CESTAT Delhi Sets Aside Customs Duty, Penalty, and Redemption Fine on Imported Marble Blocks

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 13.03.2026

CESTAT Delhi Sets Aside Customs Duty, Penalty, and Redemption Fine on Imported Marble Blocks

On March 9, 2026, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, delivered a significant judgment in the case of M/s Abhishek Exports, M/s Jain Grani Marmo (P) Ltd., and M/s Pacific Industries Ltd. The case revolved around the demand for customs duties, penalties, and redemption fines imposed on imported marble blocks used by 100% Export Oriented Units (EOUs) for domestic tariff area (DTA) sales. ​ This article delves into the details of the case, the arguments presented, and the tribunal’s findings. ​

Background of the Case

The appellants—M/s Abhishek Exports, M/s Jain Grani Marmo (P) Ltd., and M/s Pacific Industries Ltd.—are 100% Export Oriented Units (EOUs) engaged in the production of marble slabs and tiles. ​ EOUs are permitted to import capital goods and raw materials duty-free under the Foreign Trade Policy (FTP) 2004-2009, provided they export their final products. ​ However, paragraph 6.8 of the FTP allows EOUs to sell a limited quantity of finished products, rejects, waste, scrap, remnants, and by-products in the Domestic Tariff Area (DTA) under certain conditions. ​

In 2005, the Directorate General of Foreign Trade (DGFT) issued Notification No. ​ 24 (RE-2005)/2004-2009, which excluded marble from the list of items that could be sold by EOUs in the DTA. ​ The appellants challenged this notification in the Rajasthan High Court, which issued a stay order permitting DTA sales of marble slabs subject to payment of full duties as per the FTP. ​

Key Issues in the Case ​

The case raised several critical questions:

1. Demand for Customs Duties on Imported Marble Blocks: The department alleged that the appellants violated the conditions of the DGFT notification by selling marble slabs in the DTA without exporting the finished products. ​ Consequently, customs duties were demanded on the imported marble blocks. ​
2. Extended Period of Limitation: The department invoked the extended period of limitation, alleging suppression of facts and non-disclosure of DTA clearances. ​
3. Penalties Under Section 114A: The department imposed penalties under Section 114A of the Customs Act, claiming collusion, willful misstatement, or suppression of facts.
4. Confiscation and Redemption Fine: The department held the imported marble blocks liable for confiscation under Sections 111(d) and 111(o) of the Customs Act and imposed redemption fines in lieu of confiscation. ​

Arguments Presented

Appellants’ Submissions ​

1. Payment of Duties: The appellants argued that they had cleared finished products to the DTA after paying full excise duties equivalent to the aggregate customs duties, as per the proviso to Section 3(1) of the Central Excise Act, 1944. ​
2. High Court Stay Orders: The High Court had permitted DTA sales upon payment of full duties, and the appellants complied with this directive. ​
3. No Collusion or Suppression: The appellants contended that there was no collusion, willful misstatement, or suppression of facts, and all clearances were made transparently under the High Court’s stay orders. ​
4. Non-Applicability of Confiscation: The appellants argued that the imported marble blocks were not liable to confiscation under Sections 111(d) and 111(o) of the Customs Act, as their import was authorized by the Development Commissioner and cleared by the proper officer. ​

Revenue’s Submissions ​

1. Strict Interpretation of Exemption Notifications: The Revenue argued that the exemption notification for imported marble blocks was subject to strict conditions, which the appellants allegedly violated. ​
2. Extended Limitation Period: The Revenue claimed that the appellants did not disclose DTA clearances, justifying the invocation of the extended period of limitation. ​
3. Confiscation and Redemption Fine: The Revenue contended that the imported marble blocks were liable to confiscation under Sections 111(d) and 111(o) of the Customs Act, and redemption fines were correctly imposed. ​

Tribunal’s Findings ​

After considering the submissions and reviewing the records, the tribunal made the following key findings:

1. Customs Duty Demand: The tribunal held that the demand for customs duties on the imported marble blocks was unsustainable. ​ The appellants had paid central excise duties equal to the customs duties on the finished marble slabs cleared to the DTA, as per the High Court’s stay orders. ​ Since the value of finished products is higher than the raw materials, there was no loss of revenue. ​
2. Extended Limitation Period: The tribunal did not delve into the question of limitation, as the demand for customs duties was set aside on merits. ​
3. Penalty Under Section 114A: The tribunal ruled that penalties under Section 114A could not be imposed, as the duty itself was not payable and there was no evidence of collusion, willful misstatement, or suppression of facts. ​
4. Confiscation and Redemption Fine: The tribunal found that the imported marble blocks were not liable to confiscation under Sections 111(d) and 111(o) of the Customs Act. ​ The High Court’s stay orders had sanctioned the DTA clearances, and the goods were not available for confiscation. ​ Redemption fines were also deemed unsustainable, as they are optional and the goods were not seized or provisionally released on bond. ​

Conclusion

The tribunal’s decision in this case is a landmark ruling that clarifies several critical aspects of customs and excise law, particularly concerning EOUs and DTA sales. The judgment underscores the importance of adhering to judicial orders and highlights the limitations of the Revenue’s authority in cases where High Court stay orders are in effect. ​ By setting aside the demands for customs duties, penalties, and redemption fines, the tribunal has provided significant relief to the appellants and reinforced the principle that judicial orders must be respected.

This case serves as a precedent for similar disputes involving EOUs and DTA sales, offering clarity on the interpretation of customs and excise laws in the context of the Foreign Trade Policy and related notifications. It also emphasizes the need for a balanced approach that considers both the interests of the Revenue and the rights of taxpayers.

Source: CESTAT Delhi

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