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CESTAT Chennai Sets Aside Duty Demand on Nagarjuna Hospital Ltd. for Import of Medical Equipment
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.02.2026

CESTAT Chennai Sets Aside Duty Demand on Nagarjuna Hospital Ltd. for Import of Medical Equipment

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.comor on his Mobile +91-9999005379.

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has set aside the demand for differential duty and penalties imposed on Nagarjuna Hospital Ltd. for the import of medical equipment. The case revolved around the classification of a Linear Accelerator system, imported by the hospital for cancer treatment, and whether the demand raised by the Customs Department was time-barred.

Background of the Case

Nagarjuna Hospital Ltd., based in Vijayawada, Andhra Pradesh, imported medical equipment described as a “True Beam” Linear Accelerator system under two Bills of Entry (BE) dated March 18, 2016. The hospital claimed duty exemption under Customs Notifications No. 012/2012 (Sl. No. 473) and 021/2012 (Sl. No. 95), declaring the goods under Customs Tariff Heading (CTH) 9022 9030 as “Radiation Beam Delivery Unit/Equipment.” However, the Customs Department alleged that the correct classification should have been under CTH 9022 1490 as “Cancer Therapy System,” which did not qualify for the claimed exemption.

Following an investigation, the Commissioner of Customs issued a Show Cause Notice (SCN) on September 26, 2017, alleging misclassification and demanding differential duty of Rs. 1,57,71,212/- along with interest and penalties under Sections 111(m), 112(a), and 114A of the Customs Act, 1962. The imported goods were also confiscated, with an option to redeem them on payment of a fine of Rs. 15 lakhs. Nagarjuna Hospital Ltd. challenged the order, leading to the present appeal before the CESTAT.

Key Issues in the Case

The appeal raised two primary issues:
1. Time Barred Demand: The appellant argued that the SCN was issued beyond the permissible time limit under Section 28(4) of the Customs Act, 1962, which allows an extended period for issuing SCNs only in cases of fraud, collusion, or willful misstatement. The appellant contended that the goods were subjected to a “First Check” examination by Customs officials before clearance, and the classification declared by the hospital was accepted after scrutiny. Therefore, the SCN issued more than a year later was time-barred.
2. Classification Dispute: The appellant maintained that the imported equipment functioned as a single system for targeted radiation beam therapy and was correctly classified under CTH 9022 9030. The Customs Department argued that the equipment should be classified under multiple headings based on its components, as per the Accessories (Condition) Rules, 1963.
Tribunal’s Observations and Decision

The Tribunal, comprising Hon’ble Member – Technical and Hon’ble Member – Judicial, examined the submissions made by both parties and delivered its final order on February 2, 2026.

Time Barred Demand 

The Tribunal emphasized that the SCN was issued beyond the normal period of limitation under Section 28(4) of the Customs Act. It noted that the goods were subjected to a “First Check” examination, during which Customs officials physically inspected the consignments and reviewed the catalogs and documents. The goods were assessed and duty paid on May 8, 2016, as per the proper officer’s order. The SCN issued on September 26, 2017, was therefore time-barred.

The Tribunal rejected the Customs Department’s argument that SCNs under Section 124 of the Customs Act are not bound by strict timelines. It held that the SCN is the foundation for levy and recovery of duty, penalty, and interest, and all allegations must be clearly stated in the notice. Raising new legal points at the appellate stage was deemed impermissible.

Classification Dispute

While the Tribunal acknowledged the submissions on classification, it refrained from examining the merits of the case, citing precedents from the Hon’ble Supreme Court. It held that once a demand is found to be time-barred, there is no need to delve into the merits of the classification dispute.

Conclusion

The Tribunal concluded that the Customs Department failed to prove fraud or willful misstatement on the part of the appellant. It noted that the appellant’s actions, including seeking clarification and subjecting the goods to a “First Check,” demonstrated transparency and good faith. The SCN was deemed invalid due to being time-barred, and the impugned order was set aside.

Implications of the Ruling

This judgment underscores the importance of adhering to statutory timelines for issuing SCNs under the Customs Act. It also highlights the need for Customs authorities to exercise due diligence during the examination and assessment of imported goods. Importers are encouraged to maintain transparency and comply with procedural requirements to avoid disputes.

The decision provides clarity on the interpretation of classification rules under the Indian Customs Tariff and reinforces the principle that SCNs must be specific and detailed to allow the respondent to prepare an adequate defense.

Conclusion

The CESTAT’s ruling in favor of Nagarjuna Hospital Ltd. is a significant development in the realm of customs law, particularly concerning the interpretation of classification rules and the application of limitation periods for issuing SCNs. The judgment serves as a reminder to both importers and Customs authorities to ensure compliance with legal and procedural requirements to avoid unnecessary litigation.

Connected Matter

CESTAT Kolkata- Imported medical equiment were accessories, not parts

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Source: CESTAT Chennai

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February 3, 2026
Judicial Review of Delegated Legislation under the Customs Act and Allied Rules vis a vis The Constitutional framework
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 29.01.2026

Judicial Review of Delegated Legislation under the Customs Act and Allied Rules vis a vis The Constitutional framework

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.comor on his Mobile +91-9999005379.

Summary

This Article examines the constitutional discipline of delegated legislation in the context of customs law. It argues that while modern governance requires administrative agility, the legitimacy of subordinate legislation depends on fidelity to legislative policy, legality under the Constitution, and adherence to judicially crafted standards of review. The study constructs a unified framework for assessing customs notifications, rules, regulations, and circulars through four constitutional lenses: legislative policy, rights‑compatibility, standards of review, and institutional accountability.

The first chapter situates delegated legislation within India’s constitutional architecture and explains its growing centrality to customs administration. The second chapter surveys classical and Indian scholarship—Dicey, Wade & Forsyth, De Smith, Seervai, M.P. Jain, and I.P. Massey—together with doctrinal commentary on leading cases, to isolate the core standards of control. The third chapter elaborates the legal framework—Articles 13, 245–246, 265; Sections 25 and 156–159 of the Customs Act; and allied statutes—demonstrating that subordinate instruments are both enabled and constrained by constitutional and statutory design. The fourth chapter applies these standards to key judgments, presenting a comparative analysis that confirms a consistent judicial insistence on statutory fidelity, reasonableness, and competent authority. The fifth chapter consolidates findings and proposes reforms: guidance clauses in enabling provisions, pre‑notification consultation, statements of reasons and impact, stronger parliamentary scrutiny, and structured proportionality for burdensome measures.

