CESTAT Ahmedabad Ruled on Import Restrictions and Compliance with Customs Act

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 04.02.2026

CESTAT Ahmedabad Ruled on Import Restrictions and Compliance with Customs Act

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, delivered a judgment on February 4, 2026, in the case of Commissioner of Customs, Mundra Customs vs. Shree Khatu Shyam Steel & Tubes LLP. This case revolved around the import of Cold Rolled Stainless Steel (CRSS) Coils Grade J2 and raised critical questions about import restrictions, procedural compliance under the Customs Act, 1962, and the legal validity of circulars issued by the Ministry of Steel. ​

Background of the Case

The dispute originated when Shree Khatu Shyam Steel & Tubes LLP imported CRSS Coils Grade J2 from China under House Bill of Lading No. FS241205001 dated December 3, 2024, and filed Bill of Entry No. ​ 8109186 on January 31, 2025, at Mundra Port. ​ The Ministry of Steel had issued a one-time NOC (No Objection Certificate) for shipments where the Bill of Lading was generated on or before December 3, 2024. ​ However, the Customs Department alleged that the Master Bill of Lading for the shipment was issued on January 4, 2025, after the cutoff date, making the goods prohibited for import under the Ministry of Steel’s circular dated October 20, 2023.

The goods were seized on February 27, 2025, under Section 110(1) of the Customs Act, 1962, and the importer requested a waiver of the Show Cause Notice (SCN) and personal hearing to expedite the adjudication process. Despite the waiver, the adjudication order was not passed within the mandatory six-month period stipulated under Section 110(2) of the Customs Act, leading to the seizure becoming illegal. ​

Key Legal Issues

The case raised several important legal questions:

1. Validity of the Ministry of Steel’s Circulars: The department relied on circulars issued by the Ministry of Steel, which mandated importers to obtain NOCs for steel grades not covered under the Steel and Steel Products (Quality Control) Order, 2024. ​ The respondent argued that these circulars imposed restrictions without statutory authority, as the imported goods were not covered under the Quality Control Order. ​
2. Procedural Compliance Under Section 110(2): The respondent contended that the department failed to issue an SCN or adjudicate the seizure within the mandatory six-month period, rendering the seizure illegal and necessitating the unconditional release of the goods. ​
3. Distinction Between House Bill of Lading and Master Bill of Lading: The department argued that the one-time NOC applied exclusively to shipments where the Master Bill of Lading was issued on or before December 3, 2024, and not to House Bills of Lading with earlier dates. ​

Key Findings of the Tribunal

1. Procedural Compliance Under Section 110(2): ​

The Tribunal emphasized the mandatory nature of Section 110(2) of the Customs Act, which requires the issuance of an SCN within six months of the seizure. ​ The Tribunal relied on the landmark judgment of the Delhi High Court in Shiv Shakti Trading Company vs. Commissioner of Customs (Preventive), which held that the waiver of an SCN does not absolve the department of its obligation to adjudicate within the statutory timeframe. ​ The Tribunal ruled that the department’s failure to issue an SCN or adjudicate within six months rendered the seizure illegal, and the goods were liable for immediate release. ​

2. Validity of Ministry of Steel’s Circulars: ​

The Tribunal noted that the circulars issued by the Ministry of Steel could not impose additional restrictions on imports without statutory authority. ​ It relied on precedents such as Atul Commodities Pvt. ​ Ltd. vs. Commissioner of Customs, Cochin and UOI vs. Inter ​continental India Pvt. ​ Ltd., which established that substantive restrictions on trade must be imposed through legislation or statutory notifications, not through executive circulars. ​

3. Nature of the Imported Goods: ​

The Tribunal found that the imported CRSS Coils Grade J2 were not covered under the Steel and Steel Products (Quality Control) Order, 2024, and were therefore not subject to BIS standards or restrictions. ​ The goods were identified and verified through Positive Metal Identification (PMI) tests, confirming their compliance with the declared specifications. ​

Impact of the Judgment ​

1. Procedural Safeguards for Importers:

The judgment reinforces the importance of procedural compliance under Section 110(2) of the Customs Act, ensuring that importers are not subjected to indefinite delays in adjudication. It underscores the statutory obligation of the department to act within the prescribed timeframe, balancing the State’s power of investigation with the rights of importers.

2. Limits on Executive Authority:

The ruling highlights the limitations of executive circulars in imposing trade restrictions. ​ It reiterates that any change in the categorization of goods from “free” to “restricted” must be made through legislative amendments or statutory notifications, not through circulars. ​

3. Clarity on Import Restrictions: ​

The judgment provides clarity on the legal status of goods not covered under BIS standards or Quality Control Orders. ​ It establishes that such goods cannot be treated as restricted or prohibited unless explicitly stated in the law. ​

Conclusion

The CESTAT’s decision in this case is a landmark ruling that upholds the principles of procedural fairness and the rule of law in the realm of customs and trade regulations. It serves as a reminder to regulatory authorities to act within the bounds of their statutory powers and provides much-needed clarity to importers navigating complex regulatory frameworks.

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Source: CESTAT Ahmedabad

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