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Author: Aadrikaa Legal Services (ALS)

  • CESTAT Ahmedabad Clarifies Auction Purchasers Liability for Pre-Liquidation Tax Dues

    CESTAT Ahmedabad Clarifies Auction Purchasers Liability for Pre-Liquidation Tax Dues

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 13.12.2025

    CESTAT Ahmedabad Clarifies Auction Purchasers Liability for Pre-Liquidation Tax Dues

    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), West Zonal Bench at Ahmedabad, has provided clarity on the liability of auction purchasers concerning pre-liquidation dues of a company. The decision, delivered on December 8, 2025, in the case of Customs Appeal No. ​ 12564 of 2014-DB, has set a precedent for similar cases involving the sale of assets during the liquidation of companies.

    Background of the Case

    The appeals were filed by FMN Enterprise and Roshanlal & Sons Pvt. ​ Ltd., who had purchased assets of M/s. ​ Varun Seacon Ltd., a 100% Export Oriented Unit (EOU) that ceased operations in 1998 and was declared a sick industrial unit by the Board of Industrial and Financial Reconstruction (BIFR) in 2000. ​ The Gujarat High Court ordered the winding up of the company in 2002 and appointed an official liquidator to oversee the sale of its assets. ​

    The appellants acquired the assets of the company through an auction conducted by the official liquidator. However, the Customs Department sought to recover excise and customs duties from the auction purchasers, claiming that the bonded goods in the EOU could not be removed without payment of duty. ​

    Key Arguments

    The appellants contended that:

    1. Taxes and duties for the pre-liquidation period cannot be recovered from auction purchasers, as per Section 457 of the Companies Act, 1956. ​
    2. The sale of assets does not transfer the liability for pre-liquidation dues to the purchaser unless the unit is sold as a running concern. ​
    3. Auction purchasers cannot be considered importers and are not liable for duties incurred by the previous owner. ​

    The appellants supported their arguments with various case laws, including Collector of Customs Vs. Dytron (India) Ltd., M/s. ​ Dollar Industries Vs. Assistant Commissioner, and others, which established that auction purchasers are not liable for the arrears of the previous owner unless explicitly stated in the statute. ​

    On the other hand, the respondent argued that bonded goods in an EOU cannot be removed without payment of duty, citing case laws such as Sundaram Finance Ltd Vs. CC, Chennai and Kiran Spinning Mills Vs. CC.

    Tribunal’s Observations and Decision

    The Tribunal carefully examined the submissions and referred to the Gujarat High Court’s orders during the liquidation process. ​ It noted that the High Court had explicitly stated that statutory dues for the pre-liquidation period would be settled under the provisions of the Companies Act, 1956, and only sales tax on the sold assets would be payable by the purchaser. ​

    The Tribunal emphasized that no non-obstante clause in the Customs or Excise laws was presented to override the provisions of the Companies Act, 1956. ​ It also highlighted that the assets were sold, not the entire unit as a running concern, which further negated the liability of the auction purchasers for pre-liquidation dues. ​

    Relying on various judgments, including M/s. ​ Dollar Industries Vs. Assistant Commissioner and Rana Girders Limited v. Union of India, the Tribunal concluded that auction purchasers cannot be held liable for the arrears incurred by the previous owner unless explicitly stated in the statute. ​

    Final Verdict

    The Tribunal ruled that the notices issued to the appellants demanding arrears of tax or duty foregone by the previous owner were without jurisdiction. ​ It held that the recovery provisions of the Customs and Excise Acts for pre-liquidation dues were subsumed under the Companies Act, 1956, and could not be enforced against the auction purchasers. ​ Consequently, the appeals were allowed with consequential relief. ​

    Key Takeaways

    This landmark decision reinforces the principle that auction purchasers of assets during the liquidation of a company cannot be held liable for pre-liquidation dues unless explicitly stated in the statute. ​ It also highlights the importance of adhering to the provisions of the Companies Act, 1956, in such cases. ​

    The ruling provides much-needed clarity for businesses and individuals involved in purchasing assets from liquidated companies, ensuring that they are not burdened with liabilities that are not legally theirs. ​ It also underscores the need for clear statutory provisions to avoid ambiguity in such matters.

    Source: CESTAT Ahmedabad

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  • CESTAT Mumbai- Absence of BIS Marking on Imported Goods Not Grounds for Confiscation Under Section 111(d) of Customs Act

    CESTAT Mumbai- Absence of BIS Marking on Imported Goods Not Grounds for Confiscation Under Section 111(d) of Customs Act

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 12.12.2025

    CESTAT Mumbai- Absence of BIS Marking on Imported Goods Not Grounds for Confiscation Under Section 111(d) of Customs Act

    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 recent judgment by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, a significant decision was made regarding the confiscation of imported goods due to the absence of Bureau of Indian Standards (BIS) marking. The case, Voestalpine High Performance Metals India Pvt Ltd vs. Commissioner of Customs, Nhava Sheva-III, sheds light on the legal nuances surrounding BIS compliance and the import of goods into India.

