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Category: Karnataka High Court

Karnataka High Court Ruled in Favor of Vidya Herbs in Customs Dispute Over Import Declaration
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 14.02.2026

Karnataka High Court Ruled in Favor of Vidya Herbs in Customs Dispute Over Import Declaration

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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.

On January 16, 2024, the High Court of Karnataka at Bengaluru delivered a significant judgment in the case of CSTA No. 6 of 2023, involving the Commissioner of Customs, Mangalore, and Vidya Herbs Private Limited. The case revolved around the import of goods by Vidya Herbs, a 100% Export Oriented Unit (EOU), and the subsequent dispute regarding the classification and declaration of the imported goods.

Background of the Case

Vidya Herbs Private Limited, a 100% EOU, filed a Bill of Entry on November 16, 2022, to clear goods declared as “Vietnam Robusta Coffee Beans” with a declared value of ₹96,09,828. The company sought to avail the benefit of Notification No. 52/2003-Customs dated July 22, 2003, which provides certain exemptions for EOUs. The Bill of Entry was cleared through the Risk Management System (RMS) without assessment.

However, during an open examination, Customs Officers observed that the imported goods were coffee husks instead of coffee beans, as declared. The goods were subjected to further examination, and Vidya Herbs sought clearance under the Import of Goods at Concessional Rate of Duty Rules (IGCR), 2017, claiming the goods were classifiable under HS Code 09011145 and intended for use in manufacturing herbal extracts.

Vidya Herbs acknowledged the mismatch in the declaration and expressed willingness to pay the applicable duty to amend the Bill of Entry and clear the goods. Despite this, the Commissioner of Customs passed an Order-in-Original on February 1, 2023, determining the assessable value at ₹96,09,828, confiscating the goods under Sections 111(f), (l), (m), and (o) of the Customs Act, 1962, and ordering their release upon payment of a redemption fine of ₹10 lakhs.

Appeal to CESTAT and Subsequent High Court Proceedings 

Vidya Herbs challenged the Order-in-Original before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), South Regional Bench, Bengaluru. The CESTAT ruled in favor of Vidya Herbs, stating that the import policy requires a liberal approach to promote the activities of EOUs. The tribunal emphasized that the Customs Authority’s role is to verify the compliance of imported goods with import documents and approvals. It also noted that the goods were not seized, and the transaction was revenue-neutral since the goods were intended for re-export.

The Commissioner of Customs subsequently filed an appeal in the High Court of Karnataka, arguing that the CESTAT erred in allowing the appeal as the investigation was incomplete. The Revenue also pointed out that Vidya Herbs had admitted to the mismatch in the import documents and expressed willingness to pay the applicable duty.

High Court Judgment 

After hearing arguments from both sides, the High Court dismissed the appeal filed by the Commissioner of Customs. The court noted the following key points:
1. No Seizure of Goods: The court agreed with Vidya Herbs’ argument that confiscation could not be ordered unless the goods were seized. Since the goods were not seized, the confiscation order was deemed unsustainable.
2. Revenue Neutrality: The court acknowledged that Vidya Herbs is a 100% EOU, and the imported goods were intended for processing and re-export. Unless the Customs Authority could prove that the goods were sold in the domestic market or not re-exported, the issue remained revenue-neutral.
3. Liberal Approach for EOUs: The court upheld the CESTAT’s view that a liberal approach should be taken under the import policy to promote the activities of EOUs. It also noted that the CESTAT had reserved the liberty for Vidya Herbs to submit a fresh application under Rule 5(1)(a) of the IGCR Rules, 2017.
Final Order

The High Court concluded that the Revenue had no valid grievance against the CESTAT’s order. The appeal was dismissed, and the substantial questions of law raised by the Revenue were answered in favor of Vidya Herbs Private Limited. The court also ruled that no costs would be imposed.

Key Takeaways

This judgment highlights the importance of adhering to the principles of revenue neutrality and the need for a liberal approach in cases involving Export Oriented Units. It also underscores the significance of proper procedures, such as the requirement for seizure before confiscation, in customs-related disputes.

