioner of Customs / CE – Cases
amount involved exceeds Rs one crore (b) Additional Commissio
Customs / CE – When amount involved in between Rs 75 lakhs and
crore (c) Joint commissioner of Customs / CE – When the amount invo
less than Rs 75 lakhs. – MF(DR) Order SO No. 1155(E) dated 5.1.2001.
Opinion of other departments - As per EXIM policy, In case of interpreta
EXIM policy, decision of Director General of Foreign Trade (DGFT) is
Hence, the decision of DGFT in this regard is binding on customs autho
R N Rajan and Co . v. CC 1995 (77) ELT 600 (CEGAT). Similarly, license
by DGFT cannot be questioned by customs authorities. [case law discu
earlier chapter].
Prosecution for Offences
Customs Law provides stiff punishments of imprisonment and fin
violation of Customs Act. These can be imposed only by Court of L
these are independent of monetary penalties and confiscation of goo
can be ordered by Customs Authorities through departmental adjudi
Hon. Supreme Court have held that both can be imposed simultaneou
same offence.
Evasion of Duty and prohibited goods - Main penal provision contained in
135 of Customs Act is in respect of evasion of duty and breaking prohi
under the Act.

WHO CAN BE PUNISHED - The punishment is imposable on a person (
is knowingly concerned in mis-declaration of value or in any fraudulent e
or attempt to evasion of duty or of any prohibition imposed on the i
export of such goods ( b) who acquires possession or is any way con
with carrying, harbouring, keeping, concealing, selling or purchasi
otherwise dealing with goods which he knows or has reason to belie
liable to confiscation under section 111 i.e. improper imports or under
113 i.e. attempt to improperly export (c) who attempts to export any
which he knows or has reason to believe are liable to confiscation u/
[section 135(1)]
PUNISHMENT THAT CAN BE IMPOSED - Punishment imposable is ( a
under section 123 : In case of goods covered under section 123 ( i.e
watches, synthetic yarn and metallised yarn, fabrics of synthetic
electronic calculators, zip fasteners and silver bullion) : imprisonme
seven years and fine (without limit) except in exceptional case
imprisonment cannot be less than three years ( b) In other cases : three
or with fine or both [second part of section 135(1)] ( c ) repeat convict
person already convicted for offence under Customs Act is convicted
the imprisonment punishment can be seven years and fine and in abse
special and adequate reasons, the punishment shall not be less than on
[section 135(2)]

PUBLICATION OF NAME - If a person is convicted under this Act, Co
order publication of names, place of business or residence, nat
contravention etc., under section 135B. Such publication will be at the
accused and in newspaper or otherwise as directed by Court.
Other minor Offences - Other minor offences under Customs Act are as f

