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  • CESTAT Delhi Sets Aside DRI Duty Demand on Imported Aircraft

    CESTAT Delhi Sets Aside DRI Duty Demand on Imported Aircraft

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 26.11.2025

    CESTAT Delhi Sets Aside DRI Duty Demand on Imported Aircraft

    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 judgment, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has ruled in favor of M/s. Decore Exxoils Pvt. ​ Ltd., setting aside the order passed by the Additional Director General (Adjudication), Directorate of Revenue Intelligence (DRI), New Delhi. ​ The case revolved around the alleged misuse of an exemption notification related to the import of an aircraft and its spare parts, which led to a demand for differential customs duty amounting to Rs. ​ 8.84 crore, along with penalties and interest. ​

    Background of the Case

    M/s. Decore Exxoils Pvt. ​ Ltd., formerly known as Bhaskar Essoils Pvt. ​ Ltd., is a company engaged in non-scheduled air taxi services and charter operations. ​ The company imported a Learjet 60XR aircraft in December 2010, claiming exemption under Notification No. ​ 21/2002-Cus and Notification No. ​ 6/2006-CE. The exemption was granted based on the condition that the aircraft would be used exclusively for non-scheduled air transport services. ​

    However, in June 2015, the DRI issued a show-cause notice alleging that the company had violated the conditions of the exemption notification. ​ The notice claimed that the aircraft was primarily used for private purposes by the promoters and their families, rather than for non-scheduled air transport services. ​ The DRI also alleged that the company failed to issue individual passenger tickets and publish tariffs, which are requirements under the Civil Aviation Requirements (CAR) 2010. ​

    Tribunal’s Observations ​

    The case was heard by Hon’ble Justice (President) and Hon’ble (Member – Technical). ​ After a detailed examination of the submissions made by both parties, the Tribunal ruled in favor of M/s. Decore Exxoils Pvt. ​ Ltd., citing the following key points:

    1. Compliance with Exemption Notification: The Tribunal referred to previous judgments, including Commissioner of Customs (Preventive), New Delhi vs. ​ Global Vectra Helicorp Ltd., which clarified that non-scheduled operators are allowed to operate revenue charter flights for related entities. ​ The Tribunal concluded that the appellant had not violated Condition 104 of the Exemption Notification, as the aircraft was used for non-scheduled air transport services, including charter services. ​
    2. Non-Issuance of Tickets: The Tribunal held that the non-issuance of individual tickets does not violate CAR 2010. ​ It was noted that the appellant issued invoices for chartered flights, which is permissible under the CAR guidelines.
    3. Extended Period of Limitation: The Tribunal found that the invocation of the extended period of limitation under Section 28(4) of the Customs Act was unjustified. ​ It emphasized that suppression of facts must be deliberate and intended to evade payment of duty. ​ In this case, there was no evidence to suggest that the appellant had deliberately suppressed information or acted with fraudulent intent. ​

    Final Verdict

    The Tribunal set aside the impugned order dated 26.09.2017, ruling that the demand for differential customs duty, penalties, and interest could not be sustained. The appeal filed by M/s. ​ Decore Exxoils Pvt. ​ Ltd. was allowed, marking a significant victory for the company.

    Key Takeaways

    This judgment highlights the importance of adhering to the conditions of exemption notifications while also emphasizing the need for authorities to establish deliberate intent when invoking the extended period of limitation under Section 28(4) of the Customs Act. It also clarifies the scope of non-scheduled air transport services under CAR 2010, providing clarity for operators in the aviation industry.

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    Source: CESTAT Delhi

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  • CESTAT Chennai Quashes Penalties Imposed Under Customs Act in Duty Drawback Fraud

    CESTAT Chennai Quashes Penalties Imposed Under Customs Act in Duty Drawback Fraud

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 26.11.2025

    CESTAT Chennai Quashes Penalties Imposed Under Customs Act in Duty Drawback Fraud

    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), Chennai, has set aside penalties imposed on M/s. Trans Asian Shipping Services (P) Ltd. and its employee, in a case involving alleged manipulation of shipping documents and fraudulent duty drawback claims. ​ The judgment, delivered by Hon’ble, Member (Technical), on November 25, 2025, has brought clarity to the responsibilities of shipping liners and their employees in export transactions. ​

    Background of the Case

    The case originated from an investigation by the Directorate of Revenue Intelligence (DRI), Chennai, which alleged that three exportersβ€”Pathi Fashions, Starwin Exports, and S & H Incβ€”had engaged in fraudulent activities, including exports under fictitious names, inflated export values, non-realization of export proceeds, and encashment of drawback benefits through newly opened bank accounts. ​ The investigation revealed discrepancies in export documentation, including the issuance of two sets of Bills of Lading (BLs) for the same consignments, with different ports of dischargeβ€”Jebel Ali (Dubai) and Southampton (UK). ​

    The Commissioner of Customs and Central Excise imposed penalties on M/s. ​ Trans Asian Shipping Services and Mr. Lakshmanan under Sections 114(i) and 114(iii) of the Customs Act, 1962, alleging that they had abetted the fraud by issuing falsified shipping documents. ​

    Key Arguments by the Appellants ​

    The appellants, represented by Advocate, argued that:

