DAY 12 │ THE COMPLETE GUIDE TO CUSTOMS ADVANCE RULINGS
0 │ Why an Advance Ruling Matters
A Customs Advance Ruling (CAR) is the only instrument that gives an importer or exporter a binding decision before the goods are shipped—on tariff classification, valuation method, origin or duty exemption. It replaces guesswork with certainty, averts post-clearance disputes and locks in costings for tenders, long-term contracts and transfer-pricing models.
1 │ Statutory Backbone – Chapter VB, Customs Act 1962
| Section | Provision (plain-language) | Key take-away |
| 28E | Definitions & who may apply | Importer, exporter, PSUs, foreign suppliers, any person setting up business in India. |
| 28F | Establishes the Customs Authority for Advance Rulings (CAAR) – New Delhi & Mumbai benches. | CAAR replaced the AAR in 2021; decisions by Principal Commissioner-level officers. |
| 28G | Application form, fee ₹10,000 per question; must be in prescribed Form CAAR-1. | Multiple questions allowed in one form if inter-linked. |
| 28H | Subjects on which ruling may be sought tariff, valuation, applicability of exemption, origin* (when notified). | Cannot ask questions pending before Customs/Tribunal on identical facts. |
| 28I | CAAR to pronounce ruling within 90 days of receipt of complete application. | Hearings generally virtual; order served electronically. |
| 28J | Binding effect on applicant, Principal Commissioner & subordinate officers. | Stays in force unless law/facts change or ruling is void under §28K. |
| 28K | CAAR may declare ruling void ab initio if obtained by fraud, misstatement or suppression. | |
| 28L- 28M | Appeal lies only to High Court under Article 226; no statutory appellate forum. | Department usually files writ if aggrieved. |
Customs Manual 2025 affirms that CAAR decisions must also be uploaded on ICEGATE within 24 hours, making them machine-readable for risk-management targeting.
2 │ End-to-End Process Flow
Prepare draft Q&A ➔ Pre-consult CAAR secretariat (optional)
│
File CAAR-1 + fee on ICEGATE ➔ Acknowledgment no.
│
Within 7 days: Scrutiny for completeness / defects
│
Defects? ➔ rectify in 15 days (auto-drop if ignored)
│
CAAR issues “Notice of Admission” ➔ calls for Dept. comments
│
Virtual / in-person hearing (PowerPoint allowed)
│
CAAR issues speaking ruling (≤ 90 days) ➔ ICEGATE upload, e-mail
│
Bind-in effect begins • Quote ruling number on every BoE / SB
Pro-tip: Attach HS explanatory notes, WCO classification opinions, test reports and sample contracts up-front—reduces departmental objections and speeds the 90-day clock.
3 │ When to Use a Customs AR (Practical Triggers)
| Business Scenario | How the ruling helps |
| HS code dispute on new tech hardware (IoT gateway) | Locks 0% vs 10% BCD difference for five-year framework contracts. |
| Valuation of licence fee / royalty payable post import | Confirms whether addition under Rule 10(1)(c) is warranted. |
| FTAs & Origin – Whether change-in tariff heading rule met | Binds Customs at all ports; aligns with CAROTAR compliance. |
| Duty-free import under Project Import Reg. 1986 | Verifies eligibility & list of capital goods before EPC awarding. |
| Start-up planning Indian ops | Foreign OEM obtains HS & rate certainty before quoting CIF terms. |
4 │ Ten Landmark Rulings Frequently Cited
| # | Case / Order No. | Holding (one-line) |
| 1 | Nestlé India Ltd v. CAAR (SC, 2022) | SC upheld that a CAR is binding until law or facts change; corporate re-structuring alone does not void it. |
| 2 | CAAR Order 04/2023 (Dyson Technology) | Hand-held “air-purifier” classified under 8421, not 8509; saved 12% duty. |
| 3 | M/s ABB India (Kar HC 2024) | HC refused to interfere; held that valuation questions squarely fall within §28H. |
| 4 | CAAR 09/2022 (Apple India) | Declared post-import software update royalty not includible in assessable value when price unrelated to imported hardware. |
| 5 | Mitsubishi Heavy Industries (Mad HC 2021) | AAR ruling favouring importer upheld; benefit of project-import rate extended. |
| 6 | CAAR 03/2024 (BYD Auto) | Confirmed FTA origin under RVC 45% rule; Customs bound at all ports. |
| 7 | GHCL Ltd (CESTAT 2020) | Tribunal relied on earlier AAR to quash SCN—shows persuasive value beyond parties. |
| 8 | CAAR 01/2022 (Siemens Gamesa) | Ruled that negative-list solar modules eligible for Basic Duty exemption under Notif. 01/2021. |
| 9 | Samsung Heavy Industries (Del HC 2023) | Department cannot issue SCN contrary to existing AAR ruling sans §28K proceedings. |
| 10 | CAAR 06/2023 (Tesla Motors) | Confirmed “electric vehicle charger” falls under 8504; 10 % BCD— critical for pricing strategy. |
5 │ How Customs AR Differs from GST & Income-Tax /ARs
| Feature | Customs AR (CAAR) | GST AR (State / Central) | Income-Tax AR (CBDT) |
| Statute | Customs Act, Ch. VB (Section 28E-M) | CGST Ch. XVIII (Section 95-106) | Income-tax Act, Ch. XIX-B (Section 245N-V) |
