Article 40B of Excise Law: Ultimum Remedium or Restorative Justice?

BEHIND thousands of enforcement operations undertaken by the Directorate General of Customs and Excise (DGCE), there is one phenomenon that draws attention. The number of enforcement actions against violations in the field of tobacco products continues to escalate, yet cases that progress to the investigation stage remain relatively few.

Yet, on the surface, many violations have been found in the field. This phenomenon raises a question that remains relevant to this day: why do not all excise violations end in an investigation?

The answer is certainly not as straightforward as a matter of proof. Investigation is a legal process that requires resources, time, costs, evidence and administrative and juridical preparedness that are far from simple.

At the same time, before the entry into force of Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations (Harmonisasi Peraturan Perpajakan/HPP in Indonesian), the scope for administrative resolution of alleged excise crimes remains limited.

That situation subsequently changed with the introduction of Article 40B of the Excise Law. This provision allows DGCE officials to refrain from proceeding with certain alleged violations to the investigation stage, even where the elements of a crime have been fulfilled, provided the requirements prescribed by law are fulfilled.

The presence of Article 40B has sparked an interesting discussion. Does this provision represent the application of the ultimum remedium principle, given that criminal prosecution is placed as the last resort? Or does it instead represent a form of restorative justice, given that its resolution is directed towards the recovery of state losses? Or do both concepts in fact exist simultaneously, yet operate on different dimensions?

To answer these questions, it is first necessary to understand the fundamental differences between the two concepts.

The Distinction Between Ultimum Remedium and Restorative Justice

Ultimum remedium is a principle that places criminal law as the last resort. This implies that criminal prosecution is not used as the first response to every violation where the aims of law enforcement can continue to be achieved through other instruments, such as administrative penalties, guidance or the recovery of state losses.

This principle stems from the view that criminal law is the harshest legal instrument, as it can deprive individuals of their liberty, give rise to social stigma, disrupt business continuity and carry wide-ranging consequences for the offender.

Restorative justice, by contrast, does not focus on when criminal prosecution is used, but rather on how the harm caused by a violation can be remedied. This approach places emphasis on the offender's accountability and the restoration of conditions disrupted by a delict.

The United Nations Office on Drugs and Crime (UNODC) defines restorative justice as an approach that provides space for affected parties to participate in resolving the consequences of a crime through mechanisms oriented towards restoration.

In excise cases, this concept cannot, of course, be applied identically to general crimes, as the primary victim is not an individual but rather the state, which has been deprived of its entitlement to excise revenue. Accordingly, restorative justice may be understood as an effort to restore the state's fiscal rights.

Upon close examination, Article 40B in fact contains two layers of ideas simultaneously. The first layer is the limitation on the use of criminal instruments. This is reflected in the existence of an examination stage into alleged violations before an investigation is conducted.

At that stage, customs and excise officials are allowed to determine whether an incident constitutes an administrative violation or has fulfilled the elements of a crime. Accordingly, enforcement officers do not automatically refer every violation to criminal proceedings.

This is where the dimension of ultimum remedium operates. Criminal prosecution is no longer the first response, but is instead placed as the last instrument where resolution through other mechanisms is no longer adequate.

The second layer is the restoration of the state's rights. Article 40B provides that, in respect of certain examination findings, an investigation need not be conducted where the party concerned pays an administrative penalty in the form of a fine.

In addition, excisable goods connected to the violation are designated as state property, whilst other related goods may also be designated as state property pursuant to the applicable provisions.

These provisions demonstrate that Article 40B is not intended as a form of leniency towards excise violations. On the contrary, this article establishes a different mechanism of accountability.

Its focus is not solely on prosecuting the offender, but on ensuring that the state recovers its fiscal rights through the payment of administrative penalties and the seizure of goods connected to the violation.

Accordingly, Article 40B cannot appropriately be understood solely as a manifestation of ultimum remedium, nor purely as restorative justice. Both concepts are, in fact, present simultaneously. Ultimum remedium explains why criminal prosecution is not always employed, whilst restorative justice explains the objective of case resolution, namely the restoration of the state's rights.

Administrative Resolution Must Be Selective

This understanding has important implications for the DGCE. The application of Article 40B must not be perceived as a "pay the fine and be done" mechanism. Such a perspective risks reducing the deterrent effect and creating the impression that violations can be redeemed with a sum of money.

On the contrary, this mechanism must be understood as a law enforcement instrument that remains firm, measured, transparent and accountable. Administrative resolution must be applied selectively, taking into account the nature of the violation, the degree of culpability and the interest in protecting compliant entrepreneurs.

This is important because the function of excise is not merely as a source of state revenue, but also as an instrument of control and public protection. In the tobacco products ecosystem, for instance, the circulation of illicit cigarettes not only reduces state revenue but also creates unfair business competition and weakens the effectiveness of excise policy.

Accordingly, the success of Article 40B cannot be measured solely by the amount of administrative fines collected. More importantly, the question is whether the mechanism is capable of improving compliance, reducing repeat violations, changing the behaviour of entrepreneurs and strengthening public confidence in excise law enforcement.

Ultimately, the debate as to whether Article 40B represents ultimum remedium or restorative justice is not merely a matter of terminology. What is far more important is ensuring that the mechanism is capable of applying criminal prosecution proportionately, whilst at the same time effectively restoring the state's rights.

From that perspective, the two concepts are not mutually exclusive alternatives, but rather complement one another in realising excise law enforcement that is fair, effective, and compliance-oriented. (rig)

* This opinion article represents the personal views of the author and does not reflect the position of the institution at which the author is employed.