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  • CESTAT Mumbai- Customs Cannot Calculate Import IGST on Exempted BCD

    CESTAT Mumbai- Customs Cannot Calculate Import IGST on Exempted BCD

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 30.10.2026

    CESTAT Mumbai- Customs Cannot Calculate Import IGST on Exempted BCD

    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 CESTAT Mumbai has held that where imports qualify for a Basic Customs Duty (BCD) exemption under a valid Duty-Free Import Authorisation (DFIA), IGST must be calculated without adding the notional tariff-rate BCD to the assessable value.

    In TGI International v. Commissioner of Customs, Nhava Sheva-III, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai set aside an order that had rejected the importer’s challenge to IGST assessments on 105 Bills of Entry. The Tribunal ruled that the relevant statutory test is the customs duty actually β€œchargeable” after giving effect to a valid exemption notification, not the BCD shown in the tariff schedule.

    Background: 105 DFIA-based fabric imports

    TGI International, a fabric trader, imported polyester viscose fabrics through 105 Bills of Entry. It claimed full exemption from BCD under Notification No. 19/2015-Customs dated 1 April 2015, which applies to eligible imports made against a valid DFIA issued by the Directorate General of Foreign Trade (DGFT).

    The DFIA scheme permits duty-free import of specified inputs subject to prescribed conditions, including production of the authorisation at clearance and endorsements relating to the export obligation and resultant product. In this matter, the Tribunal found that the importer had complied with the applicable DFIA and notification requirements.

    Although the BCD claimed on the imports was nil, the Indian Customs EDI System (ICES) calculated IGST by adding BCD at the normal tariff rate of 20% to the transaction value. The importer paid the system-calculated IGST because the Bills of Entry could not be amended through the system, then appealed the assessments.

    The core legal issue

    The dispute concerned the meaning of β€œduty of customs chargeable” when determining the value on which IGST is levied on imported goods.

    Section 3(8) of the Customs Tariff Act, 1975 requires IGST to be calculated on an aggregate value comprising:

    1. the value of imported goods determined under Section 14 of the Customs Act, 1962; and
    2. any customs duty chargeable on the goods under Section 12 of the Customs Act.

    TGI International argued that once the DFIA exemption reduced BCD to zero, there was no BCD amount to add to the assessable value for IGST. Customs authorities, however, treated the tariff-rate BCD as part of the IGST base, even though the importer did not pay that duty in cash.

    Tribunal’s findings

    Effective duty, not tariff duty, governs the IGST base

    The Tribunal held that an exemption notification issued under Section 25 of the Customs Act must be given effect while determining the customs duty β€œchargeable” under Section 12. Although the tariff rate of BCD on the goods was 20%, the effective BCD was nil because the imports were covered by the DFIA exemption.

    Accordingly, the Tribunal concluded that the effective duty liability, rather than the unadjusted tariff rate, must be added to the import value when calculating IGST.

    No duty debit was made under the DFIA

    The Commissioner (Appeals) had reasoned that the customs duty was effectively discharged through debit in the DFIA authorisation. CESTAT rejected this conclusion as factually unsupported.

    The Bills of Entry showed β€œzero” against the duty-debit field. The DFIA documentation recorded the permitted CIF value and quantity of dyed polyester fabrics, but did not require debit of the BCD amount as a precondition for the exemption. The Tribunal therefore found that it was incorrect to treat the tariff BCD as a duty discharged through the authorisation.

    ICES could not override the legal valuation rule

    The Tribunal noted that ICES had added a notional BCD amount while computing IGST and had not taken account of the exemption claimed under Notification No. 19/2015-Customs. System-generated assessments cannot displace the statutory requirement to use the duty actually chargeable after the applicable exemption is applied.

    Reliance on earlier decisions

    CESTAT found support in earlier Tribunal rulings that distinguish the tariff rate from the effective rate after exemptions:

    • In Morarjee Brembana Ltd., the Tribunal held that only the effective customs duty, after applying the applicable exemption notification, should be added for calculating additional customs duty.
    • In Parasrampuria International, the Tribunal held that where BCD is nil due to an exemption, no BCD amount can be added to the assessable value merely because a tariff rate otherwise exists.

    The Revenue relied on Poddar Pigments Ltd., but CESTAT held that the case was distinguishable because it concerned interest on delayed IGST payment, not the correct BCD component for IGST valuation.

    Why the ruling matters

    The decision clarifies an important valuation principle for DFIA and other exemption-based imports: the IGST base must reflect the effective customs-duty liability, not a hypothetical duty calculated at the tariff rate.

    For eligible DFIA imports, this means a nil BCD exemption should result in zero BCD being added to the IGST valuation base. The ruling also reinforces that customs assessment systems must apply the substantive benefit of a valid exemption notification rather than mechanically loading tariff-rate duty into the calculation.

    Conclusion

    By allowing TGI International’s appeals, CESTAT Mumbai confirmed that a valid BCD exemption under the DFIA scheme must be fully reflected in IGST valuation. Where the effective BCD is nil, Customs cannot add the tariff-rate BCD notionally to inflate the IGST payable on imported goods.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai Allows Customs Duty Exemption on Dowtherm Heat Transfer Fluid Under SHIS Scheme

    CESTAT Mumbai Allows Customs Duty Exemption on Dowtherm Heat Transfer Fluid Under SHIS Scheme

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 26.09.2026

    CESTAT Mumbai Allows Customs Duty Exemption on Dowtherm Heat Transfer Fluid Under SHIS Scheme

    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 has held that Dowtherm RP Heat Transfer Fluid/Dowtherm A Heat Transfer Fluid, used for the initial charging and continuous operation of a Continuous Polycondensation (CP) Plant for manufacturing polyester products, falls within the definition of β€œcapital goods” and is consequently eligible for Customs duty exemption under Notification No. 104/2009-Customs dated 14 September 2009.

    Setting aside the Commissioner’s order, the Tribunal held that the thermic fluids fulfilled the statutory requirements of the Status Holders Incentive Scrip (SHIS) Scheme under the Foreign Trade Policy and that Customs was not justified in denying the exemption merely because the goods were chemicals falling under Chapter 29 or were described as inputs under SION.

    Background of the Dispute

    • Wellknown Polyesters Limited was engaged in manufacturing Polyester Filament Yarn (PFY), Polyester Oriented Yarn (POY), Fully Drawn Yarn (FDY), Draw Textured Yarn (DTY) and polyester chips at its Daman manufacturing facility.
    • For its manufacturing operations, the company had imported a Continuous Polycondensation Plant from Oerlikon Barmag under an EPCG authorisation during April–July 2012. The plant was imported without thermic fluid.
    • Subsequently, the company imported 3,01,296 kg of Dowtherm RP Heat Transfer Fluid/Dowtherm A Heat Transfer Fluid, valued at approximately β‚Ή9.86 crore, through Bills of Entry filed in October 2012. Customs duty involved was approximately β‚Ή2.55 crore.
    • Instead of paying the duty in cash, Wellknown Polyesters utilised eight SHIS scrips issued by the DGFT under the Status Holders Incentive Scrip Scheme and claimed exemption under Notification No. 104/2009-Customs. The goods were initially cleared by Customs extending the exemption.

