Automation Of Refund Application And Processing In Customs

The Government is taking several reforms to make processes automatic with the use of IT with the aim of simplification, digitization, and making the process efficient and effective. In line with the announcement by the Hon’ble Finance Minister to digitize all the remaining Customs processes by mid-2026, the CBIC has made refund application filing and processing completely automatic under customs, and for this purpose, the CBIC has issued a circular clarifying automation vide circular no. 05/2025-Customs dated 17th February 2025.

For example, system-based automated clearances for certain imports of authorized importers were introduced in Customs to reduce the time taken in this regard. Similarly, all the payments made to the Customs have been made digitally through the electronic payment gateway of ICEGATE. 

In the same line, the customs has automated an important aspect relating to the refund procedure under Customs.

The Customs Act provides for processing the claim for refund by any person of any Customs duty and interest paid or borne by him under section 27. Further, a Refund is also sanctioned for export duty in certain cases under Section 26 or certain notifications such as 102/2007- Customs. 

1. Existing refund filing procedure

• Currently, a Refund Application under section 27 is filed manually in terms of Customs Refunds Application (Form) Regulations, 1995. 
• The complete procedure for handling refunds is prescribed under Board Circular No. 24/2007-Cus dated 2nd July 2007 and Circular No. 22/2008- Customs dated 19th Dec 2008 such as a receipt, acknowledgment, deficiency memo, issuance of speaking order including on aspects of unjust enrichment, audit mechanism, monitoring mechanism etc. 
• Further, the following is the mechanism of audit:

1. Refund amount is more than 5 Lakhs: compulsory concurrent audit (pre-audit);
2. Refund amount is between INR 50,000 and 5 Lakhs: compulsory post-audit;
3. Refund amount below INR 50,000: Post audit based on the random selection.

• Manual processing and disbursal of refund amount is time-consuming and requires physical interface. Further, the status of the application is also not readily available to the trade. 

2. Automated refund process:

• To enhance transparency and to make electronic disbursal of refunds, online processing and disbursal of Customs duty refund applications has been developed and is enabled on the Customs Automated System. 

2.1 Process of filing of online refund application:

1. The applicant may file a Refund Application electronically on the ICEGATE Portal along with supporting documents such as an Unjust enrichment certificate etc. 
2. In case a re-assessment of the Bill of Entry is required before a refund, the option to request reassessment is also enabled on ICEGATE. Once re-assessment is done, the pre-filled refund application form will be made available for the applicant to file his refund claim. 
3. As the refund amount will be credited to the Bank account already registered in the Customs Automated System, the applicant may check and update the details before filing their refund application. 
4. On the successful filing of the Refund Application, a Unique Application Reference Number (ARN) will be generated immediately before its scrutiny or checking for its completeness by the Proper Officer. 

2.2 Processing of refund application

1. On receipt of the Refund Application, the proper officer shall scrutinize the application and intimate any deficiency in the application within 10 days of ARN on the ICEGATE dashboard. 
2. The proper officer may ensure that all the queries are sent in one go and piecemeal queries are avoided. 
3. If there is no deficiency or all the deficiencies have been rectified, an acknowledgment number shall be generated by the proper officer on the Portal and the same will be available to the user. 
4. The show-cause Notice in case of rejection or the order for refund sanction or rejection shall be communicated electronically through the ICEGATE Portal. 
5. The proper officer may pass a speaking order and also include an examination of aspects relating to the unjust enrichment

2.3 Removal of Concurrent Audit

1. The board has decided to do away with the concurrent audit of refund claims in all cases and shift the same to post-audit, given the processing of refund applications in an electronic environment. 
2. The manner of selection for audit will be finalized by DG-Audit in consultation with DG ARM. 

2.4 Refund sanction

1. On sanction of Refund, the amount will be electronically credited to the Bank Account of the Applicant through the PFMS system. 
2. The process of crediting the refund amount to the Consumer Welfare Fund would continue to be handled in the manner as it exists now. 
3. The fact of crediting the refund amount to the Consumer Welfare Fund will be part of the refund order. 
4. The status of the application will be made available to the applicant on the ICEGATE Dashboard. 

2.5 Other Points

1. The Board Circulars No. 24/2007-Cus dated 2nd July 2007 and Circular No. 22/2008- Customs dated 19th Dec 2008 stands modified to the above extent.
2. The DG (Systems) shall issue detailed guidelines on the processing of Refund applications.

2.6 Transitional Provisions

1. As a transitional measure, applicants may file refunds either manually or online modes till 31.03.2025. 
2. However, no manual refund application shall be accepted after 31st March 2025, unless the same is allowed by the concerned Pr. Commissioner/ Commissioner of Customs, for the reasons to be recorded in writing. 

Conclusion

The automatic refund process is a welcome move in the direction of making custom automated by mid-2026. Automation shall indeed enhance transparency and reduce the processing time as well. This step will help to reduce the compliance burden of trade and provide them much-needed relief.