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It is better to report you transaction honestly than face embarrassment later. The Customs enforcement officers at the ICD provide all the necessary trade facilitation assistance to the honest and compliant importers/exporters but are severe on those found to be reporting their transaction dis-honestly to evade duties.

We carefully profile all the importers and exporters and use the latest risk management techniques to pin point at those who may attempt to misreport their transaction. Apart from the monetary penalties, the individuals behind the cases of smuggling are also arrested and they have to face possible prosecution. So, it pays to be honest in reporting your transactions to the Customs ICD. The details of penalties and offences are as  under:

Penalties and Offences

Customs Law envisages two types of punishments

(a) Civil Liability : Penalty for violation of statutory provisions involving a penalty of money and confiscation of goods.

(b) Criminal Liability : Criminal punishment is of imprisonment and fine; which can be granted only in a criminal court after prosecution. Both penalty and punishment can be imposed for same offence.

Penalties are imposed on any person who, in relation to any goods, does or omits to do an act which renders such goods liable for confiscation in case of improperly importing goods or improperly attempting to export goods. Section 111 provides goods liable for confiscation for improper imports while section 113 contains details of goods liable for confiscation for attempt of improper export.

Smuggling - Smuggling, in relation to any goods, means any act or omission which will render such goods liable for confiscation under section 111 or 113. Thus, improper importation  attempting improper importation or  attempting improper export will amount to ‘smuggling’.  Since ‘smuggling’ has been specifically defined, normal or dictionary meaning is not applicable. As per section 111, importing or attempting to import prohibited goods, avoiding duty payment, mis-declaring goods or violating rules regarding movement, storage, unloading or use of imported goods will make them liable for confiscation under section 111. As per section 113, attempting to export prohibited goods, mis-declaring goods, export under false claim of duty drawback or violating rules regarding movement, storage or loading of export goods will make them liable for confiscation under section 113.

Seizure: An officer of Customs can seize any goods, if he has reason to believe that the same are liable to confiscation, under the Customs Act. The proper officer may also seize any document or things that may be relevant to any proceedings under the Custom Act. However, the person from whom these documents are seized is entitled to make copies of the same. The person from whom the goods are seized is issued a show cause notice, usually within six months. However, the Commissioner of Customs, on sufficient cause being shown, can extend the time period for issue of Show cause notice, by a further six months. In case the seized goods are perishable or hazardous in nature or is prone to depreciate in value over time or for reasons of constraints in space, the government can notify these goods and these goods can be disposed off before the conclusion of the proceedings eg. All electronic goods, Currency, Liquors, P&P medicine, Gold, Silver etc.

Confiscation of Goods - The word ‘confiscation’ implies appropriation consequential to seizure. The essence and the concept of confiscation is that after confiscation, the property of the confiscated goods vests with the Central Government. The adjudicating authority makes the decision regarding confiscation of goods. The specific/ different categories of violations under which the import or export goods are liable to confiscation, are enumerated in Section 111 and 113 of the Customs Act. In general, the goods that are attempted to be smuggled into or out of the country, by route other than land routes or is attempted to be cleared by way of misdeclaration in quantity, description or value etc are liable to be confiscated. The import or exported goods are also liable to confiscation if there is an intention to evade Customs duty or to fraudulently avail the benefits available under various export promotion schemes, such as duty drawback, DEPB, 100% EOU etc.

In addition to confiscation of Goods, the conveyances, i.e., vessels, aircrafts or vehicles, or animals that are used in the smuggling activities or in connection with fraudulent availment of drawback are liable to confiscation as per specific provisions in section 115 of the Customs Act. ( Tt is worth noting that the term " Smuggling", in Customs Act has vast connotations and it means " any act or omission which will render such goods liable for confiscation under section 111 or 113 of the Customs Act.) In case the goods liable to confiscation are imported in a package, the package and its other contents, if any, are also liable to confiscation as per specific provisions in section 118 of the Customs Act.

The goods used for concealing smuggled goods are also liable to confiscation as per specific provisions in section 119 of the Customs Act. Smuggled goods may be confiscated even if its form has been changed. In case the smuggled goods with other goods in such a manner that the goods cannot be separated then the whole of goods are liable to be confiscated as per specific provisions in section 120 of the Customs Act. There may be situations when the smuggled goods are sold off. In such a situation, the sale-proceeds thereof are also liable to confiscation as per specific provisions in section 121 of the Customs Act.

Re-export of offending goods - Often it is found that goods are not eligible for import as per Import Policy. In such cases, re-export of such goods is permitted as per EXIM Policy. However, in such cases, penalty and redemption fine is payable. Permission for re-export in such cases may be given .

Persons who can be penalised - Customs authorities are empowered to impose (a) monetary penalty (b) confiscation of goods, conveyance etc. These are separately provided as, if, the smuggled goods are abandoned, smuggler may not be traceable. In such cases, it is not possible to impose penalty, but goods can be confiscated. Penalty can be imposed for improper import as well as attempt to improperly export.

