Customs Duty Refund in India: Section 27, Provisional Assessment & SVB

When Customs Duty Refunds Arise

A customs duty refund arises in specific situations where you have paid more duty than legally owed. The most common scenarios include:

• Excess duty paid on import clearance. You paid duty at a higher rate than applicable, either because of a classification error on the bill of entry or because the assessable value was computed incorrectly.
• Provisional assessment finalization. Your goods were assessed provisionally under Section 18 because the final value, classification, or benefit eligibility was uncertain at the time of import. When the assessment is finalized and the final duty is lower, you get a refund of the difference.
• SVB order in your favour. You import from a related party and the Special Valuation Branch required you to pay extra duty deposits during investigation. Once SVB accepts your declared value, those deposits become refundable.
• Reclassification of goods. A tribunal, court, or appellate authority rules that your goods fall under a different HS code that attracts a lower duty rate. The excess duty already paid becomes refundable.
• Retroactive FTA benefit. You imported goods without claiming a preferential duty rate under a Free Trade Agreement (such as India-UAE CEPA or India-ASEAN FTA) and later obtain the Certificate of Origin to claim the concessional rate retrospectively.
• Anti-dumping duty refund. An anti-dumping duty was imposed provisionally and later revoked or reduced after the final finding by the Directorate General of Trade Remedies (DGTR). The excess anti-dumping duty paid during the provisional period is refundable.

Section 27 of the Customs Act: The Core Refund Provision

Section 27 of the Customs Act, 1962 is the primary legal provision governing refund of customs duties in India. Whether you overpaid Basic Customs Duty, Social Welfare Surcharge, IGST, or any other component, this section provides the framework for filing a claim and the conditions under which customs will process it.

A refund application under Section 27 can be filed by the person who paid the duty: the importer who paid duty on the bill of entry, the exporter who paid duty on the shipping bill, or any person who has borne the duty incidence (for example, a buyer who can demonstrate the duty burden was passed on to them).

Time Limit: Two Years from Payment

The refund application must be filed within two years from the date of payment of duty . This is a hard deadline. Applications filed even one day late are rejected without considering the merits. The date of payment is the date on which the duty was actually debited from your customs duty account or paid via challan, not the date of the bill of entry.

The Unjust Enrichment Bar

This is the most critical condition and the one that causes the most refund rejections. Section 27(2) provides that even if you prove you overpaid duty, the refund will not be paid to you if the duty incidence has been passed on to the buyer. The reasoning is straightforward: if you already recovered the excess duty from your customer, refunding it to you would give you a double benefit.

To overcome the unjust enrichment bar, you must submit:

• A chartered accountant certificate confirming that the excess duty was not passed on to any other person
• Accounting records showing the duty was debited to a receivable or recoverable account (not to cost of goods sold)
• Balance sheet extracts showing the refund amount as a receivable from customs

Provisional Assessment Refund (Section 18)

When customs cannot determine the final duty at the time of import (because the value is uncertain, a test report is pending, or a classification dispute is unresolved) they allow clearance on a provisional assessment under Section 18 of the Customs Act. You pay duty at a higher provisional rate (or provide a bond and bank guarantee to cover the potential difference) and clear the goods. Once the issue is resolved, the assessment is finalized .

How Provisional Assessment Works

The bond amount is usually 100% of the potential differential duty, while the bank guarantee is typically 25% to 50% of the bond amount. These are released once the assessment is finalized. Under Section 18(4), if the final duty is lower than the provisional duty, the government must pay interest at 6% per annum from the date of provisional duty payment to the date of refund.

SVB (Special Valuation Branch) Refund Process

The Special Valuation Branch comes into play when you import goods from a related party. A parent company, subsidiary, affiliate, or any entity where the relationship may influence the transaction price. SVB investigates whether your declared value is at arm's length.