The dissertation concludes that delegated legislation in customs can achieve both legality and effectiveness when drafted with clear statutory authority, supported by reasons, and implemented with transparency and proportionality. The proposed reforms align with the National Logistics Policy’s goals of predictability and facilitation without compromising constitutional discipline.

This Article also includes a short Non-Doctrinal Data survey done in an online mode using Google Form and the responses were received from across India. It has not been published here due to the Non-Disclosure agreed between the Author and the Participants.

Abstract

This Article evaluates the constitutional limits of delegated legislation under the Customs Act, 1962 and allied rules. It develops an integrated framework for judicial review based on Articles 13, 245–246, and 265 of the Constitution and the ultra vires, arbitrariness, proportionality, and legitimate‑expectation doctrines. Drawing on classical administrative‑law theory and Indian constitutional scholarship, the study maps enabling provisions (Sections 25, 156–159) and interfaces with allied statutes. A comparative analysis of landmark Supreme Court decisions—ranging from In re Delhi Laws Act (1951) to Canon India (2021) and recent cases—shows a consistent insistence on legislative policy supremacy, statutory fidelity, and competent authority.

The dissertation also focuses on specific questions raised in the Empirical Data Survey which glaringly points out to the reality of “Arbitrariness” in Executive orders being pronounced by Competent Authorities in the Customs Department.

The participants were located across India and participated in an online survey through Google Form. The Data is verifiable with the details of the participants mentioned in the Empirical survey report. The Empirical Data survey report is placed as Annexure-A at the end of this research Paper.

The dissertation proposes reforms in legislative drafting, administrative process, and judicial oversight to enhance transparency, accountability, and rights‑compatibility in customs rule‑making.

List of Cases and Statutes

• In re Delhi Laws Act, 1951 SCR 747

• Harishankar Bagla v. State of Madhya Pradesh, 1954 SCR 380

• Raj Narain Singh v. Chairman, Patna Administration Committee, 1954 SCR 1279

• Avinder Singh v. State of Punjab, (1979) 1 SCC 137

• Kunj Behari Lal Butail v. State of Himachal Pradesh, (2000) 3 SCC 40

• Canon India Pvt. Ltd. v. Commissioner of Customs, 2021 (376) E.L.T. 3 (S.C.)

• Constitution of India: Articles 13, 14, 19(1)(g), 21, 245–246, 265 • Customs Act, 1962: Sections 25, 156–159; General Clauses Act, 1897: Sections 21, 23, 24

Source: Judicial Orders, CBIC Website, Constitution of India

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January 29, 2026
CESTAT Mumbai Overturns Customs Order on MEIS Benefits
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 29.01.2026

CESTAT Mumbai Overturns Customs Order on MEIS Benefits

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

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has ruled in favor of Bayer Crop Science Limited, setting aside the impugned order passed by the Commissioner of Customs (NS-II), Jawaharlal Nehru Custom House (JNCH), Nhava Sheva. The case revolved around the classification of exported insecticides and the denial of export benefits under the Merchandise Exports from India Scheme (MEIS).

Background of the Case

Bayer Crop Science Limited, a leading research-intensive company in the agricultural industry, exports innovative agrochemical products such as insecticides under Customs Tariff Item (CTI) 3808 91 99. The company availed export incentives under the MEIS scheme, which is part of the Foreign Trade Policy 2015-2020. However, the Customs Department proposed a revision of the classification of these exported goods under CTI 3808 6100/3808 6200/3808 6990, claiming that the goods were misclassified to avail undue MEIS benefits.

The department alleged that Bayer Crop Science Limited intentionally misclassified the goods to claim ineligible MEIS benefits. Consequently, the Commissioner of Customs issued an order denying the MEIS benefits, imposing penalties, and confiscating the goods.

Key Issues in the Case 

The Tribunal was tasked with addressing the following critical issues:
1. Classification of Exported Goods: Whether the exported goods were correctly classified under CTI 3808 9199, as claimed by Bayer Crop Science Limited, or under CTI 3808 6100/3808 6200/3808 6990, as determined by the Customs Department.
2. Jurisdiction of Customs Authorities: Whether Customs authorities have the power to demand export benefits under Section 28(4) and/or 28AAA of the Customs Act, 1962, when the MEIS scrips have not been canceled by the Directorate General of Foreign Trade (DGFT).
3. Extended Period of Limitation: Whether the extended period of limitation for recovery of export benefits was applicable in this case.
CESTAT’s Observations and Ruling

After hearing both sides and reviewing the records, the Tribunal made the following observations:
1. Classification of Exported Goods: The Tribunal held that the Customs Department had incorrectly reclassified the exported goods based on Sub-Heading Note 2 to Chapter 38 of the First Schedule to the Customs Tariff Act, 1975. It clarified that the Second Schedule (Export Tariff) governs the classification of exported goods, and the Sub-Heading Notes of the First Schedule (Import Tariff) are not applicable to export goods. The Tribunal concluded that Bayer Crop Science Limited had correctly classified the goods under CTI 3808 9199.
2. Jurisdiction of Customs Authorities: The Tribunal emphasized that the MEIS scheme is governed by the Foreign Trade Policy 2015-2020 and the Foreign Trade (Development & Regulation) Act, 1992. It ruled that Customs authorities do not have the jurisdiction to question the validity of MEIS scrips issued by the DGFT unless the DGFT itself has canceled or invalidated the scrips. The Tribunal cited several judicial precedents, including rulings from the Hon’ble Supreme Court, to support its decision.
3. Extended Period of Limitation: The Tribunal found that the Customs Department had incorrectly invoked the extended period of limitation, as the department itself had expressed differing opinions on the classification of the goods in question. It ruled that the charge of suppression or willful misstatement could not be sustained when the department was unclear about the correct classification.
Conclusion

The Tribunal set aside the impugned order, ruling in favor of Bayer Crop Science Limited. It held that the Customs Department had overstepped its jurisdiction by reclassifying the exported goods and denying MEIS benefits without proper authority. The Tribunal also emphasized that the extended period of limitation was not applicable in this case.

