𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Author: Aadrikaa Legal Services (ALS)

CESTAT Delhi Orders Refund of E-Auction Deposit with Interest
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 19.12.2025

CESTAT Delhi Orders Refund of E-Auction Deposit with Interest

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.comor on his Mobile +91-9999005379.

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has ruled in favor of M/s Muchipara Consumers Co-operative Operative Stores Ltd, directing the Customs Department to refund the amount deposited by the appellant during an e-auction held in February 2017. The Tribunal also ordered the department to pay interest at the rate of 6% per annum from the date of deposit until the refund is made.

Background of the Case

The case revolves around an e-auction conducted by the Customs Department on February 7, 2017, for the sale of seized/confiscated cigarettes. M/s Muchipara Consumers Co-operative Operative Stores Ltd participated in the auction and was declared the highest bidder. As per the auction terms, the appellant deposited an initial security amount of ₹25,000 and subsequently paid ₹29,19,444 after being declared the highest bidder. However, the appellant raised concerns regarding the compliance of the cigarette packets with the Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008, and requested the department to provide the manufacturing date and testing report of the cigarettes.

The situation took a turn when the Central Board of Excise and Customs (CBEC) issued a Circular on March 29, 2017, stating that cigarette packets not complying with specific legal provisions should not be released for home consumption and must be destroyed. The appellant, citing this Circular, requested a refund of the deposited amount, as the cigarettes did not meet the required legal standards. However, the department refused the refund, claiming that the appellant had failed to deposit the balance amount within the stipulated time, leading to the forfeiture of the deposit.

Legal Battle and Tribunal Decision

The appellant challenged the department’s decision, leading to a series of legal proceedings. The Delhi High Court intervened, directing the appellant to approach CESTAT to comprehensively adjudicate the matter. The Tribunal, after hearing arguments from both sides, concluded that the cigarette packets did not meet the mandatory legal requirements and should have been destroyed as per the CBEC Circular. It was also noted that the department had failed to provide the necessary information regarding the manufacturing date, which was a critical requirement under the 2008 Rules.

The Tribunal emphasized that the forfeiture of the deposit was unjustified, as the appellant was unable to take delivery of the goods due to their non-compliance with legal standards. Furthermore, the Tribunal referred to a similar case involving M/s Ahad Traders, where the department had refunded the bid amount under comparable circumstances.

Final Order

In its final order, the Tribunal set aside the previous orders of the Assistant Commissioner and the Commissioner (Appeals) and directed the Customs Department to refund the deposited amount of ₹25,000 and ₹29,19,444 to the appellant. Additionally, the Tribunal granted interest at the rate of 6% per annum from the date of deposit until the refund is made.

Key Takeaways

This decision highlights the importance of adhering to legal and regulatory requirements in government auctions. It also underscores the need for transparency and accountability in such processes. The Tribunal’s ruling sets a precedent for similar cases, ensuring that participants in government auctions are treated fairly and that their deposits are not arbitrarily forfeited.

The case serves as a reminder to both government authorities and auction participants about the significance of compliance with legal provisions and the need for clear communication and transparency in transactions. It also reinforces the role of judicial bodies like CESTAT in upholding justice and ensuring fair treatment for all parties involved. This ruling is a victory for M/s Muchipara Consumers Co-operative Operative Stores Ltd and a testament to the importance of legal recourse in resolving disputes. It also serves as a beacon of hope for others who may find themselves in similar situations, emphasizing that justice can prevail when the law is upheld.

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Source: CESTAT Delhi

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December 19, 2025
Revised Guidelines for Arrest and Bail under Customs Act, 1962
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 18.12.2025

Revised Guidelines for Arrest and Bail under Customs Act, 1962

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.comor on his Mobile +91-9999005379.

The Central Board of Indirect Taxes & Customs (CBIC) has issued Circular No. 13/2022-Customs dated 16th August 2022, revising the guidelines for arrest and bail in relation to offences punishable under the Customs Act, 1962. This circular streamlines the threshold limits for arrest and bail, aligning them with the revised limits for launching prosecution as per Circular No. 12/2022-Customs.

Key Highlights of the Revised Guidelines:

The revised guidelines emphasize that arrests under the Customs Act, 1962 should only be made in exceptional situations. The updated provisions under Para 2.3 of the guidelines are as follows:
1. Unauthorised Importation in Baggage/Transfer of Residence Rules: Arrests can be made if the market value of goods involved is Rs. 50,00,000 or more.
2. Outright Smuggling of High-Value Goods: This includes precious metals, restricted/prohibited items, goods notified under Section 123 of the Customs Act, 1962, or foreign currency, where the value of offending goods is Rs. 50,00,000 or more.
3. Importation of Trade Goods with Wilful Mis-declaration: Arrests can be made in cases involving mis-declaration, concealment, or import of restricted/prohibited items where the market value of goods is Rs. 2,00,00,000 or more.
4. Fraudulent Evasion of Duty: Arrests are permissible if the evasion or attempted evasion of duty involves Rs. 2,00,00,000 or more.
5. Fraudulent Availment of Drawback or Duty Exemption: In cases of fraudulent claims for duty drawback or exemptions related to exports, arrests can be made if the amount exceeds Rs. 2,00,00,000.
6. Exportation of Trade Goods with Mis-declaration or Concealment: Arrests are allowed for mis-declaration in value/description or concealment of restricted goods where the market value exceeds Rs. 2,00,00,000.
7. Fraudulent Utilisation of Instruments: If an instrument obtained through fraud, collusion, or suppression of facts is used, and the duty involved exceeds Rs. 2,00,00,000, arrests can be made.
8. Special Cases: For offences involving items such as Fake Indian Currency Notes (FICN), arms, ammunition, explosives, antiques, art treasures, wildlife items, and endangered species, arrests may be considered irrespective of the value of the goods involved.
Section 104 of the Customs Act, 1962:

Section 104 of the Customs Act, 1962, empowers Customs officers to arrest individuals if they have reasons to believe that the person has committed an offence punishable under the Act. The section outlines the procedure for arrest, including informing the person of the grounds for arrest and producing them before a magistrate within 24 hours.

Relevant Case Citation:
- Appellants vs Commissioner of Customs – CESTAT Kolkata (Customs 76113 of 2025)
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Kolkata, overturned the confiscation of 259.99 kg of silver granules and a Hyundai i-20 car, ruling that the Revenue failed to provide sufficient evidence to prove the goods were smuggled. The appellants were arrested under Section 104 of the Customs Act, 1962, but the tribunal found that the silver granules were not a notified item under Section 123 of the Customs Act, and the burden of proof rested on the Revenue. The appellants provided valid GST invoices and returns, substantiating their claim of domestic procurement. The tribunal also dismissed all penalties imposed on the appellants and allowed the appeals with full relief.

Key Points:
1. Arrest Under Section 104: The appellants were arrested for alleged smuggling of silver granules under Section 104 of the Customs Act, 1962.
2. Confiscation Overturned: The tribunal ruled that the silver granules and vehicle were not liable for confiscation due to lack of evidence proving smuggling.
3. Burden of Proof: The Revenue failed to establish the foreign origin and smuggled nature of the goods, as silver granules are not a notified item under Section 123 of the Customs Act.
4. Documentary Evidence: Appellants provided valid GST invoices and returns, supporting their claim of domestic procurement.
5. Penalties Dismissed: Penalties imposed under Sections 112(a), 112(b), and 114AA of the Customs Act were set aside.
6. Cross-Examination Denied: Statements relied upon by the Revenue were deemed invalid as cross-examination under Section 138B of the Customs Act was not allowed.
Conclusion:

The revised guidelines under Circular No. 13/2022-Customs aim to ensure that arrests under the Customs Act, 1962 are made judiciously and only in exceptional circumstances. By setting clear threshold limits and emphasizing the importance of proportionality, the CBIC seeks to uphold the principles of justice while addressing serious offences under the Act. Stakeholders are encouraged to familiarize themselves with these guidelines to ensure compliance and avoid legal complications.

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Source: CBIC, CESTAT Kolkata

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December 18, 2025
Advance Ruling Grants Duty Exemption for Static Converters Used in Telecommunication Devices
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 18.12.2025

Advance Ruling Grants Duty Exemption for Static Converters Used in Telecommunication Devices

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.

The Customs Authority for Advance Rulings (CAAR), Mumbai, recently issued a significant ruling concerning the classification and duty exemption of AC-DC and DC-DC converters used in telecommunication equipment. This ruling provides clarity on the Harmonized System of Nomenclature (HSN) classification and the applicability of customs duty exemptions under Notification No. 25/2005-Customs dated March 1, 2005.

Background of the Case

M/s Sanmina SCI India Pvt Ltd, a company specializing in high-technology products for various industries, filed an application seeking an advance ruling on the classification and duty exemption of six different models of AC-DC and DC-DC converters. These converters are integral components in the manufacture of telecommunication equipment, including Wi-Fi receivers, Wi-Fi transmitters, uplink cards, and data-center switches.

The applicant sought clarity on two key aspects:
1. The appropriate HSN classification for the imported AC-DC and DC-DC converters.
2. The applicability of the “Nil” rate of Basic Customs Duty (BCD) under Serial No. 4 of Notification No. 25/2005-Customs for these converters.
Key Findings of the Ruling
1. HSN Classification:
  - The AC-DC power modules, specifically the DPS-500AB-40 A -AC-DC Power Module, were classified under CTI 85044029 as “Other Rectifiers.”
  - The DC-DC converters, including PKU4913D Series DC-DC Converters, EBDW025A0B Barracuda Series DC-DC Converter Power Modules, ARTESYN ADH700-48S28 700 Watt Half-Brick DC-DC Converter, Q48SK12050 600 W Quarter Brick DC/DC Power Modules, and 6A Digital PicoDLynxTM Non-Isolated DC-DC Power Modules, were classified under CTI 85044090 as “Other Static Converters.”
The ruling emphasized that these converters fall under Chapter Heading 8504, which covers “Electrical Transformers, Static Converters, and Inductors.” The classification was determined based on the General Rules for Interpretation (GRI), HSN explanatory notes, and Section Notes of the Customs Tariff Act, 1975.
1. Duty Exemption:
  - The ruling confirmed that the AC-DC and DC-DC converters are eligible for the “Nil” rate of Basic Customs Duty under Serial No. 4 of Notification No. 25/2005-Customs. This exemption applies to static converters used in telecommunication apparatus other than cellular mobile phones.
  - The technical datasheets provided by the applicant demonstrated that the imported converters are specifically designed for use in telecommunication equipment, such as Wi-Fi receivers, transmitters, and data-center switches. This established their eligibility for the duty exemption.
Significance of the Ruling

