Customs law: restrictions on imports and exports, duty drawback, customs authorities, search, seizure and arrest, and SEZ units

1. Restrictions on import and export

Section 11 lets the Central Government, if satisfied that it is necessary for any of the purposes listed in section 11(2), prohibit by notification, absolutely or subject to conditions, the import or export of goods of any specified description. The purposes (sixteen in all) include the security of India, public order and morality, prevention of smuggling, conservation of foreign exchange, protection of human, animal or plant life or health, protection of national treasures, and prevention of serious injury to domestic production.

Most restrictions are in fact made under the Foreign Trade (Development and Regulation) Act, 1992, whose orders under section 3 are deemed to be prohibitions under section 11 of the Customs Act, so that customs officers enforce them.

Prohibited goods are goods whose import or export is subject to any prohibition under the Act or any other law, but not goods imported or exported in compliance with the conditions subject to which they are permitted (section 2(33)). In Sheikh Mohd. Omer v. Collector of Customs, 1970 INSC 175, (1970) 2 SCC 728, the Court held that “any prohibition” in section 111(d) includes a restriction, so goods imported without the required licence are liable to confiscation. Following it, Om Prakash Bhatia v. Commissioner of Customs, 2003 INSC 306, (2003) 6 SCC 161, held that if the conditions prescribed for import or export are not fulfilled, the goods are “prohibited goods”; there, over-valued garments declared for export to claim incentives were liable to confiscation and penalty.

2. Duty drawback

Drawback returns customs duty paid on goods that leave India again, so that exports are not burdened with Indian taxes.

• Re-export of duty-paid imported goods: section 74. Where imported goods on which duty was paid, capable of being easily identified, are re-exported (as cargo, as baggage declared under section 77, or by post), 98% of the duty is repaid as drawback if (a) the goods are identified to the satisfaction of the Assistant or Deputy Commissioner as the goods imported, and (b) they are entered for export within two years from the date of payment of duty (extendable by the Board for sufficient cause). If the goods were used after import, a lower rate is fixed by notification having regard to the duration of use and depreciation (section 74(2)).
• Imported materials used in export goods: section 75. Where imported materials are used in the manufacture of goods that are exported, drawback is allowed at rates fixed by the Central Government, generally as all industry rates under the Customs and Central Excise Duties Drawback Rules, 2017, or a brand rate on application. Drawback is not allowed if the export value is less than the value of the imported materials, or where the sale proceeds are not realised within the time allowed under FEMA (in which case it is recovered).

Drawback is “on imports as against exports”: it is the import duty that is refunded, and the trigger is the export.

3. Customs authorities

• Classes of officers (section 3): Principal Chief Commissioners and Chief Commissioners of Customs; Principal Commissioners and Commissioners; Commissioners (Appeals); Additional and Joint Commissioners; Deputy and Assistant Commissioners; and such other classes as the Board specifies (Superintendents, Appraisers, Inspectors).
• Appointment (section 4) by the Board; powers (section 5): an officer exercises the powers conferred under the Act subject to conditions the Board imposes; higher officers may exercise powers of subordinates.
• Entrustment of functions to officers of other departments (section 6), for example police or State officers at land frontiers.
• The Act is administered by the Central Board of Indirect Taxes and Customs. Appeals lie to the Commissioner (Appeals) (section 128), the Appellate Tribunal (section 129A), the High Court (section 130) and the Supreme Court (section 130E).

