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Customs Seizure Under Section 110 of the Customs Act, 1962
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 14.04.2026

Customs Seizure Under Section 110 of the Customs Act, 1962

This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .

The Customs Act, 1962, governs the procedures for the seizure and provisional release of goods suspected to be liable for confiscation. This article delves into the legal framework, case summaries, and the importance of recording reasons to believe during the seizure process.

Legal Framework: Section 110 of the Customs Act, 1962

Section 110 of the Customs Act, 1962, empowers customs officers to seize goods if they have “reason to believe” that the goods are liable for confiscation. The provision also includes:
- Sub-section (1): Allows the proper officer to seize goods if they have reason to believe the goods are liable for confiscation.
- Proviso to Sub-section (1): If it is not practicable to seize the goods, the officer may serve an order on the owner, prohibiting them from removing, parting with, or dealing with the goods without prior permission.
- Sub-section (2): Specifies that if no notice is issued under Section 124(a) within six months of seizure, the goods must be returned to the person from whom they were seized. This period can be extended by the Principal Commissioner or Commissioner of Customs for up to six additional months, provided reasons are recorded in writing.
Importance of “Reasons to Believe” in Seizure Cases

The phrase “reasons to believe” is a critical element in the seizure process under Section 110. It requires the proper officer to record valid reasons before seizing goods. This ensures transparency and accountability in the exercise of seizure powers.

Key Guidelines from Instruction No. 01/2017-Customs

The Central Board of Excise and Customs issued Instruction No. 01/2017-Customs on February 8, 2017, emphasizing:
1. Mandatory Recording of Reasons: Proper officers must pass an appropriate order (seizure memo/order) clearly mentioning the reasons to believe that the goods are liable for confiscation.
2. Panchnama Cannot Replace Seizure Memo: The Delhi High Court ruled that a panchnama, being a statement by witnesses, cannot be considered an order under Section 110.
3. Timely Issuance of Show Cause Notices: Even if goods are provisionally released, the stipulated time period for issuing show cause notices under Section 110(2) must be strictly adhered to.
Customs Instruction

Case Summaries

1. Worldline Tradex Private Limited v. Commissioner of Customs (Import) & Ors.
- Court: Delhi High Court
- Case No.: W.P.(C) 5939/2016
- Summary:
  - The petitioner sought the provisional release of imported goods and a copy of the panchnama.
  - The court held that the panchnama cannot be considered an order under Section 110 of the Customs Act, 1962.
  - The court emphasized that the proper officer must record reasons to believe before seizing goods.
Order Copy

2. Krishna Kali Traders v. Union of India
- Court: Patna High Court
- Case No.: CWJC No. 7682 of 2020
- Summary:
  - The petitioners challenged the seizure of 21,098 kg of betel nuts and a truck.
  - The court ruled that the seizure memo did not comply with Section 110 as it lacked recorded reasons to believe.
  - The court quashed the seizure memo but allowed the customs authorities to continue their investigation.
Order Copy

3. Ashoke Das v. Union of India
- Court: Patna High Court
- Case No.: CWJC No. 4918 of 2021
- Summary:
  - The petitioners challenged the seizure of 19,188 kg of betel nuts and a truck.
  - The court found that the seizure memo did not include valid reasons to believe, as required under Section 110.
  - The court quashed the seizure memo but refrained from interfering with the show cause notice, allowing the investigation to proceed.
Order Copy

4. Sheo Nath Singh v. Appellate Assistant Commissioner of Income Tax, Calcutta
- Court Name: Supreme Court
- Diary No: 379/1967
- Summary:
- The Supreme Court ruled that the Income-tax Officer’s reasons for issuing notices under Section 34(1-A) of the Income-tax Act, 1922, were insufficient and self-contradictory, failing to meet the statutory requirements.
- The court clarified that “reason to believe” must be based on reasonable grounds and supported by relevant material, not mere suspicion or rumor, and that the Income-tax Officer would act without jurisdiction if these conditions were not met.
Order Copy

Reasons to Believe and Panchnama

The courts have consistently emphasized that the recording of reasons to believe is a prerequisite for a valid seizure under Section 110. Merely citing sections of the Customs Act without providing material information or evidence does not fulfill this requirement. Additionally, panchnama documents, which are statements by witnesses, cannot substitute for a seizure memo.

Key Observations from Case Law:
- Worldline Tradex Case: The panchnama is not an order under Section 110.
- Krishna Kali Traders Case: Panchnama cannot be read into the seizure memo.
- Ashoke Das Case: The absence of recorded reasons in the seizure memo renders it invalid.
Conclusion

The legal framework under Section 110 of the Customs Act, 1962, and subsequent judicial interpretations highlight the importance of adhering to procedural requirements during the seizure of goods. Proper officers must ensure that reasons to believe are clearly recorded in the seizure memo, and panchnama documents should not be used as a substitute for this requirement. Failure to comply with these guidelines can lead to the quashing of seizure memos, as demonstrated in the cases discussed above.

Source: CBIC, Delhi High Court, Patna High Court, Supreme Court

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April 14, 2026
Supreme Court Clarifies Requirement of Wilful Intent for Extended Limitation
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 14.04.2026

Supreme Court Clarifies Requirement of Wilful Intent for Extended Limitation

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 case of M/s Continental Foundation Joint Venture Sholding, Nathpa H.P. vs. Commissioner of Central Excise, Chandigarh-I (Civil Appeal No. 3139 of 2002) is a landmark judgment delivered by the Supreme Court of India on August 29, 2007. This case revolves around the classification and excise duty liability of Ready Mix Concrete (RMC) manufactured by construction companies for a power project. It also addresses critical issues such as the extended period of limitation under Section 11A of the Central Excise Act, 1944, and procedural compliance.