This ruling is a landmark decision for businesses involved in the import and manufacture of telecommunication equipment. It provides clarity on the classification of AC-DC and DC-DC converters, ensuring that companies can accurately determine their customs obligations. Additionally, the confirmation of duty exemption under Notification No. 25/2005-Customs will significantly reduce costs for manufacturers, promoting the growth of the telecommunication sector in India.

Conclusion

The CAAR’s ruling underscores the importance of advance rulings in providing certainty and transparency in customs procedures. By addressing the classification and duty exemption of AC-DC and DC-DC converters, the ruling supports businesses in navigating complex customs regulations and encourages the development of high-technology telecommunication equipment in India.

Source: CAAR Mumbai

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December 18, 2025
CESTAT Kolkata Overturns FSEZ Decision and Orders Revaluation of Duty Drawback Claims
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 17.12.2025

CESTAT Kolkata Overturns FSEZ Decision and Orders Revaluation of Duty Drawback Claims

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.

In a significant development, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has delivered a favorable judgment for M/s Promising Exports Limited in two appeals concerning supplementary duty drawback claims. The appeals, numbered C/75607/2022 and C/75608/2022, were heard and decided on November 19, 2025, by a bench comprising Hon’ble Member Judicial and Hon’ble Member Technical.

Background of the Case

M/s Promising Exports Limited, a Kolkata-based company engaged in the export of garments, had supplied Men’s Cotton Knitted Vests and T-Shirts to a unit at Falta Special Economic Zone (FSEZ) under the Duty Drawback Scheme. The company initially claimed duty drawback amounts of Rs. 7,48,800/- and Rs. 6,02,640/- for the vests and T-shirts, respectively. However, only Rs. 6,52,464/- was sanctioned on March 31, 2004.

Seeking revaluation of the drawback amount, the appellant approached the Development Commissioner, FSEZ, and subsequently filed a supplementary drawback claim on January 3, 2008, under Rule 15 of the Customs, Central Excise Duties & Service Tax Drawback Rules, 1995. The claim was based on a revised valuation of the goods by the Apparel Export Promotion Council (AEPC), which indicated a lower per-piece value for the T-shirts.

Despite reminders and legal interventions, the supplementary claim was rejected by the Development Commissioner, FSEZ, on December 12, 2017, citing it as time-barred under Rule 15(1) of the Drawback Rules, 1995. This led the appellant to pursue legal remedies, including appeals before the Commissioner of Customs (Appeals) and writ petitions in the Hon’ble High Court of Calcutta.

CESTAT Kolkata’s Decision

The tribunal observed that the cause of action for the supplementary claim arose only on October 5, 2007, when the AEPC’s revised valuation was communicated to the appellant. Since the supplementary claim was filed on January 3, 2008, it was well within the three-month limitation period prescribed under Rule 15 of the Drawback Rules, 1995.

The tribunal held that the rejection of the claim as time-barred was unsustainable and set aside the orders passed by the Development Commissioner, FSEZ. It further directed the proper officer to reconsider the supplementary claims and sanction the eligible amount of drawback based on AEPC’s revaluation.

Key Takeaways
1. Timely Filing of Supplementary Claims: The tribunal clarified that the limitation period for filing supplementary claims begins from the date the cause of action arises, not the date of the original claim.
2. Importance of AEPC Valuation: The revised valuation by AEPC played a crucial role in determining the eligibility for additional duty drawback.
3. Legal Remedies for Exporters: The case highlights the importance of pursuing legal remedies when administrative decisions adversely affect exporters.
Conclusion

The judgment is a significant win for M/s Promising Exports Limited and sets a precedent for similar cases involving supplementary duty drawback claims. It underscores the importance of adhering to procedural timelines and leveraging legal avenues to ensure justice. Exporters can take heart from this decision, knowing that the judiciary remains a robust mechanism for resolving disputes and protecting their rights.

Source: CESTAT Kolkata

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December 17, 2025
Gujarat High Court Sets Aside Adjudicating Authority’s Order for Non-Compliance with Section 138-B of Customs Act, 1962
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 17.12.2025

Gujarat High Court Sets Aside Adjudicating Authority’s Order for Non-Compliance with Section 138-B of Customs Act, 1962 

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.

In a significant judgment, the Gujarat High Court, comprising Honourable Justice, has set aside the impugned order dated 18.03.2025, passed by the adjudicating authority (Respondent No.2), in the case of M/S Mitesh Impex & Ors. vs Union of India & Anr.  The court has directed a fresh adjudication of the matter, emphasizing the importance of adhering to the principles of natural justice and the provisions of Section 138-B of the Customs Act, 1962.