    DRI Objects to SHIS Benefit

    • The Directorate of Revenue Intelligence (DRI), Ahmedabad Zonal Unit subsequently initiated an investigation on the ground that Notification No. 104/2009-Customs permitted duty-free import of capital goods, whereas Dowtherm heat-transfer fluid was, according to the Department, not capital goods.
    • DRI also relied upon the Standard Input Output Norms (SION), under which Dowtherm/Therminol and heat-transfer oil were identified as permitted inputs for manufacture of Polyester Partially Oriented Yarn and Polyester Filament Yarn. The Department therefore treated the material as an input rather than capital goods.
    • A Show Cause Notice dated 14 May 2013 consequently demanded approximately β‚Ή2.55 crore Customs duty with interest under Section 28(1) of the Customs Act, 1962, besides proposing confiscation under Section 111(o) and penalty under Section 112(a).
    • The Commissioner confirmed the duty demand and interest but refrained from confiscating the goods because they were no longer physically available and did not impose the proposed penalty. Wellknown Polyesters challenged that order before CESTAT.

    Appellant: Thermic Fluid Was Integral to Continuous Polycondensation Plant

    • The appellant argued that although the CP Plant and thermic fluid had been imported separately, both were required to operate together.
    • The thermic fluid was charged into the heaters, piping and vessels and thereafter continuously circulated in a closed loop between the heaters and reactors. The polyester polycondensation process required temperatures of approximately 270Β°C–300Β°C under high vacuum, making the thermic fluid critical for providing precise high-temperature heat while maintaining low system pressure.
    • The appellant relied upon the definition of β€œcapital goods” under the Foreign Trade Policy and Notification No. 104/2009-Customs, arguing that it was broad enough to cover goods required directly or indirectly for manufacture, including items necessary for the initial setting up and functioning of plant and machinery.
    • It also relied upon CBEC’s earlier clarification concerning transformer oil, under which oil required for filling/topping up a transformer was considered part of the equipment because the transformer could not function without it.

    Revenue: Chemical Falling Under Chapter 29 Cannot Be Capital Goods

    • The Department maintained that the imported thermic fluid was a chemical classifiable under Chapter 29 and therefore could not be regarded as plant, machinery, equipment or an accessory.
    • The Commissioner’s reasoning was that even though the chemical was indirectly used in manufacturing, its nature did not change into that of plant, machinery, equipment or accessories. The Department also relied upon the fact that SION treated Dowtherm as an input/raw material for polyester production.
    • CESTAT was therefore required to decide whether denial of the exemption under Notification No. 104/2009-Customs for the October 2012 imports was legally sustainable.

    CESTAT Examines SHIS Scheme and Definition of β€˜Capital Goods’

    • The Tribunal examined the Foreign Trade Policy 2009–2014 and observed that the objective of the SHIS Scheme was to promote investment in technology upgradation.
    • Paragraph 3.17.5 of the FTP permitted Duty Credit Scrips to be used for import of inputs or goods, including capital goods, subject to the stipulated conditions. More importantly, the FTP defined β€œcapital goods” broadly as plant, machinery, equipment or accessories required directly or indirectly for manufacture or production, including specified items such as refractories for initial lining and catalysts for initial charge.
    • Notification No. 104/2009-Customs, issued under Section 25(1) of the Customs Act, 1962, similarly exempted capital goods and specified components/spares/parts imported against SHIS Duty Credit Scrips from Customs duties, subject to its conditions.
    • CESTAT found the definition of β€œcapital goods” under the Customs notification and the FTP to be substantially identical.

    Thermic Fluid Critical to Functioning of CP Plant

    • The Tribunal accepted the technical evidence concerning the role played by Dowtherm in the Continuous Polycondensation Plant.
    • It observed that the thermic fluid enabled the plant to provide precise high-temperature heat while maintaining low pressure, thereby permitting efficient continuous polycondensation and energy-efficient manufacture of high molecular weight polyester.
    • On that basis, CESTAT concluded that the imported goods fulfilled the statutory requirements of the SHIS Scheme.
    • A particularly important factual finding arose from the Chartered Engineer’s Certificate. Out of the total 3,01,296 kg of imported thermic fluid, 2,92,920 kgβ€”approximately 97.2%β€”was used as a one-time/initial charge in the CP Plant’s Electric Thermal Oil Heater Boiler.
    • The fluid thereafter enabled continuous high-temperature operation at very low pressure for the polycondensation process.
    • The technical diagrams reproduced on pages 13–15 of the order further illustrate the closed-loop recirculation of Dowtherm between the thermic-fluid heater and CP Plant, the stages of polyester manufacture where heat transfer is required, and the Electric Thermal Oil Heater Boiler arrangement.

    Capitalisation in Books Also Supported Appellant

    • CESTAT additionally noted that the imported thermic fluid had been capitalised in Wellknown Polyesters’ books of account, as certified by its Chartered Accountants on 29 May 2026.
    • The Tribunal regarded this financial treatment as further evidence supporting the appellant’s case that the imported goods were treated as capital goods.

    Accordingly, the Bench held:

    • β€œthe impugned goods are covered under the definition of β€˜capital goods’”
    • and were therefore eligible for exemption under Notification No. 104/2009-Customs.

    CESTAT Relies on Reliance Communications Infrastructure

    • The Tribunal found support in Reliance Communications Infrastructure v. Commissioner of Customs, 2009 (240) E.L.T. 461 (Tri.-Bang.).
    • In that case, a Gas Suppression System included HFC 227 EA gas. The Tribunal had held that Customs could not dissect an integrated system and treat the gas required for its functioning as a mere consumable when the EPCG licence covered the complete system.
    • CESTAT applied the same reasoning to the thermic fluid, observing that where a material is essential to the functioning of the plant, its character cannot be determined merely by isolating it from the system in which it operates.

    Transformer Oil Analogy Applied to Dowtherm

    • CESTAT also referred to CBEC Circular No. 344/60/97-CX dated 22 October 1997, concerning transformer oil.
    • The circular recognised that a transformer cannot function without transformer oil and that the equipment cannot be regarded as complete without the oil filled into it.
    • Applying the same analogy, CESTAT held that if the Continuous Polycondensation Plant cannot function without thermic fluid, the fluid has to be treated as part of the plant, notwithstanding the absence of a specific Customs clarification concerning thermic fluid.

    Cases Cited by Wellknown Polyesters

    The appellant relied upon several judicial authorities in support of its interpretation of capital goods:

    S. No.CaseCitation
    1Reliance Communications Infrastructure v. Commissioner of Customs2009 (240) E.L.T. 461 (Tri.-Bang.)
    2Commissioner of Central Excise, Coimbatore v. Jawahar Mills2001 (132) E.L.T. 3 (S.C.)
    3Bharti Airtel Limited v. Commissioner of Central Excise, Pune2025 (391) E.L.T. 3 (S.C.)
    4Chief Commissioner of Central Goods and Service Tax & Ors. v. Safari Retreats Private Limited & Ors.2024 SCC OnLine SC 2691
    5Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax, Andhra Pradesh(1986) 1 SCC 11
    • These authorities are expressly recorded in the appellant’s submissions.
    • Of these, the final reasoning expressly discusses and applies Reliance Communications Infrastructure.

    Final Decision: Wellknown Polyesters Wins Appeal

    CESTAT concluded that the Commissioner’s order denying the benefit of Notification No. 104/2009-Customs dated 14 September 2009 by refusing to treat Dowtherm RP/Dowtherm A Heat Transfer Fluid as capital goods β€œdoes not stand the scrutiny of law.”

    The Tribunal consequently set aside the Order-in-Original dated 7 October 2016 and allowed Wellknown Polyesters’ appeal in its favour.