    1. The containers were stuffed and sealed in the presence of Customs officials, and the appellants had no knowledge of the cargo contents. ​
    2. The Master Bill of Lading (MBL) issued by the appellants only specified Dubai as the port of discharge, while the House Bill of Lading (HBL) issued by freight forwarders mentioned Southampton, UK. ​
    3. The appellants had no direct relationship with the exporters and were not involved in the fraudulent activities. ​
    4. The penalties imposed were based on incorrect legal provisions, and the adjudicating authority had traversed beyond the scope of the Show Cause Notice (SCN). ​

    Tribunal’s Observations and Decision

    After carefully examining the submissions, evidence, and records, the Tribunal made the following key observations:

    • The appellants issued only one Master Bill of Lading with Dubai as the port of discharge, and there was no evidence of falsification or issuance of duplicate BLs. ​
    • The appellants had no direct knowledge of the cargo contents, as their role was limited to providing containers and issuing the Master BL. ​
    • The fraudulent duty drawback claims were processed using the Shipping Bill and House BL, which were submitted by the exporters and freight forwarders, not the appellants. ​
    • The Customs officials responsible for examining the cargo at the time of stuffing failed to detect the alleged undervaluation and other discrepancies, indicating systemic lapses in the examination process. ​
    • The penalties imposed under Sections 114(i) and 114(iii) of the Customs Act were not applicable, as the goods were not prohibited or restricted for export, and the appellants were not proven to have acted with wrongful intent or knowledge. ​

    The Tribunal concluded that the appellants were not beneficiaries of the fraudulent activities and had no role in facilitating the fraud. ​ It also emphasized that the adjudicating authority had erred by invoking incorrect penal provisions and altering the charges without issuing a corrigendum or providing proper notice to the appellants. ​

    Final Order

    The Tribunal set aside the penalties imposed under the three impugned Orders-in-Original and allowed all six appeals filed by the appellants with consequential benefits as per the law. ​

    Key Takeaways

    This judgment highlights the importance of adhering to due process and ensuring that penalties are imposed under the correct legal provisions. ​ It also underscores the need for robust customs examination procedures to prevent fraudulent activities and protect the integrity of export transactions. ​ The Tribunal’s decision serves as a reminder that penalties cannot be imposed without clear evidence of intent or active facilitation of fraud. ​

    This case is a landmark ruling that reinforces the principles of natural justice and provides clarity on the role and responsibilities of shipping liners and their employees in export operations. It is a significant step toward ensuring fairness and accountability in customs adjudication processes.

    Source: CESTAT Chennai

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  • CESTAT Mumbai- Procedural Lapses Cannot Deny SEZ Exemption Under Section 26 of SEZ Act, 2005

    CESTAT Mumbai- Procedural Lapses Cannot Deny SEZ Exemption Under Section 26 of SEZ Act, 2005

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 25.11.2025

    CESTAT Mumbai- Procedural Lapses Cannot Deny SEZ Exemption Under Section 26 of SEZ Act, 2005​

    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€‹ ​ ​

    Introduction

    In a significant development, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has delivered a landmark judgment in the case of ACE Enterprises vs. Commissioner of CGST & Central Excise, Nashik. The ruling, issued on November 17, 2025, reaffirms the overriding authority of the Special Economic Zones (SEZ) Act, 2005, in granting exemption benefits to excisable goods supplied to SEZ units, even in cases of procedural lapses. This decision is a major win for businesses operating in SEZs and sets a precedent for similar cases in the future.

    Background of the Case

    The case revolved around M/s ACE Enterprises, a manufacturer of automobile parts and seat covers, which supplied goods to SEZ units without payment of central excise duty under Notification No. ​ 58/2003-C.E. dated July 22, 2003. ​ During an audit, the department alleged that the appellant failed to comply with procedural requirements, such as filing Form ARE-1 and submitting re-warehousing certificates, and did not reflect the clearances in their ER-1 returns. ​ Consequently, a demand for β‚Ή7,52,063/- in excise duty, along with interest and penalties, was raised against the appellant. ​

    The appellant challenged the demand, arguing that the goods were supplied to SEZ units with proper documentation and recorded in their books of accounts. ​ They contended that the exemption under Section 26 of the SEZ Act, 2005, should not be denied due to procedural lapses, as the SEZ Act provides overriding authority over other laws. ​

    Key Issues Addressed

    The Tribunal examined two critical issues:

    1. Whether the appellant was eligible for exemption from central excise duty on goods supplied to SEZ units under the SEZ Act, 2005. ​
    2. Whether the extended period of limitation and penalty under Section 11AC of the Central Excise Act, 1944, was applicable in this case. ​

    The Tribunal analyzed the legal provisions of the SEZ Act, SEZ Rules, and relevant notifications, including Notification No. ​ 58/2003-C.E. and Circular No. 29/2006-Cus. It also referred to landmark judgments, including GMR Aerospace Engineering Ltd. vs. Union of India and Commissioner of C. Ex. New Delhi vs. Hari Chand Shri Gopal, to arrive at its decision. ​

    Key Takeaways from the Judgment

    1. Exemption Benefits Under SEZ Act, 2005: The Tribunal emphasized that Section 26 of the SEZ Act, 2005, provides standalone exemptions for goods supplied to SEZ units. ​ These exemptions cannot be denied due to non-compliance with procedural requirements under other laws or notifications. ​ The SEZ Act has an overriding effect, as stated in Section 51, which ensures that its provisions take precedence over any inconsistent laws. ​
    2. Procedural Lapses Are Not Grounds for Denial: The Tribunal highlighted that procedural lapses, such as non-filing of Form ARE-1 or non-submission of re-warehousing certificates, cannot be used to deny exemption benefits under the SEZ Act. ​ The appellant had provided substantial evidence, including invoices, transportation receipts, and SEZ gate entry records, to establish that the goods were indeed supplied to SEZ units. ​
    3. Extended Period of Limitation and Penalty: The Tribunal rejected the department’s claim of suppression of facts and intention to evade duty. It ruled that the appellant had acted in good faith and had substantially complied with the procedural requirements, making the invocation of the extended period of limitation and imposition of penalties unsustainable.

