𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Category: Karnataka High Court

Karnataka HC Ruled on Customs Dispute Over EPCG Scheme Compliance
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 28.07.2026

Karnataka HC Ruled on Customs Dispute Over EPCG Scheme Compliance

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 Karnataka High Court recently delivered a significant judgment in a customs and export promotion case involving M/s. Kalinga Commercial Corporation Ltd. (KCCL) and the Commissioner of Customs. The dispute centered on the use of capital goods imported under the Export Promotion Capital Goods (EPCG) Scheme and alleged violations of the scheme’s conditions.

Case Overview

KCCL, a mining contractor for Odisha Mining Corporation (OMC), imported 33 capital goods under 12 EPCG authorizations between 2005 and 2008. These authorizations were issued by the Directorate General of Foreign Trade (DGFT) offices in Cuttack and Patna. The imported equipment was used for mining operations at three OMC mines in Odisha.

The Directorate of Revenue Intelligence (DRI) alleged that KCCL violated the ‘Actual User Condition’ of the EPCG scheme by deploying the imported machinery at locations other than those declared in the authorizations. This led to:
- Seizure of the imported goods by DRI
- Show cause notices from DGFT offices proposing cancellation of licenses and blacklisting
- An Order-in-Original (OIO) by the Commissioner of Customs, confirming confiscation, demanding differential customs duty, imposing penalties, and encashing bank guarantees
KCCL appealed these actions, leading to a series of legal proceedings before the CESTAT (Customs, Excise and Service Tax Appellate Tribunal) and ultimately the Karnataka High Court.

Key Legal Questions

The High Court considered several substantial questions of law, including:
1. Whether using mobile capital equipment at permitted mining sites (not owned by KCCL but under their control) violated the EPCG scheme’s ‘Actual User Condition.’
2. Whether the mines needed to be owned by KCCL to qualify as their ‘own manufacturing unit.’
3. Whether the customs authorities could question the eligibility for EPCG benefits after the DGFT had issued and not cancelled the authorizations.
4. Whether customs authorities could deny exemptions based on alleged misrepresentation when the licensing authority had not questioned the license.
Arguments Presented

KCCL’s Position
- KCCL had declared all relevant mines as installation sites in their EPCG applications.
- The DGFT was aware that private parties cannot own mines; they are leased from state entities.
- The imported equipment was used solely for the declared mining activities, and the equipment was movable.
- The licensing authority (DGFT) had already adjudicated in KCCL’s favor, and customs authorities should not take a contrary view.
- Installation certificates were issued by competent authorities, and there was no misuse of imported goods.
Revenue’s Position
- KCCL was not the owner of the mines or the products, and the installation certificates were allegedly invalid.
- The company failed to fulfill export obligations as a manufacturer-exporter.
- Customs authorities have the power to verify and enforce license conditions, including imposing penalties for violations.
Court’s Analysis and Decision

The High Court found that:
- KCCL was engaged in mining activities with permission from OMC and used the imported capital goods for the intended purpose.
- The DGFT had already examined the issue and ruled in favor of KCCL, and this decision was final and binding.
- The customs authorities could not take a different stand once the licensing authority had adjudicated the matter.
- The movable nature of the equipment and the permissive use of the mines were consistent with the EPCG scheme’s requirements.
Final Order

The Karnataka High Court ruled as follows:
1. KCCL’s appeal was allowed.
2. The CESTAT’s order imposing duty and interest on KCCL was set aside.
3. The substantial questions of law were answered in favor of KCCL and against the Revenue.
4. The Revenue’s appeal was dismissed.
Significance

This judgment clarifies the interpretation of ‘Actual User Condition’ under the EPCG scheme, especially regarding the use of movable capital goods in leased or permissively held sites. It reinforces the principle that once the licensing authority has adjudicated eligibility, customs authorities should not revisit the same issue unless the license is cancelled or modified by the DGFT.

The decision provides relief to businesses operating under similar circumstances and sets a precedent for future disputes involving the EPCG scheme and the roles of customs and licensing authorities.

This case highlights the importance of clear communication and coordination between regulatory bodies and the need for consistency in the enforcement of trade policies.

Connected Matter

CESTAT Bangalore- Export benefits cannot be denied due to procedural non-compliances when export obligations are met

Source: Karnataka High Court

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July 28, 2026
High Court of Karnataka Upholds Rejection of Discharge in Document Forgery and Fraud
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 23.07.2026

High Court of Karnataka Upholds Rejection of Discharge in Document Forgery and Fraud

This Short Article has been prepared & written by Advocate Madhumita Jha-Bombay High Court. The views expressed are based on her interpretation of the law. She can be reached at her email id jhamadhumita27@gmail.com .

