𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Tag: #CESTAT

L&T granted relief by CESTAT Chennai as it Sets Aside Customs Duty Demand Over Procedural Lapses and Limitation Issues
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 04.11.2025

L&T granted relief by CESTAT Chennai as it Sets Aside Customs Duty Demand Over Procedural Lapses and Limitation Issues

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 significant judgment, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has ruled in favor of M/s Larsen & Toubro Ltd. (L&T Construction) in a series of appeals challenging the Order-in-Original No. 35511/2015 dated 27.02.2015 issued by the Commissioner of Customs, Chennai-II. The case revolved around allegations of suppression of freight and other charges during the importation of used machinery from M/s Sharaf Foundations, Dubai, and the subsequent demand for differential duty, interest, penalties, and confiscation under various provisions of the Customs Act, 1962.

Background of the Case

The dispute originated from a Show Cause Notice (SCN) issued on 08.10.2014, alleging that M/s L&T Ltd. had misdeclared freight and other charges paid to their overseas supplier, M/s Sharaf Foundations, Dubai. The SCN proposed reassessment of the declared value under Rule 9 and Rule 10 of the Customs Valuation Rules, 2007, read with Section 14 of the Customs Act, 1962. It also sought to invoke Section 28 for the demand of differential duty, interest, and penalties under Sections 112(a), 114A, and 114AA.

M/s L&T Ltd. contested the allegations, submitting a detailed explanation and a worksheet to justify their stand. They argued that they had paid duty on freight, overhead expenses, and yard charges, and that the proceedings under the SCN should have been terminated as per Section 28(5) of the Customs Act. They also raised objections to the issuance of the SCN beyond the normal period of limitation and the non-issuance of a mandatory notice under Section 28(6).

Tribunal’s Observations

Tribunal noted several key points in their judgment:
1. Non-Issuance of Mandatory Notice: The Tribunal observed that Section 28(6) of the Customs Act mandates the issuance of a notice if the proper officer believes there is a short payment of duty or penalty. The failure to issue this notice rendered the provision ineffective and undermined the legal process.
2. Extended Period of Limitation: The Tribunal highlighted that the SCN was issued beyond the normal period of limitation, and the allegations of suppression were not substantiated with evidence of intent to evade duty. The Tribunal emphasized that the conditions for invoking the extended period under Section 28 were not met.
3. Interpretational Issues: The Adjudicating Authority itself admitted that the difference in duty calculation was not solely due to factual discrepancies but also involved interpretational issues. This further weakened the allegation of suppression.
Final Order

In light of these observations, the Tribunal set aside the impugned Order-in-Original and allowed the appeals filed by M/s Larsen & Toubro Ltd. with consequential benefits as per law. The Tribunal also disposed of the Department’s appeal and the cross-objections filed by the importer, stating that the Revenue’s grievance merged with the impugned order, which was deemed unsustainable.

Key Takeaways

This judgment underscores the importance of adhering to procedural requirements under the Customs Act, particularly the issuance of mandatory notices under Section 28(6). It also highlights the significance of proving intent to evade duty when invoking the extended period of limitation. The decision serves as a reminder to both importers and the Revenue to ensure compliance with legal provisions and procedural mandates.

The ruling is a major victory for M/s Larsen & Toubro Ltd., reaffirming the principle that procedural lapses and unsubstantiated allegations cannot form the basis for imposing demands and penalties. This case sets a precedent for similar disputes and reinforces the need for transparency and fairness in customs adjudication processes.

Source: CESTAT Chennai

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November 4, 2025
CESTAT Delhi Overturns Drawback Denial of Texcomash Export
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 04.11.2025

CESTAT Delhi Overturns Drawback Denial of Texcomash Export

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), Principal Bench, New Delhi, has ruled in favor of M/s Texcomash Export, allowing their appeal against the Order-in-Original No. 6/88/2005 dated 13.07.2005. The case revolved around the disallowance of a drawback amount of Rs. 31,66,822/- and the confiscation of goods related to 9 shipments of ladies’ garments exported by the appellant.

Background of the Case

The dispute dates back to export shipments made by M/s Texcomash Export between September 1994 and October 1994. The appellant exported 29 shipments of children’s garments and 9 shipments of ladies’ garments to Russia under the duty drawback scheme. However, the customs authorities alleged that the goods were over-invoiced to claim inflated drawback amounts. Following investigations, the value of the goods was reassessed, and the drawback amount was reduced. The appellant challenged the decision, leading to multiple rounds of litigation.

