Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 03.11.2026
CESTAT Delhi- Related-Party Imports Alone Cannot Justify Rejection of Declared Value
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, has allowed the appeals of Diyas Mantra Lighting Pvt. Ltd. and its directors, ruling that Customs had not established that the companyβs relationship with its UK supplier influenced the declared import prices.
Background of the dispute
The case arose from imports of electric decorative lighting fixtures under the brands βDiyasβ and βmAntra.β Diyas Mantra Lighting Pvt. Ltd. filed a bill of entry at ICD Tughlakabad on 21 January 2015 for clearance of a consignment valued at Rs. 19.01 lakh.
Customs alleged that the importer had not declared the brands on its import documents and had undervalued the goods to reduce customs duty. The department also examined earlier imports and contended that the companyβs UK supplier, Inspired Lighting Ltd., was a related party.
The department relied on several circumstances to support its case, including common directorship and shareholding involving Anil Kumar Anand, financial dealings between the entities, and catalogue references identifying Diyas Mantra as the India office of the UK supplierβs brand.
Earlier proceedings and Supreme Court remand
In the original adjudication, Customs rejected the declared value of the live consignment and 20 earlier bills of entry. It re-determined the assessable value using a deductive method based on domestic sale prices, imposed differential duty, ordered confiscation, levied redemption fines, and imposed penalties on the importer and its directors.
CESTAT initially upheld that decision in 2017. However, the Supreme Court set aside both the original Customs order and CESTATβs earlier ruling in April 2019. It held that the Customs Valuation Rules require a sequential approach:
First, authorities must assess whether transaction value can be accepted under Rule 3.
If it cannot, they must examine identical goods under Rule 4 and similar goods under Rule 5.
Only after those methods are unavailable may they proceed to later valuation methods, including deductive valuation under Rules 7 to 9.
The Supreme Court observed that data from non-related suppliers in China and Spain could be relevant to the valuation exercise, subject to appropriate adjustments.
Customsβ de novo order
After remand, Customs again held that the UK supplier and Diyas Mantra were related parties and that the relationship had influenced prices. It rejected the declared values for the live consignment and 13 past UK bills of entry.
The de novo order:
Re-determined the live consignmentβs value from Rs. 19.01 lakh to Rs. 52.22 lakh.
Re-determined the value of 13 earlier UK imports from Rs. 2.16 crore to Rs. 4.46 crore.
Confirmed differential duty of Rs. 9.53 lakh for the live shipment and Rs. 74.85 lakh for the past UK imports.
Imposed redemption fines of Rs. 10 lakh and Rs. 89 lakh in relation to the goods.
Imposed equivalent penalties on the company under Section 114A of the Customs Act.
Imposed penalties of Rs. 10 lakh each on directors Rahul Mehta and Anil Kumar Anand under Section 112(b).
At the same time, Customs dropped a differential-duty demand of Rs. 48.41 lakh concerning seven imports from Spain and China, finding no evidence that those suppliers were related to the importer.
CESTATβs reasoning
CESTAT found that, even if the importer and the UK supplier were related, that fact alone did not justify rejection of the transaction value. Under Rule 3(3)(a) of the Customs Valuation Rules, Customs needed to establish that the relationship actually affected the price.
The Tribunal noted a central inconsistency in the departmentβs case: Customs accepted the transaction values for comparable goods imported from unrelated suppliers in Spain and China, but did not demonstrate how the UK prices were distorted by the related-party relationship.
The Tribunal emphasized that the declared transaction value is normally the basis for customs assessment. To reject it, the department must provide cogent evidence that the declared price is not genuine or that the relationship affected pricing. Mere suspicion, related-party status, or assertions of possible financial flow-back are insufficient without a demonstrated impact on the import price.
CESTAT also relied on the Supreme Courtβs earlier direction that the valuation rules must be applied sequentially. It held that Customs could not move to a deductive valuation method under Rules 7 and 9 without adequately establishing why Rules 3 to 5 could not support the assessment.
Final outcome
CESTAT set aside the entire adverse order against Diyas Mantra Lighting Pvt. Ltd. and its directors. Specifically, it:
Accepted the declared value for the live consignment covered by Bill of Entry No. 8059523 dated 21 January 2015.
Set aside the re-determination of value for the UK imports.
Set aside the differential-duty demand and related interest.
Set aside confiscation of the live shipment and goods seized from the importerβs godown.
Set aside redemption fines.
Set aside penalties imposed on the importer under Section 114A.
Set aside personal penalties imposed on the two directors under Section 112(b).
The appeals were allowed by Final Order Nos. 51642-51644/2026, pronounced on 29 October 2026.
Key legal takeaway for importers
The ruling reinforces that a related-party relationship does not automatically invalidate an import transaction value. Customs must establish, with evidence, that the relationship influenced the price. Where comparable imports from unrelated suppliers are available and accepted, authorities must meaningfully address that evidence before rejecting the declared value or resorting to alternative valuation methods.
For customs valuation disputes, the decision underlines two important safeguards: transaction value remains the primary method of valuation, and the Customs Valuation Rules must be applied in their prescribed sequence.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 02.11.2026
Telangana High Court Quashes Customs Confiscation of Used MFD Imports
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Telangana High Court has ruled that a later amendment imposing a 100-unit-per-model annual threshold could not be used to confiscate Arka Business Solutionsβ consignment of used multi-function devices (MFDs) imported before that amendment took effect.
Background of the dispute
Arka Business Solutions, an importer and seller of used digital multi-function devices, imported 73 used MFDs from the United States. The company filed its Bill of Entry on 4 June 2026 at ICD Thimmapur.
Customs examined the consignment on 19 June 2026. A Chartered Engineer appointed at Customsβ instance found that the machines were functional second-hand capital goods, had more than six years of residual life, were neither hazardous waste nor electronic waste, and each weighed more than 80 kg.
Those findings were significant because the weight criterion placed the devices within the exemption for Highly Specialised Equipment (HSE) under the Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2021 (CRO 2021).
Customsβ decision to confiscate the goods
Despite the technical certification, Customs issued a show-cause notice alleging that the importer required DGFT authorisation under the Foreign Trade Policy, 2023, and had not met BIS registration requirements. The adjudicating authority subsequently divided the 73 machines into two categories:
36 units were treated as prohibited goods because their models allegedly exceeded a 100-unit annual threshold when imports by all importers across India were counted. These units could be redeemed only for re-export, subject to a redemption fine of Rs. 1,33,257.
37 units were treated as restricted goods. Customs allowed redemption for home consumption on payment of a Rs. 3,95,021 redemption fine.
The order was based on the view that the 100-unit threshold under the amended Paragraph 8 of CRO 2021 applied nationally and across unrelated importers.
Courtβs findings: the amendment could not operate retrospectively
The High Court set aside the confiscation order, holding that the amendment adding the quantitative limit came into force only on 15 June 2026. Since Arka Business Solutions had filed its Bill of Entry on 4 June 2026, the amended provision did not govern the import.
The Court emphasized that subordinate legislation is presumed to operate prospectively unless it clearly states otherwise. The notification did not contain language giving it retrospective effect.
Under Section 15 of the Customs Act, the relevant legal position for goods entered for home consumption is determined on the date the Bill of Entry is presented. Accordingly, later events, including the Customs examination, show-cause notice, and adjudication order, could not subject the earlier import to a restriction that was not in force at the relevant time.
Why the 100-unit interpretation was also flawed
The Court found additional defects in Customsβ reasoning. The language of the amended provision referred to equipment βmanufactured/imported in less than 100 units per model per year,β but did not expressly create an industry-wide cap shared by all importers.
The Court observed that Customs had not explained why one importer should lose an exemption because unrelated importers had brought in the same model. A restrictive interpretation that limits an exemption on the basis of third-party imports required clear statutory language, which was absent.
The Court also noted that the show-cause notice did not tell the importer that eligibility would be tested using all-India import data from other importers. Deciding the case on a basis not disclosed in the notice violated the principle that a noticee must know the case it has to answer.
HSE exemption meant the devices were freely importable
The Court reaffirmed its earlier interpretation of the relationship between CRO 2021 and the Foreign Trade Policy. Where used MFDs satisfy the HSE exemption, the compulsory registration requirement does not apply. As a result, the import cannot be treated as restricted under the provision dealing with second-hand goods subject to CRO compliance.
Instead, qualifying goods fall within the category of freely importable second-hand capital goods. Since the Chartered Engineer had confirmed the devices met the weight threshold and were functional capital goods rather than e-waste, there was no basis to classify them as prohibited or restricted.
