With effect from 8-4-2011, Self-Assessment in Customs has become the norm of assessing Customs duty in respect of imported/export goods. This is a measure aimed at facilitating trust based compliance management in respect of goods which are imported into or exported from India. With introduction of the concept of self assessment, Government expected to usher a new era of trust based Customs-Trade partnership which is a welcome move. The focus of self assessment is reliance on declarations made by importers/exporters for facilitating the clearance of imported/export consignment. Its fundamental aim is to reduce pre-clearance checks based on risk parameters. The basic postulates of Self-Assessment are covered under Board Circular No.17/2011- Custom dated 08.04.2011.
As the clearances are based on self-assessment, on-site post clearance audit at the premises of importer or exporter has been introduced to protect the interest of the Revenue. This measure empowers the customs authority to inspect the account books of the company and to verify each import or export related declaration or documentation. Therefore, importer/exporter are expected to maintain and preserve the documents in a proper manner.
As per the new scheme, while the responsibility for assessment has shifted to the importer/exporter, the Customs officers would have the power to verify such assessments and make re-assessment, where warranted. In furtherance of this legislative provisions, Board always makes endeavour to attain higher percentage of facilitation and ensure that there is no disruption in the assessment work, and clearance of imported and export goods .
Thus, Importers/exporters are required to declare the correct description, value, classification, notification number, if any, and themselves assess the Customs duty leviable, if any, on the imported / export goods. The Section 17 of the Customs Act, 1962 provides for self-assessment of duty on imported and export goods by the importer or exporter himself by filing a Bill of Entry or Shipping Bill, as the case may be, in the electronic form ( Section 46 or 50). Self-Assessment is covered under Sections 17, and also supported by Sections 18, 46 and 50 of the Customs Act, 1962. The Bill of Entry (Electronic Declaration) Regulations, 2011 and Shipping Bill (Electronic Declaration) Regulations, 2011 are being framed to carry out the aforesaid provisions. In terms of Section 17(6) and to verify the correctness of self assessment, in order to safeguard the revenue On-site Post Clearance Audit was introduced at the premises of Importers and Exporters. Accordingly, important changes are also made in Section 46 of the Customs Act, 1962 whereby it has been made mandatory for the importer to make entry for the imported goods by presenting a Bill of Entry electronically to the proper officer except for the cases where it is not feasible to make such entry electronically.
Self assessment scheme has also enacted provisions to impose penal liability on erring importer/exporter, for the commission or omission of act willfully, whereas it would result in trade facilitation for the compliant importers/ exporters, however, non compliant importers/ exporters could face penal actions on account of wrong self assessment done with the intent to evade duty or to avoid compliances under Customs law/ Foreign Trade policy. However, bonafide errors are excluded from the ambit of invocation of penal provisions. Therefore, to avail of the benefit of the facility, trade would now need to put in place robust systems and processes to ensure that accurate information is submitted to the Customs as the onus would lie largely on the importer/ exporter
(a) Importer/exporter is responsible for correctly disclosing relevant details in the Bill of Entry/ Shipping Bill. They subscribe to the truthfulness of the declaration in terms of Section 46(4) and 50(2) of the Act.
(b) Declarations made by the importer/exporter would be verified by Customs authorities through contract, base for transfer price, invoice, catalogue etc. If required the goods may also be examined or tested by the officer.
(c) Verification could result in re-assessment of duty by the Customs authorities for which speaking order is required to be passed within 15 days from the date of assessment. (except in cases where reassessment is accepted in writing by the importer/ exporter/CHA). Such speaking order can be subject to review/ appeal.
(d) Verification of Self-Assessment and Re-Assessment – Sections 17(2) and 17(3) of the Customs Act, 1962 provide for verification of the Self-Assessment by the proper officer of Customs. In the process of verification, the Customs officer may ask for further documents or information, or get the goods examined or send the sample of imported / export for testing by an approved agency. Requirement of information for the purpose of verification will be documented by the proper officer. After verification, based on the merits of the case, the proper officer may either accept the Self-Assessment or initiate the process of reassessment as described under Section 17(4) of the Act, 1962.
