Corrigendum can neither impose penalty nor duty

Using corrigendum to bring about substantial changes such as imposing penalty or bringing about higher rate of duty has been resorted to by Revenue on some occasions. The latest one is a case where extensive changes have been made in the adjudication order and penalty has been imposed through a corrigendum in a service tax case . Similarly on a previous occasion a corrigendum was issued by the Ministry of Finance, Department of Revenue from file No.341/145/2008-TRU on 6th November, 2008. It says, “for 2%, read 3%” in the notification No.110/2008-Customs dated 22nd October 2008.

I am writing this treatise not to go into the individual cases but to underline the important legal principle that corrigendum cannot be used for a purpose other than what is authorised by the statute.

In the Customs Act Section 154 lays down that clerical or arithmetical mistake in any decision or order passed by the Central Government, the Board or any officer of customs under this Act, or errors arising therein from accidental slip or omission may, at any time, be corrected by such officers. What is permissible, therefore, is to correct clerical or arithmetical error in a decision or an error arising from accidental slip in such decisions. It does not at all permit any substantial change in the order or decision be brought about by a corrigendum.

Imposing a penalty is definitely a substantial change. When an adjudication is done, if an order is passed without imposing penalty, it is permissible to issue another show cause memo for the purpose of imposing penalty.

Then there will have to be one more adjudication, though in continuation of the previous one, for the specific purpose of imposing penalty. This is usually done in cases of smuggled narcotic drug, gold, diamond, ship or boat, used for smuggling.

The reason is that these goods are usually unclaimed. If Revenue waits for finding out who the actual smuggler is, these goods cannot be confiscated and disposed of. Therefore, Revenue imposes penalty in a separate adjudication after the first adjudication regarding the goods is over.

This practice could have been followed in this case also and then there would have been no legal infirmity . In another case , the Tribunal has held that an adjudication order if it is changed by corrigendum becomes a changed order and it is illegal.

Regarding the imposition of duty by corrigendum, mentioned above, what has been done by a corrigendum is to increase duty from 2% to 3%. Writing 2% where it should have been 3% may as well be called an accidental slip but a notification is neither an order nor a decision. Therefore changing the substance of the notification amounting to imposition of duty cannot be done by corrigendum. It can only be done by an amendment.

In the excise act, there is no Section for corrigendum. There is a Section 38A for amendment of Rules, Orders and Notifications.

Section 38A(c) specifically lays down that such amendment “shall not affect any right, privilege, obligation, liability, acquired, accrued or incurred under any rule, notification or order so amended…..” unless a different intention appears (italics mine). In the Service Tax law, there is a Section 74 for rectification of mistakes. It does not provide for corrigendum. It provides for amendment of order. Sub Section (4) provides specifically that an amendment which has the effect of enhancing the liability of the assessee cannot be made unless the assessee is given notice to that effect and he is allowed to represent his case.

The conclusion is that the substance of the legal provisions in Customs, Central Excise and Service Tax laws is that no fresh liability can be imposed without giving further notice to assessee and opportunity to represent his case. Imposing penalty or imposing higher duty through a corrigendum goes against the legal provisions.

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