This decision is a significant victory for Bayer Crop Science Limited and sets a precedent for similar cases involving the classification of exported goods and the jurisdiction of Customs authorities in matters related to export incentives. It underscores the importance of adhering to the legal framework governing export benefits and respecting the jurisdiction of the DGFT in matters related to the Foreign Trade Policy.

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Source: CESTAT Mumbai

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January 29, 2026
CESTAT Kolkata Dismisses Revenue Appeal and Orders Release of Confiscated Gold Bar
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 29.01.2026

CESTAT Kolkata Dismisses Revenue Appeal and Orders Release of Confiscated Gold Bar

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

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, recently delivered a significant judgment in Customs Appeal No. 75045 of 2024. The case revolved around the confiscation of two gold bars weighing 999.900 grams each, valued at Rs. 61,79,382, and the imposition of penalties under the Customs Act, 1962. The final order, pronounced on January 27, 2026, upheld the decision of the Commissioner of Customs (Appeals) to release one of the gold bars unconditionally to the respondent, and drop the penalties imposed on him.

Background of the Case

The case originated from the seizure of two gold bars on September 18, 2018, from an employee of respondent, outside his shop, M/s. Gems & Jarwa House. The seized gold bars were identified as:
- AS-1 (Serial No. 156469) weighing 999.900 grams
- AS-2 (Serial No. 151551) weighing 999.900 grams
During the investigation, the respondent admitted ownership of the gold bars. He stated that one bar was purchased from M/s. Dutta Bullion Mart, Kolkata, while the other was handed over to him by his late cousin, as repayment for a loan. The shop premises were searched, and statements from various parties involved in the gold’s transaction chain were recorded.

The investigation revealed that both gold bars were originally purchased from M/s. Kundan Care Products Ltd., Kolkata, under valid tax invoices. However, the Revenue alleged that the respondent failed to provide valid documentation for the gold bar bearing serial number 151551, claiming it was smuggled. A Show Cause Notice was issued on September 6, 2019, proposing the confiscation of the gold and the imposition of penalties under Sections 111(b), 111(d), 112(a), 112(b), and 14AA of the Customs Act, 1962.

Adjudication and Appeal 

The adjudicating authority, in its Order-in-Original dated March 5, 2020, ordered the release of the gold bar bearing serial number 156469 but confiscated the gold bar bearing serial number 151551. A penalty of Rs. 6,00,000 was also imposed on the respondent under Sections 112(a) and 112(b) of the Customs Act.

The respondent challenged the adjudication order before the Commissioner of Customs (Appeals), who set aside the confiscation order and directed the unconditional release of the gold bar bearing serial number 151551. The Commissioner (Appeals) relied on the judgment in Commissioner of Central Excise, Meerut-I Vs. Parmarth Iron Pvt Ltd [2010 (260) E.L.T. 514 (All.)], which held that the Revenue cannot rely on statements from prosecution witnesses if cross-examination is not allowed. The Commissioner (Appeals) also observed that the Department failed to provide sufficient evidence to establish the smuggled nature of the gold bar.

CESTAT’s Final Order

The Revenue filed an appeal against the Commissioner (Appeals)’ decision, arguing that the respondent had not discharged the burden of proof under Section 123 of the Customs Act, 1962, which requires the person from whom goods are seized to prove that they are not smuggled. The Revenue contended that the respondent failed to provide valid documentation for the gold bar bearing serial number 151551 and relied heavily on the statement of proprietor of M/s. Dutta Bullion Mart, who claimed that the gold bar in question was sold in cut pieces to different customers.

After hearing both sides and reviewing the case records, the CESTAT upheld the decision of the Commissioner (Appeals). The Tribunal noted the following key points:
1. Burden of Proof Under Section 123: The Tribunal clarified that the burden of proof under Section 123 of the Customs Act shifts to the respondent only when there is a reasonable belief that the goods are smuggled. In this case, the Revenue failed to establish the smuggled nature of the gold bar, as it was originally purchased from M/s. Kundan Care Products Ltd. under valid tax invoices.
2. Lack of Evidence: The Revenue relied solely on the statement of Shri Aniruddha Dutta, which claimed that the gold bar was sold in cut pieces to different customers. However, the Department did not provide any documentary evidence or conduct further investigations to substantiate this claim. The Tribunal emphasized that the absence of evidence to prove the smuggled nature of the gold bar invalidated the Revenue’s allegations.
3. Cross-Examination: The Tribunal highlighted that the Department did not allow the respondent to cross-examine Shri Aniruddha Dutta, which violated the principles of natural justice. Citing the Parmarth Iron Pvt Ltd case, the Tribunal held that the Revenue cannot rely on statements from witnesses who were not cross-examined.
4. Legal Chain of Transactions: The Tribunal observed that the gold bar in question had a clear legal chain of transactions, starting from M/s. Kundan Care Products Ltd. to M/s. J.J. House Pvt. Ltd., and then to M/s. Dutta Bullion Mart. This established that the gold was legally imported and was circulating in the domestic market.
5. No Evidence of Smuggling: The Tribunal concluded that the Department failed to provide any evidence, documentary or otherwise, to prove that the gold bar was smuggled. It noted that gold is freely imported and widely available in the Indian market, and mere suspicion cannot justify penal action.
Conclusion

In its final order, the CESTAT upheld the decision of the Commissioner (Appeals) and rejected the Revenue’s appeal. The Tribunal emphasized the importance of adhering to the principles of natural justice and the need for concrete evidence to substantiate allegations of smuggling. This judgment serves as a reminder that the burden of proof lies with the Department to establish the smuggled nature of goods, and mere suspicion or unsubstantiated statements cannot form the basis for confiscation or penalties.

Source: CESTAT Kolkata

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January 29, 2026
Patanjali Foods Wins on Customs Duty Exemption for Crude Palm Oil
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 28.01.2026

Patanjali Foods Wins on Customs Duty Exemption for Crude Palm Oil

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, recently delivered a significant judgment in favor of M/s. Patanjali Foods Ltd. (formerly known as M/s. Ruchi Soya Industries Ltd.) in two appeals—Customs Appeal No. 20073/2014 and Customs Appeal No. 20074/2014. The case revolved around the eligibility of crude palm oil imported by the appellant for exemption under Notification No. 21/2002-Cus., dated March 1, 2002. The tribunal’s decision has set a precedent for interpreting exemption notifications in customs law.

