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CESTAT Mumbai Ruled in Favor of Suzlon Energy Ltd in Service Tax Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 15.12.2025

CESTAT Mumbai Ruled in Favor of Suzlon Energy Ltd in Service Tax Dispute

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

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has ruled in favor of M/s Suzlon Energy Ltd in a long-standing service tax dispute. The case revolved around the classification of imported technical know-how and engineering designs as taxable services under the category of “Design Services” as defined under Section 65(36b) read with Section 65(105)(zzzzd) of the Finance Act, 1994.

Background of the Case

Suzlon Energy Ltd, a leading manufacturer of Wind Turbine Generators (WTGs), had entered into agreements with its group companies—Suzlon Energy GmbH (Germany), AE Rotor Holdings BV (Netherlands), and Suzlon Blade Technology BV (Netherlands)—to import technical know-how and engineering designs for manufacturing WTGs in India. The agreements involved the outright purchase of intellectual property rights (IPRs) and technical know-how, including engineering drawings and designs.

The company filed Bills of Entry (B/Es) with customs authorities, classifying the imported goods under CTI 49119920 and paying Research & Development Cess (R&D Cess) at 5% of the value of the imported products. The customs department assessed the goods at a “Nil” rate of customs duty under applicable notifications and cleared them for home consumption.

However, following an excise audit, the department alleged that the imported goods were not merely engineering drawings and designs but constituted “Design Services” under the Finance Act, 1994. Consequently, two Show Cause Notices (SCNs) were issued, demanding service tax under the reverse charge mechanism for the periods 01.06.2007 to 30.09.2010 and 01.10.2010 to 30.09.2011. The total service tax demand amounted to ₹21,79,28,167.

Key Issues in the Case

The case was remanded to the Tribunal by the Hon’ble Supreme Court for consideration of two critical issues:
1. Classification of Services: Whether the imported engineering designs and drawings constituted “Design Services” under the Finance Act, 1994.
2. Extended Period of Limitation: Whether the department was justified in invoking the extended period of limitation for issuing the SCNs.
CESTAT’s Observations and Ruling

After a detailed examination of the agreements, statutory provisions, and arguments presented by both parties, the Tribunal ruled in favor of Suzlon Energy Ltd. The key observations and findings were:
1. Nature of the Transaction: The Tribunal concluded that the agreements between Suzlon Energy Ltd and its group companies involved the outright sale and permanent transfer of intellectual property rights, including engineering designs and drawings. The relationship between the parties was that of a buyer and seller, not a service provider and service recipient. Therefore, the transaction could not be classified as “Design Services.”
2. IPR Services: The Tribunal opined that the transaction was more appropriately categorized as “Intellectual Property Rights (IPR) Services.” However, since the IPRs were permanently transferred to Suzlon Energy Ltd, the group companies no longer held the rights, and the transaction did not fall under the taxable category of IPR services.
3. Extended Period of Limitation: The Tribunal held that the extended period of limitation could not be invoked in this case. It emphasized that the department failed to provide evidence of fraud, collusion, willful misstatement, or suppression of facts by Suzlon Energy Ltd. The company had complied with customs regulations and paid R&D Cess, demonstrating its belief that the transaction was not taxable under “Design Services.”
4. Penalties: The Tribunal also set aside the penalties imposed under Section 78 of the Finance Act, 1994, citing the absence of evidence to prove fraudulent intent or suppression of facts.
Final Verdict

The Tribunal set aside the impugned order dated 25.03.2013, which had confirmed the service tax demands and imposed penalties on Suzlon Energy Ltd. The appeals were allowed both on merits and on the grounds of limitation.

Implications of the Judgment

This ruling is a significant victory for Suzlon Energy Ltd and sets a precedent for similar cases involving the classification of imported technical know-how and intellectual property rights. The judgment underscores the importance of carefully analyzing the nature of transactions and agreements to determine their taxability under the service tax regime. It also highlights the need for the department to substantiate claims of fraud or suppression with concrete evidence when invoking the extended period of limitation.

As businesses continue to navigate complex tax regulations, this case serves as a reminder of the importance of maintaining transparent records and adhering to statutory requirements. It also emphasizes the role of judicial forums in ensuring fair and just outcomes in tax disputes. This decision is a testament to the importance of legal expertise and thorough documentation in resolving complex tax matters. It is a win not only for Suzlon Energy Ltd but also for businesses seeking clarity and fairness in tax compliance.

Source: CESTAT Mumbai

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December 15, 2025
CESTAT Chennai Sets Aside Allegations of Undervaluation in Silk Imports
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 15.12.2025

CESTAT Chennai Sets Aside Allegations of Undervaluation in Silk Imports

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

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has set aside allegations of undervaluation and misdeclaration against M/s Sino Import and Export Pvt Ltd and its director, in connection with the import of raw silk and tussah silk. The appeals, arising from Order-in-Original No. 109388/2024, were heard and decided by the Hon’ble Members Technical and Judicial.

Background of the Case

The case revolved around allegations that Sino Import and Export Pvt Ltd had misdeclared the origin and undervalued imported raw silk and tussah silk from Uzbekistan, China, and Vietnam between January 2019 and November 2022. The Directorate of Revenue Intelligence (DRI) conducted investigations, including searches and analysis of documents, and issued a Show Cause Notice (SCN) alleging that the importer had evaded customs duties by misdeclaring the transaction value and origin of the goods.

