Fined by the System: Automated Penalties under S.R.O. 1346(I)/2026 and the Hearing the Customs Act Requires

On 1st October 2026 two notifications of the Federal Board of Revenue, both dated 13th August 2026, come into field together. The first, S.R.O. 1346(I)/2026, fixes a daily tariff of penalties for cargo that overstays at a customs station. The second, S.R.O. 1347(I)/2026, adds Chapter XLIX to the Customs Rules, 2001 under the name “Overstayed Cargo Management Rules, 2026”, and it provides that the “Customs Computerized System” shall “automatically determine the amount of penalty” and send the owner of the goods an electronic notice of it. Dawn reported on 14th August 2026 that the measure followed a scam in which a private company was found to delay filing goods declarations for advantage. The purpose is legitimate. The question for every importer at Karachi and Port Qasim is narrower, and it is whether a sum calculated by software is a penalty the Customs Act, 1969 (Act IV of 1969) permits to be imposed without a hearing. It is not, and the Board’s own drafting history shows that it knew as much.

The tariff

Section 82(1) of the Customs Act, 1969 makes the owner of goods liable to penalties in four cases, and S.R.O. 1346(I)/2026 prices each of them. Where the goods declaration is not filed for home consumption, warehousing or transhipment within twenty days of arrival, the penalty is twenty five thousand rupees for each of the next five days and fifty thousand rupees for each day after that. Where a declaration filed before berthing is followed by goods not removed within five days of assessment and berthing, it is fifteen thousand rupees a day for five days and twenty thousand thereafter. Where a declaration filed after berthing is followed by goods not removed within five days of clearance, it is ten thousand rupees a day for five days and twenty thousand thereafter. Where goods for export are not loaded within fifteen days of entering the port, it is five thousand rupees a day for five days and fifteen thousand thereafter. Each is capped at one million rupees “in each case”.

The arithmetic of the first row deserves a moment. By the thirtieth day after arrival an importer who has filed nothing owes three hundred and seventy five thousand rupees, and on that same day the first proviso to Section 82(2) makes the goods themselves liable to confiscation. The ceiling of one million rupees is reached only on the forty third day. Hence the cap is not the real limit of exposure for an importer who has not filed; the goods are.

The press has not reported the table consistently. Business Recorder gave the notification as S.R.O. 136(I)/2026 and transposed the figures of the second and fourth rows; the notification as the Board published it reads as set out above, and it is the notification that will be applied.

The power to fix these amounts moved this year. The Finance Act, 2026 (Act XLIII of 2026), assented to on 26th June 2026, substituted “Board with the approval of the Minister-in-Charge” for “Federal Government” in Section 82(1), allowed the Collector to “waive or reduce” the penalty in unavoidable circumstances where before he could only waive it, and added a second proviso empowering the Board to “notify the rules to regulate the implementation of the above provisions, including the process of appeal against imposed penalties”. The “Overstayed Cargo Management Rules, 2026” are those rules.

The machine

Rule 1239 sets out the procedure. Where a penalty becomes leviable under clauses (a) to (d) of Section 82(1), the “Customs Computerized System” determines it at the time of filing of the goods declaration or within twenty four hours of the release message, and issues “an electronic notice to the owner of the goods or his authorized agent, specifying the penalty so determined”. The trader may accept it and pay through the “WeBOC payment module”, or “opt to contest the same”. A contested notice is marked to the Collector or an authorised officer “for passing an order within five working days of the issuance of the notice”, extendable by the Chief Collector for another five working days for reasons recorded in writing. If the notice is vacated the system “shall allow filing of the GD or delete the payable penalty”; if it is not, the penalty “as decided by the authority” is processed for payment. Rule 1240 then gives an appeal in the system to the Chief Collector within fifteen days, to be decided within five working days. The rules do not apply at land customs stations or airports, and they exclude goods under Chapter 99 of the First Schedule, goods in transit or international transhipment, personal baggage, LCL export cargo and bulk cargo.

The words that were taken out

The rules were first published in draft as S.R.O. 1081(I)/2026 of 6th July 2026, under Section 219(3A), with three days allowed for objections. The draft was plainer than the final text. It said the system would issue “an electronic show cause notice”; that the trader might “contest the same through adjudication process”; that “in case the trader opts for adjudication of the matter” the case would go to the Collector; and that on “vacation of show cause notice by the adjudication authority” the declaration would proceed, failing which the penalty “as decided by the adjudicating officer” would be processed.

Every one of those expressions is gone from S.R.O. 1347(I)/2026. The “show cause notice” became an “electronic notice” and, in rule 1239(d), a “notice for payment”. Contesting “through adjudication process” became contesting. The “adjudication authority” and the “adjudicating officer” both became “the authority”. Nothing else in the procedure changed.