Background of the Case

M/s. Patanjali Foods Ltd. imported crude palm oil of edible grade in bulk and claimed exemption from customs duty under Notification No. 21/2002-Cus., which provides a ‘Nil’ rate of duty for crude palm oil with an acid value of 4 or more and total carotenoid (as beta carotene) in the range of 250 mg/kg to 2500 mg/kg. The imported goods were provisionally assessed pending test reports to confirm their eligibility for the exemption.

Upon testing, conflicting reports were issued by different laboratories regarding the acid value of the imported crude palm oil. While the Customs Food Laboratory (CFL), Mysore, reported an acid value of 9.1, the Customs Revenue Laboratory (CRL), Mangalore, and the Central Revenue Control Laboratory (CRCL), New Delhi, reported acid values exceeding 10. Based on these reports, the Revenue denied the exemption, arguing that the acid value exceeded the permissible limit for edible-grade crude palm oil.

Key Arguments

Appellant’s Arguments
1. Notification Interpretation: The appellant argued that Notification No. 21/2002-Cus. does not specify an upper limit for the acid value of crude palm oil. The notification only requires the acid value to be “4 or more,” and the goods met this criterion.
2. Conflicting Test Reports: The appellant contended that the initial test report from CFL, Mysore, which confirmed the acid value as 9.1, should be considered binding. The subsequent reports from CRL, Mangalore, and CRCL, New Delhi, were inconsistent and should not be relied upon.
3. Legal Precedents: The appellant cited judgments from the Hon’ble High Courts of Calcutta and Gujarat, which held that the benefit of Notification No. 21/2002-Cus. cannot be denied based on an acid value exceeding 10, as the notification does not prescribe an upper limit.
4. Reprocessing of Goods: The appellant highlighted that the imported crude palm oil was reprocessed to meet edible-grade standards and was cleared by the Port Health Officer (PHO) after reprocessing.
Revenue’s Arguments
1. Compliance with Notification Conditions: The Revenue argued that the conditions of Notification No. 21/2002-Cus. must be strictly adhered to. They relied on CBEC Circular No. 40/2001-Cus., which specifies a maximum acid value of 10 for edible-grade crude palm oil.
2. Test Reports: The Revenue emphasized the findings of CRCL, New Delhi, which reported an acid value of 11–11.4, exceeding the alleged maximum limit of 10.
3. Strict Interpretation of Exemption Notifications: The Revenue referred to the Supreme Court’s decision in Commissioner of Customs (Import), Mumbai vs. Dilip Kumar and Company and Others, which held that exemption notifications must be interpreted strictly, and any ambiguity must favor the Revenue.
CESTAT’s Observations and Ruling

After hearing both sides, the tribunal made the following observations:
1. No Upper Limit in Notification: The tribunal noted that Notification No. 21/2002-Cus. does not specify an upper limit for the acid value of crude palm oil. The phrase “acid value of 4 or more” should be interpreted strictly, and no additional conditions can be read into the notification.
2. Legal Precedents: The tribunal relied on the judgments of the Hon’ble High Courts of Calcutta and Gujarat, which had ruled in favor of importers in similar cases. The Supreme Court had also upheld the Gujarat High Court’s decision in Union of India vs. Cargill India Pvt. Ltd., confirming that the benefit of the notification cannot be denied based on an acid value exceeding 10.
3. Reprocessing of Goods: The tribunal observed that the imported crude palm oil was reprocessed to meet edible-grade standards and was cleared by the PHO after reprocessing. This further invalidated the Revenue’s claim that the goods were not of edible grade.
4. Misplaced Reliance on CBEC Circular: The tribunal held that the CBEC Circular No. 40/2001-Cus. was not applicable to the case, as it pertained to a different notification and did not apply to the conditions specified in Notification No. 21/2002-Cus.
5. Strict Interpretation of Exemption Notifications: While the tribunal acknowledged the principle of strict interpretation of exemption notifications, it emphasized that there was no ambiguity in the language of Notification No. 21/2002-Cus., and the Revenue’s attempt to impose an upper limit on the acid value was unwarranted.
Final Decision

The tribunal set aside the impugned orders and allowed the appeals filed by M/s. Patanjali Foods Ltd. with consequential relief. It ruled that the denial of the benefit of Notification No. 21/2002-Cus. was unjustified, as the notification does not specify an upper limit for the acid value of crude palm oil.

Key Takeaways
1. Strict Interpretation of Exemption Notifications: Exemption notifications must be interpreted strictly based on their language. Authorities cannot impose additional conditions that are not explicitly mentioned in the notification.
2. Importance of Legal Precedents: The tribunal’s reliance on previous High Court and Supreme Court judgments highlights the importance of consistent legal interpretation.
3. Reprocessing of Goods: The tribunal’s acknowledgment of the reprocessing of goods to meet edible-grade standards underscores the importance of considering the final state of imported goods.
4. Impact on Importers: This ruling provides clarity to importers regarding the interpretation of exemption notifications and reinforces the principle that the language of the notification must be strictly adhered to.
Conclusion

The CESTAT’s decision in favor of M/s. Patanjali Foods Ltd. is a landmark judgment that underscores the importance of adhering to the precise language of exemption notifications. It serves as a reminder to both importers and Revenue authorities to interpret such notifications strictly and avoid imposing unwarranted conditions. This ruling is expected to have a significant impact on similar cases in the future, providing much-needed clarity and consistency in the application of customs law.

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Source: CESTAT Bangalore

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January 28, 2026
CESTAT Mumbai Grants Customs Duty Exemption for Imported UPS Systems
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 28.01.2026

CESTAT Mumbai Grants Customs Duty Exemption for Imported UPS Systems

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

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Mumbai recently delivered a significant judgment in the case of Socomec Innovative Power Solutions P Ltd vs. Commissioner of Customs (NS-V), which has far-reaching implications for businesses importing Uninterrupted Power Supply (UPS) systems. This blog delves into the details of the case, the legal arguments presented, and the final verdict that has set a precedent for similar cases in the future.

Background of the Case

The case revolved around 36 appeals filed by Socomec Innovative Power Solutions P Ltd against the order passed by the Commissioner of Customs (Appeals), Nhava Sheva, Mumbai-II, on October 31, 2023. The Commissioner had dismissed the appeals, denying the exemption from payment of Basic Customs Duty (BCD) on UPS systems imported by the appellant under Serial No. 4 of Notification No. 25/2005-Cus dated March 1, 2005.

