Introduction

Jurisdictional issues stemming from the intersection of Customs Act (‘CA’) and Integrated Goods and Services Tax Act, 2017 (‘IGST Act’) are galore. Recently, the Hon’ble Bombay High Court, when faced with the question of whether customs appellate authorities would be appropriate authorities to adjudicate the issue of interest on delayed refund of integrated tax (‘IGST’) paid on export, allowed the petitioner to file an appeal before the GST appellate authorities.[1] In a similar dispute, the Hon’ble Delhi High Court, when faced with the issue of whether Customs Department could initiate recovery proceedings in respect of the IGST refund allowed earlier, directed the Customs Department and the CGST Department to file a joint affidavit to clarify who would be the ‘proper officer’.[2]

The above judgments bring an important point to the limelight: Whether the officers of Customs Department or the GST Department would be the ‘proper officer’ in respect of recovery proceedings relating to short payment of IGST on import of goods or erroneous refund of IGST paid on export of goods, and other related issues? Proviso to Section 5(1) of the IGST Act provides that IGST on import of goods, except goods notified by the Government, shall be levied and collected in accordance with Section 3 of the Customs Tariff Act, 1975 (‘CTA’), whereas, Section 3(7) of the CTA provides that imported goods shall, in addition, be liable to IGST as is leviable under Section 5 of the IGST Act.

At this juncture, the issue arises as to whether IGST on import of goods is a levy under CTA or IGST Act. At the outset, it is clarified that this article does not seek to examine the widely contested issue of whether IGST on import of goods is a levy under the CTA or the IGST Act. Rather, this article seeks to examine the question as to whether Customs or GST Department has jurisdiction and to what extent, if IGST is declared to be a levy under the CTA or the IGST Act, respectively.

Jurisdiction if IGST on import of goods is deemed a CTA levy

If IGST paid on import of goods is concluded to be a levy under the CTA and not under the IGST Act, the jurisdiction of GST officers to demand any short-paid GST on such import would be highly disputed.

In this regard, Circular No. 238/32/2024-GST dated 15 August 2024 issued in the context of amnesty scheme noted that waiver of interest and penalty is not available in respect of IGST paid on import of goods as recovery proceedings are not initiated under Section 73 of the CGST Act, but as per the provisions of the CA.

Further, the jurisdiction of the Customs authorities to determine IGST exemption was upheld by the Hon’ble Kerala High Court.[3]

Section 28 of the CA provides for recovery of short-paid duty. Said recovery provision is borrowed for levies under the CTA vide Section 3(12) of the CTA. If IGST provided under Section 3(7) is concluded to be a Customs levy, Section 3(12) enables borrowing Section 28 of CA for customs authorities to recover IGST. Only customs officers are empowered to act as ‘proper officers’ for the purposes of recovery of levies under CTA and CA.[4] There is no notification empowering GST officers to be proper officer for initiating action under Section 28 of the CTA.

If IGST is eventually concluded to be a CTA levy, any GST demand raised under Section 73/74 of the CGST Act on import of goods during GST audits, investigations, intelligence proceedings, scrutiny proceedings, etc., would be without jurisdiction. The implications would not be restricted only to import of goods where a bill of entry has been filed. Even in case of intangibles (e.g., permanent transfer of intellectual property by way of import), the taxpayers may argue that the same is an import of goods liable to IGST under the CTA as opposed to import of services. For these transactions, any GST demand raised under Section 73/74 of the CGST Act can be contested as demands raised without jurisdiction.

Further, if a GST officer issues a notice invoking Section 28 of the CA, the proceedings can be disputed on the ground that the GST officer is not empowered to act as a proper officer under the CA/CTA.

Jurisdiction if IGST on import of goods is deemed a IGST Act levy

If IGST paid on import of goods is seen as a levy under the IGST Act with only collection being made under the CTA, the jurisdiction of customs/GST authorities becomes complex. The question of whether collection also entails powers of recovery arises.

If both customs and GST authorities have simultaneous powers of recovery in respect of short-paid IGST on import of goods, the risk of parallel proceedings cannot be ruled out. While Section 6(2) of the CGST Act provides for express instructions regarding parallel proceedings in cases where both State and Central GST authorities initiate proceedings, the law is silent on parallel proceedings by GST and customs authorities.

Under customs law, Section 2(2) of the CA defines ‘assessment’ broadly as the determination of dutiability of goods and the amount of inter alia tax leviable under any other law for the time being in force. The bill of entry filed at the time of import results in a self-assessment in terms of Section 17(1) of the CA. Further, Section 17(4) provides that where it is found that the self-assessment is not done correctly, the proper officer may re-assess the duty leviable on such goods, and if the re-assessment is contrary to the self-assessment, the proper officer shall pass a speaking order on the re-assessment within 15 days from the date of re-assessment.

From a conjoint reading of Section 2(2) and Section 17 of the CA, it could be said that the jurisdiction of the proper officer under Customs law extends to making an assessment, not only of duty which is leviable under CA, but also to any tax, cess, or any other sum payable under any other act, including IGST leviable under IGST Act.

