Customs Finalisation Regulations, 2025- Efficiency At The Cost Of Accuracy?

On 12 September 2025, CBIC implemented the Customs (Finalisation of Provisional Assessments) Regulations, 2025 (hereinafter “the 2025 Regulations”) by Notification No. 55/2025-Cus (N.T.), exercising powers under Section 157 read with Section 18 of the Customs Act, 1962. These Regulations operationalise amendments effected by the Finance Act, 2025, most notably a statutory two-year long-stop for finalising provisional assessments and a presumption that legacy provisional cases pending as on 29 March 2025 must be finalised within that two-year window.

Counterintuitively, a rule designed to deliver certainty and speed now collides with a technical, evidence-heavy adjudicatory process- Special Valuation Branch (“SVB”) enquiries (governed by Circular No. 05/2016-Cus). SVB matters turn on related-party pricing, transfer-pricing style analyses and cross-border evidence, factors that do not conform neatly to fixed calendars. The central question becomes- can doctrinally rigid timelines be reconciled with substantively complex valuation inquiries without compromising fairness or accuracy?

This article answers that question in four parts- (i) statutory and regulatory architecture; (ii) the nature of SVB work; (iii) the points of doctrinal and operational tension; and (iv) practical and institutional recommendations to avoid a collision between form and function.

Keywords- Customs Finalisation 2025, Provisional Assessment, SVB Enquiries, CBIC Notification 55/2025, Valuation Disputes.

Legal and Regulatory Architecture

Section 18, Customs Act, 1962 historically authorised provisional clearance where the final assessment could not be completed. Until 2025 it lacked a statutory time limit, leaving completion to administrative practice.

Finance Act, 2025 amended Section 18 to introduce a two-year statutory limit (extendable by the Principal Commissioner/Commissioner for sufficient cause). Thus, Parliament has turned what was discretionary into a time-bound legal obligation. The 2025 Regulations gives effect to the amendment.

As the hierarchy suggests, any regulation issued under Section 157 of the Customs Act will constitute delegated legislation and subsequently have a binding force in law, which means they prevail over the departmental circulars in case a conflict may arise. That said, the interpretive principle generalia specialibus non derogant remains relevant when reconciling a general time-limit rule with a specialised procedure like SVB.

SVB- nature, purpose and governing instruction

SVB is the administrative mechanism for robust valuation enquiries under Section 14 and the Customs Valuation Rules, 2007. Its raison d'être is to test declared values in related-party transactions, a task requiring forensic review of inter-company agreements, transfer pricing documentation, supplier confirmations, and comparability analyses. These exercises mirror transfer-pricing inquiries and commonly involve cross-border document exchange, multilayered commercial analysis, and coordination with other authorities.

Circular No. 05/2016 (Clause 8.2) explicitly instructs that-

“assessments in respect of import transactions subject to SVB enquiries shall continue to be made provisional till the completion of such enquiries.”

In other words, SVB creates an administrative rule that provisional status should endure for the lifespan of the valuation enquiry.

What the 2025 Regulations change?

There are three interlinked fault-lines-

1. Normative hierarchy vs. specialised exception

Formally, the 2025 Regulations override circulars. Thus, a textual reading suggests that every provisional assessment must fit the Reg. 5/Reg. 8 timeline. Yet, SVB is a special administrative regime; invoking generalia specialibus counsels' cautious interpretation. The problem is that the Regulations themselves expressly cover “enquiries” and do not carve out SVB. Consequently, officers confront real legal ambiguity- should they obey the general statutory timetable or defer to the SVB circular's longer provisional posture?

2. Timelines versus evidentiary reality

The Regulations assume enquiries (including SVB) can close in 14 months, with finalisation following shortly and an ultimate two-year cap. In practice SVB enquiries often require more time because supplier responses, benchmark searches, and cross-agency coordination are slow. Therefore, the Regulations risk forcing a trade-off- speed at the cost of accuracy, producing finalisations made without full evidentiary canvass, precisely the outcome the SVB mechanism was designed to avoid.

3. Narrow exceptions and the tolling lacuna

Reg. 8(2) lists specific tolling grounds (foreign legal processes, stays/appeals, CBIC direction, Settlement Commission). Critically, routine SVB pendency does not automatically fit these grounds. Unless CBIC classifies SVB pendency as a “direction” or expands exceptions, officers have limited lawful authority to toll the two-year clock. That lacuna pushes either toward premature finalisation or administrative contortions (e.g., seeking ad hoc Board directions), neither of which is doctrinally or operationally satisfactory.

Doctrinal and practical consequences

If final orders are issued while essential SVB evidence remains outstanding, assessees will plausibly argue denial of audi alteram partem. Historically, the Courts have effectively struck down assessments where there exists lack of opportunity to be heard or an incomplete fact-finding which may have led to arbitrary outcomes. The 2025 Regulations will not insulate mechanical finalisations from judicial review.

Furthermore, Assessees may challenge finalisations as ultra vires where officers disregard SVB circulars without clear statutory basis, asking courts to read Reg. 8(2) purposively to include SVB pendency.

In addition, the imperative of meeting fixed timelines may incentivise superficial closure or frequent use of CBIC directions to toll timelines administratively, reintroducing discretion that the Regulations sought to constrain and creating unpredictability.

Therefore, Finalising without SVB may create under-assessed valuations that the revenue later seeks to re-open (or litigate), generating stacked disputes and undermining fiscal certainty.

The Customs (Finalisation of Provisional Assessments) Regulations, 2025 are a doctrinally significant attempt to correct delay and uncertainty in provisional assessments. However, when measured against the realities of SVB proceedings, the Regulations reveal a fundamental tension- statutory timeliness versus evidentiary complexity. Unless CBIC pairs the regulatory timetable with clarificatory guidance, procedural transparency, and institutional investment in SVB capacity, the reform risks substituting administrative haste for accurate adjudication, thereby spawning precisely the litigation and uncertainty it aims to eliminate.

Put succinctly- the law has marched forward; the institution must now catch up. If it does so thoughtfully, by recognising SVB's special needs, making tolling rules clear, and strengthening valuation capacity, the Regulations can deliver both speed and substance. If not, the two-year promise may become an engine of premature finalisation and renewed controversy.

Views Are Personal.