𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Tag: #DeepTraders

Delhi High Court Acquittal under Section 21(c) NDPS Act Due to Procedural Lapses and Evidentiary Deficiencies
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 08.05.2026

Delhi High Court Acquittal under Section 21(c) NDPS Act Due to Procedural Lapses and Evidentiary Deficiencies

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

This article examines a significant legal judgment from the Delhi High Court concerning the conviction and subsequent acquittal of Sunil Sharma under Section 21(c) of the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act). The case highlights procedural complexities, evidentiary standards, and the importance of strict compliance in narcotics prosecutions.

Case Background
1. Incident & Arrest: On May 18, 2012, Sunil Sharma was intercepted at the Singhu Border, Delhi, allegedly found in possession of 1 kg of heroin while driving a Honda Civic. The Directorate of Revenue Intelligence (DRI) conducted the operation based on secret information.
2. Trial Proceedings: Sharma was charged under Section 21(c) of the NDPS Act, which deals with possession of commercial quantities of narcotic drugs. The trial court convicted him, sentencing him to 10 years of rigorous imprisonment and a fine of ₹1,00,000.
3. Appeal: Sharma appealed, claiming false implication, procedural lapses, and violations of mandatory legal provisions.
Key Legal Issues

1. Procedural Compliance under NDPS Act
- Section 52A: Mandates inventory, sampling, and certification by a Magistrate for seized narcotics. The court found that the inventory and sampling procedures were not strictly followed, with unexplained delays and missing documentation.
- Standing Order No. 1/89: Requires immediate deposit of samples and seals in the malkhana (storage), which was not done. The seal remained with the raiding team, raising concerns about possible tampering.
- Section 50: Ensures the accused’s right to be searched before a Magistrate or Gazetted Officer. While the accused opted for a Gazetted Officer, the search was conducted at the DRI office, not at the place of seizure or before a Magistrate.
2. Evidentiary Concerns
- Confession Statement: The trial court relied on Sharma’s confession under Section 67 of the NDPS Act. However, the Supreme Court in Tofan Singh v. State of Tamil Nadu ruled such confessions inadmissible unless made before a Magistrate.
- Chain of Custody: The court noted discrepancies in the chain of custody, including unclear handling of samples and the main contraband, and inconsistencies in the recorded quantity.
3. Burden of Proof & Benefit of Doubt
- The NDPS Act prescribes stringent punishments, requiring a higher degree of proof. The court emphasized that strong suspicion cannot substitute for proof beyond reasonable doubt.
- Due to procedural lapses and unsatisfactory evidence, the court granted Sharma the benefit of doubt and acquitted him.
Court’s Findings & Rationale
1. Procedural Lapses: The court found major anomalies in inventory preparation, sample handling, and chain of custody, violating mandatory provisions and standing orders.
2. Evidentiary Gaps: The absence of proper documentation and unexplained delays undermined the prosecution’s case.
3. Legal Precedents: The court cited Supreme Court judgments, including Bharat Aambale v. State of Chhattisgarh and Tofan Singh v. State of Tamil Nadu, reinforcing the need for strict compliance and heightened scrutiny in NDPS cases.
4. Acquittal: The conviction was set aside, and Sharma was acquitted, with the court directing authorities to ensure strict compliance in future cases to prevent miscarriage of justice.
Lessons & Recommendations
- Strict Compliance: Law enforcement must rigorously follow NDPS Act procedures, especially regarding inventory, sampling, and chain of custody.
- Documentation: Proper and timely documentation is crucial for maintaining evidentiary integrity.
- Training & Oversight: The judgment recommends enhanced training and oversight for officers handling narcotics cases.
Conclusion

This case underscores the critical importance of procedural safeguards in narcotics prosecutions. Even in cases involving commercial quantities of dangerous drugs, lapses in compliance can result in acquittal. The judgment serves as a reminder to law enforcement and judicial authorities to uphold the highest standards of evidence and procedure under the NDPS Act.