The primary contention in the case was whether M/s Texcomash Export was entitled to claim drawback for the 9 shipments of ladies’ garments, which were delivered to Dubai instead of Russia. The department argued that the goods did not reach Russia, violating the Reserve Bank of India (RBI) Circular No. 30/1993, which prohibited third-country exports financed by state credit funds. Consequently, the drawback was disallowed, and the goods were ordered to be confiscated.

Key Arguments

Appellant’s Arguments:
1. The appellant contended that the show cause notice was issued by an unauthorized officer, violating the Drawback Rules.
2. They argued that the Drawback Rules, 1995, invoked by the department, were not applicable to exports made in 1994, as the rules were not retrospective.
3. The appellant highlighted that the goods had been exported to a place outside India, fulfilling the definition of “export” under the Drawback Rules.
4. They emphasized that the remittances for the exports were received in India, and the RBI had released the funds, indicating compliance with the relevant regulations.
Department’s Arguments:
1. The department claimed that the goods were delivered to Dubai instead of Russia, violating the RBI Circular and making the drawback inadmissible.
2. They argued that the remittances received by the appellant could not be treated as export proceeds for the Russian consignee.
3. The department maintained that the confiscation of goods and disallowance of the drawback were justified under the Customs Act and Drawback Rules.
CESTAT’s Decision

The key observations and findings of the Tribunal were:
1. Definition of Export: The Tribunal clarified that under the Drawback Rules, export is defined as taking goods out of India to a place outside India. Since the goods were delivered to Dubai, the export was deemed complete, and the appellant was entitled to claim the drawback.
2. Non-Retrospective Application of Rules: The Tribunal held that the Drawback Rules, 1995, could not be applied retrospectively to exports made in 1994. Therefore, the department’s reliance on these rules was deemed legally impermissible.
3. Invalid Confiscation: The Tribunal noted that the goods were released provisionally in 1995-96, making their confiscation in the impugned order untenable.
4. RBI Circular: The Tribunal observed that the RBI had released the remittances in Indian rupees from state credit funds, which contradicted the department’s claim of a violation of the RBI Circular.
5. Lack of Evidence: The department failed to provide sufficient evidence to support its findings that the appellant was not entitled to the drawback.
Conclusion

In light of the above findings, the Tribunal set aside the impugned order and allowed the appeal, granting M/s Texcomash Export the drawback amount of Rs. 31,66,822/- for the 9 shipments of ladies’ garments. This decision is a significant victory for exporters, reaffirming their rights under the Drawback Rules and emphasizing the importance of adhering to legal provisions and procedures.

Connected Matter

Gujarat High Court Clarifies Recovery Period for Erroneously Paid Customs Drawback

Source: CESTAT Delhi

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November 4, 2025
CESTAT Delhi Sets Aside Revocation of Customs Broker License
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.11.2025

CESTAT Delhi Sets Aside Revocation of Customs Broker License

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), Principal Bench, New Delhi, recently delivered a significant judgment in the case of M/s Dehasu Logistics India Pvt Ltd. vs. Commissioner of Customs-Airport & General. The case revolved around the revocation of the customs broker license of the appellant, M/s Dehasu Logistics India Pvt Ltd., and the forfeiture of their security deposit, along with the imposition of penalties. The Tribunal, in its final order dated 15th October 2025, set aside the impugned order passed by the Commissioner of Customs, citing a violation of the principles of natural justice.

Background of the Case

The dispute originated from an Order-in-Original dated 12th September 2024, wherein the Commissioner of Customs revoked the customs broker license of M/s Dehasu Logistics India Pvt Ltd. The appellant challenged this order before the Tribunal, which initially decided the appeal on 4th November 2024. However, the department filed an appeal before the Delhi High Court, which directed the Tribunal to reconsider the matter and deliver a decision before 15th December 2025.

