Section 28AAA 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 28AAA lets the customs department recover duty from the person to whom a scrip, authorisation, licence or certificate was issued, when that person obtained it by collusion, wilful misstatement or suppression of facts and somebody else then used it to clear goods. The duty that the instrument covered is treated as never having been exempted, and the recovery runs against the original holder, not against the user.
This article follows the text of the Customs Act, 1962 as per the text on the CBIC portal updated to 30 March 2022. Later Finance Acts must be checked for changes to this section before you act on it.
Where an instrument was obtained by collusion, wilful misstatement or suppression of facts and is used under this Act by a person other than the one it was issued to, the duty relatable to that use is deemed never to have been exempted or debited and is recovered from the person to whom the instrument was issued. The proper officer issues a show cause notice allowing thirty days, and the amount found due must be repaid within thirty days of the order. Interest runs from the date the instrument was used until the duty is recovered.
Who and what the section is aimed at
Many trade schemes work through a transferable document. An exporter earns a scrip or an authorisation, and an importer then uses it to pay duty or to import goods without payment of duty. Section 28AAA deals with the case where the document itself was obtained wrongly.
The first sub-section applies when three things are true together:
- An instrument was issued to a person.
- That person obtained it by means of collusion, wilful misstatement or suppression of facts. The wrong act may be for the purposes of this Act, of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), or of any other law or any scheme of the Central Government for the time being in force. The text also reaches an act done by the person's agent or employee.
- The instrument is utilised under this Act, or the rules or regulations made or notifications issued under it, by a person other than the person it was issued to.
A notice under this section is a serious matter, and a legal dispute resolution adviser can read it with you against the three conditions below. When those conditions are met, the duty relatable to the utilisation is "deemed never to have been exempted or debited". The duty is then recovered from the person to whom the instrument was issued.
The words "or regulations" and the reference to "any other law, or any scheme of the Central Government" in the first sub-section are printed in the copy with footnotes showing they came in through the Finance Act, 2020 (12 of 2020).
What counts as an "instrument"
Explanation 1 gives a wide meaning. An instrument is any scrip, authorisation, licence or certificate, or any other document by whatever name called, issued under the Foreign Trade (Development and Regulation) Act, 1992, or a duty credit issued under section 51B, with respect to a reward or incentive scheme, a duty exemption scheme, a duty remission scheme or any other scheme bestowing financial or fiscal benefits, which may be utilised under this Act or the rules made or notifications issued under it.
The reference to duty credit under section 51B was brought in by a substitution that the footnote dates to the Finance Act, 2020. Our article on Section 51A and 51B explains that ledger. For the scheme side, see our post on the RoDTEP scheme at the end of this article.
The proviso: the importer remains exposed
The proviso says that action to recover duty under this section against the person to whom the instrument was issued is "without prejudice to an action against the importer under section 28". So there are two tracks. The department may pursue the instrument holder under section 28AAA, and it may also proceed against the importer who used the instrument under section 28. Our article on the extended period in section 28 covers the second track.
Explanation 2 makes the first sub-section apply to any utilisation of an instrument obtained in this way on or after the date on which the Finance Bill, 2012 received the assent of the President, "whether or not such instrument is issued to him prior to the date of the assent". The footnote prints the substitution of this section by the Finance Act, 2012 (23 of 2012), section 122, w.e.f. 28-5-2012.
Interest: sub-section (2)
Once duty becomes recoverable under sub-section (1), the person from whom it is to be recovered must pay, in addition to the duty, interest at the rate fixed by the Central Government under section 28AA. The interest is calculated for the period beginning on the date of utilisation of the instrument and ending on the date of recovery of the duty. The section itself states no rate. Section 28AA prints a range and leaves the rate to notification; see our article on Section 28AA.
Procedure: sub-section (3)
Recovery follows a set sequence:
| Step | What the text says |
|---|---|
| Notice | The proper officer serves a notice on the person to whom the instrument was issued, requiring him to show cause why the amount specified in the notice (excluding the interest) should not be recovered |
| Reply period | Thirty days from the date of receipt of the notice |
| Hearing | The person is given an opportunity of being heard and the representation, if any, is considered |
| Order | The officer determines the duty or interest or both to be recovered, not in excess of the amount specified in the notice, and passes an order to recover |
| Repayment | The person repays the amount specified in the order within thirty days from the date of receipt of the order, along with the interest due, whether or not the interest is specified separately |
Note that the notice amount excludes interest, but the order and repayment include it. The cap on the order is the amount in the notice; the officer cannot determine more.
Two limits on the power
Sub-section (4) says that where an order determining the duty has been passed under section 28, no order to recover that duty can be passed under section 28AAA. This stops the same duty from being collected twice through the two tracks.
Sub-section (5) says that if the person does not repay within the thirty days, the amount is recovered in the manner laid down in sub-section (1) of section 142. Section 28BA, covered in the article on provisional attachment listed below, names section 28AAA and its notice in sub-section (3).
A worked example
Suppose Meridian Textiles obtains an incentive scrip from an export promotion authority by furnishing statements that it knew to be wrong. It sells the scrip to Anand Components, which uses it to pay import duty at a port. If the department later establishes the wilful misstatement, the duty relatable to Anand Components' use is deemed never to have been exempted or debited. The proper officer serves Meridian with a notice, allowing thirty days to show cause. After hearing Meridian, the officer passes an order for an amount not above the amount in the notice. Meridian then has thirty days to repay, with interest from the day Anand Components used the scrip. The proviso means the department can still look at Anand Components under section 28, and sub-section (4) means no order under 28AAA can follow if duty on the same goods was already determined under section 28.
Practical points for businesses
- If you hold instruments, keep the underlying application file. The section turns on how the instrument was obtained, and the wrong act can be that of an agent or employee.
- If you buy or use transferable instruments, check their source. The proviso leaves the importer open to section 28.
- Reply inside thirty days. The reply period and the repayment period are both counted from receipt.
- Check both the notice and the order. The order cannot exceed the notice amount, and an earlier section 28 order bars a 28AAA order for the same duty.
Need help with a notice under section 28AAA?
If you have received a show cause notice about a scrip, licence or duty credit, the thirty-day reply period starts on receipt. Our team can review the notice with you and prepare the response; start with our legal dispute resolution service.
Key takeaways
- Section 28AAA applies where an instrument was obtained by collusion, wilful misstatement or suppression of facts and is used by someone other than the person it was issued to.
- The duty is recovered from the person to whom the instrument was issued, and the proviso keeps action against the importer under section 28 open.
- The notice allows thirty days to show cause, and repayment after the order is due within thirty days.
- Interest is charged from the date of utilisation of the instrument until recovery, at the rate fixed under section 28AA.
- No recovery order under this section can be passed for duty already determined under section 28.
- Unpaid amounts are recovered as laid down in sub-section (1) of section 142.
Read next
- Section 28AA: interest on delayed payment of duty
- Section 28BA and 28BB: provisional attachment and time limit for investigation
- Section 28: extended period of five years for collusion or suppression
- RoDTEP scheme: remission of duties and taxes on exports
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.