The Karnataka High Court recently delivered a significant order in a criminal petition involving allegations of document forgery, impersonation, and fraud related to property transfer. This article provides a detailed overview of the case, the legal arguments, and the court’s reasoning behind its decision.

Background of the Case

The case centers around a property dispute in Suledevarahalli Village, Hassan District. The complainant alleged that after the death of Siddegowda (the original property owner) in 1996, a relinquishment deed was fraudulently executed in 2007 by impersonating the deceased.

This deed transferred land to the father of the petitioner, and subsequently, the property was mutated in the petitioner’s name in 2013. The police registered an FIR and filed a charge sheet for offences under Sections 419, 420, 465, and 468 of the Indian Penal Code (IPC), which pertain to cheating, forgery, and impersonation.

Key Allegations
1. Impersonation and Forgery:
  - The relinquishment deed was allegedly executed in the name of Siddegowda, who had already passed away.
  - The complainant claimed that the accused, including the petitioner, conspired to create false documents to transfer property ownership.
2. Mutation of Property:
  - The property was mutated in the petitioner’s name based on the forged deed.
  - Official records related to the mutation process went missing, prompting further investigation and departmental action against government officials.
Legal Proceedings
- The petitioner sought discharge from the case, arguing that he was not in India at the time the deed was executed and presented passport evidence to support his alibi.
- The trial court rejected the discharge application, stating that the plea of alibi must be proven during the trial, not at the discharge stage.
- The petitioner challenged this order in the High Court under Section 482 of the Criminal Procedure Code (Cr.P.C.), seeking to set aside the trial court’s decision.
Arguments Presented

For the Petitioner
- Claimed innocence and lack of involvement in the alleged forgery.
- Asserted that he was working in Germany during the period in question and could not have participated in the execution of the forged deed.
- Highlighted the pending civil suit over the same property, suggesting the criminal case was filed with ulterior motives.
For the Respondents
- Emphasized that the petitioner was present in India during the property mutation in 2013, as shown by passport records.
- Pointed out that the petitioner benefited from the fraudulent transfer and must explain his role.
- Noted that the missing official records raised further suspicion and warranted a full trial.
Court’s Analysis and Findings
- The High Court reviewed the evidence, including the timeline of the petitioner’s travel and the mutation of property records.
- It found that while the petitioner may not have been in India during the execution of the relinquishment deed, he was present during the mutation process and benefited from the transfer.
- The court stressed that the plea of alibi is a matter for trial and cannot be the basis for discharge at the preliminary stage.
- The court also highlighted the suspicious disappearance of official records and directed action against responsible government officials.
- Citing Supreme Court precedents, the court reiterated that at the discharge stage, only the existence of prima facie material needs to be considered, not the merits of the defense.
Final Order
- The High Court dismissed the criminal petition, upholding the trial court’s decision to reject the discharge application.
- It directed the authorities to expedite departmental proceedings against officials involved in the missing records.
Legal Takeaways
1. Discharge Applications: Courts will not consider detailed defenses or alibi at the discharge stage; only prima facie evidence is assessed.
2. Role of Beneficiaries: Even if not directly involved in the initial act, beneficiaries of fraudulent transactions may be required to stand trial if evidence suggests their involvement.
3. Accountability in Public Records: Missing government records in fraud cases can lead to both criminal and departmental action against responsible officials.
This case underscores the importance of thorough judicial scrutiny in property fraud matters and the limited scope of discharge applications in criminal proceedings.

Source: Karnataka High Court

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July 23, 2026
High Court of Karnataka Quashes Proceedings Against Sitting MLA
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 22.07.2026

High Court of Karnataka Quashes Proceedings Against Sitting MLA

This Short Article has been prepared & written by Advocate Madhumita Jha-Bombay High Court. The views expressed are based on her interpretation of the law. She can be reached at her email id jhamadhumita27@gmail.com .

The High Court of Karnataka at Bengaluru, in Criminal Petition No. 12840 of 2024, delivered a significant judgment on July 11, 2025, quashing criminal proceedings against Ningaraddi Hanamaraddi Konaraddi, a sitting MLA from Navalgund.

The case revolved around alleged violations of the Juvenile Justice (Care and Protection of Children) Act, 2015, and the Child and Adolescent (Prohibition and Regulation) Act, 1986. This article provides a detailed analysis of the case, the legal principles involved, and the broader implications of the court’s decision.