Background of the Case

The Nathpa Jhakri Power Corporation (NJPC), a joint venture between the Government of India and the Government of Himachal Pradesh, was established to construct a power project in Himachal Pradesh. The civil work for the project was awarded to three construction companies:
- M/s Continental Foundation Joint Venture (CFJV)
- M/s Nathpa Jhakri Joint Venture (NJJV)
- M/s Jai Prakash Hyundai Consortium (JPHC)
These companies were contracted to manufacture and supply Ready Mix Concrete (RMC) for the project. The manufacturing process involved blasting rocks from designated quarries, crushing them to specific sizes, and mixing them with cement, sand, and other materials using automatic batching plants. The final product was transported to the construction site using transit mixers and placed using concrete pumps.

The Dispute

The Commissioner of Central Excise, Chandigarh, issued a show-cause notice to the construction companies in January 1999, alleging that they were manufacturing RMC without paying the required central excise duty. The Commissioner argued that RMC falls under Chapter Heading No. 3824.20 of the Central Excise Tariff Act, 1985, and is subject to excise duty.

The construction companies contended that the product they manufactured was “mix concrete” and not RMC, claiming exemption under Notification No. 4/97-CE dated March 1, 1997. They argued that the concrete was manufactured at the construction site and was not subject to excise duty.

Key Legal Issues
1. Classification of the Product:
  - The central issue was whether the concrete manufactured by the construction companies qualified as RMC or mix concrete.
  - The Bureau of Indian Standards (BIS) specifications under IS: 4926/1976 and IS: 456-1978 were examined to determine the manufacturing process and classification.
2. Extended Period of Limitation:
  - The Revenue invoked the extended period of limitation under Section 11A of the Central Excise Act, alleging suppression of facts.
  - The appellants argued that they acted under a bona fide belief that their product was exempt from excise duty and that there was no intent to evade duty.
3. Mens Rea and Suppression:
  - The Supreme Court analyzed whether the appellants had willfully suppressed facts or misrepresented information to evade duty.
  - The Court emphasized that suppression must be deliberate and accompanied by intent to evade payment of duty.
Judgment and Observations

The Supreme Court ruled in favor of the appellants, primarily on the grounds of non-applicability of the extended period of limitation under Section 11A of the Central Excise Act. Key observations include:
1. Interpretation of Suppression:
  - The Court held that mere omission to provide correct information does not constitute suppression unless it is deliberate and intended to evade duty.
  - The terms “fraud,” “collusion,” and “willful misstatement” imply intent to evade duty, which was not proven in this case.
2. Circulars and Confusion:
  - The Court noted that various circulars issued by the Revenue at different times created confusion regarding the classification of RMC.
  - The lack of clarity in the circulars supported the appellants’ claim of bona fide belief.
3. Extended Limitation Period:
  - The Court ruled that the extended period of limitation could not be invoked as the Revenue failed to prove deliberate suppression or intent to evade duty.
4. Outcome:
  - The appeals were allowed, and the demands raised by the adjudicating authorities were set aside.
Implications of the Judgment
1. Clarity in Taxation:
  - The judgment underscores the importance of clear and consistent guidelines from tax authorities to avoid disputes and confusion.
2. Burden of Proof:
  - The ruling reiterates that the burden of proving suppression or intent to evade duty lies with the Revenue.
3. Protection for Bona Fide Actions:
  - The judgment protects businesses acting in good faith from being penalized under the extended period of limitation.
4. Impact on Construction Industry:
  - The case highlights the need for construction companies to seek legal and tax advice to ensure compliance with excise laws.
Conclusion

The Continental Foundation case serves as a significant precedent in the realm of excise duty and taxation law in India. It highlights the complexities of classifying goods under the Central Excise Tariff and the importance of intent in determining liability under Section 11A of the Central Excise Act. The judgment provides valuable insights for businesses and legal practitioners navigating the intricate landscape of tax compliance and dispute resolution.

Connected Matter

CESTAT Delhi- the extended period of limitation under Section 28(4) of the Customs Act cannot be invoked

Source: Supreme Court

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April 14, 2026
CESTAT Chennai Reinforces Principle of Substantive Compliance in SAD Refund Claims
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 14.04.2026

CESTAT Chennai Reinforces Principle of Substantive Compliance in SAD Refund Claims

This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chennai recently issued a significant ruling in the case of M/s Akshay Impex versus the Commissioner of Customs, Chennai II Commissionerate. This case revolved around the rejection of refund claims for Special Additional Duty (SAD) under Notification No. 102/2007-Cus. The tribunal’s decision sheds light on the interpretation of procedural compliance versus substantive compliance in the context of exemption notifications. This article provides a detailed analysis of the case, the arguments presented, and the tribunal’s final ruling.

Background of the Case

M/s Akshay Impex, the appellant, filed two refund claims under Notification No. 102/2007-Cus dated September 14, 2007. The claims sought refunds for SAD paid during the import of goods, which were later sold in the domestic market with VAT/Sales Tax paid. The refund claims were rejected by the Deputy Commissioner of Customs on October 8, 2012, citing non-compliance with paragraph 2(b) of the notification. This paragraph mandates that sales invoices must include an endorsement stating that no credit of SAD is admissible to the buyer.

The appellant challenged the rejection, arguing that they had complied with the substantive requirements of the notification, including payment of SAD, VAT, and submission of supporting documents such as Bills of Entry, duty payment challans, VAT returns, and Chartered Accountant certificates. However, the Commissioner of Customs (Appeals) upheld the rejection, leading the appellant to file an appeal with the CESTAT.