Key Arguments by the Appellant 

The appellant, represented by Advocate, raised two primary arguments:
1. Vagueness of the Show Cause Notice: The appellant contended that the show cause notice merely reproduced the order passed by the Additional Commissioner of Customs without specifying the reasons for alleged violations of regulations under the Customs Broker Licensing Regulations (CBLR), 2018.
2. Violation of Principles of Natural Justice: The appellant argued that the Commissioner of Customs had disagreed with the findings of the Inquiry Officer without providing reasons for the disagreement or an opportunity for the appellant to submit a representation.
Findings of the Inquiry Officer 

The Inquiry Officer meticulously examined the alleged violations of regulations 10(d), 10(e), 10(q), and 13(12) of the CBLR, 2018. The inquiry report concluded that the appellant had not violated any of the provisions and had complied with the regulations. Key findings included:
- No discrepancies were found in the export shipments handled by the appellant.
- The appellant had advised their client to comply with the Customs Act and related regulations.
- The appellant had exercised due diligence and cooperated with customs authorities during investigations.
- The appellant had ensured proper conduct of their employees, who were duly approved by the Customs Department.
Tribunal’s Observations

The Tribunal noted that while the Commissioner of Customs is not bound to accept the findings of the Inquiry Officer, it is mandatory to communicate the reasons for disagreement to the customs broker and provide an opportunity to respond. This principle was upheld in the Delhi High Court judgment in the Him Logistics case, which emphasized the importance of adhering to the principles of natural justice.

In the present case, the Commissioner failed to provide the appellant with the reasons for disagreement with the inquiry report, which was in favor of the appellant. This procedural lapse led the Tribunal to conclude that the impugned order was in violation of the principles of natural justice.

Final Decision

The Tribunal set aside the order dated 12th September 2024, revoking the customs broker license of M/s Dehasu Logistics India Pvt Ltd. The appeal was allowed, and the Tribunal emphasized the necessity of following due process and ensuring compliance with the principles of natural justice.

Source: CESTAT Delhi

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November 3, 2025
CESTAT Chennai Sets Aside Penalty in PVC Flex Banner Import
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.11.2025

CESTAT Chennai Sets Aside Penalty in PVC Flex Banner Import

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), Chennai, recently delivered a significant judgment in the case concerning the import of PVC flex banners allegedly misdeclared as originating from Malaysia to evade anti-dumping duties. The case involved multiple appellants, including Appellants and M/s. Calcutta Canvas Co., who challenged the Order-in-Original No. 50362/2016 dated 30.09.2016 passed by the Commissioner of Customs, Chennai-II.

Background of the Case

The Directorate of Revenue Intelligence (DRI), Chennai Zonal Unit, initiated an investigation based on intelligence reports alleging that Indian importers were importing PVC flex banners of Chinese origin through Malaysia. The investigation claimed that the goods were misdeclared as being of Malaysian origin to avoid anti-dumping duties. The investigation led to the seizure of goods and documents, and a Show Cause Notice (SCN) was issued on 18.02.2016, proposing differential duty, confiscation of goods, and penalties.

The appellants argued that the allegations were based on presumptions and lacked substantive evidence. They contended that the Certificate of Origin (COO) issued by the Malaysian Government was valid and could not be disregarded without proper verification. Furthermore, they challenged the admissibility of electronic evidence cited in the SCN, citing procedural lapses in data retrieval and certification under Section 138C of the Customs Act, 1962.

Key Arguments and Judgments 
1. Certificate of Origin (COO): The appellants argued that the COO certificates issued by the Malaysian Ministry of International Trade and Industry were valid and should not be arbitrarily disregarded. They cited several case laws emphasizing the importance of verifying the authenticity of such certificates before making allegations of fraud. The Tribunal agreed, stating that the revenue authorities failed to follow the prescribed procedures for verifying the COO certificates with Malaysian authorities.
2. Admissibility of Electronic Evidence: The Tribunal noted that the electronic evidence relied upon by the revenue authorities was not admissible due to the absence of a certificate under Section 138C(4) of the Customs Act, 1962. The Tribunal referred to landmark judgments, including Anvar P.V. vs. P.K. Basheer and Arjun Panditrao Khotkar vs. Kailash Kishanrao Goratyal, which established the mandatory requirement of certification for electronic evidence under Section 65B of the Indian Evidence Act.
3. Valuation of Goods: The Tribunal found that the valuation method used by the revenue authorities was not supported by the Customs Valuation Rules, 2007. The alleged undervaluation of goods was not substantiated with credible evidence.
4. Imposition of Penalty: The Tribunal held that the charge against Shri Manoj Arjun Gore of obtaining fake COO certificates was not proven, as the revenue authorities did not investigate the authenticity of the certificates with Malaysian authorities. Consequently, the imposition of penalties on the appellants was deemed unjustifiable.
Final Order

After a detailed examination of the case, the Tribunal concluded that the revenue authorities failed to provide substantial evidence to support their allegations. The impugned order was set aside, and the appellants were granted consequential relief as per the law.

