Excess or Short Payment of Customs Duty on Import of goods into India

[Pradeep Reddy]

Customs Duty payments often present challenges for importers, sometimes resulting in overpayment or underpayment. In this article, I delve into the common scenarios leading to such challenges and outline remedial measures.

𝗜. 𝗘𝘅𝗰𝗲𝘀𝘀 𝗽𝗮𝘆𝗺𝗲𝗻𝘁 𝗼𝗳 𝗖𝘂𝘀𝘁𝗼𝗺𝘀 𝗗𝘂𝘁𝘆

Excess payment can be due to failure to claim an exemption benefit, adoption of incorrect classification, declaring incorrect value of goods, etc. Importers facing this situation have recourse to the following options:

(𝗮) 𝗢𝗽𝘁𝗶𝗼𝗻 𝟭- 𝗔𝗽𝗽𝗲𝗮𝗹 𝘁𝗼 𝗖𝗼𝗺𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝗲𝗿 (𝗔𝗽𝗽𝗲𝗮𝗹𝘀)

𝙇𝙚𝙜𝙞𝙨𝙡𝙖𝙩𝙞𝙫𝙚 𝙗𝙖𝙘𝙠𝙜𝙧𝙤𝙪𝙣𝙙

A self-assessed bill of entry is an order of assessment under Section 47 of the Customs Act, 1962 (“the Act”). Such an order of assessment can be challenged by way of an appeal under Section 128 of the Act, within sixty days of the date of the Bill of Entry.

𝙋𝙧𝙤𝙘𝙚𝙙𝙪𝙧𝙚 𝙞𝙣𝙫𝙤𝙡𝙫𝙚𝙙

Importers can challenge the Bill of Entry wherein there was an excess payment of Customs Duty by way of an appeal. In such an appeal the importer can seek the reassessment of the Bill of Entry, the determination of appropriate Customs Duty therefor.

Typically, the Commissioner (Appeals) does allow for such reassessment of the Bill of Entry subject to the availability of sufficient documentation. In the event, that the appeal is allowed Commissioner (Appeals) often remands the case back to the jurisdictional customs authorities directing them to reassess the bill of entry. Based on such reassessment the importer can seek a refund of excess Customs Duty paid.

Briefly, first, the importer must file an appeal and seek reassessment, the jurisdictional customs authority may reassess the bill of entry based on the Commissioner (Appeals) order, and thereafter the importer must file an application seeking a refund based on such reassessment order.

(𝗯) 𝗢𝗽𝘁𝗶𝗼𝗻 𝟮- 𝗔𝗺𝗲𝗻𝗱𝗺𝗲𝗻𝘁 𝗶𝗻 𝘁𝗲𝗿𝗺𝘀 𝗼𝗳 𝘀𝗲𝗰𝘁𝗶𝗼𝗻 𝟭𝟰𝟵

𝙇𝙚𝙜𝙞𝙨𝙡𝙖𝙩𝙞𝙫𝙚 𝙗𝙖𝙘𝙠𝙜𝙧𝙤𝙪𝙣𝙙

In the event, that the importer has realized the fact of excess payment after the expiry of sixty days from the date of the Bill of Entry ( i.e. after the expiry of the time limit to file an appeal), the alternate option is to apply to the jurisdictional Customs authorities seeking amendment of the Bill of Entry in terms of Section 149. The relevant extract of the provision is as follows:

