Central Board of Indirect Taxes and Custom (CBIC) has upped the threshold for launching prosecution and arrest to ₹50 lakh in case of smuggling and ₹2 crore in case of duty evasion. Earlier, these limits were ₹20 lakh and ₹1 crore respectively.

Experts say higher threshold will reduce the litigations.

According to circular issued by CBIC, in the matter related with baggage and outright smuggling cases, prosecution will be launched if the market value of the goods involved is ₹50 lakh  or more. The same limit will be applicable in case of high value goods such as precious metal, restricted items or prohibited items or foreign currency. Arrest can be made accordingly.

Commercial duty evasion

In case of commercial duty evasion, the circular talks about when the market value of goods wilfully mis-declared in value/description or concealed restricted goods ₹2 crore, prosecution can be launched and arrest to be made. Same threshold will be applicable in cases related to fraudulent evasion or attempt at evasion of duty and also in cases related to fraudulent availment of drawback or exemption.

Further, in respect of cases involving non-declaration of foreign currency by foreign nationals and NRIs (normally visiting India for travel/business trips etc.) detected at the time of departure from India, exceeding the threshold limits of ₹50 lakh as prescribed above, if is claimed that the currency has been legally acquired into India but not declared inadvertently, prosecution need not be considered as a routine.

Ilustrative list

Saurabh Agarwal, Tax Partner with EY said, CBIC by way of release of circulars, has not merely increased the threshold monetary limit for arrest, prosecution and bail but has also provided more illustrative list of scenarios where offences can lead to arrest. “This move will help in reducing litigation and bringing in better clarity for both importers and the customs department,” he said.

Abhishek Jain, Partner, Indirect Tax, KPMG in India, says, in an effective justice system prosecution and arrest should be initiated only in situations involving substantial duty evasion. “Pursuant to the revised monetary limits being prescribed by the Government, going forward, while the civil proceedings would continue for duty, interest, and penalty recovery; prosecution and arrest would be initiated in cases where the financial severity is high,” he said.