The Court therefore found no basis for confiscation under Section 111(d) of the Customs Act. It also held that the record did not support allegations of misdeclaration under Section 111(m) or a penalty under Section 112.
Outcome and release conditions
The High Court allowed the writ petition and quashed the Customs order to the extent it:
classified the goods as prohibited or restricted;
confiscated them under Section 111(d);
imposed redemption fines; and
imposed any related penalty.
Customs was directed to release the goods covered by the Bill of Entry, subject to conditions adopted from an earlier Arka Business Solutions decision. These conditions require the importer to deposit the enhanced duty amount after Customs quantifies it, while preserving the partiesβ rights to pursue valuation issues separately. The Court also stated that any demurrage-waiver request must be considered objectively.
Key legal takeaway
The ruling confirms that import restrictions and exemption conditions must be assessed under the law in force when the Bill of Entry is filed. Customs cannot apply a later quantitative restriction retrospectively, expand an exemption limitation through an unclear all-India interpretation, or rely on grounds that were not put to the importer in the show-cause notice.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 30.10.2026
CESTAT Mumbai- Customs Cannot Calculate Import IGST on Exempted BCD
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The CESTAT Mumbai has held that where imports qualify for a Basic Customs Duty (BCD) exemption under a valid Duty-Free Import Authorisation (DFIA), IGST must be calculated without adding the notional tariff-rate BCD to the assessable value.
In TGI International v. Commissioner of Customs, Nhava Sheva-III, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai set aside an order that had rejected the importerβs challenge to IGST assessments on 105 Bills of Entry. The Tribunal ruled that the relevant statutory test is the customs duty actually βchargeableβ after giving effect to a valid exemption notification, not the BCD shown in the tariff schedule.
Background: 105 DFIA-based fabric imports
TGI International, a fabric trader, imported polyester viscose fabrics through 105 Bills of Entry. It claimed full exemption from BCD under Notification No. 19/2015-Customs dated 1 April 2015, which applies to eligible imports made against a valid DFIA issued by the Directorate General of Foreign Trade (DGFT).
The DFIA scheme permits duty-free import of specified inputs subject to prescribed conditions, including production of the authorisation at clearance and endorsements relating to the export obligation and resultant product. In this matter, the Tribunal found that the importer had complied with the applicable DFIA and notification requirements.
Although the BCD claimed on the imports was nil, the Indian Customs EDI System (ICES) calculated IGST by adding BCD at the normal tariff rate of 20% to the transaction value. The importer paid the system-calculated IGST because the Bills of Entry could not be amended through the system, then appealed the assessments.
The core legal issue
The dispute concerned the meaning of βduty of customs chargeableβ when determining the value on which IGST is levied on imported goods.
Section 3(8) of the Customs Tariff Act, 1975 requires IGST to be calculated on an aggregate value comprising:
the value of imported goods determined under Section 14 of the Customs Act, 1962; and
any customs duty chargeable on the goods under Section 12 of the Customs Act.
TGI International argued that once the DFIA exemption reduced BCD to zero, there was no BCD amount to add to the assessable value for IGST. Customs authorities, however, treated the tariff-rate BCD as part of the IGST base, even though the importer did not pay that duty in cash.
Tribunalβs findings
Effective duty, not tariff duty, governs the IGST base
The Tribunal held that an exemption notification issued under Section 25 of the Customs Act must be given effect while determining the customs duty βchargeableβ under Section 12. Although the tariff rate of BCD on the goods was 20%, the effective BCD was nil because the imports were covered by the DFIA exemption.
Accordingly, the Tribunal concluded that the effective duty liability, rather than the unadjusted tariff rate, must be added to the import value when calculating IGST.
No duty debit was made under the DFIA
The Commissioner (Appeals) had reasoned that the customs duty was effectively discharged through debit in the DFIA authorisation. CESTAT rejected this conclusion as factually unsupported.
The Bills of Entry showed βzeroβ against the duty-debit field. The DFIA documentation recorded the permitted CIF value and quantity of dyed polyester fabrics, but did not require debit of the BCD amount as a precondition for the exemption. The Tribunal therefore found that it was incorrect to treat the tariff BCD as a duty discharged through the authorisation.
ICES could not override the legal valuation rule
The Tribunal noted that ICES had added a notional BCD amount while computing IGST and had not taken account of the exemption claimed under Notification No. 19/2015-Customs. System-generated assessments cannot displace the statutory requirement to use the duty actually chargeable after the applicable exemption is applied.
Reliance on earlier decisions
CESTAT found support in earlier Tribunal rulings that distinguish the tariff rate from the effective rate after exemptions:
In Morarjee Brembana Ltd., the Tribunal held that only the effective customs duty, after applying the applicable exemption notification, should be added for calculating additional customs duty.
In Parasrampuria International, the Tribunal held that where BCD is nil due to an exemption, no BCD amount can be added to the assessable value merely because a tariff rate otherwise exists.
The Revenue relied on Poddar Pigments Ltd., but CESTAT held that the case was distinguishable because it concerned interest on delayed IGST payment, not the correct BCD component for IGST valuation.
Why the ruling matters
The decision clarifies an important valuation principle for DFIA and other exemption-based imports: the IGST base must reflect the effective customs-duty liability, not a hypothetical duty calculated at the tariff rate.
For eligible DFIA imports, this means a nil BCD exemption should result in zero BCD being added to the IGST valuation base. The ruling also reinforces that customs assessment systems must apply the substantive benefit of a valid exemption notification rather than mechanically loading tariff-rate duty into the calculation.
Conclusion
By allowing TGI Internationalβs appeals, CESTAT Mumbai confirmed that a valid BCD exemption under the DFIA scheme must be fully reflected in IGST valuation. Where the effective BCD is nil, Customs cannot add the tariff-rate BCD notionally to inflate the IGST payable on imported goods.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 28.10.2026
CESTAT Kolkata Upholds Classification of Ice-Cream Making Machinery Under CTH 8438
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata has dismissed six Revenue appeals against J.B. Pen Mart, holding that the disputed imported ice-cream making machinery should be classified under Customs Tariff Heading (CTH) 8438 rather than CTH 8418. The Tribunal also rejected Customsβ enhancement of the declared import value because the statutory reassessment procedure was not followed.
The dispute: classification and valuation of imported machinery
The case concerned six Bills of Entry filed by J.B. Pen Mart for imported ice-making and ice-cream making equipment during 2017 and 2018. The importer had sought classification under CTH 8438 80 90, covering machinery used in the industrial preparation or manufacture of food and drink.
Customs authorities reclassified the goods under CTH 8418 69 90, treating them as ice-cream machines or refrigeration-related equipment. They also enhanced the declared value of the imports, resulting in an aggregate differential duty demand of Rs. 12,27,374.98.
J.B. Pen Mart paid the additional duty to secure clearance of the goods and avoid demurrage, but did so under protest. The company challenged both the classification and the valuation before the Commissioner (Appeals), who ruled in its favour. The Revenue then appealed to CESTAT.
Tribunalβs finding: no valid reassessment without a speaking order
A central issue was the Customs departmentβs failure to issue a speaking order under Section 17(5) of the Customs Act, 1962.
Where Customs reassesses goods contrary to an importerβs self-assessment on classification or value, the proper officer must issue a reasoned order within 15 days unless the importer has expressly accepted the reassessment in writing. In this case, the Tribunal found that no such order had been issued.
The Tribunal rejected the Revenueβs argument that payment of the revised duty amounted to acceptance. It noted that J.B. Pen Mart had paid under protest, sought to avoid port-related charges, and subsequently challenged the reassessment. These facts showed that the importer had not accepted the revised classification or enhanced value.
As a result, the Tribunal held that the reassessment was unsustainable for breach of statutory procedure and principles of natural justice.
Why CTH 8438 was preferred over CTH 8418
The Tribunal also found that the Departmentβs own past treatment of comparable machinery supported classification under CTH 8438.
The record showed a consistent history of orders and assessments treating similar ice-cream making equipment as machinery for food preparation under CTH 8438, including:
A 2008 departmental review stating that ice-cream candy making machinery was classifiable under CTH 8438.
A 2012 Order-in-Appeal that classified an integrated ice-cream production system under CTH 8438 80 90.
The 2018 appellate order in J.B. Pen Martβs own matter.