Section 112 of Customs Act provide that penalty can be imposed on any person : (a) who does or omits to do any act which act or omission would render such goods liable for confiscation under section 111 of Customs Act or who abets in doing or omission of such act (b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111.

Goods can be confiscated even after goods are cleared from customs port, even if the goods are sold by the importer. As per section 124(1) of Customs Act, option to pay fine in lieu of confiscation has to be given. As per section 124(2), duty and charges payable in respect of the goods are payable in addition to fine. Such fine is payable by owner of goods or the person from whose possession or custody the goods are seized. Mens rea is not required in penalty proceedings .

 Where duty or interest was not levied or short levied or refunded on account of fraud, collusion, wilful mis-statement or suppression of facts, person liable to pay duty and interest is also liable to pay a penalty equal to the duty or interest so determined. However, if the duty and interest demanded is paid within 30 days, penalty payable will be only 25%. - section 114A.

Monetary Penalty in Customs - The Customs Act provides for following monetary penalties.

Section 112 provides penalties for improper imports :

(i) Not exceeding the value of goods or Rs 5,000 whichever is greater, if these are prohibited for imports under Customs Act or any other law

(ii) Not exceeding the duty sought to be evaded in case of dutiable goods, which are not prohibited goods or Rs 5,000 whichever is greater

(iii) If actual value is higher than the value declared in Bill of Entry or declaration of contents of baggage, not exceeding the difference in actual value and declared value or Rs 5,000 whichever is greater

(iv) If the goods are prohibited and the value is mis-declared, penalty not exceeding the value of goods or the difference between actual value and declared value, or Rs 5,000, whichever is higher.

 (v) If the goods are not prohibited but duty is sought to be evaded and the value is mis-declared, penalty not exceeding the duty sought to be evaded or the difference between actual value and declared value, or Rs 5,000 whichever is higher.

In each case, minimum penalty is Rs. 5,000/-.

Section 114 provides for penalty for attempt to improper export

(i) if the goods are prohibited for export under any law, not exceeding the value of goods or Rs 5,000 whichever is higher

(ii) if goods are liable to export duty but not prohibited goods, penalty not exceeding duty sought to be evaded or Rs 5,000 whichever is higher

(iii) If goods are exported under claim for drawback, not exceeding the amount of drawback wrongly claimed or Rs 5,000 whichever is higher.

In each case, minimum penalty is Rs. 5,000.

Section 117 of Customs Act provide general penalty to a person who contravenes any provision of the Act or abets in contravention and if no penalty has been prescribed, the penalty would be up to Rs. 10,000.

Procedure for imposing penalty - Section 124 of Customs Act provide that before imposing a penalty, show cause notice must be issued to the person, informing grounds for confiscation and he should be given opportunity to make representation and being heard. Such notice and representation can be oral at the request of the person concerned.

Departmental Adjudication - Monetary penalties and confiscation can be ordered by departmental authorities themselves. The Customs Act enjoins quasi-judicial proceedings to be followed before any penalties are imposed and any confiscation action etc. initiated against any offending goods. Apart from issuing proper show cause notice under section 124, the persons concerned are also required to be given opportunity of representation in writing and personal hearing in the matter. The proper adjudication authority is then to pass final order taking due note of all evidences brought on record. As per Section 122 of the Customs Act, adjudication powers have been given to different class of officers as follows:-

(a)    without limit, by a Commissioner of Customs or a Joint Commissioner of Customs;

(b) where the value of the goods liable to confiscation does not exceed fifty thousand rupees, by an Assistant Commissioner of Customs or Deputy Commissioner of Customs;

(c) where the value of the goods liable to confiscation does not exceed two thousand five hundred rupees, by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs or Deputy Commissioner of Customs.

        Generally, ‘mens rea’ is not required to be proof for the imposition of penalty under the provisions of the Customs Act. The amount of penalty depends on the gravity of the offence and is to act as the deterrent for future. Whenever the goods are confiscated by an adjudicating authority, if these are not prohibited goods, an option is to be given to the party as per Section 125 of the Customs Act, to pay a fine known as ‘redemption fine’ of quantum as the adjudicating authority deems fit, in lieu of the confiscation. Prohibited goods can be confiscated absolutely.

        The offences under the Customs Act can be broadly categorised in two categories – non-bailable or cognisable offences & bailable or non-cognisable offences

Non-bailable or cognisable offences:     The offences punishable with imprisonment for a term of more than 3 years are covered in this category. As per section 135 (1) of the Customs Act if any person is involved, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods, or acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be punishable, in the case of an offence relating to any of the goods to which section 123 applies and the market price whereof exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine. If any person convicted of an offence under section 135(1) or of section 136 (1) (applicable to customs officers) of the Act is again convicted of an offence under the same sections, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to seven years and with fine.

Bailable or non-cognisable offences:      The offences punishable with imprisonment for a term of less than 3 years or only fine are covered in this category .The offences under this category are as follows:-