Source: CESTAT Chennai

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November 3, 2025
CESTAT Kolkata- Differential Customs Duty Demand and Confiscation Order Declared Unsustainable
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.11.2025

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

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 significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata, has set aside the demand for differential Customs Duty (CVD) imposed on M/s Reach Infocom Tech Pvt. Ltd. and its Director. The case revolved around allegations of undervaluation of imported goods, specifically mobile phones and laptops, due to discrepancies in the declared Retail Sale Price (RSP) at the time of import and the RSP found during a subsequent investigation.

Background of the Case

M/s Reach Infocom Tech Pvt. Ltd. (RITPL) is engaged in the import and sale of mobile phones and laptops under the brand name “REACH.” The company had imported goods from China between 2015 and 2017, paying the appropriate Customs Duty, including Countervailing Duty (CVD), based on the declared RSP. However, during a search conducted by the Directorate of Revenue Intelligence (DRI) in 2019, discrepancies were allegedly found between the declared RSP and the RSP displayed on goods seized during the investigation. This led to the issuance of two Show Cause Notices (SCNs) and a subsequent demand for differential CVD amounting to Rs. 2,92,54,340, along with interest, penalties, and redemption fines.

Key Arguments by the Appellant 

The appellants, represented by their legal counsel, raised several critical points challenging the demand:
1. Jurisdictional Overreach: The appellants argued that Customs authorities lacked jurisdiction to demand differential CVD for goods that had already been assessed and cleared for home consumption. They contended that any subsequent activity, such as affixing new MRP stickers, constituted “manufacture” under Section 2(f)(iii) of the Central Excise Act, 1944, and any duty liability arising from such activities should fall under the purview of Central Excise authorities, not Customs.
2. Lack of Evidence: The appellants highlighted that the demand was based on assumptions and generalizations rather than concrete evidence. The Department failed to provide proof of any single transaction where goods were sold at a price higher than the declared MRP.
3. Non-compliance with Legal Procedures: The appellants pointed out that the statements relied upon by the Department were recorded under Section 108 of the Customs Act but were not subjected to the mandatory procedure under Section 138B, which requires examination and cross-examination of witnesses before admitting their statements as evidence.
4. Time-Barred Demand: The appellants argued that the extended period of limitation could not be invoked for the second SCN issued in 2020, as the facts of the case were already known to the Department when the first SCN was issued in 2019.
5. Finality of Self-Assessed Bills of Entry: The appellants contended that the self-assessed Bills of Entry for the imported goods were not challenged by the Department, and as per the Supreme Court’s ruling in the ITC Ltd. case, the Department cannot reassess the original assessments indirectly.
Tribunal’s Observations and Ruling 

After hearing both sides, the Tribunal made the following key observations:
1. No Provision for Re-Determination of CVD: The Tribunal held that Section 3(2) of the Customs Tariff Act, read with Section 4A of the Central Excise Act, does not provide any mechanism for re-determining the CVD when it is paid based on the declared RSP at the time of import.
2. Activity Constitutes “Manufacture”: The Tribunal agreed with the appellants that affixing new MRP stickers on goods listed under the Third Schedule of the Central Excise Act amounts to “manufacture.” As such, any duty liability arising from this activity should be under the Central Excise Act, not Customs Law.
3. Non-Admissibility of Statements: The Tribunal emphasized that the Department failed to follow the mandatory procedure under Section 138B of the Customs Act, rendering the recorded statements inadmissible as evidence.
4. Erroneous Quantification of Duty: The Tribunal found that the Department’s method of calculating differential duty was flawed, as it relied on RSPs from unrelated e-commerce websites without corroborating evidence.
5. Time-Barred Demand: The Tribunal ruled that the extended period of limitation could not be invoked for the second SCN, as the facts were already within the Department’s knowledge when the first SCN was issued.
6. Confiscation and Redemption Fine Unsustainable: The Tribunal held that confiscation and redemption fines were not legally sustainable, as the goods were not available for confiscation and had been cleared without any bond.
Final Verdict

The Tribunal set aside the impugned order in its entirety, both on merits and on account of time-bar. The appeals filed by M/s Reach Infocom Tech Pvt. Ltd. and its Director were allowed, and they were granted consequential relief as per law.

