Chapter: 2.7 Demand, Recovery and Refind of Duty

Demand, Recovery and Refund of Duty

A demand for duty arises in cases where duty on goods has not been levied though such goods are leviable to duty or duty has been short levied or refunded erroneously. The Act provides the provisions for the recovery of such duty.

Section 28 specifies the procedure to the department for recovery thereof by service of a show cause notice for demand within the specified time limits and thereafter by considering the representation, if any, made by the person on whom such demand notice is served.

The notice must be issued within six months from relevant date, except in cases of import by an individual for personal use or by government or by any educational, charitable, research institution or hospital, where the time limit for such an issue is one year. The above period of limitation is extended to five years in case the short levy or non-levy or refund was due to collusion, misstatement, suppression of facts or fraud by the Importer/ Exporter.

Where the assessee notices the short levy or non-levy, he can pay it along with interest, without a show cause notice and inform the jurisdictional officer accordingly. If the assessee does not pay the short levy or non-levy in full, he will be liable to pay interest under sections 28AA and 28AB on the whole amount including the amount part paid.

Refunds

The refund of duty is subject to the principle of 'no unjust enrichment'. Refund of duty is granted to the importer only when he is able to substantiate that the burden of the customs duty

Customs Act claimed in refund has not been passed on to the customer. The Hon'ble Supreme Court in the case of Solar Pesticides has held that, even in case of imported goods that have been consumed in the manufacture of final product, the importer is required to substantiate similarly.

Application for refund must be made in the prescribed form in duplicate within six months or one year as the case may be. If application is found complete in all respects, the applicant will be issued an acknowledgement in prescribed form within ten days. If application is found incomplete, it will be returned and a fresh application shall be filed removing the deficiencies.