FEBRUARY 21, 2025

By Ms Nupur Maheshwari, Executive Partner & Keerti Kataria Nagpal, Principal Associate, Lakshmikumaran and Sridharan, Attorneys

THE Finance Minister in the Budget 2025 proposed certain amendments under the Customs Act, 1962 ("referred to as "the Act") as a trade facilitation measure. One of the key amendments proposed is Section 18A which provides an opportunity for the importer and the exporters to revise an entry made in relation to the goods.

For ease of reference, the proposed Section 18A has been reproduced as under for ease of reference: -

"(1) Notwithstanding anything contained in section 149, the importer or exporter of the goods, after the clearance, may revise an entry already made in relation to the goods, in such form and manner, within such time and subject to such conditions as may be prescribed.

(2) On revising the entry under sub-section (1), the importer or exporter of the goods shall self-assess the duty.

(3) Where the revised entry and self-assessment made under sub-sections (1) and (2) results in–

(a) any duty short-levied, not levied, short-paid or not paid, then the same may be paid voluntarily by the importer or exporter of such goods along with the interest under section 28AA;

(b) duty paid in excess of that payable on such goods or whole of the duty paid, requiring refund, then, such revised entry shall be deemed to be a claim for refund under section 27.

(4) The proper officer may,–

(a) verify the revised entry and self-assessment made under sub-sections (1) and (2) in cases selected primarily on the basis of risk evaluation through appropriate selection criteria;

(b) re-assess the duty leviable on such goods in cases where the self-assessment under sub-section (2) is not done correctly.

(5) No revision of entry shall be made under this section in the following cases, namely:

(a) cases where any audit under Chapter XIIA or search, seizure or summons under Chapter XIII has been initiated and intimated to the importer or the exporter concerned;

(b) cases requiring refund where the proper officer has re-assessed the duty under section 17 or assessed the duty under section 18 or under section 84;

(c) any other case which the Board may specify by notification in the Official Gazette."

The term "entry" as provided in the aforesaid section has been defined in Section 2(16) of the Act to mean, "entry encompass within its ambit a bill of entry, shipping bill or bill of export as well as entry made with respect to courier or post imports ."

A reading of the above Section indicates that both, the importers and the exporters can request for revision of ‘entry'.

The revision of ‘entry' can result in the following consequences:

a. voluntary payment of duty with interest; or

b. refund of excess duties paid.

For the purposes of the present article, we are restricting the analysis to the extent of voluntary payment of duty and the potential issues thereafter.

Verification by Proper Officer

Under the proposed Section, upon revision by the importer or the exporter, the proper officer has the power to verify the revised entry made on the basis of risk evaluation through appropriate selection criteria. It appears that the existing risk management system will be used by Customs to identify the transactions that need verification. As a result, the proper officer has the power to either accept the revision or re-assess the entry in case he is not in agreement with the revision.

Where the revision to the extent of voluntary payment is accepted, the importer or exporter can pay the duty with interest and the entry shall be revised. However, there is a possibility that the revised entry and the voluntary payment by the assessee is not accepted by the department as they do not agree with the revision proposed. This situation can be further illustrated with the following examples:

1. When multiple products are imported under a single bill of entry, the importer might request a revision for one specific product. However, during verification, the proper officer might determine that other products also require revision on account of re-classification, wrong claim of exemption etc. resulting in additional duty payments.

2. An assessee opts for a revision based on interpretational issues for a two-year period (normal period of limitation) as it was a bonafide mistake which was suo-moto disclosed to the department. However, he has been importing these goods for more than 2 years. In such a case, the proper officer can deny the revision and insist the assessee must revise the entry for the entire period of import.

In the examples discussed above, if the Importers do not agree with the re-assessment, they not only lose the benefit of saving penalties under the proposed section but are further exposed and will be slammed with a show cause notice ("SCN) under Section 28 of the Act for all the issues which are highlighted to the Department due to their voluntary disclosure. Such notices are likely to be issued invoking the larger period of limitation.

Period of Limitation stands extended by virtue of corresponding amendment proposed under Section 28.

Another point to note is that in terms of proposed amendment in Section 28 of the Act, the relevant date for issuing the SCN where the additional duty is paid upon revision of entry, is the date on which such additional duty is paid. Accordingly, in the cases wherein the assesses opt for revision of entry, the time period available with the Customs Department to initiate proceedings either under Section 28(1) or Section 28(4) of the Act automatically gets extended beyond 2 years or 5 years. For example,

Accordingly, if an assessee chooses to revise an entry under Section 18A, such a revision effectively allows the department extended time to commence recovery proceedings under Section 28 of the Act.

Further clarity is needed on situations where Section 18A will not apply

Thirdly, as per the proposed section, where audits are initiated or search, seizure or summons proceedings have commenced, the benefit of voluntary disclosure and payment cannot be availed. Additionally, the proposed section 18A leaves room for additional exclusions which can be provided by Board vide notification in the Official Gazette.

Importantly, the exclusions mention on-going audit and investigation proceedings only without specifying whether such proceedings should be qua the specific products, or qua the issues for which the revision is sought or is it qua the importer or the exporter. The FAQ on the Budget 2025 also fails to provide the above clarity.

Is the penalty under the proposed section payable?

Another important aspect to consider is the possibility of penalties on assessees opting for revision under the proposed provision. While the Hon'ble Finance Minister mentioned in her Budget Speech that Section 18A would enable importers or exporters to voluntarily declare material facts and pay duty with interest but without penalty after the clearance of goods, this is not explicitly stated in the section. In other words, the proposed section does not specifically bar the imposition of penalties, rather it remains silent on this aspect in contrast to the language used under Section 28(2) and 28(5) of the Act.

Despite the above issues that can pose serious challenges to the assesses, the said section will hold special importance for Authorized Economic Operators (referred to as "AEO") or assessees operating in Manufacturing and Other Operations in Warehouse (referred to as "MOOWR") Scheme which requires a clean track record of the assesses in order to be eligible for special benefits. This is for the reason that Section 18A can be used by the AEO scheme holders to avoid the situation of issuance of SCN and potential revocation of the AEO certificate.

When applying under the MOOWR scheme for duty deferment, applicants must declare that they have not been penalized, convicted, or are being prosecuted for any offense under the Act. To meet this requirement, MOOWR holders can utilize the revision option provided under Section 18A to avoid proceedings under the Act.  

While the proposed section is likely to benefit some, considering the above challenges posed by the language used therein, it is worthwhile to await the subordinate legislation to assess if the proposed amendment is indeed a trade facilitation measure.

[The views expressed are strictly personal.]