Key Issues in the Case

The tribunal identified the central issue as whether the appellant had complied with the conditions prescribed under paragraph 2(b) of Notification No. 102/2007-Cus. Specifically, the tribunal examined:
1. Whether the sales invoices contained the required endorsement regarding the non-admissibility of SAD credit.
2. Whether discrepancies in invoice formats and typographical presentation justified the rejection of the refund claims.
Arguments Presented

Appellant’s Submissions

The appellant, represented by Advocate, argued the following:
- Documentary Evidence: The appellant provided original copies of Bills of Entry, TR-6 challans, sales invoices, VAT returns, and Chartered Accountant certificates to establish compliance with the notification.
- Endorsement Compliance: The sales invoices included the required declaration, although there were minor typographical and formatting variations.
- Substantial Compliance: The appellant emphasized that procedural variations should not override the substantive compliance with the notification’s conditions.
Respondent’s Submissions

The respondent, represented by Authorized Representative, argued:
- Mandatory Compliance: The endorsement required under paragraph 2(b) of the notification is mandatory and must be strictly adhered to.
- Discrepancies in Invoices: Differences in invoice formats and the absence of identical endorsements raised doubts about compliance.
Tribunal’s Findings

The tribunal carefully examined the submissions and evidence presented by both sides. Key observations included:
1. Substantive Compliance: The appellant had paid SAD at the time of import, sold the goods in the domestic market with VAT/Sales Tax paid, and provided sufficient documentation to establish correlation between imports and sales.
2. Purpose of the Endorsement: The endorsement under paragraph 2(b) is intended to prevent buyers from availing credit for SAD, thereby avoiding double benefits. The tribunal found no evidence that buyers had availed such credit.
3. Procedural Variations: The discrepancies in invoice formats were deemed procedural and did not affect the substantive compliance with the notification.
4. Judicial Precedents: The tribunal referred to previous rulings, including those by the Hon’ble Supreme Court and High Courts, which emphasized the distinction between substantive conditions and procedural requirements.
Final Decision

The tribunal concluded that the appellant had substantially complied with the conditions of Notification No. 102/2007-Cus. The rejection of the refund claims based solely on procedural discrepancies in invoice formats was deemed legally unsustainable. Consequently, the tribunal set aside the Order-in-Appeal Nos. 292 & 293/2014 dated February 21, 2014, and allowed the refund claims of Rs. 2,51,046 and Rs. 2,63,572 with consequential relief as per law.

Key Takeaways
1. Substantive vs. Procedural Compliance: The ruling underscores the importance of distinguishing between substantive compliance and procedural lapses in exemption notifications.
2. Documentary Evidence: Comprehensive documentation, including Bills of Entry, VAT returns, and Chartered Accountant certificates, plays a crucial role in establishing compliance.
3. Judicial Precedents: The tribunal’s reliance on previous rulings highlights the importance of consistency in interpreting exemption notifications.
Conclusion

The Akshay Impex case serves as a landmark decision in the realm of customs law, particularly in the interpretation of Notification No. 102/2007-Cus. It reinforces the principle that procedural discrepancies should not overshadow substantive compliance, especially when the intent and purpose of the notification are fulfilled. Importers and legal practitioners can draw valuable insights from this case to ensure proper compliance and safeguard their rights to claim refunds under similar notifications.

Source: CESTAT Chennai

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April 14, 2026
CESTAT Chandigarh Allows Provisional Release of Allegedly Prohibited Goods
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 14.04.2026

CESTAT Chandigarh Allows Provisional Release of Allegedly Prohibited Goods

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 case of M/s Global Copier System vs. Commissioner of Customs, Ludhiana, heard by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chandigarh, revolves around the seizure and classification of imported second-hand multifunctional printing machines. This legal dispute highlights the complexities of Indian customs and trade laws, particularly concerning import restrictions, compliance requirements, and the provisional release of seized goods.

Background of the Case

M/s Global Copier System, the appellant-importer, filed an appeal against the order passed by the Commissioner of Customs (Appeals), Ludhiana, which upheld the rejection of their request for the provisional release of 230 second-hand Highly Specialized Equipment (HSE) Digital Multi-Function Print and Copying Machines. These machines were valued at Rs. 40,17,969 and classified under CTE 84333100.

The appellant had filed a Bill of Entry for the clearance of these goods on July 29, 2025. However, during the examination, it was found that the appellant lacked the necessary import authorization from the Directorate General of Foreign Trade (DGFT) and registration with the Bureau of Indian Standards (BIS). A Chartered Engineer’s report concluded that the imported goods were multifunctional devices and not HSE, leading to their seizure on August 14, 2025, under the belief that they were liable for confiscation.

Key Arguments by the Appellant

The appellant, represented by legal counsel, presented the following arguments:
1. Exemption from BIS Registration: The appellant argued that the CRO 2012 exempts HSE from BIS registration requirements, and the imported goods should qualify for this exemption.
2. Freely Importable Goods: According to the ITC HS classification, the imported goods are categorized as “freely importable,” and no notification explicitly prohibits their import.
3. Foreign Chartered Engineer’s Certification: The foreign Chartered Engineer had classified and valued the goods at the time of export, and the local Chartered Engineer did not provide sufficient reasons to refute this classification.
4. Precedents Supporting Provisional Release: The appellant cited multiple cases where courts had allowed provisional release of goods under similar circumstances, emphasizing that provisional release is permissible even for goods deemed prohibited.
5. Legal Provisions: Section 110A of the Customs Act allows for the provisional release of seized goods, and the impugned order failed to provide evidence of fraud or concealment by the appellant.
Key Arguments by the Respondent

The Commissioner of Customs, Ludhiana, represented by the Authorized Representative, countered the appellant’s claims with the following points:
1. Non-Compliance with Import Regulations: The appellant failed to obtain the required DGFT authorization and BIS registration, rendering the goods prohibited under Section 2(33) of the Customs Act.
2. Exemption Not Applicable: The exemption under S.O. 2844 (E) applies only to HSE, and the local Chartered Engineer’s report confirmed that the imported goods were multifunctional devices, not HSE.
3. Legal Precedents: The respondent argued that the cases cited by the appellant were not applicable due to differences in facts and circumstances.
CESTAT’s Observations and Final Order