FALSE DECLARATION - Person making, signing or using any stat
declaration or document knowing or having reason to believe tha
statement, declaration or document is false in any material particular, s
punishable with imprisonment upto six months or fine or both (section
Customs Act).
OBSTRUCTION OF OFFICERS OF CUSTOMS - If any person inten
obstructs any officer of Customs in exercise of any powers conferred
the Customs Act, he shall be punishable with imprisonment upto six mo
fine or both (section 133 of Customs Act).
REFUSAL TO BE X-RAYED - If any person refuses to take X-ray picture
body in accordance with order of Magistrate or refuses to allow suitable
to be taken to bringing out goods from his body under supervision of a
he shall be punishable with imprisonment upto six months or fine o
(section 134 of Customs Act). This provision is mainly in respect of p
smuggling goods by hiding the same in their body.
PREPARATION FOR IMPROPER EXPORT - Attempting to make exp
contravention of Customs Act is punishable with imprisonment upto
years or fine or both.
Offence in case of Company - Though Company is an independent legal
it works through Managing Directors, directors and employees. P
penalty can be imposed on person in-charge or responsible to pay c
duty. If an employee is involved in fraud, penalty can be imposed on
case of Company or partnership firm, every person who was in-charg
was responsible to affairs of the Company/firm is deemed to be guilty [
140 (1) of Customs Act]. Normally, a Managing Director (partner in c
firm) or other person specially authorised is deemed to be in-charge. Ho
such person can prove that offence was committed without his knowle
he had taken due care to prevent the offence. In addition, if it is prov
the offence in relation to Company is committed with consent or conn
of, or due to neglect on part of any director, Manager or Secretary or
officer of Company, such person shall be deemed to be guilty [section
of Customs Act]. Difference between provisions of section 140 (1) and
is that in former case, the person in charge is deemed to be guilty and
of proof is on him to prove that he had no knowledge; while in later
burden of proof is on prosecution to prove that offence was committe
knowledge or connivance of the director, manager, secretary or other of
Offence by Officers of Customs - If an Officer of Customs enters in
agreement to do or abstains from doing or permits any act or connives
act or thing, whereby any fraudulent export is effected, or by which
customs is evaded or prohibited goods are allowed to enter India or go
India, he shall be punishable with imprisonment upto a term of three y
with fine, or both. [section 136(1)].
If any customs officer (a) requires a person to be searched for goods
any reason to believe that he has such goods (b) Arrests a person with
reason to believe that he has committed an offence u/s 135 or (c) Se
or authorises search without any reason to believe that any goods, doc
or things are secreted in the place; he shall be punishable with impris
upto 6 months or fine upto Rs 1,000 or both. [section 136(2)].
If an officer of customs discloses any information obtained by him in
capacity, he shall be punishable with imprisonment upto 6 months or fin
Rs 1,000 or both. Of course, he can disclose the information in disch
his duties on in compliance with any law in force. [section 136(3)].
The prosecution can be launched in Court only with previous sanct
Central Government in case of prosecution against officer of rank of As
Commissioner and above. In lower ranks, previous sanction of Commissi
required. [section 137(2)]
Proof in Customs Law
Burden of Proof of Offence is on Department - In Customs law, the comm
of offence has to be proved by department beyond reasonable doubt. Ho
the accused has to prove beyond reasonable doubt that there was no c
state of mind like intention, knowledge, belief etc. In case of goods c
under section 123, burden of proof is on person from whom goods are
as explained below.
MENS REA PRESUMED - Section 138A of Customs Act provides that
rea’ shall be presumed by Court ‘ burden of proof regarding non-ex
of Mens rea is on the accused’. This proof has to be ‘ beyond reasonable
Thus, department has to prove the offence beyond reasonable doubt. Ho
the accused has to prove that he had no ‘culpable state of mind’. - vali
this provision upheld in Devchand Kalyan Tandel v. State of Gujarat 1997(8
433 (SC) = AIR 1996 SC 2787.
Burden of proof in case of goods covered under section 123 - Section
Customs Act makes special provisions in respect of certain sensitive
like Gold, Synthetic yarn and metallised yarn, fabrics made of syntheti
Electronic calculators, watches, watch movements, zip fasteners and
bullion. In case of these items, if these are seized in the reasonable beli
they are smuggled goods, the owner or possessor has to prove that the
not smuggled goods. In other words, ‘burden of proof’ that these a
smuggled is on accused. Validity of this section (section 178A of earli
has been upheld in CC v. Nathella Sampathu Chetty AIR 1962 SC 316 = 1
157 (SC 5 member bench).
Statement before Customs is relevant as evidence - Statement made and
before any Customs Officer of gazetted rank is allowed as evidence
prosecution as follows : ( a ) in case of a person who is dead or if he can
found or whose presence cannot be obtained without undue delay or exp
the statement will be allowed as evidence ( b) In case of person
present before the Court and is examined as witness, Court may ad
statement if it is of the opinion that the statement should be admitted
interest of justice. Thus, discretion is given to Court in case of stat
made before Customs Officer, only if such person is examin
witness. This provision is applicable to departmental adjudication also. –
138 .
Question of relevancy of statement made before customs officer, retrac
statement etc. has been discussed in relevant chapter in Central Excise.

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