In contradistinction, Section 28 of the CA read with Section 3(12) of the CTA, provides for the recovery proceedings by the proper officer for short payment of duty, tax and cess chargeable under CA & CTA. In this regard, the Hon’ble Supreme Court held that the proceedings under Section 17 and Section 28 are independent and there is no statutory linkage between the two.[5] At this juncture, if IGST is concluded to be a levy under the IGST Act, it remains to be seen whether Section 3(12) be invoked by the customs authorities to recover IGST as per Section 28 of the CA.

Prior to 16 August 2024, recovery of interest and penalty on CTA levies was held to be not permissible by a combined reading of Section 3(12) of the CTA and Section 28 of CA due to the lack of explicit mention of interest and penalty in Section 3(12) of the CTA.[6] Section 3(12) was amended w.e.f. 16 August 2024[7] to specifically provide for recovery of interest and penalty. At this juncture, if the charging provision for IGST on import of goods is held to be traceable to Section 5 of the IGST Act and not Section 3(7) of the CTA, in the absence of any specific mention of IGST in Section 3(12), it remains to be seen whether said provision provides scope for the customs authorities to recover IGST on import of goods and interest and penalty thereon.

Under the notifications issued for notifying the proper officer under GST law, the customs authorities have not been notified as proper officers empowered to initiate recovery proceedings under Section 73/74/74A of the CGST Act. The impact of this also merits to be seen.

Even in the erstwhile regime, the jurisdiction of excise authorities or customs authorities was examined by various tribunals in the context of failure to meet conditions of bond and improper import of goods.[8] Proceedings initiated by excise authorities were held to be without jurisdiction and it was held that only customs officers who have assessed the bill of entry had the power of re-assessment and power to initiate recovery under Section 28 of CA.

Jurisdiction of Customs/IGST Authorities pertaining to issues relating to refund on export of goods

In respect of export of goods, IGST paid thereon is no doubt a GST levy pursuant to Section 5 of the IGST Act. The Government has decided to treat the shipping bill filed by exporters for export of goods as an automatic application for refund of IGST paid on export of goods. This refund is processed by the customs authorities in terms of Rule 96 of the CGST Rules.

Rule 96(4) provides for few situations when the IGST refund on export of goods can be withheld by customs authorities. If refund is withheld, Rule 96(5A) requires the refund claim to be transmitted to the proper officer of Central tax, State tax or Union territory tax, as the case may be on the common portal and the intimation of such transmission shall also be sent to the exporter electronically.

Rule 96B provides for recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where export proceeds are not realised. Such recovery shall be in accordance with the provisions of Section 73 or Section 74 or Section 74A of the CGST Act. Thus, an inference can be made that GST authorities being those empowered to initiate recovery proceedings under aforesaid sections are the only authorities permitted to recover refund of IGST granted on export of goods when export proceeds are not realised. However, this position cannot be seen as conclusive. If ‘proper officer’ for the purpose of granting refund is the customs officer, the possibility that the ‘proper officer’ for recovery of refund granted can also be a customs officer cannot be ruled out.

On a similar note, the question of which authority is liable to pay interest if IGST refund is delayed and against whom such remedies can be pursued are note-worthy questions which await resolution. While Rule 96(5A) provides some guidance on the statute’s intention to limit customs authorities’ role only to grant of refund, the question requires a deeper scrutiny especially in light of recent cases.

Conclusion

A resolution of the jurisdictional conflicts between the customs and the GST authorities in respect of short payment of IGST on import of goods and refund of IGST paid on export of goods and other related issues is much needed. It is hoped that the above issues are resolved so that unnecessary disputes are avoided and the tax administration is streamlined in the future. It is also imperative that taxpayers take adequate grounds on jurisdiction in their litigation on these issues.

[The authors are Associate Partner, Principal Associate and Associate, respectively, in GST practice at Lakshmikumaran & Sridharan Attorneys, Chennai]

[1] Gulabdas International Trading LLP v. Union of India [2025-VIL-1290-BOM].

[2] Talbros Sealing Material Pvt. Ltd. v. Addl. Commr. of Customs Export and Anr. [2025-VIL-1217-DEL].

[3] Ajwa Dry Fruit Impex v. Union of India [[2023] 156 taxmann.com 448 (Kerala)].

[4] Section 2(34) r.w. Section 5(1A) of the Customs Act and Notification No. 26/2022-Cus. (N.T.) dated 31 March 2022.

[5] Commr. of Customs v. Canon India Pvt. Ltd. [2024 INSC 854].

[6] A.R. Sulphonates Pvt. Ltd. v. Union of India & Ors. [2025 (4) TMI 578 – Bombay High Court], read with Mahindra & Mahindra Ltd. (Automotive Sector) v. Union of India & Ors. [2022 (10) TMI 212 – Bombay High Court], affirmed by the Hon’ble Supreme Court in Union of India v. Mahindra and Mahindra Ltd. [2023 (386) E.L.T. 11 (S.C.)] and Union of India & Ors. v. Mahindra and Mahindra Ltd. [2025 (392) E.L.T. 675 (S.C.)].

[7] Finance Act, 2024, §106.

[8] Shilpi Cables Technologies Ltd. v. Commr. Of C. Ex., Alwar [2018 (363) E.L.T. 938 (Tri. - Del.)]; S. Balasubramanian, Dir. (Operations), Surana Telecom & Power Ltd. v. C,C.E., C. & S.T., Hyderabad-III [2019 (370) ELT 1412 (Tri. - Hyd)].

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