(e) Provisional assessment under Section 18(1) would be resorted to in the cases where self assessment is not possible/Customs authorities cannot verify the assessment. However, same would require permission of concerned jurisdictional Commissioner of Customs. In cases, where the importer or exporter is not able to determine the duty liability / make assessment for any reason, under Section 17(1) except in cases where examination is requested by the importer under proviso to sub-section (1) of Section 46, a request shall be made to the proper officer for assessment of the same under Section 18 (1) of the Customs Act, 1962. In this situation an option is available to the proper officer of Customs to resort to provisional assessment of duty by asking the importer / exporter to furnish security as deemed fit by the proper officer for differential duty equal to duty provisionally assessed and duty finally payable after assessment. In this regard, it is clarified that importer should not resort to this provision in a routine manner and it is expected that this would be done in deserving cases only where importer or exporter is not able to assess the goods for duty for want of certain information / documents etc.
(f) In terms of Section 17(6) of the Customs Act, 1962, cases where re-assessment is not undertaken or where re-assessment is done but speaking order is not passed, would be subject to audit at the premises of the importer/ exporter.
(g) Importer/exporter are also required to put adequate checks and balances to ensure that CHA /CB makes correct declarations, to avoid any penal consequences on account of incorrect declarations made by the CHA/CB.
Hence, in both the cases where no self-assessment is done and when self-assessment is done and reassessment is required under Section 17, the importer or exporter can opt for provisional assessment of duty by the proper officer of Customs. The difference is that when no self-assessment is done, the provisional assessment shall get converted into final assessment and when self-assessment is done, the provisional assessment shall get converted into re-assessment.
Wrong Self Assessment
Now, in case of contrary finding by the proper officer under Section 17(4),when self assessment found to be wrong, remedy is either re-assessment or issuance of speaking order under Section 17(5) that too when there is categorical non-acceptance of reassessment by importer/exporter. It implies that in case of acceptance of re-assessment by the importer/exporter, there is no occasion to issue Speaking Order. In such cases , generally neither fine nor penalty is imposed. It means it is across the counter affairs as held in Escorts Limited v UOI 1998 (97) ELT 211(SC). In this case, it was also held that when there is no lis, no separate formal order is required to be issued.
And thus in case where dispute remains and circumstances warrants for issuance of Speaking Order, then appealable Order is issued, wherein differential duty ordered to be recovered. It has been observed in Departmental Orders that for the mere non-compliance and breach of the provisions of Section 46(4) and other allied provisions, fine and penalty are not imposed and Orders are issued limiting it to the recovery of differential duty. The ongoing procedure cannot be said to incorrect, as it is supported by provisions laid in Para 2.2 of Customs Manual on Self-Assessment – 2011 which says that “ Penal provisions would not be invoked in cases of bonafide errors in Self Assessment where mens rea and willful intention to evade duty or non-compliance of a condition cannot be proved. Bonafide error is not defined anywhere in the Customs Act . Bonafide error includes clerical, calculation, computer malfunction or printing error. An error which is unintentional; an “honest error.” If a bona fide error is corrected immediately, then a defendant may not be liable for an action.
The cases of honest error wherein fraudulent intention is absent is excluded from invocation of penalty under this scheme. Bare perusal of the said provisions suggest that for impositions of penal liability in self assessment deliberate and positive act is required to be committed. The disclosures and declaration should be willfully suppressed.
In Shally Thapar vs Collector Of Customs on 2 November 1992 case, Hon’ble CEGAT, Delhi examined the word bonafide error. The Tribunal held that through the show cause notice and as well as the orders passed by the authorities under the Act in the present case, there is only the bare quoting of Section 112 of the Act and there is no reference to either to clause (a) or (b) or both of Section 112 of the Act. The essential ingredients have not been specifically set out with reference to either of the clauses. Hence, it has got to be held that there was no making up of mind either at the earlier stage or at the subsequent stage of the prosecution of the proceedings and the passing of the orders thereon as to which of the clauses would be attracted in the instant case. The whole matter has been dealt with in a sphere of ambiguity. The present case is not a case, where a wrong provision has been quoted, so that it can be stated that it was due to a bonafide error, which did not vitiate the jurisdiction of the authority. As stated above, this is a case where there had been a failure to apply the mind as to which of the clauses is relevant and would be attracted. The power and the discretion given to the Authority functioning under Section 112 of the Act are judicial in character and are open to judicial review, and if they are found to have been exercised on irrational and ambiguous basis, the court will strike down the orders.”
That non-mentioning of specific clause may be due to the reason of non-application of mind resulting in vagueness but not on account of bonafide error. Therefore, every mistake is not attributable to bonafide error.
