In the last ten years, in several aspects, the Union government has demonstrated a steadfast commitment to ‘ease of doing business’. In the latest parliamentary speech for the Union budget 2025-26, the Hon’ble Finance Minister on six occasions used the phrase ‘ease of doing business’ - the maximum since 2015 - providing a clear cue of the legislative intent.
Amongst several legislative changes in this budget, changes made in the Customs Act, 1962 (“Act” for short) are prima facie to facilitate trade. Some of these are:
(a) insertion of sub-section 1(B) in Section 18 of the Act, which prescribes a time limit of two years (extendable by a year) for finalising the provisional assessment (earlier there was no limitation for the finalization of provisional assessment).
(b) insertion of Section 18A, which allows the importer/ exporter to revise an entry made in the statutory document after the clearance.
(c) insertion of an explanation in Section 27 (hereinafter referred to as “the New Explanation”) which clarifies that the period of limitation of one year, in case of claim of refund pursuant to amendment of documents under Section 149, shall be computed from the date of payment of duty or interest.
The New Explanation inserted to Section 27 is the focal point of this article.
The New Explanation has been analysed in light of the theory of legal rights, relevant precedent and the test of manifest arbitrariness under Article 14 of the Constitution of India. Last but not least, it would be interesting to see if the New Explanation conforms with the spirit of ‘ease of doing business’ or confines it.
There are several entries to be made in a bill of entry. While the entire process is automated, there is always (some) room for errors. These errors could be ‘minor errors’ like typographical errors in the quantity or the value; or ‘major/ substantive errors’ like incorrect tariff classification, omission of an applicable duty exemption or failure to select an export benefit scheme. These mistakes can result in serious consequences for the assessees, either resulting in higher payment of duty or short payment of duty.
The Act contemplates three options for correcting the errors in the bill of entry, viz.
(i) revision under Section 18A;
(ii) modification of order under Section 128; and
(iii) amendment of documents under Section 149, available to the importer/ exporter to correct their mistakes.
The table below compares the scope, power, and limitation of the respective provisions:
With the insertion of Section 18A, the importer is now empowered to voluntarily revise the entries in a bill of entry. This eases the process of rectifying an error as opposed to the cumbersome process of amendment under Section 149 and modification under Section 128. In short, an importer is no more dependent on proper officer or an appellate authority for getting a bill of entry revised. Certainly, an ease.
The remedy under Section 18A is in addition to the remedies already available under Section 128 and Section 149.
The correction made in the bill of entry by resorting to any of the aforesaid remedies can either lead to short payment of duty or excess payment of duty. This article deals with the cases where correction leads to excess payment of duty by an importer.
Section 27 of the Act provides for a refund of duty and interest. Sub-section (1) of the said Section prescribes a limitation period of one year for claiming such duty and interest. Further, sub-section (1B) creates a special class of cases to specify that the period of limitation of one year shall be computed as tabulated below:
While the cases of amendment under Section 149 never formed part of the special class of cases under Section sub-section (1B), it was settled through judicial precedents that the period of limitation in cases pursuant to amendment under Section 149 would be triggered only when the amendment is carried out and not from the date of the assessment when the duty is paid. Contrary to the settled jurisprudence, the New Explanation clarifies that the period of limitation of one year, in the case of a claim of refund pursuant to amendment of documents under Section 149, shall be computed from the date of payment of duty.
Having discussed the position of law - both pre and post insertion of the New Explanation - let us now analyse the same on the touchstone of the theory of legal rights and test it on the ground of manifest arbitrariness under Article 14, in seriatim.
The right to amend a bill of entry and the right to claim a consequential refund are legal rights, well envisaged under the Act. But what type of legal rights?
According to Salmond, legal rights are classified as perfect and imperfect rights, positive and negative rights, rights in rem and rights in personam, proprietary and personal rights, rights in re propria and rights sin re aliena, principal and accessory rights and legal and equitable rights.
The right of amendment and the consequential right of refund could safely be classifiable as principal and accessory rights. The right so augmented may be termed the principal, while the one so appurtenant to it is the accessory right. [P.J. Fitzgerald Salmon on Jurisprudence, page No. 243 12th edition, Salmond on jurisprudence, 2014]
The right of refund ought to follow the right to amendment, and so do their respective limitation(s). The limitation period for the accessory right, i.e., the right to claim a refund, cannot start before the principal right, i.e., the right to amend the bill of entry, has been exercised. Accessorium non ducit sed sequitur suum principale, which means that an accessory does not draw, but follows its principal.’ Thus, an accessory does not lead but follows the principal to which it is an accessory.
Under any circumstance, if the accessory right lapses before the exercise of the principal right, it will result in absurdity. A legal right cannot become stale before it comes into existence.
The test of Manifest Arbitrariness is applied by the constitutional courts to invalidate legislations. The test is to determine whether the legislature has done something unreasonable, capricious, irrational or without adequate determining principles of law.
We foresee unreasonableness and irrationality in the new explanation. Let us take two instances where: (a) an importer realises the need to amend the bill of entry after the expiry of one year from the date of import – Section 149 would allow the amendment with no consequential benefit of Section 27; (b) an importer realises the need to amend the bill of entry within a year and files an application under Section 149; however, the proper officer fails in adjudicating the application within a year.
The importer, in both situations, is put in a detrimental spot, beyond his control.
In fact, a deeper examination of the second scenario, where the proper officer fails in authorising the amendment within a period of one year, would suggest an impossible situation, as there is no limitation for adjudicating the application under Section 149.
Two provisions are introduced – one which enables a voluntary revision and the other which prescribes an arbitrary limitation for seeking a refund, which is nothing short of giving with one hand and taking away with the other.
The government will need to resolve this conundrum for the provisions to be in line with the spirit of “ease of doing business."
About the authors: Shareen Gupta is a Partner and Rajan Mishra is a Principal Associate at JSA Advocates & Solicitors.
Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.
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