    Implications of the Ruling

    This judgment is a significant win for businesses operating in SEZs, as it reinforces the principle that exemptions under the SEZ Act cannot be denied due to procedural lapses. ​ It also highlights the importance of the SEZ Act’s overriding effect, ensuring that its provisions are not undermined by conflicting requirements under other laws or notifications. ​

    The Tribunal’s decision aligns with previous rulings by the Hon’ble Andhra Pradesh High Court and the Hon’ble Supreme Court, which upheld the primacy of the SEZ Act in granting exemptions. ​ This consistency in judicial interpretation provides clarity and confidence to businesses, encouraging them to leverage the benefits of SEZs for their operations.

    Conclusion

    CESTAT Mumbai’s ruling in favor of M/s ACE Enterprises is a landmark decision that underscores the importance of the SEZ Act, 2005, in promoting exports and economic growth. By upholding the exemption benefits for SEZ supplies, the Tribunal has reinforced the principle that procedural lapses should not hinder the intent of the law. ​ This judgment is expected to have far-reaching implications for businesses and policymakers, ensuring a more streamlined and business-friendly environment for SEZ operations.

    Source: CESTAT Mumbai

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  • Gujarat High Court Invalidates DRI Notice on Customs Duty for Crude Palm Kernel Oil Imports

    Gujarat High Court Invalidates DRI Notice on Customs Duty for Crude Palm Kernel Oil Imports

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 25.11.2025

    Gujarat High Court Invalidates DRI Notice on Customs Duty for Crude Palm Kernel Oil 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 judgment, the High Court of Gujarat has quashed a show cause notice issued by the Directorate of Revenue Intelligence (DRI) against VVF India Ltd & Anr., marking a significant decision in the realm of customs duty exemptions and the interpretation of exemption notifications. ​

    Background of the Case

    The case revolved around the import of “crude palm kernel oil edible grade” by VVF India Ltd, a company engaged in manufacturing personal care products such as soaps, fatty acids, and fatty alcohols. The company had been availing the benefit of concessional customs duty under Serial No. ​ 57 of Customs Notification No. ​ 12/2012, which provides for a reduced or nil rate of duty on “all goods, crude and edible grade” under specific tariff headings. ​

    However, the DRI issued a show cause notice on June 27, 2013, alleging that the imported crude palm kernel oil was not fit for human consumption without further processing and refining. ​ The notice claimed that the goods should be classified under a different tariff heading (CTH 15132110) and subjected to a 100% customs duty instead of the concessional rate. ​

    Key Arguments

    Petitioners’ Submissions:

    1. Challenge to Circular No. ​ 40/2001-CUS: The petitioners argued that the show cause notice was based on Circular No. ​ 40/2001-CUS, which had been quashed by the Gujarat High Court in the case of Intercontinental (India) v. Union of India and upheld by the Supreme Court. ​ The circular had sought to impose an end-use condition on exemption notifications, which was deemed unlawful. ​
    2. Edible Grade Definition: The petitioners contended that the crude palm kernel oil imported by them met the standards of “edible grade” as per the Prevention of Food Adulteration Rules, 1955 and the Food Safety and Standards (Food Products and Food Additives) Regulations, 2011. ​ They argued that the exemption notification did not require the oil to be fit for immediate human consumption, but only to meet the criteria for “edible grade.” ​
    3. Past Practice: The petitioners highlighted that they had been availing the exemption for years without any objections from the authorities, and the sudden issuance of the show cause notice was unjustified. ​

    Respondents’ Submissions:

    1. End-Use Condition: The respondents argued that the exemption notification implicitly required the imported oil to be used for edible purposes, and since the crude palm kernel oil was imported for industrial use, it did not qualify for the concessional rate. ​
    2. Misdeclaration Allegations: The respondents claimed that the petitioners had misdeclared the description of the imported goods to avail the exemption. ​

    The Court’s Analysis and Judgment

    The Court, led by Honourable Justice, delved into the legal provisions of the Customs Act, 1962, the Prevention of Food Adulteration Rules, 1955, and the Food Safety and Standards Regulations, 2011. The Court observed the following:

    1. No End-Use Condition in Notification: The exemption notification did not stipulate any condition regarding the end-use of the imported goods. ​ The Court reiterated that a circular cannot impose conditions that are not explicitly mentioned in the notification, as this would amount to rewriting the law. ​
    2. Edible Grade vs. Edible Oil: The Court clarified that “edible grade” refers to the quality of the oil as per prescribed standards, and it is distinct from “edible oil,” which is fit for immediate human consumption. ​ The crude palm kernel oil imported by the petitioners met the criteria for “edible grade” and was therefore eligible for the concessional rate. ​
    3. Precedents and Legal Principles: The Court relied on previous judgments, including Intercontinental (India) v. Union of India and Supreme Oil Industries Limited v. Special Secretary, Finance (Taxation) Department, Government of West Bengal, to emphasize that exemption notifications must be interpreted based on their plain language without reading additional conditions into them. ​

