This content explains how importers and exporters should respond to "show cause notices" issued by customs authorities, primarily concerning incorrect duty classification or rates, to avoid penalties and confiscation.
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Hello everyone. Today I'm going to talk
on a very interesting topic and that
mainly pertains to importers and
exporters. I'm going to talk about show
cause notices issued from customs to
importers and exporters for less charge
mainly under section 28 of the customs
act 1962. My name is Viren Dal. I'm a
custom broker and LSC certified trainer
in customs law applied rules and regulations.
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We are in the regime of trade
facilitation and ease of doing business.
Most importantly, all our imports are
self assessed to duty by us and the
goods are removed forth with without any
delay from customs authorities. But the
mechanism of postclarance audit which is
enforced currently may result in issue
of a show cause notice under the
provisions of section 28 of the customs
act. The show cause notice mainly talks
about why a particular classification
or a rate of duty as claimed by us or
the notification claimed by us for a
particular chapter heading is not
correct and it should be some other
heading that is a normal contention of
the department. So in Indian customs
there is always a dispute between the
importers and the department in so far
as the classification of goods is
concerned which results in a change in
the rate of duty. It's a very common
example. The topic here is to how to
circumvent or how to reply to the show
cause notice is what I'm going to tell
you a little more in detail today. So
once you get a show cause notice or even
before the show cause notice we get a
pre-notice consultative memo. If you
think that the classification claimed by
the department visav you claimed by you
in your bill of entry is correct then it
is prudent or advisable to pay the
amount along with applicable interest
under section 28 of the customs act. So
that closes the matter then and there
and we give a simple letter under
section 28 subsection six that as an
example the short levy is for one lakh
rupees. We have paid the one lakh and
here is the interest along with the
interest the amount has been paid on the
chalan which can be generated now
online. Very easy and a very simple
step. But if you do not agree with the
contention of the customs department
that you know the classification claim
by them which are taken by us in the
self assessment we don't agree with the
contention. So we can always argue and
the customs is bound to give us a
personal hearing and where in the
personal hearing we can put forward our
views our contention and accordingly the
custom officer who known as the
adjudicating authority will pass an
order. Once the order comes many a times
it is against us against the import not
in favor and interestingly the order
original passed by the adjudicating
authority imposes penalty
imposes redemption fine imposes goods
are liable for confiscation under
section 111 of the customs act. All
these are relevant sections and penalty
provisions which have been invoked which
I have personally attended to. So my
advice to everyone is to just because
you get a show cause notice. The literal
meaning of show cause notice to show cause
cause
why I should not impose a penalty on you
why I should not confiscate your goods
and so on. How do we reply to the show
cause notice is what you should know. So
let me tell you today how you are
supposed to reply to the show cause
notice. First of all we have to
technically and legally state that why
we do not accept with the contention of
the department that the HS code and the
rate of duty should be as claimed by
them and not correctly claimed by us.
That should be the first stand if we are
right to substantiate this stand
whatever technical literature or other
some previous case laws if they're
available they should be part of your
reply in the first paragraph. Secondly
you must also state that the goods have
come correctly. Self assessment is a
legal provision embodied in the customs
act because customs want us to do self
assessment and when the self assessment
is done the goods are declared correctly
the same goods have arrived there is no
dispute on the goods and therefore just
because the department does not agree
with the rate of duty and the
classification claimed by us. It does
not tantamount to be a misdeclaration
which can lead to confiscation of the
goods under section 111m of the customs
act. Since the goods are correctly
described and they are correctly arrived
as per the bill of entry self assessment
is done by us. So choosing a particular classification
classification
which according to you is right is not
it's it's not it's a belief on the part
of the importer. It's not a statement of
fact. It's just the belief and just
because the department does not agree
with the classification done by us that
does not give them any scope that the
goods are liable to confiscation. So
importantly again since the goods are
correctly described they've correctly
arrived only the dispute of classification
classification
there is no confiscation envisaged at
all. Therefore there can be no penalty
provisions under the custom act. So
you're not liable for any confiscation
neither you're liable for any penalty.
Many a times the show cause notice also
says that the department will impose a
redemption fine. Redemption of fine is a
provision under section 125 of the
custom act. In that particular section
it is very clearly stated that for
matters pertaining to section 28 that is
short levy there is no redemption fine
to be paid at all and therefore
redemption fine is also not applicable.
So you have to if I have to summarize
this entire topic of today which I have
discussed in this particular clip when
the goods are correctly described
although the show cause notice has been
issued by the department disputing the
classification goods are not liable to
confiscation. Since the goods are not
liable to confiscation there can be no
penalty under section 112 or under
section 114A of the customs act. And
thirdly, for all section 28 matters,
there is no redemption fine to be paid.
And considering these all these
parameters which I have discussed with
you, you must make a reply. And after
that you make a reply, you should go for
a personal hearing. This is my
suggestion. I hope I have been able to
explain in sufficient details the entire
modus operendi to your satisfaction.
Thank you. For detailed learning of all
logistics subjects, visit www.logiva.com.
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