What are the Penalties for QCO or BIS Non-Compliance?

What the law says

As per BIS Act, 2016, any person who contravenes a Quality Control Order is liable to a fine of not less than two lakh rupees for the first contravention and not less than five lakh rupees for second and subsequent contraventions. The fine is extendable to ten times the value of goods produced or sold in contravention. A criminal liability leading to imprisonment of up to two years may be imposed in addition to or in lieu of a fine depending on the severity of the violation.

Using the ISI mark without a valid BIS licence or affixing an expired or counterfeit mark to a product constitutes misuse of a statutory certification mark under BIS Act. The Act also provides for seizure and confiscation of non-compliant goods and any equipment used to produce a non-compliant mark.

A discretionary compounding mechanism exists for certain first-time violations not punishable with imprisonment that allows BIS to resolve the matter through payment rather than prosecution. This mechanism is not available for serious violations and cannot be relied upon as a contingency.

How port enforcement unfolds

When a Bill of Entry is filed for goods in a notified product category, the customs system flags the entry for BIS compliance verification. The importer’s broker provides the applicable BIS licence number (the FMCS number for industrial and consumer goods or the CRS R-number for electronics). The customs officer verifies the number against the BIS portal in real time whether the licence is active, covers the declared product and corresponds to the declared factory.

If any of these checks fail, the goods are detained. A detention memo is issued and demurrage on the container begins accruing from that day, charged in escalating daily slabs. Shipping line container detention charges apply separately. The importer then receives a show-cause notice with a short response window. If a valid BIS licence number or a documented pre-approved exemption cannot be produced within that window, the only available options are arrange for a re-export (it requires customs permission and shipping line cooperation incurring further costs) or apply to the Government for an emergency conditional exemption (rarely granted on a commercially viable timeline) or face confiscation and destruction of the consignment. The Customs Act, 1962 operates independently of the BIS Act and the customs officers do not require a separate BIS enforcement action to detain goods.

Note: At major ports including Mumbai, JNPT, Nhava Sheva, Chennai and Mundra combined container demurrage and ground rent charges in extended detentions can reach several hundred thousand dollars per week in escalating slabs. Costs resulting from a two-week detention often equal the value of the customs duty applied to the shipment.

Corporate liability

The BIS Act, 2016 provides that where an offence is committed by a company, every person who was in charge of and responsible for the conduct of the business at the time of the offence is deemed responsible and may be prosecuted personally in addition to the company. This provision applies to directors, senior officers and others in positions of operational responsibility and not only to those with direct involvement in the specific transaction creating a direct personal exposure for senior leadership.

The cost comparison

BIS certification involves costs like the application fees, laboratory testing, BIS officer travel and per diem charges for factory inspections, AIR engagement and the Performance Bank Guarantee under FMCS. These are largely one-time costs per certification cycle with defined renewal expenses.

The cost of a detention event is open-ended from the moment it begins. Container demurrage escalates daily and the ground rent escalates over time. Shipping line container detention adds a further daily charge. The importer’s customer bears the downstream consequences of delayed delivery. Supply chain commitments to that customer are disrupted. In no case does deferred certification produce a net financial saving over the full accounting period.

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