Export obligation defaults, EPCG non-fulfilment, conditional exemption denials, Rules of Origin challenges under India's FTAs, SEZ de-bonding disputes and Project Import re-classification — AMLEGALS navigates the intersection of customs law and trade policy where duty exemptions are at stake.
India's customs duty exemption architecture is layered: general exemption notifications under Section 25 of the Customs Act 1962, export promotion schemes (advance authorisation, EPCG, drawback) administered by DGFT, preferential tariff regimes under bilateral and multilateral FTAs, and special zone incentives under the SEZ Act 2005. Each layer has its own conditions, compliance timelines, verification mechanisms and penalty consequences — and a default in one can trigger cascading liability across multiple schemes.
The fiscal exposure in duty exemption disputes is often disproportionate to the underlying transaction. An advance authorisation with ₹5 crore of duty-free imports can generate a duty demand of ₹5 crore plus 15% interest compounded over years, plus penalty under Section 114A equal to the duty — effectively tripling the exposure. FTA disputes compound further because denial of preferential tariff applies retroactively to all past consignments under the same certificate.
AMLEGALS combines customs litigation experience with trade policy advisory to navigate these intersecting regimes. The approach begins with scheme-level compliance architecture that minimises dispute exposure, and extends to full-scale litigation when demands materialise.
Defence in export obligation default proceedings, regularisation applications, composition fee computation, extension requests, bond invocation challenges, and appeals against DGFT and customs orders. Includes Duty Free Import Authorisation (DFIA) transferability and value-addition disputes.
Defence in EPCG non-fulfilment proceedings: pro-rata duty computation, interest calculation challenges, installation certificate disputes, capital goods re-export options, and representation before DGFT Policy Relaxation Committee for genuine hardship cases. Includes domestic sourcing credit computation.
Interpretation and compliance disputes under Section 25 exemption notifications: end-use condition fulfilment, procedural condition compliance (certificates, permissions, registrations), time-bound conditions, substantial compliance arguments, and challenge to retrospective withdrawal of exemptions.
Defence against denial of preferential tariff under India's FTAs (ASEAN, Japan CEPA, Korea CEPA, India-EFTA TEPA, SAFTA, AIFTA, India-Mauritius CECPA): Certificate of Origin validity, product-specific rule compliance, value-addition computation, origin verification under CAROTAR 2020, and appeals against preferential tariff denial.
Disputes on de-bonding duty computation, inter-unit transfer valuation, DTA clearance duty assessment, NFE computation for EOUs, bond and bank guarantee invocation challenges, subcontracting permissions, and transition from EOU to SEZ or DTA.
Eligibility disputes under Heading 9801: project registration, goods inclusion, composite duty rate application, provisional assessment finalisation, individual item re-classification challenges, and bond disputes on project completion. Includes power, cement, steel and infrastructure project imports.
All Industry Rate (AIR) drawback disputes, brand rate drawback fixation, Section 26A refund claims for excess duty paid, unjust enrichment challenges (Section 28D), and time limitation disputes on refund applications under Section 27.
| Agreement | Partner(s) | Origin rule framework |
|---|---|---|
| India-ASEAN FTA | ASEAN member states | Product-specific rules (PSR) + Regional Value Content (RVC 35%); CAROTAR 2020 applicable; preferential Certificate of Origin from designated authority |
| Japan CEPA | Japan | Change in Tariff Classification (CTC) or RVC (40%); specific rules for auto, steel, chemicals; bilateral verification mechanism |
| Korea CEPA | Republic of Korea | CTC + RVC (35%); product-specific rules for electronics, auto, chemicals; direct consignment requirement |
| India-EFTA TEPA | Switzerland, Norway, Iceland, Liechtenstein | In force 1 October 2025; CTC-based origin rules; pharmaceutical, machinery and precision instruments focus; USD 100B investment commitment |
| SAFTA | South Asian nations | Change in tariff heading (CTH) or domestic value addition ≥30% (LDCs: 25%); sensitive lists limit coverage; CoO from designated authority |
| India-Mauritius CECPA | Mauritius | CTC or RVC (35%); product-specific rules; first African comprehensive agreement; services and investment chapters |
Rules of Origin are product-specific and may differ by HS chapter within the same FTA. CAROTAR 2020 (Customs Administration of Rules of Origin under Trade Agreements Rules) applies to all FTAs and provides verification, record-keeping and denial procedures.
If the export obligation under an advance authorisation is not fulfilled within the prescribed period (typically 18 months from date of issuance, extendable), the authorisation holder becomes liable to pay customs duty on the imported inputs along with interest at 15% per annum from the date of clearance of the inputs. The DGFT can also impose a penalty of up to five times the CIF value of imports. The bond and bank guarantee executed at the time of import can be invoked. Regularisation and composition is possible under the FTP by paying composition fee and completing partial obligations.
When customs authorities deny preferential tariff under an FTA (ASEAN, Japan CEPA, Korea CEPA, India-EFTA TEPA, SAFTA, AIFTA), they must issue a show cause notice and afford opportunity of hearing. The importer must produce a valid Certificate of Origin from the exporting country's designated authority. Disputes typically involve: whether the product-specific rules (PSR) are met, whether sufficient value addition occurred, whether the certificate is genuine, and whether transshipment rules were complied with. Under CAROTAR 2020 (Customs Administration of Rules of Origin under Trade Agreements Rules), customs can verify origin directly with the exporting country's verification authority. Appeals lie to Commissioner (Appeals), CESTAT and High Court.
The Export Promotion Capital Goods (EPCG) scheme under the Foreign Trade Policy allows import of capital goods at zero duty against an export obligation of six times the duty saved (for most sectors), to be fulfilled over six years. Non-fulfilment results in: duty demand with interest at 15% per annum on the proportionate unfulfilled obligation; bond/bank guarantee invocation; penalty under DGFT provisions; and potential prosecution for fraudulent availing. Regularisation is possible by paying duty on pro-rata basis with interest and composition fee.
Conditional exemption notifications under Section 25 of the Customs Act 1962 can be challenged on multiple grounds: that the conditions were in fact fulfilled (factual dispute before adjudicating authority), that the conditions are ultra vires the parent statute or unconstitutional (before High Court under Article 226), that the notification is ambiguous and the benefit of ambiguity must go to the assessee (Sun Export Corp, Supreme Court), or that the withdrawal or modification of exemption is arbitrary (under Article 14). CESTAT can also examine whether conditions were substantively complied with.
SEZ units operate under the SEZ Act 2005 and SEZ Rules 2006 — goods moved to SEZ are treated as exports and are duty-free; de-bonding (exit from SEZ) requires payment of applicable duties. EOU units under the EXIM Policy/FTP clear goods duty-free against a Letter of Permission (LoP) with net foreign exchange earning (NFE) obligation. DTA clearance by EOUs attracts concessional duty under specific notifications. Bond/bank guarantee disputes, NFE computation disputes, de-bonding duty valuation and inter-unit transfer issues are common areas of dispute.
Project Import under Heading 9801 of the Customs Tariff Act 1975 allows importation of goods forming part of an industrial project at a concessional composite rate of duty. Disputes arise over: eligibility of the project, whether specific goods form part of the project, valuation of the entire project for assessment, re-classification of individual items outside Heading 9801 by customs, provisional assessment and finalisation delays, and bond/bank guarantee invocation for non-fulfilment of project conditions. The sponsoring authority's registration is a prerequisite.
No. No engagement is treated as accepted until conflicts, scope and terms are confirmed in writing.
Share the scheme details, goods description, export obligation status and dispute stage for a confidential preliminary assessment.