    The ruling is significant for the interpretation of capital goods under export-promotion schemes, particularly where a material may chemically resemble an input or consumable but is technically required as an initial charge and thereafter continuously circulates as an integral part of plant operation.

    It also demonstrates that classification of an item as a chemical under Chapter 29, or its description as an β€œinput” under SION for a different regulatory purpose, is not by itself determinative of whether it can qualify as capital goods under the specific language and objective of an exemption notification.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai: Vitamin and Enzyme Premixes for Animal Feed Classifiable Under CTH 2309

    CESTAT Mumbai: Vitamin and Enzyme Premixes for Animal Feed Classifiable Under CTH 2309

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 17.09.2026

    CESTAT Mumbai: Vitamin and Enzyme Premixes for Animal Feed Classifiable Under CTH 2309

    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 has ruled in favour of DSM Nutritional Products India Pvt. Ltd. in a long-running customs classification dispute, holding that imported vitamin premixes and enzyme preparations meant for use in animal feeding are classifiable under Customs Tariff Heading (CTH) 2309, and not under CTH 2936 or CTH 3507 as contended by Customs.

    A Division Bench comprising S.K. Mohanty, Member (Judicial), and M.M. Parthiban, Member (Technical) set aside the May 8, 2024 order of the Commissioner of Customs (Appeals), JNCH, Nhava Sheva, and allowed Customs Appeal Nos. 87088 to 87126 of 2024 with consequential relief. The final order was pronounced on September 11, 2026.

    The ruling is significant for the tariff classification of feed-grade vitamin and enzyme premixes, particularly where such products contain active ingredients along with carriers, fillers, stabilisers, anti-caking agents and other substances specifically designed for animal-feed applications.

    DSM Imported Vitamin and Enzyme Premixes for Animal Feeding

    • DSM Nutritional Products India imported preparations containing vitamins and enzymes from its related overseas supplier, DSM Nutrients Asia Pacific Private Limited, Singapore.
    • The imports included a range of Rovimix vitamin premixes and Ronozyme enzyme preparations, which were intended for use in preparation of animal feed.
    • DSM classified these products under CTH 2309, covering preparations of a kind used in animal feeding.
    • Because the overseas supplier was a related party, the assessments had remained provisional since October 2010. The Special Valuation Branch subsequently concluded in 2016 that the relationship had not influenced the declared import price.

    Customs Sought Classification Under Chapters 29 and 35

    • The dispute arose after the Central Intelligence Unit and Special Investigation & Intelligence Branch examined the classification adopted by DSM.
    • Customs took the position that the vitamin and vitamin premixes should be classified under CTH 2936, while enzyme preparations should fall under CTH 3507, instead of Heading 2309.
    • Consequently, provisional assessments covering imports from October 2010 to December 2020 remained pending.
    • DSM repeatedly sought finalisation of the assessments and refund of pre-deposits/Extra Duty Deposits. When the matter remained unresolved, it approached the Bombay High Court in Writ Petition No. 3323 of 2021. The High Court directed Customs to finalise the provisional assessments.

    Customs Finalised Assessments Against DSM

    • The Assistant Commissioner of Customs eventually passed an Order-in-Original dated September 22, 2023 rejecting DSM’s classification under CTH 2309.
    • The authority classified the vitamin products under CTH 2936 and enzyme products under CTH 3507, finalised the assessments under Section 18(2) of the Customs Act, 1962, demanded differential customs duty with interest and ordered appropriation against deposits already made by DSM.
    • Interestingly, the Tribunal recorded that the exact amount of duty demanded, confirmed or appropriated was not mentioned in the operative portion of the original order.
    • The Commissioner (Appeals) subsequently upheld the classification adopted by the original authority and dismissed DSM’s appeals, leading to the proceedings before CESTAT.

    DSM: Products Are Exclusively Intended for Animal Feed

    • DSM argued that the disputed vitamin and enzyme premixes were exclusively intended for animal feeding and were not used for human consumption.
    • The preparations contained vitamins or enzymes as active ingredients together with carriers, fillers, anti-caking agents, stabilisers and other additives selected keeping their animal-feed end use in view.
    • DSM further used these imported premixes to manufacture composite premixes containing vitamins, minerals, enzymes and other ingredients, which were also intended exclusively for animal feeding.
    • DSM therefore relied heavily on the Larger Bench decision in Tetragon Chemie (P) Ltd. v. Collector of Central Excise, Bangalore, 2001 (138) E.L.T. 414 (Tri.-LB), which had held that premixes of the relevant nature used in animal feeding fall under the animal-feed heading. That ruling was upheld by the Supreme Court when the Revenue’s appeal was dismissed.

    Earlier Venkateshwara B.V. Bio Corp Ruling Became Crucial

    • A particularly important aspect of DSM’s case was the Tribunal’s earlier ruling in Venkateshwara B.V. Bio Corp Private Limited v. Commissioner of Customs (NS-I), (2025) 26 Centax 283 (Tri.-Bom.).
    • DSM argued that the classification dispute in Venkateshwara was virtually identical, arose from the same investigation and even involved the same overseas supplier, DSM Nutritional Products Asia Pacific Pte. Ltd., Singapore.
    • In that case, CESTAT had classified the imported products under CTI 2309 9090. Customs challenged that ruling before the Supreme Court, but its appeal was dismissed on February 7, 2025.
    • The Supreme Court order reproduced on page 10 of the CESTAT judgment records that it found no good ground to interfere with the Tribunal’s decision, particularly in light of Circular No. 188/22/96-CX dated March 26, 1996, and dismissed the Revenue’s appeal.

    Core Issue Before CESTAT: CTH 2309 vs 2936/3507

    • The Tribunal framed the principal issue as whether the imported vitamin premixes and enzyme preparations for feed/animal grade were classifiable under CTI 2309 9020 as claimed by DSM, or whether vitamins should be classified under CTH 2936 and enzymes under CTH 3507 as determined by Customs.
    • Customs had reasoned that vitamins and enzymes had specific tariff headings and that a specific classification should prevail over what it regarded as the more general or residual animal-feed heading.
    • The Commissioner (Appeals) had relied substantially upon Rule 3(a) of the General Rules for Interpretation and the ingredients of the imported products in concluding that vitamins belonged under 2936 and enzyme preparations under 3507.

    CESTAT Finds Customs Order Legally Deficient

    • The Tribunal was not persuaded by that approach.
    • It observed that neither the Commissioner (Appeals) nor the original authority had undertaken a sufficiently detailed examination of the scope of the competing tariff headings and the relevant HSN Explanatory Notes.
    • According to CESTAT, a comprehensive classification exercise under the Customs Tariff Act, 1975 required proper examination of the competing entries rather than merely proceeding on the premise that Chapters 29 and 35 contained more specific descriptions.
    • The Tribunal therefore found, even at the preliminary level of its analysis, that the impugned appellate order was not sustainable.

    Larger Bench in Tetragon Chemie Supports Heading 2309

    • CESTAT then relied on the Larger Bench ruling in Tetragon Chemie.
    • That decision had considered the specific question whether preparations used in animal feeding consisting of one or more vitamins mixed with diluents should be classified under the vitamin heading or under the animal-feed heading.
    • The Larger Bench concluded that premixes containing mineral substances, vitamins or provitamins, trace elements, appetisers, soya flour or meal, yeast and similar ingredients were covered by Heading 23.09 of the HSN, corresponding to the relevant animal-feed heading in the Central Excise Tariff.
    • The Larger Bench ultimately answered the classification issue in favour of the assessees.
    • CESTAT noted that this decision was upheld by the Supreme Court in 2001 (132) E.L.T. 525 (S.C.).

