Section 28AA 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 28AA says that a person who is liable to pay duty under section 28 must also pay interest on it, whether the duty is paid voluntarily or after it has been determined. The rate is not in the Act: the section gives a range and leaves the actual rate to a notification. This article explains the section as printed in the text on the CBIC portal updated to 30 March 2022.
A person liable to pay duty in accordance with section 28 is, in addition to the duty, liable to pay interest, if any, at the rate fixed under sub-section (2), whether the payment is made voluntarily or after determination of the duty. The rate lies not below ten per cent. and not exceeding thirty-six per cent. per annum and is fixed by the Central Government by notification. Interest runs from the first day of the month succeeding the month in which the duty ought to have been paid (or from the date of an erroneous refund) up to the date of payment. No interest is payable under sub-section (3) where a duty arising from a Board order, instruction or direction under section 151A is voluntarily paid in full within forty-five days of its issue.
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 may have changed this section, so check it before acting.
Where section 28AA fits
Section 28AA sits in Chapter V, next to the demand provisions. Section 28 deals with duty not levied, short-levied, short-paid or erroneously refunded; read it in our articles on the show cause notice under section 28 and the extended period under section 28. Section 28AA adds the money consequence: duty found payable under section 28 carries interest on top.
The footnote to the section prints that it was substituted by the Finance Act, 2011 (8 of 2011), section 43, for sections 28AA and 28AB, with effect from 08-04-2011. The footnote also prints the older wording of both sections; that older wording is not the rule and is not explained here.
If an interest demand is part of a notice you have received, our legal dispute resolution team can help you read the demand against the text.
Sub-section (1): who pays and when it applies
Sub-section (1) opens with a long "notwithstanding" clause: it applies notwithstanding anything contained in any judgment, decree, order or direction of any court, Appellate Tribunal or any authority, or in any other provision of the Act or the rules made under it. Within that, three points matter.
- The person. It is "the person, who is liable to pay duty in accordance with the provisions of section 28". The interest follows the duty liability under section 28; it is not a separate charge on every payment of duty.
- The charge. The person "shall, in addition to such duty, be liable to pay interest, if any, at the rate fixed under sub-section (2)". The words "if any" show that interest depends on a rate having been fixed under sub-section (2).
- Voluntary or determined. The liability arises "whether such payment is made voluntarily or after determination of the duty under that section". So paying on your own, before any notice is decided, does not remove the interest; it only changes how the duty came to be paid.
Sub-section (2): the rate range and the start date
| Element | What the text prints |
|---|---|
| Rate | "Interest at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum" |
| Who fixes it | The Central Government, by notification in the Official Gazette |
| Who pays | The person liable to pay duty in terms of section 28 |
| Start of interest | The first day of the month succeeding the month in which the duty ought to have been paid, or the date of such erroneous refund, as the case may be |
| End of interest | The date of payment of such duty |
The Act itself does not state the rate that applies on any given day. It states only the range. The rate is whatever the notification in force fixes within that range, so a finance team should read the notification and not rely on a figure remembered from an earlier year.
The start date has two limbs. For short-levied, short-paid or not-paid duty, interest starts from the first day of the month after the month in which the duty ought to have been paid. For an erroneous refund, it starts from the date of that refund. In both cases it ends on the date the duty is actually paid.
Example 1. Marlin Traders Pvt Ltd cleared goods in June and the duty ought to have been paid at that time. A later review shows part of the duty was not paid, and the company pays it under section 28. Interest is calculated from the first day of July, the month succeeding the month in which the duty ought to have been paid, up to the date of payment, at the rate fixed by notification within the printed range.
Example 2. A refund was granted to Kestrel Imports Pvt Ltd and the department later treats it as erroneous. On the printed words, interest is calculated from the date of that refund up to the date the duty is paid.
Sub-section (3): the forty-five day exception
Sub-section (3) begins "Notwithstanding anything contained in sub-section (1)" and removes the interest liability where both of these are true:
| Condition | Text |
|---|---|
| (a) | The duty becomes payable consequent to the issue of an order, instruction or direction by the Board under section 151A |
| (b) | The amount of duty is voluntarily paid in full, within forty-five days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage |
Both limbs are joined by "and". Payment of part of the amount does not meet the word "full". Payment after the forty-five days does not meet limb (b). And payment while reserving a right to appeal does not meet the last words of limb (b). The text of section 28AA does not say what follows if one limb fails, beyond the general rule in sub-section (1) that interest is then payable. For what section 151A itself provides, see our article on sections 151, 151A and 152.
How other sections use section 28AA
Section 28AA is a reference point for other parts of the Act as printed in the copy:
- Section 114. The reduced-penalty proviso in the export penalty section counts payment of the duty determined under section 28(8) and the interest under section 28AA; see section 114.
- Section 28AAA. Where duty is recovered because an instrument was obtained by collusion, wilful misstatement or suppression of facts, the person is also liable to pay interest at the rate fixed under section 28AA, calculated from the date of utilisation of the instrument; see section 28AAA.
- Section 28. The demand provisions themselves are in the articles linked above.
Section 28AB is omitted
The copy prints section 28AB as omitted: the footnote says "Omitted vide Finance Act, 2011, w.e.f. 8-4-2011". The old text is shown only as history and is not law. There is nothing further to explain.
What section 28AA does not say
- It does not state the rate. It gives only the range and refers to a notification.
- It does not say how the duty is computed; for that, read section 28 and the valuation and tariff provisions.
- It does not set a separate procedure for demanding interest. The text says only that the person "shall ... be liable to pay interest".
- It does not say what happens where a notification fixing the rate is absent, beyond the words "if any".
Practical points
- Read the notification in force. The rate comes from it, within the printed range.
- Compute from the right month. Interest starts from the first day of the month succeeding the month in which the duty ought to have been paid.
- Track the end date. Interest runs up to the date of payment of the duty.
- Watch the forty-five days. The exception in sub-section (3) needs a Board order, instruction or direction under section 151A, full voluntary payment within forty-five days, and no reservation of appeal.
- Keep the record. Note the date of payment and the basis, so the interest figure can be reconciled later.
Need help with an interest demand?
An interest demand under section 28AA follows from the duty demand, so the two should be read together. Our team can help you check the dates and the basis of the calculation, and plan a reply. See our legal dispute resolution page.
Key takeaways
- Section 28AA makes a person liable to pay duty under section 28 also liable to pay interest, whether the payment is voluntary or follows determination of the duty.
- The rate is fixed by notification within a printed range of not below ten per cent. and not exceeding thirty-six per cent. per annum.
- Interest starts from the first day of the month succeeding the month in which the duty ought to have been paid, or from the date of an erroneous refund, and ends on the date of payment.
- No interest is payable where a duty arising from a Board order, instruction or direction under section 151A is voluntarily paid in full within forty-five days, without reserving a right to appeal.
- Section 28AB is printed as omitted.
- Later Finance Acts may have changed this section; check before acting.
Read next
- Section 28: show cause notice for duty not levied or short paid
- Section 28: extended period of five years for collusion or suppression
- Section 28AAA: recovery of duty where an instrument was obtained by fraud
- Customs duty calculation explained
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.