Sections 114AB and 114AC 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.
Sections 114AB and 114AC are two short penalty provisions for fraud that touches duty payment. Section 114AB reaches a person who obtained an instrument by fraud, collusion, wilful misstatement or suppression of facts, where the instrument was then used to discharge duty. Section 114AC reaches a person who obtained an invoice by those means to use input tax credit on goods entered for export under a claim of refund. This article follows the text on the CBIC portal updated to 30 March 2022.
Section 114AB: the person to whom the instrument was issued is liable to a penalty not exceeding the face value of the instrument, where it was obtained by fraud, collusion, wilful misstatement or suppression of facts and was utilised by that person or any other person for discharging duty. Section 114AC: where an invoice was obtained by those means to utilise input tax credit for discharging duty or tax on goods entered for exportation under a claim of refund, the penalty is not exceeding five times the refund claimed.
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 are not in that copy; check any later change to these sections before acting.
Section 114AB: instrument obtained by fraud
If a notice under either section has reached you, our legal dispute resolution team handles customs penalty matters of this kind. The section applies where three things come together:
- A person has obtained an instrument.
- The means were "fraud, collusion, wilful misstatement or suppression of facts".
- The instrument has been utilised, by that person or by any other person, for discharging duty.
The consequence falls on "the person to whom the instrument was issued". That person is liable for a penalty "not exceeding the face value of such instrument". So the ceiling is the face value printed on the instrument, whether the instrument was used in full or in part.
Two features of the wording deserve attention. First, the use can be by "such person or any other person", so the person to whom the instrument was issued can be liable even where someone else, for instance a buyer to whom it was passed on, used it to pay duty. Second, the section says "has obtained... and such instrument has been utilised": the act of obtaining by fraud and the act of utilising it both have to be present.
The Explanation says that "instrument" has the same meaning as in Explanation 1 to section 28AAA. That section covers the recovery of duty where an instrument was obtained by fraud and sits in Chapter V; for the recovery side see our article on section 28AAA. This article does not repeat the definition; read it in section 28AAA as printed.
The footnote prints that section 114AB was inserted with effect from 1-8-2019 by section 76 of the Finance (No.2) Act, 2019 (23 of 2019).
Example
Rudra Metals Pvt Ltd secures a duty credit instrument by suppressing facts about its export performance. It passes the instrument to Sahil Traders, which uses it to pay import duty. The instrument was issued to Rudra Metals, so under section 114AB the penalty ceiling is the face value of the instrument and it is Rudra Metals, "the person to whom the instrument was issued", that is liable. Whether Sahil Traders has any separate liability is not answered by section 114AB; look at the other provisions of the Act that apply to that person's conduct.
Section 114AC: fraudulent use of input tax credit to claim refund
Section 114AC concerns exports where a refund of duty or tax is claimed. It applies where:
- a person has obtained an invoice by fraud, collusion, willful misstatement or suppression of facts;
- the person intends to utilise input tax credit on the basis of that invoice for discharging any duty or tax; and
- the duty or tax is on goods that are entered for exportation under claim of refund of such duty or tax.
The penalty is "not exceeding five times the refund claimed". The Explanation gives "input tax credit" the meaning in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017 (12 of 2017). This article says nothing more about that Act. If you want to understand how customs refunds and export-side reliefs sit together, our article on whether drawback and a GST refund can both be claimed covers that topic from the exporter's side. The article is a separate post and the text of section 114AC does not refer to drawback.
The footnote prints that section 114AC was inserted with effect from 28-03-2021 by section 96 of the Finance Act, 2021 (13 of 2021).
Printing note
The section prints the word "willful" with one "l" where the neighbouring section 114AB prints "wilful". The footnote mark and spacing are also uneven ("the expression"input tax credit""). These are printing points and do not change the meaning.
The two sections side by side
| Point | Section 114AB | Section 114AC |
|---|---|---|
| What was obtained | An instrument | An invoice |
| Means | Fraud, collusion, wilful misstatement or suppression of facts | Fraud, collusion, willful misstatement or suppression of facts |
| Use | Utilised by the person or any other person for discharging duty | Used to utilise input tax credit for duty or tax on goods entered for exportation under claim of refund |
| Who is liable | The person to whom the instrument was issued | "Such person", the one who obtained the invoice |
| Ceiling | The face value of the instrument | Five times the refund claimed |
| Footnote on origin | Finance (No.2) Act, 2019, with effect from 1-8-2019 | Finance Act, 2021, with effect from 28-03-2021 |
| Explanation | Meaning of "instrument" from Explanation 1 to section 28AAA | Meaning of "input tax credit" from the Central Goods and Services Tax Act, 2017 |
What the sections do not say
Neither section prescribes a separate procedure. They sit in Chapter XIV, whose section 122 says who may adjudge penalties and whose section 124 says that no order imposing a penalty is made without notice, a chance to represent in writing and a reasonable hearing. Our articles on section 122 and 123 and section 124 explain those steps.
Neither section contains a proviso like the one in section 114A that bars a penalty under sections 112 and 114. The text consulted is silent on how these penalties relate to the other penalties in the Chapter, so this article draws no conclusion.
Practical care for exporters
- Keep the chain of documents behind every invoice used for a credit claim, so you can show how and from whom the invoice was obtained.
- Where an instrument is received from another person, check that its issue to that person was proper before using it to discharge duty.
- If a notice proposes a penalty under either section, ask which of the means (fraud, collusion, wilful misstatement, suppression) is alleged, and what the officer relies on for it.
Need help with a notice under section 114AB or 114AC?
Notices on fraud allegations call for a careful reading of the facts before any reply is filed. Our team can help you review the papers and prepare a reply through legal dispute resolution for customs matters, starting with how the instrument or invoice came into your hands. For the wider picture of penalty provisions see Penalties under the Customs Act, sections 112 to 117.
Key takeaways
- Section 114AB: penalty not exceeding the face value of an instrument obtained by fraud, collusion, wilful misstatement or suppression of facts and utilised for discharging duty.
- Section 114AC: penalty not exceeding five times the refund claimed, where an invoice obtained in the same ways is used to utilise input tax credit on goods entered for export under claim of refund.
- Under section 114AB the liable person is the one to whom the instrument was issued; use by another person is covered.
- Each section brings in its meaning from elsewhere: section 28AAA for "instrument", the CGST Act, 2017 for "input tax credit".
Read next
- Section 114A: penalty for short-levy or non-levy of duty
- Section 114AA: penalty for use of false and incorrect material
- Section 115: confiscation of conveyances
- 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.