After hearing both sides, the tribunal made the following observations:
1. Provisional Release Under Section 110A: The tribunal emphasized that Section 110A of the Customs Act allows for the provisional release of seized goods, irrespective of whether they are deemed prohibited.
2. Adjudication Required for Prohibition: The tribunal noted that the categorization of goods as prohibited is subject to adjudication, and the mere act of seizure does not establish the goods as prohibited.
3. Precedents Supporting Provisional Release: The tribunal referred to various judgments, including those by the High Courts of Delhi, Madras, and Telangana, which upheld the right to provisional release under similar circumstances.
4. Conditions for Provisional Release: The tribunal concluded that the impugned goods could be released provisionally, subject to the following conditions:
  - Payment of applicable duty on the imported goods.
  - Submission of a bond equivalent to the value of the imported goods.
  - Submission of a bank guarantee equivalent to 30% of the applicable duty.
Conclusion

The case of M/s Global Copier System vs. Commissioner of Customs, Ludhiana, underscores the importance of adhering to import regulations while also highlighting the legal provisions for provisional release of seized goods.

The tribunal’s decision to allow provisional release, subject to specific conditions, reflects a balanced approach that considers both compliance with trade laws and the rights of importers. This case serves as a significant precedent for similar disputes in the future, emphasizing the need for clear adjudication before categorizing goods as prohibited.

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Source: CESTAT Chandigarh

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April 14, 2026
CESTAT Delhi Holds Marketing & Sponsorship Expenses Not Includible in Assessable Value
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 13.04.2026

CESTAT Delhi Holds Marketing & Sponsorship Expenses Not Includible in Assessable Value

This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in New Delhi recently delivered a significant judgment in the case of M/s Indo Rubber and Plastic Works versus the Commissioner of Customs, Inland Container Depot, Tughlakabad, New Delhi. This case revolved around the valuation of imported sports goods branded as ‘Li Ning’ and the inclusion of marketing and promotional expenses in the customs valuation.

Background of the Case

M/s Indo Rubber and Plastic Works, a proprietary concern, is engaged in manufacturing sports goods under its own brand name, ‘Vicky,’ and importing and distributing ‘Li Ning’ branded sports goods from M/s Sunlight Sports Pte. Ltd., Singapore. The appellant entered into a distribution agreement with Sunlight Sports on January 1, 2010, which included provisions for marketing, advertising, and promotion of ‘Li Ning’ products within India.

Under Article 7 of the agreement, the appellant was responsible for bearing all costs related to marketing, advertising, and promotions within the assigned territory. Additionally, Sunlight Sports entered into sponsorship agreements with entities such as the Karnataka Badminton Association (KBA) and prominent badminton player P.V. Sindhu, which involved providing sports equipment and sponsorships to promote the ‘Li Ning’ brand.

The Dispute

The Revenue authorities investigated the valuation of ‘Li Ning’ branded goods imported from Singapore between February 2012 and March 2015. A show-cause notice was issued in February 2017, alleging that the marketing, advertising, sponsorship, and promotional expenses incurred by the appellant were a condition of sale and should be included in the value of the imported goods under Rule 10(1)(e) of the Customs Valuation Rules, 2007.

The key allegations included:
- The appellant undertook promotional activities for ‘Li Ning’ branded products as per Article 7 of the distribution agreement.
- Sponsorship agreements signed by Sunlight Sports were represented in India through the appellant.
- Some sponsorship agreements were signed by the appellant’s manager on behalf of Sunlight Sports.
- The appellant failed to provide a clear bifurcation of marketing expenses between ‘Li Ning’ and ‘Vicky’ brands.
- The marketing expenses were deemed a condition of sale, making them includable in the customs valuation.
The Revenue authorities argued that the appellant’s marketing expenses were a condition of sale and invoked the extended period of limitation, alleging suppression of facts and intent to evade customs duty.

Appellant’s Defense

The appellant contested the allegations, arguing:
1. No Payments on Behalf of Sunlight Sports: The appellant claimed that they did not pay any amount on behalf of Sunlight Sports and that the marketing expenses were incurred independently as part of their responsibility for sales promotion within India.
2. Post-Import Activity: The appellant argued that the marketing and promotional expenses were post-import activities and not a condition of sale.
3. Arms-Length Transactions: The appellant emphasized that the transactions were conducted at arm’s length and that the parties were not related.
4. No Fixed Obligation: The appellant highlighted that the distribution agreement did not specify any fixed amount or percentage of the invoice value to be spent on marketing and promotion.
5. Precedents: The appellant cited rulings from the Supreme Court and CESTAT, including the Toyota Kirloskar Motor Pvt. Ltd. and Richemont India Pvt. Ltd. cases, to argue that post-import expenses are not includable in the transaction value.
6. Extended Limitation Period: The appellant contended that the extended period of limitation was not applicable as there was no suppression of facts or intent to evade duty.
CESTAT’s Final Decision

After considering the arguments, the Tribunal ruled in favor of the appellant, stating:
- The marketing and promotional expenses incurred by the appellant were post-import activities and not a condition of sale.
- The distribution agreement did not impose any fixed obligation on the appellant to incur specific marketing expenses as a precondition for the sale of goods.
- The appellant was not related to Sunlight Sports, and the transactions were conducted at arm’s length.
- The extended period of limitation was not applicable as there was no suppression of facts or intent to evade duty.
The Tribunal set aside the impugned order, allowing the appeal and granting consequential benefits, including a refund of the amount deposited during the investigation, along with applicable interest.