A 2025 Order-in-Appeal involving the same importer, which again held that complete ice-cream making and ice-cube machines belonged under CTH 8438 80 90.
A subsequent October 2018 clearance of identical goods for J.B. Pen Mart under CTH 8438.
The Tribunal distinguished complete machinery used to prepare and dispense edible products from ordinary refrigeration equipment. While Heading 8418 covers refrigerators, freezers, and similar cooling equipment, the imported machines were designed for the production of ice cream and ice cubes as food products. Their principal function was food preparation, making CTH 8438 the more appropriate heading.
Inconsistent departmental practice benefited the importer
CESTAT observed that Customs had taken divergent positions over the years, classifying similar goods under CTH 8438 in 2008, 2012, 2018, and 2025, while seeking classification under CTH 8418 for the disputed 2017β2018 imports.
The Tribunal held that Revenue could not selectively classify identical or similar goods under different tariff headings without cogent reasoning. Because the Department itself had created uncertainty through inconsistent practice, the benefit of that confusion had to go to the importer.
The Tribunal also noted that prior appellate orders supporting CTH 8438 had not been effectively challenged or stayed by the Department. Those orders therefore continued to carry weight in determining the correct classification.
Value enhancement was set aside
The Tribunal upheld the Commissioner (Appeals)β decision to reject the enhanced import values. Customs had not provided evidence showing why the transaction values declared by J.B. Pen Mart should be rejected, nor had it disclosed a lawful method for determining the enhanced values.
The order emphasizes that transaction value cannot be discarded merely on assumption or routine assessment practice. Customs must first establish legally valid grounds under the Customs Valuation Rules, 2007. Comparable-import data, if relied upon, must be supported by evidence regarding quality, quantity, country of origin, and timing of imports.
In this case, there was no evidence that the invoices were unreliable, that the buyer and seller were related, or that any amount over the invoice price had been paid. The failure to issue a Section 17(5) speaking order independently made the value enhancement invalid.
Key takeaways from the decision
Classification must reflect the machineβs principal function. Complete machinery designed for making ice cream and ice cubes as edible products may fall under CTH 8438 as food-preparation machinery rather than under CTH 8418 as cooling equipment.
A speaking order is mandatory for disputed reassessments. Customs must issue a reasoned order under Section 17(5) when it changes declared classification or value without the importerβs written acceptance.
Payment to avoid demurrage is not acceptance. An importerβs payment of additional duty, particularly under protest, does not eliminate its right to challenge reassessment.
Declared value needs evidence to be rejected. Customs cannot enhance value without lawful reasons, supporting evidence, and compliance with the Customs Valuation Rules.
Consistency in assessments matters. When the Department has repeatedly accepted a particular classification for similar goods, it must provide strong reasons and follow due process before departing from that position.
CESTAT Kolkata therefore dismissed the Revenueβs appeals and confirmed the relief granted to J.B. Pen Mart: classification under CTH 8438 and assessment at the importerβs declared values.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 26.10.2026
CESTAT Kolkata: Foreign Origin and Smuggled Character Are Two Distinct Questions Under Customs Law
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata has allowed nine connected appeals concerning the seizure of 39.156 metric tonnes of betel nuts, ruling that Customs did not establish that the goods were of foreign origin or had been smuggled into India.
In Final Order Nos. 76499-76507/2026, pronounced on 15 October 2026, the Tribunal set aside the confiscation order and all related penalties. The decision underscores an important principle in customs law: for non-notified goods such as betel nuts, the burden remains on the Revenue to prove smuggling with reliable evidence rather than assumptions, inconclusive reports, or uncorroborated statements.
Background: Two Trucks Intercepted Near Siliguri
The case arose from a Directorate of Revenue Intelligence (DRI) operation on 3 March 2019. Acting on intelligence that allegedly smuggled betel nuts from Myanmar were being transported through the Siliguri area, officers intercepted two trucks at Goaltuli More on the Fulbari-Ghoshpukur Bypass Road in Darjeeling district, West Bengal.
The trucks, bearing registration numbers AP-27TX-6129 and WB-65C-5608, were carrying betel nuts stated to have been loaded at Vairengte, Mizoram, for delivery to consignees in Hooghly and Nabadwip, West Bengal. The drivers produced transport documents, tax invoices, consignment notes and e-way bills. One consignment was documented as supplied by M/s A.D. Store to M/s Papai Traders, while the other was documented as supplied by M/s Zotei Enterprise to Shri Narayan Karmakar.
Following a search at the DRI office in Siliguri, officers found:
209 bags weighing 16.302 MT in truck AP-27TX-6129;
293 bags weighing 22.854 MT in truck WB-65C-5608; and
A combined quantity of 39.156 MT, valued by Customs at Rs. 1,07,67,900.
Customs seized the goods, the two carrier vehicles, related documents and two mobile phones. The department alleged that the betel nuts had been smuggled from Myanmar through the Indo-Myanmar border and were therefore liable to confiscation under Sections 111(b) and 111(d) of the Customs Act, 1962.
Customs Case and Earlier Orders
The Revenue relied mainly on statements recorded from the truck drivers and helpers, investigation into the consignors and consignees, call-detail records, and a report from the Arecanut Research and Development Foundation (ARDF), Mangalore.
The ARDF report stated that the samples βseems to be of North-East including Myanmar region.β It also noted mould infestation and non-compliance with BIS standards. Customs treated this report, along with the statements and surrounding circumstances, as support for the allegation that the consignments were of Myanmar origin and had entered India illegally.
On 28 August 2020, the adjudicating authority ordered absolute confiscation of the betel nuts and imposed penalties on the persons connected with the consignments. The Commissioner of Customs (Appeals) upheld that order on 23 February 2022.
The affected parties, including Debasish Saha of M/s Papai Traders, Dipak Saha, Narayan Karmakar, Sujit Mitra, Md. Shamim Uddin, Zoramthari, Nilkamal Saha, Anjan Kumar Paul and Lalenkawli, then appealed to CESTAT.
Tribunalβs Findings: Evidence Did Not Prove Smuggling
The Tribunal found that the departmentβs evidence was insufficient to establish either foreign origin or illegal importation.
1. The ARDF opinion was not conclusive
CESTAT noted that the ARDF report did not say the goods were of Myanmar origin. Its wordingβthat the samples βseems to be of North-East including Myanmar regionββwas held to be inconclusive. A reference to a broad region that includes Myanmar could not, by itself, prove that the goods originated in Myanmar.
The Tribunal also relied on judicial precedents that question the evidentiary value of such reports where there is no recognised scientific or objective test capable of determining the territorial origin of betel nuts.
2. Betel nuts are non-notified goods
A central point in the ruling was that betel nuts are not notified under Section 123 of the Customs Act. As a result, the statutory burden does not shift to the person from whom the goods are seized. Instead, Customs must prove that the goods are smuggled.
The Tribunal held that the Revenue could not meet this burden merely by relying on suspicion, a tentative expert opinion, or statements. Even if goods were assumed to be of foreign origin, that alone would not establish illegal importation; positive evidence of smuggling was still required.
3. The seizure location and accompanying documents mattered
The goods were intercepted in West Bengal, not at the Indo-Myanmar border. The trucks also carried invoices and other commercial transport documents identifying Mizoram-based suppliers and West Bengal consignees.
The Tribunal held that these facts did not permit an automatic inference that the goods had crossed the border illegally. The documentary trail could not be displaced without cogent contrary evidence.
4. Precedents required proof, not presumption
The order relied on the Calcutta High Courtβs ruling in Commissioner of Customs, Central Excise and Service Tax, Siliguri v. Subodh Das, which was subsequently affirmed by the Supreme Court. That line of authority establishes that, for non-notified betel nuts, Customs must discharge the burden of proving foreign origin and smuggled character.
The Tribunal also referred to Maqsood Alam v. Commissioner of Customs, Lucknow and Maa Kamakhya Trader v. Commissioner of Customs (Preventive). These decisions emphasise that visual assessments, inconclusive opinions and strong suspicion cannot replace objective evidence of smuggling.
Outcome: Confiscation and Penalties Quashed
CESTAT concluded that the Revenue had failed to prove that the seized betel nuts were smuggled goods. It therefore set aside the confiscation of the 39.156 MT consignment and held that no penalties could be imposed on the appellants.
The Tribunal allowed all connected appeals and overturned the Order-in-Appeal dated 23 February 2022.