    Background of the Case

    The appellant, Voestalpine High Performance Metals India Pvt Ltd, imported “Alloy Tool Steel” under two Bills of Entry dated 27.09.2023 and 30.09.2023. ​ These goods fall under the purview of BIS standard IS 3748:2022, which mandates that imported goods must bear BIS marking as per Para (6) of Scheme (1) of BIS Notification dated 04.06.2018. ​ While the goods conformed to BIS standards and were accompanied by BIS certificates, some items lacked the required BIS marking. ​

    The appellant admitted the lapse and requested permission to affix the BIS marking prior to clearance. ​ However, the adjudicating authority rejected this request and ordered the confiscation of the goods under Section 111(d) of the Customs Act, 1962, with an option to redeem them for home consumption upon payment of a redemption fine and penalty. ​ The appellant challenged this decision before the Commissioner of Customs (Appeals), who modified the penalty but upheld the confiscation. ​ Dissatisfied, the appellant approached the CESTAT.

    Key Legal Issue

    The primary issue in this case was whether the absence of BIS marking on the imported goods, despite their conformity to BIS standards and the appellant’s willingness to affix the marking under customs supervision, rendered the goods liable for confiscation under Section 111(d) of the Customs Act, 1962. ​

    Tribunal’s Observations and Decision

    The Tribunal, presided over by Hon’ble Member Judicial, examined the facts and legal precedents. ​ It was noted that the foreign manufacturer held a valid BIS license for the imported goods, and the goods conformed to the prescribed BIS standards as per the test certificate. ​ The appellant had also affixed the required BIS marking under customs supervision prior to clearance. ​

    The Tribunal referred to previous judgments, including Ganesh Benzoplast Ltd. vs. UOI and Prostarm Info Systems Ltd. vs. UOI, where similar issues were addressed. In these cases, the courts held that the absence of BIS marking was a curable defect and that confiscation was unjustified if the marking was affixed prior to clearance. ​

    Applying the same legal principles, the Tribunal concluded that the absence of BIS marking was a procedural lapse that had been rectified. ​ Since the goods conformed to BIS standards and the marking was affixed under customs supervision, the confiscation was deemed unsustainable. ​ The Tribunal set aside the impugned order to the extent of the challenge and allowed the appeal with consequential relief. ​

    Key Takeaways

    1. BIS Compliance is Mandatory: Imported goods falling under BIS standards must bear the required marking as per the applicable regulations. ​
    2. Curable Defects: The absence of BIS marking can be considered a curable defect if the goods conform to BIS standards and the marking is affixed under customs supervision prior to clearance. ​
    3. Legal Precedents Matter: Previous judgments, such as Ganesh Benzoplast Ltd. and Prostarm Info Systems Ltd., play a crucial role in shaping decisions in similar cases. ​
    4. Prohibited Goods Definition: Section 2(33) of the Customs Act, 1962, excludes goods from being classified as prohibited if the conditions for their import are complied with. ​

    Conclusion

    This case highlights the importance of adhering to BIS standards while importing goods into India. ​ However, it also emphasizes that procedural lapses, such as the absence of BIS marking, can be rectified under customs supervision, ensuring compliance with regulations without resorting to confiscation. ​ Importers must remain vigilant about regulatory requirements to avoid legal complications, but this judgment provides a precedent for addressing curable defects in a fair and reasonable manner.

    Source: CESTAT Mumbai

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  • CESTAT Chennai Ruled in Favor of HDFC Bank on Gold Import Valuation

    CESTAT Chennai Ruled in Favor of HDFC Bank on Gold Import Valuation

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 12.12.2025

    CESTAT Chennai Ruled in Favor of HDFC Bank on Gold Import Valuation​

    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 Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, recently delivered a significant judgment in favor of HDFC Bank Ltd. in a case concerning the valuation of imported gold bars. The case revolved around the interpretation of transaction value under Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 2007. ​

    Background of the Case

    HDFC Bank, a nominated bank for importing gold, had imported gold bars on a consignment basis during the disputed period. ​ The bank declared the value of the gold bars in the Bills of Entry at the time of import, which was based on the internationally prevailing gold price. ​ However, the Revenue authorities raised concerns about the declared value, citing a change in the rate of duty from specific duty to ad valorem duty as per Customs Notification No. ​ 02/2012 dated 16.01.2012. ​ They alleged that the actual remittances made to the foreign supplier were higher than the declared value, leading to a short payment of customs duty. ​

    The Revenue issued a Show Cause Notice under Section 28(1) of the Customs Act, 1962, demanding differential duty along with applicable interest. ​ The Adjudicating Authority upheld the demand, and the First Appellate Authority dismissed HDFC Bank’s appeal, prompting the bank to approach the CESTAT. ​