4. Search of suspected persons: sections 100 to 103

• Section 100: if the proper officer has reason to believe that a person has secreted about his person goods liable to confiscation or documents relating to them, he may search that person. It applies to persons who have landed from, are about to board, or are on board a vessel in Indian customs waters or a foreign-going aircraft; persons getting into or out of a vehicle arriving from or going to a place outside India; any other person who has entered or is about to leave India; and any person in a customs area.
• Section 101: an officer empowered by the Commissioner may search any person (anywhere) whom he has reason to believe has secreted gold, diamonds, manufactures of gold or diamonds, watches, or other notified goods liable to confiscation.
• Section 102: the person about to be searched may require to be taken without unnecessary delay before the nearest gazetted officer of customs or magistrate, who will discharge him if there is no reasonable ground for search; the search must be made in the presence of two or more witnesses and a list of things seized signed by them; and no female shall be searched except by a female.
• Section 103: where an officer has reason to believe that a person has goods secreted inside his body, he may produce him before a magistrate, who may order screening or X-ray; if the person consents, the screening may be done without such an order.

5. Arrest: section 104

• An officer empowered by the Commissioner who has reason to believe that a person has committed an offence punishable under section 132, 133, 135, 135A or 136 may arrest him and must, as soon as may be, inform him of the grounds of arrest (section 104(1)).
• The arrested person must be taken to a magistrate without unnecessary delay (section 104(2)). For bail, the officer has the powers of an officer in charge of a police station (section 104(3)).
• Offences relating to prohibited goods, evasion of duty above fifty lakh rupees, fraudulent drawback or exemption above fifty lakh rupees, and fraudulent instruments under the FTDR Act above that amount are cognizable (section 104(4)); all others are non-cognizable (section 104(5)).

In Om Prakash v. Union of India, 2011 INSC 728, (2011) 14 SCC 1, the Court held that offences under the Customs Act and the Central Excise Act were then non-cognizable and bailable, and that a person arrested who offered bail had to be released; this led to the later amendments making serious offences cognizable. In Radhika Agarwal v. Union of India, 2025 INSC 272, a three-judge Bench upheld the power of arrest under the Customs Act and the CGST Act. It held that customs and GST officers are not police officers, but that the safeguards of the criminal procedure code (now the Bharatiya Nagarik Suraksha Sanhita, 2023) on arrest apply to them, that the “reasons to believe” must be based on material and recorded, that the grounds of arrest must be supplied, and that persons apprehending arrest may seek anticipatory bail.

6. Other powers, seizure and confiscation

• Search of premises (section 105) on reason to believe that goods liable to confiscation or documents are secreted; stopping and searching conveyances (section 106); examining persons (section 107); summons to give evidence and produce documents (section 108), such inquiries being judicial proceedings.
• Seizure (section 110): goods the proper officer has reason to believe are liable to confiscation may be seized; documents and things useful in proceedings may be seized. If no show-cause notice is given within six months of seizure (extendable by six months), the goods must be returned.
• Confiscation of improperly imported goods (section 111) and goods attempted to be improperly exported (section 113); penalties on persons concerned (sections 112 and 114). Confiscated goods may be released on payment of a redemption fine in lieu of confiscation (section 125).
• Offences: evasion of duty or prohibitions (section 135), with imprisonment up to seven years where the value or duty exceeds the specified amounts.

7. SEZ units

A Special Economic Zone, under the Special Economic Zones Act, 2005, is treated as a territory outside the customs territory of India for authorised operations. Consequences:

• Goods brought into an SEZ unit or developer from abroad or from the domestic tariff area (DTA) for authorised operations are exempt from customs duty and other duties (section 26 of the SEZ Act).
• Supplies from the DTA to an SEZ are treated as exports, and supplies to or by SEZ units are inter-State zero-rated supplies under sections 7(5)(b) and 16 of the IGST Act.
• Goods removed from an SEZ into the DTA are chargeable to customs duty as if imported (section 30 of the SEZ Act).
• The SEZ Act has overriding effect over inconsistent laws (section 51).

How this is examined

January 2026 (100-mark) Q. 7: powers of the Commissioner to search and arrest suspected persons. January 2026 (80-mark) Q. 5(a): search of suspected persons and seizure; alternative Q. 5(a): drawback on imports as against exports; Q. 5(b) (alternative): restrictions on export and import. February 2025 Q. 5(b) (alternative): SEZ units under the Customs Act.