Background of the Case

The petitioner, Ningaraddi Hanamaraddi Konaraddi, was accused under Section 79 of the Juvenile Justice Act, 2015, and Section 3 of the Child and Adolescent (Prohibition and Regulation) Act, 1986, based on an FIR registered at Navalgund Police Station (Crime No. 79/2023). The allegations centered on the purported employment or exploitation of a child, which both statutes strictly prohibit.

The trial court, after considering the evidence, concluded that Section 79 of the Juvenile Justice Act was not applicable to the facts of the case. However, it refused to discharge the petitioner under Section 3 of the 1986 Act, holding that the petitioner was involved in the process, even though actual employment was not established.

Legal Principles Involved

Section 79, Juvenile Justice Act, 2015

This section penalizes anyone who engages a child in employment or bondage for exploitation, or withholds their earnings. The law requires clear evidence of employment or exploitation for prosecution.

Section 3, Child and Adolescent (Prohibition and Regulation) Act, 1986

This provision prohibits the employment of children in any occupation or process, with certain exceptions (such as helping family enterprises outside hazardous occupations). Actual employment must be established for the section to apply.

Discharge Under Section 239 CrPC

Section 239 of the Code of Criminal Procedure allows for the discharge of an accused if, upon reviewing the case record and hearing the accused, the court finds that the allegations do not constitute the alleged offence.

The High Court’s Reasoning

Justice S.R. Krishna Kumar, presiding over the petition, observed that:
1. The trial court had already found Section 79 of the Juvenile Justice Act inapplicable.
2. The trial court erred in refusing discharge under Section 3 of the 1986 Act, as there was no evidence of actual employment of a child.
3. The necessary precondition for prosecution under both statutes—proof of employment or exploitation—was not met.
Accordingly, the High Court set aside the trial court’s order and allowed the discharge application, quashing all proceedings against the petitioner.

Implications of the Judgment

This judgment reinforces the principle that criminal prosecution must be based on clear statutory grounds and supported by evidence. Courts must ensure that all legal ingredients of an offence are satisfied before allowing a case to proceed.

The decision also highlights the judiciary’s role in protecting individuals from unwarranted prosecution, especially in cases involving public figures.

Conclusion

The High Court of Karnataka’s order in Criminal Petition No. 12840 of 2024 serves as a reminder of the importance of due process and strict adherence to statutory requirements in criminal law. By quashing the proceedings against the MLA, the court has clarified the evidentiary standards necessary for prosecution under child protection laws, ensuring that justice is not only done but seen to be done.

Source: Karnataka High Court

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July 22, 2026
Karnataka HC Quashes Customs Seizure: Ruled on Classification and Release of Imported Roasted Areca Nuts
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 07.07.2026

Karnataka HC Quashes Customs Seizure: Ruled on Classification and Release of Imported Roasted Areca Nuts

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 Karnataka High Court recently delivered a significant judgment in a series of writ petitions filed by M/s Vaibhav International, a Bengaluru-based importer, against the Customs Department’s seizure and detention of imported roasted areca nuts. This article provides a comprehensive overview of the case, the legal issues involved, the court’s analysis, and the implications for importers and customs authorities.

Background of the Case

M/s Vaibhav International imported 28 metric tons of roasted areca nuts from Indonesia in August 2024. The goods were declared under Bill of Entry No. 5470956 dated 06.09.2024, classified under tariff entry 20081920, and valued at Rs. 35,65,800. Upon arrival, the Customs Department sent samples for testing to the Central Revenues Control Laboratory (CRCL), New Delhi, which confirmed the goods as roasted areca nuts. However, a subsequent test by ICAR-CPCRI, Kerala, was inconclusive about the roasting process, leading customs authorities to treat the goods as raw areca nuts and seize the consignment on 06.12.2024 for alleged violation of the Foreign Trade Policy.

Legal Proceedings and Reliefs Sought

Vaibhav International filed multiple writ petitions seeking:
1. Quashing the seizure and detention of goods.
2. Release of the imported cargo in accordance with interim court orders.
3. Setting aside the show cause notice and related communications from customs authorities.
4. Issuance of waiver certificates for demurrage, detention, and ground rent charges.
Key Legal Issues Examined

The High Court considered four main points:
1. Legality of the provisional assessment under the Customs Act.
2. Correct tariff classification of the imported goods.
3. Lawfulness of the valuation adopted by customs authorities.
4. Validity of the show cause notice and confiscation proceedings.
1. Provisional Assessment Procedures

The court found that the Customs Department failed to follow the prescribed procedures under Sections 17 and 18 of the Customs Act. The bills of entry were initially marked as final and only later changed to provisional without proper justification or adherence to timelines. The department also did not finalize the provisional assessment within the required period after receiving test reports, violating the Customs (Finalisation of Provisional Assessment) Regulations, 2018.

