India’s customs litigation landscape continues to be burdened by a significant volume of disputes pending across multiple stages, ranging from adjudication to appellate forums and courts. A large number of these cases do not arise from deliberate wrongdoing, but from genuine classification disputes, procedural lapses, or interpretational differences under customs law. Against this backdrop, there is a strong case for introducing a dedicated Customs Amnesty Scheme aimed at resolving legacy disput ..
The core objective of such a scheme should be to offer a one-time settlement window for eligible disputes, reduce prolonged litigation, ease pressure on judicial forums, and ensure timely revenue realisation for the government.
The need for a customs-focused amnesty has become more pronounced following the discontinuation of the Settlement Commission under the Customs Act, 1962, pursuant to amendments introduced by the Finance Act, 2025. The absence of an effective alternative dispute resolution mechanism has further aggravated the problem of unresolved customs disputes.
As per data furnished in response to Un-starred Question No. 1829 before the Rajya Sabha on 5 August 2025, there were 61,069 cases of customs tax arrears pending adjudication for the period FY 2021–22 to FY 2024–25, involving an aggregate duty amount of approximately ₹2.07 lakh crore.
The steadily rising number and value of pending cases underscore the urgent need for targeted dispute resolution mechanisms. Many of these disputes do not necessarily warrant judicial determination and could instead be resolved through a settlement-based approach.
While the Customs Act does provide mechanisms such as pre-notice consultation and voluntary payment of differential duties under Section 28—both in normal cases and those involving collusion or misrepresentation—these measures have not delivered the desired reduction in litigation. Importantly, Section 28 does not facilitate closure of matters already pending before appellate forums or courts. With the settlement commission no longer available, the absence of a comprehensive resolution mechanism has marginally increased pendency, further strengthening the case for a Customs Amnesty Scheme.
With the Union Budget 2026–27 approaching, the government could consider introducing a Customs Amnesty Scheme covering disputes that are non-fraudulent in nature and capable of resolution without detailed adjudication. Potentially eligible cases could include:
Classification disputes arising from genuine interpretational differences
Clerical or procedural errors due to inadvertent mistakes
Cases issued under Section 28(1) of the Customs Act where there is no substantive evidence confirmed in the show cause notice of collusion or wilful misrepresentation
Cases involving only interest or penalty where the underlying duty demand is not in dispute
Revenue-neutral reclassification cases where there is no loss to the exchequer due to identical duty rates or availability of alternative exemptions
The government may also consider extending the scheme, with appropriate safeguards, even to cases involving suppression of facts, collusion, or wilful misrepresentation.
India’s experience with amnesty schemes in other areas of indirect taxation provides useful guidance. Under the Goods and Services Tax (GST) regime, amnesty schemes allowed taxpayers to regularise non-compliance, particularly in cases involving delayed returns and procedural defaults. Waivers or reductions in penalties and interest led to improved compliance, reduced litigation, and much-needed relief for businesses grappling with transition-related challenges.
Similarly, the Directorate General of Foreign Trade (DGFT) introduced amnesty schemes under the Advance Authorisation and Export Promotion Capital Goods (EPCG) frameworks. These schemes enabled exporters to close long-pending export obligation defaults, regularise past non-compliance, and move forward without the overhang of enforcement action. Together, these experiences demonstrate that well-designed amnesty schemes can strike a pragmatic balance between enforcement and facilitation.
To preserve the integrity of enforcement, serious offences must remain clearly excluded from the scope of any amnesty. These would include cases involving smuggling of gold, precious metals, counterfeit or fake currency, as well as offences related to narcotic drugs and psychotropic substances. Such exclusions would ensure that the scheme is not perceived as diluting action against grave violations.
To ensure finality and prevent parallel proceedings, importers and exporters seeking to avail the scheme should be required to mandatorily withdraw any pending appeals or writ petitions before appellate authorities, tribunals, or High Courts. Additionally, where penalties or interest have already been paid, the scheme should not permit any refund of such amounts.
For the government and the judiciary, a Customs Amnesty Scheme would substantially reduce litigation backlog—particularly at the CESTAT level—encourage voluntary compliance, and enable faster realisation of revenue otherwise locked in disputes.
For industry, the scheme would offer relief from prolonged litigation, lower legal costs, and provide an opportunity to regularise past errors without the fear of punitive penalties or prosecution. Closure of legacy disputes would also enhance business confidence and allow companies to focus on core operations.
The introduction of a Customs Amnesty Scheme represents a balanced and pragmatic solution to resolving long-pending disputes under customs law. Drawing on the successful experience of similar schemes under GST and DGFT, such an initiative can reduce litigation, improve compliance, unlock revenue, and ease the burden on judicial forums.
By focusing on disputes that are procedural and non-fraudulent in nature, the scheme would deliver benefits for the government, industry, and the judiciary alike, making it a timely and necessary reform in India’s customs administration.
Source Name : Economic Times