Section 114A explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 114A sets a penalty equal to the duty or interest that is determined against a person, where the duty was not levied, was short-levied, or was erroneously refunded because of collusion, wilful mis-statement or suppression of facts. It also contains a reduced-penalty route and a rule that keeps it from stacking with the penalties in sections 112 and 114. This article follows the text on the CBIC portal updated to 30 March 2022.
Where duty or interest was not levied, was short-levied, was part paid, or was erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person liable to pay it, as determined under section 28(8), is also liable to a penalty equal to the duty or interest so determined. If the duty or interest, with interest under section 28AA, is paid within thirty days of the communication of the order, the penalty is twenty-five per cent of the amount, provided that penalty is paid in the same thirty days. Where a penalty is levied under this section, no penalty is levied under section 112 or 114.
The text consulted is the CBIC copy last updated on 30 March 2022 (the Act as amended up to the Finance Act, 2022). Later Finance Acts and notifications are not in that copy, so check any later change to section 114A before acting.
When section 114A applies
The opening words describe the trigger. One of these must have happened:
- the duty has not been levied;
- the duty has been short-levied;
- the interest has not been charged or paid, or has been part paid; or
- the duty or interest has been erroneously refunded.
And the cause must be "collusion or any wilful mis-statement or suppression of facts". Mere error is not the trigger the section describes. The person who is liable to pay the duty or interest "as determined under sub-section (8) of section 28" then becomes liable for the penalty. The amount of the penalty is tied to what the order under section 28(8) determines, so the penalty cannot exist without that determination. Our articles on section 28 and the notice for duty not levied and on the extended period of five years explain how that determination is reached. If an order of this kind has reached you, a customs matter like this is handled under our legal dispute resolution work.
A small drafting point: the text consulted prints "has 2 [****]been part paid", where words were omitted by a corrigendum to the Finance Act, 1996, and the Explanation reads "the order determining the duty or interest 3 " without a connecting word. Read both as printed; neither changes how the section works.
The basic penalty
The basic rule is a penalty "equal to the duty or interest so determined". If the order determines duty of ten lakh rupees against Meridian Components Pvt Ltd for suppression of the true description of imported parts, the penalty under this section is also ten lakh rupees, and where interest is determined as well, the penalty covers the duty or interest so determined. The section does not give an officer a range to choose from, unlike many other penalty sections in Chapter XIV.
The reduced penalty: thirty days
The first proviso offers a lower figure. Where the duty or interest determined under section 28(8), and the interest payable on it under section 28AA, is paid within thirty days from the date of the communication of the order of the proper officer determining the duty, the penalty payable under this section is twenty-five per cent of the duty or interest determined.
The second proviso adds a condition: the benefit of the reduced penalty is available only if the penalty amount so determined has also been paid within the same thirty days. So three payments fall in one window: the duty or interest, the interest under section 28AA, and the reduced penalty.
| Item | What the text says |
|---|---|
| Starting point | Communication of the order of the proper officer determining the duty |
| Period | Thirty days |
| What must be paid | Duty or interest as determined, interest under section 28AA, and the penalty |
| Penalty if all is paid in time | Twenty-five per cent of the duty or interest determined |
| Penalty otherwise | Equal to the duty or interest determined |
The rate of interest under section 28AA is fixed by notification within the range that section prints; this article states none.
When the amount changes on appeal
The third proviso deals with a change of the determined amount. Where the duty or interest is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or the court, the duty or interest "as reduced or increased" is taken into account for the purposes of the section. In practice the penalty follows the revised figure.
The fourth proviso covers an increase. If the duty or interest is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, the reduced-penalty benefit remains available only if the increased duty or interest, the interest payable on it under section 28AA, and twenty-five per cent of the consequential increase in penalty are paid within thirty days of the communication of the order by which the increase takes effect. A later increase therefore opens a fresh thirty-day window for the added amount.
No overlap with sections 112 and 114
The fifth proviso says that where any penalty has been levied under section 114A, no penalty is levied under section 112 or section 114. This matters because the same facts may fit more than one section. Section 112 is the general penalty for improper importation, discussed in our article on section 112; section 114 is its export counterpart, covered in section 114. Section 114A takes the place of those penalties when it has been levied. For the penalty overview across sections 112 to 117, see Penalties under the Customs Act, sections 112 to 117.
The Explanation
The Explanation is stated to remove doubts, in two parts:
- The section also applies to cases in which the order determining the duty or interest relates to notices issued before the date on which the Finance Act, 2000 received the assent of the President. The footnote prints that date as 12th May, 2000.
- Any amount paid to the credit of the Central Government before the date of communication of the order referred to in the first proviso or the fourth proviso is adjusted against the total amount due from that person.
The second part protects a person who has already paid an amount to the Central Government before the order. Such payments are adjusted, not ignored.
A worked example
Tarini Exports Pvt Ltd imported machine spares and declared a lower assessable value than the real transaction value by hiding an additional payment to the supplier. The officer issues a notice, and after the hearing the proper officer determines duty and interest under section 28(8) and records suppression of facts. The order is communicated on 4 May.
- If Tarini pays the determined duty, the interest under section 28AA and twenty-five per cent of the duty as penalty within thirty days of that communication, it has used the first and second provisos.
- If it pays only the duty and interest, the penalty equal to the duty remains payable.
- If it appeals and the Commissioner (Appeals) raises the duty, the fourth proviso decides whether a fresh thirty days gives it the reduced penalty on the increase.
No penalty under section 112 can be added to the same case once a penalty under section 114A has been levied.
Need help with a penalty order under section 114A?
If you have received an order that demands duty with a penalty, the thirty-day period and the payment conditions matter from the day of communication. Our team can read the order with you and plan the response, and you can reach us through legal dispute resolution for customs matters. For a wider view of the appeal ladder, see how to file a customs appeal before CESTAT.
Key takeaways
- Section 114A needs collusion, wilful mis-statement or suppression of facts, together with duty or interest not levied, short-levied, part paid or erroneously refunded.
- The penalty is equal to the duty or interest determined under section 28(8).
- Payment of the duty or interest, the interest under section 28AA and the penalty within thirty days brings the penalty to twenty-five per cent.
- A reduction or an increase on appeal changes the figure on which the penalty is worked out; an increase carries its own thirty-day condition.
- Once a penalty is levied under section 114A, none is levied under section 112 or 114.
Read next
- Section 114AA: penalty for use of false and incorrect material
- Sections 114AB and 114AC: penalty for instrument obtained by fraud and fraudulent refund claims
- Confiscation of goods under section 111
- Section 124: show cause notice before confiscation or penalty
Disclaimer: Based on the Customs Act, 1962 as published on the CBIC Tax Information Portal, updated to 30 March 2022 (amended up to the Finance Act, 2022), as consulted on 2 October 2026. Finance Acts of 2023 and later, and the current rules, regulations and notifications, should be checked. This article is general information, not legal advice; check the official text before acting.