The case serves as a reminder for importers to ensure accurate declarations in their import documents to avoid legal complications. At the same time, it emphasizes the role of Customs Authorities in verifying compliance without unnecessarily penalizing EOUs that contribute to export activities.

Conclusion

The High Court’s decision in favor of Vidya Herbs Private Limited is a landmark ruling that reinforces the principles of fairness and transparency in customs proceedings. It sets a precedent for similar cases involving EOUs and highlights the importance of balancing regulatory compliance with the promotion of export-oriented businesses.

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Source: Karnataka High Court

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February 14, 2026
High Court of Karnataka Sets Aside Cryptic Customs Order for Violating Principles of Natural Justice
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 05.01.2026

High Court of Karnataka Sets Aside Cryptic Customs Order for Violating Principles of Natural Justice

This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.

On November 24, 2025, the High Court of Karnataka delivered a significant judgment in the case of Veetech Infoline Private Limited & Anr. vs. The Additional Commissioner of Customs & Ors. . The case revolved around allegations of improper removal of warehoused goods and violations of the Customs Act, 1962, and Central Excise Rules, 2002. The court, presided over by Hon’ble Justice, ruled in favor of the petitioners, setting aside the impugned Order-in-Original dated July 10, 2025, and remitting the matter back to the adjudicating authority for reconsideration.

Background of the Case

Veetech Infoline Private Limited (VIPL), a 100% Export Oriented Unit (EOU) under the Software Technology Parks of India (STPI) scheme, had been operating under a Private Bonded Warehouse License since November 14, 2000. The company imported duty-free capital goods and procured goods locally without payment of duty under the EOU scheme. These goods were bonded at their licensed premises in Bengaluru for the purpose of developing computer software for export.

The controversy began when customs officials conducted a verification of VIPL’s premises on July 8, 2010, and alleged that the company had improperly removed duty-free goods by renting out its bonded premises to other entities without payment of customs duty. The officials claimed that VIPL had failed to apply for de-bonding of the premises after the expiration of its warehousing license on March 31, 2007, and had not sought further extension of the warehousing period. Consequently, a Show Cause Notice was issued on May 25, 2011, demanding customs duty of Rs. 36,88,280/- along with penalties and interest.

The adjudicating authority passed an Order-in-Original on February 21, 2012, confirming the demand and imposing penalties on VIPL and its Managing Director. Aggrieved by this order, VIPL filed an appeal before the Commissioner of Customs (Appeals), which was dismissed on October 30, 2014. Subsequently, VIPL approached the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), which set aside the order of the Appellate Authority and remitted the matter back to the Additional Commissioner of Customs for fresh adjudication.

The Impugned Order 

In the de novo proceedings, VIPL submitted detailed replies and evidence, including documentation from the STPI confirming that the company had fulfilled its Net Foreign Exchange (NFE) obligations during its operational period. Despite these submissions, the Additional Commissioner of Customs passed the impugned Order-in-Original on July 10, 2025, reiterating the earlier order without addressing the petitioner’s claims or providing adequate reasoning. The order was deemed cryptic, laconic, and violative of the principles of natural justice.

Key Issues in the Case

The High Court was tasked with addressing the following key issues:
1. Whether the warehoused goods valued at Rs. 2,19,94,694/- were liable to confiscation under Sections 111(j) and 111(o) of the Customs Act, 1962.
2. Whether the demand of Rs. 36,88,280/- along with interest and penalties was valid under Section 72(1)(a) of the Customs Act, 1962.
3. Whether the Managing Director of VIPL, was liable for penalties under Section 112(a) and (b) of the Customs Act, 1962.
High Court’s Observations

Justice noted that the impugned order was a non-speaking and unreasoned order that failed to address the petitioner’s submissions and evidence. The court emphasized that the principles of natural justice had been violated, as the adjudicating authority did not provide cogent reasons for reiterating its earlier order.

The court also rejected the respondents’ argument that the petition was not maintainable due to the availability of an alternative remedy by way of an appeal. It held that the violation of natural justice warranted the exercise of its jurisdiction under Article 226 of the Constitution of India.