Background of the Case

The petitioners, M/S Mitesh Impex & Ors., challenged the impugned order on the grounds that it was passed in defiance of the directions issued by the Central Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad. The Tribunal, in its order dated 13.03.2023, had remanded the matter to the adjudicating authority, directing it to grant the petitioners an opportunity to cross-examine six witnesses whose statements were relied upon in the original adjudication.

The petitioners argued that the adjudicating authority ignored the statements of three witnesses who had deposed in their favor after cross-examination, while relying on the statements of three other witnesses who were not cross-examined in the first round of adjudication. The petitioners contended that this approach violated the principles of natural justice and the directions of the Tribunal.

Key Legal Issues

The case revolved around the interpretation and application of Section 138-B of the Customs Act, 1962, which deals with the relevancy of statements made during the course of inquiry or proceedings under the Act. The provision outlines two scenarios under which such statements can be considered relevant:
1. Clause (a): Statements made by witnesses who are unavailable due to death, incapacity, or other reasonable circumstances can be treated as relevant, provided the adjudicating authority records findings on the non-availability of the witness and offers the assessee an opportunity to respond to the statement.
2. Clause (b): Statements made by witnesses who are available for cross-examination can be admitted in evidence in the interest of justice, provided the assessee is given an opportunity to cross-examine the witness.
The petitioners argued that the adjudicating authority failed to comply with these provisions, as it relied on the statements of witnesses who were not cross-examined, while ignoring the evidence of witnesses who had deposed in their favor.

Observations of the Court 

The Gujarat High Court carefully examined the impugned order and the provisions of Section 138-B of the Customs Act, 1962. The court noted the following:
1. The adjudicating authority had relied on the statements of three witnesses who did not appear for cross-examination, despite being given four opportunities to do so. These statements were recorded during the first round of adjudication, where the petitioners were not granted the opportunity to cross-examine the witnesses.
2. The adjudicating authority ignored the evidence of three witnesses who had appeared and deposed in favor of the petitioners after cross-examination.
3. The adjudicating authority failed to record findings on the non-availability of the three witnesses who did not appear for cross-examination, as required under clause (a) of Section 138-B.
The court emphasized that the principles of natural justice require that the statements of witnesses cannot be used against an assessee unless they are given an opportunity to cross-examine the witnesses and respond to their statements. The court also highlighted that the adjudicating authority must record reasons and findings based on the evidence and corroborative material before arriving at a decision.

Court’s Decision 

The Gujarat High Court held that the adjudicating authority had not fully complied with the directions issued by the Tribunal. While the Tribunal had remanded the matter to provide an opportunity for cross-examination, the adjudicating authority failed to properly consider the evidence of all six witnesses in accordance with Section 138-B of the Customs Act, 1962.

The court quashed the impugned order and remanded the matter back to the adjudicating authority for fresh adjudication. The court directed the authority to pass an appropriate order within 12 weeks, taking into account the evidence of all witnesses and adhering to the principles of natural justice. The court also clarified that it was not expressing any opinion on the merits of the case, leaving all rights and contentions of the parties open.

Conclusion

This judgment underscores the importance of adhering to procedural fairness and the principles of natural justice in adjudication processes under the Customs Act, 1962. The Gujarat High Court’s decision serves as a reminder to adjudicating authorities to ensure that the rights of the assessee are protected, particularly with regard to the opportunity for cross-examination of witnesses. By remanding the matter for fresh adjudication, the court has reinforced the need for a fair and transparent process in cases involving penalties under the Customs Act.

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Source: Gujarat High Court

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December 17, 2025
CESTAT Delhi Sets Aside Penalties and Confiscation on Shared Container Imports
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 16.12.2025

CESTAT Delhi Sets Aside Penalties and Confiscation on Shared Container Imports

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.

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside the penalties and confiscation imposed on M/s Kool International, its proprietor. The judgment, delivered on December 12, 2025, brings clarity to the application of customs laws in cases involving shared containers and non-existent firms.

Background of the Case

The case arose from the Order-in-Original No. 05/2012 dated January 31, 2012, issued by the Commissioner of Customs, New Delhi. The order involved the confiscation of goods and imposition of penalties under Section 112(b) of the Customs Act, 1962. The goods in question were imported under the names of M/s Kool International, DSA Imports & Exports, and Prakriti Collection. However, investigations revealed that DSA Imports & Exports and Prakriti Collection were non-existent firms, leading to the absolute confiscation of their goods.

M/s Kool International and its proprietor, were penalized Rs. 10,00,000/- each for alleged acts of omission and commission that rendered the goods liable to confiscation. Similarly, Appellant was also penalized Rs. 10,00,000/- for using the Importer Exporter Code (IEC) of Kool International to import goods.

Key Arguments

The appellants contested the penalties, arguing that:
- They had no personal involvement in the alleged offense.
- They did not file any Bill of Entry for the goods.
- They should not be held responsible for discrepancies in consignments belonging to other importers in the same shared container (LCL cargo).
- The penalties were imposed without proper application of mind, and the principles of natural justice were violated.
On the other hand, the Revenue argued that the goods were deliberately concealed and mis-declared, and the appellants were involved in collusion and deception. It was also highlighted that the goods were imported in the names of non-existent firms, violating customs laws and Intellectual Property Rights (IPR) regulations.