    Key Arguments

    HDFC Bank contended that the gold bars were imported on a consignment basis, meaning the ownership remained with the foreign supplier until the goods were sold in India. ​ The bank argued that the transaction value should be determined based on the price prevailing at the time of import, as per Section 14 of the Customs Act, 1962. ​ They emphasized that the sale of the gold bars occurred after the import, and the subsequent sale price should not be considered for determining the transaction value. ​

    The bank also referred to the Customs Valuation Rules, 2007, and the Reserve Bank of India’s Master Circular on Import of Goods and Services, which supports the concept of consignment-based imports. They argued that the rejection of the declared transaction value was unwarranted and that the demand for differential duty was unjustified. ​

    On the other hand, the Revenue argued that the higher remittances made to the foreign supplier should be considered as the correct transaction value, as they reflected the actual cost of the imported goods. ​

    CESTAT’s Observations and Final Order ​

    After hearing both sides, the Tribunal analyzed the provisions of Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 2007. ​ It observed that the declared transaction value was based on the supplier’s invoice and the prevailing international gold price at the time of import. ​ The Tribunal noted that the Revenue had not provided evidence of identical goods being imported at a higher value during the same period.

    The Tribunal also rejected the Revenue’s argument that the subsequent sale price should determine the transaction value, emphasizing that the taxable event for customs duty occurs at the time of import when the goods cross the customs barrier. ​ The Tribunal concluded that the rejection of the declared transaction value was unwarranted and that the demand for differential duty was unjustified. ​

    In its final order, the Tribunal set aside the impugned Order-in-Appeal and allowed HDFC Bank’s appeal, granting consequential benefits as per the law. ​

    Key Takeaways

    This judgment highlights the importance of adhering to the principles of customs valuation as laid down in the Customs Act, 1962, and the Customs Valuation Rules, 2007. ​ It reinforces the concept that the transaction value at the time of import is the basis for determining customs duty, and any subsequent changes in the sale price cannot alter the taxable event. ​

    The ruling is a significant win for HDFC Bank and provides clarity on the treatment of consignment-based imports under Indian customs law. It also underscores the need for Revenue authorities to provide concrete evidence when challenging declared transaction values.

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    Source: CESTAT Chennai

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  • CESTAT Bangalore Sets Aside Penalty and Dismisses Revenue Appeal in Boric Acid Import

    CESTAT Bangalore Sets Aside Penalty and Dismisses Revenue Appeal in Boric Acid Import

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 11.12.2025

    CESTAT Bangalore Sets Aside Penalty and Dismisses Revenue Appeal in Boric Acid Import

    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 legal development, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, has delivered its final verdict on two appeals concerning the import of boric acid by M/s. Maliakkal Industrial Enterprises. ​ The judgment, pronounced on December 5, 2025, by Hon’ble Member (Technical), marks a crucial milestone in the ongoing legal battle between the appellant and the Commissioner of Customs, Cochin. ​

    Background of the Case

    The case revolves around the import of 29 consignments of boric acid/boric acid anhydrate by M/s. ​ Maliakkal Industrial Enterprises between October 2005 and June 2013. ​ As per Notification No. 2 (RE 06)/2004-2009 dated April 7, 2006, the import of boric acid for non-insecticidal purposes required an Import Permit issued by the Central Insecticide Board and Registration Committee under the Ministry of Agriculture. ​ However, the appellant did not furnish the requisite permit at the time of import, leading to the goods being withheld by customs authorities. ​

    The appellant challenged this requirement in the Hon’ble High Court of Kerala, which initially ruled in their favor, stating that the condition to obtain a registration certificate under the Insecticides Act, 1968, was arbitrary and unsustainable. ​ However, this decision was later overturned by the Division Bench of the High Court, which upheld the necessity of the registration certificate for such imports. ​

    The Appeals

    Following the Division Bench’s decision, the Revenue issued a show-cause notice alleging that the imported goods were liable for confiscation under Section 111(d) of the Customs Act, 1962, and imposed a penalty of Rs. ​ 4,00,000 under Section 112(a). ​ The appellant contested this decision, arguing that the goods were provisionally cleared based on the High Court’s directions and were used solely for industrial purposes, as required by the bond executed under Section 18 of the Customs Act, 1962. ​

    The Revenue also filed a separate appeal, challenging the Commissioner’s decision to set aside the redemption fine and impose a lower penalty. ​

    The Tribunal’s Decision ​

    After hearing both sides, the Tribunal ruled in favor of M/s. Maliakkal Industrial Enterprises, setting aside the penalty imposed under Section 112(a) of the Customs Act, 1962. ​ The Tribunal noted that the goods were cleared provisionally under the directions of the Hon’ble High Court of Kerala, and the appellant had complied with the condition that the boric acid would be used solely for industrial purposes. ​ Furthermore, the Tribunal observed that the show-cause notice issued under Section 124 and 143 of the Customs Act was not in accordance with the provisions of Section 18, under which the bond was executed. ​

    The Tribunal also dismissed the Revenue’s appeal, stating that there was no basis for imposing redemption fines or additional penalties, as the goods were cleared under judicial directions and the appellant had adhered to the stipulated conditions. ​

    Key Takeaways

    1. Judicial Precedence: The case highlights the importance of judicial directions in customs matters, especially when there is ambiguity in the interpretation of import policies. ​
    2. Compliance Matters: The Tribunal emphasized that the appellant’s adherence to the condition of using the imported goods for industrial purposes was a critical factor in the decision to set aside the penalty. ​
    3. Legal Framework: The judgment underscores the significance of following the correct legal provisions when issuing show-cause notices and imposing penalties.