Key Legal Significance
This ruling reinforces that customs enforcement actions involving non-notified goods must rest on clear, affirmative and legally reliable evidence. In particular:
A tentative report suggesting a possible regional origin is not proof of foreign origin.
Foreign origin, even if established, does not automatically prove that goods were illegally imported.
For non-notified goods, Customs bears the burden of proving smuggling.
Confiscation and penalties cannot be sustained on presumptions, suspicion or inadequately supported statements.
The decision provides a significant restatement of evidentiary standards in betel-nut smuggling cases, particularly where seizures occur away from an international border and goods are accompanied by commercial documentation.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 22.10.2026
Gujarat HC: Unjust Enrichment Principle Not Applicable to Pre-2006 Provisional Assessment Refunds
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Gujarat High Court has dismissed the Revenueβs appeal and confirmed that the doctrine of unjust enrichment does not apply to refunds arising from the finalisation of provisional customs assessments completed before 13 July 2006.
Case overview
In Commissioner of Customs, Ahmedabad v. ArcelorMittal Nippon Steel India Private Limited (formerly Essar Steel Ltd.), the Court considered whether an importer seeking a refund after finalisation of a provisional assessment had to prove that it had not passed the duty burden on to another person.
The appeal, brought under Section 130 of the Customs Act, 1962, challenged a 2011 CESTAT order that had ruled in favour of the assessee. The Gujarat High Court, in its judgment dated 23 September 2026, upheld that outcome.
The legal issue
The central question was:
Does unjust enrichment apply to a refund resulting from finalisation of a provisional assessment when that assessment was pending before the 2006 amendment to Section 18 of the Customs Act?
The Court answered this question in favour of the assessee and against the Revenue.
Background: provisional assessments and refunds
A provisional assessment is used when customs duty cannot be finally determined at the time goods are cleared, such as when relevant information or documentation is unavailable or requires verification. The importer pays duty provisionally, subject to later adjustment when the assessment is finalised.
If the provisional duty paid exceeds the finally assessed duty, a refund becomes due. The dispute in this case was whether such a refund, for the pre-amendment period, was subject to the doctrine of unjust enrichment.
Under that doctrine, a claimant may be denied direct receipt of a refund where the duty incidence has already been passed on to customers or another party. The objective is to prevent a windfall to a person who did not ultimately bear the duty burden.
Why the Court rejected the Revenueβs position
The Court found that the issue was no longer open to debate because the Supreme Court had settled it in Commissioner of Customs v. Hindustan Zinc Limited in 2023.
The Gujarat High Court noted that, before the amendment effective from 13 July 2006, Section 18 did not incorporate the unjust-enrichment requirements contained in Section 27 of the Customs Act. Consequently, those requirements could not be imported into refunds that arose directly from finalisation of a provisional assessment under the earlier legal framework.
The Court also relied on the established principle from Allied Photographics India Ltd. and its own earlier ruling in Commissioner of Customs v. Hindalco Industries Ltd.: refunds resulting from the adjustment of provisional duty upon final assessment are distinct from independent refund claims governed by the general refund provisions.
Supreme Court guidance followed by the High Court
The Supreme Court in Hindustan Zinc reaffirmed that refunds flowing directly from finalisation of a provisional assessment are not governed by the general refund provisions applicable to other claims. It endorsed the reasoning in Allied Photographics and clarified that a later decision in Sahakari Khand Udyog Mandal Ltd. should be confined to its own facts.
The Supreme Courtβs analysis draws an important distinction:
Automatic adjustment on final assessment: Where provisional duty is adjusted against final duty and an excess emerges, the resulting refund follows from the provisional-assessment mechanism itself.
Independent or appellate refund claim: Where a refund is claimed separately after the assessment process, including after an appeal or other challenge, the general refund provisions may apply.
For the period before 13 July 2006, the first category was not subject to unjust enrichment under Section 18.
Application to ArcelorMittal Nippon Steel India
In this matter, the provisional assessment was finalised before 13 July 2006, and the assessee had also submitted letters claiming the relevant amounts before that date. The appellate authority had ruled for the assessee, referring to a Chartered Accountantβs certificate and concluding that unjust enrichment did not arise in relation to the refund generated by finalisation.
CESTAT upheld that decision. The Gujarat High Court found no error in CESTATβs approach, particularly in light of the Supreme Courtβs later confirmation of the governing legal position.
Practical significance
The decision provides clarity for customs disputes involving older provisional assessments. Its key implication is that the applicable legal regime depends on when the provisional assessment was finalised and when the refund entitlement arose.
For refunds directly arising from finalisation of a provisional assessment before 13 July 2006, customs authorities cannot require the importer to satisfy the unjust-enrichment test merely by reading Section 27 requirements into the unamended Section 18 framework.
The ruling also reinforces the need to distinguish between a refund that is a direct statutory consequence of final assessment and a separate refund claim pursued through other proceedings. That distinction can determine whether unjust enrichment is relevant.
Conclusion
By dismissing the Revenueβs appeal, the Gujarat High Court confirmed that pre-13 July 2006 provisional-assessment refunds are not subject to unjust enrichment when they arise directly upon finalisation of the assessment. The judgment aligns the Courtβs position with the Supreme Courtβs decisions in Allied Photographics and Hindustan Zinc, offering a settled rule for legacy customs refund matters.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 21.10.2026
Bombay HC: DGFT Cannot Retrospectively Apply Import Restrictions to Goods Shipped Before Notification
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Bombay High Court has held that an import restriction cannot be applied to goods that were dispatched and had arrived in India before the restriction was published in the Official Gazette, even where the bills of entry were filed later.
The dispute: a change from βFreeβ to βRestrictedβ
In Heimerle Refinery Private Limited v. Union of India & Ors., the petitioner imported studded platinum jewellery under five airway bills dated 30 and 31 March 2026. The consignments reached India on 1 and 2 April 2026.
The Directorate General of Foreign Trade (DGFT) had issued Notification No. 02/2026-27, dated 1 April 2026, changing the import policy for goods under Customs Tariff Heading 7113 from βFreeβ to βRestricted.β However, the notification was uploaded to the e-Official Gazette only on 2 April 2026 at approximately 8:52 p.m.
Customs authorities declined clearance of certain consignments because the related bills of entry were filed after publication of the notification. The importer challenged this approach, arguing that the relevant import date under the Foreign Trade Policy was the date of shipment or dispatch, not the later date of filing or clearance of the bill of entry.
The central legal issue
The case turned on a narrow but important question: which date governs the applicability of an import-policy restriction under the Foreign Trade Policy?
The authorities argued that goods not cleared for home consumption before the restriction came into force were subject to the revised βRestrictedβ policy. They relied on customs-law principles that treat clearance across the customs barrier as significant for determining the applicable rate of duty.
The Court rejected that approach for this dispute. It distinguished between:
Customs duty issues, where the Customs Act may make the date of filing a bill of entry or clearance relevant; and
Import-policy restrictions under the Foreign Trade Policy, where the policy itself defines the date of import differently.
Why the Court ruled for the importer
The Court relied on paragraph 1.05(b) of the Foreign Trade Policy 2023, read with paragraphs 2.17(a) and 11.11 of the Handbook of Procedures. These provisions make the date of shipment or dispatch from the supplying country the relevant date for determining importability under the policy.
For imports by air, paragraph 11.11 treats the relevant date as the date on the airway bill, provided it reflects when the goods left the last airport in the exporting country.
Because the jewellery had been dispatched on 30 and 31 March 2026 and had arrived in India before the e-Gazette publication on 2 April 2026, the Court found that the later restriction could not apply to those consignments.
The Court also emphasized that a notification gains legal force only upon publication in the Official Gazette. In the context of an e-Gazette, the specific upload time matters. The notification therefore could not operate retrospectively against goods already dispatched and imported before that publication.
Customs clearance date was not decisive
A key part of the judgment is its clarification that filing a bill of entry after a policy change does not, by itself, make the new import restriction applicable.
The Court held that the date of filing a bill of entry is relevant to the rate of customs duty under Section 15 of the Customs Act. But the case did not concern a change in duty rate or valuation. It concerned a change in import policy under the Foreign Trade (Development and Regulation) Act and the Foreign Trade Policy.
Applying customs-duty timing rules to a policy restriction, the Court said, would make the Foreign Trade Policyβs own definition of the date of import redundant.
DGFT clarification could not override the policy
The DGFT had issued an Office Memorandum on 13 May 2026 stating that consignments not cleared before 1 April 2026 would be governed by the revised restricted policy, regardless of their arrival date or bill-of-entry status.
