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  • CESTAT Mumbai Dismisses Customs Appeals Against Adani Group: Tribunal Upholds Legitimacy of EPC Imports and Declared Valuation

    CESTAT Mumbai Dismisses Customs Appeals Against Adani Group: Tribunal Upholds Legitimacy of EPC Imports and Declared Valuation

    Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

    Date: 06.06.2026

    CESTAT Mumbai Dismisses Customs Appeals Against Adani Group: Tribunal Upholds Legitimacy of EPC Imports and Declared Valuation

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

    The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai recently delivered a significant order involving Adani Enterprises Limited and several other Adani Group companies. This article provides a detailed overview of the case, the legal proceedings, and the implications of the Tribunal’s decision.

    Background of the Case

    The case originated from a Directorate of Revenue Intelligence (DRI) investigation into imports made by various Adani Group entities. The investigation led to three separate show cause notices (SCNs) alleging over-valuation of imported goods supplied by Electrogen Infra FZE (EIF), UAE. The notices targeted different Adani companies across multiple projects, including solar power and port infrastructure.

    Key Entities Involved

    • Adani Enterprises Limited (AEL)
    • Adani Renewable Energy LLP (AREL)
    • Adani Hazira Port Private Limited (AHPPL)
    • Adani Port and Special Economic Zone Limited (APSEZL)
    • Adani International Container Terminal (P) Limited (AICTPL)
    • Adani Vizag Coal Terminal Private Limited (AVCTPL)

    Timeline of Proceedings

    1. 2014: Two initial SCNs were issued to Adani Power Maharashtra Ltd., Adani Power Rajasthan Ltd., and Maharashtra Eastern Grid Power Transmission Company Ltd., alleging over-valuation.
    2. 2016: A third SCN was issued to the six Adani entities listed above, based on the same investigation and evidence.
    3. 2017: The Additional Director General (DRI) dropped proceedings for the first two SCNs, finding no merit in the over-valuation allegations.
    4. 2022: The Tribunal upheld the dropping of proceedings in both cases. The department’s appeals to the Supreme Court were dismissed in 2023, making the findings final.
    5. 2023-2026: The third SCN was adjudicated by the Principal Commissioner, who also dropped the proceedings. The department appealed this decision, leading to the current CESTAT order.

    Facts of the Appeals

    Each Adani entity had followed transparent international competitive bidding processes for their respective projects, awarding contracts to EIF as the lowest bidder. The contracts were comprehensive EPC (Engineering, Procurement, and Construction) agreements, including:

    • Supply of specialized equipment (solar modules, cranes, tugs)
    • Extended warranties and performance guarantees
    • On-site training and risk coverage

    The imports were executed under multiple Bills of Entry, and all assessments were finalized between 2011 and 2013.

    Legal Issues Examined

    The Tribunal considered three main issues:

    1. Whether the declared value of imports should be rejected and re-determined under customs valuation rules.
    2. Whether the goods were liable to confiscation under Section 111(m) of the Customs Act.
    3. Whether penalties should be imposed on the importers and related parties.

    Key Findings

    • No Influence on Pricing: Although the importers and EIF were related, the Tribunal found that the relationship did not influence the transaction prices. The contracts were awarded through transparent bidding, and the declared values were consistent with market rates.
    • Evidentiary Value: The evidence relied upon by the DRI (such as overseas bankers’ letters) lacked proper certification under Section 138C(4) of the Customs Act, rendering them inadmissible.
    • Consistency with Previous Decisions: Since the facts and evidence were identical to the earlier cases (which had attained finality up to the Supreme Court), the Tribunal held that the same outcome must apply.
    • No Grounds for Confiscation or Penalty: As there was no mis-declaration or over-valuation, the goods could not be confiscated, and no penalties could be imposed.

    Implications of the Decision

    The CESTAT Mumbai’s order reinforces several important legal principles:

    1. Finality of Judicial Decisions: Once findings of fact are upheld through all appellate forums, including the Supreme Court, similar cases based on the same facts and evidence must follow suit.
    2. Transparency in Procurement: The use of international competitive bidding and comprehensive EPC contracts was crucial in establishing the legitimacy of the declared values.
    3. Strict Evidentiary Standards: Authorities must ensure that evidence meets statutory requirements to be admissible in customs proceedings.

    Conclusion

    The dismissal of the department’s appeals by CESTAT Mumbai marks a decisive end to a long-standing dispute involving Adani Group companies. The order upholds the importance of transparent business practices and the rule of law in customs adjudication, setting a precedent for future cases involving similar allegations.

    Source: CESTAT Mumbai

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  • Understanding Section 135, GIR, and the Legal Implications of the Bombay High Court Judgment

    Understanding Section 135, GIR, and the Legal Implications of the Bombay High Court Judgment

    ALO Law Office- IDT Tax I Arbitration I Litigation

    Date: 14.03.2026

    Understanding Section 135, GIR, and the Legal Implications of the Bombay High Court Judgment

    Adv Ravi Shekhar Jha
    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 idΒ intelconsul@gmail.com or on his Mobile +91-9999005379.

    The Customs Act, 1962, is a pivotal legislation in India that governs the import and export of goods, ensuring compliance with customs duties and preventing illegal activities such as smuggling. ​ One of the most significant provisions under this Act is Section 135, which deals with penalties for offences related to customs violations. ​ Recently, the Bombay High Court delivered a landmark judgment that delved into the procedural aspects of investigations under the Customs Act, particularly in relation to Section 135 and the General Interpretative Rules (GIR) for classification of goods.

