CESTAT Chennai Quashes Customs Demand on DFIA Imports: No Suppression, Extended Limitation Not Invocable

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 27.04.2026

CESTAT Chennai Quashes Customs Demand on DFIA Imports: No Suppression, Extended Limitation Not Invocable

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The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Chennai recently delivered a significant judgment in the case involving M/s. TaraJyot Polymers Limited and the Commissioner of Customs Chennai-II. This article provides a comprehensive overview of the case, its background, legal issues, and the final decision, offering insights into customs duty exemption and the limitation period under Indian law.

Background of the Case

M/s. TaraJyot Polymers Limited, based in Kolkata, imported goods under Duty Free Import Authorization (DFIA) licenses originally issued to M/s. Pan Parag India Ltd., Kanpur. These licenses allowed duty-free imports, provided certain export obligations and procedural requirements were met. However, investigations by the Directorate of Revenue Intelligence (DRI) Lucknow revealed irregularities in exports and alleged manipulation of export documents by several exporters, including Pan Parag India Ltd., Kothari Products Ltd., and others.

The authorities found that these exporters had contravened provisions of the Foreign Trade Policy (FTP) by failing to disclose technical characteristics, quality, and specifications of essential oils used in manufacturing pan-masala/gutkha. As a result, show cause notices (SCNs) were issued, and several DFIA licenses were either cancelled or penalized.

Legal Issues Raised

The Revenue contended that TaraJyot Polymers had availed undue benefits of import duty exemption based on DFIA licenses issued on the strength of manipulated export documents. The main allegation was that the import duty was short-paid due to fraudulent export undertakings, making the import incentives inadmissible.

TaraJyot Polymers, however, argued that:

• They were bona fide purchasers of the DFIA licenses.
• At the time of import and issuance of the notice, the licenses were valid.
• The imports under these licenses could not be deemed illegal.
• The demand for duty was barred by limitation, as the SCN was issued 2½ years after the imports, exceeding the one-year period prescribed under Section 28 of the Customs Act, 1962.
• There was no allegation of suppression of facts to justify invoking the extended limitation period.

Tribunal Proceedings

The case was heard by Judicial and Technical. The appellant’s counsel focused on the limitation issue, citing several precedents, including:

• Commissioner Vs Leader Values Ltd. [2008 (227) ELT A29 (SC)]
• Pee Jay International Vs Commissioner of Customs [2016 (340) ELT 625 (P&H)]
• Binani Cements Ltd. Vs Commissioner of Customs, Kandla [2010 (259) ELT 247 (Tri.-Ahmd.)]

The Revenue relied on the impugned order, arguing for the sustainability of the demand.

Key Findings and Decision

The Tribunal noted:

• The facts were undisputed: imports occurred on 17.05.2011, SCN was issued on 26.11.2014, and license cancellation happened on 17.02.2012 (after the imports).
• Section 28 of the Customs Act prescribes a one-year period for recovery of short-paid duty unless suppression of facts is alleged, which allows for an extended period.
• The SCN did not allege suppression of facts, nor did the impugned order discuss limitation.

Based on these findings, the Tribunal concluded that the demand was confirmed by wrongly invoking the extended limitation period without evidence of suppression or intent to evade duty. The appeal was allowed on the ground of limitation, with consequential benefits to TaraJyot Polymers as per law.

Conclusion

This case underscores the importance of adhering to statutory limitation periods in customs proceedings and the necessity for authorities to substantiate allegations of suppression when seeking to invoke extended periods. The Tribunal’s decision provides clarity for importers relying on DFIA licenses and reinforces the principle of legal certainty in customs law.

Source: CESTAT Chennai

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