“𝚂𝚎𝚌𝚝𝚒𝚘𝚗 𝟷𝟺𝟿. 𝙰𝚖𝚎𝚗𝚍𝚖𝚎𝚗𝚝 𝚘𝚏 𝚍𝚘𝚌𝚞𝚖𝚎𝚗𝚝𝚜. –

𝚂𝚊𝚟𝚎 𝚊𝚜 𝚘𝚝𝚑𝚎𝚛𝚠𝚒𝚜𝚎 𝚙𝚛𝚘𝚟𝚒𝚍𝚎𝚍 𝚒𝚗 𝚜𝚎𝚌𝚝𝚒𝚘𝚗𝚜 𝟹𝟶 𝚊𝚗𝚍 𝟺𝟷, 𝚝𝚑𝚎 𝚙𝚛𝚘𝚙𝚎𝚛 𝚘𝚏𝚏𝚒𝚌𝚎𝚛 𝚖𝚊𝚢, 𝚒𝚗 𝚑𝚒𝚜 𝚍𝚒𝚜𝚌𝚛𝚎𝚝𝚒𝚘𝚗, 𝚊𝚞𝚝𝚑𝚘𝚛𝚒𝚣𝚎 𝚊𝚗𝚢 𝚍𝚘𝚌𝚞𝚖𝚎𝚗𝚝, 𝚊𝚏𝚝𝚎𝚛 𝚒𝚝 𝚑𝚊𝚜 𝚋𝚎𝚎𝚗 𝚙𝚛𝚎𝚜𝚎𝚗𝚝𝚎𝚍 𝚒𝚗 𝚝𝚑𝚎 𝚌𝚞𝚜𝚝𝚘𝚖 𝚑𝚘𝚞𝚜𝚎 𝚝𝚘 𝚋𝚎 𝚊𝚖𝚎𝚗𝚍𝚎𝚍 𝚒𝚗 𝚜𝚞𝚌𝚑 𝚏𝚘𝚛𝚖 𝚊𝚗𝚍 𝚖𝚊𝚗𝚗𝚎𝚛, 𝚠𝚒𝚝𝚑𝚒𝚗 𝚜𝚞𝚌𝚑 𝚝𝚒𝚖𝚎, 𝚜𝚞𝚋𝚓𝚎𝚌𝚝 𝚝𝚘 𝚜𝚞𝚌𝚑 𝚛𝚎𝚜𝚝𝚛𝚒𝚌𝚝𝚒𝚘𝚗𝚜 𝚊𝚗𝚍 𝚌𝚘𝚗𝚍𝚒𝚝𝚒𝚘𝚗𝚜, 𝚊𝚜 𝚖𝚊𝚢 𝚋𝚎 𝚙𝚛𝚎𝚜𝚌𝚛𝚒𝚋𝚎𝚍:

𝙿𝚛𝚘𝚟𝚒𝚍𝚎𝚍 𝚝𝚑𝚊𝚝 𝚗𝚘 𝚊𝚖𝚎𝚗𝚍𝚖𝚎𝚗𝚝 𝚘𝚏 𝚊 𝚋𝚒𝚕𝚕 𝚘𝚏 𝚎𝚗𝚝𝚛𝚢 𝚘𝚛 𝚊 𝚜𝚑𝚒𝚙𝚙𝚒𝚗𝚐 𝚋𝚒𝚕𝚕 𝚘𝚛 𝚋𝚒𝚕𝚕 𝚘𝚏 𝚎𝚡𝚙𝚘𝚛𝚝 𝚜𝚑𝚊𝚕𝚕 𝚋𝚎 𝚜𝚘 𝚊𝚞𝚝𝚑𝚘𝚛𝚒𝚣𝚎𝚍 𝚝𝚘 𝚋𝚎 𝚊𝚖𝚎𝚗𝚍𝚎𝚍 𝚊𝚏𝚝𝚎𝚛 𝚝𝚑𝚎 𝚒𝚖𝚙𝚘𝚛𝚝𝚎𝚍 𝚐𝚘𝚘𝚍𝚜 𝚑𝚊𝚟𝚎 𝚋𝚎𝚎𝚗 𝚌𝚕𝚎𝚊𝚛𝚎𝚍 𝚏𝚘𝚛 𝚑𝚘𝚖𝚎 𝚌𝚘𝚗𝚜𝚞𝚖𝚙𝚝𝚒𝚘𝚗 𝚘𝚛 𝚍𝚎𝚙𝚘𝚜𝚒𝚝𝚎𝚍 𝚒𝚗 𝚊 𝚠𝚊𝚛𝚎𝚑𝚘𝚞𝚜𝚎, 𝚘𝚛 𝚝𝚑𝚎 𝚎𝚡𝚙𝚘𝚛𝚝 𝚐𝚘𝚘𝚍𝚜 𝚑𝚊𝚟𝚎 𝚋𝚎𝚎𝚗 𝚎𝚡𝚙𝚘𝚛𝚝𝚎𝚍, 𝚎𝚡𝚌𝚎𝚙𝚝 𝚋𝚊𝚜𝚎𝚍 𝚘𝚗 𝚍𝚘𝚌𝚞𝚖𝚎𝚗𝚝𝚊𝚛𝚢 𝚎𝚟𝚒𝚍𝚎𝚗𝚌𝚎 𝚠𝚑𝚒𝚌𝚑 𝚠𝚊𝚜 𝚒𝚗 𝚎𝚡𝚒𝚜𝚝𝚎𝚗𝚌𝚎 𝚊𝚝 𝚝𝚑𝚎 𝚝𝚒𝚖𝚎 𝚝𝚑𝚎 𝚐𝚘𝚘𝚍𝚜 𝚠𝚎𝚛𝚎 𝚌𝚕𝚎𝚊𝚛𝚎𝚍, 𝚍𝚎𝚙𝚘𝚜𝚒𝚝𝚎𝚍, 𝚘𝚛 𝚎𝚡𝚙𝚘𝚛𝚝𝚎𝚍, 𝚊𝚜 𝚝𝚑𝚎 𝚌𝚊𝚜𝚎 𝚖𝚊𝚢 𝚋𝚎…”