    Conclusion

    The High Court concluded that the show cause notice issued by the DRI was without jurisdiction and based on an invalid circular. ​ It held that the crude palm kernel oil edible grade imported by the petitioners was entitled to the benefit of the exemption notification, regardless of its end-use. ​ The Court quashed the show cause notice and ruled in favor of the petitioners. ​

    Implications of the Judgment

    This judgment reinforces the principle that exemption notifications under the Customs Act must be interpreted strictly based on their language, without imposing additional conditions through circulars or other means. ​ It also highlights the distinction between “edible grade” and “edible oil,” providing clarity for importers and customs authorities alike. ​

    The decision is a significant win for businesses importing crude edible grade oils for industrial purposes, as it ensures that they can continue to avail concessional duty rates without being subjected to unwarranted conditions. ​ It also serves as a reminder to authorities to adhere to the legal framework and avoid overstepping their jurisdiction. ​

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    Source: Gujarat High Court

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  • CESTAT Mumbai Quashes Penalties on Chem Trader Tankers

    CESTAT Mumbai Quashes Penalties on Chem Trader Tankers

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 24.11.2025

    CESTAT Mumbai Quashes Penalties on Chem Trader Tankers

    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 & Service Tax Appellate Tribunal (CESTAT), Mumbai, has delivered a landmark judgment in the Customs Appeal Nos. ​ 86442 and 86445 of 2022, providing relief to Chem Trader Tankers Co. Ltd. and Appellant. The appeals were filed against the Order-in-Original No. ​ 145/2021-22/CAC/CC (Import-II)/MKK dated 11.03.2022, issued by the Commissioner of Customs (Import-II), Mumbai. ​

    Background of the Case

    The case revolved around allegations of misdeclaration of the country of origin and differential freight charges for imported goods. ​ The Commissioner of Customs had imposed penalties under Sections 114A, 114AA, and 112(a) of the Customs Act, 1962, and ordered the confiscation of goods with an option for redemption upon payment of fines. ​ The appellants, Chem Trader Tankers Co. Ltd. and Appellant, challenged these penalties and confiscation orders before the CESTAT Mumbai.

    Key Highlights of the Judgment

    The Tribunal, presided over by Hon’ble (Member Judicial), heard arguments from both sides and reviewed the case records, legal precedents, and submissions. ​ The judgment was heavily influenced by a prior decision in the case of Jupiter Dye Chem Pvt. ​ Ltd. vs. CC (Import-II), Mumbai and CJ Shah & Co. vs. CC (Import-II), reported in 2023 (5) TMI 670-CESTAT Mumbai. ​ In that case, the Tribunal had set aside the impugned orders, ruling that the allegations of misdeclaration and differential freight charges were based on presumptions and lacked substantial evidence.

    The Tribunal noted that the Revenue had not provided any order from the Hon’ble Supreme Court or High Court to challenge or overturn the previous decision. ​ As per the principles of judicial discipline and consistency, the Tribunal followed the earlier ruling and set aside the penalties and confiscation orders in the present appeals. ​

    Observations by the Tribunal ​

    The Tribunal emphasized the importance of evaluating the facts and evidence presented in the case. ​ It highlighted that the Revenue’s case was based on presumptions and lacked concrete evidence to support the allegations of misdeclaration and additional freight charges. ​ The Tribunal also pointed out that the adjudicating authority failed to establish any false or incorrect material used by the importers, which is a prerequisite for imposing penalties under Sections 114AA and 112(a) of the Customs Act, 1962. ​

    Final Order

    In its final order, pronounced on 20.11.2025, the Tribunal set aside the impugned order and allowed the appeals with consequential relief as per law. ​ The penalties imposed on Chem Trader Tankers Co. Ltd. and Appellant were cancelled, and the confiscation of goods was annulled.

    Implications of the Judgment

    This decision reinforces the importance of evidence-based adjudication in customs cases and upholds the principles of judicial discipline. ​ It serves as a reminder to authorities to ensure that penalties and confiscation orders are not imposed based on mere assumptions but are backed by substantial evidence. ​

    The judgment is a significant victory for the appellants and sets a precedent for similar cases in the future. It highlights the role of the judiciary in safeguarding the rights of importers and ensuring that the rule of law prevails in customs-related disputes. ​ This case is a testament to the importance of a fair and transparent legal process, and it underscores the need for authorities to adhere to established legal principles while adjudicating cases. ​

    The decision by CESTAT Mumbai is a step forward in ensuring justice and accountability in the realm of customs law. ​

    Source: CESTAT Mumbai

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  • CESTAT Chandigarh Sets Aside Time-Barred Provisional Assessment and Demand Under Section 28

    CESTAT Chandigarh Sets Aside Time-Barred Provisional Assessment and Demand Under Section 28

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 24.11.2025

    CESTAT Chandigarh Sets Aside Time-Barred Provisional Assessment and Demand Under Section 28

