Sections 127H and 127I 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 127H lets the Settlement Commission grant an applicant immunity from prosecution, and wholly or partly from penalty and fine, where the applicant has co-operated and made a full and true disclosure. The immunity can be withdrawn. Section 127I covers the opposite case: if the applicant has not co-operated, the Commission may send the case back to the proper officer. This article follows the text on the CBIC portal updated to 30 March 2022 and adds the new sub-section (4) of section 127H inserted by the Finance Act, 2025, which hands the power to the Interim Board on and from 1 April 2025.
The Settlement Commission may grant immunity from prosecution for any offence under the Act, and wholly or in part from penalty and fine, to an applicant who has co-operated and made a full and true disclosure, on conditions it thinks fit, but not where prosecution was instituted before the application was received. Immunity stands withdrawn if the applicant fails to pay or comply, and may be withdrawn for concealment or false evidence. If the applicant has not co-operated, the Commission may send the case back to the proper officer under section 127I. On and from 1 April 2025 the power under section 127H is exercised by the Interim Board (new sub-section (4)); section 127I was not amended by the Finance Act, 2025.
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 addition to section 127H. The Finance Act, 2023 could not be checked in full; see the section on later Finance Acts below.
Why these sections matter
An applicant who goes to the Settlement Commission accepts a duty liability and discloses it. Section 127H explains what the applicant can gain in return, and section 127I explains what follows if the applicant does not engage. For the application itself and the procedure that follows, see our articles on section 127B and section 127C. If you are considering settlement and want to understand the immunity, our legal dispute resolution team can help you check the conditions.
Section 127H(1): who may get immunity
The Commission "may", not "shall", grant immunity. Two conditions must be satisfied in the Commission's view:
- the person who made the application under section 127B "has co-operated with the Settlement Commission in the proceedings before it"; and
- the person "has made a full and true disclosure of his duty liability".
The immunity has two limbs, and the Commission may "subject to such conditions as it may think fit to impose" grant:
| Limb | What is granted |
|---|---|
| Prosecution | Immunity from prosecution for any offence under this Act |
| Penalty and fine | Immunity "either wholly or in part" from the imposition of any penalty and fine under this Act |
Both are "with respect to the case covered by the settlement". The immunity is limited to that case. The words "and also either wholly or in part from the imposition of any penalty and fine" were substituted by the Finance Act, 2007 (22 of 2007), with effect from 01.06.2007, per the footnote; the footnote shows earlier wording that also named another Act and interest, and that old wording is not law and is not explained here. The text consulted refers to this Act only.
The proviso. "No such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under section 127B." The date of receipt of the application is the dividing line. The Explanation that followed was omitted by the Finance Act, 2015 (20 of 2015), with effect from 14.05.2015, and its old wording is not explained.
Example with invented names: Rohan Gems Pvt Ltd applies to the Commission, co-operates throughout and makes a full and true disclosure. The Commission grants immunity from prosecution for the offences connected with the case settled and partial relief from penalty, subject to conditions. If a prosecution for such an offence had been instituted before the Commission received the application, the proviso would have barred the immunity.
Section 127H(2): withdrawal for non-payment or non-compliance
An immunity "shall stand withdrawn" in two situations:
- the person "fails to pay any sum specified in the order of the settlement passed under sub-section (5) of section 127C within the time specified in such order"; or
- the person "fails to comply with any other condition subject to which the immunity was granted".
"Thereupon the provisions of this Act shall apply as if such immunity had not been granted." The word is "shall stand withdrawn", so withdrawal follows by force of the sub-section. The footnote records that the words on the time for payment were substituted by the Finance Act, 2007, with effect from 01.06.2007, and the earlier words about further time are not law.
