Section 127B explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 127B says who can apply to the Settlement Commission, when, and on what conditions. Since the Finance Act, 2025, no application can be made under section 127B on or after 1 April 2025, and applications already pending are dealt with by an Interim Board. The rest of this article explains the conditions as they stood in the text on the CBIC portal updated to 30 March 2022: the applicant had to make a full and true disclosure of duty liability not disclosed before the proper officer, had to have a show cause notice on a customs document, had to accept additional duty above a stated threshold and had to have paid it with interest. Exclusions and a bar on withdrawal follow.
No new application may be made under section 127B on or after 1 April 2025 (first new proviso, Finance Act, 2025). From the date the Interim Board is constituted, every pending application (one filed before 1 April 2025 and allowed under section 127C, with no order under section 127C(5) by 31 March 2025) is dealt with by the Interim Board from the stage it had reached. Under the text as it stood before that bar, an importer, exporter or any other person could apply to the Settlement Commission before adjudication, with a full and true disclosure of undisclosed duty liability. The applicant must have a show cause notice on a bill of entry, shipping bill or similar document, the additional duty accepted must exceed three lakh rupees, and that duty with interest under section 28AA must have been paid. There are exclusions for matters before the Tribunal or a court, section 123 goods, narcotics offences and classification interpretation. An application cannot be withdrawn.
The text consulted is the CBIC copy last updated on 30 March 2022 (the Act as amended up to the Finance Act, 2022), with the Finance Act, 2025 provisos added. The Finance Act, 2023 could not be checked in full; see the section on later Finance Acts below.
The Finance Act, 2025: no new applications, pending ones to the Interim Board
The Finance Act, 2025 (section 97) inserted two provisos after sub-section (5) of section 127B:
- "Provided that no application shall be made under this section on or after the 1st day of April, 2025." So the conditions described in the rest of this article can no longer be used to start a new settlement application.
- "Provided further that on and from the date of the constitution of the Interim Board, every pending application shall be dealt by it from the stage at which such pending application stood immediately before its constitution."
"Pending application" and "Interim Board" are defined in section 127A (see our article on section 127A). In short, an application filed before 1 April 2025, allowed under section 127C, and not yet the subject of a section 127C(5) order by 31 March 2025, is pending and goes to the Interim Board. How the Interim Board handles it is in section 127C(11) and (12); see our article on section 127C. The gazette text does not give the date of constitution of the Interim Board, and none is stated here.
A person who needs to resolve a customs dispute now should look at the appeal and adjudication routes; our legal dispute resolution team can help. The sections below describe the conditions as they stood for applications made before the bar, which matter for reading a pending application.
Where section 127B sits
Section 127B is the gateway to Chapter XIVA. Definitions, including that of "case", are in section 127A, explained in our article on section 127A; what the Settlement Commission does after an application is received is in section 127C, covered in our article on section 127C. If you are weighing whether to apply, our legal dispute resolution team can help you test your facts against the conditions below.
The text consulted has live sub-sections (1), (3), (4) and (5), now followed by the two provisos described above. Sub-sections (1A) and (2) are printed as omitted (" "); the footnotes record their omission and the old wording, which is not explained here.
Sub-section (1): the application (as it stood for applications made before 1 April 2025)
Who. "Any importer, exporter or any other person", called "the applicant in this Chapter".
When. "In respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled". The words "before adjudication" fix the timing of the application.
Form and manner. "In such form and in such manner as may be specified by rules". The Act itself prints no form.
What it must contain. A "full and true disclosure of his duty liability which has not been disclosed before the proper officer", the manner in which that liability has been incurred, the additional amount of customs duty accepted to be payable, and other particulars specified by rules. The particulars include the dutiable goods for which the applicant admits short levy "on account of misclassification, under-valuation or inapplicability of exemption notification or otherwise".
The footnotes print that sub-section (1) was substituted by the Finance Act, 2007 (22 of 2007), with effect from 01.06.2007, and that the words "or otherwise" were substituted by the Finance Act, 2010 (14 of 2010), with effect from 08.05.2010. The footnote to sub-section (1) is printed with the words "section 101, or sub-section (1)", where the word "or" looks like a slip for "for"; this is a printing point and is flagged, not corrected.
The conditions in the first proviso
"No such application shall be made unless" all three clauses are met:
| Clause | Condition |
|---|---|
| (a) | The applicant has filed a bill of entry, or a shipping bill, or a bill of export, or made a baggage declaration, or a label or declaration accompanying goods imported or exported through post or courier, as the case may be, and in relation to such document or documents a show cause notice has been issued to him by the proper officer |
| (b) | The additional amount of duty accepted by the applicant in the application exceeds three lakh rupees |
| (c) | The applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AA |
Clause (a) was substituted by the Finance (No.2) Act, 2014 (25 of 2014), with effect from 06.08.2014, per the footnote, and in clause (c) "section 28AA" replaced a reference to section 28AB by the same Act. The rate of interest under section 28AA is fixed by notification within the range that section prints, and is not stated here.