Yet S.R.O. 1346(I)/2026, signed by the same officer on the same day, still says in its paragraph 2 that the penalties “shall be subject to the adjudicating proceedings or voluntarily deposit”. The tariff therefore assumes an adjudication that the rules no longer name. A change of label does not change what the statute requires, and if the drafting was meant to take the process outside Sections 179 and 180, it cannot do so.

What Section 180 requires

Section 179(1) confers the power of adjudication in cases involving “imposition of penalty or any other contravention under this Act or the rules made thereunder”, and Section 180 states the condition on which that power may be used in terms no rule can soften: “No order under this Act shall be passed for the confiscation of any goods or for imposition of any penalty on any person unless” that person is informed in writing of the grounds on which it is proposed to impose the penalty, is given an opportunity of making a representation in writing within a reasonable time, and “is given a reasonable opportunity of being heard personally or through a counsel or duly authorized agent”. Article 10A of the Constitution, which guarantees a fair trial and due process in the determination of civil rights and obligations, stands behind it. Section 24A of the General Clauses Act, 1897 adds that an authority making an order under an enactment shall give reasons for it and provide a copy to the person prejudicially affected.

The Act is not hostile to software. The proviso to Section 179(2) lets a respondent “opt for adjudication through the customs computerized system” for notified goods or offences, and the Finance Act, 2026 added Section 179(6), under which the Board may notify “faceless adjudication” conducted “without any face-to-face interaction”. Both provisions change the medium of the hearing. Neither removes it, and the first makes computerised adjudication the respondent’s option and not the department’s.

Read with Section 180, the scheme can be operated lawfully, and it should be read so that it is. The figure the system produces is a proposal. It becomes a penalty in one of two ways only: the owner accepts it and deposits, which is the “voluntarily deposit” of S.R.O. 1346(I)/2026, or an officer passes an order after the electronic notice has stated its grounds, a representation has been received and a hearing, virtual if need be, has been given. An order that adopts the calculation without those steps is an order Section 180 says “shall” not be passed.

Two features of the rules make the hearing more than a formality. The first proviso to Section 82(1) lets the Collector waive or reduce the penalty “in unavoidable circumstances”, and no computation can find that a berth was unavailable, a vessel’s manifest late, or the clearance system itself down. The question sits unexamined inside every notice, and only a hearing answers it. The second is that Section 179(3) already allows forty five days to decide a case where goods are lying at a sea port; five working days is faster, which is good for the trader, but only if the five days contain the representation and the hearing and are not merely a queue.

The price of contesting

Rule 1239(e) provides that on vacation of the notice the system “shall allow filing of the GD”, which implies that until the order is passed a contested notice under the first row holds the declaration. Ten working days is two calendar weeks. The rules do not say whether those days count toward the daily penalty, nor whether they count toward the thirty days after which the goods become liable to confiscation under Section 82(2), and a trader who contests on the twenty sixth day could find the answer mattering a great deal. Add terminal and shipping line charges running throughout, and the choice the rules offer is in practice between paying and waiting, which is not the choice Section 180 contemplates.

The appeal raises a further difficulty. Section 193 gives any person aggrieved by an order under Section 179 of an officer below the rank of Additional Collector an appeal to the Collector (Appeals) within thirty days. Rule 1240 gives an appeal to the Chief Collector within fifteen. The second proviso to Section 82(1) authorises rules on “the process of appeal”, and whether that power extends to substituting a different forum and halving the time for a right Parliament has given in Section 193 is doubtful. Until a court decides it, I would not advise any importer to treat the fifteen day appeal as the only one.

What should change, and what to do before 1st October

Four amendments would make the scheme answer the statute without slowing it down. The electronic notice should state the clause of Section 82(1) relied on, the date of arrival or berthing taken, and the days counted, and it should invite a representation and offer a hearing, so that it is a Section 180 notice in substance whatever it is called. A contested notice should not block the declaration: the goods should move on deposit or security under protest, refundable if the notice is vacated. The days during which a contest is pending should be excluded from the count under both sub-sections of Section 82. And the claim to waiver or reduction under the first proviso should be available on the face of the first notice.

Until then the practical steps are the trader’s. Keep the arrival, berthing and assessment dates in documents of your own and not only in the system. Where a notice is wrong, contest it in writing, ask for a hearing in terms, and plead the first proviso where the delay was not yours. Where goods must move and the only route is payment, record in writing that the deposit is made to secure release and not as acceptance of liability. And diarise the thirty days under Section 193 as well as the fifteen under rule 1240.

A calculation is not a hearing, and Section 180 has said so since 1969.