Source: Delhi High Court

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May 8, 2026
Bombay High Court Sets Aside Preferential Duty Rejection
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 23.04.2026

Bombay High Court Sets Aside Preferential Duty Rejection

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 .

Covestro India Private Limited, a leading manufacturer and trader of polycarbonate resins and related materials, recently secured a significant victory in the Bombay High Court. The court quashed the customs department’s order denying Covestro’s claim for preferential duty rates under the ASEAN-India Free Trade Agreement (AIFTA), restoring the assessment proceedings for fresh consideration. This article provides a detailed overview of the case, the legal issues involved, and the implications for importers and customs authorities.

Background of the Case

Covestro India regularly imports goods from Thailand, claiming preferential duty rates under various Free Trade Agreements (FTAs), including the AIFTA. The company had been availing these benefits for over a decade, submitting all required documents such as the Certificate of Origin (CoO), commercial invoices, and packing lists.

In March 2024, the Commissioner of Customs issued Public Notice No.33/2024, imposing additional documentary requirements for third-party invoicing cases. Covestro and other importers argued that these requirements deviated from the established rules under the FTAs and CAROTAR 2020 (Customs Administration of Rules of Origin under Trade Agreements Rules).

The Dispute

The customs department rejected Covestro’s claim for preferential duty on the grounds that the FOB (Free on Board) value could not be verified from the submitted invoices, as required by Public Notice No.33/2024. Covestro was unable to provide the exporter’s invoice from the originating country in time, leading to the denial of the FTA benefit and the passing of the impugned order dated 12th June 2024.

Covestro challenged this order, arguing that:
- The public notice was ultra vires (beyond legal authority) and inconsistent with CBIC (Central Board of Indirect Taxes & Customs) instructions.
- The customs department failed to follow the correct legal framework, including the procedures under CAROTAR 2020 and Section 28DA of the Customs Act.
Key Legal Developments

Following industry representations, the CBIC issued clarifications and new instructions:
- CBIC Instruction No.23/2024-Customs (21st October 2024): Clarified that third-party invoicing is permitted under AIFTA and that importers are not obligated to provide commercially sensitive information. The customs department must follow verification procedures consistent with the trade agreement.
- Public Notice No.55/2024 (24th June 2024): Superseded the earlier notice, prescribing updated procedures for document verification.
- Public Notice No.10/2025 (23rd January 2025): Incorporated CBIC’s clarifications, ensuring customs officers follow the correct process.
The Court’s Reasoning and Judgment

The Bombay High Court found that:
- The customs department’s rejection was based on a superseded public notice and not on the current legal framework.
- CBIC instructions and CAROTAR 2020 take precedence over local public notices.
- The impugned order caused serious prejudice to Covestro and was passed without proper jurisdiction.
Order Highlights:
- The impugned order dated 12th June 2024 was quashed and set aside.
- Assessment proceedings were restored for fresh consideration, instructing customs authorities to reassess Covestro’s claim for preferential duty under Notification No.46/2011 (Customs) and the latest CBIC instructions.
- All contentions of both parties were kept open for reassessment.
- All related writ petitions were disposed of in Covestro’s favor.
Implications for Importers and Customs Authorities

This judgment reinforces the importance of adhering to CBIC instructions and the legal framework established under FTAs and CAROTAR 2020. Importers can expect:
- Greater clarity and consistency in customs procedures for preferential duty claims.
- Protection against arbitrary or ultra vires public notices that deviate from national policy.
- The right to have claims reassessed under the correct legal standards.
Customs authorities are reminded to:
- Follow CBIC instructions and trade agreement provisions strictly.
- Avoid imposing additional requirements not supported by law.
- Ensure fair and transparent assessment processes.
Conclusion

The Bombay High Court’s ruling in favor of Covestro India Private Limited is a landmark decision for importers seeking preferential duty benefits under FTAs. It underscores the primacy of CBIC instructions and the need for customs authorities to act within their legal mandate. The reassessment of Covestro’s claims will now proceed under the correct legal framework, setting a precedent for similar cases in the future.

