EDD in customs stands for Extra Duty Deposit, a security taken from importers while the Special Valuation Branch investigated whether a related-party relationship influenced the declared value. Two things matter most about EDD today. First, it was abolished by Circular No. 05/2016-Customs dated 9 February 2016, so no EDD is routinely collected any more. Second, EDD is a security deposit and not customs duty, which means the one-year refund limitation under Section 27 of the Customs Act does not apply to it.
That second point is worth money to any importer still waiting on an old EDD refund that customs rejected as time-barred.
When a related-party import was referred to the SVB, the goods were cleared on provisional assessment under Section 18 of the Customs Act, 1962. To safeguard revenue while the investigation ran, customs took an Extra Duty Deposit, historically 1 per cent of the declared assessable value, rising to 5 per cent where the importer did not furnish the required documents. EDD arises from Board circulars governing SVB procedure, notably Circulars 1/98, 11/2001, and 5/2016, rather than from any charging provision of the Customs Act.
Circular 05/2016 states plainly that, for the sake of reducing transaction cost and bringing uniformity across Customs Houses, no security in the form of EDD shall be obtained from importers. Industry had long complained that EDD in customs inflated transaction costs while SVB cases dragged on. Today, a security deposit of 5 per cent of the declared assessable value applies only in one narrow circumstance: where the importer fails to furnish the documents and information required for the SVB inquiry within 60 days of requisition. Even then, the security may not be imposed for more than three months, and the importer may choose between a cash deposit and a bank guarantee.
This is the legal point that decides refund disputes. Circular 05/2016 expressly clarifies that the amount collected after provisional assessment for release of goods is in the form of a security deposit. EDD in customs is not duty within the meaning of Section 2(15), and it is not charged or collected under Section 12 of the Customs Act or the Customs Tariff Act, 1975. It is simply a protection for revenue, held against the possibility that undervaluation is later established. Details of the circular are published by CBIC.
Section 27 of the Customs Act governs the refund of duty, and it carries a one-year limitation. Because EDD is not duty, that limitation does not apply to an EDD refund. The Delhi High Court in Sentec India Company Pvt. Ltd. held that once the allegation of under-declaration is disproved, the very basis of the deposit ceases to exist, and the period of limitation under Section 27 does not apply to EDD. The CESTAT Mumbai Bench in Gorakhram Haribux followed the same reasoning, allowing an EDD refund claim that customs had rejected as time-barred and directing repayment with interest.
For the same reason, the doctrine of unjust enrichment under Section 27(2) does not apply to EDD refunds. This was confirmed in SKF Technologies (I) Pvt. Ltd.
Circular 05/2016 provides that when the SVB submits an Investigation Report accepting the declared value under Rule 3 of the Customs Valuation Rules, 2007, the customs stations must immediately finalise the provisional assessments without issuing a speaking order. The importer need not apply for finalisation. It follows that any EDD found in excess after final assessment is liable to be refunded suo motu once the Bill of Entry is finalised, or at most on a simple letter request from the importer.
If you are holding an EDD in customs balance from a legacy SVB case, the practical steps are:
At JPARKS INDIA, we make sure importers are not asked for EDD that is no longer due, and we recover legacy EDD that customs is holding. We track SVB cases to a clean Investigation Report, push for finalisation of provisional Bills of Entry, and contest refund rejections grounded in Section 27 limitation or unjust enrichment, neither of which applies to a security deposit. We also handle the connected SVB refund process for excess duty. Having served 500+ importers and exporters since 2018, we get deposits released. Learn more about our SVB registration services or book a free consultation.
EDD in customs stands for Extra Duty Deposit, a security taken during SVB investigations into related-party imports. It was abolished by Circular 05/2016 and is not routinely collected today.
No. Circular 05/2016 provides that no security in the form of EDD shall be obtained from importers. A 5 per cent security applies only if documents are not furnished within 60 days of requisition, for a maximum of three months.
No. EDD is a security deposit. It is not duty under Section 2(15) and is not levied under Section 12 of the Customs Act. Circular 05/2016 expressly describes it as a security deposit.
No. Section 27 governs refund of duty and carries a one-year limitation. Courts including the Delhi High Court in Sentec India have held that this limitation does not apply to EDD, because EDD is not duty.
No. The unjust enrichment bar in Section 27(2) applies to refunds of duty. Tribunals including SKF Technologies have held it does not apply to the refund of a security deposit such as EDD.
