The Indian copper industry has come under intense scrutiny as the Customs Department initiates a nationwide probe into alleged misuse of duty concessions under the ASEAN-India Free Trade Agreement (AIFTA).
The investigation centers on copper tubes and pipes imported at zero duty, and authorities have already issued show-cause notices to nearly 2,000 importers across the country.
According to sources, Customs officials allege that certain importers have misclassified goods to wrongfully avail lower or nil import duties under AIFTA. Officials are now demanding full duties—up to 35%—along with bank guarantees and provisional assessments. These demands are reportedly based on third-party data sourced from Vietnamese manufacturers, raising questions about the validity and admissibility of the evidence.
Industry Pushback: ‘Retrospective and Arbitrary’
The crackdown has triggered a strong reaction from the industry, particularly from the Bombay Metal Exchange (BME), which has appealed to Finance Minister Nirmala Sitharaman for urgent intervention.
“This kind of enforcement contradicts the essence of the Free Trade Agreement,” said Sandeep Jain, President of BME. “Thousands of MSMEs that have operated within the law and based their business models on certificates approved by the Indian Customs are now at risk of financial collapse. This move threatens legitimate businesses across India.”
Industries that rely heavily on copper inputs, such as the air-conditioning and refrigeration sectors, are feeling the pinch. Importers supplying copper components to major consumer electronics brands—including Voltas, Daikin, LG, Samsung, and Bluestar—warn that the current action could disrupt their supply chains and halt production.
Faith in Treaty-Based Trade Undermined
Industry players argue that copper imports were conducted in full compliance with AIFTA provisions, including the submission of Certificates of Origin issued by ASEAN authorities and verified by Indian Customs. These certificates, they say, formed the foundation for duty-free treatment for over a decade.
“The sudden shift in interpretation of rules, applied retrospectively, is deeply destabilizing,” an industry representative stated. “MSMEs cannot be expected to question the legitimacy of foreign-issued certificates that have already been cleared by Indian Customs.”
Legal Experts: Importers Have Limited Verification Power
Legal experts foresee a potential courtroom battle brewing over the government’s move. Abhishek A Rastogi, founder of legal firm Rastogi Chambers, highlighted the legal fragility of the show-cause notices.
“These notices do not question the authenticity of the foreign Certificates of Origin but still seek to impose penalties on importers,” Rastogi said. “Importers cannot realistically verify information from foreign manufacturers. Retrospective tax demands based on unverifiable data violate the principles of natural justice. Judicial scrutiny is inevitable.”
He added that a writ petition in High Courts may be the most viable legal remedy for affected businesses.
Sector-Wide Implications Beyond Copper
Experts warn that the outcome of this probe could have far-reaching implications beyond the copper industry. Electronics, automotive, and renewable energy sectors—all of which benefit from FTAs—could face similar scrutiny. A breakdown in trust around FTA mechanisms might deter foreign investors and threaten India’s standing in global manufacturing supply chains.
While the Finance Ministry has yet to comment officially on the matter, tax authorities have made it clear that any misuse of FTAs will be investigated and penalized. They also cautioned that all sectors benefiting from duty concessions are currently under surveillance to ensure strict compliance with trade regulations.
As legal uncertainty looms, importers, MSMEs, and multinational brands now await a formal response from the Ministry of Finance. The industry is hoping for policy clarity to safeguard legitimate trade and maintain stability in crucial supply chains.
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