Source: Bombay High Court

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April 23, 2026
Supreme Court Upholds Retrospective Amendment to Section 11A: Approved Classification No Bar to Demand Within Limitation
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 18.04.2026

Supreme Court Upholds Retrospective Amendment to Section 11A: Approved Classification No Bar to Demand Within Limitation

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

The Easland Combines case, decided by the Supreme Court of India on January 13, 2003, is a landmark judgment that delves into the legal implications of amendments made to Section 11A of the Central Excise Act, 1944. This article explores the case, the amendments, and their impact on the recovery of duties and the validity of notices issued under the law.

Background of the Case

Easland Combines, a small-scale industrial undertaking, operated factories in Trivandrum and Coimbatore, manufacturing water taps classified under sub-heading 8481.80 of the Central Excise Tariff Act. While the Trivandrum factory was registered as a Small Scale Industry (SSI), the Coimbatore factory was not independently registered. The company claimed exemption under Notification No. 175/86, which was applicable to SSI units.

During audits conducted in 1986 and 1987, discrepancies were identified, leading to a show-cause notice issued by the Collector of Central Excise, demanding differential duty of Rs. 7,59,501.28 and imposing penalties. The case eventually reached the Supreme Court after appeals and counter-appeals.

Key Legal Questions

The Supreme Court addressed two primary questions:
1. Impact of Amendments to Section 11A:
  - Section 11A was amended by the Finance Act, 2000, with retrospective effect from November 17, 1980. The amendments extended the time limit for issuing notices from six months to one year and introduced provisions for recovering duties even if the non-payment or short-payment was based on approved classification lists or assessments.
  - The amendments also validated actions taken under Section 11A during the period from November 17, 1980, to the date of the Finance Act, 2000.
2. Applicability of the Extended Limitation Period:
  - The court examined whether the extended limitation period of five years under the first proviso to Section 11A could be invoked in cases involving fraud, collusion, or willful misstatement.
Legal Analysis and Judgment

Impact of Section 11A Amendments

The court noted that the amendments fundamentally altered the legal basis of previous judgments, including the Cotspun case. The amended Section 11A explicitly allowed the Central Excise Officer to issue show-cause notices for short-levied or short-paid duties, even if the errors were based on approved classification lists or assessments. This change invalidated the reasoning in Cotspun’s case, which had previously held that duties levied based on approved classification lists were correct and could not be reopened.

The court emphasized that the legislature has the authority to retrospectively amend laws to address judicial pronouncements and fill legal gaps. The amendments to Section 11A were designed to validate past actions and ensure the recovery of duties that were erroneously not collected.

Extended Limitation Period

The court clarified that the extended limitation period of five years could only be invoked in cases involving fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with the intent to evade duty. In the Easland Combines case, the court found that the company’s failure to register its Coimbatore factory as an SSI unit was due to a clerical error and not a willful misstatement or suppression of facts. Therefore, the extended limitation period was not applicable.

Implications of the Judgment
1. Retrospective Validation:
  - The amendments to Section 11A provide a legal framework for recovering duties that were not levied or paid due to errors in classification or assessment, even if these errors were based on approved lists.
  - This ensures that the government can recover revenue that would otherwise be lost due to administrative mistakes or judicial interpretations.
2. Protection Against Misuse:
  - The court acknowledged concerns about potential misuse of the extended limitation period but emphasized that the law provides remedies for challenging unjustified actions.
3. Impact on Businesses:
  - Businesses must exercise caution in their compliance with excise regulations, as errors in classification or registration can lead to significant financial liabilities.
  - The judgment underscores the importance of accurate documentation and adherence to regulatory requirements.
Conclusion

The Easland Combines case highlights the dynamic nature of tax laws and the power of the legislature to amend and validate provisions retrospectively. While the amendments to Section 11A strengthen the government’s ability to recover duties, they also place a greater onus on businesses to ensure compliance with excise regulations. The judgment serves as a reminder of the importance of meticulous record-keeping and adherence to legal requirements to avoid financial and legal repercussions.