    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, Excise, and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a significant judgment in the case of M/s S.K. Petrochem vs. Commissioner of Customs, Ludhiana (Customs Appeal No. ​ 60956 of 2019). This case revolved around the classification and valuation of imported goods and the procedural adherence to the Customs Act, 1962, particularly Sections 18 and 28. ​

    Case Background

    M/s S.K. ​ Petrochem imported consignments of ‘Rubber Processing Oil’ (RPO) between September 2011 and September 2012, classifying them under CTH 2710.1990. The goods were provisionally assessed under Section 18(1)(b) of the Customs Act, 1962. ​ However, test reports from Punjab Test House and CRCL indicated that the aromatic compounds in the goods exceeded 50%, suggesting that the goods should be classified under CTH 27079900 instead. ​ This led to a Show Cause Notice (SCN) being issued in February 2016, followed by a corrigendum in October 2016. ​ Subsequently, an Order-in-Original was passed in December 2017, confirming a differential duty of Rs. ​ 45 lakhs. ​ The Commissioner of Customs (Appeals) upheld this order in March 2019, prompting the appellant to challenge the decision before CESTAT. ​

    Key Issues Raised ​

    The case raised several critical legal and procedural issues, including:

    1. Time-Barred Finalisation of Provisional Assessment: The appellant argued that the finalisation of the provisional assessment was delayed beyond the reasonable time frame of six months prescribed in the CBEC Customs Manual. ​ The final assessment was made after five years, which the appellant claimed was time-barred. ​
    2. Violation of Principles of Natural Justice: The appellant contended that the demand for differential duty under Section 28 was confirmed without issuing a proper SCN, which is a violation of the Principles of Natural Justice. ​
    3. Lack of Evidence for Value Enhancement: The appellant argued that the enhancement of the value of imported goods was arbitrary, as there was no evidence of contemporaneous imports or suppressed transaction value. ​
    4. Legal Authority to Finalise Provisional Assessments: The appellant questioned the legal basis for finalising provisional assessments under Section 18, arguing that the provision for finalisation was introduced only in 2018 and could not be applied retrospectively. ​

    Tribunal’s Observations and Decision ​

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

    • Time Frame for Finalisation: While Section 18 does not prescribe a specific time limit for finalising provisional assessments, the CBEC Customs Manual recommends a six-month period, with exceptions for complex cases. ​ The Tribunal held that the inordinate delay of five years in finalising the assessment was unjustified and violated the principles of reasonable time. ​
    • Violation of Principles of Natural Justice: The Tribunal found that the demand under Section 28 was not maintainable as the provisional assessment had not been finalised, and no SCN was issued. ​ This was deemed a clear violation of the Principles of Natural Justice. ​
    • Legal Precedents: The Tribunal referred to several landmark judgments, including ITC Ltd (2006) and Gupta Smelters Pvt Ltd (2019), which established that finalisation of provisional assessment is a prerequisite for issuing a demand under Section 28. ​ The Tribunal emphasized that the absence of a final assessment order and SCN rendered the proceedings invalid.

    Final Verdict

    The Tribunal concluded that the proceedings initiated by the Revenue were vitiated due to the inordinate delay in finalising the provisional assessment and the lack of adherence to procedural requirements under Section 28. ​ Consequently, the impugned orders were set aside, and the appeal was allowed. ​

    Key Takeaways

    This judgment underscores the importance of adhering to statutory timelines and procedural requirements under the Customs Act, 1962. ​ It reiterates that:

    1. Provisional assessments must be finalised within a reasonable time frame, as per CBEC guidelines. ​
    2. Issuance of a Show Cause Notice is mandatory under Section 28 for recovery of differential duty after finalisation of provisional assessments. ​
    3. The Principles of Natural Justice must be upheld in all proceedings, including the right to cross-examination.

    The case serves as a reminder to both importers and the Revenue to ensure compliance with legal provisions and procedural fairness in customs assessments and disputes. It also highlights the role of judicial precedents in shaping the interpretation and application of statutory provisions.

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    Source: CESTAT Chandigarh

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  • CESTAT Kolkata Quashes Confiscation and Penalties in Betel Nut Smuggling

    CESTAT Kolkata Quashes Confiscation and Penalties in Betel Nut Smuggling

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 22.11.2025

    CESTAT Kolkata Quashes Confiscation and Penalties in Betel Nut Smuggling

    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, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has delivered a significant judgment in favor of two appellants, proprietresses of M/s Kumar Traders & Company and M/s Kumar Enterprise, respectively. The case revolved around the alleged smuggling of betel nuts and the subsequent confiscation of goods and imposition of penalties under the Customs Act, 1962. ​

    Background of the Case

    The case originated from an investigation by the Directorate of Revenue Intelligence (DRI) into the supply of betel nuts stored in 54 containers. ​ The DRI suspected that the goods were of foreign origin and smuggled into India without proper customs duty payment. ​ Samples from 51 containers were sent to the Arecanut Research & Development Foundation (ARDF) for testing, which concluded that the betel nuts in 46 containers were of foreign origin. ​ Based on this report, the DRI seized the goods and issued Show Cause Notices to the appellants, proposing confiscation and penalties under Section 112(b) of the Customs Act, 1962.