This position of law has been held repeatedly, notable judgments in this context are as follows:

• M/S. USHA INTERNATIONAL LIMITED, M/S. JAY ENGINEERING WORKS LIMITED VERSUS THE ASSISTANT COMMISSIONER OF CUSTOMS, THE ASSISTANT COMMISSIONER OF CUSTOMS, THE COMMISSIONER OF CUSTOMS - 2018 (9) TMI 1454 - MADRAS HIGH COURT
• HINDUSTAN UNILEVER LIMITED VERSUS UNION OF INDIA, THE CHAIRMAN, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS, JOINT SECRETARY (CUSTOMS) , COMMISSIONER OF CUSTOMS, CHENNAI-II, DEPUTY COMMISSIONER OF CUSTOMS, CHENNAI-II, ASSISTANT COMMISSIONER OF GST & CENTRAL EXCISE, DIRECTOR GENERAL, THE COMMISSIONER OF GST & CENTRAL EXCISE, THE COMMISSIONER (ST) - 2021 (4) TMI 265 - MADRAS HIGH COURT
• M/S. HEWLETT PACKARD ENTERPRISE INDIA PRIVATE LIMITED VERSUS JOINT COMMISSIONER OF CUSTOMS, DEPUTY COMMISSIONER OF CUSTOMS, THE PRINCIPAL COMMISSIONER OF CUSTOMS, UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE - 2020 (10) TMI 970 - MADRAS HIGH COURT
• COMMISSIONER OF CUSTOMS, TUTICORIN VERSUS THIRU AROORAN SUGARS LTD. - 2010 (2) TMI 448 - MADRAS HIGH COURT

In these cases, it was held that in the event of excess payment of Customs Duty the importer’s request for amending the bills of entry under Section 149 should be considered.

𝙋𝙧𝙤𝙘𝙚𝙙𝙪𝙧𝙚 𝙞𝙣𝙫𝙤𝙡𝙫𝙚𝙙

Section 149 of the Act allows amendment of bills of entry based on documentary evidence that existed at the time of clearance of goods for home consumption. Typically, the Customs authorities do allow requests for amendments subject to the submission of sufficient documentation.

In the event the Customs authorities allow the request for amendment, a speaking order reassessing the Bill of Entry shall be passed. Based on such a reassessment order the importer can approach the jurisdictional customs authorities to seek a refund of excess Customs Duty.

Where the Customs authorities reject the request for amendment without reasonable explanation, the importers may prefer a Writ Petition before the jurisdictional High Court.

Appeal vs Amendment

It is a settled principle of law that the importers can seek either an amendment in terms of Section 149 of the Act or prefer an appeal under Section 128 of the Act.

The Hon’ble Supreme Court has held this position of law in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV - 2019 (9) TMI 802 - SUPREME COURT. The above position of law has been further upheld by the Telangana High Court in the case of M/S. SONY INDIA PVT. LTD. VERSUS UNION OF INDIA AND ANOTHER - 2021 (8) TMI 622 - TELANGANA HIGH COURT as affirmed by the Hon’ble Supreme Court in the case of UNION OF INDIA & ANR. VERSUS M/S SONY INDIA PVT. LTD. - 2023 (4) TMI 1086 - SC ORDER.

𝗜𝗜. 𝗦𝗵𝗼𝗿𝘁 𝗽𝗮𝘆𝗺𝗲𝗻𝘁 𝗼𝗳 𝗖𝘂𝘀𝘁𝗼𝗺𝘀 𝗗𝘂𝘁𝘆

Conversely, underpayment may stem from factors like improper selection of exemption notification, or misclassification, or undervaluation of goods. In such cases, importers can take the following steps for paying incremental Basic Customs Duty including IGST, and availing credit on such IGST.

(a) 𝙋𝙖𝙮𝙢𝙚𝙣𝙩 𝙤𝙛 𝙄𝙣𝙘𝙧𝙚𝙢𝙚𝙣𝙩𝙖𝙡 𝘽𝙖𝙨𝙞𝙘 𝘾𝙪𝙨𝙩𝙤𝙢𝙨 𝘿𝙪𝙩𝙮 𝙖𝙣𝙙 𝙄𝙂𝙎𝙏- Importers can pay the differential Duty and IGST through TR-6 Challan.

