Analyzing Customs Show Cause Notices for Legal Preparedness and Response Planning

Exim Vidya

The analogy of customs topics being like an onion suggests that they have layers of complexity that are gradually unraveled and understood. Just as you peel away one layer of onion only to find another beneath it, delving into customs topics often reveals deeper and more intricate aspects that require further exploration. When you take any topic, you pass through various phases like

Surface Understanding: Initially, when approaching customs topics, one might have a superficial understanding.

Deeper Complexity: As you delve deeper into customs-related issues, you encounter additional layers of complexity.

Unforeseen Challenges: Just as peeling an onion can sometimes lead to tears, exploring customs topics can uncover unforeseen challenges.

Time and Patience: Unraveling the intricacies of customs topics takes time. It’s a gradual process that requires attention to detail and a willingness to dig deeper beneath the surface.

Revealing the Core: Ultimately, after peeling away multiple layers, you may arrive at the core of the fundamental principles or key insights that underpin customs practices.

When I started the article on Customs Audit and SCN, I was sure that I would land in the above situation. Before replying to Show Cause Notice it is important to understand how SCN is made and how to decode same.

Four “C” of Show Cause Notices

It is important to understand the four “C”. The Customs Officer having studied all details related to the case identifies the legal provisions that have been contravened; the consequences of such contravention of each of the legal provisions; the person to be charged in the SCN; and finally makes Charging Paragraph of the SCN.

  • 1. Contraventions: Which Section of the Customs Act and which Rules are applicable?
  • 2. Consequences: What are consequences as per Section given in the Customs Act are applicable rules. what are Penalties?
  • 3. Person Charged: Company, person, customs broker, etc.
  • 4. Charging Paragraph: Generally, it will be given as “In view of the above, now, the importer M/s XXX, Mumbai is hereby required to show to the …………. within …. days of the receipt of this notice as to why?”.

Decoding Show Cause Notice

It is important to understand the structure of SCN.

Part I: This part covers the background as to how the proceeding started. It will differ from case to case. A case may be based on intelligence, audit, discrepancies in documents noticed during scrutiny, references received from other Dept, etc. This part mentions the gist of intelligence/audit objection/ observation/ communication received from other departments/organizations, the name of the unit/ importer/exporter, etc., and a brief modus operandi of duty evasion adopted by the alleged offender.

Part II: In this part, after receipt of intelligence/inputs indicating evasion of duty, or violation of any provision of Customs Act law, further action carried out by the customs is mentioned.

Part III: In this part, further course of action taken to pursue inquiry/ investigation further is mentioned. This action could be goods seized, sent for testing, etc. Some SCN can have differential duty recoverable and its calculation.

Part IV: This part covers the Summary of Investigations. after conducting an investigation, recording statements, conducting market inquiries/ testing of samples, seizure/ or provisional release of goods, etc., the storyline, that emerges, is summarized.

Part V: In this part, Relevant legal provisions in the form of Sections/Rules/Notification/ Circular/Department Instructions, etc. which are relevant to the case are discussed.

Part VI: This part is most important where the act of Importer /exporter (noticee/s) vis-a-vis legal requirements are mentioned thereby contravention of various statutory provisions as well.

The role played by each person (Company/Individuals) and contravention of a specific provision of the Act by the person is mentioned. This part also covers the imposition of personal penalty on the individuals whose acts resulted in evasion of duty/ contravention of provisions of law.

This part also covers if an extended period of five years for the demand of duty/tax is invoked, and justification for such an extended period of limitation is mentioned. Whether there is fraud, suppression of fact, or deliberate contravention of provisions of the Act is mentioned in this part of SCN.

Part VII: This part is called the Charging Paragraph.

  • In this part, noticee is asked to show cause against the actions which are proposed to be taken by the Department.
  • This part gives the Designation of the adjudicating authority and its office address.
  • Depending upon the facts of the case, dept proposes a course of action such as confiscation of seized goods, the demand of duty along with interest, and imposition of penalty on the importer/exporter as well as individuals including customs Broker.
  • This part also mentions Relevant sections of the Customs Act.

Part VIII: This part covers Standard clauses, which are common to all SCNs. This includes.

  • The time limit for written submissions
  • Warning (if fail to submit a reply within the prescribed time limit, the SCN will be decided Ex-parte.
  • Submission of documents/evidence in support of defense.
  • Request for PH
  • A clause such as “The present show cause notice is without prejudice to any other action, which may be taken under the same Act or any other Act for the time being in force.”

Part IX: List of Relied upon Documents (RUDs) and copies of the same.

Part X: List of all noticees to whom the notice is served with the name and address of these noticees. Companies and individuals are different, and both are issued separate notices.

Part XI: Return of non-RUDs if not required for further investigation.

This is an abridged version of the EXIM VIDYA segment published in the April issue of the Logistics Insider magazine. To read the complete segment, click here.

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