Connected Matter

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

Source: Supreme Court

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April 18, 2026
Supreme Court Clarifies Limits of Rule 9(1)(e) Under Customs Valuation Rules
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 16.04.2026

Supreme Court Clarifies Limits of Rule 9(1)(e) Under Customs Valuation Rules

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

The Supreme Court of India delivered a landmark judgment in the case of Commissioner of Customs (Port), Kolkata vs. M/s J.K. Corporation Limited. This case revolved around the valuation of imported goods and the applicability of customs duty, particularly in the context of a collaboration agreement involving the import of machinery and technical know-how. The judgment clarified key aspects of customs valuation under the Customs Act, 1962, and the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988.

Background of the Case

M/s. Orissa Synthetics Limited, a division of J.K. Corporation Limited, entered into a collaboration agreement on November 18, 1999, with M/s. Samsung Company Limited and M/s. Cheil Synthetics Inc., both based in Korea. The agreement was divided into two parts:
1. Part-A: Pertained to the licensing, know-how, and technology transfer, for which J.K. Corporation agreed to pay a lump sum of USD 1,400,000.
2. Part-B: Covered the supply of equipment, including plant and machinery necessary for manufacturing polyester-oriented yarn, with a price of USD 3,486,000 + DM 12,000,000 + JPY 8,850,000,000.
Pursuant to this agreement, J.K. Corporation imported plant and machinery manufactured by the Korean companies. However, the Assistant Commissioner of Customs, Special Valuation Branch, ruled that the amounts mentioned in both parts of the agreement should be combined for customs valuation purposes, as the payment for technical know-how was deemed a precondition for the sale of the equipment.

Legal Proceedings

The decision of the Assistant Commissioner was challenged by J.K. Corporation, leading to a series of appeals:
1. First Appeal: The Commissioner of Customs dismissed J.K. Corporation’s appeal, upholding the Assistant Commissioner’s decision.
2. Second Appeal: The Customs Excise and Service Tax Appellate Tribunal (CESTAT) allowed J.K. Corporation’s appeal and remitted the matter for a fresh decision, citing the Supreme Court’s earlier judgment in Tata Iron and Steel Company Limited vs. Commissioner of Central Excise and Customs Bhubaneswar, Orissa (2000).
3. Third Appeal: The Deputy Commissioner of Customs reaffirmed the original decision, stating that the two parts of the agreement were complementary and interdependent.
4. Fourth Appeal: The Commissioner of Customs overturned the Deputy Commissioner’s decision, ruling that the Supreme Court’s decision in TISCO was applicable and that the value of technical know-how should not be added to the assessable value of the imported goods.
5. Final Appeal: The Revenue challenged the Tribunal’s decision in the Supreme Court, leading to the judgment delivered on February 2, 2007.
Key Legal Issues

The primary question before the Supreme Court was whether customs duty should be levied on the purchase price of imported goods by adding the value of the license and technical know-how fees.

The case revolved around the interpretation of Section 14 of the Customs Act, 1962, and Rule 9(1)(e) of the Customs Valuation Rules, 1988. These provisions govern the valuation of imported goods for customs duty purposes. Specifically, Rule 9(1)(e) states that “all other payments actually made or to be made as a condition of sale of the imported goods” should be added to the transaction value.

Supreme Court’s Analysis and Judgment

The Supreme Court analyzed the provisions of the Customs Act and the Customs Valuation Rules, along with the interpretative notes to Rule 4. The Court emphasized the following points:
1. Valuation of Imported Goods:
  - The assessable value of imported goods must be determined at the time and place of importation.
  - Payments made for post-importation services or activities, such as technical assistance, are not included in the assessable value.
2. Interpretative Notes:
  - The interpretative notes to Rule 4 explicitly exclude charges for post-importation activities, such as construction, erection, assembly, maintenance, or technical assistance, from the assessable value.
3. Separate Identifiable Amounts:
  - The payment of USD 1,400,000 for technical know-how was a separate and identifiable amount, not related to the fabrication or design of the imported plant and machinery.
4. Precedents:
  - The Court distinguished the present case from earlier judgments, such as Essar Gujarat Limited vs. Collector of Customs (Prev.), Ahmedabad and Mukund Limited vs. Commissioner of Customs, ACC, Mumbai, where the license fees were deemed a precondition for the sale of the imported goods.
  - The Court found the TISCO judgment to be directly applicable, as it clarified that post-importation charges should not be included in the assessable value.
5. Final Decision:
  - The Supreme Court dismissed the Revenue’s appeal, ruling that the value of the license and technical know-how fees should not be added to the assessable value of the imported goods.
Implications of the Judgment