The Judgment

In its oral order, the High Court allowed the writ petition and set aside the impugned Order-in-Original dated July 10, 2025. The matter was remitted back to the Additional Commissioner of Customs for reconsideration afresh, directing the authority to pass a reasoned and speaking order in accordance with the law.

Implications of the Judgment

This judgment is a significant win for Veetech Infoline Private Limited and highlights the importance of adhering to the principles of natural justice in adjudication proceedings. It serves as a reminder to authorities that orders must be reasoned and address the submissions and evidence presented by the parties involved.

The case also underscores the role of the judiciary in ensuring fairness and accountability in administrative actions. By exercising its writ jurisdiction, the High Court has reinforced the principle that mere availability of an alternative remedy does not preclude judicial intervention in cases where natural justice is violated.

Conclusion

The Karnataka High Court’s decision in this case is a testament to the importance of transparency and reasoned decision-making in administrative proceedings. For businesses operating under schemes like the EOU/STPI, this judgment provides reassurance that the judiciary will intervene to protect their rights when procedural lapses occur. As the matter is now remitted back for fresh adjudication, it remains to be seen how the Additional Commissioner of Customs will address the petitioner’s claims and evidence in accordance with the law.

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Source: Karnataka High Court

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January 5, 2026
High Court of Karnataka Upholds CESTAT Ruling and Dismisses Revenue Appeals in Customs Duty Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 17.11.2025

High Court of Karnataka Upholds CESTAT Ruling and Dismisses Revenue Appeals in Customs Duty Dispute

This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.

On September 16, 2025, the High Court of Karnataka at Bengaluru delivered a significant judgment in the Customs Appeals (CSTA No. 4 of 2021, CSTA No. 1 of 2022, and CSTA No. 2 of 2022) filed by the Commissioner of Customs, Bengaluru, against M/s. 3M India Limited and its representatives. The appeals challenged the common Final Order Nos. 20343-20345/2020, dated March 20, 2020, passed by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bengaluru.

Background of the Case

The case revolved around the import of surgical and medical products, including Micropore surgical tapes, by M/s. 3M India Limited. The Directorate of Revenue Intelligence (DRI) alleged that the company had misdeclared these products as “Skin Barrier Micropore Surgical Tapes” to avail the concessional customs duty under Notification No. 21/2002-Cus, dated March 1, 2002. The notification provides a reduced duty rate for certain goods used in ostomy surgery cases.

The Revenue issued a show-cause notice under Section 28 of the Customs Act, 1962, invoking the extended limitation period under sub-section (4) of Section 28, which applies in cases of collusion, willful misstatement, or suppression of facts. The order-in-original imposed penalties and interest on M/s. 3M India Limited and its representatives, holding them liable for misdeclaration and ineligible duty exemptions.

M/s. 3M India Limited challenged the order before the CESTAT, which ruled that the imported products were not eligible for exemption under the notification but also held that the extended limitation period was not applicable due to the lack of evidence of willful misstatement or suppression of facts. The Revenue subsequently filed appeals before the High Court.

Key Questions of Law

The High Court addressed several substantial questions of law, including:
1. Whether the Tribunal erred in accepting additional evidence during the appeal.
2. Whether the extended limitation period under Section 28(4) of the Customs Act was applicable.
3. Whether penalties under Section 114A of the Customs Act were justified.
4. Whether the judgment of the CESTAT Chennai Bench in a similar case was correctly decided.
5. Whether the respondent’s earlier consignments were cleared under self-assessment or physical examination.
High Court’s Findings

The High Court dismissed the appeals, providing detailed reasoning for its decision:
1. Acceptance of Additional Evidence: The Court found no merit in the Revenue’s objection to the Tribunal accepting additional evidence, as the evidence ultimately supported the Revenue’s case.
2. Extended Limitation Period: The Court upheld the CESTAT’s finding that the extended limitation period under Section 28(4) was not applicable. It emphasized that the threshold for invoking extended limitation is high and requires evidence of deliberate and willful misstatement or suppression of facts. The Court noted that the respondent had been importing similar products for years, and the Revenue had previously cleared these goods without objection, creating a reasonable belief that the exemption was valid.
3. Penalty Under Section 114A: Since the extended limitation period was not applicable, the corresponding penalty under Section 114A was also deemed unjustified.
4. Judgment of CESTAT Chennai Bench: The Court declined to comment on the correctness of the CESTAT Chennai Bench’s decision, as it was not under appeal in this case.
5. Self-Assessment vs. Physical Examination: The Court found no evidence of perversity in the CESTAT’s factual finding that earlier consignments were physically examined and cleared by the Revenue. It rejected the Revenue’s claim that the goods were cleared under self-assessment.
Conclusion