Key Takeaways
1. Customs Valuation Rules: Rule 10(1)(e) of the Customs Valuation Rules, 2007, applies only when marketing and promotional expenses are a condition of sale.
2. Post-Import Activities: Expenses incurred for marketing and promotion after the importation of goods are not includable in the customs valuation.
3. Extended Limitation Period: The extended period of limitation under the Customs Act requires evidence of suppression of facts or intent to evade duty.
4. Precedents Matter: Previous rulings, such as those in the Toyota Kirloskar and Richemont India cases, play a crucial role in determining the applicability of customs valuation rules.
Conclusion

The Indo Rubber CESTAT Delhi case highlights the importance of understanding the nuances of customs valuation rules and the distinction between pre-import and post-import activities. It serves as a precedent for importers and distributors, emphasizing the need for clear agreements and proper documentation to avoid disputes with Revenue authorities.

This judgment reinforces the principle that marketing and promotional expenses incurred independently by the importer are not necessarily includable in the customs valuation of imported goods.

Connected Matter

CESTAT Delhi – Import Valuation Cannot Include Advertising or Management Fees

Source: CESTAT Delhi

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April 13, 2026
CESTAT Mumbai Sets Aside Rejection of ₹27.5 Lakh ADD Refund
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 13.04.2026

CESTAT Mumbai Sets Aside Rejection of ₹27.5 Lakh ADD Refund

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 .

This article delves into the legal case of M/s AKASAKA Electronic Ltd (now M/s MIRC Electronics Limited) versus the Commissioner of Customs (Import), Mumbai, as adjudicated by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai. The case revolves around a refund dispute concerning Anti-Dumping Duty (ADD) payments and the principle of unjust enrichment.

Case Background

The dispute originated from the provisional imposition of Anti-Dumping Duty (ADD) on Copper Clad Laminates imported by AKASAKA Electronic Ltd through nine Bills of Entry between September 19, 2003, and January 22, 2004. The ADD was later rescinded on January 22, 2004, as per Rule 21(3) of the Anti-Dumping Duty Rules, 1995, which mandates the refund of provisional ADD if the duty is withdrawn without confirmation.

Despite the withdrawal of the ADD, the appellant did not receive the refund of Rs. 27,51,395/- paid as ADD. After waiting for a year, the appellant filed a refund application under Section 11B of the Central Excise Act, which was rejected on the grounds of unjust enrichment. The rejection was based on the observation that the duty amount was recorded as an expenditure in the appellant’s Profit & Loss Account rather than as a receivable.

Legal Proceedings

First Round of Litigation

In the first round of litigation, the Tribunal remanded the matter back for re-adjudication, emphasizing that the appellant should be given an opportunity to substantiate their case with relevant documents. The Tribunal disagreed with the lower authorities’ contention that recording the duty amount as an expenditure in the Profit & Loss Account conclusively proved unjust enrichment.

Second Round of Litigation

Despite the Tribunal’s direction, the Refund Sanctioning Authority rejected the refund claim again, citing the appellant’s failure to provide conclusive evidence that the duty incidence was not passed on to customers. The Commissioner (Appeals) upheld this decision, relying on the Supreme Court’s judgment in the case of Allied Photographic India Ltd, which stated that uniformity in price does not necessarily prove that the duty incidence was not passed on.

Final Tribunal Decision

In the second round of litigation, the Tribunal ruled in favor of the appellant, stating that:
- Rule 21(3) of the Anti-Dumping Duty Rules, 1995, explicitly mandates the refund of provisional ADD if the duty is withdrawn, without requiring the importer to file a refund claim.
- The rejection of the refund claim based on the principle of unjust enrichment was not supported by standard accounting principles.
- The Tribunal cited multiple precedents, including M/s. EMA Lubes Pvt. Ltd. and M/s. Ring Plus Aqua Ltd., to argue that the mere recording of the duty amount as an expenditure does not establish unjust enrichment.
- The Tribunal also criticized the reliance on the Allied Photographic India Ltd case, stating that it was not applicable to the present case.
The Tribunal concluded that the Commissioner (Appeals) had erred in scrutinizing the refund claim under the principle of unjust enrichment, as Rule 21(3) of the Anti-Dumping Duty Rules, 1995, clearly stipulates that the ADD should be refunded without such scrutiny.

Final Order

The Tribunal allowed the appeal and directed the Commissioner of Customs (Import), Mumbai, to refund the Anti-Dumping Duty of Rs. 27,51,395/- along with applicable interest to the appellant within two months of the order date.

Key Takeaways
1. Rule 21(3) of the Anti-Dumping Duty Rules, 1995: This rule mandates the refund of provisional ADD if the duty is withdrawn without confirmation, eliminating the need for a refund application.
2. Unjust Enrichment: The principle of unjust enrichment cannot be conclusively established based solely on the recording of duty as an expenditure in financial statements. Standard accounting principles do not support this assumption.
3. Legal Precedents: The Tribunal’s decision was supported by multiple precedents, which clarified the interpretation of unjust enrichment and the role of accounting practices in legal disputes.
4. Importance of Proper Documentation: The case highlights the critical role of documentation, such as Chartered Accountant certificates and financial statements, in legal disputes involving tax refunds.
Conclusion

The case of AKASAKA Electronic Ltd vs. Commissioner of Customs (Import), Mumbai, underscores the importance of adhering to statutory provisions and established accounting principles in legal disputes. It also serves as a reminder of the need for clear and consistent documentation to substantiate claims in tax-related matters. The Tribunal’s decision not only provides relief to the appellant but also sets a precedent for similar cases in the future.

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Source: CESTAT Mumbai

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April 13, 2026
Bombay High Court Clarifies Scope of Redemption Fines Under Section 125 of the Customs Act
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 13.04.2026

Bombay High Court Clarifies Scope of Redemption Fines Under Section 125 of the Customs Act

This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .

The Bombay High Court recently delivered a significant judgment in the case of The Commissioner of Customs (Import) vs. M/s. Finesse Creation Inc.. This case revolved around the legality of imposing redemption fines and confiscating imported goods that were no longer available for seizure or confiscation under the Customs Act, 1962. The judgment provides clarity on the interpretation of Section 125 of the Customs Act and its application in cases where the goods in question are not physically available for confiscation.

Background of the Case

The case originated from a search conducted at the premises of M/s. Finesse Creation Inc. on September 28, 2006, where incriminating documents were recovered. Upon scrutiny, it was discovered that the value declared by the respondent for imported artificial flowers was significantly lower than the value indicated in the seized documents. This discrepancy led to the issuance of a show-cause notice on August 31, 2007, and subsequent adjudication by the Commissioner of Customs.

The Commissioner of Customs rejected the declared value of the goods for 13 consignments imported between August 4, 2003, and September 20, 2006. The goods were reassessed at a higher value of ₹44,82,452, resulting in a differential duty of ₹8,20,543 under Section 28(2) of the Customs Act. Additionally, interest under Section 28AB was ordered, and penalties were imposed. The imported goods were confiscated, and a redemption fine of ₹13,45,000 under Section 125 of the Customs Act was imposed in lieu of confiscation.

Appeal to CESTAT

The respondent challenged the Commissioner order before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). While the tribunal upheld the differential duty, penalties, and interest, it set aside the redemption fine imposed under Section 125 of the Customs Act. The tribunal relied on the judgment of the Punjab & Haryana High Court in Commissioner of Customs, Amritsar vs. Raja Impex (P) Ltd., which held that redemption fines cannot be imposed if the goods are not available for confiscation.

Key Legal Questions

The Bombay High Court admitted the appeal on two key questions:
1. Whether goods deemed improperly imported are liable for confiscation under Section 111 of the Customs Act, even if they are cleared and not available for seizure.
2. Whether the CESTAT was correct in holding that imported goods not available for confiscation are not liable for redemption fines under Section 125 of the Customs Act.
Courts Analysis and Judgment

The Bombay High Court examined the provisions of Section 125 of the Customs Act, which grants the Customs Authorities the power to confiscate goods that violate the Act, rules, or notifications. The court emphasized that the concept of redemption fine arises only when the goods are available for redemption. If the goods are not available, the question of confiscation or redemption does not arise.

The court distinguished the present case from the Supreme Court\u0019s judgment in Weston Components Ltd. vs. Commissioner of Customs, New Delhi. In Weston, the goods were released on the execution of a bond, and the Supreme Court held that redemption fines could still be imposed. However, in the case of Finesse Creation, the goods were cleared earlier and were not available for confiscation or redemption.

The court concluded that the tribunal was correct in holding that no redemption fine could be imposed in the absence of the goods. The appeal was dismissed, affirming the CESTAT decision.

Implications of the Judgment

This judgment has significant implications for the interpretation and application of Section 125 of the Customs Act:
1. Clarification on Redemption Fines: The judgment establishes that redemption fines under Section 125 can only be imposed if the goods are physically available for confiscation and redemption.
2. Distinction from Previous Judgments: The court clarified that the Weston Components Ltd. case is not applicable in situations where the goods are not available for confiscation.
3. Impact on Importers and Exporters: Importers and exporters must ensure accurate declarations to avoid penalties and confiscation. However, this judgment provides relief in cases where goods are no longer available for seizure.
Conclusion

The Bombay High Court’s decision in The Commissioner of Customs (Import) vs. M/s. Finesse Creation Inc. underscores the importance of adhering to the provisions of the Customs Act while also providing clarity on the limitations of imposing redemption fines. This case serves as a precedent for similar disputes and highlights the need for transparency and compliance in international trade practices.

Connected Matter

CESTAT Kolkata- Differential Customs Duty Demand and Confiscation Order Declared Unsustainable

Source: Bombay High Court

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April 13, 2026
Punjab & Haryana High Court Mandates Strict Compliance with Section 9D
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 11.04.2026

Punjab & Haryana High Court Mandates Strict Compliance with Section 9D

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 June 21, 2016, the Punjab and Haryana High Court delivered a landmark judgment in the case of M/S Jindal Drugs Pvt. Ltd. and Anr vs Union of India and Anr (CWP No. 12714 of 2016). This case revolved around procedural compliance under Section 9D of the Central Excise Act, 1944, and the principles of natural justice. The judgment has significant implications for adjudication proceedings under the Central Excise Act, particularly concerning the admissibility of statements recorded during investigations.

Background of the Case

The petitioners, M/S Jindal Drugs Pvt. Ltd., operated manufacturing units in Jammu and Kashmir, which were exempted from duty payment under Notification 56/2002-CE dated November 14, 2002. The exemption allowed the petitioners to claim refunds for duties paid from their Personal Ledger Account (PLA). Between November 2007 and March 2010, the petitioners claimed refunds amounting to ₹48,10,79,820.

The Revenue issued a Show Cause Notice (SCN) alleging that the petitioners had fraudulently claimed refunds without manufacturing any finished products. The SCN proposed recovery of the refunded amount along with interest and penalties. During the adjudication process, the petitioners contended that the adjudicating authority had violated Section 9D of the Central Excise Act by relying on statements recorded during the investigation without following the prescribed procedure.