    The adjudicating authority ordered the absolute confiscation of the goods but allowed redemption upon payment of fines. Penalties of Rs. ​ 40 lakhs each were imposed on the appellants. ​ The appellants challenged the order, asserting that the goods were purchased from domestic sources and that the ARDF was not a competent authority to determine the foreign origin of the betel nuts. ​

    Tribunal’s Observations

    After hearing arguments from both sides, the Tribunal found that the confiscation of the betel nuts was based solely on the ARDF report, which lacked evidentiary value. ​ The Tribunal noted that the ARDF did not have the infrastructure to conclusively determine the foreign origin of the goods. ​ Furthermore, the betel nuts were not notified under Section 123 of the Customs Act, meaning the burden of proof to establish their smuggled nature lay with the Revenue. ​ The Tribunal held that the Revenue failed to provide tangible evidence to substantiate its claims, relying instead on mere suspicion and the inconclusive ARDF report. ​

    The Tribunal also referred to several precedents, including judgments from the Hon’ble High Courts of Allahabad, Meghalaya, and Calcutta, which emphasized that the burden of proof lies with the Revenue to establish the smuggled nature of goods. The absence of foreign markings on the seized goods and the appellants’ submission of valid purchase receipts further weakened the Revenue’s case.

    Final Order

    In its final order, the Tribunal set aside the confiscation of the betel nuts and the penalties imposed on the appellants. ​ It ruled that the goods were not liable for confiscation under the Customs Act, 1962, and that no penalties could be imposed as there was no violation of the Act. ​

    Key Takeaways

    This judgment underscores the importance of due process and the need for the Revenue to provide concrete evidence when alleging smuggling. ​ It also highlights the limitations of relying solely on inconclusive reports from non-accredited institutions like the ARDF. ​ The decision serves as a reminder that the burden of proof lies with the authorities, especially when dealing with non-notified goods under Section 123 of the Customs Act. ​

    Conclusion

    The CESTAT Kolkata’s decision is a significant win for the appellants and sets a precedent for similar cases in the future. It reinforces the principle that allegations of smuggling must be backed by substantial evidence and not mere assumptions. ​ This judgment is a testament to the importance of upholding justice and ensuring that legal processes are followed meticulously.

    Source: CESTAT Kolkata

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  • CESTAT Delhi Sets Aside Penalties and Confiscation in Mercedes Benz Import

    CESTAT Delhi Sets Aside Penalties and Confiscation in Mercedes Benz Import

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 22.11.2025

    CESTAT Delhi Sets Aside Penalties and Confiscation in Mercedes Benz 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.com or on his Mobile +91-9999005379.

    In a significant judgment delivered on November 20, 2025, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, provided relief to Watermark Systems (India) Private Limited and Appellant in a long-standing customs appeal case. The case revolved around the import of a Mercedes Benz CLS 320 CDI car, which was alleged to have been mis-declared as “new” to claim benefits under a customs notification, leading to undervaluation and evasion of duty. ​

    Background of the Case ​

    The case dates back to 2008 when the car was imported by Seller, the importer-on-record, through New Customs House, New Delhi. ​ The declared value of the car was β‚Ή20,47,300, which was later reassessed to β‚Ή28,83,435 by the Commissioner of Customs (Imports). The car was confiscated under Section 111(d) of the Customs Act, 1962, with an option to redeem it on payment of a fine of β‚Ή6,00,000, along with a penalty of β‚Ή4,00,000 under Section 112(a). ​

    The car was subsequently registered in India in the name of Seller and later purchased by Appellant through Watermark Systems (India) Pvt. ​ Ltd. for β‚Ή54,00,000. ​ Investigations by the Directorate of Revenue Intelligence (DRI) in 2011 revealed alleged mis-declaration and undervaluation of imported luxury cars, including the Mercedes Benz in question. ​ A show-cause notice was issued in 2013, and the car was seized by DRI. ​ The matter was adjudicated afresh in 2016, leading to penalties of β‚Ή10,00,000 under Section 112(a) and β‚Ή5,00,000 under Section 114AA of the Customs Act against Watermark Systems and Appellant.

    Key Arguments Presented

    The appellants challenged the penalties imposed, arguing that the DRI lacked jurisdiction to issue the show-cause notice under Section 28 of the Customs Act. ​ They contended that the Additional Director of DRI was not a “proper officer” authorized to demand duty. ​ However, this issue was settled by the Supreme Court in its review judgment dated November 7, 2024, which confirmed that DRI officers are indeed proper officers under Section 28. ​

    The appellants also argued that they were bona fide purchasers of the car and had no role in the alleged mis-declaration or undervaluation during its import. ​ They emphasized the absence of evidence proving their involvement in any wrongdoing. ​ The appellants relied on various judicial precedents, including the Supreme Court’s decision in Hindustan Steel Ltd. vs. State of Orissa, which held that penalties should not be imposed for technical or venial breaches of legal provisions. ​

    Tribunal’s Observations and Final Decision

    The Tribunal carefully examined the facts and legal arguments presented by both parties. ​ It noted that the car had already been confiscated and released on payment of redemption fine and penalty, and as per established legal principles, it could not be reconfiscated. ​ The Tribunal referred to the Supreme Court’s decision in Mohan Meakin Ltd., which held that subsequent purchasers of redeemed goods cannot be penalized for undervaluation or mis-declaration during import. ​

    Regarding the penalties imposed on the appellants, the Tribunal found that there was no evidence of any act or omission by the appellants that rendered the goods liable to confiscation under Section 111 of the Customs Act. ​ It also noted that the appellants had purchased the car in a bona fide manner and were not involved in the import process or any fraudulent activities. ​