    Conclusion

    The decision by CESTAT Bangalore is a landmark ruling that reinforces the importance of judicial oversight in customs disputes. It also serves as a reminder to importers and authorities alike to ensure compliance with legal provisions and conditions while dealing with imports. ​ For M/s. Maliakkal Industrial Enterprises, this judgment is a vindication of their stance and a testament to the power of legal recourse in resolving complex regulatory issues.

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    Source: CESTAT Bangalore

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  • CESTAT Kolkata Sets Aside Penalties Imposed on Customs Broker Under Sections 114(i) and 114AA of the Customs Act, 1962

    CESTAT Kolkata Sets Aside Penalties Imposed on Customs Broker Under Sections 114(i) and 114AA of the Customs Act, 1962

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 11.12.2025

    CESTAT Kolkata Sets Aside Penalties Imposed on Customs Broker Under Sections 114(i) and 114AA of the 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 Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has set aside penalties imposed on M/s. ​ Seaking Agencies, a Customs Broker, under Sections 114(i) and 114AA of the Customs Act, 1962. ​ This decision, delivered on December 9, 2025, highlights the importance of evidence-based adjudication and the role of Customs Brokers in export processes.

    Background of the Case

    The case revolved around the export of a container (No. ​ TCKU 2571904) under Shipping Bill No. ​ 6092170 dated February 25, 2016, which was intercepted by the Directorate of Revenue Intelligence (DRI) at Kolkata Port. ​ The container, declared to contain sanitary ware accessories, was found to contain Red Sandersβ€”a prohibited item for export. ​ Investigations linked the Customs Broker, M/s. ​ Seaking Agencies, to two earlier consignments under Shipping Bill Nos. 3134799 dated June 5, 2014, and 3690980 dated July 4, 2014, which were alleged to have been part of fraudulent exports.

    The Principal Commissioner of Customs (Port) imposed penalties of β‚Ή50 lakhs under Section 114(i) for failure to verify the Know Your Customer (KYC) details and β‚Ή1 crore under Section 114AA for allegedly using forged documents to facilitate fraudulent exports. ​

    Key Arguments by the Appellant

    M/s. Seaking Agencies challenged the penalties, arguing that:

    1. No Evidence of Misconduct: The containers under the two shipping bills were duly sealed and cleared by customs authorities without any misdeclaration or concealment of Red Sanders. ​ The Appellant had no authority to inspect the contents of the sealed containers. ​
    2. No Proven Violation of KYC Norms: A separate action under the Customs Brokers Licensing Regulations (CBLR), 2013, had already been adjudicated by the Commissioner of Customs (Airport & Admin), who dropped the charges against the Appellant in 2017, confirming that the allegations of improper KYC verification were unsubstantiated. ​
    3. No Proof of Forged Documents: The investigation failed to provide concrete evidence to establish that the Appellant had submitted forged or fabricated documents. ​ The Appellant had relied on documents provided by the exporter and intermediary, and there was no indication of connivance or monetary benefit.
    4. Conjecture-Based Allegations: The adjudicating authority’s findings were based on assumptions and lacked concrete evidence to prove the Appellant’s involvement in fraudulent activities. ​

    CESTAT’s Observations and Judgment

    After hearing both sides, the Tribunal made the following observations:

    1. No Evidence of KYC Violation: The Tribunal noted that the Commissioner of Customs (Airport & Admin) had already dropped charges against the Appellant in 2017, confirming that the allegations of KYC violations were not proven. ​ Therefore, imposing penalties on the same grounds was legally unsustainable. ​
    2. No Proof of Forged Documents: The Tribunal found no evidence to substantiate the claim that the Appellant had submitted forged or fabricated documents. ​ The containers were sealed under Central Excise supervision, and the Appellant had no authority to examine the contents. ​
    3. Lack of Concrete Evidence: The Tribunal highlighted that the allegations against the Appellant were based on conjectures and surmises, with no concrete evidence to establish their involvement in fraudulent exports. ​
    4. Precedent Case: The Tribunal referred to the case of Pallab Mitra v Commissioner of CGST & CX, Kolkata [(2024) 22 Centax 383 (Tri-Cal)], where penalties on a Customs Broker under similar circumstances were set aside. ​

    Final Decision

    The Tribunal set aside the penalties imposed under Sections 114(i) and 114AA of the Customs Act, 1962, and allowed the appeal filed by M/s. ​ Seaking Agencies. ​ The judgment emphasized the need for evidence-based adjudication and recognized the limited role of Customs Brokers in verifying the contents of sealed containers. ​

    Key Takeaways

    This judgment is a landmark decision for Customs Brokers and the export-import community. It underscores the importance of adhering to legal principles and evidence-based findings in adjudication processes. The case also highlights the limited scope of a Customs Broker’s responsibilities, emphasizing that they cannot be held liable for the contents of sealed containers unless concrete evidence of misconduct is presented.