Key Legal Issues

The case primarily revolved around the following legal issues:
1. Compliance with Section 9D of the Central Excise Act, 1944:
  - Whether the adjudicating authority followed the mandatory procedure for admitting statements recorded during investigations as evidence.
2. Principles of Natural Justice:
  - Whether the petitioners were given an opportunity to cross-examine witnesses whose statements were relied upon by the Revenue.
Legal Principles Established

1. Mandatory Compliance with Section 9D

Section 9D governs the admissibility of statements made before a gazetted Central Excise Officer during investigations. The court emphasized that:
- Statements are admissible only under specific circumstances outlined in Section 9D(1)(a), such as when the person who made the statement is dead, cannot be found, or is incapable of giving evidence.
- If these circumstances do not exist, the statement can only be admitted under Section 9D(1)(b) after the person is examined as a witness before the adjudicating authority and the authority forms an opinion that admitting the statement is in the interest of justice.
2. Principles of Natural Justice

The court underscored the importance of natural justice, particularly the right to cross-examine witnesses. It held that:
- Statements recorded during investigations cannot be relied upon unless the assessee is given an opportunity to cross-examine the makers of those statements.
- Failure to provide this opportunity renders the statements inadmissible as evidence.
3. Evidentiary Value of Statements

The court ruled that statements recorded during investigations lose their evidentiary value unless the procedure prescribed under Section 9D is followed. Adjudicating authorities must rely on general principles of evidence, as affirmed by the Supreme Court in C.C. v Bussa Overseas Properties Ltd.

Court’s Directions

The High Court directed the adjudicating authority to:
1. Summon the makers of the statements relied upon by the Revenue.
2. Examine the witnesses in chief before the adjudicating authority.
3. Provide the assessee with a copy of the examination-in-chief.
4. Allow the assessee to cross-examine the witnesses.
5. Exclude statements from evidence if the prescribed procedure is not followed.
Outcome

The court ruled in favor of the petitioners, directing the adjudicating authority to strictly adhere to the procedural requirements of Section 9D and the principles of natural justice. The writ petition was disposed of with these directions, effectively granting relief to the petitioners.

Implications of the Judgment

This judgment serves as a reminder to adjudicating authorities to strictly follow the procedural safeguards outlined in Section 9D of the Central Excise Act. It reinforces the importance of natural justice in adjudication proceedings and ensures that statements recorded during investigations are not used as evidence without proper examination and cross-examination.

Conclusion

The judgment in M/S Jindal Drugs Pvt. Ltd. vs Union of India is a significant milestone in the interpretation of Section 9D of the Central Excise Act, 1944. It highlights the mandatory nature of procedural compliance and the need to uphold the principles of natural justice in adjudication proceedings. This case will undoubtedly serve as a precedent for similar cases in the future, ensuring fairness and transparency in the adjudication process.

Connected Matter

CESTAT Allahabad Sets Aside Penalties in Alleged Onion Export

Source: Punjab & Haryana High Court

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April 11, 2026
Supreme Court Upholds Exporter’s Declared FOB Value
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 11.04.2026

Supreme Court Upholds Exporter’s Declared FOB Value

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 February 12, 2007, the Supreme Court of India delivered a landmark judgment in the case of Commissioner of Customs, New Customs House, Mumbai vs. M/s Vishal Exports Overseas Limited. This case revolved around the valuation of exported goods and the claim of Duty Entitlement Pass Book (DEPB) benefits under customs law. The judgment addressed critical issues related to the determination of the Free on Board (FOB) value of exported goods and the eligibility for DEPB benefits.

Background of the Case

M/s Vishal Exports Overseas Limited, the respondent in this case, exported 4.8 lakh coffee mugs between February and November 2001. The company declared the FOB value of the mugs at USD 3.40 per piece (approximately INR 157 per piece). The exported goods were eligible for DEPB benefits, which were claimed at a rate of 11% or 10% as per the rules. The company declared the market value of the mugs at INR 52.50 per piece, calculated as 150% of the purchase price of INR 35 per piece from manufacturers in Rajasthan.

The Assistant Commissioner of Customs alleged that the FOB value of USD 3.40 per piece was inflated to claim higher DEPB benefits. The department argued that the export price was not genuine, as it was significantly higher than the domestic purchase price of INR 35 per piece. The Assistant Commissioner recalculated the FOB price to INR 80 per piece and ordered that DEPB credit be granted based on this revised value. Additionally, the goods were deemed liable for confiscation, and a penalty under Section 114 of the Customs Act was imposed.

Legal Proceedings

The case went through multiple levels of appeal:
1. Commissioner (Appeals): The Commissioner upheld the Assistant Commissioner’s order, agreeing that the assessee was not entitled to any further benefits.
2. Customs, Excise & Gold (Control) Appellate Tribunal: The Tribunal overturned the decisions of the lower authorities, ruling in favor of Vishal Exports. It found no evidence to support the claim that the FOB price was inflated or misdeclared.
3. Supreme Court: The Revenue challenged the Tribunal’s decision in the Supreme Court, arguing that the FOB value was unreasonably high and that the assessee had inflated the price to gain undeserved DEPB benefits.
Key Arguments

Revenue’s Arguments:
- The FOB value of USD 3.40 per piece was 450% higher than the domestic purchase price of INR 35 per piece, which was unreasonable.
- The Tribunal failed to consider evidence regarding the price.
- The case was similar to the precedent set in Om Prakash Bhatia vs. Commissioner of Customs, Delhi, where over-invoicing was established.
Respondent’s Arguments:
- The DEPB scheme explicitly links credit to the FOB value of exports made in freely convertible currency, as per the Export and Import Policy (April 1, 1997 – March 31, 2002).
- The FOB value declared by the assessee was supported by substantial evidence, including shipping bills, invoices, packing lists, bills of lading, bank realization certificates (BRCs), and AR4 forms.
- The BRCs confirmed that the declared FOB price was actually received by the assessee.
- The adjudicating authorities arbitrarily computed the FOB value without any evidence.
- The case of Om Prakash Bhatia vs. Commissioner of Customs, Delhi was not applicable, as it pertained to the drawback scheme, not the DEPB scheme.
Supreme Court’s Decision