The Court held that this executive clarification had no statutory force and could not override the Foreign Trade Policy or alter its definition of the date of import. It also could not retrospectively expand the notificationβs effect.
In the Courtβs view, changing the policy in that manner would require an amendment made through the legally prescribed statutory process, not an administrative memorandum.
The outcome
The Bombay High Court allowed the writ petition and directed the authorities to release the consignments covered by Bills of Entry Nos. 8590663, 8590666 and 8735308. It declared that Notification No. 02/2026-27 did not apply to goods that had arrived in India before its publication in the e-Official Gazette on 2 April 2026.
The ruling aligns with earlier decisions of the Gujarat High Court in Enero Jewels and the Delhi High Court in Bright Metal Refiners, both of which had permitted clearance of goods imported before publication of a similar restriction despite post-notification bills of entry.
Practical significance for importers
This decision draws a clear line between the timing rules for customs duty and those for import-policy restrictions. Where the Foreign Trade Policy defines the date of import by shipment or dispatch, importers may rely on the airway bill or other prescribed transport document to establish that the goods were imported before a later policy restriction became legally effective.
For goods transported by air, the airway bill date can therefore be critical evidence. The judgment also reinforces that an e-Gazette notification takes effect at the time it is actually published online, not merely on the date printed on the notification.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 17.10.2026
Rules of Origin vs. Rules of Customs: Constitutional Authority, Treaty Enforcement and the New CBIC Clarification
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
From Article 253 of the Constitution to Section 28DA of the Customs Act: Understanding how international trade commitments become enforceable rights under Indian law.
Introduction: When International Trade Commitments Meet Domestic Customs Administration
India’s expanding network of Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs) has transformed the legal framework governing international trade. These agreements offer preferential market access, reduced Customs duties and enhanced commercial opportunities. However, their effective implementation depends upon a fundamental constitutional question: Can domestic Customs authorities impose conditions that dilute or defeat the benefits negotiated under a bilateral Trade Agreement?
This question has acquired renewed importance following CBIC Circular No. 43/2026-Customs, dated 24 September 2026. The Circular clarifies the relationship between Section 28DA of the Customs Act, 1962, the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR), and the Rules of Origin contained in India’s Trade Agreements.
Its significance extends beyond routine Customs administration. It raises questions concerning constitutional treaty-making powers, legislative competence, delegated legislation, administrative discretion and the enforceability of international obligations within India’s domestic legal system.
The Circular specifically addresses two recurring disputes: the insistence upon Form-I for preferential tariff claims under the IndiaβUK Comprehensive Economic and Trade Agreement (CETA), and the automatic denial of preferential treatment to subsequent consignments following an earlier adverse origin determination.
By reiterating that agreement-specific Rules of Origin prevail over conflicting CAROTAR provisions, CBIC has reinforced an essential legal distinction between the authority to verify preferential claims and the power to impose additional substantive conditions.
To appreciate the Circular’s wider significance, it is necessary to examine the constitutional foundation of India’s bilateral trade agreements, the mechanism through which international obligations acquire domestic legal effect, and the judicial principles governing Customs exemptions and administrative interpretation.
I. Constitutional Foundation of Bilateral Trade Agreements in India
The Constitution of India does not contain a single provision exclusively governing Free Trade Agreements. Instead, India’s treaty-making and treaty-implementation powers arise from several interconnected constitutional provisions.
Article 51(c): Respect for International Law and Treaty Obligations
Article 51(c), contained in Part IV of the Constitution, directs the State to foster respect for international law and treaty obligations in dealings between organised peoples. This provision reflects India’s constitutional commitment to international cooperation and the observance of treaty obligations.
However, Article 51(c) forms part of the Directive Principles of State Policy. By virtue of Article 37, these principles are not directly enforceable by courts, although they remain fundamental to governance. Consequently, Article 51(c) does not independently transform an international trade agreement into an enforceable domestic statute.
Its principal significance lies in guiding constitutional interpretation and encouraging consistency between domestic law and India’s international commitments.
Article 73: Executive Authority to Negotiate and Conclude Trade Agreements
Article 73 defines the extent of the Union’s executive power. Read with Articles 53 and 246 and the relevant Union List entries, it provides the constitutional foundation for the Union executive’s authority in international relations.
Accordingly, the Central Government may negotiate and conclude bilateral and multilateral trade agreements within its constitutional competence. Such agreements may cover tariff concessions, market access, Rules of Origin, investment protection, services, intellectual property, technical barriers to trade and dispute-settlement arrangements.
However, an important distinction must be maintained between concluding an international agreement and giving its provisions enforceable domestic legal effect. An international agreement may bind India at the international level without automatically creating enforceable rights or obligations against private parties under Indian municipal law.
Where implementation requires alteration of existing legislation, restriction of legal rights or imposition of domestic obligations, appropriate legislative authority becomes necessary.
Article 253: Parliament’s Power to Implement International Agreements
Article 253 is the central constitutional provision concerning domestic implementation of international treaties. It empowers Parliament to legislate for implementing treaties, agreements and conventions with foreign countries, notwithstanding the ordinary distribution of legislative powers between the Union and States.
Its importance is twofold. First, it enables Parliament to implement international obligations through domestic legislation. Second, it permits Parliament to legislate even upon matters ordinarily falling within State legislative competence when implementing an international agreement.
Therefore, Article 253 acts as a constitutional bridge between international commitments and domestic legislative authority. However, Article 253 is an enabling provision. It does not automatically make every provision of a bilateral trade agreement directly enforceable in Indian courts.
The Supreme Court’s decision in Maganbhai Ishwarbhai Patel v. Union of India, AIR 1969 SC 783, remains particularly important in understanding this distinction.
Article 246 and the Seventh Schedule: Legislative Competence Over Foreign Trade
Article 246 distributes legislative competence between Parliament and State Legislatures.
Several entries in List I of the Seventh Schedule are directly relevant to bilateral trade agreements.
Constitutional provision
Subject matter
Relevance to international trade
Union List, Entry 10
Foreign affairs and matters concerning the Union’s relations with foreign countries
International economic relations and trade negotiations
Union List, Entry 14
Entering into treaties and agreements with foreign countries and implementing them
Constitutional legislative foundation for treaty implementation
Union List, Entry 41
Trade and commerce with foreign countries; import and export across Customs frontiers
Import-export regulation and foreign trade administration
Union List, Entry 83
Duties of Customs, including export duties
Customs tariff legislation and duty concessions
Article 253
Legislation implementing international agreements
Parliamentary authority extending beyond ordinary federal legislative limitations
These provisions collectively explain why international trade negotiations, Customs tariff legislation and foreign trade regulation principally fall within Union competence.
Articles 265 and 14: Constitutional Controls Over Customs Administration
Article 265 provides that no tax shall be levied or collected except by authority of law.
This principle is central to Customs taxation. An international agreement does not, merely through its execution, independently amend the Customs tariff or authorise Customs authorities to collect duties contrary to domestic law.
Preferential tariff treatment must be implemented through a legally valid domestic mechanism. Conversely, once a preferential concession has been lawfully implemented, its administration must remain within the governing statute and notification.
Article 14 introduces another constitutional limitation. Administrative decisions must not be arbitrary, discriminatory or unsupported by legally relevant considerations. Accordingly, Customs officers exercising powers under Section 28DA and CAROTAR remain subject to constitutional standards of legality, reasonableness and non-arbitrariness.
II. How Are Bilateral Trade Agreements Enforced Domestically in India?
India broadly follows a dualist approach to international treaties. Under this approach, international obligations and domestic legal rights operate in related but distinct legal spheres.
The execution of an international agreement does not necessarily make all its provisions directly enforceable against individuals or authorities. Domestic implementation may occur through legislation, statutory notifications, delegated legislation or executive action supported by existing law.
The Domestic Implementation Mechanism
1. Negotiation and conclusion of a Trade Agreement
Union executive authority under the Constitution
2. Identification of domestic legal requirements
Articles 246 and 253; relevant Union List entries
3. Implementation through Indian law
Customs Act, Customs Tariff Act, notifications and Rules of Origin
4. Administration of preferential tariff claims
Section 28DA, CAROTAR and the applicable Trade Agreement
5. Judicial review and statutory remedies
Customs appeals and constitutional remedies, where maintainable:-
In the Customs context, Section 5 of the Customs Tariff Act, 1975 enables the Central Government to make rules for determining the origin of goods under Trade Agreements. Preferential tariff concessions are generally implemented through notifications issued under the relevant statutory powers, including Section 25 of the Customs Act.