(b) 𝘼𝙫𝙖𝙞𝙡𝙢𝙚𝙣𝙩 𝙤𝙛 𝙂𝙎𝙏 𝙘𝙧𝙚𝙙𝙞𝙩 𝙤𝙣 𝙞𝙣𝙘𝙧𝙚𝙢𝙚𝙣𝙩𝙖𝙡 𝙄𝙂𝙎𝙏

As per Section 16(2)(a) of the CGST Act, 2017 (“CGST Act”) read with Rule 36 of CGST Rules, 2017 GST credit on imports can be availed based on a Bill of Entry or any similar document prescribed under the Act, or rules made thereunder for the assessment of integrated tax on imports.

TR-6 Challan is a document prescribed under the Customs Act, 1962 for payment of Customs Duty, GST credit can be availed based on the same.

(c) 𝙏𝙞𝙢𝙚 𝙡𝙞𝙢𝙞𝙩 𝙛𝙤𝙧 𝙂𝙎𝙏 𝙘𝙧𝙚𝙙𝙞𝙩 𝙤𝙣 𝙞𝙣𝙘𝙧𝙚𝙢𝙚𝙣𝙩𝙖𝙡 𝙄𝙂𝙎𝙏

As per section 16(4) of the CGST Act, GST credit in respect of any invoice or debit note for goods or services or both, procured in a financial year should be availed on or before 30th November of the following financial year.

Based on the provisions above, the restriction to avail GST credit within the aforesaid time limit is applicable only in the case of tax invoices or debit notes but not for bills of entry or TR-6 challan. Therefore, GST credit on incremental IGST can be availed irrespective of the period in which such imports were made.

Does this article make sense? Let me know your thoughts in the comments.

Discussions to this article

[MK Singh]

As per section 16(4) of the CGST Act, GST credit in respect of any invoice or debit note for goods or services or both, procured in a financial year should be availed on or before 30th November of the following financial year.

Based on the provisions above, the restriction to avail GST credit within the aforesaid time limit is applicable only in the case of tax invoices or debit notes but not for bills of entry or TR-6 challan. Therefore, GST credit on incremental IGST can be availed irrespective of the period in which such imports were made.

Sir, it is seen that when the import paid the past import duty when not paid or less paid due to classification issue and any other issue by TR-6 Challan (manually) they did not get the GST Credit. It will be cumbersome to get the GST credit. It is requested to please elaborate the procedure about the GST credit when importer has paid the duty with Challan and manually. It will be also beneficial to know that which section in Customs or GST will process this request.

[Shivam Agrawal]

Hi Pradeep Ji,

I was looking for an article or discussion on how to avail input tax credit of IGST paid through manual TR-6 Challans as duty on debonding of capital goods in STPI/ SEZ which were imported duty free originally. I was not sure whether TR-6 is a document prescribed for payment of customs duty and can be considered a valid document as per Rule 36 of CGST Rules.

During my long search, I came across your article which is similar to above scenario since incremental IGST duty has been paid with TR-6 Challans.

Also, I came across Customs Circular no. 16/2023 (https://taxinformation.cbic.gov.in/view-pdf/1003163/ENG/Circulars) relating to similar incremental IGST payment scenario and availment of ITC/ Refund. 

Adding to Mr. MK Singh's request, requesting you to please elaborate the detailed procedure to follow to get the BOE reassessed and get the BOE data flowing from ICEGATE to GSTN portal and how to make the challan payment.

Thanks and Regards,

CA. Shivam Agrawal

[email protected]

[Pradeep Reddy]

Rule 36 (1) (d) says that input tax credit can be availed based on a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports.

Since the Customs law allows payment of Incremental Customs Duty through TR-6 Challan, such TR-6 Challan can be construed as "any similar document prescribed under the Customs Act, 1962" mentioned in Rule 36.

Therefore, credit can be availed manually in GSTR-3B based on the TR-6 Challan. While it may be disputed by the GST authorities at the adjudication level, it can be defended based on merits at the appellate/tribunal level.

Separately, it may be noted that Rule 36 (4) does not mandate that the bill of entry should appear in GSTR-2A/2B to be eligible to avail of ITC. Therefore, availing ITC based on TR-6 Challan though not reflected in GSTR-2A/2B is valid.

Alternatively, the importers may approach the Customs authorities to reassess the bill of entry, who may reassess the bill of entry and incremental duty may be pushed from ICEGATE to the GST portal. Usually, it is time a consuming process.

The importer may choose the appropriate option considering the above.

[Shivam Agrawal]

Thank you Pradeep Ji for your guidance. I also agree with the view that ITC cannot be restricted even if the IGST payment on Bill of Entry is not reflecting in GSTR-2B. Trade and Industry has to make representation on this to CBIC through various trade forums.