    In light of these findings, the Tribunal set aside the impugned order and allowed the appeals, providing relief to Watermark Systems (India) Pvt. ​ Ltd. and Appellant.​

    Implications of the Judgment

    This landmark decision reinforces the principle that bona fide purchasers of goods cannot be penalized for alleged irregularities during the import process, especially when they have no role in the import or any fraudulent activities. ​ It also clarifies the scope of penalties under Sections 112(a) and 114AA of the Customs Act, emphasizing the need for concrete evidence and the presence of mens rea for imposing penalties. ​

    The judgment serves as a reminder to authorities to ensure due diligence during the adjudication process and highlights the importance of adhering to principles of natural justice. ​ It also provides clarity on the jurisdiction of DRI officers under Section 28 of the Customs Act, following the Supreme Court’s review judgment.

    Connected Matter

    Bombay High Court Holds Subsequent Buyer Not Liable for Customs Duty

    Source: CESTAT Delhi

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  • CESTAT Delhi Upholds Fulfillment of Export Obligations Under EPCG Scheme

    CESTAT Delhi Upholds Fulfillment of Export Obligations Under EPCG Scheme

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 21.11.2025

    CESTAT Delhi Upholds Fulfillment of Export Obligations Under EPCG 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.com or on his Mobile +91-9999005379.​ ​

    The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment in the case of Interglobe Enterprises Limited vs. Commissioner of Customs, New Delhi. This case revolved around the import of three cars under the Export Promotion Capital Goods (EPCG) scheme and the fulfillment of export obligations. ​ The decision, pronounced on November 20, 2025, has far-reaching implications for businesses operating under the EPCG scheme and highlights the interplay between customs authorities and the Directorate General of Foreign Trade (DGFT).

    Background of the Case

    Interglobe Enterprises Limited, engaged in the tours and travel services business, imported three cars under the EPCG scheme, availing concessional customs duty benefits. The company claimed that the cars were used for tourism-related services to earn foreign exchange, thereby fulfilling the export obligations under the scheme. ​ While the DGFT issued Export Obligation Discharge Certificates (EODCs) for two licenses, the third license’s EODC was delayed due to investigations initiated by the Directorate of Revenue Intelligence (DRI). ​

    The DRI alleged misuse of the imported cars and non-compliance with EPCG scheme conditions, leading to a demand for customs duty, interest, and penalties. ​ The Commissioner of Customs upheld these allegations, prompting Interglobe Enterprises to file an appeal before the CESTAT. ​

    Key Arguments and Findings

    1. DGFT’s Role in Export Obligation Certification: The appellant argued that the DGFT, as the competent authority, had already issued EODCs for two licenses and clarified that export obligations could be fulfilled through foreign exchange earnings from tourism-related services, not exclusively from the use of imported cars. ​ The Tribunal agreed, emphasizing that the issuance of EODCs by DGFT is determinative of export obligation fulfillment. ​
    2. Registration of Imported Cars: The DRI contended that the cars were registered as private vehicles, not commercial/tourist vehicles, violating EPCG scheme conditions. ​ However, the Tribunal noted that the requirement for commercial registration was introduced only in 2006, whereas the cars were imported between 2001 and 2003. ​ Thus, the registration as private vehicles did not invalidate the appellant’s compliance with the scheme. ​
    3. Use of Imported Cars for Tourism Services: The Tribunal examined whether the foreign exchange earnings were directly attributable to the use of the imported cars. ​ It concluded that the appellant had provided tourism-related services, including transportation, hotel accommodation, and food, as part of an overall package. The DGFT had clarified that such earnings could be considered for export obligation fulfillment, further supporting the appellant’s case. ​
    4. Applicability of the Surya Samundra Case: The department relied on the Supreme Court’s decision in the Surya Samundra Holiday Resorts Pvt. ​ Ltd. case, which emphasized direct use of imported capital goods for fulfilling export obligations. ​ However, the Tribunal distinguished the facts of the present case, noting that the cars were used for tourism services and not transferred or misused, unlike in the Surya Samundra case.
    5. Time-Barred Demand: The appellant argued that the demand was time-barred, as the cars were imported between 2001 and 2003, and the show cause notice was issued in 2006. ​ The Tribunal agreed, finding no evidence of willful misrepresentation or suppression of facts by the appellant.

    Final Decision

    The Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. ​ It reaffirmed the principle that once EODCs are issued by DGFT, they are deemed to signify the completion of export obligations. ​

    Implications of the Judgment

    This landmark decision underscores the importance of DGFT’s role in certifying export obligation fulfillment under the EPCG scheme. ​ It clarifies that customs authorities cannot override DGFT’s certification without valid reasons. ​ Additionally, the judgment highlights the need for clear and consistent policy guidelines to avoid disputes over compliance with EPCG scheme conditions.

    Key Takeaways for Businesses

    1. EODC as a Determinative Factor: Businesses can rely on EODCs issued by DGFT as conclusive proof of export obligation fulfillment, provided there is no evidence of misuse or fraud. ​
    2. Clarity on Registration Requirements: The judgment provides clarity on the registration of vehicles imported under the EPCG scheme, emphasizing that conditions introduced after the import cannot be applied retrospectively. ​
    3. Holistic View of Export Earnings: The Tribunal recognized that foreign exchange earnings from tourism-related services, including transportation, hotel accommodation, and food, can be considered for export obligation fulfillment.