    Source: CESTAT Kolkata

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  • Madras High Court Quashes Customs Inquiry Report for Breach of Mandatory Timelines Under CBLR, 2018

    Madras High Court Quashes Customs Inquiry Report for Breach of Mandatory Timelines Under CBLR, 2018

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 10.12.2025

    Madras High Court Quashes Customs Inquiry Report for Breach of Mandatory Timelines Under CBLR, 2018

    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 Madras High Court, in a significant judgment delivered on September 18, 2025, quashed an inquiry report issued by the Deputy Commissioner of Customs under Regulation 17 of the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018). The case, titled M/s. Sea Queen Shipping Services Private Limited vs. ​ The Commissioner of Customs & Anr. ​, was presided over by Honourable Justice. ​

    Background of the Case

    The petitioner, M/s. Sea Queen Shipping Services Private Limited, challenged the inquiry report dated June 27, 2025, issued by the second respondent, the Deputy Commissioner of Customs. ​ The report alleged violations of Regulation 10(q) of the CBLR, 2018, and recommended further proceedings. ​ The petitioner contended that the report was illegal, arbitrary, and issued beyond the mandatory timeline prescribed under Regulation 17(5) of the CBLR, 2018. ​

    The case stemmed from an investigation into an importer, M/s. ​ Anomsoft Solutions Private Limited, which revealed discrepancies between the imported goods and the business activities mentioned in the GST numbers of the importer. ​ The petitioner, acting as the customs broker, filed the Bills of Entry for the importer. ​ Following the investigation, the Principal Commissioner of Customs suspended the petitioner’s customs broker license on December 21, 2024, under Regulation 16(1) of the CBLR, 2018. ​ Subsequent inquiry proceedings under Regulation 17 were initiated, leading to the issuance of a show-cause notice on January 17, 2025. ​

    Key Issues Raised

    The petitioner raised two primary issues in the writ petition:

    1. The inquiry report was submitted beyond the mandatory 90-day timeline prescribed under Regulation 17(5) of the CBLR, 2018, thereby vitiating the proceedings. ​
    2. The petitioner was not afforded an opportunity to cross-examine witnesses, violating the principles of natural justice as per Regulation 17(4) of the CBLR, 2018. ​

    Court’s Observations and Judgment

    The Court examined the arguments presented by both parties and referred to multiple precedents, including judgments from the Madras High Court and the Delhi High Court. It reiterated that the 90-day timeline under Regulation 17(5) of the CBLR, 2018, is mandatory and not directory. The Court emphasized that exceeding this timeline results in the abatement of proceedings, as established by previous judicial pronouncements. ​

    The respondents argued that the delay in submitting the inquiry report was due to the petitioner’s repeated requests for time during the personal hearing. ​ However, the Court noted that the 90-day period had already expired by the time the first hearing was scheduled on April 28, 2025. ​ Therefore, any subsequent delays could not justify the violation of the mandatory timeline. ​

    The Court also addressed the issue of estoppel, stating that the petitioner’s participation in the proceedings does not negate the mandatory nature of the timeline under Regulation 17(5). ​ Furthermore, the Court found that the inquiry report was not communicated to the petitioner within the stipulated time, further violating the regulations. ​

    Conclusion

    In its judgment, the Madras High Court allowed the writ petition and set aside the impugned inquiry report dated June 27, 2025. ​ The Court held that the proceedings stood abated due to the violation of the mandatory timeline under Regulation 17(5) of the CBLR, 2018. ​ The Court also deemed it unnecessary to address the second issue regarding the alleged violation of natural justice. ​

    This judgment underscores the importance of adhering to mandatory timelines in regulatory proceedings and reinforces the principle that procedural lapses can vitiate the entire process. ​ It serves as a reminder to authorities to strictly comply with statutory requirements to ensure fairness and transparency in administrative actions.

    Source: Madras High Court

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  • Madras High Court Quashes Service Tax Notifications and IGST on Ocean Freight as Ultra Vires

    Madras High Court Quashes Service Tax Notifications and IGST on Ocean Freight as Ultra Vires

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 10.12.2025

    Madras High Court Quashes Service Tax Notifications and IGST on Ocean Freight as Ultra Vires

     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 dated October 13, 2025, the Madurai Bench of the Madras High Court, comprising Honourable Justice, delivered a landmark ruling in the cases W.P. ​(MD) Nos. ​ 1139 & 1143 of 2021 and 14856 & 14857 of 2022. ​ The court declared certain service tax notifications and the imposition of Integrated Goods and Services Tax (IGST) on ocean freight as ultra vires, providing relief to the petitioners.