Section 28DA and CAROTAR then regulate the administration and verification of preferential claims. Thus, an FTA’s tariff commitments do not ordinarily operate as an independent substitute for India’s Customs legislation. Their domestic enforceability must be examined through the applicable implementing law.
III. Landmark Constitutional Precedent: Maganbhai Ishwarbhai Patel v. Union of India
Case: Maganbhai Ishwarbhai Patel v. Union of India Citation: AIR 1969 SC 783; (1969) 3 SCC 400 Court: Supreme Court of India Date: 9 January 1969
The dispute arose from the implementation of an international boundary determination involving India and Pakistan. The Supreme Court considered the constitutional powers of the Union executive to enter into international agreements and the circumstances requiring parliamentary legislation. The Court recognised that the executive could conclude international agreements within its constitutional authority.
However, it distinguished international obligations from their domestic legal consequences. Where implementation affects enforceable private rights or modifies existing domestic law, legislative support is required. The Court also explained the significance of Article 253 and Parliament’s authority to implement international agreements.
Commentary
Although the judgment concerned an international boundary dispute rather than an FTA, its constitutional reasoning remains directly relevant to trade agreements. It establishes that the Union executive’s treaty-making authority and Parliament’s treaty-implementation authority are legally distinct.
Consequently, a bilateral trade agreement cannot automatically override an inconsistent Indian statute merely because India has accepted the agreement internationally. The legally enforceable rights of importers must be identified through the applicable domestic implementing provisions, interpreted in light of the Trade Agreement where the law permits or requires such interpretation.
IV. Section 28DA of the Customs Act: The Statutory Framework for Preferential Origin
Section 28DA, introduced through the Finance Act, 2020, establishes the responsibilities of importers claiming preferential Customs duty under Trade Agreements.
The provision was intended to strengthen verification of originating status and prevent the misuse of preferential tariff concessions. Under Section 28DA(1), importers must declare that imported goods qualify as originating goods, possess sufficient supporting information, furnish prescribed particulars and exercise reasonable care regarding the accuracy of origin claims.
Section 28DA(2) makes it clear that the mere submission of a Certificate of Origin does not discharge the importer’s responsibility to exercise reasonable care. However, this provision cannot be interpreted in isolation.
Section 28DA(3) contemplates requests for further information consistent with the relevant Trade Agreement. This qualification is important because different agreements prescribe different documentary and verification procedures.
Section 28DA also establishes mechanisms for origin verification, suspension of preferential treatment, provisional clearance and denial of preferential benefits in specified circumstances. Subsection (11) addresses subsequent imports of identical goods following an earlier adverse origin determination. Importantly, the statutory framework does not confer unrestricted authority upon Customs to disregard agreement-specific origin procedures.
V. CAROTAR, 2020: Procedural Compliance and the Limits of Delegated Legislation
CAROTAR, 2020 was notified through Notification No. 81/2020-Customs (N.T.), dated 21 August 2020, and came into effect on 21 September 2020.
The Rules provide a domestic administrative mechanism for implementing Section 28DA. Rule 3 governs preferential tariff claims at the Bill of Entry stage. Rule 4 addresses the information importers must possess, including origin-related information identified in Form-I.
Rule 5 governs requests for further information. Rule 6 provides for verification through the prescribed authorities, while Rule 7 addresses identical goods and earlier adverse origin determinations.
Rule 8 deals with additional administrative matters, including consequences of non-compliance.
Rule 8(3): The Most Important Provision
Rule 8(3) expressly provides that where CAROTAR conflicts with the Rules of Origin under the relevant Trade Agreement, the latter shall prevail. This creates a specific rule of precedence within the domestic regulatory framework.
Its legal effect should be carefully understood. Rule 8(3) does not establish that every international treaty automatically overrides Indian legislation. Rather, it is a domestic legal provision expressly recognising the precedence of agreement-specific Rules of Origin over conflicting CAROTAR requirements.
The distinction is constitutionally significant. The authority of the Trade Agreement’s Rules of Origin in this context flows through the statutory framework enacted and notified under Indian law. Accordingly, Customs officers cannot disregard Rule 8(3) while administering preferential tariff claims.
VI. CBIC Circular No. 43/2026: Five Major Legal Clarifications
1. Valid Origin Declaration Under IndiaβUK CETA
Paragraph 2.1.1 recognises an Origin Declaration completed by the UK exporter or producer in the prescribed manner as proof of origin.
Therefore, a claim supported by a valid Origin Declaration must be processed without requiring Form-I. This clarification protects importers from an additional routine documentary requirement. However, the declaration must satisfy the applicable agreement’s conditions, and the goods must qualify under the relevant Rules of Origin.
2. Form-I Cannot Be a Routine Precondition
Paragraph 2.1.2 clarifies that Form-I is not required to be submitted with the Bill of Entry. Customs cannot treat its submission as a mandatory precondition for preferential tariff treatment. Nevertheless, the Circular does not abolish Form-I or eliminate lawful requests for origin-related information.
3. Requests for Form-I Information Are Restricted
Paragraph 2.1.3 identifies two cumulative conditions for seeking relevant Form-I information under the clarification concerning IndiaβUK CETA.
The Bill of Entry must have been interdicted by the National Risk Management System for origin-related checks, and the proper officer must have reason to believe that the applicable origin criteria have not been satisfied. The words used in the Circular limit routine administrative discretion. However, other verification powers lawfully available under the governing framework remain subject to their respective statutory conditions.
4. Confidential Commercial Information Is Protected
Paragraph 2.1.4 clarifies that IndiaβUK CETA importers need not obtain confidential information from exporters or producers.
Failure to furnish such information cannot, by itself, justify denial of preferential treatment. The importer must nevertheless provide information made available by the exporter or producer. Where the information remains insufficient, verification may be undertaken through the exporting Party’s Verification Authority in accordance with the Trade Agreement.
Paragraphs 2.2.1 to 2.2.3 address Section 28DA(11).
The Circular rejects the assumption that goods are identical merely because they share an HSN classification, description, exporter, producer or technical characteristics.
Before applying an earlier adverse determination, Customs must provide the importer an opportunity to furnish additional information. Where material origin-related facts differ, the current claim must be independently examined. This safeguard is particularly relevant to industrial imports involving changing suppliers, production arrangements, originating inputs and manufacturing processes.
VII. Supreme Court Judgments from 2025: Their Relevance to Customs Exemptions and Administrative Powers
The following decisions were delivered within the preceding two years. Their holdings are relevant to the broader legal principles involved, although neither directly adjudicates Circular No. 43/2026.
A. M/s L.G. Electronics India Private Limited v. Commissioner of Customs
Court: Supreme Court of India Decision: 10 September 2025 Proceedings: Civil Appeal Nos. 10349β10350 of 2024
The Supreme Court allowed LG Electronics India Pvt. Ltd.βs customs appeals concerning the import classification of G Watch smartwatches.
While it did not decide the classification dispute, the Court held that LG was eligible for the Korea-origin duty exemption based on the Certificate of Origin, set aside the CESTAT and original orders, and directed refund of the duty paid with applicable interest within two months.
Legal commentary: The Supreme Court rightly distinguished tariff classification from entitlement to a preferential-origin exemption, holding that an incorrect claimed classification cannot defeat a substantive benefit otherwise established by a valid Certificate of Origin. While leaving the smartwatch classification issue open, the ruling reinforces that customs adjudication must prioritize proven statutory conditions over technical errors made in good faith.
B. Noble Resources and Trading India Private Limited v. Union of India & Others
Citation: 2025 INSC 684 Court: Supreme Court of India Decision: 14 May 2025 Proceedings: Civil Appeal No. 2572 of 2025
The dispute concerned an exemption claimed on imported crude degummed soyabean oil under the applicable Duty Free Credit Entitlement framework.
The Department relied upon a Customs circular to extend an exclusion concerning agricultural and dairy products to certain manufactured products derived from agricultural commodities. The Supreme Court rejected the enlarged interpretation and held that the departmental circular could not expand the exclusion beyond the governing notification.
The Court allowed the importer’s appeal.
Legal commentary: This decision reinforces the principle that executive circulars cannot alter the substantive scope of statutory exemptions. Although the case did not concern Section 28DA or FTA origin verification, its reasoning is relevant where departmental instructions purport to impose restrictions beyond the governing legal instrument. The decision also demonstrates the importance of distinguishing a statutory condition from an administrative interpretation.