The High Court’s judgment underscores the importance of adhering to procedural requirements and evidentiary standards when invoking extended limitation periods under the Customs Act. It also highlights the significance of consistent past practices by the Revenue in determining the applicability of exemptions. This case serves as a reminder to both importers and the Revenue to ensure clarity and accuracy in declarations and assessments, as well as the need for robust evidence when alleging willful misstatement or suppression of facts. The dismissal of the Revenue’s appeals reinforces the principle that a mere change in interpretation or classification cannot retroactively constitute willful misstatement or suppression of facts.

Source: Karnataka High Court

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November 17, 2025
Karnataka High Court- Customs Duty Not Leviable on Import of Capital Goods by 100% EOU

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 25.09.2025

Karnataka High Court- Customs Duty Not Leviable on Import of Capital Goods by 100% EOU

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.

On July 30, 2025, the High Court of Karnataka at Bengaluru delivered a significant judgment in the customs appeals filed by the Commissioner of Central Excise, Customs, and Service Tax, Mysore, against M/s Such Silk International Ltd. The appeals, CSTA No. 8 of 2018 and CSTA No. 1 of 2021, were dismissed by a bench. This judgment has far-reaching implications for the interpretation of customs duty obligations under the Export Oriented Unit (EOU) scheme.

Background of the Case

M/s Such Silk International Ltd., a 100% Export Oriented Unit (EOU), had imported duty-free capital goods and raw materials under the erstwhile Notification No. 53/1997-Customs dated June 3, 1997. The company was obligated to fulfill export obligations as per the scheme. However, the unit became defunct, and the export obligations were not met. The Revenue initiated proceedings under Sections 28 and 72 of the Customs Act, 1962, to recover the customs duty on the imported goods, alleging non-compliance with the conditions of the notification.

The respondent accepted the duty liability on unutilized raw materials and consumables but contested the levy of duty on capital goods. The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled in favor of the respondent, holding that duty on capital goods was not leviable if the goods were installed and used for manufacturing, even if the export obligation was not fulfilled. The Revenue challenged this decision before the High Court.

Source: Karnataka High Court

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September 25, 2025
Karnataka High Court Upholds Conversion of Shipping Bills from MEIS to DEPB Scheme

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 18.08.2025

Karnataka High Court Upholds Conversion of Shipping Bills from MEIS to DEPB Scheme

In a significant judgment delivered on July 30, 2025, the High Court of Karnataka at Bengaluru dismissed Customs Appeal No. 4 of 2022 filed by the Principal Commissioner of Customs, Bengaluru. The case revolved around the conversion of shipping bills under export promotion schemes, and the court upheld the decision of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bengaluru, in favor of the Assessee, M/s Louverline Blinds.

Background of the Case

M/s Louverline Blinds, engaged in the manufacture of motorized curtain and blind assemblies, imported inputs under an Advance Authorization License for manufacturing goods meant for export. The Assessee filed six shipping bills under the Merchandise Export Incentive Scheme (MEIS) but later sought to amend them to reflect exports under the Advance Authorization License. The Principal Commissioner of Customs rejected this request, citing Section 149 of the Customs Act, 1962, and Circulars No. 36/2010 and 6/2002.

The Assessee appealed to the CESTAT, which ruled in its favor, allowing the conversion of shipping bills from the MEIS Scheme to the Duty Entitlement Passbook (DEPB) Scheme. The Revenue challenged this decision in the High Court.

This Article has been written by Shri Ravi Shekhar Jha, Advocate Delhi High Court based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.

Source: Karnataka High Court

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August 18, 2025