During the investigation (typically 6 to 24 months), customs requires you to execute a bond for the differential duty, furnish a bank guarantee (typically 1% of assessable value), and pay an extra duty deposit (EDD) of 1% to 5% of declared value on each consignment. Once SVB completes its investigation and accepts your declared transaction value, all EDDs become refundable. The steps to claim the refund are:

• Obtain a copy of the SVB final order from the SVB office
• File refund applications for the extra duty deposits with the jurisdictional customs house (not the SVB office)
• Attach copies of all bills of entry on which EDD was paid, the SVB order, and duty payment challans
• Provide a chartered accountant certificate to clear the unjust enrichment bar
• The jurisdictional officer processes the refund under Section 27 provisions

Step-by-Step Customs Duty Refund Process

Whether your refund arises from excess duty, reclassification, or an FTA benefit, the procedural steps through ICEGATE are largely the same. Here is the process from start to finish:

Step 1: Identify the Overpayment and Prepare Documentation

Review your bill of entry, duty computation sheet, and the applicable customs notification. Identify the specific reason for overpayment and gather the following documents:

• Copy of the bill of entry (self-assessed or reassessed)
• Duty payment challan or TR-6 challan
• Import invoice and packing list
• Customs notification or exemption notification being relied upon
• Certificate of Origin (for FTA-based refund claims)
• Chartered accountant certificate on unjust enrichment
• Self-declaration that duty incidence was not passed on
• Any appellate order, tribunal ruling, or reclassification order (if applicable)

Step 2: File on ICEGATE

Log in to the ICEGATE portal and navigate to the refund module. Fill in the application form with bill of entry details, duty paid, refund amount, and grounds. Upload supporting documents. The system generates an acknowledgment with a refund application number.

Step 3: Adjudication and Disbursement

The jurisdictional Assistant or Deputy Commissioner examines your application, verifies documents, checks unjust enrichment compliance, and issues a refund order. Straightforward claims take 30 to 60 days; complex cases involving classification disputes or FTA interpretation can take 3 to 6 months. Once the order is passed, the refund is credited directly to the bank account linked to your ICEGATE profile . Ensure your bank details are updated before filing.

IGST Refund for Exporters

Exporters who pay IGST on exports (instead of using a Letter of Undertaking) are entitled to a refund through a largely automated process separate from Section 27.

The shipping bill itself acts as the refund application. The automated process works as follows:

• You file the shipping bill on ICEGATE with the IGST amount and invoice details
• You file GSTR-1 and GSTR-3B on the GST portal, reporting the export with payment of IGST
• The ICEGATE system validates the shipping bill data against the GST return data (GSTIN, invoice number, IGST amount)
• If the data matches, ICEGATE generates a refund scroll and transmits it to the customs refund bank
• The refund is credited directly to the exporter's bank account registered on ICEGATE

Despite the automation, a significant number of IGST refunds get stuck. The most common reasons and fixes:

ICEGATE generates refund scrolls in batches, each containing validated shipping bills. The scroll is transmitted to the customs refund bank (typically SBI or ICICI), which credits the refund to the exporter's bank account. Track scroll status on the ICEGATE dashboard under "IGST Refund." For a detailed guide, see our article on claiming GST refund as an exporter .

Drawback Refund vs Customs Duty Refund

Both involve getting money back from customs, but duty drawback and customs duty refund serve fundamentally different purposes.

Interest on Delayed Refunds (Section 27A)

Section 27A provides for interest when refunds are delayed:

Common Rejection Reasons and How to Avoid Them

Most rejections are procedural or documentation failures that are entirely avoidable:

Frequently Asked Questions

Related reads

• Customs Valuation in India. How assessable value is calculated for imports and exports, WTO valuation methods, and related-party transactions.
• Duty Drawback Guide. All Industry Rates, brand rates, Section 74 vs Section 75, and how to maximise your drawback claims.
• Import Process in India. End-to-end guide to importing goods into India -- IEC, bill of entry, customs clearance, and duty payment.
• ICEGATE Guide for Importers and Exporters. How to register, file bills of entry and shipping bills, track refunds, and manage your ICEGATE profile.
• GST Guide for Exporters. LUT vs IGST payment, ITC refund, GST return filing, and common compliance issues for Indian exporters.

Update history

• 2026-08-12 First published.