Misdeclaration of goods - legal issues under the Customs Act

[raghunandhaanan rvi]

Misdeclaration of goods - legal issues under the Customs Act

Section 46(4) and 50(2) of the Customs Act 1962, requires an importer or exporter when they file the bill of entry or shipping bill required to subscribe to a declaration regarding the truth of the contents of the bill of entry or shipping bill as the case may be. If the details so declared to be true are found to be not true, it is ‘mis-declaration’. Mis-declaration is an offense and punishable under the provisions of the Customs Act 1962.

What is misdeclaration for customs?

Mis-declarations that customs have so far identified in the bill of entry are the following:

• Wrong declaration of goods description
• Wrong declaration of the country of origin
• Wrong declaration of quantity
• Wrong declaration of weight
• Wrong declaration of value
• Wrong declaration of the year of manufacture
• Claim ineligible notification benefit

Why does one make misdeclarations in the bill of entry?

Generally, misdeclarations are being made in the bill of entry for avoiding customs duty or escape from the licensing route, or clearing smuggled or prohibited goods.

Misdeclaration of goods is an offense and liable for confiscation  

Once misdeclaration is proved, such goods are becoming offending goods and liable for confiscation under the provision of section 111 of the Customs Act and a penalty under section 112 or 114AA can be imposed.

Procedure for Confiscation

Section 124 of the Customs Act 1962 requires that before confiscating offending goods, a show-cause notice must be issued to the owner of goods informing him of the grounds for confiscation of the goods and also allow him to be heard or make a representation to defend the charges leveled against him before passing appropriate orders by the adjudicating authority.     

Confiscated goods may be released on payment of the redemption fine

Goods once confiscated, those goods become the property of the Central Government and those goods can be sold at auction by the said Government. However, in some cases, the persons from whom goods were seized can get them back on payment of the redemption fine. 

Misdeclaration of description, quantity or weight, etc.

In the case of misdeclaration in respect of dutiable or prohibited goods imported contrary to any prohibition is covered under clauses (l) or (d) or (q) of section 111 of the customs act and liable for confiscation of such goods under these sections and also liable to a penalty under section 112(a) or 114AA.

Similarly, in respect of the export of goods, misdeclaration attracts section 113(d) and imposes a penalty under section 114. 

Misdeclaration of value

If the value of goods is incorrectly declared in the bill of entry, the Customs authority can re-assess the bill of entry at the proper value under section 14 of the Customs Act 1962 read with the provisions of rules under Customs Valuation Rules 2007. If misdeclaration of value is proved, such goods are liable for confiscation under Section 111(m)  and a penalty is imposable under Section 112(a) or 114AA (for making a false statement and document). of the customs act 1962.

Misdeclaration of Origin

In the case of misdeclaration of Origin to claim an ineligible Preferential rate of duty, such goods are also liable to be confiscated either under sections 111(d) or  111(m) or both and also impose a penalty under sections 112(q) and 114AA.

Penalty for contravention - if not expressly mentioned.

As per section 117 of the said act, contravening any provisions of the Customs Act, wherein if no express penalty is provided elsewhere in the act, penalty under this section is attracted. This provision also applies to misdeclaration as well.

Quantum of Penalties

The penalty is imposed depending upon the gravity of the offense committed by the person concerned.

Mens Rea is not mandatory in penalty provisions

Mens rea means guilty mind. Generally, a penalty is imposed if the violation is intentional. However, in taxation laws, a penalty is leviable irrespective of any intention. Further, the penalty is imposed on a person who violates rules and whether the mistake is genuine or lack of knowledge or intentional violation does not matter.

Conclusion

Mis-declaration of any particulars in the bill of entry or shipping bill is a serious concern for the customs department and is a punishable offense under the provisions of the customs act 1962. Such an act does harm the importers and exporters.

Therefore, Proper care should be taken by the importer or exporter, or the customs broker while filing the Bill of Entry. He has to check the documents with utmost care and ensure himself that he has properly declared the value of the goods, weight,  description of goods, quantity,  HS Code, and exemption notifications in the bill of entry before he submits the same for customs.  This will help to avoid unwarranted complications to a certain extent and able to avoid unnecessary legal consequences.