Tribunal’s Findings

After carefully reviewing the submissions and evidence, the Tribunal made the following observations:
1. Shared Container (LCL Cargo): The Tribunal ruled that the appellants could not be held responsible for discrepancies in consignments belonging to other importers in the same shared container. It likened the situation to a shared taxi, where one passenger cannot be held accountable for contraband carried by another passenger.
2. Inapplicability of Sections 111(l), (m), and 119: The Tribunal found that no Bill of Entry was filed for the goods imported in the name of Kool International, making Sections 111(l) and (m) inapplicable. Additionally, the goods imported in the name of Kool International were not used to conceal other goods, rendering Section 119 irrelevant.
3. Non-Existent Firms: The Tribunal noted that the consignments imported in the names of DSA Imports & Exports and Prakriti Collection were found to be fraudulent, as these firms did not exist. However, the appellants could not be penalized for discrepancies in these consignments.
4. Penalties and Confiscation: The Tribunal concluded that the penalties imposed on M/s Kool International, and Appellants were not sustainable under the Customs Act, 1962.
Final Decision

The Tribunal allowed all three appeals and set aside the penalties and confiscation imposed by the Commissioner of Customs. The judgment emphasized the importance of proper application of customs laws and the need for clear evidence to establish liability.

Key Takeaways

This decision highlights several important aspects of customs law:
- Importers cannot be held liable for discrepancies in consignments belonging to other importers in shared containers (LCL cargo).
- The provisions of the Customs Act must be applied correctly, and penalties cannot be imposed without proper evidence.
- The use of non-existent firms for imports is a serious offense, but liability must be established with clear evidence and cannot be arbitrarily imposed on unrelated parties.
The CESTAT’s ruling in this case serves as a reminder of the importance of due process and the need for thorough investigations in customs-related matters. It also underscores the significance of adhering to legal provisions, such as the prohibition on lending or transferring Importer Exporter Codes (IEC), as outlined in the Foreign Trade (Development & Regulation) Act, 1992. This judgment is a significant precedent for importers and exporters, ensuring that penalties and confiscations are imposed only when there is clear evidence of wrongdoing. It also reinforces the principle that shared containers do not automatically implicate all importers for violations committed by others.

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Source: CESTAT Delhi

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December 16, 2025
CESTAT Mumbai Ruled in Favor of Suzlon Energy Ltd in Service Tax Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 15.12.2025

CESTAT Mumbai Ruled in Favor of Suzlon Energy Ltd in Service Tax Dispute

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.comor on his Mobile +91-9999005379.

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has ruled in favor of M/s Suzlon Energy Ltd in a long-standing service tax dispute. The case revolved around the classification of imported technical know-how and engineering designs as taxable services under the category of “Design Services” as defined under Section 65(36b) read with Section 65(105)(zzzzd) of the Finance Act, 1994.

Background of the Case

Suzlon Energy Ltd, a leading manufacturer of Wind Turbine Generators (WTGs), had entered into agreements with its group companies—Suzlon Energy GmbH (Germany), AE Rotor Holdings BV (Netherlands), and Suzlon Blade Technology BV (Netherlands)—to import technical know-how and engineering designs for manufacturing WTGs in India. The agreements involved the outright purchase of intellectual property rights (IPRs) and technical know-how, including engineering drawings and designs.

The company filed Bills of Entry (B/Es) with customs authorities, classifying the imported goods under CTI 49119920 and paying Research & Development Cess (R&D Cess) at 5% of the value of the imported products. The customs department assessed the goods at a “Nil” rate of customs duty under applicable notifications and cleared them for home consumption.

However, following an excise audit, the department alleged that the imported goods were not merely engineering drawings and designs but constituted “Design Services” under the Finance Act, 1994. Consequently, two Show Cause Notices (SCNs) were issued, demanding service tax under the reverse charge mechanism for the periods 01.06.2007 to 30.09.2010 and 01.10.2010 to 30.09.2011. The total service tax demand amounted to ₹21,79,28,167.

Key Issues in the Case

The case was remanded to the Tribunal by the Hon’ble Supreme Court for consideration of two critical issues:
1. Classification of Services: Whether the imported engineering designs and drawings constituted “Design Services” under the Finance Act, 1994.
2. Extended Period of Limitation: Whether the department was justified in invoking the extended period of limitation for issuing the SCNs.
CESTAT’s Observations and Ruling

After a detailed examination of the agreements, statutory provisions, and arguments presented by both parties, the Tribunal ruled in favor of Suzlon Energy Ltd. The key observations and findings were:
1. Nature of the Transaction: The Tribunal concluded that the agreements between Suzlon Energy Ltd and its group companies involved the outright sale and permanent transfer of intellectual property rights, including engineering designs and drawings. The relationship between the parties was that of a buyer and seller, not a service provider and service recipient. Therefore, the transaction could not be classified as “Design Services.”
2. IPR Services: The Tribunal opined that the transaction was more appropriately categorized as “Intellectual Property Rights (IPR) Services.” However, since the IPRs were permanently transferred to Suzlon Energy Ltd, the group companies no longer held the rights, and the transaction did not fall under the taxable category of IPR services.
3. Extended Period of Limitation: The Tribunal held that the extended period of limitation could not be invoked in this case. It emphasized that the department failed to provide evidence of fraud, collusion, willful misstatement, or suppression of facts by Suzlon Energy Ltd. The company had complied with customs regulations and paid R&D Cess, demonstrating its belief that the transaction was not taxable under “Design Services.”
4. Penalties: The Tribunal also set aside the penalties imposed under Section 78 of the Finance Act, 1994, citing the absence of evidence to prove fraudulent intent or suppression of facts.
Final Verdict

The Tribunal set aside the impugned order dated 25.03.2013, which had confirmed the service tax demands and imposed penalties on Suzlon Energy Ltd. The appeals were allowed both on merits and on the grounds of limitation.