The primary issue was whether the imported UPS systems qualified for exemption under the said notification, which provides relief from BCD for “static converters for automatic data processing machines and units thereof, and telecommunication apparatus, other than static converters for cellular mobile phones.”

Arguments Presented

Appellant’s Argument

The appellant contended that the imported UPS systems were eligible for exemption under Serial No. 4 of Notification No. 25/2005-Cus. They argued that the UPS systems were intended for use in machines that qualify as Automatic Data Processing (ADP) machines or telecommunication apparatus, and thus, the exemption should apply.

The appellant also referred to a previous decision by the Tribunal in their own case (2025 (2) TMI 1296 – CESTAT Mumbai), where the Tribunal had ruled in their favor, granting the exemption for UPS systems under the same notification.

Respondent’s Argument

The respondent, represented by Deputy Commissioner (AR), supported the Commissioner’s order. The Commissioner (Appeals) had earlier ruled that the exemption was applicable only to static converters meant solely for ADP machines and telecommunication apparatus, excluding those used for other purposes such as healthcare, infrastructure, and other sectors.

The Commissioner relied on the principle that tax notifications must be interpreted strictly based on the language used, as established in the Supreme Court judgment in Hansraj Gordhandas v. H.H. Dave.

Key Findings of the Tribunal 

The Tribunal, comprising Hon’ble Justice President and Hon’ble Member – Technical, examined the arguments and previous judgments, including:
1. Previous Tribunal Decision in the Appellant’s Case: The Tribunal had earlier ruled in favor of the appellant, stating that UPS systems classified under Customs Tariff Item (CTI) 8504 4090 were eligible for full exemption from BCD under Serial No. 4 of Notification No. 25/2005-Cus.
2. Prostarm Info Systems Ltd Case: Another Division Bench of the Tribunal had ruled in favor of granting the exemption for imported UPS systems, stating that the benefit of the notification was applicable even if the goods were not specific to a particular ADP machine. This decision was accepted by the department, as confirmed by a letter dated May 8, 2025.
3. Interpretation of Notification: The Tribunal emphasized that the language of the notification should be interpreted in light of judicial precedents. It rejected the Commissioner’s narrow interpretation, which excluded UPS systems used in sectors like healthcare and infrastructure.
Final Verdict

The Tribunal concluded that the imported UPS systems were eligible for exemption under Serial No. 4 of Notification No. 25/2005-Cus. It set aside the impugned order dated October 31, 2023, and allowed all 36 appeals filed by Socomec Innovative Power Solutions P Ltd.

The judgment reaffirmed the principle that tax notifications must be interpreted based on their plain language and established judicial precedents. It also highlighted the importance of consistency in decision-making, as the department had previously accepted a similar ruling in the Prostarm Info Systems Ltd case.

Implications of the Judgment

This landmark decision has significant implications for businesses importing UPS systems and other goods under exemption notifications. It underscores the importance of:
1. Strict Interpretation of Notifications: Tax notifications must be interpreted based on their clear language, without introducing new words or phrases.
2. Judicial Precedents: Previous rulings by the Tribunal and higher courts play a crucial role in determining the outcome of similar cases.
3. Consistency in Decision-Making: The acceptance of the Prostarm Info Systems Ltd decision by the department was a key factor in the Tribunal’s ruling, highlighting the need for uniformity in applying legal principles.
Conclusion

The CESTAT Mumbai’s decision in favor of Socomec Innovative Power Solutions P Ltd is a win for businesses seeking clarity and fairness in the application of tax exemptions. It reinforces the principle that exemptions must be granted based on the clear language of notifications and established judicial precedents, ensuring a level playing field for importers.

Source: CESTAT Mumbai

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January 28, 2026
CESTAT Chennai Reiterates DGFT Authority on FTP Schemes; Customs Cannot Re-Assess Fulfilled Export Obligations
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 27.01.2026

CESTAT Chennai Reiterates DGFT Authority on FTP Schemes; Customs Cannot Re-Assess Fulfilled Export Obligations

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

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai, recently delivered a significant judgment in the case of M/s Vedanta Ltd. vs. Commissioner of Customs. This case revolved around the fulfillment of export obligations under the Advance Authorization Scheme and the interpretation of Customs Notifications No. 96/2009-Cus and 99/2009-Cus, both dated September 11, 2009. The judgment, delivered on January 23, 2026, provides clarity on the jurisdiction of the Directorate General of Foreign Trade (DGFT) and the Customs authorities in matters related to export obligations.

Background of the Case

M/s Vedanta Ltd., formerly known as Sterlite Industries India Ltd., is an importer engaged in the manufacturing of copper products such as copper anodes and cathodes. The company had obtained three Advance Authorizations (dated January 2, 2009, November 30, 2009, and June 10, 2010) under the Advance Authorization Scheme, which is part of the Foreign Trade Policy (FTP). This scheme allows manufacturers to import raw materials duty-free, provided they fulfill specific export obligations (EO) in terms of both value and quantity.

The dispute arose when the Directorate of Revenue Intelligence (DRI) issued a Show Cause Notice (SCN) to Vedanta Ltd. on July 17, 2019, alleging that the company had failed to fulfill its export obligations in terms of value and quantity as required under the Customs Notifications. The SCN demanded payment of customs duty and interest for the unfulfilled portion of the EO and imposed penalties under Section 112(a) of the Customs Act, 1962.

Key Issues in the Case

The primary issue for consideration was whether the Customs authorities could raise a demand for customs duty and penalties, alleging a violation of the conditions of the Customs Notifications, when the DGFT had already issued Export Obligation Discharge Certificates (EODCs) confirming the fulfillment of the export obligations.