This judgment has significant implications for businesses involved in importing goods and entering into collaboration agreements:
1. Clarity on Customs Valuation:
  - The judgment provides clear guidelines on what constitutes the assessable value of imported goods, emphasizing the exclusion of post-importation charges.
2. Impact on Collaboration Agreements:
  - Businesses entering into agreements involving both technical know-how and equipment supply must ensure that payments for post-importation services are separately identifiable to avoid additional customs duty.
3. Legal Precedents:
  - The judgment reinforces the principles established in the TISCO case, providing a strong precedent for similar disputes in the future.
Conclusion

The Supreme Court’s judgment in the case of Commissioner of Customs (Port), Kolkata vs. M/s J.K. Corporation Limited is a landmark decision that clarifies the scope of customs valuation under Indian law. By distinguishing between pre-importation and post-importation charges, the Court has provided valuable guidance for businesses and legal practitioners navigating the complexities of customs duty assessments. This case serves as a reminder of the importance of clear and precise drafting in collaboration agreements to ensure compliance with customs regulations and avoid unnecessary financial liabilities.

Source: Supreme Court

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April 16, 2026
Supreme Court Refines the Doctrine of Royalty Inclusion in Import Valuation
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 16.04.2026

Supreme Court Refines the Doctrine of Royalty Inclusion in Import 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 .

In the realm of international trade, customs valuation plays a pivotal role in determining the assessable value of imported goods. A landmark case in Indian customs law, Commissioner of Customs vs. M/s Ferodo India Pvt. Ltd., sheds light on the inclusion of royalties and license fees in the assessable value of imported goods. This article delves into the legal principles and implications of this case, providing insights into the complexities of customs valuation under Indian law.

Background of the Case

The case revolves around M/s Ferodo India Pvt. Ltd., a subsidiary of M/s T & N International Ltd., UK. Ferodo India is a manufacturer of brake liners and brake pads in India. On September 8, 1995, the company entered into a Technical Assistance and Trademark Agreement (TAA) with its foreign collaborator, T & N International Ltd. Under this agreement:
- The licensor (T & N International Ltd.) provided technical know-how, secret processes, formulas, and information to Ferodo India.
- Ferodo India was required to import raw materials and capital goods from the licensor.
- The agreement mandated the payment of license fees and royalties based on the net sales value of the licensed products sold, consumed, or otherwise disposed of.
The central issue in this case was whether the technical know-how fees and royalty payments should be included in the assessable value of the imported goods for customs duty purposes.

Legal Framework: Customs Valuation Rules, 1988

The Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (CVR, 1988) provide the framework for determining the assessable value of imported goods. The rules emphasize the principle of arm’s length pricing, ensuring that the transaction value is uninfluenced by the relationship between the buyer and seller.

Key Provisions of CVR, 1988
1. Rule 9(1)(c):
  - Royalties and license fees related to imported goods must be added to the transaction value if they are paid as a condition of sale.
  - Payments must be directly or indirectly related to the imported goods.
2. Rule 9(1)(e):
  - Any other payments made as a condition of sale of the imported goods must be added to the transaction value.
3. Section 14 of the Customs Act, 1962:
  - Defines the assessable value of imported goods as the price at which such goods are ordinarily sold in international trade, uninfluenced by the relationship between the buyer and seller.
4. Methods of Customs Valuation:
  - Transaction Value Method: The primary method, based on the price actually paid or payable for the goods.
  - Alternate Methods: Include transaction value of identical goods, transaction value of similar goods, deductive value, computed value, and fall-back method.
Key Issues in the Case

The Department argued that the technical know-how fees and royalty payments were related to the imported goods and constituted a condition of sale. Consequently, they sought to include these payments in the assessable value of the imported goods under Rule 9(1)(c) or Rule 9(1)(e).

