Customs show cause notice reply: format, time limits and what to check first

What a customs show cause notice is

A show cause notice (SCN) is the formal start of adjudication under the Customs Act, 1962. It sets out what the department alleges — short payment of duty, wrong classification, undervaluation, misuse of an exemption, or goods liable to confiscation — and asks you to explain why the proposed duty, interest, confiscation or penalty should not be confirmed.

Most notices fall into two groups. Section 28 notices demand duty that was not levied, short-levied or erroneously refunded. Section 124 notices propose confiscation of goods and penalty, often together with a Section 28 demand. Import and export disputes, baggage and household goods cases, and DRI investigations usually lead to one or both.

Time limits that matter

• Normal period: a Section 28 demand can ordinarily be raised within two years from the relevant date.
• Extended period: where collusion, wilful misstatement or suppression of facts is alleged, the period extends to five years. Whether the extended period is justified is one of the most frequent and strongest grounds of challenge.
• Seized goods: under Section 110(2), if no notice is issued within six months of seizure (extendable once by up to six months), the goods must be returned to the person from whom they were seized.
• Deciding the notice: Section 28(9) sets time limits within which the officer should decide the case after issuing the notice. Delay beyond those limits is a legal point worth examining.
• Your reply: the notice itself states the time for the written reply, commonly 30 days. If you need more time, ask for it in writing before the deadline.

Check these before you write a word on merits

The best customs replies start with the threshold points, because they can end the case regardless of the facts:

1. Limitation — is the notice within two years? If it invokes five years, does it actually show suppression or wilful misstatement, or only a difference of interpretation?
2. Proper officer and jurisdiction — was the notice issued by an officer empowered to do so for that port and that kind of case?
3. Pre-notice consultation — for many Section 28 cases, the department must offer a consultation before issuing the notice. Check whether it was offered.
4. Relied-upon documents — you are entitled to the documents the notice relies on. If they were not supplied, ask for them in writing.
5. Statements — if the notice rests on statements recorded under Section 108, consider whether to seek cross-examination of those witnesses.

A reply format that works

There is no prescribed form for a customs reply, but a clear structure helps both the adjudicating officer and any appellate authority later:

1. Heading and reference — notice number and date, your name, IEC, bill of entry or shipping bill numbers.
2. Brief facts — your version of the transaction in a few paragraphs, with dates.
3. Preliminary objections — limitation, jurisdiction, non-supply of documents, lack of consultation.
4. Reply on merits — respond to each allegation in the notice’s own order: classification, valuation, exemption, origin, quantity, as the case may be.
5. Confiscation and redemption — why goods are not liable to confiscation, and alternatively why a redemption fine under Section 125 should be nominal.
6. Penalty — why penalty under Sections 112, 114A or 114AA is not attracted, especially where there was no intent to evade duty.
7. Requests — personal hearing, cross-examination, supply of documents.
8. Prayer and annexures — what you ask the officer to do, and a numbered list of supporting documents.

Paying early to reduce penalty

Paying is sometimes the better commercial choice, and the law rewards early payment. In normal-period cases, duty paid with interest before the notice can avoid it altogether. Where the extended period is invoked, paying duty, interest and a reduced penalty within 30 days of the notice can conclude the proceedings for that amount. If an order is passed under Section 114A, the penalty is reduced to 25% of the duty if duty, interest and the reduced penalty are paid within 30 days of the order. Decide this early, because the windows are short.

The personal hearing

Section 122A requires that you be given a hearing, and adjournments are limited to three. Use the hearing to highlight the two or three strongest points, file a short written synopsis, and make sure everything you rely on is on record. After the order, an appeal lies to the Commissioner (Appeals) within 60 days and then to CESTAT, with mandatory pre-deposits.

Common mistakes

• Replying only on merits and missing limitation or jurisdiction.
• Admitting facts in a hurried first letter that later cannot be withdrawn.
• Not asking for relied-upon documents or cross-examination.
• Missing the hearing dates and leaving the officer to decide ex parte.
• Treating a baggage or household goods notice as minor — penalties and confiscation can be significant.