Reading the conditions together: the application comes after a notice and before adjudication, with the accepted duty above the threshold and already paid with interest. Payment comes first; the application cannot be made without it.
The exclusions
Three further provisos shut the door in specific cases.
- Tribunal or court. "No application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court."
- Section 123 goods and narcotics. "No application under this sub-section shall be made in relation to goods to which section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed." Section 123 applies to gold and manufactures thereof, watches and notified classes; see our article on sections 122, 122A and 123.
- Classification. "No application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975 (51 of 1975)." The Act is named only as printed.
Sub-sections (3), (4) and (5)
Fees (sub-section (3)). Every application under sub-section (1) shall be accompanied by "such fees as may be specified by rules". The amount is not in the Act.
No withdrawal (sub-section (4)). An application "shall not be allowed to be withdrawn by the applicant". Once made, it stays.
Other persons (sub-section (5)). Inserted by the Finance Act, 2017 (7 of 2017), with effect from 31-3-2017, per the footnote. "Any person, other than an applicant referred to in sub-section (1)" may apply to the Settlement Commission "in respect of a show cause notice issued to him in a case relating to the applicant which has been settled or is pending before the Settlement Commission and such notice is pending before an adjudicating authority", in such manner and subject to such conditions as specified by rules.
The rules for forms and fees
The Customs (Settlement of Cases) Rules, 2007, made under section 156 of the Act as their opening lines say, contain a rule on the form and manner of application. The copy consulted is dated 12 April 2017, the date printed on that file and not of the Act text. This article takes no form details, fee amount or other particulars from it.
An example
Samarth Textiles Ltd imported fabric and, after a bill of entry was filed, received a show cause notice alleging under-valuation. In a year before the bar, before the adjudicating authority decided, the company decided to accept additional duty that exceeded three lakh rupees. It paid that duty with interest under section 28AA and then applied to the Settlement Commission with a full and true disclosure. If the same company tried to apply on or after 1 April 2025, the first new proviso would stop the application, whatever the conditions above. Had the same matter been pending in the Appellate Tribunal, the second proviso would have stopped the Commission from entertaining the application. Had the company wanted to settle only a question of tariff classification, the last proviso would have blocked it.
Practical points
- Note first that no application can be made under section 127B on or after 1 April 2025.
- If you have an application filed before that date, check whether it meets the definition of a "pending application" in section 127A and read section 127C(11) and (12) for how the Interim Board deals with it.
- For an application made before the bar, the conditions of the first proviso were notice, threshold, payment with interest, and the exclusions were Tribunal or court, section 123 goods, narcotics offence and classification interpretation.
- An application, once made, cannot be withdrawn (sub-section (4)).
- Take the form and fee from the rules in force, not from this article.
Need help preparing a settlement application?
New applications are barred from 1 April 2025, so the question now is usually where a customs dispute can be taken instead, or how an earlier application stands before the Interim Board. Our team can help you assess the position; see our legal dispute resolution service for customs matters.
Changes made by later Finance Acts
| Finance Act | What changed | What the gazette prints about commencement |
|---|---|---|
| Finance Act, 2025 (No. 7 of 2025), section 97 | Two provisos inserted after sub-section (5): no application shall be made under section 127B on or after 1 April 2025; from the date the Interim Board is constituted, every pending application is dealt with by it from the stage at which it stood | The bar operates "on or after the 1st day of April, 2025" as printed in the proviso itself. The Act received the assent of the President on 29 March 2025. The date of constitution of the Interim Board is not printed in the clause |
The Finance Act, 2023 amendments to the Customs Act could not be checked in full, because only an extract of that Act was available. Check the current text on the CBIC portal before relying on any clause of this section.
Key takeaways
- No application can be made under section 127B on or after 1 April 2025 (Finance Act, 2025).
- From the constitution of the Interim Board, every pending application is dealt with by it from the stage at which it stood.
- For applications made earlier, any importer, exporter or other person could apply to the Settlement Commission before adjudication, with a full and true disclosure.
- The earlier conditions were a show cause notice on a customs document, additional duty exceeding three lakh rupees, and payment with interest under section 28AA.
- No application lay for matters pending in the Appellate Tribunal or a court, section 123 goods, narcotics offences or classification interpretation.
- The application cannot be withdrawn.
- Form, manner and fee are as specified by rules.
Read next
- Section 127A: settlement of cases, definitions
- Section 127C: procedure on a settlement application
- Sections 127D to 127G: powers of the Settlement Commission and inspection of reports
- Customs appeal process: Commissioner (Appeals), CESTAT and the High Court
Disclaimer: Based on the Customs Act, 1962 as published on the CBIC Tax Information Portal, updated to 30 March 2022 (amended up to the Finance Act, 2022), as consulted on 2 October 2026. The changes made by the Finance Act, 2025 are added from its gazette text; the Finance Act, 2023 could not be checked in full, and the current rules, regulations and notifications should be checked. This article is general information, not legal advice; check the official text before acting.