However, the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) ruled that the payments were related to the manufacture of brake liners and brake pads in India, not the imported goods. The Department challenged this decision, leading to the civil appeal.

Supreme Court’s Analysis and Judgment

The Supreme Court examined the scope of Rule 9(1)(c) and Rule 9(1)(e) of CVR, 1988. Key observations include:
1. No Nexus Between Royalties and Imported Goods:
  - The Court found that the royalties and license fees were entirely related to the manufacture of brake liners and brake pads in India, not the imported goods.
  - The Department failed to establish a direct or indirect link between the payments and the imported goods.
2. Importance of Pricing Arrangements:
  - The Court emphasized the need to examine both the Technical Assistance Agreement (TAA) and the pricing arrangement between the buyer and the foreign collaborator.
  - If the Department could prove that the importer adjusted the price of imported goods to disguise increased royalty payments, the royalties could be included in the assessable value.
3. Interpretative Notes:
  - The Court highlighted the significance of the Interpretative Notes to CVR, 1988, which place the burden of proof on the importer to demonstrate the correctness of the transaction value.
4. Comparison with Previous Cases:
  - The Court distinguished this case from earlier judgments, such as Essar Gujarat Ltd. and Matsushita Television & Audio India Ltd., where royalties were found to be directly related to the imported goods.
5. Final Decision:
  - The Court upheld the Tribunal’s decision, dismissing the Department’s appeal. It ruled that the royalties and license fees were not related to the imported goods and could not be included in their assessable value.
Implications of the Judgment

This case has significant implications for businesses and customs authorities:
1. Clarification on Rule 9(1)(c):
  - Payments for technical know-how and royalties can only be included in the assessable value of imported goods if they are directly or indirectly related to the goods and are a condition of sale.
2. Burden of Proof:
  - Importers must provide evidence to demonstrate the correctness of the transaction value.
3. Importance of Agreements:
  - Both the technical assistance agreements and pricing arrangements must be scrutinized to determine the relationship between royalties and imported goods.
4. Precedent for Future Cases:
  - The judgment sets a precedent for similar disputes, emphasizing the need for a detailed examination of agreements and pricing arrangements.
Conclusion

The case of Commissioner of Customs vs. M/s Ferodo India Pvt. Ltd. underscores the complexities of customs valuation and the inclusion of royalties and license fees in the assessable value of imported goods. By clarifying the scope of Rule 9(1)(c) and Rule 9(1)(e) of CVR, 1988, the Supreme Court has provided valuable guidance for businesses and customs authorities, ensuring a fair and transparent valuation process in international trade.

Connected Matter

CESTAT Bangalore- Technical assistance fees not to be included in the value of imported goods

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Source: Supreme Court

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April 16, 2026
Gujarat High Court Clarifies Recovery Period for Erroneously Paid Customs Drawback
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 15.04.2026

Gujarat High Court Clarifies Recovery Period for Erroneously Paid Customs Drawback

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

Exporters in India often rely on customs drawback schemes to remain competitive in global markets. These schemes allow exporters to claim refunds on duties paid for imported inputs used in exported goods. However, disputes sometimes arise regarding the recovery of erroneously paid drawback amounts. A recent judgment by the Gujarat High Court in the case of Padmini Exports vs. Union of India (Special Civil Application No. 17812 of 2003) has clarified important legal principles regarding such recoveries.

Background of the Case

Padmini Exports, a firm engaged in exporting polyester fabric, claimed customs drawback under the Customs & Central Excise Duties Drawback Rules, 1995. Their goods were covered under Sub-Serial No. 5404 of the Drawback Schedule, which allowed a rate of 20% of the Free on Board (FOB) value, subject to a maximum of Rs. 62 per kg of filament yarn content. If certain conditions were not met, a lower rate of 17% applied.