Arguments Presented
1. Appellant’s Argument:
  - Vedanta Ltd. argued that the DGFT had already regularized the shortfall in the fulfillment of export obligations in terms of value under the Advance Authorization Scheme.
  - The company had paid the required amount (1% of the shortfall in value) to the DGFT, as per the provisions of the FTP (Para 4.28 of FTP 2009-2014 / Para 4.49 of FTP 2015-2020).
  - The DGFT issued EODCs for all three Advance Authorizations, confirming the fulfillment of export obligations.
  - The Customs authorities had no jurisdiction to question the DGFT’s decision or raise demands for customs duty and penalties.
2. Respondent’s Argument:
  - The Customs authorities contended that Vedanta Ltd. had violated conditions (viii) and (ix) of the Customs Notifications by failing to fulfill the export obligations in terms of value and quantity.
  - They argued that the issuance of EODCs by the DGFT did not absolve the company from fulfilling the conditions of the Customs Notifications.
Tribunal’s Observations and Judgment 

The Tribunal made several key observations and ultimately ruled in favor of Vedanta Ltd. The highlights of the judgment are as follows:
1. Jurisdiction of DGFT vs. Customs Authorities:
  - The Tribunal emphasized that the DGFT is the final authority on matters related to the interpretation and implementation of the FTP. The Customs authorities cannot override the DGFT’s decisions regarding the fulfillment of export obligations.
  - The issuance of EODCs by the DGFT is conclusive evidence of the fulfillment of export obligations, and the Customs authorities cannot question or contradict this certification.
2. Regularization of Bona Fide Defaults:
  - The FTP provides provisions for regularizing bona fide defaults in fulfilling export obligations. Vedanta Ltd. had complied with these provisions by paying the required amount to the DGFT, which subsequently issued EODCs.
  - The Tribunal held that the regularization of the shortfall by the DGFT effectively revised and restated the export obligations, making the Customs authorities’ demand for duty and penalties untenable.
3. Customs Notifications and FTP:
  - The Tribunal clarified that the conditions in the Customs Notifications must be interpreted in the context of the FTP and the Handbook of Procedures (HBP). The fulfillment of export obligations specified in the Advance Authorizations by the DGFT is binding on the Customs authorities.
4. Precedents from Higher Courts:
  - The Tribunal referred to several judgments from the Supreme Court and High Courts, which consistently upheld the jurisdiction of the DGFT in matters related to export obligations under the FTP. These judgments emphasized that Customs authorities cannot take a view contrary to the DGFT’s decisions.
5. Cancellation of Bonds:
  - The Tribunal noted that the bonds executed by Vedanta Ltd. in respect of the three Advance Authorizations had been canceled by the Customs authorities. As a result, no demand for customs duty could be enforced under Section 143(3) of the Customs Act, 1962.
Final Decision

The Tribunal set aside the impugned order passed by the Commissioner of Customs and allowed Vedanta Ltd.’s appeal. It held that the demand for customs duty, interest, and penalties was not sustainable, as the export obligations had been fulfilled and regularized by the DGFT. The Tribunal also emphasized the need for coordination and harmony between the Ministry of Commerce and the Ministry of Finance in implementing the FTP and Customs Notifications.

Key Takeaways
1. Authority of DGFT:
  - The DGFT is the final authority on matters related to the FTP and export obligations. Customs authorities cannot override or contradict the DGFT’s decisions.
2. Regularization of Defaults:
  - The FTP provides mechanisms for regularizing bona fide defaults in fulfilling export obligations, ensuring that businesses can comply with the scheme without facing undue penalties.
3. Harmonious Interpretation:
  - The FTP, HBP, Customs Act, and related notifications must be interpreted harmoniously to ensure that the benefits of the Advance Authorization Scheme are not denied to importers and exporters.
4. Precedents Matter:
  - The judgment highlights the importance of adhering to established legal precedents, which consistently uphold the jurisdiction of the DGFT in matters related to export obligations.
Conclusion

The CESTAT’s decision in the Vedanta Ltd. vs. Commissioner of Customs case is a landmark ruling that reinforces the authority of the DGFT in matters related to the FTP and export obligations. It underscores the importance of a coordinated approach between government departments to ensure the smooth implementation of trade policies and schemes. This judgment serves as a reminder that businesses operating under the Advance Authorization Scheme can rely on the DGFT’s certification of export obligation fulfillment as conclusive evidence, safeguarding their rights and benefits under the FTP.

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Source: CESTAT Chennai

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January 27, 2026
CESTAT Delhi Sets Aside Undervaluation Finding in Furniture Imports
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 27.01.2026

CESTAT Delhi Sets Aside Undervaluation Finding in Furniture Imports

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently delivered a significant judgment in the case of Ajanta Overseas vs. Principal Commissioner of Customs (Import), which has far-reaching implications for the interpretation and application of Sections 138B and 138C of the Customs Act, 1962. This blog aims to provide a detailed analysis of the case, the legal provisions involved, and the final decision.

Background of the Case

The case arose from an appeal filed by Ajanta Overseas against the order dated December 3, 2020, passed by the Commissioner of Customs (Appeals). The Commissioner had rejected the declared value of imported goods under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and re-determined the value under Rule 3. The rejection was based on allegations of undervaluation and misdeclaration of furniture and furniture parts imported by the appellant.

The allegations stemmed from an investigation conducted by the Directorate of Revenue Intelligence (DRI), which claimed that several importers had formed a cartel to evade customs duty. The evidence relied upon by the Commissioner (Appeals) included printouts of emails and statements recorded under Section 108 of the Customs Act.

Key Legal Provisions Examined

Section 108 of the Customs Act 

Section 108 empowers Gazetted Officers of Customs to summon individuals to provide evidence or produce documents during an inquiry. Statements recorded under this section are often used as evidence in adjudication proceedings.

Section 138B of the Customs Act 

Section 138B outlines the conditions under which statements recorded under Section 108 can be considered relevant and admissible as evidence. It mandates that:
1. The person who made the statement must be examined as a witness before the adjudicating authority.
2. The adjudicating authority must form an opinion that the statement should be admitted in evidence in the interest of justice.
3. The person against whom the statement is made must be given an opportunity to cross-examine the witness.
Failure to comply with these mandatory provisions renders the statements inadmissible as evidence.

Section 138C of the Customs Act 

Section 138C deals with the admissibility of microfilms, facsimile copies, and computer printouts as evidence. It specifies conditions under which such documents can be deemed admissible, including the requirement of a certificate identifying the document and describing how it was produced.