Implications of the Judgment

This ruling is a significant victory for Suzlon Energy Ltd and sets a precedent for similar cases involving the classification of imported technical know-how and intellectual property rights. The judgment underscores the importance of carefully analyzing the nature of transactions and agreements to determine their taxability under the service tax regime. It also highlights the need for the department to substantiate claims of fraud or suppression with concrete evidence when invoking the extended period of limitation.

As businesses continue to navigate complex tax regulations, this case serves as a reminder of the importance of maintaining transparent records and adhering to statutory requirements. It also emphasizes the role of judicial forums in ensuring fair and just outcomes in tax disputes. This decision is a testament to the importance of legal expertise and thorough documentation in resolving complex tax matters. It is a win not only for Suzlon Energy Ltd but also for businesses seeking clarity and fairness in tax compliance.

Source: CESTAT Mumbai

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December 15, 2025
CESTAT Chennai Sets Aside Allegations of Undervaluation in Silk Imports
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 15.12.2025

CESTAT Chennai Sets Aside Allegations of Undervaluation in Silk Imports

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.comor on his Mobile +91-9999005379.

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has set aside allegations of undervaluation and misdeclaration against M/s Sino Import and Export Pvt Ltd and its director, in connection with the import of raw silk and tussah silk. The appeals, arising from Order-in-Original No. 109388/2024, were heard and decided by the Hon’ble Members Technical and Judicial.

Background of the Case

The case revolved around allegations that Sino Import and Export Pvt Ltd had misdeclared the origin and undervalued imported raw silk and tussah silk from Uzbekistan, China, and Vietnam between January 2019 and November 2022. The Directorate of Revenue Intelligence (DRI) conducted investigations, including searches and analysis of documents, and issued a Show Cause Notice (SCN) alleging that the importer had evaded customs duties by misdeclaring the transaction value and origin of the goods.

The adjudicating authority confirmed the demands of differential duty amounting to Rs. 1,10,21,861, imposed penalties on the importer and its director, and ordered the confiscation of goods under Section 111 of the Customs Act, 1962. Aggrieved by the decision, the appellants challenged the order before the CESTAT.

Key Issues in the Case

The Tribunal examined several critical issues, including:
1. Rejection of Transaction Value: The department alleged undervaluation based on unsigned invoices and export documents from Uzbekistan Customs, which were not provided to the importer.
2. Non-Compliance with Section 138C: The appellants argued that the documents relied upon by the department were not certified as required under Section 138C of the Customs Act, rendering them inadmissible.
3. Reliance on Statements: The department relied on statements made by Appellant under Section 108 of the Customs Act, but the mandated procedure under Section 138B for testing the relevancy of such statements was not followed.
4. Comparison with Other Importers: The department compared the declared transaction values with average unit prices of similar goods imported by other Indian importers, which the appellants contended was not a valid basis for rejecting their declared values.
Key Findings of the Tribunal 

After a detailed examination of the evidence and arguments, the Tribunal made the following observations:
- The department failed to provide authenticated copies of the export documents from Uzbekistan Customs, which were crucial to substantiate the allegations of undervaluation.
- The unsigned invoice relied upon by the department lacked evidentiary value, and the failure to provide certified documents violated the principles of fairness and justice.
- The statements of Appellant were deemed irrelevant as the procedure under Section 138B was not followed, and the department did not allow cross-examination of the deponent.
- The comparison of transaction values with average unit prices of other importers was found to be flawed, as it did not account for factors such as quantity, quality, and negotiation terms.
Tribunal’s Decision

The Tribunal held that the department failed to prove the allegations of undervaluation with credible evidence. It emphasized that the burden of proof lies with the department to establish undervaluation, which cannot be based on mere suspicion or unsubstantiated documents. The Tribunal also highlighted the importance of adhering to statutory requirements under Sections 138B and 138C of the Customs Act.

As a result, the Tribunal set aside the impugned order in its entirety, including the demands for differential duty, penalties, and confiscation of goods. The appeals were allowed with consequential relief to the appellants.

Significance of the Ruling

This judgment underscores the importance of adhering to procedural requirements and evidentiary standards in customs investigations. It reiterates the principle that allegations of undervaluation must be supported by concrete evidence and cannot be based on assumptions or unverified documents. The decision also highlights the need for transparency and fairness in adjudication proceedings, ensuring that importers are given access to all relevant documents and the opportunity to cross-examine witnesses.