    Indian Trading Bureau Decision Also Favoured Animal-Feed Classification

    • The Mumbai Bench further referred to Indian Trading Bureau Private Limited v. Commissioner of Customs (Port), Kolkata, 2024 (2) TMI 1030 – CESTAT Kolkata.
    • In that case, vitamins and enzymes used as animal-feed additives were classified under CTH 2309 rather than the competing tariff heading asserted by Revenue.
    • The decision emphasised the product literature showing that the goods were part of animal feed and were not fit for human consumption.
    • The Revenue’s appeal against that decision was also dismissed by the Supreme Court.

    CESTAT: DSM’s Case Identical to Venkateshwara Classification Dispute

    • The Tribunal found the classification dispute in DSM’s appeals to be identical to the issue already considered in Venkateshwara B.V. Bio Corp.
    • It noted that the overseas supplier in the present case was also one of the suppliers involved in that earlier dispute.
    • The Venkateshwara decision had examined the Customs Tariff Act, General Rules for Interpretation, competing tariff headings 2309 and 2936, HSN Explanatory Notes and CBEC Circular No. 188/2/96-CX dated March 26, 1996.
    • That decision had concluded that the disputed goods were classifiable under CTH 2309 and not CTH 2936, and the Supreme Court subsequently declined to interfere with the Tribunal’s decision.

    Vitamin and Enzyme Feed Preparations Classifiable Under CTH 2309

    • On the basis of these authorities and its own analysis, the Mumbai Bench concluded that DSM’s imported goods were properly classifiable under CTH 2309 of the First Schedule to the Customs Tariff Act, 1975.
    • The Tribunal expressly held that the May 8, 2024 appellate order sustaining classification under CTH 2936 and CTH 3507 did not withstand legal scrutiny and was legally unsustainable.
    • This finding resolved the substantive classification dispute in DSM’s favour.

    DSM Nutritional Products Wins 39 Customs Appeals

    • CESTAT accordingly set aside the impugned Order-in-Appeal and allowed DSM Nutritional Products India’s appeals, together with consequential relief, if any, in accordance with law.
    • The ruling therefore represents a substantive victory for DSM on tariff classification: its animal-feed vitamin and enzyme preparations were held classifiable under Heading 2309, rather than being split between the vitamin and enzyme headings in Chapters 29 and 35.

    Key Legal Takeaway

    The decision reinforces an important classification principle for feed-grade preparations: the presence of vitamins or enzymes as active ingredients does not, by itself, necessarily require classification of the finished preparation under the standalone vitamin or enzyme headings.

    The nature of the preparation, its composition, HSN guidance, relevant tariff notes, established judicial precedent and its exclusive design and use in animal feeding must all be considered.

    The ruling is particularly important because CESTAT found the dispute materially covered by previous decisionsβ€”including Tetragon Chemie and Venkateshwara B.V. Bio Corpβ€”whose outcomes had survived Revenue challenges before the Supreme Court.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai: EPCG Duty Demand Cannot Survive Once DGFT Issues EODC Confirming Fulfilment of Export Obligation

    CESTAT Mumbai: EPCG Duty Demand Cannot Survive Once DGFT Issues EODC Confirming Fulfilment of Export Obligation

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 12.09.2026

    CESTAT Mumbai: EPCG Duty Demand Cannot Survive Once DGFT Issues EODC Confirming Fulfilment of Export Obligation

    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 .  

    In a significant ruling concerning imports under the Export Promotion Capital Goods (EPCG) Scheme, the CESTAT Mumbai has set aside the customs duty demand, redemption fine and penalties imposed upon Unison Hotels Limited and its Managing Director, Umesh Saraf, in relation to the import of a Honda CR-V under an EPCG authorization.

    The Tribunal held that the alleged violation of EPCG conditions could not legally survive once the competent DGFT authority had issued an Export Obligation Discharge Certificate (EODC) in favour of the importer.

    Background of the Dispute

    • Unison Hotels Limited is engaged in providing hotel-related services. For its business operations, it obtained EPCG authorizations from the Directorate General of Foreign Trade for importing four vehicles as capital goods while availing concessional customs duty benefits. One Honda CR-V was imported through Mumbai Sea Port, while three BMW cars were imported through Chennai Sea Port.
    • The Department initiated investigation on the basis of information alleging that the vehicles were being used as private vehicles for the personal use of the Managing Director and his family members rather than for commercial purposes connected with earning foreign exchange and fulfilling the prescribed export obligation.
    • In respect of the Honda CR-V imported through Mumbai, a show cause notice dated 30 August 2011 sought recovery of customs duty of β‚Ή9,41,922 along with interest, besides confiscation and penalties. The adjudicating authority confirmed the demand, ordered confiscation under Sections 111(d) and 111(o) of the Customs Act, 1962, permitted redemption on payment of a fine of β‚Ή7 lakh, and imposed penalties of β‚Ή1.50 lakh on Unison Hotels and β‚Ή1 lakh on Umesh Saraf. The Commissioner (Appeals) upheld the order.

    Issue Before CESTAT

    • The principal question before the Tribunal was whether the appellants had violated the conditions of the EPCG authorization and consequently failed to satisfy the requirements of Notification No. 97/2004-Customs dated 17 September 2004, under which concessional customs duty had been availed for import of the Honda CR-V.
    • The EPCG authorization required the importer, among other things, to fulfil an export obligation equivalent to eight times the duty saved within eight years and comply with the actual-user condition. In respect of the Honda CR-V, the authorization recorded an export obligation connected with the imported vehicle and required fulfillment through use of the imported capital goods.

    Appellants Relied on Earlier Chennai CESTAT Decision

    • The appellants argued that an identical dispute involving the other three BMW cars imported under the same EPCG arrangement had already been decided in their favour by a coordinate Bench of CESTAT Chennai through Final Order Nos. 40598-40599/2023 dated 21 July 2023. They contended that the facts and legal issues relating to the Honda CR-V were materially identical and therefore the same reasoning ought to apply.
    • The Mumbai Bench accepted this contention, observing that the factual matrix relating to the Honda CR-V was exactly similar to that relating to the BMW cars already adjudicated by the coordinate Bench. It consequently held that it could not take a different view in relation to the same appellants and substantially identical EPCG conditions.

    Revenue’s Allegation Found Premature

    • The Tribunal reproduced the reasoning adopted in the earlier proceedings, where it had been held that initiation of proceedings before expiry of the period available for fulfilment of the export obligation was premature. The EPCG authorization allowed eight years for fulfilment of the export obligation, whereas the show cause proceedings were initiated well before that period had expired.
    • The earlier Bench had also found that the importer had declared substantial foreign-exchange earnings, which were not disputed by the Revenue. The Tribunal emphasized that the essential inquiry was whether the imported capital goods had satisfied the actual-user requirement, and observed that the existence of foreign-exchange earnings supported the appellant’s case.
    • It further noted that allegations concerning vehicle registration, insurance or parking arrangements were matters primarily within the jurisdiction of the concerned transport or other authorities and could not, by themselves, establish a violation of EPCG conditions enforceable by Customs.