| Eligible applicants | Importer, exporter, any foreign entity proposing imports | Registered person or prospective registrant | NR companies, JV with NR share ≥ 10 %, PSU, resident for specific issues |
| Jurisdiction | Two national benches (Delhi & Mumbai) | State bench + Appellate AAR | National AAR (Delhi) |
| Subjects | Tariff, valuation, exemption, origin | Classification, rate, supply vs. service, ITC | Tax liability, PE status, RBI approvals |
| Timeline | 90 days | 90 days (AAR) + 90 days (AAAR) | 6 months |
| Appeal | Writ to HC | Appellate AAR → HC | Advance-Ruling Board → HC |
| Binding scope | Entire Customs hierarchy; all ports, same goods & facts | Only applicant & jurisdictional officers | Applicant & IT Dept.; not binding in transfer-pricing |
6 │ Common Pitfalls & Winning Hacks
| Pitfall | Avoid / Remedy |
| Question pending before ADGSVB or Commissioner (Valuation) | CAAR will reject – withdraw local proceedings first. |
| Vague description of goods | Attach catalogues, photos, exploded diagrams; cite WCO notes. |
| Mixing multiple unrelated queries in one form | File separate CAAR-1s; prevents partial rejection. |
| Forgetting to quote ruling on BoE | Auto-trigger for RMS red flag; mention ruling no. & date in “Invoice Remarks.” |
| Department still issues SCN | Point to §28J & Samsung Heavy HC; ask to drop at pre-notice consult. |
7 │ Quick Application Docket Checklist
- Form CAAR-1 e-filled & signed (DSC)
- Demand draft / ICEGATE e-pay ₹10,000
- Detailed HS classification note (2-3 pages)
- Valuation worksheet (if Rule 10 query)
- Product catalogue / test report / origin calc.
- List of identical/similar imports in last 12 m (helps CAAR)
- Declaration that no identical issue is pending in proceedings
8 │ Timetable & Diary Dates
| Action | Deadline |
| CAAR to raise deficiency | 7 working days |
| Applicant to cure deficiency | 15 days (auto-lapse) |
| CAAR to forward application to Dept. | Within 7 days of admission |
| Dept. to file comments | 30 days |
| Final ruling | ≤ 90 days from complete app. |
If 90-day limit breached, file reminder; HC writ can compel disposal (ABB India, 2024 Kar HC).
Disclaimer
The information shared in this post (and throughout the 30-Day Customs Series) is provided solely for general, educational purposes. It is not intended to be—and should not be relied on as—legal advice or a substitute for professional guidance tailored to your specific facts and jurisdiction.
- No attorney-client relationship is created by reading, commenting on, or sharing these materials.
- Customs statutes, regulations, circulars and court rulings are subject to change, and
their application can vary with minute factual differences. - While every effort is made to quote current law and landmark judgments accurately, no
warranty—express or implied—is given as to completeness, timeliness or fitness
for a particular purpose. - You should consult a qualified customs or trade lawyer, or other licensed professional
adviser, before acting (or refraining from acting) on any information herein. - The authors, contributors and publishers disclaim all liability for any loss, damage or
penalty arising from reliance on this content, whether in contract, tort (including
negligence) or otherwise. - By continuing to read or share this material, you acknowledge and accept the above
terms.
About the Author & Office Locations
CA Navjot Singh is a seasoned indirect-tax specialist with deep expertise in Customs, Foreign Trade Policy and GST. He delivers strategic advisory and hands-on execution to conglomerates, Fortune 500 companies and high-growth enterprises.
- Key architect of long-term retainership models that pre-empt audit objections and mitigate litigation risk.
- Designs India-wide GST frameworks that optimise tax and cash-flow while dovetailing
cross-border VAT regimes (EU VAT, GCC VAT). - Advises clients through assessment proceedings, prepares robust submissions and
representations, and drafts precise replies to show-cause notices, audit objections and
spot memos. - Represents taxpayers before adjudicating authorities, the Tribunal, the Sales-Tax
Revisionary Board and the West Bengal Taxation Tribunal. - Conducts comprehensive GST-impact assessments, incentive-scheme evaluations and
cash-flow modelling; recommends mitigation strategies as benefits phase out. - Prepares advance-ruling applications and engages with GST-Council committees to
shape interpretative guidance. - Develops end-to-end dispute-resolution roadmaps, from pre-litigation negotiation to
appellate and judicial forums.
TaxTru Business Advisors LLP
Primary Office (Delhi-NCR)
Unit No. 702, Plot No. 29, Sector 142, NOIDA, Uttar Pradesh 201305
Branch Offices
Gurugram: 313A, 3rd Floor, Iris Tech Park, Sector 48, Gurugram, Haryana 122018
Mumbai: C-20, G-Block Road, Bandra Kurla Complex, Bandra (East), Mumbai 400051
Associate offices across other key metros enable pan-India support
Share this content:
Post Comment