2. Tariff Classification Dispute

The core dispute was whether roasted areca nuts should be classified under Chapter 8 (as raw/dried nuts) or Chapter 20 (as roasted nuts) of the Customs Tariff. The court relied on:
- Multiple CRCL reports confirming the goods as roasted areca nuts.
- Judicial precedents from the Madras and Allahabad High Courts, which held that roasted areca nuts are specifically classifiable under Chapter 20 (CTH 20081920), not under the general entry for raw/dried nuts in Chapter 8.
- Harmonized System of Nomenclature (HSN) explanatory notes, which treat roasting as a distinct process from drying.
The court concluded that the Customs Department’s attempt to classify the goods under Chapter 8 was contrary to law and facts.

3. Valuation of Imported Goods

The court held that the relevant date for determining the rate and valuation is the date of presentation of the bill of entry (06.09.2024), as per Section 15 of the Customs Act. Subsequent DGFT notifications imposing restrictions or changing classification could not be applied retrospectively. The declared transaction value was accepted since there was no evidence or procedure followed to dispute it under Section 14 and Rule 12 of the Customs Valuation Rules.

4. Show Cause Notice and Confiscation

The show cause notice and confiscation proceedings were found to be premature and illegal, as they were initiated before finalizing the provisional assessment. The court cited Supreme Court judgments clarifying that such proceedings can only commence after assessment is finalized.

Court’s Final Orders

The High Court allowed all three writ petitions and ordered:
1. Quashing of the seizure memorandum, impugned communications, and show cause notice.
2. Immediate release of the imported goods to the petitioner, adopting the classification and valuation as declared by the importer.
3. Issuance of waiver certificates for demurrage, detention, and ground rent charges.
4. Direction to customs authorities to comply within seven days of receiving the court order.
Implications and Takeaways
- For Importers: The judgment reinforces the importance of proper classification and the right to rely on accredited laboratory reports. It also highlights the need for customs authorities to strictly follow statutory procedures and timelines.
- For Customs Authorities: The ruling serves as a reminder that arbitrary or retrospective application of policy changes, and deviation from prescribed assessment procedures, will not withstand judicial scrutiny.
- For Trade Policy: The case underscores the significance of clarity and consistency in tariff classification and the limited retrospective effect of policy notifications.
Conclusion

This Karnataka High Court decision sets a strong precedent for the protection of importers’ rights and the necessity for customs authorities to adhere to due process. It clarifies the classification of roasted areca nuts and provides guidance on the interplay between customs law, trade policy, and administrative procedures.

Connected Matter

Karnataka High Court Quashes Customs Seizure

Source: Karnataka High Court

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July 7, 2026
Karnataka High Court Quashes Customs Seizure
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 06.07.2026

Karnataka High Court Quashes Customs Seizure

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 Karnataka High Court recently delivered a significant judgment in a series of writ petitions filed by M/s Hope Impex, a Bengaluru-based importer, challenging the seizure and detention of their imported goods by the Customs Department. This article provides a detailed overview of the legal proceedings, the issues involved, and the final outcome.

Background of the Case

M/s Hope Impex, represented by proprietor Sathish Kumar R., faced multiple actions by the Customs authorities, including:
1. Seizure of Imported Goods: Goods imported under Bill of Entry No. 5739104 dated 21.09.2024 were seized by Customs at the Inland Container Depot, Whitefield, Bengaluru.
2. Detention of Additional Consignments: Several other consignments were detained under various Bills of Entry in August and September 2024.
3. Issuance of Show Cause Notices: The Customs Department issued show cause notices and communications questioning the classification and nature of the imported goods, particularly regarding whether the goods were roasted arecanut.
Hope Impex filed four writ petitions (WP Nos. 33855/2024, 18324/2025, 24211/2025, and 24222/2025) before the Karnataka High Court, seeking relief against these actions.

Reliefs Sought by Hope Impex

The petitions requested the following key reliefs:
1. Quashing of Seizure and Detention: Setting aside the seizure and detention orders issued by Customs.
2. Re-testing of Samples: Mandamus for re-testing detained samples at the Central Revenues Control Laboratory (CRCL) and providing test reports.
3. Release of Goods: Directions for immediate release of the imported cargo in accordance with interim court orders.
4. Quashing of Show Cause Notices: Setting aside show cause notices as infructuous.
5. Waiver of Charges: Issuance of certificates waiving demurrage, detention, and ground rent charges.
Court Proceedings and Connected Cases

The Hope Impex petitions were heard alongside similar cases involving other importers, notably M/s Vaibhav International. The core issues revolved around the legality of Customs’ actions in seizing and detaining goods, the sufficiency of FSSAI (Food Safety and Standards Authority of India) reports, and the proper classification and valuation of the imported goods.