Connected Matter

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

Source: CESTAT Kolkata

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November 3, 2025
CESTAT Delhi- Refund Interest Must Be Paid Directly to Importer Not Credited to Consumer Welfare Fund
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 01.11.2025

CESTAT Delhi- Refund Interest Must Be Paid Directly to Importer Not Credited to Consumer Welfare Fund

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 significant legal victory, Micromax Informatics Limited has successfully challenged the decision of the Commissioner of Customs (Appeals) regarding the refund and interest on excess countervailing duty (CVD) paid during the import of mobile handsets in 2014-2015. The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has ruled in favor of Micromax, allowing the company to receive both the principal refund amount and the interest accrued on delayed payments.

Background of the Case

Micromax Informatics Limited had imported mobile handsets during 2014-2015 and paid CVD at a higher rate without availing exemption under a specific notification. Following a Supreme Court ruling in the case of M/s SRF Ltd vs. Commissioner of Customs, Chennai, Micromax filed five refund applications for the excess duty paid. The Assistant Commissioner sanctioned the refund of the principal amount with interest but directed the funds to be credited to the Consumer Welfare Fund, citing unjust enrichment.

The Department challenged the payment of interest in four appeals before the Commissioner (Appeals), who subsequently set aside the Assistant Commissioner’s orders regarding interest. Micromax, on the other hand, filed appeals against the decision to credit the refund amount to the Consumer Welfare Fund.

Key Developments
1. Delhi High Court Intervention: Micromax filed a writ petition before the Delhi High Court, challenging the decision to credit the refund to the Consumer Welfare Fund. During the pendency of the petition, Micromax also filed appeals before the Commissioner (Appeals).
2. Commissioner (Appeals) Decision: On March 9, 2022, the Commissioner (Appeals) ruled in favor of Micromax, stating that the principal refund amount should be paid to the company instead of being credited to the Consumer Welfare Fund. However, the Commissioner (Appeals) did not sanction interest for four refund applications, which led Micromax to file appeals before the CESTAT.
3. CESTAT Ruling: On October 27, 2025, the CESTAT ruled in favor of Micromax, setting aside the earlier order and allowing the company to receive interest on the principal refund amount. The Tribunal emphasized that since the principal amount was directed to be credited to Micromax’s account, the interest on delayed payment should also be credited to the company.
Implications of the Judgment

This decision is a landmark ruling for businesses dealing with customs and excise matters. It reinforces the principle that when a refund is sanctioned, the rightful claimant is entitled to both the principal amount and the interest accrued due to delays. The judgment also highlights the importance of challenging decisions that may not align with legal precedents or established laws.

Conclusion

The CESTAT’s decision in favor of Micromax Informatics Limited sets a precedent for similar cases, ensuring that businesses are not unfairly deprived of their rightful refunds and interest. This case underscores the importance of pursuing legal remedies to protect business interests and uphold justice in matters of taxation and customs.

Source: CESTAT Delhi

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November 1, 2025
CESTAT Ahmedabad Overturns Penalties and Redemption Fine in Tug ‘Alliance’ Smuggling
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 31.10.2025

CESTAT Ahmedabad Overturns Penalties and Redemption Fine in Tug ‘Alliance’ Smuggling

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), Ahmedabad, recently delivered a significant judgment in the case of Customs Appeal No. 11938 of 2015 and related appeals, concerning the alleged illegal supply of goods to a foreign vessel, MT CANTA, by the tug ‘Alliance’. The case, which involved multiple appellants, including individuals and companies, revolved around allegations of smuggling and violations of the Customs Act, 1962.

Background of the Case

The case originated from intelligence reports suggesting that the tug ‘Alliance’, owned by M/s. K.B. Shipping & Company, had illegally supplied 20 KL of diesel oil, welding rods, grinders, and discs to the foreign vessel MT CANTA in high seas without filing export documents or obtaining proper customs clearance. The Directorate of Revenue Intelligence (DRI) investigated the matter, leading to the issuance of a Show Cause Notice on March 11, 2014.

The Adjudicating Authority found the goods liable for confiscation under Sections 113(f) and (g) of the Customs Act, 1962, and imposed penalties on several individuals and entities under Sections 114(iii) and 114AA of the Act. Additionally, the tug ‘Alliance’ was confiscated, with an option for redemption upon payment of a fine of Rs. 30,00,000.