Key Issues in the Case

The appeal was heard on two primary issues:
1. Whether the statements recorded under Section 108 of the Customs Act could be considered relevant if the procedure under Section 138B was not followed.
2. Whether the printouts of emails could be relied upon in the absence of compliance with Section 138C of the Customs Act.
Tribunal’s Observations

Section 138B Compliance 

The Tribunal emphasized that the provisions of Section 138B are mandatory. It noted that the Commissioner (Appeals) had relied on statements recorded under Section 108, but these statements were retracted by the appellant. The Tribunal referred to several precedents, including M/s Surya Wires Pvt. Ltd. vs Principal Commissioner, CGST, Raipur and Ambika International vs. Union of India, which highlighted the importance of following the procedure under Section 138B. The Tribunal reiterated that statements recorded during investigations have a high likelihood of being made under coercion or compulsion, and the safeguards provided under Section 138B are designed to ensure fairness and justice.

Section 138C Compliance 

The Tribunal also examined the provisions of Section 138C, which require specific conditions to be met for computer printouts and other electronic evidence to be admissible. In this case, the Commissioner (Appeals) failed to record any findings regarding compliance with Section 138C. The Tribunal noted that there was no certificate under Section 138C to validate the printouts of the emails, nor was there any evidence of a Panchnama being drawn regarding these printouts. As a result, the Tribunal held that the printouts could not be relied upon.

Final Decision

The Tribunal concluded that the Commissioner (Appeals) had erred in relying on the statements recorded under Section 108 and the email printouts without ensuring compliance with Sections 138B and 138C of the Customs Act. Consequently, the Tribunal set aside the impugned order dated December 3, 2020, and allowed the appeal filed by Ajanta Overseas.

Key Takeaways
1. Mandatory Compliance with Section 138B: The judgment underscores the importance of adhering to the procedure outlined in Section 138B for admitting statements recorded under Section 108 as evidence. Failure to comply with these provisions renders such statements inadmissible.
2. Admissibility of Electronic Evidence: Section 138C provides specific conditions for the admissibility of electronic evidence, such as computer printouts. Without proper certification and compliance with the section, such evidence cannot be relied upon.
3. Safeguards Against Coercion: The Tribunal highlighted the rationale behind the mandatory provisions of Sections 138B and 138C, emphasizing the need to prevent the use of statements or evidence obtained under coercion or compulsion.
4. Precedents Matter: The Tribunal relied heavily on previous judgments, including Ambika International vs. Union of India and M/s Surya Wires Pvt. Ltd., to reinforce its decision. This demonstrates the importance of judicial precedents in interpreting statutory provisions.
Conclusion

The decision in Ajanta Overseas vs. Principal Commissioner of Customs (Import) serves as a reminder of the importance of adhering to procedural safeguards in customs and excise adjudication proceedings. It highlights the need for strict compliance with Sections 138B and 138C of the Customs Act to ensure that evidence is admissible and that justice is served. This case will undoubtedly serve as a benchmark for future cases involving similar issues.

Source: CESTAT Delhi

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January 27, 2026
CESTAT Ahmedabad Quashes Undervaluation & Penalties in Timber Imports
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 24.01.2026

CESTAT Ahmedabad Quashes Undervaluation & Penalties in Timber Imports

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, recently delivered a significant judgment in the case of Appellants vs. Commissioner of Customs – Mundra. This case revolved around allegations of undervaluation of imported timber and evasion of customs duty. The final verdict, pronounced on January 23, 2026, set aside the impugned order and allowed the appeals with consequential benefits. Let’s delve into the details of this case and the implications of the judgment.

Background of the Case

The appellants imported various types of timber at Kandla and Mundra ports during 2009 and 2010. Following an investigation by the Directorate of Revenue Intelligence (DRI), it was alleged that the appellants, along with other timber importers, had undervalued their goods and evaded customs duty. Evidence of undervaluation was reportedly found in emails submitted by a supplier, who admitted to undervaluing timber imports in his statements.

The investigation led to a show cause notice issued on June 9, 2014, proposing the rejection of the declared value of the imported timber, re-determination of value, and demanding differential duty of Rs. 47,421/- and Rs. 91,780/- for imports at Kandla and Mundra ports, respectively. Additionally, penalties and redemption fines were imposed under various sections of the Customs Act, 1962.

Appeals and Arguments 

The appellants challenged the findings of the adjudicating authority and the Commissioner (Appeals), who had upheld the lower authority’s order with minor modifications. The appellants raised several key arguments:
1. Lack of Evidence: The investigation relied heavily on statements and emails from third parties, without corroborative evidence directly linking the appellants to the alleged undervaluation.
2. Third-Party Evidence: The appellants argued that third-party evidence, such as emails and statements from individuals not directly involved in their transactions, cannot be used as the sole basis for demanding duty and imposing penalties.
3. Burden of Proof: The appellants emphasized that the burden of proving undervaluation lies with the Revenue, which failed to provide tangible evidence to substantiate its claims.
4. Contemporaneous Imports: The appellants highlighted that the declared value of their imports was consistent with the prices of similar goods imported during the same period, as evidenced by the National Import Database (NIDB).
5. Extended Period of Limitation: The appellants contended that the extended period for demanding duty was not applicable, as there was no suppression or misstatement on their part.
6. Confiscation and Redemption Fine: The appellants argued that confiscation of goods under Section 111(m) of the Customs Act was not legally valid, as the goods were not physically available for confiscation.
Key Precedents Cited 

The appellants relied on several landmark judgments to support their case, including:
- Beena Sales Corporation (2019): This case dealt with similar allegations of undervaluation based on third-party statements and documents. The Tribunal had set aside the demand and penalties, stating that the evidence was not tangible or cogent enough to substantiate the allegations.
- South India Television (P) Ltd. (2007): The Supreme Court held that the burden of proving undervaluation lies with the Revenue, which must provide credible evidence of contemporaneous imports at higher prices.
- Truwoods Private Limited (2006): The Tribunal ruled that transaction value must be accepted unless credible evidence proves otherwise. It emphasized that third-party documents and statements without corroboration cannot form the basis for rejecting declared values.
The Tribunal’s Observations 

After carefully examining the submissions and evidence, the Tribunal found that the investigation against the appellants was based on common evidence and statements used in other similar cases. The Tribunal noted the following:
1. Lack of Incriminating Evidence: Searches conducted at the appellants’ premises did not yield any incriminating documents.
2. Third-Party Evidence: The investigation relied on statements and emails from Person and other third parties, which were not corroborated by independent evidence directly involving the appellants.
3. Consistency with Contemporaneous Imports: The declared value of the appellants’ imports was consistent with the prices of similar goods imported during the same period.
4. Precedents: The Tribunal referred to the Beena Sales Corporation case, which dealt with identical allegations and evidence. Since the Supreme Court had upheld the Tribunal’s decision in that case, the same principles were applied here.
Final Verdict

The Tribunal concluded that the allegations of undervaluation and duty evasion against the appellants were not substantiated by credible evidence. It held that the declared transaction value must be accepted, as the Revenue failed to prove undervaluation. The Tribunal set aside the impugned order, including the demand for differential duty, penalties, and redemption fines, and allowed the appeals with consequential benefits.