    Background of the Case

    The petitions were filed by M/s. TVS Srichakra Limited and M/s. ​ Hitech Arai Private Limited, challenging Notifications No. ​ 14/2017, 15/2017, and 16/2017 issued by the Union Ministry of Finance on April 13, 2017. ​ The petitioners argued that these notifications exceeded the scope of Section 68(2) of the Finance Act, 1994, and violated Articles 14, 19(1)(g), 245, and 269A of the Constitution of India. ​ Additionally, the petitioners sought to quash show-cause notices issued for the collection of service tax and IGST on ocean freight for the period between April 2017 and June 2017. ​

    Court’s Observations

    The court noted that similar challenges had been addressed by the Madras, Gujarat, and Bombay High Courts in previous cases, including:

    1. M/s. Eastman Spinning Mills (P) Limited Vs. Union of India (Madras High Court, 2025) ​
    2. Sal Steels Limited Vs. Union of India (Gujarat High Court, 2020) ​
    3. Santhan Textile Private Limited Vs. Union of India (Bombay High Court, 2024) ​

    The Gujarat High Court, in the Sal Steels case, had struck down the impugned notifications, ruling that they were ultra vires Sections 64, 66B, 67, and 94 of the Finance Act, 1994. ​ The court held that the notifications lacked proper legal backing to impose service tax and IGST on ocean freight under CIF contracts. ​ Similarly, the Madras High Court in the Eastman Spinning Mills case followed the Gujarat High Court’s decision and quashed the notifications. ​

    Key Judgment

    The Madurai Bench of the Madras High Court aligned with the earlier rulings and declared the impugned notifications as ultra vires. The court emphasized that the notifications failed to provide a proper mechanism under Section 68(2) of the Finance Act, 1994, to shift the burden of paying service tax and IGST on ocean freight to the petitioners, who were not the recipients of the taxable service. ​ Consequently, the court quashed the notifications and the related show-cause notices, granting relief to the petitioners. ​

    IGST on Freight

    IGST on freight is applicable only when the importer directly pays the freight to the transporter, such as in FOB import contracts or domestic freight services. However, in CIF imports, where freight is included in the supplier’s invoice and paid by the foreign exporter, the importer is not liable to pay IGST under reverse charge. The Supreme Court in Union of India vs. Mohit Minerals (2022) declared the levy of IGST on ocean freight under RCM as unconstitutional and resulting in double taxation. Therefore, no IGST is payable on ocean freight in CIF imports as per the settled legal position.

    Implications of the Judgment

    This judgment is a significant development for businesses involved in import transactions under CIF contracts. ​ The ruling reinforces the position that service tax and IGST on ocean freight cannot be imposed without proper legal authority. ​ It also highlights the importance of adhering to constitutional provisions and ensuring that tax notifications do not exceed the scope of the enabling legislation. ​

    Conclusion

    The Madurai High Court’s decision is a welcome relief for businesses, as it sets a precedent for similar cases across the country. By declaring the service tax notifications and IGST on ocean freight as ultra vires, the court has upheld the principles of constitutional validity and provided clarity on the scope of taxation under the Finance Act, 1994. ​ This judgment is expected to have far-reaching implications for the interpretation of tax laws in India.

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    Source: Madras High Court

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  • Penalties Under Sections 114(3) and 114AA of Customs Act Quashed by CESTAT Ahmedabad

    Penalties Under Sections 114(3) and 114AA of Customs Act Quashed by CESTAT Ahmedabad

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 09.12.2025

    Penalties Under Sections 114(3) and 114AA of Customs Act Quashed by CESTAT Ahmedabad​

    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 legal development, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, has delivered a landmark judgment in the case of Appellant vs. C.C. ​ – Ahmedabad. ​ The case revolved around the imposition of penalties under Sections 114(3) and 114AA of the Customs Act, 1962, amounting to Rs. ​ 7 Lakh and Rs. ​ 3 Lakh, respectively, on the appellant. ​

    Background of the Case

    The case originated from allegations that the appellant was involved in issuing erroneous valuation certificates for export cargo, leading to penalties imposed by the adjudicating authority. ​ Despite the original authority noting that the appellant had no knowledge of the alleged misdeclaration of export cargo, the Commissioner (Appeals) upheld the penalties, citing intentional misconduct.