C. The Constitutional Connection
The decisions in Maganbhai, L.G. Electronics and Noble Resources operate at different levels. Maganbhai addresses the constitutional relationship between international agreements and domestic legislation.
L.G. Electronics concerns the examination of preferential Customs exemption entitlement. Noble Resources addresses the limits of departmental circulars in interpreting statutory exemptions.
Taken together, these authorities support the proposition that Customs administration must operate within the authority conferred by Indian law. They do not establish an unrestricted supremacy of FTAs over Parliament’s legislation. Instead, they reinforce lawful implementation, proper statutory interpretation and limitations on executive action.
VIII. Constitutional and Administrative Limitations on Customs Discretion
The Circular raises several questions concerning the lawful exercise of Customs powers. Under Article 265, Customs duty must have legal authority. Consequently, tariff concessions and their withdrawal must be examined within the applicable statutory framework.
Article 14 requires administrative action to satisfy constitutional standards against arbitrariness. Article 19(1)(g), subject to Article 19(6), protects the right of citizens to practise professions and carry on occupations, trade or business. This does not eliminate lawful import restrictions, but it may be relevant where administrative action unjustifiably interferes with protected commercial activity.
Article 226 empowers High Courts to exercise judicial review over unlawful administrative action, subject to principles governing the availability of alternative statutory remedies.
Therefore, Customs action concerning preferential tariff claims may raise constitutional issues where it exceeds statutory authority, disregards mandatory procedures or violates principles of natural justice. However, not every disagreement concerning an origin determination constitutes a constitutional violation.
Ordinary disputes involving documentary sufficiency, factual origin criteria or assessment may appropriately fall within the Customs Act’s statutory appellate framework. The constitutional remedy becomes particularly relevant where the challenge concerns jurisdictional error, procedural illegality, violation of natural justice or the validity of subordinate legislation.
IX. Inclusions, Exclusions, Limitations and Discretions: A Consolidated Legal Position
Category
Legal position
Constitutional inclusion
Articles 73 and 253 provide distinct foundations for treaty-making and legislative implementation.
Legislative inclusion
Customs Act and Customs Tariff Act provisions provide mechanisms for domestic administration of trade commitments.
Preferential origin inclusion
Valid agreement-prescribed origin documents support preferential claims.
Procedural exclusion
Form-I cannot be imposed routinely as a prerequisite under the IndiaβUK CETA clarification.
Confidentiality exclusion
IndiaβUK CETA importers need not obtain confidential exporter or producer information.
Statutory limitation
Importers must exercise reasonable care and satisfy substantive origin requirements.
Treaty limitation
International agreements do not automatically override inconsistent Indian primary legislation.
Administrative limitation
CAROTAR cannot override conflicting Rules of Origin under the applicable Trade Agreement, as recognised by Rule 8(3).
Customs discretion
Origin-related information and verification may be sought within the prescribed conditions.
Identical-goods safeguard
Earlier adverse determinations cannot be applied mechanically without considering relevant origin facts and additional information.
Judicial safeguard
Unlawful administrative action may be challenged through statutory remedies or constitutional judicial review, as appropriate.
X. A Constitutional Question for Future Litigation
One of the most significant questions emerging from this framework is whether a delegated rule, administrative instruction or Customs assessment can impose requirements inconsistent with the Rules of Origin incorporated into India’s domestic legal framework.
The answer requires identifying the precise legal source of each obligation. Where an agreement-specific rule has been implemented under the Customs Tariff Act, the officer must consider that rule alongside Section 28DA and CAROTAR. Where CAROTAR itself expressly gives precedence to the Trade Agreement’s Rules of Origin, administrative authorities must respect that prescribed hierarchy.
Where a conflict arises between an international commitment and primary parliamentary legislation, the analysis is different. The international agreement does not automatically invalidate or override the statute. The constitutional distinction is fundamental.
The enforceability of preferential trade benefits in India rests not merely upon diplomatic commitments but upon their lawful incorporation and administration under the Indian legal system.
Consequently, future litigation may increasingly examine whether origin-verification demands are supported by statutory authority, whether they comply with the applicable Trade Agreement, and whether administrative discretion has been exercised for a legitimate legal purpose.
XI. The Role of Aadrikaa Legal Services in Corporate Legal Support and Case Research
Aadrikaa Legal Services (ALS) assists large corporates, in-house legal departments, law firms and professional advisory organisations with specialised paralegal support and legal research relating to Customs, GST, Foreign Trade Policy, international trade compliance and regulatory disputes. Its support may include case-law research, statutory interpretation, preparation of legal research notes, compilation of judicial precedents, document examination, litigation chronologies, drafting assistance, regulatory compliance reviews and preparation of case briefs for counsel.
By combining legal research with domain-specific knowledge of Customs and trade regulations, ALS aims to support corporate legal teams and law firms in managing complex regulatory matters, developing litigation strategies and preparing well-researched submissions before statutory and judicial forums.
XII. Conclusion: The Constitution Sets the Boundary, Parliament Creates the Framework, and Customs Must Follow the Law
CBIC Circular No. 43/2026-Customs is more than a procedural clarification concerning Form-I and Rules of Origin. It highlights the constitutional relationship between India’s international trade commitments and their domestic implementation.
Articles 73 and 253 establish the foundations of treaty-making and legislative implementation. Articles 246 and 265 define the relevant legislative and taxation framework, while Article 14 imposes constitutional limitations upon administrative action.
Section 28DA and CAROTAR provide the domestic machinery for administering preferential tariff claims. However, Rule 8(3) expressly recognises that conflicting CAROTAR provisions must yield to the applicable Trade Agreement’s Rules of Origin.
The Supreme Court’s decisions in Maganbhai, L.G. Electronics and Noble Resources illuminate the constitutional and statutory principles that govern this relationship. The essential legal conclusion is that Customs authorities retain the power to verify originating status, prevent misuse of preferential concessions and protect public revenue.
What they cannot do is transform procedural authority into an independent power to impose substantive conditions unsupported by the governing law.
For importers, the Circular provides meaningful procedural protection. For Customs authorities, it reinforces the requirement of agreement-consistent administration. For legal practitioners, it offers a framework for examining origin disputes through statutory interpretation, delegated legislation and constitutional principles.
Ultimately, India’s international trade commitments can deliver their intended commercial benefits only when their domestic implementation remains legally coherent, transparent and consistent with the constitutional rule of law.
About the Author
Advocate Ravi Shekhar Jha is a New Delhi-based legal professional practising in matters involving Customs, indirect taxation, constitutional law, international trade and regulatory compliance, including matters before the Delhi High Court and statutory tribunals.
With approximately two decades of experience in international trade, regulatory advisory and supply-chain compliance, his professional work encompasses Customs classification and valuation, Free Trade Agreements, Rules of Origin, DGFT and Foreign Trade Policy matters, BIS and Quality Control Orders, trade remedies, and Customs litigation.
He holds an LL.M. in Constitutional Law and is associated with Aadrikaa Legal Services (ALS), which provides legal advisory, litigation, research and regulatory support to corporate clients and professional organisations.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 26.09.2026
CESTAT Mumbai Allows Customs Duty Exemption on Dowtherm Heat Transfer Fluid Under SHIS Scheme
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai has held that Dowtherm RP Heat Transfer Fluid/Dowtherm A Heat Transfer Fluid, used for the initial charging and continuous operation of a Continuous Polycondensation (CP) Plant for manufacturing polyester products, falls within the definition of βcapital goodsβ and is consequently eligible for Customs duty exemption under Notification No. 104/2009-Customs dated 14 September 2009.
Setting aside the Commissioner’s order, the Tribunal held that the thermic fluids fulfilled the statutory requirements of the Status Holders Incentive Scrip (SHIS) Scheme under the Foreign Trade Policy and that Customs was not justified in denying the exemption merely because the goods were chemicals falling under Chapter 29 or were described as inputs under SION.
Background of the Dispute
Wellknown Polyesters Limited was engaged in manufacturing Polyester Filament Yarn (PFY), Polyester Oriented Yarn (POY), Fully Drawn Yarn (FDY), Draw Textured Yarn (DTY) and polyester chips at its Daman manufacturing facility.
For its manufacturing operations, the company had imported a Continuous Polycondensation Plant from Oerlikon Barmag under an EPCG authorisation during AprilβJuly 2012. The plant was imported without thermic fluid.