    DGFT’s EODC Became Crucial

    • A decisive factor in the Mumbai proceedings was that the DGFT had eventually issued the EODC/Redemption Letter on 11 January 2024 in respect of the relevant EPCG authorization.
    • The Tribunal recorded that the appellants had furnished the vehicle’s installation certificate, registration certificate showing the Honda CR-V as a β€œTourist Taxi Deluxe”, details of foreign-exchange earnings and repeated requests for issuance of the EODC.
    • The Bench held that once the competent DGFT authority had issued the EODC, the allegation of non-compliance with EPCG conditions under Notification No. 97/2004-Customs could no longer legally sustain. It also noted that the importer had asserted fulfillment of the export obligation even during the original proceedings and that DGFT had subsequently formally discharged the obligation.
    • The Tribunal further observed that non-production of the EODC during the earlier adjudication and appellate proceedings could not be held against the appellants because the certificate had not yet been issued by DGFT and the delay was beyond their control.

    Earlier Judicial Authorities Considered

    • The Tribunal also referred to several earlier decisions dealing with EPCG imports and actual-user requirements. Among them was Goldfinch Hotels Pvt. Ltd. v. Commissioner of Customs, 2015 (328) E.L.T. 282 (Tri.-Mumbai), where CESTAT had held that mere parking of an EPCG vehicle at a particular place or statements of drivers could not, without more, establish breach of the actual-user condition. The Bombay High Court later dismissed Revenue’s appeal against that decision.
    • The order also refers to Vadilal Chemicals Ltd. v. State of Andhra Pradesh, 2005 (192) E.L.T. 33 (S.C.), and M Far Hotels Ltd. v. Union of India, 2011 (270) E.L.T. 158 (Ker.), in the context of EPCG benefits and compliance with prescribed statutory or policy conditions.
    • The Tribunal additionally referred to the Delhi High Court’s ruling in Interglobe Enterprises Ltd. v. Union of India, 2006 (203) E.L.T. 202 (Del.), as followed in subsequent EPCG litigation, noting that the Supreme Court had dismissed the Revenue’s SLP in the connected matter.

    CESTAT’s Final Ruling

    The Mumbai Bench concluded that the order sustaining the customs duty demand, redemption fine and penalties was not legally sustainable. It therefore set aside the impugned order and allowed both appeals in favour of Unison Hotels Limited and Umesh Saraf.

    Key Takeaway

    The ruling reinforces an important principle in EPCG disputes: where the DGFT, being the competent licensing authority, has accepted fulfillment of the export obligation and issued an EODC, Customs cannot ordinarily continue to sustain a demand founded on an allegation of non-fulfilment of the very same EPCG obligation without a legally sustainable basis to disregard that discharge.

    The decision is also significant because CESTAT rejected a purely factual inference of personal use based on matters such as vehicle location, registration-related allegations and statements, particularly when the importer demonstrated foreign-exchange earnings and subsequently secured formal discharge of its EPCG obligation from DGFT.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

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    Source: CESTAT Mumbai

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  • CESTAT Mumbai Sets Aside Customs Duty Demand Under EPCG Scheme; Delay in EODC Issuance by DGFT Held Beyond Exporter’s Control

    CESTAT Mumbai Sets Aside Customs Duty Demand Under EPCG Scheme; Delay in EODC Issuance by DGFT Held Beyond Exporter’s Control

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 10.09.2026

    CESTAT Mumbai Sets Aside Customs Duty Demand Under EPCG Scheme; Delay in EODC Issuance by DGFT Held Beyond Exporter’s Control

    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 has granted significant relief to CEAT Limited in an EPCG dispute, setting aside a customs duty demand of β‚Ή1.79 crore, along with redemption fine and penalty, after finding that the company had fulfilled its export obligations and that the delay in issuance of the Export Obligation Discharge Certificate (EODC) by DGFT was beyond its control.

    The Regional Bench comprising Judicial Member Ajay Sharma and Technical Member M.M. Parthiban allowed CEAT’s appeal against the Order-in-Original dated 22 May 2025 passed by the Commissioner of Customs (Export), Mumbai.

    Background of the EPCG Dispute

    • CEAT, engaged in the manufacture of automobile tyres, had obtained six EPCG authorisations in 2013 for importing capital goods against the export of tyres. The capital goods imported under these authorisations were valued at approximately β‚Ή7.76 crore, involving customs duty foregone of β‚Ή1,79,12,579. CEAT had executed bonds undertaking fulfilment of its export obligations.
    • Customs subsequently alleged that CEAT had failed to produce the required Capital Goods Installation Certificates and had also not submitted the EODC as required under the applicable EPCG exemption notification.
    • Accordingly, a show cause notice dated 7 October 2024 proposed recovery of the entire duty foregone amount of β‚Ή1.79 crore with interest, confiscation of the imported capital goods under Section 111(o) of the Customs Act, 1962, and penalty under Section 112(a). The Commissioner confirmed the proposals through the Order-in-Original dated 22 May 2025.

    CEAT Had Already Applied to DGFT for EODC

    • Before CESTAT, CEAT contended that it had fulfilled the prescribed export obligation and had already approached the DGFT authorities for issuance of the EODC.
    • Significantly, the application seeking the discharge certificate had been submitted to DGFT on 13 January 2020, well before the Customs adjudication. The EODC, however, remained pending with the licensing authority when the Commissioner passed the impugned order.
    • CEAT also produced installation certificates issued by the jurisdictional Central Excise authorities covering the imported capital goods. Subsequently, the EODC covering all six EPCG authorisations was issued by DGFT, and Customs itself accepted the discharge certificate and cancelled the bonds executed under the six EPCG authorisations.

    Delay by DGFT Was Beyond Exporter’s Control: CESTAT

    • The Tribunal found that the requisite conditions concerning installation of the imported capital goods had been fulfilled.
    • More importantly, CESTAT noted that CEAT had submitted the necessary details to DGFT for obtaining the EODC as early as 13 January 2020, whereas the certificate was ultimately issued only later by the DGFT authorities.
    • The Tribunal therefore held that non-production of the EODC during adjudication was beyond CEAT’s control, since the competent authority had not issued the certificate despite CEAT having completed the exports necessary for fulfilment of its export obligation and submitted the requisite documents.
    • This finding is particularly important for EPCG disputes where an importer/exporter has completed the substantive export obligation but faces Customs proceedings merely because the formal discharge certificate remains pending before DGFT.

    Customs Should Not Prematurely Decide EPCG Compliance While EODC Is Pending

    • CESTAT relied upon its earlier decision in Alca Technologies v. Commissioner of Customs, Nhava Sheva-IV, reported at 2019 (369) E.L.T. 1447 (Tri.-Mumbai).
    • In that case, the Tribunal had held that where an application for EODC remained pending before the licensing authority, the proper course for Customs was to keep the show cause notice pending until the licensing authority took a decision, rather than independently proceeding to conclude that the conditions of the exemption notification had not been fulfilled.
    • The principle assumes importance because determination of whether the export obligation under an EPCG authorisation has been discharged substantially falls within the framework administered by DGFT.

    CESTAT Notes Contradictory Stand Taken by Customs

    • One of the strongest observations in the order concerned the contradictory positions adopted within the Customs Department itself.
    • After DGFT issued the EODC, the Customs authorities accepted the certificate and cancelled the bonds relating to all six EPCG licences. At the same time, the impugned adjudication order continued to demand customs duty on the premise that CEAT had failed to submit the EODC.
    • CESTAT observed that, on one hand, Customs had confirmed the duty demand for non-production of the EODC, while on the other hand, authorities of the same Commissionerate had subsequently accepted the EODC and cancelled the bonds.
    • The Tribunal therefore found no merit in sustaining the demand merely on the ground of non-submission of the documents during the original adjudication.