The ruling serves as a reminder to both importers and authorities about the importance of compliance with legal provisions and the need for a fair and just adjudication process. It is a landmark decision that reinforces the principles of natural justice and sets a precedent for similar cases in the future. This case is a testament to the importance of robust legal representation and adherence to procedural safeguards in customs disputes. Importers and stakeholders in the trade community can draw valuable lessons from this ruling to ensure compliance and protect their rights.

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Source: CESTAT Chennai

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December 15, 2025
The Issue of Pre-Import Condition under Advance Authorization Scheme
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 14.12.2025

The Issue of Pre-Import Condition under Advance Authorization Scheme

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.comor on his Mobile +91-9999005379.

The “pre-import condition” under the Advance Authorization Scheme has been a significant issue for exporters, particularly for imports made between October 13, 2017, and January 9, 2019. This condition required that goods be imported first and then used for manufacturing export goods, which created operational challenges for exporters. The condition was introduced to regulate exemptions from Integrated Goods and Services Tax (IGST) and GST Compensation Cess under the scheme.

Legal Framework Governing the Issue

1. Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act):
- The FTDR Act, 1992 provides the legal foundation for the formulation and implementation of the Foreign Trade Policy (FTP).
- Section 5 of the FTDR Act empowers the Central Government to formulate and amend the FTP to regulate imports and exports.
- The Advance Authorization Scheme is governed under Chapter IV of the FTP, which is framed under the FTDR Act.
2. Customs Act, 1962:
- The Customs Act, 1962 governs the levy and collection of customs duties on imports and exports.
- Section 25(1) of the Customs Act empowers the Central Government to issue exemption notifications for customs duties.
3. Customs Notification No.  18/2015-Customs (April 1, 2015):
- This notification exempted goods imported under Advance Authorization from various duties, including Basic Customs Duty (BCD), Additional Customs Duty, Anti-Dumping Duty, and others.
4. Customs Notification No.  79/2017-Customs (October 13, 2017):
- This notification amended Notification No. 18/2015-Customs to include exemptions for IGST and GST Compensation Cess, subject to the fulfillment of the pre-import condition.
- Two key conditions were introduced:
  - Exemption from IGST and Compensation Cess was applicable only for physical exports.
  - The exemption was subject to the pre-import condition, meaning goods had to be imported first and then used for manufacturing export goods.
5. Customs Circular No.  16/2023:
- Issued in compliance with the Supreme Court’s judgment, this circular provides a procedure for regularizing imports that failed to meet the ‘pre-import condition’ during the specified period. It allows importers to pay IGST and Compensation Cess along with applicable interest and claim refunds or ITC, subject to eligibility under GST laws.
6. Foreign Trade Policy (FTP) 2023:
- Paragraph 4.03: Governs the Advance Authorization Scheme, allowing duty-free import of inputs physically incorporated into export products.
- Paragraph 4.13: Empowers the Director General of Foreign Trade (DGFT) to impose pre-import conditions for specific inputs.
- Paragraph 4.14: Lists the duties exempted under the Advance Authorization Scheme, including IGST and Compensation Cess, subject to the pre-import condition.
- Paragraph 4.27: Permits exports in anticipation of authorization, allowing exporters to export goods before importing inputs under Advance Authorization.
7. Handbook of Procedures (HBP) 2023:
- Paragraph 4.27(d): States that duty-free authorizations for inputs subject to pre-import conditions cannot be issued.
- Appendix 4J: Lists specific inputs subject to pre-import conditions and their export obligation periods.
Supreme Court Judgment (April 28, 2023):

The Supreme Court upheld the Revenue’s appeal, ruling that the pre-import condition was valid and not arbitrary or unreasonable. Key points from the judgment include:
1. Legality of Pre-Import Condition:
  - The pre-import condition was within the powers of the DGFT under Paragraph 4.13(i) of the FTP and Section 5 of the FTDR Act.
  - The condition was introduced to align the Advance Authorization Scheme with the GST regime, which aimed to create a unified tax structure.
2. Impact of GST:
  - The GST regime introduced IGST and Compensation Cess, which were not part of the original Notification No. 18/2015-Customs. The pre-import condition was introduced to ensure compliance with the new tax framework.
3. Hardship to Exporters:
  - The court acknowledged the operational challenges faced by exporters due to the pre-import condition but emphasized that inconvenience does not render a policy arbitrary or unconstitutional.
4. Legislative Intent:
  - The court recognized the legislative intent behind the pre-import condition as part of broader fiscal reforms under GST.
How DGFT Clarifications Helped Address Discrepancies

The Directorate General of Foreign Trade (DGFT) issued several clarifications and circulars to address the challenges and discrepancies arising from the pre-import condition:

1. Trade Notice No.  07/2023-24 (June 8, 2023):
- In compliance with the Supreme Court judgment, this notice informed exporters that imports made under the Advance Authorization Scheme between October 13, 2017, and January 9, 2019, which could not meet the pre-import condition, may be regularized by making payments as prescribed in Customs Circular No.  16/2023 (dated June 7, 2023).
- Regional Authorities were instructed to guide exporters on the regularization process.
2. Trade Notice No.  27/2023 (September 25, 2023):
- Provided detailed clarifications for specific scenarios:
  - Imports after January 10, 2019: Not subject to the pre-import condition.
  - Imports under Advance Authorization on payment of IGST and Compensation Cess: Not subject to the pre-import condition, irrespective of the date of import.
  - Partially completed imports: Imports made after January 10, 2019, are not subject to the pre-import condition, even if some imports were made before this date.
3. Policy Circular No.  07/2025-26 (November 11, 2025):
- Clarified that the Export Obligation Discharge Certificate (EODC) shall not be withheld if all other requirements are fulfilled in the following cases:
  - IGST paid in cash during the specified period.
  - Non-availing of duty exemptions for IGST, Compensation Cess, or other levies (except Basic Customs Duty).
  - Compliance with pre-import condition and other procedural requirements under the scheme.
Addressing Deficiencies in Advance Authorization Applications

For exporters facing deficiencies due to non-compliance with the pre-import condition, the following steps can be taken:

1. Regularization of Imports:
- As per Trade Notice No.  07/2023-24, imports made between October 13, 2017, and January 9, 2019, which did not meet the pre-import condition, can be regularized by paying the applicable duties and interest to the Customs Authority.
- Exporters should approach the jurisdictional Customs Authority with the required documentation and make the necessary payments.
2. **Claim Refund or Input Tax Credit 

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Source: Supreme Court, DGFT, CBIC

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December 14, 2025
Delhi High Court Partially Allows Chillies Exporters Association’s Petition Against TMA Scheme Foreclosure
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 13.12.2025

Delhi High Court Partially Allows Chillies Exporters Association’s Petition Against TMA Scheme Foreclosure

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.comor on his Mobile +91-9999005379.

In a significant judgment delivered on December 10, 2025, the Delhi High Court partially ruled in favor of the Chillies Exporters Association India in their petition challenging the foreclosure of the “Revised Transport and Marketing Assistance (TMA) for Specified Agricultural Products” scheme. The case, W.P. (C) 9463/2024, revolved around the retrospective withdrawal of export incentives under the TMA Scheme by the Directorate General of Foreign Trade (DGFT).

Background of the Case 

The TMA Scheme was introduced by the Government of India in February 2019 to provide assistance for the international transportation and marketing of specified agricultural products. The scheme aimed to mitigate the higher costs of transportation and promote brand recognition for Indian agricultural products in overseas markets. Initially, the scheme was applicable for exports from March 1, 2019, to March 31, 2020, and was later extended until March 31, 2021.

In September 2021, the government issued a revised TMA Scheme notification, making it applicable retrospectively for exports from April 1, 2021, to March 31, 2022. However, this notification was withdrawn on March 25, 2022, effectively foreclosing the scheme. The Chillies Exporters Association India challenged the retrospective withdrawal, arguing that it unfairly denied exporters the incentives they were entitled to under the scheme.

Key Arguments

The petitioners contended that the notification dated March 25, 2022, was ultra vires as it retrospectively rescinded the benefits of the TMA Scheme, which had been operational from April 1, 2021, to March 31, 2022. They argued that the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), under which the scheme was introduced, does not empower the government to issue notifications with retrospective effect. The petitioners also invoked the principle of legitimate expectation, stating that exporters had relied on the scheme to make business decisions and that the retrospective withdrawal of benefits was arbitrary and unfair.

The respondents, represented by the DGFT, argued that the notification was issued to revamp and redesign the scheme for better outcomes. They emphasized that the government has the authority to amend or rescind policies in the public interest, especially in complex economic matters, and that such decisions should not be subject to judicial review unless malice or arbitrariness is established.

The Court’s Decision

The Delhi High Court ruled that the government does not have the authority under Sections 3 and 5 of the FTDR Act to issue notifications with retrospective effect. The court held that the notification dated September 9, 2021, which introduced the revised TMA Scheme, could only operate prospectively. Therefore, the court concluded that chilli exporters who made exports between September 9, 2021, and March 24, 2022, are eligible to claim incentives under the scheme, provided they meet the eligibility criteria.

However, the court also ruled that no rights had accrued to chilli exporters for exports made between April 1, 2021, and September 8, 2021, as the scheme was not in operation during that period. The retrospective application of the September 9, 2021, notification was deemed impermissible under the FTDR Act.

Implications of the Judgment

This judgment is a landmark decision in the realm of foreign trade policy and government schemes. It reinforces the principle that delegated or subordinate legislation cannot have retrospective effect unless explicitly authorized by the governing statute. The ruling also highlights the importance of the principle of legitimate expectation, emphasizing that public authorities must act in a consistent, transparent, and predictable manner.

For chilli exporters, the judgment provides partial relief, allowing them to claim incentives for exports made between September 9, 2021, and March 24, 2022. However, it also underscores the limitations of retrospective policy changes, which can disrupt business planning and create uncertainty for exporters.

Conclusion

The Delhi High Court’s decision in W.P. (C) 9463/2024 serves as a reminder of the legal boundaries within which government policies must operate. While the government has the right to amend or rescind policies in the public interest, such actions must comply with statutory provisions and cannot infringe upon the legitimate expectations of stakeholders. This case is a significant development for exporters and policymakers alike, setting a precedent for the treatment of retrospective policy changes in India’s foreign trade framework.

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Source: Delhi High Court

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December 13, 2025