The appellants challenged the Order-in-Original, arguing that the penalties and fines were imposed without proper consideration of their submissions and in violation of the principles of natural justice. They contended that they were not given an opportunity to cross-examine key witnesses and that the penalties were unjustified due to a lack of evidence proving their involvement or knowledge of the alleged illegal activities.

Tribunal’s Observations and Decision 

After a detailed examination of the case, The Tribunal made the following key observations:
1. No Evidence of Prior Knowledge or Connivance: The Tribunal found no evidence to suggest that the appellants, including Appellants, had prior knowledge or were involved in the illegal activities carried out by the tug’s Master, and Supervisor. The Tribunal noted that the appellants had trusted their employees to follow proper procedures, but the employees failed to comply with customs regulations.
2. Violation of Principles of Natural Justice: The Tribunal highlighted that the appellants were denied the opportunity to cross-examine key witnesses, which violated the principles of natural justice. This was a significant procedural lapse in the adjudication process.
3. Wrongful Imposition of Penalties: The Tribunal ruled that penalties under Sections 114(iii) and 114AA of the Customs Act were wrongly imposed on the appellants, as there was no evidence of their direct involvement or intent to violate customs laws.
4. Redemption Fine on Tug ‘Alliance’ Not Sustainable: The Tribunal observed that the tug ‘Alliance’ was under the operational control of M/s. K.B. Shipping & Co. at the time of the alleged incident, and the actual owners, M/s. V.S. Marine Services, were not involved in or aware of the illegal activities. Therefore, the redemption fine of Rs. 30,00,000 imposed on the tug was deemed unsustainable.
Final Verdict

The Tribunal set aside the impugned order passed by the Commissioner of Customs (Appeals) and allowed the appeals filed by the appellants. The penalties imposed on the appellants under Sections 114(iii) and 114AA of the Customs Act were revoked, and the redemption fine on the tug ‘Alliance’ was also annulled.

Source: CESTAT Ahmedabad

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October 31, 2025
CESTAT Delhi – Import Valuation Cannot Include Advertising or Management Fees
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 31.10.2025

CESTAT Delhi – Import Valuation Cannot Include Advertising or Management Fees

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), New Delhi, has ruled in favor of M/s Triumph Motorcycles (India) Pvt. Ltd., setting aside the order passed by the Additional Director General (Adjudication), Directorate of Revenue Intelligence (DRI), New Delhi. The case revolved around the inclusion of Advertisement and Promotional Expenses (APE) and Management Service Fees (MSF) in the transaction value of imported goods under Rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

Background of the Case

Triumph Motorcycles (India) Pvt. Ltd., a subsidiary of Triumph Motorcycles (Singapore) Pte. Ltd., imports motorcycles, parts, accessories, and clothing from its affiliated companies, Triumph Motorcycles Ltd., UK, and Triumph Motorcycles (Thailand) Ltd. The company entered into a Distributor Agreement and a Management Services Agreement with Triumph UK, which were renewed in 2017.

The DRI initiated an investigation and issued a show-cause notice in 2019, alleging that the APE and MSF incurred by Triumph India were a “condition of sale” of the imported goods and should be added to the transaction value under Rule 10(1)(e). The Additional Director General passed an order in 2020, confirming the demand for differential customs duty amounting to ₹21.85 crore, along with interest and penalties.

Key Issues in the Appeal 

The appeal raised several critical issues, including:
1. Whether APE incurred by Triumph India should be added to the value of imported goods under Rule 10(1)(e).
2. Whether MSF remitted to Triumph UK should be included in the transaction value.
3. Whether the extended period of limitation was applicable.
4. Whether interest and penalties under Sections 28AA and 114A of the Customs Act were justified.
Tribunal’s Observations and Ruling

After a detailed examination of the Distributor Agreement, Management Services Agreement, and relevant provisions of the Customs Act and 2007 Valuation Rules, the Tribunal ruled in favor of Triumph India. Key observations included:
1. APE Expenses: The Tribunal held that advertising and promotional expenses incurred by Triumph India were undertaken “on its own account” to promote its own business and were not a “condition of sale” of the imported goods. The Tribunal referred to the Interpretative Note to Rule 3(2)(b), which clearly states that marketing activities undertaken by the buyer on its own account cannot be added to the transaction value of imported goods.
2. MSF Payments: The Tribunal found that the Management Services Agreement was an independent commercial transaction unrelated to the import of goods. Payments made under this agreement were for business support services and had no direct correlation with the imported goods. The Tribunal cited previous rulings, including Thyssenkrupp Elevator (I) P. Ltd. vs. ACC (Import & General), New Delhi, to support its decision.
3. Interest and Penalty: Since neither APE nor MSF could be added to the transaction value, the Tribunal ruled that interest under Section 28AA and penalty under Section 114A of the Customs Act were not applicable.
4. Extended Limitation Period: The Tribunal did not find it necessary to examine the invocation of the extended period of limitation, as the impugned order was already set aside.
Final Verdict