Section 127H(3): withdrawal for concealment or false evidence
Here the verb is "may": an immunity "may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person had, in the course of the settlement proceedings, concealed any particulars, material to the settlement or had given false evidence". The consequences follow: the person "may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement", and "shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had no such immunity been granted."
| Sub-section | Verb | Trigger | Result |
|---|---|---|---|
| (2) | "shall stand withdrawn" | Failure to pay as ordered, or to comply with a condition | The Act applies as if no immunity had been granted |
| (3) | "may, at any time, be withdrawn" | Concealment of material particulars, or false evidence | Trial for the offence or any other connected offence; liability to penalty |
Section 127H(4): the Interim Board (Finance Act, 2025)
The Finance Act, 2025 (section 102) added sub-section (4): "On and from the 1st day of April, 2025, the power of the Settlement Commission under this section shall be exercised by the Interim Board and the provisions of this section shall mutatis mutandis apply to the Interim Board as they apply to the Settlement Commission." So, for pending applications, the Interim Board decides on immunity and its withdrawal, on the same conditions as sub-sections (1) to (3). The Interim Board is defined in section 127A, and the gazette text does not give the date of its constitution. See our article on section 127A.
Section 127I: sending the case back
The heading is printed "Section 127-I" in the copy consulted, and section 127L refers to "section 127-I". It is the same section; the hyphen is a printing point.
Sub-section (1). The Commission "may, if it is of opinion that any person who made an application for settlement under section 127B has not co-operated with the Settlement Commission in the proceedings before it, send the case back to the proper officer who shall thereupon dispose of the case in accordance with the provisions of this Act as if no application under section 127B had been made." The condition here is non-co-operation, the mirror image of the condition in section 127H.
Sub-section (2). For that purpose, the proper officer "shall be entitled to use all the materials and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it", as if produced before or recorded by the proper officer. What the applicant puts before the Commission therefore stays available to the officer.
Sub-section (3). For the time limit under section 28 and for interest under section 28AA, in a case sent back, "the period commencing on and from the date of the application to the Settlement Commission under section 127B and ending with the date of receipt by the officer of customs of the order of the Settlement Commission sending the case back to the officer of customs shall be excluded." For the time limit see our articles on section 28 and the extended period. The rate of interest under section 28AA is fixed by notification and is not stated here.
Consequence for a later application
Section 127L, covered in our article on sections 127J to 127N, lists a case sent back under section 127I as one of the grounds on which the person cannot apply for settlement in relation to any other matter.
Practical points
- Co-operate fully and keep disclosure complete; both sections turn on those two things.
- Treat each condition of an immunity order as binding, since failure to pay or comply withdraws the immunity.
- Remember that what you produce before the Commission can be used by the proper officer if the case is sent back.
- Note the date the application was received; prosecution instituted before that date bars immunity.
Changes made by later Finance Acts
| Finance Act | What changed | What the gazette prints about commencement |
|---|---|---|
| Finance Act, 2025 (No. 7 of 2025), section 102 | Section 127H: new sub-section (4), the power of the Settlement Commission under the section is exercised by the Interim Board | "On and from the 1st day of April, 2025" (in the sub-section). The Act received the assent of the President on 29 March 2025 |
Section 127I is not shown as amended in the Finance Acts checked. 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 these sections.
Need help with immunity or a case sent back?
Immunity depends on conditions, and conditions need to be tracked from the day the order is received. Our team can help you review the settlement order, plan compliance and respond if a case is returned, through legal dispute resolution for customs matters.
Key takeaways
- Section 127H lets the Commission grant immunity from prosecution and wholly or partly from penalty and fine to a co-operating applicant who has made a full and true disclosure.
- No immunity where prosecution was instituted before the application was received.
- Immunity stands withdrawn for non-payment or non-compliance, and may be withdrawn for concealment or false evidence.
- On and from 1 April 2025 the immunity power under section 127H is exercised by the Interim Board (sub-section (4), Finance Act, 2025).
- Section 127I lets the Commission send a case back for non-co-operation; the period from application to receipt of the order is excluded for the section 28 time limit and section 28AA interest.
Read next
- Sections 127D to 127G: powers of the Settlement Commission and inspection of reports
- Sections 127J to 127N: settlement order, recovery and bar on second application
- Section 127C: procedure on a settlement application
- Section 128: appeal to the Commissioner (Appeals)
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 change made by the Finance Act, 2025 is 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.