    Duty Demand, Redemption Fine and Penalty Set Aside

    • In light of CEAT’s fulfilment of the EPCG conditions, issuance of the EODC by DGFT, production of installation certificates and subsequent cancellation of the bonds by Customs itself, CESTAT held that the impugned order could not legally survive.
    • The Tribunal accordingly held that the order, insofar as it confirmed the customs duty demand along with redemption fine and penalty, was legally unsustainable.
    • The impugned order was therefore set aside and CEAT’s appeal was allowed.

    Key Legal Takeaway

    The ruling reinforces an important principle in EPCG and export-promotion disputes: where an exporter has completed the substantive export obligation and has timely approached DGFT for an EODC, it should not ordinarily suffer adverse customs consequences merely because issuance of the formal certificate remains pending with the licensing authority.

    The decision also underlines the need for coordination between DGFT and Customs. Where the licensing authority is still considering an EODC application, Customs should avoid prematurely concluding that the export obligation has not been fulfilled.

    Once DGFT subsequently certifies fulfilment and Customs itself accepts that certificate by cancelling the corresponding bonds, maintaining a duty demand based solely on earlier non-production of the EODC becomes untenable.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

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    Source: CESTAT Mumbai

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  • CESTAT Mumbai confirming that SAD exemption claims are valid when statutory taxes are paid on domestic sales

    CESTAT Mumbai confirming that SAD exemption claims are valid when statutory taxes are paid on domestic sales

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 04.09.2026

    CESTAT Mumbai confirming that SAD exemption claims are valid when statutory taxes are paid on domestic sales

    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 .  

    A recent decision by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has significant implications for manufacturers importing goods through Free Trade Warehousing Zones (FTWZ) and claiming Special Additional Duty (SAD) exemptions. The case involved M/s Emerson Process Management (India) Pvt. Ltd. and its Managing Director, Amit Paithankar, challenging customs duty demands and penalties imposed by the Principal Commissioner of Customs, JNCH, Nhava Sheva.

    Background of the Case

    Emerson Process Management (India) Pvt. Ltd. manufactures process management equipment and imports raw materials via FTWZs. These goods are processed at their Navi Mumbai factory and sold domestically, with applicable VAT/sales tax paid on final products. The company availed SAD exemption under Notification No. 45/2005-Customs, based on the undertaking that VAT/CST would be paid on domestic sales.

    However, the Directorate General of Central Excise Intelligence (DGCEI) alleged that Emerson wrongly availed SAD exemption on goods used in manufacturing, leading to a Show Cause Notice demanding over Rs. 1.79 crore in SAD, interest, and penalties. The Principal Commissioner confirmed these demands, prompting appeals from both the company and the Revenue (the latter seeking higher penalties).

    Key Legal Issues

    The central question was whether SAD exemption under Notification No. 45/2005-Customs applies to goods cleared from FTWZ to Domestic Tariff Area (DTA) units on a stock transfer basis, especially when VAT/sales tax is eventually paid on the final product.

    Arguments Presented

    For the Appellants

    1. Precedent and Industry Practice: The issue was already settled in favor of appellants in several tribunal and Supreme Court decisions, confirming eligibility for SAD exemption when VAT is paid on final sales.
    2. Full Disclosure: Emerson argued there was no suppression of facts, as all clearances followed prescribed procedures and were supervised by customs officers.
    3. No Malafide Intent: The company relied on approvals from the Development Commissioner of SEZ/FTWZ and industry-wide interpretations, negating any intent to evade duty.
    4. Limitation Period: The demand was time-barred, as the Show Cause Notice covered a period beyond the normal limitation period.

    For the Revenue

    1. Circular Interpretation: The Revenue cited a Ministry of Finance circular clarifying that SAD exemption is not available for stock transfers from SEZ/FTWZ to DTA for self-consumption.
    2. Mandatory Penalty: The Revenue sought imposition of a penalty equal to the duty amount under Section 114A of the Customs Act.

    Tribunal’s Findings

    1. Precedent Supports Exemption: The Tribunal cited multiple decisions, including CRI Ltd. v. Commissioner of Customs and Serum Institute of India, confirming that SAD exemption applies when VAT is paid on final sales, regardless of whether the initial transfer is a sale or stock transfer.
    2. No Suppression or Malafide: The Tribunal found no evidence of suppression or malafide intent, as the company acted in line with industry practice and customs approvals.
    3. Limitation Period Applies: Since the demand was raised beyond the normal limitation period and there was no suppression, the extended period could not be invoked.
    4. Revenue’s Appeal Dismissed: The Tribunal rejected the Revenue’s demand for a higher penalty, as the underlying duty demand itself was unsustainable.

    Outcome

    • The Tribunal set aside the duty demand, confiscation order, and penalties against Emerson and its Managing Director.
    • The Revenue’s appeal for a higher penalty was dismissed.
    • The decision reinforces the principle that SAD exemption is available when VAT/sales tax is paid on final sales, even if goods are initially transferred on a stock basis from FTWZ/SEZ to DTA units.

    Implications for Industry

    This ruling provides clarity and relief for manufacturers using FTWZ/SEZ facilities, confirming that SAD exemption claims are valid when statutory taxes are paid on domestic sales. It also underscores the importance of following prescribed procedures and maintaining transparent documentation to defend against future disputes.

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    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai Upholds Correct Classification of Imported Alcohol Ethoxylates under Heading 3824

    CESTAT Mumbai Upholds Correct Classification of Imported Alcohol Ethoxylates under Heading 3824

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 26.08.2026

    CESTAT Mumbai Upholds Correct Classification of Imported Alcohol Ethoxylates under Heading 3824

    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 judgment in the case involving Godrej Industries Limited and the Commissioner of Customs (NS-I), Nhava Sheva. This article provides a comprehensive overview of the dispute, the legal arguments, and the Tribunal’s final decision, offering valuable insights for importers, legal professionals, and industry stakeholders.

    Background of the Case

    Godrej Industries Limited, a prominent manufacturer with operations in Gujarat and a registered office in Mumbai, imported chemical products such as Dehydol LS1 TH, Dehydol LS2 TH, and Lauryl Alcohol Ethoxylate 2 Mole from overseas suppliers. The company classified these goods under Customs Tariff Item (CTI) 3824 9090/3824 9990, claiming a 0% Basic Customs Duty (BCD) exemption as per Notification No. 46/2011-Customs.

    However, the Directorate of Revenue Intelligence (DRI) alleged misclassification, asserting that the correct classification should be under CTI 3402 1300, which attracts a 5% BCD. This led to investigations, chemical testing, and the issuance of Show Cause Notices (SCNs) proposing reclassification, duty demand, confiscation, and penalties.

    Key Legal Issues

    The Tribunal was tasked with determining:

    1. Whether Godrej Industries misdeclared the classification of imported goods and if the goods were liable for confiscation and penalties.
    2. Whether the original authority’s order to drop the proposals for reclassification, duty demand, and penalties was legally sustainable.

    Arguments Presented

    Revenue’s Stand

    • The Revenue argued that the imported goods met the definition of Organic Surface-Active Agents (OSAA) under Chapter 34 of the Customs Tariff, based on chemical test reports showing non-ionic nature and surface tension reduction.
    • It was contended that the importer failed in self-assessment, indicating malafide intent to evade duty.