The Tribunal concluded that the impugned order dated 24.09.2020 could not be sustained and set it aside, allowing the appeal filed by Triumph Motorcycles (India) Pvt. Ltd.

Implications of the Judgment

This decision is a significant win for Triumph Motorcycles India and sets a precedent for similar cases involving the inclusion of APE and MSF in the transaction value of imported goods. The ruling reinforces the principle that expenses incurred by an importer on its own account for marketing and promotional activities cannot be considered a “condition of sale” under Rule 10(1)(e) of the 2007 Valuation Rules. Additionally, it highlights the importance of distinguishing between independent commercial agreements and obligations tied to the sale of imported goods.

This judgment is expected to provide clarity and relief to importers facing similar disputes, ensuring that only legitimate costs directly related to the import of goods are included in the transaction value for customs duty purposes.

Connected Matter

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

Source: CESTAT Delhi

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October 31, 2025
CESTAT Delhi Overturns Penalties in Customs Valuation Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 30.10.2025

CESTAT Delhi Overturns Penalties in Customs Valuation Dispute

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

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, delivered a judgment on October 29, 2025, in the case of Appellant vs. Principal Commissioner of Customs. The Tribunal set aside penalties imposed under Sections 112(b)(ii) and 114AA of the Customs Act, 1962, highlighting critical procedural lapses and the importance of adhering to legal safeguards during investigations and adjudication.

Background of the Case

The appellant a partner in M/s Chandra Impex, challenged the order passed by the Principal Commissioner of Customs, ICD TKD, New Delhi, which imposed penalties of Rs. 5 lakhs under Section 112(b)(ii) and Rs. 50 lakhs under Section 114AA of the Customs Act. The case revolved around allegations of undervaluation of imported goods, specifically spray paints, in the 14th consignment imported by M/s Chandra Chemicals, a firm owned by the appellant’s father.

The department alleged that the appellant had submitted fraudulent commercial invoices to declare lower transaction values, while the actual values were reflected in proforma invoices retrieved from his email account during an investigation. The appellant, however, retracted his statement made under Section 108 of the Customs Act, claiming coercion and undue pressure during the investigation.

Key Issues Raised

The appellant’s counsel argued that the statement recorded under Section 108 of the Customs Act could not be relied upon due to the following reasons:
1. The statement was retracted immediately, citing coercion and threats.
2. The provisions of Section 138B of the Customs Act, which mandate examination and cross-examination of the person making the statement, were not followed.
3. The proforma invoices retrieved from the appellant’s email were not recorded under a panchnama, nor were they properly substantiated as evidence.
4. The department failed to provide evidence linking the proforma invoices to the alleged undervaluation of goods.
CESTAT’s Observations

The Tribunal meticulously analyzed the procedural requirements under Sections 108 and 138B of the Customs Act. It emphasized that statements recorded during investigations must be admitted as evidence only after the adjudicating authority examines the person making the statement and provides an opportunity for cross-examination. Failure to follow this mandatory procedure renders such statements inadmissible.

The Tribunal also noted:
- The appellant’s retraction of his statement highlighted the possibility of coercion during the investigation.
- The proforma invoices relied upon by the department were not properly substantiated or linked to the alleged undervaluation.
- The earlier 13 consignments had been cleared after physical examination by customs authorities, and no evidence was presented to prove undervaluation in those cases.
Final Decision

The Tribunal concluded that the charge of undervaluation could not be substantiated, and the transaction value declared in the commercial invoices could not be rejected under Rule 12 of the Customs Valuation Rules, 2007. Consequently, the confiscation of goods under Section 111(m) of the Customs Act and the imposition of penalties under Sections 112(b)(ii) and 114AA were deemed unsustainable.

