LLM Group 2 Business Law Law Relating to Customs and Foreign Exchange 2015 Question Paper with Solutions

For full marks, cover: that assessment under the Customs Act has been a self-assessment regime since 2011 and that the older description of assessment as an officer's act is out of date; the definition of assessment in section 2(2) and its breadth; the machinery of section 17 and the verification power; section 18 as the exception, its three gateways and the security it requires; the two-year outer limit that the Finance Act 2025 has just imposed on finalisation, which no textbook printed before 2025 contains; the new section 18A voluntary revision; and the two decisions that give the topic its edge, ITC Ltd on the appealability of a self-assessment and the Canon India saga on who the proper officer is.

Section 17(2) empowers the proper officer to verify the entries and the self-assessment, and for that purpose to require the production of any document or information and to test the goods. Section 17(3) allows him to call for documents; section 17(4) allows him to re-assess where the self-assessment is found to be incorrect; and section 17(5) requires that where the re-assessment is not accepted in writing by the importer, the officer must pass a speaking order within fifteen days. That obligation to give reasons is the principal legal protection the section contains, and it is the hook on which most successful challenges hang.

The valuation input comes from section 14, which fixes transaction value as the basis and lays down the price actually paid or payable for delivery at the time and place of importation, in a sale where the buyer and seller are not related and price is the sole consideration, with the Customs Valuation Rules supplying the sequence of alternative methods when transaction value cannot be accepted.

The second criticism is the one ITC Ltd v. Commissioner of Central Excise, Kolkata IV, decided on 18 September 2019, 2019 INSC 1049, brought to a head, and it must be worked out in full. The assessee had cleared goods on self-assessed bills of entry, paid additional customs duty, and later claimed a refund of about Rs 35.89 crore under section 27, without having appealed against any of the bills of entry. The question was whether a refund claim can be entertained where the assessment stands unchallenged. The Supreme Court held that it cannot. A self-assessment is itself an order of assessment, it is appealable under section 128, and so long as it stands, the officer deciding a refund application has no power to sit in judgment over it; the refund authority cannot act as an appellate authority over an assessment that has become final.

The consequence of ITC Ltd is severe and is exactly what a critical answer needs. An importer who self-assesses at the wrong rate must appeal against his own assessment in order to recover the excess. That is a counter-intuitive requirement, and it converted a simple refund into a limitation-bound appellate exercise. Parliament's answer arrived only in 2025, in the shape of section 18A, and that sequence, a judicial hardening followed six years later by a legislative softening, is the strongest single illustration of how this branch of the Act develops.

Parliament responded through the Finance Act 2022, amending section 2(34), section 3 and section 5 and enacting a retrospective validation of past notices. On 7 November 2024 a three-judge Bench allowed the review and reversed the 2021 judgment. It held that section 2(34), which defines the proper officer as one to whom functions have been assigned by the Board or the Commissioner, must be read harmoniously with section 6, which permits functions to be entrusted to diverse classes of officers, so that DRI officers to whom the function has been validly allocated are competent to issue notices under section 28. Demands of the order of Rs 20,000 crore that had been held up were released. A student writing on assessment in 2026 who states Canon India as good law is stating a judgment that has been recalled, and that is the single easiest way to lose marks on this question.

Why that mattered is the criticism the section had always attracted. Provisional assessments under a free trade agreement, or referred to the Special Valuation Branch in related-party imports, routinely remained open for many years. The importer's working capital sat in a bond, his books could not be closed, and there was no statutory lever to compel finalisation. Section 18(1B) supplies the lever, and its arrival is the clearest recent example of the Act being amended in response to a practical grievance rather than to a judgment.

Section 18A, inserted by the same Finance Act with effect from 1 May 2025, is the companion reform. It permits a voluntary revision of an entry after clearance, within the time and manner prescribed, so that an importer who discovers a short payment may deposit the differential duty with interest under section 28AA without waiting to be found out, and one who discovers an excess payment has a route that does not require him to appeal against himself. Section 18A is the legislative answer to ITC Ltd, and an answer that pairs the two shows the examiner that the development has been followed.

The distinction, set out

The refund limb of section 18 carries the unjust enrichment test as well. Section 18(5) requires that the amount refundable on finalisation be credited to the Consumer Welfare Fund unless the claimant shows that the incidence of the duty was not passed on, which applies the Mafatlal Industries Ltd v. Union of India, (1997) 5 SCC 536, principle to provisional assessments as much as to ordinary refunds.

Section 18 remains the exception it always was, confined to its three gateways and secured by a bond, but it is now an exception with a deadline. Read with the reversal of Canon India on 7 November 2024, which restored the Directorate of Revenue Intelligence's competence to issue notices under section 28, the position in 2026 is that the department's power to re-open has been confirmed while the assessee's power to correct has for the first time been recognised, and the balance between speed and accuracy that self-assessment disturbed has been partly restored.