    Section 135 of the Customs Act, 1962: An Overview ​

    Section 135 of the Customs Act lays down penalties for offences such as misdeclaration of value, fraudulent evasion of duty, and dealing with prohibited goods. ​ The section is divided into two parts:

    1. Section 135(1): This subsection prescribes penalties for individuals who:
      • Misdeclare the value of goods or fraudulently evade or attempt to evade customs duty. ​
      • Acquire possession of goods liable for confiscation under Sections 111 or 113 of the Customs Act. ​
      • Attempt to export goods that are liable for confiscation under Section 113. ​

    The penalties under Section 135(1) are categorized based on the severity of the offence:

    1. If the market price of the goods exceeds β‚Ή1 crore, or the evasion of duty exceeds β‚Ή30 lakh, or the goods are prohibited as notified by the Central Government, the offence is punishable with imprisonment for up to 7 years and a fine. ​ The minimum imprisonment is one year unless special reasons are recorded. ​
    2. For other cases, the punishment may extend to 3 years of imprisonment, a fine, or both. ​
    3. Section 135(2): This subsection deals with repeat offenders. ​ If a person convicted under Section 135 or Section 136(1) is convicted again for a similar offence, they may face imprisonment for up to 7 years and a fine, with a minimum imprisonment of one year unless special reasons are recorded. ​

    General Interpretative Rules (GIR) and Classification of Goods

    The General Interpretative Rules (GIR) are a set of guidelines used for the classification of goods under the Harmonized System of Nomenclature (HSN). These rules are critical for determining the correct classification of goods for customs purposes, which directly impacts the applicable duty rates. ​

    The GIR consists of six rules:

    1. Rule 1: Classification is determined according to the terms of the headings and any relevant section or chapter notes. ​
    2. Rule 2: Covers incomplete or unfinished goods and mixtures or combinations of materials.
    3. Rule 3: Provides guidance for classifying goods that could fall under multiple headings. ​
    4. Rule 4: States that goods not specifically covered by any heading should be classified under the heading most akin to them.
    5. Rule 5: Deals with cases where goods are sold in sets or containers.
    6. Rule 6: Specifies that classification should be determined at the subheading level.

    The GIR plays a crucial role in ensuring uniformity and consistency in the classification of goods, which is essential for the proper implementation of customs laws, including Section 135.

    The Bombay High Court Judgment: Key Legal Principles

    The Bombay High Court judgment in the case involving Adani Power Limited and the Directorate of Revenue Intelligence (DRI) provides significant insights into the procedural requirements for investigations under the Customs Act. The case revolved around allegations of overvaluation of Indonesian coal imports by Adani Group companies, which allegedly led to the evasion of customs duties and manipulation of power tariff compensation. ​

    Key Allegations

    The DRI alleged that Adani Group companies:

    • Overstated the import value of Indonesian coal compared to its actual export value. ​
    • Misdeclared the grade and value of coal to evade customs duties. ​
    • Benefited from concessional duty rates under the ASEAN-India Free Trade Agreement (AIFTA) while overstating the value of imported coal. ​

    The DRI sought to issue Letters of Rogatory (LRs) under Section 166A of the CrPC to collect evidence from foreign jurisdictions, including Singapore, UAE, Hong Kong, and the British Virgin Islands. ​

    Legal Issues Addressed ​

    The court examined whether the DRI had legally and validly commenced its investigation into the alleged offences under Section 135 of the Customs Act and whether it was entitled to invoke Section 166A of the CrPC for issuing Letters of Rogatory. ​

    Court’s Observations ​

    1. Procedural Safeguards Under CrPC: The court emphasized that the Customs Act does not provide a specific procedure for initiating investigations into cognizable or non-cognizable offences. ​ Therefore, the procedural safeguards under Chapter XII of the CrPC, including Sections 154 and 155, must be followed. ​
    2. Non-Obstante Clause in Section 166A: The court clarified that the non-obstante clause in Section 166A of the CrPC does not override the mandatory procedural safeguards in Chapter XII of the CrPC. ​ Section 166A can only be invoked during a valid investigation initiated under Sections 154 or 155. ​
    3. Customs Act as a Special Law: While the Customs Act is a special law, it does not provide a comprehensive procedure for initiating investigations. ​ In the absence of such provisions, the procedural framework of the CrPC must be followed. ​
    4. Invalidity of Letters of Rogatory: The court held that the Letters of Rogatory issued by the Magistrate were invalid because the investigation was not initiated in compliance with the mandatory procedural requirements of the CrPC. ​

    Impact on Section 135 and GIR ​

    The judgment highlights the importance of adhering to procedural safeguards when investigating offences under Section 135 of the Customs Act. ​ Misdeclaration of goods, as alleged in this case, often involves complex issues of classification under the General Interpretative Rules (GIR). Accurate classification is crucial to determine the correct duty rates and avoid penalties under Section 135. ​

    Conclusion

    The Bombay High Court judgment underscores the interplay between the Customs Act, the CrPC, and the General Interpretative Rules (GIR). It establishes that procedural safeguards under the CrPC must be followed for investigations under the Customs Act, even when the Act classifies offences as cognizable or non-cognizable. ​ The judgment also highlights the critical role of GIR in ensuring accurate classification of goods, which is essential for compliance with customs laws and avoiding penalties under Section 135.

    Source: Bombay High Court

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