    Conclusion

    The CESTAT’s decision in Interglobe Enterprises Limited vs. Commissioner of Customs is a significant milestone in the interpretation of the EPCG scheme. ​ It reinforces the principle that businesses operating under the scheme must be given the benefit of clarifications issued by DGFT and ensures that compliance is assessed fairly and transparently. ​ This judgment will undoubtedly serve as a guiding precedent for similar cases in the future.

    Source: CESTAT Delhi

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  • CESTAT Ahmedabad Grants 12% Interest on Revenue Deposit

    CESTAT Ahmedabad Grants 12% Interest on Revenue Deposit

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 21.11.2025

    CESTAT Ahmedabad Grants 12% Interest on Revenue Deposit

    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, Excise & Service Tax Appellate Tribunal (CESTAT) West Zonal Bench at Ahmedabad recently delivered a significant judgment in the case of KLJ Plasticizers Ltd. vs. Commissioner of Customs, Kandla. ​ This case revolved around the appellant’s claim for interest on a refund of Rs. ​ 5 crore, which was deposited during an investigation into alleged duty evasion. ​ The judgment, delivered by Hon’ble, Member (Judicial), has set a precedent for granting interest on revenue deposits, even in the absence of explicit statutory provisions.

    Background of the Case

    The appellant, KLJ Plasticizers Ltd., had deposited Rs. 5 crore on September 18, 2014, during an investigation into duty evasion. The investigation was based on the premise that the actual consumption of certain inputs was less than the Standard Input Output Norms (SION). ​ After a series of legal proceedings, the CESTAT ruled in favor of the appellant on March 25, 2019, stating that the revenue could not demand duty based on actual consumption being less than SION norms if the export obligations were fulfilled. ​

    Following this favorable ruling, KLJ Plasticizers Ltd. filed a refund claim for the deposited amount, which was sanctioned by the adjudicating authority on November 8, 2019. ​ However, the appellant later filed an application on January 21, 2020, seeking interest on the refunded amount for the period between the deposit date and the refund date. ​ This claim was rejected by the adjudicating authority and subsequently by the Commissioner (Appeals), leading the appellant to approach the CESTAT.

    Key Issues in the Case

    The case raised two critical legal questions:

    1. Jurisdiction of the Single Member Bench: Could a Single Member Bench decide the matter, given the potential for the refund amount to exceed Rs. ​ 50 lakh? ​
    2. Entitlement to Interest on Revenue Deposits: Was the appellant entitled to interest on the refunded deposit, even though the Customs Act, 1962, does not explicitly provide for such interest? ​

    CESTAT’s Observations and Ruling ​

    Jurisdiction of Single Member Bench ​

    The Tribunal clarified that disputes regarding interest do not fall under the excluded categories mentioned in Section 129C(4) of the Customs Act, 1962. ​ Since interest is neither duty, fine, nor penalty, the Single Member Bench has jurisdiction to decide the matter. ​ The Tribunal cited precedents, including Dhampur Sugar Mills Ltd. vs. Commissioner of Central Excise, Meerut, to support this interpretation. ​

    Entitlement to Interest ​

    The Tribunal acknowledged that the Customs Act, 1962, does not explicitly prescribe interest on revenue deposits. ​ However, it emphasized the principle of compensation for the deprivation of the use of money wrongfully retained by the Revenue. ​ The Tribunal relied on landmark judgments, including Sandvik Asia Ltd. vs. Commissioner of Income Tax and Parle Agro Pvt. Ltd. vs. Commissioner, CGST, which established the doctrine of compensation for unjust retention of funds. ​

    The Tribunal also noted that various High Courts and CESTAT benches have consistently granted interest at 12% per annum on revenue deposits in similar cases. ​ It held that the appellant was entitled to interest at 12% per annum on the refunded amount from the date of deposit (September 18, 2014) to the date of refund (November 8, 2019).

    Implications of the Judgment

    This decision is a landmark in the realm of indirect tax law, as it reinforces the principle that taxpayers are entitled to compensation for the wrongful retention of their funds by the Revenue. It also clarifies the jurisdiction of Single Member Benches in cases involving interest disputes, ensuring that such matters can be resolved efficiently. ​

    The judgment sets a precedent for future cases involving claims for interest on revenue deposits, providing clarity and consistency in the application of the law. ​ It also underscores the importance of judicial discipline, as the Tribunal followed established precedents from the Supreme Court and High Courts. ​

    Conclusion

    The CESTAT’s decision in the KLJ Plasticizers Ltd. case is a significant step toward ensuring fairness and justice in tax-related disputes. By granting interest on revenue deposits at 12% per annum, the Tribunal has upheld the principle of compensating taxpayers for the deprivation of their funds. ​ This judgment serves as a reminder of the importance of adhering to judicial precedents and the doctrine of equity in cases where statutory provisions may be silent. ​

    This case is a testament to the evolving jurisprudence in indirect tax laws and highlights the role of judicial bodies in safeguarding taxpayer rights. ​ It is a must-read for legal professionals, businesses, and anyone interested in understanding the nuances of tax law in India.

    Connected Matter

    Kerala High Court Orders 12% Interest on Delayed Refund of Pre-Deposit

    Source: CESTAT Ahmedabad

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