Subsequently, the company imported 3,01,296 kg of Dowtherm RP Heat Transfer Fluid/Dowtherm A Heat Transfer Fluid, valued at approximately βΉ9.86 crore, through Bills of Entry filed in October 2012. Customs duty involved was approximately βΉ2.55 crore.
Instead of paying the duty in cash, Wellknown Polyesters utilised eight SHIS scrips issued by the DGFT under the Status Holders Incentive Scrip Scheme and claimed exemption under Notification No. 104/2009-Customs. The goods were initially cleared by Customs extending the exemption.
DRI Objects to SHIS Benefit
The Directorate of Revenue Intelligence (DRI), Ahmedabad Zonal Unit subsequently initiated an investigation on the ground that Notification No. 104/2009-Customs permitted duty-free import of capital goods, whereas Dowtherm heat-transfer fluid was, according to the Department, not capital goods.
DRI also relied upon the Standard Input Output Norms (SION), under which Dowtherm/Therminol and heat-transfer oil were identified as permitted inputs for manufacture of Polyester Partially Oriented Yarn and Polyester Filament Yarn. The Department therefore treated the material as an input rather than capital goods.
A Show Cause Notice dated 14 May 2013 consequently demanded approximately βΉ2.55 crore Customs duty with interest under Section 28(1) of the Customs Act, 1962, besides proposing confiscation under Section 111(o) and penalty under Section 112(a).
The Commissioner confirmed the duty demand and interest but refrained from confiscating the goods because they were no longer physically available and did not impose the proposed penalty. Wellknown Polyesters challenged that order before CESTAT.
Appellant: Thermic Fluid Was Integral to Continuous Polycondensation Plant
The appellant argued that although the CP Plant and thermic fluid had been imported separately, both were required to operate together.
The thermic fluid was charged into the heaters, piping and vessels and thereafter continuously circulated in a closed loop between the heaters and reactors. The polyester polycondensation process required temperatures of approximately 270Β°Cβ300Β°C under high vacuum, making the thermic fluid critical for providing precise high-temperature heat while maintaining low system pressure.
The appellant relied upon the definition of βcapital goodsβ under the Foreign Trade Policy and Notification No. 104/2009-Customs, arguing that it was broad enough to cover goods required directly or indirectly for manufacture, including items necessary for the initial setting up and functioning of plant and machinery.
It also relied upon CBEC’s earlier clarification concerning transformer oil, under which oil required for filling/topping up a transformer was considered part of the equipment because the transformer could not function without it.
Revenue: Chemical Falling Under Chapter 29 Cannot Be Capital Goods
The Department maintained that the imported thermic fluid was a chemical classifiable under Chapter 29 and therefore could not be regarded as plant, machinery, equipment or an accessory.
The Commissioner’s reasoning was that even though the chemical was indirectly used in manufacturing, its nature did not change into that of plant, machinery, equipment or accessories. The Department also relied upon the fact that SION treated Dowtherm as an input/raw material for polyester production.
CESTAT was therefore required to decide whether denial of the exemption under Notification No. 104/2009-Customs for the October 2012 imports was legally sustainable.
CESTAT Examines SHIS Scheme and Definition of βCapital Goodsβ
The Tribunal examined the Foreign Trade Policy 2009β2014 and observed that the objective of the SHIS Scheme was to promote investment in technology upgradation.
Paragraph 3.17.5 of the FTP permitted Duty Credit Scrips to be used for import of inputs or goods, including capital goods, subject to the stipulated conditions. More importantly, the FTP defined βcapital goodsβ broadly as plant, machinery, equipment or accessories required directly or indirectly for manufacture or production, including specified items such as refractories for initial lining and catalysts for initial charge.
Notification No. 104/2009-Customs, issued under Section 25(1) of the Customs Act, 1962, similarly exempted capital goods and specified components/spares/parts imported against SHIS Duty Credit Scrips from Customs duties, subject to its conditions.
CESTAT found the definition of βcapital goodsβ under the Customs notification and the FTP to be substantially identical.
Thermic Fluid Critical to Functioning of CP Plant
The Tribunal accepted the technical evidence concerning the role played by Dowtherm in the Continuous Polycondensation Plant.
It observed that the thermic fluid enabled the plant to provide precise high-temperature heat while maintaining low pressure, thereby permitting efficient continuous polycondensation and energy-efficient manufacture of high molecular weight polyester.
On that basis, CESTAT concluded that the imported goods fulfilled the statutory requirements of the SHIS Scheme.
A particularly important factual finding arose from the Chartered Engineer’s Certificate. Out of the total 3,01,296 kg of imported thermic fluid, 2,92,920 kgβapproximately 97.2%βwas used as a one-time/initial charge in the CP Plant’s Electric Thermal Oil Heater Boiler.
The fluid thereafter enabled continuous high-temperature operation at very low pressure for the polycondensation process.
The technical diagrams reproduced on pages 13β15 of the order further illustrate the closed-loop recirculation of Dowtherm between the thermic-fluid heater and CP Plant, the stages of polyester manufacture where heat transfer is required, and the Electric Thermal Oil Heater Boiler arrangement.
Capitalisation in Books Also Supported Appellant
CESTAT additionally noted that the imported thermic fluid had been capitalised in Wellknown Polyesters’ books of account, as certified by its Chartered Accountants on 29 May 2026.
The Tribunal regarded this financial treatment as further evidence supporting the appellant’s case that the imported goods were treated as capital goods.
Accordingly, the Bench held:
βthe impugned goods are covered under the definition of βcapital goodsββ
and were therefore eligible for exemption under Notification No. 104/2009-Customs.
CESTAT Relies on Reliance Communications Infrastructure
The Tribunal found support in Reliance Communications Infrastructure v. Commissioner of Customs, 2009 (240) E.L.T. 461 (Tri.-Bang.).
In that case, a Gas Suppression System included HFC 227 EA gas. The Tribunal had held that Customs could not dissect an integrated system and treat the gas required for its functioning as a mere consumable when the EPCG licence covered the complete system.
CESTAT applied the same reasoning to the thermic fluid, observing that where a material is essential to the functioning of the plant, its character cannot be determined merely by isolating it from the system in which it operates.
Transformer Oil Analogy Applied to Dowtherm
CESTAT also referred to CBEC Circular No. 344/60/97-CX dated 22 October 1997, concerning transformer oil.
The circular recognised that a transformer cannot function without transformer oil and that the equipment cannot be regarded as complete without the oil filled into it.
Applying the same analogy, CESTAT held that if the Continuous Polycondensation Plant cannot function without thermic fluid, the fluid has to be treated as part of the plant, notwithstanding the absence of a specific Customs clarification concerning thermic fluid.
Cases Cited by Wellknown Polyesters
The appellant relied upon several judicial authorities in support of its interpretation of capital goods:
S. No.
Case
Citation
1
Reliance Communications Infrastructure v. Commissioner of Customs
2009 (240) E.L.T. 461 (Tri.-Bang.)
2
Commissioner of Central Excise, Coimbatore v. Jawahar Mills
2001 (132) E.L.T. 3 (S.C.)
3
Bharti Airtel Limited v. Commissioner of Central Excise, Pune
2025 (391) E.L.T. 3 (S.C.)
4
Chief Commissioner of Central Goods and Service Tax & Ors. v. Safari Retreats Private Limited & Ors.
2024 SCC OnLine SC 2691
5
Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax, Andhra Pradesh
(1986) 1 SCC 11
These authorities are expressly recorded in the appellant’s submissions.
Of these, the final reasoning expressly discusses and applies Reliance Communications Infrastructure.
Final Decision: Wellknown Polyesters Wins Appeal
CESTAT concluded that the Commissioner’s order denying the benefit of Notification No. 104/2009-Customs dated 14 September 2009 by refusing to treat Dowtherm RP/Dowtherm A Heat Transfer Fluid as capital goods βdoes not stand the scrutiny of law.β
The Tribunal consequently set aside the Order-in-Original dated 7 October 2016 and allowed Wellknown Polyesters’ appeal in its favour.
The ruling is significant for the interpretation of capital goods under export-promotion schemes, particularly where a material may chemically resemble an input or consumable but is technically required as an initial charge and thereafter continuously circulates as an integral part of plant operation.
It also demonstrates that classification of an item as a chemical under Chapter 29, or its description as an βinputβ under SION for a different regulatory purpose, is not by itself determinative of whether it can qualify as capital goods under the specific language and objective of an exemption notification.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