    Key Arguments Presented

    The appellant’s legal team highlighted critical discrepancies in the findings of the Commissioner (Appeals). They pointed out that the original adjudicating authority had explicitly stated that the appellant was not aware of the misdeclaration and was not part of any conspiracy. ​ This factual observation was contradicted in the impugned order by the Commissioner (Appeals), who claimed that the appellant knowingly signed false valuation certificates. ​

    To support their case, the appellant’s advocates relied on precedents such as Anchor Logistics vs C.C. ​ (2013) and Bhatia Shipping Pvt. ​ Limited (2024), which emphasized the necessity of proving knowledge before imposing penalties under Sections 114 and 114AA of the Customs Act. ​ They argued that the absence of knowledge invalidates the penalties imposed. ​

    Tribunal’s Decision

    The Hon’ble Member Judicial, presided over the case and delivered the final order on November 21, 2025. ​ After carefully examining the facts and legal precedents, the Tribunal concluded that the penalties imposed on the appellant were unjustified. ​ The court emphasized that knowledge of the alleged misdeclaration is a prerequisite for imposing penalties under Sections 114 and 114AA of the Customs Act. ​ The Tribunal found that the Commissioner (Appeals) had made factually incorrect findings, which contradicted the original adjudicating authority’s observations. ​

    In light of these findings, the Tribunal allowed the appeal and granted consequential relief to the appellant, setting aside the penalties imposed. ​

    Implications of the Judgment

    This judgment reinforces the principle that penalties under the Customs Act cannot be imposed without establishing clear evidence of knowledge and intent. ​ It serves as a reminder to authorities to ensure that their findings are consistent and based on factual evidence. ​ The decision also highlights the importance of judicial scrutiny in upholding justice and protecting individuals from unwarranted penalties.

    Conclusion

    The case of Appellant vs. C.C. ​ – Ahmedabad is a testament to the importance of due process and the role of appellate tribunals in correcting errors in administrative decisions. It underscores the need for fairness and accuracy in adjudication, ensuring that penalties are imposed only when supported by concrete evidence. ​ This victory is not just for the appellant but for the principles of justice and transparency in the legal system.

    Source: CESTAT Ahmedabad

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  • CESTAT Chennai Overturns Duty Demand and Penalty on Godrej Consumer Products Ltd. in Target Plus Scheme Dispute

    CESTAT Chennai Overturns Duty Demand and Penalty on Godrej Consumer Products Ltd. in Target Plus Scheme Dispute

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 09.12.2025

    CESTAT Chennai Overturns Duty Demand and Penalty on Godrej Consumer Products Ltd. in Target Plus Scheme 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.com or on his Mobile +91-9999005379.  β€‹β€‹

    In a significant judgment, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has ruled in favor of M/s. Godrej Consumer Products Ltd., setting aside the duty demand, redemption fine, and penalty imposed by the Commissioner of Customs (Appeals – I), Chennai. This decision marks a crucial win for the appellant in a long-standing dispute over the interpretation of the Target Plus Scheme under Notification No. 73/2006-Cus.

    Background of the Case

    M/s. Godrej Consumer Products Ltd., a manufacturer-exporter of electronic mosquito repellent machines and related products, had imported β€˜PTC Thermistors’ using a duty credit certificate issued under the Target Plus Scheme. The company utilized the imported goods for manufacturing electronic mosquito repellent machines through a job worker, M/s. ​ EMOX Device and Company, and subsequently exported the finished products.

    The Department alleged that the appellant violated the conditions of Notification No. ​ 73/2006-Cus, which exempted goods imported under the Target Plus Scheme from customs duty, provided the goods were not transferred or sold. The Department contended that the appellant, as a manufacturer-exporter, was required to use the imported goods in its own manufacturing unit and could not send them to a job worker for processing. ​ Consequently, a Show Cause Notice (SCN) was issued, demanding recovery of Rs. ​ 41,24,764/- in duty, along with interest, a redemption fine of Rs. ​ 25,00,000/-, and a penalty of Rs. ​ 20,000/-.

    The appellant contested the allegations, arguing that the term “own use” under the notification and the Foreign Trade Policy (FTP) includes the use of job workers for manufacturing resultant products. ​ The appellant relied on various legal precedents and clarifications issued by the Directorate General of Foreign Trade (DGFT) to support its case. ​

    CESTAT Chennai’s Observations ​

    After hearing both parties, the CESTAT Chennai bench, comprising Hon’ble Member – Technical and Hon’ble Member – Judicial, carefully analyzed the provisions of Notification No. 73/2006-Cus and relevant sections of the FTP. ​ The bench observed the following:

    1. No Restriction on Job Work: The tribunal noted that the notification does not explicitly prohibit manufacturer-exporters from utilizing job workers for processing imported goods into finished products. ​ The condition of “own use” does not mandate that the goods must be processed solely within the premises of the manufacturer-exporter. ​
    2. Clarifications from DGFT: The tribunal referred to Public Notice No. ​ 113 (RE-2007)/2004-09 dated 15.02.2008, which clarified that job workers can be used for converting imported goods into resultant products under the Target Plus Scheme. ​ This further supported the appellant’s argument that utilizing job workers does not violate the notification’s conditions. ​
    3. Precedents from Similar Cases: The tribunal relied on previous judgments, including M/s. ​ Silver Line Plastpack Pvt. ​ Ltd. v. CCE & ST, Bhavnagar, which held that “own use” includes the use of job workers for processing imported goods. ​ The tribunal found no evidence that the appellant had transferred or sold the imported goods to the job worker, which would have constituted a violation of the notification. ​
    4. No Evidence of Transfer or Sale: The tribunal emphasized that the investigation did not establish any transfer or sale of the imported goods to the job worker. ​ The goods were merely sent for processing and returned to the appellant for further activities like testing, repacking, and export. ​

    Final Verdict

    The CESTAT Chennai concluded that the appellant had not violated the conditions of Notification No. 73/2006-Cus and was entitled to the exemption under the Target Plus Scheme. The tribunal set aside the impugned order, including the duty demand, interest, redemption fine, and penalty, and allowed the appeal with consequential relief. ​

    Key Takeaways

    This judgment reinforces the principle that the term “own use” under the Target Plus Scheme includes the utilization of job workers for manufacturing resultant products. ​ It also highlights the importance of adhering to established procedures and obtaining necessary permissions when sending imported goods for job work. ​

    The decision is a significant win for M/s. Godrej Consumer Products Ltd. and sets a precedent for similar cases involving the interpretation of customs notifications and FTP provisions. It underscores the need for clarity in government notifications and policies to avoid disputes and ensure smooth compliance by exporters and manufacturers.

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    Source: CESTAT Chennai

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  • CESTAT Chennai Sets Aside Demand on Grounds of Limitation

    CESTAT Chennai Sets Aside Demand on Grounds of Limitation

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 08.12.2025

    CESTAT Chennai Sets Aside Demand on Grounds of Limitation

    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 ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has delivered a favorable judgment for M/s Jocil Ltd., setting aside the demand for differential duty and penalties imposed by the Commissioner of Customs (Appeals-II), Chennai. The case revolved around the classification of imported goods and the invocation of the extended period of limitation under Section 28 of the Customs Act, 1962. ​

    Background of the Case

    M/s Jocil Ltd. had imported 23 consignments of β€˜lauric acid’ between March 2012 and August 2012, classifying the goods under tariff item 2915 7090 and availing exemption under Notification No. ​ 46/2011-Cus. However, the Revenue contended that the correct classification was under tariff item 2915 9090, which did not qualify for the exemption. ​ This led to the issuance of a show cause notice (SCN) on August 8, 2013, demanding differential duty of Rs. ​ 22,04,830/- and interest.

    The appellant agreed to pay the duty and interest for seven bills of entry within the normal limitation period but contested the demand for the remaining 16 bills of entry, citing the one-year limitation period under Section 28(1)(a) of the Customs Act, 1962. ​ Despite this, the Revenue issued a second SCN on August 18, 2014, invoking the extended period of limitation and alleging willful misclassification.

    Key Arguments by M/s Jocil Ltd.

    The appellant argued that:

    1. The classification issue was interpretational and did not involve any misdeclaration or suppression of facts. ​
    2. The second SCN was barred by limitation, as the facts were already known to the authorities when the first SCN was issued. ​
    3. Reliance on dictionary definitions and HSN explanatory notes without expert evidence was insufficient to substantiate the Revenue’s claims. ​
    4. The extended period of limitation could not be invoked in cases involving interpretational disputes. ​

    CESTAT’s Observations and Ruling

    The Tribunal, comprising Hon’ble Member Technical and Hon’ble ​Member – Judicial, examined the submissions and legal precedents. The key findings were:

    1. The second SCN was issued more than a year after the first SCN, making it wholly barred by limitation as per the Supreme Court’s ruling in Nizam Sugar Factory v. Collector of Central Excise. ​
    2. The classification issue was interpretational, and the appellant’s declaration of goods as β€˜lauric acid’ was accurate. ​ Merely claiming a classification under a particular tariff heading does not amount to suppression or misstatement. ​
    3. The Revenue failed to provide expert evidence to substantiate its claims, relying instead on dictionary definitions and HSN notes, which were deemed insufficient. ​

    The Tribunal concluded that the extended period of limitation could not be invoked in this case and set aside the impugned order, allowing the appeal with consequential relief. ​

    Implications of the Judgment

    This ruling reinforces the principle that extended limitation cannot be invoked in cases involving interpretational disputes or where there is no evidence of willful suppression or misstatement. ​ It also highlights the importance of adhering to procedural timelines and the need for robust evidence when challenging the classification of goods.

    The decision is a significant win for M/s Jocil Ltd. and sets a precedent for similar cases, ensuring that importers are not unfairly penalized for genuine classification disputes. ​ It underscores the importance of legal recourse in protecting the rights of businesses and ensuring fair treatment under the law.

    Source: CESTAT Chennai

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