Implications of the Judgment

This judgment reinforces the principle that the burden of proving undervaluation lies with the Revenue. It highlights the importance of tangible and corroborative evidence in cases involving allegations of duty evasion. The decision also underscores the significance of adhering to the Customs Valuation Rules and respecting the principles of natural justice during investigations and adjudication.

For importers, this case serves as a reminder to maintain proper documentation and ensure compliance with customs regulations. It also provides reassurance that baseless allegations without credible evidence can be successfully challenged in legal forums.

Conclusion

The case of Appellant vs. Commissioner of Customs – Mundra is a landmark judgment that upholds the principles of fairness and justice in customs valuation disputes. By setting aside the impugned order, the Tribunal has reaffirmed the importance of evidence-based investigations and the need to respect transaction values unless proven otherwise. This decision will undoubtedly serve as a precedent for similar cases in the future, ensuring that importers are not unfairly penalized based on unsubstantiated claims.

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Source: CESTAT Ahmedabad

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January 24, 2026
CESTAT Delhi Overturns Foreign Currency Confiscation Under Customs Act
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 24.01.2026

CESTAT Delhi Overturns Foreign Currency Confiscation Under Customs Act

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

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in New Delhi recently delivered a landmark judgment in the case of Salt Experiences & Management Pvt Ltd & Others vs. Commissioner of Customs (NS-V). This case revolved around the confiscation of foreign currency and travel cards under the Customs Act, 1962, and raised critical questions about the jurisdiction of customs authorities in handling alleged violations of the Foreign Exchange Management Act (FEMA), 1999. The judgment, delivered on January 21, 2026, provides significant insights into the interplay between the Customs Act and FEMA, and the limits of customs authorities’ powers in foreign currency-related cases.

Background of the Case

The case originated from an incident on August 20, 2018, at the international departure terminal of IGI Airport, New Delhi. Security operatives intercepted foreign currency worth ₹81,01,421 (comprising 50,409 USD, 30,745 EUR, and 25,030 GBP) carried by an employee of M/s Salt Experiences & Management Pvt Ltd. The investigation revealed that the foreign currency was intended for business expenses related to organizing travel and events for M/s Hero MotoCorp Ltd, a client of M/s Salt Experiences & Management Pvt Ltd. The company had a longstanding arrangement with Hero MotoCorp to manage international travel and promotional events.

The customs authorities initiated proceedings under Section 113(d) of the Customs Act, 1962, alleging contravention of FEMA regulations. The seized currency was confiscated absolutely, and penalties were imposed on the appellants under Section 114 of the Customs Act, 1962. The appellants challenged the confiscation and penalties, arguing that the proceedings were extra-jurisdictional and that the customs authorities lacked the competence to adjudicate alleged violations of FEMA.

Key Legal Issues

The case raised several critical legal questions:
1. Jurisdiction of Customs Authorities: The appellants argued that the customs authorities were not competent to adjudicate violations of FEMA, as the Foreign Exchange Regulation Act (FERA), 1973, which previously allowed customs authorities to act on foreign exchange violations, had been repealed and replaced by FEMA, 1999. Unlike FERA, FEMA does not contain provisions that deem violations of its regulations as prohibitions under the Customs Act, 1962.
2. Definition of “Goods” Under the Customs Act: The case also examined whether “currency” falls under the definition of “goods” in Section 2(22) of the Customs Act, 1962. The appellants contended that while “currency” is included in the definition of “goods,” it is not subject to the same prohibitions as other goods under the Customs Act.
3. Applicability of FEMA Regulations: The appellants argued that the foreign currency was procured legally and within the limits prescribed by the Reserve Bank of India (RBI) for business purposes. They contended that the carriage of foreign currency exceeding USD 3,000 was a technical oversight and did not warrant absolute confiscation or harsh penalties.
The Tribunal’s Findings 

The Tribunal’s judgment, delivered by Hon’ble Members Technical and Judicial, provided a detailed analysis of the legal framework governing foreign currency transactions and the jurisdiction of customs authorities. Key findings include:
1. Lack of Competence Under Customs Act: The Tribunal held that the Customs Act, 1962 does not provide the necessary jurisdiction for customs authorities to adjudicate violations of FEMA. The inclusion of “currency” in the definition of “goods” under Section 2(22) of the Customs Act does not automatically confer the authority to confiscate foreign currency or impose penalties for violations of FEMA regulations.
2. Absence of Deeming Provisions: The Tribunal emphasized that under FERA, customs authorities were empowered to act on foreign exchange violations through a deeming provision that treated certain prohibitions under FERA as prohibitions under the Customs Act. However, FEMA does not contain such deeming provisions, effectively rescinding the dual machinery of enforcement that existed under FERA.
3. Improper Invocation of Customs Act: The Tribunal found that the lower authorities had improperly invoked Section 113(d) of the Customs Act, 1962, which allows for the confiscation of goods exported or attempted to be exported contrary to prohibitions imposed by the Customs Act or any other law. Since FEMA does not deem its prohibitions as prohibitions under the Customs Act, the customs authorities lacked the legal basis to confiscate the foreign currency or impose penalties.
4. Technical Errors and Harsh Penalties: The Tribunal acknowledged that the foreign currency was legally procured for business purposes and that the excess cash carried by Shri Amit Bali was a technical oversight. It held that absolute confiscation and harsh penalties were unwarranted in this context.
Conclusion

The Tribunal’s judgment in this case underscores the importance of adhering to the legislative intent and the limits of statutory authority. It highlights the need for customs authorities to operate within the framework of the law and avoid overreach. The deliberate omission of deeming provisions in FEMA, 1999, signals a shift in legislative intent to centralize the regulation of foreign exchange under the exclusive jurisdiction of the Enforcement Directorate.

Source: CESTAT Delhi

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January 24, 2026