    Godrej Industries’ Defense

    • The company maintained that the goods, while reducing surface tension, did not meet the water solubility requirement of Chapter Note 3(a) to Chapter 34, as test reports showed separation of insoluble matter.
    • They cited Supreme Court and High Court judgments emphasizing the primacy of statutory definitions over trade parlance and the exclusion of water-insoluble surfactants from Heading 34.02.
    • Godrej also argued that interest and penalties under certain sections of the Customs Act could not be applied to additional duties (CVD/IGST), referencing recent judicial precedents.

    Tribunal’s Analysis and Findings

    Classification Principles

    • The Tribunal reviewed the General Rules for Interpretation (GIR) of the Customs Tariff and relevant Chapter Notes.
    • It emphasized that classification must be based on statutory definitions and technical criteria, not trade usage.

    Technical Assessment

    • The imported products (Lauryl Alcohol Ethoxylates with 1 or 2 moles of ethylene oxide) were found to be non-ionic surfactants but did not fully dissolve in water, forming a translucent liquid with separation of insoluble matter.
    • As per Chapter Note 3(a) to Chapter 34, only products forming a transparent or translucent liquid or stable emulsion without separation of insoluble matter qualify as OSAA under Heading 34.02.
    • The Tribunal noted that water-insoluble surfactants are specifically excluded from Heading 34.02 and should be classified under Heading 38.24.

    International and Domestic References

    • The Tribunal considered HSN Explanatory Notes and correspondence from Singapore Customs, both supporting classification under Heading 3824.

    Final Decision

    • The Tribunal upheld the original order, confirming that the goods are correctly classifiable under CTI 3824 9090/3824 9990, not under CTI 3402 1300.
    • Consequently, the demand for additional customs duty, interest, and penalties was found unsustainable.
    • The Revenue’s appeal was dismissed, and Godrej Industries’ cross-objection was disposed of.

    Implications of the Ruling

    1. Clarity on Classification: The judgment reinforces the importance of statutory definitions and technical criteria in customs classification, especially for chemical imports.
    2. Precedent for Water-Insoluble Surfactants: Products not fully soluble in water, even if they reduce surface tension, are to be classified under Heading 3824, not 3402.
    3. Limitation on Penalties: The ruling limits the applicability of interest and penalties on additional duties, aligning with recent judicial trends.
    4. Guidance for Importers: Importers should ensure accurate classification based on chemical properties and statutory notes to avoid disputes and penalties.

    Conclusion

    The CESTAT Mumbai’s decision in the Godrej Industries case provides a detailed roadmap for the classification of chemical imports under Indian customs law. By upholding the primacy of statutory definitions and technical evidence, the Tribunal has set a clear precedent that will guide future disputes and compliance strategies in the chemical and allied industries.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai Overturns Customs Penalty: Brass Scrap Classification and Valuation

    CESTAT Mumbai Overturns Customs Penalty: Brass Scrap Classification and Valuation

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 20.08.2026

    CESTAT Mumbai Overturns Customs Penalty: Brass Scrap Classification and 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 in the case of A.P. Trading Company versus the Commissioner of Customs (Import), Nhava Sheva. This case revolved around the classification, valuation, and confiscation of imported brass scrap, raising important questions about customs procedures, the interpretation of tariff entries, and the evidentiary standards for mis-declaration.

    Background of the Case

    A.P. Trading Company, based in Bhiwandi, Maharashtra, is engaged in the import and sale of brass scrap. In May 2013, the company imported a consignment described as ‘Brass Scrap Pallu as per ISRI’ from a UAE supplier. The goods were declared under Customs Tariff Item (CTI) 7404 0022, with a declared value of Rs. 62,27,262. However, upon examination, customs officers found that only 25% of the consignment was brass scrap, while 75% consisted of secondary defective brass pipes, which they considered serviceable and not scrap.

    Customs Department’s Actions

    The customs authorities alleged mis-declaration, rejected the transaction value, and re-determined the value based on contemporary prices and London Metal Exchange (LME) rates. They imposed a differential duty of Rs. 5,25,460, confiscated the goods (allowing release on payment of a Rs. 1,50,000 redemption fine), and levied a penalty of Rs. 75,000 on the importer. The company appealed, but the Commissioner (Appeals) upheld the original order, prompting a further appeal to the CESTAT.

    Key Legal Issues

    The Tribunal identified two main issues:

    1. Whether the re-determination/enhancement of the assessable value and duty demand was sustainable.
    2. Whether the imposition of redemption fine and penalty was legally justified.

    Arguments by the Appellant

    • The importer argued that the entire consignment was ordered as per ISRI specifications for brass scrap, and the contract, invoice, and packing list supported this.
    • A Chartered Engineer’s report stated the goods were rejected/discarded heat exchanger/boiler tubes, not serviceable, and thus qualified as scrap.
    • The customs officers’ contrary assessment was based on visual inspection, not expert analysis.
    • The department failed to provide evidence of contemporaneous prices or identical goods to justify value enhancement under Rule 5 of the Customs Valuation Rules, 2007.

    Tribunal’s Analysis and Findings

    1. Classification and Valuation

    • The Tribunal noted that ISRI specifications and customs tariff entries cover a wide range of brass scrap types, including ‘pallu’, ‘ebony’, and ‘melon’.
    • The contract and documentation clearly indicated the goods were ordered as brass scrap.
    • There was a contradiction between the customs officers’ assessment and the Chartered Engineer’s expert report regarding the serviceability and nature of the goods.
    • The customs tariff and ISRI guidelines do not prescribe strict size or length limits for brass scrap unless mutually agreed by buyer and seller.

    2. Mis-declaration and Penalty

    • The Tribunal found no concrete evidence of mis-declaration. The department relied solely on visual inspection, without expert corroboration or documentary proof of serviceability.
    • Precedents (e.g., Prateek Traders v. Commissioner of Customs, Ahmedabad) establish that visual inspection alone is insufficient to classify goods as serviceable when expert opinion suggests otherwise.
    • The request for mutilation by the importer, if accepted, would have further supported the claim that the goods were indeed scrap.

    3. Procedural Lapses

    • The authorities did not adequately discuss the grounds for reclassification or provide details of contemporaneous values for identical goods.
    • There was no evidence of additional consideration or flow-back to justify value enhancement.

    Final Order and Implications

    The CESTAT set aside the impugned order, ruling in favor of A.P. Trading Company. The Tribunal held that the duty demand, fine, and penalty were unsustainable due to lack of evidence and improper procedure. This decision underscores the importance of:

    • Relying on expert reports over mere visual inspection for classification disputes.
    • Providing concrete evidence when alleging mis-declaration or enhancing value.
    • Adhering to procedural fairness and transparency in customs adjudication.

    Conclusion

    The A.P. Trading Company case serves as a crucial precedent for importers and customs authorities alike. It highlights the need for objective, evidence-based assessments and reinforces the legal protections available to importers against arbitrary or unsupported customs actions. Importers should ensure thorough documentation and, when necessary, seek expert opinions to support their case in classification and valuation disputes.

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    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai Orders Refund of Deposit u/s 27 of Customs Act against Investigation fixes Departmental Accountability

    CESTAT Mumbai Orders Refund of Deposit u/s 27 of Customs Act against Investigation fixes Departmental Accountability

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 30.07.2026

    CESTAT Mumbai Orders Refund of Deposit u/s 27 of Customs Act against Investigation fixes Departmental Accountability

    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 .  

    A recent decision by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has set a significant precedent regarding the refund of amounts deposited during customs investigations.