Between December 1995 and May 1996, Padmini Exports exported goods and claimed drawback at the 17% rate. Their claims were scrutinized and sanctioned by customs authorities, and payments were made by August 1996.

The Dispute: Recovery of Erroneously Paid Drawback

Years later, customs authorities issued show cause notices in February and March 2000, seeking recovery of excess drawback paid to Padmini Exports. The authorities argued that the maximum limit of Rs. 62 per kg should have applied, and invoked Rule 16 of the Drawback Rules and Section 142 of the Customs Act, 1962 for recovery.

Padmini Exports challenged these notices and subsequent orders, arguing that the recovery was time-barred and that the authorities had delayed action unreasonably.

Legal Issues and Court’s Reasoning

The central legal question was whether Rule 16 of the Drawback Rules, which does not specify a time limit for recovery, allows authorities to recover excess drawback after any length of time, or whether a “reasonable period” must be implied.

Key Points from the Judgment:
- No Statutory Limitation, But Reasonable Period Applies: The Court noted that while Rule 16 does not prescribe a limitation period, established Supreme Court precedents require that powers without a statutory time limit must be exercised within a reasonable period.
- Delay of Over Three Years Unreasonable: In this case, drawback was paid by August 1996, but show cause notices were issued only in February 2000—over three years later. The Court held that such a delay was not reasonable.
- Finality and Legitimate Expectation: Exporters are entitled to believe that their claims, once scrutinized and paid, have attained finality. Delayed recovery disturbs their rights and financial planning.
- Invalidation of Show Cause Notices and Orders: The Court declared the show cause notices time-barred and quashed all subsequent orders, including the impugned Order-in-Appeal.
Supporting Precedents:

The judgment cited Supreme Court cases such as Government of India v. Citedal Fine Pharmaceuticals and Collector of Central Excise, Jaipur v. Raghuvar (India) Ltd., which held that in the absence of a statutory limitation, actions must be taken within a reasonable period, determined by the facts of each case.

Implications for Exporters and Customs Authorities
- Exporters: This judgment provides clarity and protection for exporters, ensuring that recovery actions for excess drawback cannot be initiated after unreasonable delays.
- Customs Authorities: The authorities must act promptly when recovering erroneously paid drawback, and cannot rely on open-ended powers.
- Legal Certainty: The concept of “reasonable period” is now firmly established in the context of customs drawback recovery, promoting fairness and legal certainty.
Conclusion

The Gujarat High Court’s decision in Padmini Exports vs. Union of India is a landmark ruling that balances the interests of exporters and the government. It underscores the importance of timely action by authorities and protects exporters from arbitrary and delayed recoveries. Exporters should be aware of their rights, and customs officials must ensure compliance with the principle of reasonable period in all recovery proceedings.

Connected Matter

CESTAT Delhi Overturns Drawback Denial of Texcomash Export

Source: Gujarat High Court

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April 15, 2026
Customs Seizure Under Section 110 of the Customs Act, 1962
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 14.04.2026

Customs Seizure Under Section 110 of the Customs Act, 1962

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

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

Legal Framework: Section 110 of the Customs Act, 1962

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

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

Key Guidelines from Instruction No. 01/2017-Customs

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

Case Summaries

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

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

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

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

Reasons to Believe and Panchnama

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

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

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

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

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

Date: 14.04.2026

Supreme Court Clarifies Requirement of Wilful Intent for Extended Limitation

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

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

Background of the Case

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

The Dispute

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

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

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

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

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

Connected Matter

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

Source: Supreme Court

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

Date: 14.04.2026

CESTAT Chennai Reinforces Principle of Substantive Compliance in SAD Refund Claims

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

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

Background of the Case

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

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

Key Issues in the Case

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

Appellant’s Submissions

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

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

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

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

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

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

Source: CESTAT Chennai

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

Date: 14.04.2026

CESTAT Chandigarh Allows Provisional Release of Allegedly Prohibited Goods

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

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

Background of the Case

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

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

Key Arguments by the Appellant

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

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

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

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

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

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Source: CESTAT Chandigarh

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April 14, 2026