Therefore, in case of bonafide error , importer/exporter can correct their mistake at the first instance and once the error is corrected liability is discharged and matter seems to be settled.Though, it may be a correct proposition for self assessment as object is higher facilitation in clearance of imported/export cargo and supported by provisions of Manual. But when the Customs Act is read as a whole, which is also a fundamental theory of interpretation, then it is found that provision regarding bonafide error and non-imposition of penalty therein is slightly making a departure from the object and aim of the Customs Act. The Customs Act is widely considered as a Civil Law barring few provisions falling under Chapter XVI-Offence and Prosecution –covered under Section 132-140. In Civil Law, intention is not key in fixing tortuous liability, but attract higher graded penalty when coupled with intention. Though, it is very much essential ingredient in Criminal Proceedings. Intention is a psychological attitude with which a person acts and therefore it cannot be straightway proved but must be inferred from surrounding facts and circumstances. It also refer state of mind with which the act is done or committed.
Criminal Law may insists that defendant intention may extend to all the elements and consequence of his act constitute the crime. The law of tort separates the initial interference with the state of mind which produces the consequence. Therefore, intention may be indispensable for the Criminal Law but may not be of much relevance for fixing tortuous liability. Tortuous act coupled with intention may give scope to fix the higher liability.
Therefore, in Chapter 30, which deals with Offence and Penal Provisions at Para 9.3 which talks about Adjudication of confiscation and penalties wherein in clear words it is laid down that “ 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 offence and is to act as deterrent to the future.”
If this is the case, then any sort of breach, violation amounts to improper exportation and importation under Section 113 and 112 of the Act and attracts punishment. Violations are nothing but non-compliance of the provisions of Customs Act or Allied Act by which import/export is regulated. In such case, it is very difficult to ascertain whether the particular act is bonafide error or mere violations of the provisions, which also attracts penal liabilities. Then, how in the case of wrong self assessment , proper officer can ascertain and established that the act falls under bonafide error thereby penalty is not imposable. What is the test to be applied to arrive correctly at the conclusion. It appears that there is not much difference between the two and may be left to the wisdom and prudence of proper officer and his correct application of discretion can only answer the query. But even it is ascertained that the particular act is bonafide error and penal provisions are not applied, then after reading of the Customs Act as a whole and specifically para 9.3, Chapter 30, do not give any scope regarding non imposition of penalty, as every breach is a non-compliance with the prescribed procedure and thereby punishable. The questions still remain to be answered then how in cases of loading/increase of value etc by the Group in Self Assessment ,only higher amount of duty is recovered and fine and penalty is not imposed in the light of existing provisions in Para 9.3 of Chapter 30. Whether the said declaration of value at lower side does not attract provision of section111(m), and thereby breaches Section 46(4), and Section 11 (1) of the Foreign Trade (Development and Regulation) Act, 1992, which render the improperly imported goods liable for confiscation. The invocation of the said provision automatically attracts penal provision prescribed in section 112.
To understand this aid may be taken from the analogous provisions of Section 28(1), which says that when duty along with interest which has been erroneously escaped and recovered after the ascertainment, the proper officer shall not proceed to issue the Notice, on receipt of information about the payment. It is only buttressing the fundamental principal that State endeavour to mitigate the litigation and proceeds on the general principle of less litigation. Whenever there is short levy of duty in present assessment or past cleared consignment ,if it on account of bonafide error ,then the same are not punishable and Government is restricting its machinery to the extent of collection of duty only.
In view of the above, bonafide error in self assessment is specifically excluded from penal liabilities, in spite of this broad proposition that every act or omission under Civil Law is punishable. Based on the Doctrine that Special Provisions prevail over General Law, it can be said that non-imposition of penalty in cases of wrong self assessment is supported by provisions of Manual. In such a case, strict construction is required to be done by the Customs authorities, when categorizing certain act or omission as bonafide error or done willfully. By the self assessment scheme, a trust is placed in the hands of Trade, for speedy clearance by way of facilitation. Therefore, in light of doctrine “No man can take advantage of his own wrong”, trade is not liberally allowed to advance their plea, justifying every act or omission as bonafide error in order to escape from the clutches of penal liabilities. The customs officers are also enjoin to be very cautious and unbiased during self assessment so that there is correct application of law. While construing the word bonafide error, extended meaning should not be given to it in order to include deliberate act or omission of the importer/exporter.
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