ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 25.09.2025
Karnataka High Court- Customs Duty Not Leviable on Import of Capital Goods by 100% EOU
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379. โ
On July 30, 2025, the High Court of Karnataka at Bengaluru delivered a significant judgment in the customs appeals filed by the Commissioner of Central Excise, Customs, and Service Tax, Mysore, against M/s Such Silk International Ltd. The appeals, CSTA No. โ 8 of 2018 and CSTA No. โ 1 of 2021, were dismissed by a bench. This judgment has far-reaching implications for the interpretation of customs duty obligations under the Export Oriented Unit (EOU) scheme. โ
Background of the Case
M/s Such Silk International Ltd., a 100% Export Oriented Unit (EOU), had imported duty-free capital goods and raw materials under the erstwhile Notification No. โ 53/1997-Customs dated June 3, 1997. โ The company was obligated to fulfill export obligations as per the scheme. โ However, the unit became defunct, and the export obligations were not met. โ The Revenue initiated proceedings under Sections 28 and 72 of the Customs Act, 1962, to recover the customs duty on the imported goods, alleging non-compliance with the conditions of the notification. โ
The respondent accepted the duty liability on unutilized raw materials and consumables but contested the levy of duty on capital goods. โ The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled in favor of the respondent, holding that duty on capital goods was not leviable if the goods were installed and used for manufacturing, even if the export obligation was not fulfilled. โ The Revenue challenged this decision before the High Court.
Source: Karnataka High Court
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