    The case involved Shri John Miranda, proprietor of M/s Jojojem International, and revolved around the refund of Rs. 3,00,000 deposited during an investigation into alleged undervaluation of imported electronic goods.

    Background of the Case

    • Parties Involved:
      • Appellant: Shri John Miranda, M/s Jojojem International
      • Respondent: Commissioner of Customs, Import-II, Mumbai
    • Context:
      • The Directorate of Revenue Intelligence (DRI) investigated alleged gross undervaluation in the import of electronic goods by various importers, including M/s Surya Trading and M/s New Star Enterprises.
      • During the investigation, John Miranda deposited Rs. 3,00,000 each on behalf of both companies via demand drafts in July 2008.
      • A Show Cause Notice (SCN) was issued in February 2012, and subsequent adjudication led to a penalty on John Miranda, but the deposited amounts were not appropriated.

    Chronology of Events

    1. Deposit of Funds:
      • Rs. 3,00,000 deposited on behalf of M/s Surya Trading (July 2008).
      • Rs. 3,00,000 deposited on behalf of M/s New Star Enterprises (July 2008).
    2. Investigation and Adjudication:
      • SCN issued by DRI in 2012.
      • Commissioner of Customs (Port), Kolkata, adjudicated the case in November 2013, imposing penalties but not appropriating the deposited amounts.
    3. Appeals and Refund Claim:
      • John Miranda appealed the penalty and filed a refund claim for Rs. 3,00,000 in January 2019.
      • The refund claim was rejected by both the Assistant Commissioner and the Commissioner (Appeals), citing lack of documentary evidence (notably, the original challan) and jurisdictional issues.
    4. CESTAT Appeal:
      • Miranda appealed to CESTAT, Mumbai, challenging the rejection of his refund claim.

    Key Legal Issues

    • Proof of Payment:
      • Authorities rejected the refund claim due to the absence of the original challan, despite evidence of the deposit in departmental records.
    • Appropriation of Deposit:
      • The deposited amount was neither appropriated in the SCN nor in the adjudication order.
    • Eligibility for Refund:
      • The Tribunal examined whether the appellant was entitled to a refund under Section 27 of the Customs Act, 1962, and relevant CBIC circulars.

    Tribunal’s Findings and Ruling

    • Evidence of Deposit:
      • The Tribunal found sufficient evidence that the amount was deposited and credited to the government account, as reflected in the Central Board of Revenue (CBR) records.
    • Departmental Responsibility:
      • The Tribunal criticized the department for failing to verify its own records and for not providing the appellant with a copy of the challan.
    • Legal Entitlement:
      • Since the duty demand was set aside by the Tribunal and the deposit was not appropriated, the appellant was entitled to a refund.
    • Order:
      • The CESTAT set aside the impugned order and directed the department to refund Rs. 3,00,000 to the appellant without undue delay.

    Implications of the Ruling

    1. Clarity on Refunds:
      • The decision clarifies that deposits made during investigations, if not appropriated and if the duty demand is set aside, must be refunded.
    2. Departmental Accountability:
      • Customs authorities are expected to maintain proper records and facilitate refunds when justified, rather than relying on procedural technicalities.
    3. Guidance for Future Cases:
      • The ruling reinforces the importance of documentary evidence and the need for departments to cooperate in refund matters, aligning with broader government visions of efficiency and transparency.

    Conclusion

    The CESTAT Mumbai’s decision in the case of John Miranda vs. Commissioner of Customs, Import-II, Mumbai, is a landmark in ensuring fair treatment of taxpayers and upholding procedural justice in customs matters. It underscores the necessity for authorities to act transparently and efficiently, especially when handling taxpayer funds deposited during investigations.

    Source: CESTAT Mumbai

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  • CESTAT Mumbai- Marginal Excess in Marble Slab Measurement Attributed to Methodology, Not Mis-declaration

    CESTAT Mumbai- Marginal Excess in Marble Slab Measurement Attributed to Methodology, Not Mis-declaration

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

    Date: 02.07.2026

    CESTAT Mumbai- Marginal Excess in Marble Slab Measurement Attributed to Methodology, Not Mis-declaration

    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 in the case of Bajrang Marble Co., addressing key issues related to the measurement, valuation, and penal consequences for imported marble slabs. This article provides a detailed overview of the case, the legal reasoning, and its implications for importers and the marble industry.

    Background of the Case

    Bajrang Marble Co., based in Navi Mumbai, imported honed polished marble slabs through the Nhava Sheva port. The consignments, declared under specific Bills of Entry, were subjected to a 100% physical examination by Customs.

    The measurement of the slabs was conducted using the method of taking the maximum length and breadth of each slab, which resulted in a reported excess surface area of approximately 13%β€”slightly above the 10% tolerance limit prescribed by Standing Order No. 22/2010.

    Customs Proceedings and Dispute

    1. Valuation and Duty Demand:
      • Customs authorities rejected the declared transaction value and re-determined it, demanding a differential customs duty of Rs. 4,90,570, along with interest.
      • Additionally, a redemption fine of Rs. 25 lakhs and a penalty of Rs. 12.5 lakhs were imposed in the original orders.
    2. Appellant’s Response:
      • Bajrang Marble Co. initially accepted the measurement report and agreed to pay the differential duty to avoid delays, but later clarified that this acceptance was not a concession on merits.
      • The company contested the imposition of fine and penalty, arguing that the excess was due to the measurement method and not due to any fraudulent intent or mis-declaration.
    3. Appeal and Modification:
      • The Commissioner (Appeals) reduced the fine and penalty but did not eliminate them, prompting Bajrang Marble Co. to appeal further to CESTAT.

    Key Legal Issues

    The central question before CESTAT was whether the imposition of redemption fine and penalty was justified when the excess surface area was marginal and attributable to the measurement methodology, especially since the importer was willing to pay the differential duty from the outset.

    Tribunal’s Analysis and Findings

    1. Measurement Methodology:
      • The Tribunal acknowledged that measuring irregular or broken marble slabs by maximum length and breadth overstates the actual surface area.
      • The 10% tolerance limit in the Standing Order recognizes inherent measurement variations in the marble industry.
    2. Intent and Mens Rea:
      • Penal provisions under Sections 111(l), 111(m), and 114A of the Customs Act require evidence of deliberate mis-declaration, suppression, or fraudulent intent.
      • The Tribunal found no evidence of dishonest conduct or intent to evade duty by Bajrang Marble Co.
    3. Acceptance of Duty Liability:
      • The company’s willingness to pay the differential duty from the beginning indicated good faith.
      • The absence of a contemporaneous protest did not, in this context, amount to an admission of guilt or mis-declaration.
    4. Marginal Excess Not Sufficient for Penalty:
      • The marginal excess (3% above the tolerance limit) was attributed to the measurement method, not to any attempt to evade customs duty.

    Final Order and Implications

    CESTAT set aside the redemption fine and penalty, holding that:

    • The excess surface area was due to measurement methodology, not mis-declaration.
    • No penal liability arises when the importer acts in good faith and promptly accepts duty liability.
    • The appeal was allowed, and the orders imposing fine and penalty were quashed.

    Conclusion

    This decision underscores the importance of context and intent in customs enforcement. For importers, it highlights the need for transparent communication and prompt acceptance of legitimate duty liabilities. For authorities, it reinforces that penal provisions should be invoked only in cases of deliberate wrongdoing, not for marginal or technical discrepancies inherent to the industry.

    Source: CESTAT Mumbai

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