Customs & Indirect Taxation

Customs law in India governs the levy and collection of customs duties on the import and export of goods, and related matters such as classification, valuation, clearance procedures, warehousing, seizures and confiscation. The principal statutory framework is the Customs Act, 1962, together with the Customs Tariff Act, 1975 for tariff classification and rates, and the rules, regulations and notifications made thereunder. Customs duties include basic customs duty, additional customs duty and other applicable levies. The Customs Act provides for assessment, demand and recovery, appeals, and related procedural mechanisms. The Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Exchange Management Act, 1999 may also be relevant to particular aspects of cross-border trade and foreign exchange, but they operate as distinct statutory frameworks.

Customs duty is levied on the import and export of goods into and out of India under the Customs Act, 1962 and the Customs Tariff Act, 1975, and includes basic customs duty and other applicable duties. The goods and services tax (GST), on the other hand, is levied on the supply of goods or services under the Central Goods and Services Tax Act, 2017, the Integrated Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Acts, 2017. In the case of imports, integrated GST (IGST) may be levied on the import of goods, along with customs duty. The two frameworks operate under distinct statutes, with different authorities, procedures and appellate remedies. The specific applicability in a given transaction depends on the nature of the goods, the nature of the transaction and the applicable statutory provisions.

Classification refers to the determination of the appropriate tariff heading under the Customs Tariff Act, 1975 under which imported or exported goods fall, which determines the applicable rate of customs duty. Valuation refers to the determination of the value of the goods for the purposes of computing customs duty, generally based on the transaction value, subject to the rules and conditions prescribed under the Customs Act, 1962 and the rules made thereunder. Both classification and valuation are central to the assessment of customs duty, and disputes may arise regarding the applicable tariff heading, the transaction value, related-party transactions, and the application of valuation rules. Such disputes may be pursued through the applicable statutory remedies, including appeals before the Commissioner (Appeals) and the CESTAT.

When goods are seized by customs authorities under the Customs Act, 1962, the authorities may issue a show cause notice under the applicable provisions, requiring the person concerned to explain why the goods should not be confiscated and why a penalty should not be imposed. The proceedings may lead to confiscation of the goods and imposition of penalties, subject to the applicable statutory provisions. The concerned person may have the right to seek provisional release of seized goods, subject to the conditions prescribed under the Act, including execution of a bond and furnishing of security. Remedies against seizure, confiscation or penalty orders may be available through appeals before the Commissioner (Appeals), the CESTAT and, where applicable, the High Courts. The specific position depends on the facts of the matter and the applicable statutory provisions.

Duty drawback is a mechanism under the Customs Act, 1962 and the rules made thereunder, under which a person may claim a refund of customs duty or a portion of it paid on the import of goods, where such goods are subsequently exported, or where specified conditions relating to their use or processing are satisfied. Eligibility for duty drawback depends on the applicable statutory provisions, the nature of the goods, the applicable rates and the prescribed procedure. A claim for duty drawback may be subject to conditions and timelines prescribed under the applicable rules, and may require supporting documentation. Where a claim is denied or delayed, remedies may be available through the applicable statutory framework, subject to the facts of the matter and the applicable provisions.

The Directorate General of Foreign Trade (DGFT) is an authority under the Ministry of Commerce and Industry responsible for the administration of the Foreign Trade Policy and matters relating to import and export authorisations, licences, incentives and related schemes under the Foreign Trade (Development and Regulation) Act, 1992. The DGFT issues and regulates various authorisations, including those under schemes such as the Advance Authorisation scheme and the Export Promotion Capital Goods scheme. Matters relating to the grant, refusal, suspension or cancellation of such authorisations, compliance with policy conditions and related issues may arise before the DGFT or the relevant authorities under the applicable policy framework. Remedies against orders passed under this framework may be available through the applicable statutory mechanisms, subject to the facts of the matter.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) is a statutory tribunal that exercises appellate jurisdiction over specified categories of customs, central excise and service tax matters. In the customs framework, CESTAT hears appeals against orders passed by the Commissioner (Appeals) and, in certain cases, against orders of the adjudicating authority, in accordance with the applicable provisions of the Customs Act, 1962. The Tribunal also exercises jurisdiction over specified matters relating to central excise and service tax, subject to the applicable statutory framework. The remedies against CESTAT orders depend on the applicable statutory framework and may include proceedings before the High Court or the Supreme Court, where provided by law and subject to the applicable jurisdictional and procedural requirements. For matters relating to goods and services tax, the GST Appellate Tribunal (GSTAT) is the corresponding appellate forum under the applicable GST framework.

In customs matters, appellate remedies may include an appeal before the Commissioner (Appeals) against orders of the adjudicating authority, followed by an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Further remedies may, where provided by law, include proceedings before the High Court and, in appropriate cases, the Supreme Court, subject to the applicable statutory conditions, jurisdiction, limitation and procedure. The availability and scope of each remedy depend on the nature of the order, the applicable provisions of the Customs Act, 1962 and the forum having jurisdiction. Not every order follows the same appellate route. Where a remedy is pursued, compliance with the applicable pre-deposit requirements and procedural conditions may be required.

The limitation period for filing customs appeals depends on the applicable statute, the nature of the order and the forum before which the appeal is filed. The Customs Act, 1962 prescribes specific limitation periods for different categories of appeals, including appeals to the Commissioner (Appeals) and the CESTAT, subject to the provisions relating to condonation of delay, where applicable. The computation of limitation and the availability of condonation depend on the applicable statutory provisions and the facts of the matter. The specific limitation applicable to a matter should be verified with reference to the applicable provisions and the order concerned. It is advisable to seek timely legal advice where a limitation issue arises.

Legal representation is not uniformly mandatory in every customs or indirect tax matter, and the position depends on the forum and the applicable rules. Before customs authorities, a person may generally appear in person or through an authorised representative, subject to the applicable provisions of the relevant statute. In proceedings before the Commissioner (Appeals), the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and the GST Appellate Tribunal (GSTAT), representation through an authorised representative may be permitted in accordance with the applicable statutory provisions and rules. Proceedings before the High Court and the Supreme Court are ordinarily conducted through advocates, subject to the applicable procedural rules and permissions. The specific position should be verified with reference to the applicable rules and the forum concerned.