Key Takeaways
1. Adherence to Legal Safeguards: The judgment underscores the importance of following mandatory procedures under Sections 108 and 138B of the Customs Act to ensure fairness and justice during investigations and adjudication.
2. Protection Against Coercion: The Tribunal highlighted the need to safeguard individuals from coercion or undue pressure during investigations, ensuring that statements are voluntary and admissible.
3. Evidence-Based Adjudication: Reliance on unsubstantiated evidence, such as proforma invoices, without proper linkage or corroboration, cannot form the basis for penalties or confiscation.
Conclusion

This landmark decision by CESTAT serves as a reminder of the critical role of procedural compliance in customs investigations and adjudication. It reinforces the principle that justice must not only be done but also be seen to be done, ensuring that individuals are not penalized based on assumptions or procedural lapses. The ruling is a significant step toward upholding transparency and fairness in customs law enforcement.

Source: CESTAT Delhi

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October 30, 2025
CESTAT Chennai Sets Aside Extended Limitation and Differential Duty Demands in Iron Ore Export
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 29.10.2025

CESTAT Chennai Sets Aside Extended Limitation and Differential Duty Demands in Iron Ore Export

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 significant judgment, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai, has ruled in favor of M/s Bharat Mines and Minerals and M/s V S Lad & Sons in a long-standing dispute over export duty on iron ore. The case revolved around two key issues: the redetermination of export value and the applicability of differential customs duty based on a change in tax rates.

Background of the Case

The appellants, both partnership firms engaged in mining and exporting iron ore, faced allegations from the Department of Revenue Intelligence (DRI). The department claimed that the exporters had realized higher values for their shipments than declared at the time of export, leading to demands for differential duty, interest, penalties, and confiscation of goods. Additionally, M/s Bharat Mines and Minerals faced a separate demand for differential customs duty due to a change in tax rates under Notification No. 79/2008-Cus, dated June 13, 2008.

The appeals were filed after the adjudicating authorities confirmed the demands and imposed penalties. The appellants argued that the exports occurred before the introduction of the self-assessment mechanism under Section 17 of the Customs Act, 1962, which came into effect on April 8, 2011. They contended that the proper officer had the responsibility to assess the goods at the time of export, and the department’s failure to do so could not be used to penalize them retrospectively.

Key Issues Addressed 
1. Redetermination of Export Value and Extended Limitation Period The Tribunal ruled that under the pre-2011 regime, it was the responsibility of the proper officer to verify, examine, and assess the goods at the time of export. Since the appellants had disclosed all relevant documents and information, the department’s failure to assess the goods properly at the time of export could not justify invoking the extended limitation period to demand differential duty or impose penalties. The Tribunal emphasized that the department’s indolence in fulfilling its duties should not be detrimental to the appellants.
2. Applicability of Differential Customs Duty Based on Notification No. 79/2008-Cus The Tribunal clarified that the relevant date for determining the rate of duty is the date on which the “Let Export Order” is issued by the proper officer under Section 51 of the Customs Act. In this case, the Let Export Order was issued on June 9, 2008, prior to the change in duty rates on June 13, 2008. Therefore, the demand for differential duty based on the new rates was deemed untenable.
Key Takeaways from the Judgment
- Non-Retrospective Application of Self-Assessment: The Tribunal reiterated that the self-assessment mechanism introduced in 2011 cannot be applied retrospectively to transactions that occurred before its implementation.
- Responsibility of Proper Officers: The judgment highlighted the duty of proper officers to assess goods at the time of export and emphasized that exporters cannot be penalized for the department’s failure to perform its obligations.
- Wet Metric Ton (WMT) vs. Dry Metric Ton (DMT) Method: The Tribunal upheld the established practice of using the WMT method for determining the Fe content in iron ore for export duty purposes, as per the Supreme Court’s decision in Gangadhar Narsingdas Aggarwal’s case. The DMT method was deemed applicable only after May 1, 2022, following amendments introduced by the Finance Act, 2022.
- Relevant Date for Duty Assessment: The Tribunal reaffirmed that the date of the Let Export Order is the decisive factor for determining the applicable rate of duty, not the date of loading.
Conclusion

This landmark ruling by the CESTAT Chennai Bench underscores the importance of adhering to established legal principles and procedures in customs assessments. It provides clarity on the determination of export duty rates and the responsibilities of customs officers, ensuring that exporters are not unfairly penalized for procedural lapses by the department. The decision is expected to have far-reaching implications for similar cases and offers much-needed relief to exporters navigating complex customs regulations.

Source: CESTAT Chennai

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October 29, 2025