Union Budget 2024: Opportune time to roll out a Customs Amnesty Scheme

Customs disputes often arise due to differing interpretations of laws, classification issues, valuation disputes, and procedural non-compliances. These disputes often persist for extended periods, causing uncertainty and financial strain for businesses.

The Customs landscape in India is characterised by complex regulations, often resulting in protracted litigation. This litigation not only burdens the administrative machinery and judiciary, it also results in significant costs for businesses and the government. Consequently, there has been a growing call for an amnesty scheme to resolve the pending customs disputes.
 
Addressing long-standing Customs disputes

Customs disputes often arise due to differing interpretations of laws, classification issues, valuation disputes, and procedural non-compliances. These disputes often persist for extended periods, causing uncertainty and financial strain for businesses.
In 2019, the Government launched the 'Sabka Vishwas (Legacy Dispute Resolution) Scheme’ (SVLDRS), a strategic initiative designed to offer businesses a singular opportunity to close their outstanding litigations under the erstwhile Central Excise and Service Tax regulations. This scheme provided a partial remission of disputed tax liabilities, along with a complete waiver of accrued interest and penalties. The initiative proved to be very effective, substantially mitigating the volume of pending litigations and allowing businesses to reallocate their focus towards compliance with the Goods and Services Tax (GST) regime.

In 2020, the Government introduced the 'Vivad Se Vishwas' scheme in 2020, targeting the settlement of direct tax disputes. This scheme provided businesses with the chance to resolve their direct tax litigations pending at appellate forums by remitting the stipulated percentage of disputed tax, penalties, interest, or fees, on a case-to-case basis. The scheme emerged as another pivotal initiative by the Government, markedly curtailing the backlog of pending litigations under direct tax laws.
In 2023, addressing the persistent demands of the industry, the Government rolled out an amnesty scheme for holders of Advance Authorisation (AA) and Export Promotion Capital Goods (EPCG) licenses. This scheme enabled defaulters to regularise their non-compliance with Export Obligation (EO) by paying Customs duties proportional to the unfulfilled EO, along with the applicable interest capped at 100% of the duty exempted. The industry embraced this scheme as it allowed defaulters to integrate into the new Foreign Trade Policy regime unencumbered by the weight of pending EO liabilities. Similarly, all states have also introduced amnesty/settlement schemes from time to time to resolve outstanding sales tax disputes.

Presently, there are various disputes under Customs Law right from duty differential to valuation and procedural issues etc. which are pending at different forums involvinga huge amount of duty, interest and penalty exposures. The industry has been waiting for more than a decade for a one-time settlement scheme to resolve past Customs-related disputes akin to the aforementioned dispute resolution schemes.Such a scheme would be a welcome step in resolving long pending litigations and enabling businesses to move ahead with a clean slate. Additionally, such a scheme in turn would also help the Government to immediately realise revenues and increase its target collections substantially.

An Amnesty Scheme to resolve Customs disputes

At this juncture when the Union Budget 2024-25 announcements are around the corner, the declaration of an amnesty scheme in respect of Customs disputes would be a timely and pragmatic call. By offering a structured mechanism to resolve disputes, the scheme can significantly reduce the burden of litigation, generate revenue, and give impetus to governments’ motto of ease of doing business.Moreover, the scheme would especially benefit small and medium enterprises by enabling them to focus on growing their business rather than being pressed with the baggage of prolonged litigation. The success of the amnesty scheme would also hinge on meticulous planning, execution and real-time feedback from the industry. With the right approach, an amnesty scheme can provide a much-needed relief valve for the Customs dispute resolution system, benefiting both the Government and businesses alike.