High Court’s Judgment and Orders

On 9 March 2026, the Hon’ble Mr. Justice S.R. Krishna Kumar delivered the following key orders:
1. Quashing of Customs Actions: The seizure memorandum, communications, and show cause notices issued by Customs were quashed.
2. Release of Goods: Customs was directed to release the imported goods to Hope Impex within seven days, using the classification and valuation adopted by the petitioner, as the FSSAI reports submitted were deemed sufficient.
3. Waiver of Charges: Customs was ordered to issue certificates waiving demurrage, detention, and ground rent charges within seven days.
The Court held that the issues in Hope Impex’s petitions were directly covered by its earlier orders in the connected Vaibhav International case, which had already set a precedent for similar disputes.

Implications of the Judgment

This judgment reinforces the importance of due process in customs enforcement and the evidentiary value of FSSAI reports in determining the nature of imported food products. It also provides relief to importers facing arbitrary seizure and detention of goods, ensuring that procedural safeguards are upheld.

Conclusion

The Karnataka High Court’s decision in favor of Hope Impex marks a significant victory for importers’ rights and sets a clear precedent for similar cases involving customs seizures and detentions. The judgment underscores the judiciary’s role in protecting businesses from administrative overreach and ensuring fair trade practices.

Connected Matter

Karnataka HC Quashes Customs Seizure: Ruled on Classification and Release of Imported Roasted Areca Nuts

Source: Karnataka High Court

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July 6, 2026
Karnataka High Court Allows Air India SATS Appeal: Delay in Filing Condoned
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 29.06.2026

Karnataka High Court Allows Air India SATS Appeal: Delay in Filing Condoned

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 .

Air India SATS Airport Services Pvt Ltd, a prominent airport services provider, faced customs proceedings after show cause notices were issued by the Principal Commissioner of Customs, Bengaluru. The notices alleged pilferage of imported jewellery and sought to confiscate goods under Section 111 of the Customs Act, 1962, along with imposing penalties.

The Dispute

Following the show cause notices (Nos. 169/2022 and 55/2022), the Adjudicating Authority passed orders against Air India SATS. The company filed appeals before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). However, for the order related to notice No. 55/2022, there was a significant delay of 324 days in filing the appeal. Air India SATS submitted an application to condone this delay, citing ongoing disinvestment and merger processes with the Tata Group as the primary reasons.

CESTAT’s Decision

CESTAT dismissed the appeal solely on the ground of the inordinate delay, refusing to condone it. This led Air India SATS to approach the Karnataka High Court, seeking to set aside CESTAT’s order and allow their appeal to be heard on merits.

High Court Proceedings

The High Court, presided over by Hon’ble Mr. Justice S.G. Pandit and Hon’ble Mr. Justice Rajesh Rai K, examined the reasons for the delay. The Court noted:
1. The delay was attributed to the company’s disinvestment and merger activities, which were ongoing during the relevant period.
2. The delay was not deliberate or mala fide, but arose from bona fide circumstances.
3. The principles established by the Supreme Court encourage a pragmatic and justice-oriented approach to condonation of delay, especially when no negligence or malafide intent is evident.
The Verdict

The Karnataka High Court found the reasons provided by Air India SATS to be credible and sufficient. The Court set aside CESTAT’s order, condoned the 324-day delay, and remitted the matter back to CESTAT for a hearing on merits. The Court emphasized that substantial justice should prevail over technicalities, especially when the delay is explained satisfactorily.

Key Takeaways
- Corporate Restructuring as Sufficient Cause: The Court recognized that large-scale corporate events like mergers and disinvestments can impact legal timelines, and such circumstances may constitute sufficient cause for delay.
- Liberal Approach to Delay Condonation: Courts are inclined to condone delays when there is no evidence of negligence or malafide intent, prioritizing justice over procedural technicalities.
- Next Steps: The appeal will now be heard by CESTAT on its merits, giving Air India SATS a fair opportunity to contest the customs order.
This decision underscores the judiciary’s commitment to ensuring that genuine litigants are not denied justice due to procedural delays arising from bona fide circumstances.

Source: Karnataka High Court

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June 29, 2026
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