The Supreme Court dismissed the appeal filed by the Commissioner of Customs, upholding the Tribunal’s decision. The Court made the following observations:
- There was no evidence to support the claim that the FOB value was inflated or misdeclared.
- The Tribunal had correctly found that the adjudicating authorities had arbitrarily computed the FOB value without any basis.
- The DEPB scheme explicitly links credit to the FOB value, which was supported by the BRCs and other documentation provided by the assessee.
- The precedent set in Om Prakash Bhatia vs. Commissioner of Customs, Delhi was not applicable to this case, as it dealt with a different scheme and factual scenario.
Key Takeaways
1. Importance of Evidence: The judgment underscores the necessity of concrete evidence to support claims of misdeclaration or over-invoicing in export transactions.
2. Role of Documentation: The case highlights the critical role of proper documentation, such as invoices, shipping bills, and BRCs, in substantiating the declared FOB value.
3. DEPB Scheme: The judgment clarifies that DEPB benefits are directly linked to the FOB value of exports, as specified in the Export and Import Policy.
4. Judicial Precedents: The Court emphasized that precedents must be applied carefully, considering the specific facts and legal context of each case.
Conclusion

The Supreme Court’s decision in this case serves as a significant precedent in customs law, particularly concerning the valuation of exported goods and the application of the DEPB scheme. It reinforces the principle that allegations of misdeclaration must be supported by substantial evidence and that exporters are entitled to claim benefits based on the actual FOB value of their goods. This judgment is a reminder of the importance of adhering to established legal principles and maintaining robust documentation in international trade.

Connected Matter

CESTAT Allahabad Sets Aside Penalties in Alleged Over Invoicing

Source: Supreme Court

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April 11, 2026
Supreme Court Rejects Arbitrary Market Enquiry in Export Drawback
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 11.04.2026

Supreme Court Rejects Arbitrary Market Enquiry in Export Drawback

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 Supreme Court of India recently delivered a judgment in the case of M/S Sidhachalam Exports Pvt. Ltd. vs. Commissioner of Central Excise, Delhi-III, addressing critical issues surrounding the mis-declaration of export goods’ value and the admissibility of duty drawback claims under Indian customs law. This case highlights the importance of adhering to legal procedures for determining the value of export goods and the consequences of non-compliance.

Background of the Case

M/S Sidhachalam Exports Pvt. Ltd., the appellant, is a merchant exporter dealing in ready-made garments, engineering goods, handicrafts, woolen garments, and leather goods. On February 24, 2003, the company filed seven shipping bills for the export of goods, including ladies’ tops and denim shirts, to Moscow, Russia. The declared Free on Board (FOB) value of the goods was ₹4,14,63,360, and the exporter claimed a duty drawback of ₹49,75,536.

However, customs authorities, acting on secret information, suspected that the goods were overvalued to claim undue duty drawback. Upon examination, the goods were found to be of poor quality, and their market value was estimated to be significantly lower than the declared FOB value. This led to the issuance of a show-cause notice to the exporter, alleging mis-declaration of the goods’ value and proposing the reduction or denial of the duty drawback claim.

Legal Proceedings

Commissioner of Central Excise’s Decision

The Commissioner of Central Excise adjudicated the case and ruled in favor of the exporter, allowing the duty drawback claim. The Commissioner reasoned that the market enquiry conducted by the customs authorities was invalid as it was done without notifying the exporter and lacked corroborative evidence. The Commissioner also dismissed the valuation report provided by M/S Skipper International, citing its lack of evidentiary weight.

CESTAT’s Decision

The Revenue challenged the Commissioner’s decision before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The CESTAT overturned the Commissioner’s ruling, stating that the declared export prices were unsubstantiated and based on mis-declaration. The tribunal relied on the valuation report from M/S Skipper International, which described the goods as export surplus and rejected garments of poor quality. Consequently, the CESTAT reduced the duty drawback claim and imposed penalties on the exporter and its director.

Supreme Court’s Judgment

The Supreme Court found the decisions of both the Commissioner and the CESTAT to be flawed. The Court emphasized that the procedure for determining the value of export goods must adhere to Section 14(1) of the Customs Act, 1962, and the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The Court noted that the initial burden of proving mis-declaration lies with the Revenue, and the value of goods should be determined based on contemporaneous exports of identical goods before resorting to market enquiry.

The Supreme Court set aside the orders of both the Commissioner and the CESTAT and remitted the matter back to the adjudicating authority for fresh consideration. The Court directed that the case be resolved within six months, ensuring that the exporter is given adequate opportunity to present evidence.

Key Legal Principles Established
1. Adherence to Legal Procedures: The valuation of export goods must follow the prescribed procedures under Section 14(1) of the Customs Act and Rules 4 to 8 of the Customs Valuation Rules.
2. Burden of Proof: The initial responsibility to prove mis-declaration of export value lies with the Revenue.
3. Prohibited Goods: Goods that do not comply with prescribed export conditions are considered “prohibited goods” under Section 2(33) of the Customs Act.
4. Market Enquiry as a Last Resort: Market enquiry should only be conducted if data on contemporaneous exports of identical goods is unavailable.
Implications of the Judgment

This case serves as a precedent for future disputes involving the valuation of export goods and duty drawback claims. It underscores the necessity for customs authorities to follow established legal procedures and for exporters to maintain proper documentation to substantiate their claims. The judgment also highlights the importance of transparency and accountability in international trade practices.

Conclusion

The Sidhachalam Exports case is a significant ruling that reinforces the importance of compliance with customs laws and procedures. It serves as a reminder to exporters and customs authorities alike to ensure accuracy and integrity in declaring the value of goods for export. By adhering to the legal framework, stakeholders can avoid disputes and contribute to a fair and transparent trade environment.

Connected Matter

CESTAT Allahabad Sets Aside Penalties in Alleged Over Invoicing

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Source: Supreme Court

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April 11, 2026