The adjudicating authority confirmed the demands of differential duty amounting to Rs. 1,10,21,861, imposed penalties on the importer and its director, and ordered the confiscation of goods under Section 111 of the Customs Act, 1962. Aggrieved by the decision, the appellants challenged the order before the CESTAT.

Key Issues in the Case

The Tribunal examined several critical issues, including:
1. Rejection of Transaction Value: The department alleged undervaluation based on unsigned invoices and export documents from Uzbekistan Customs, which were not provided to the importer.
2. Non-Compliance with Section 138C: The appellants argued that the documents relied upon by the department were not certified as required under Section 138C of the Customs Act, rendering them inadmissible.
3. Reliance on Statements: The department relied on statements made by Appellant under Section 108 of the Customs Act, but the mandated procedure under Section 138B for testing the relevancy of such statements was not followed.
4. Comparison with Other Importers: The department compared the declared transaction values with average unit prices of similar goods imported by other Indian importers, which the appellants contended was not a valid basis for rejecting their declared values.
Key Findings of the Tribunal 

After a detailed examination of the evidence and arguments, the Tribunal made the following observations:
- The department failed to provide authenticated copies of the export documents from Uzbekistan Customs, which were crucial to substantiate the allegations of undervaluation.
- The unsigned invoice relied upon by the department lacked evidentiary value, and the failure to provide certified documents violated the principles of fairness and justice.
- The statements of Appellant were deemed irrelevant as the procedure under Section 138B was not followed, and the department did not allow cross-examination of the deponent.
- The comparison of transaction values with average unit prices of other importers was found to be flawed, as it did not account for factors such as quantity, quality, and negotiation terms.
Tribunal’s Decision

The Tribunal held that the department failed to prove the allegations of undervaluation with credible evidence. It emphasized that the burden of proof lies with the department to establish undervaluation, which cannot be based on mere suspicion or unsubstantiated documents. The Tribunal also highlighted the importance of adhering to statutory requirements under Sections 138B and 138C of the Customs Act.

As a result, the Tribunal set aside the impugned order in its entirety, including the demands for differential duty, penalties, and confiscation of goods. The appeals were allowed with consequential relief to the appellants.

Significance of the Ruling

This judgment underscores the importance of adhering to procedural requirements and evidentiary standards in customs investigations. It reiterates the principle that allegations of undervaluation must be supported by concrete evidence and cannot be based on assumptions or unverified documents. The decision also highlights the need for transparency and fairness in adjudication proceedings, ensuring that importers are given access to all relevant documents and the opportunity to cross-examine witnesses.

The ruling serves as a reminder to both importers and authorities about the importance of compliance with legal provisions and the need for a fair and just adjudication process. It is a landmark decision that reinforces the principles of natural justice and sets a precedent for similar cases in the future. This case is a testament to the importance of robust legal representation and adherence to procedural safeguards in customs disputes. Importers and stakeholders in the trade community can draw valuable lessons from this ruling to ensure compliance and protect their rights.

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Source: CESTAT Chennai

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December 15, 2025
The Issue of Pre-Import Condition under Advance Authorization Scheme
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 14.12.2025

The Issue of Pre-Import Condition under Advance Authorization Scheme

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

The “pre-import condition” under the Advance Authorization Scheme has been a significant issue for exporters, particularly for imports made between October 13, 2017, and January 9, 2019. This condition required that goods be imported first and then used for manufacturing export goods, which created operational challenges for exporters. The condition was introduced to regulate exemptions from Integrated Goods and Services Tax (IGST) and GST Compensation Cess under the scheme.

Legal Framework Governing the Issue

1. Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act):
- The FTDR Act, 1992 provides the legal foundation for the formulation and implementation of the Foreign Trade Policy (FTP).
- Section 5 of the FTDR Act empowers the Central Government to formulate and amend the FTP to regulate imports and exports.
- The Advance Authorization Scheme is governed under Chapter IV of the FTP, which is framed under the FTDR Act.
2. Customs Act, 1962:
- The Customs Act, 1962 governs the levy and collection of customs duties on imports and exports.
- Section 25(1) of the Customs Act empowers the Central Government to issue exemption notifications for customs duties.
3. Customs Notification No.  18/2015-Customs (April 1, 2015):
- This notification exempted goods imported under Advance Authorization from various duties, including Basic Customs Duty (BCD), Additional Customs Duty, Anti-Dumping Duty, and others.
4. Customs Notification No.  79/2017-Customs (October 13, 2017):
- This notification amended Notification No. 18/2015-Customs to include exemptions for IGST and GST Compensation Cess, subject to the fulfillment of the pre-import condition.
- Two key conditions were introduced:
  - Exemption from IGST and Compensation Cess was applicable only for physical exports.
  - The exemption was subject to the pre-import condition, meaning goods had to be imported first and then used for manufacturing export goods.
5. Customs Circular No.  16/2023:
- Issued in compliance with the Supreme Court’s judgment, this circular provides a procedure for regularizing imports that failed to meet the ‘pre-import condition’ during the specified period. It allows importers to pay IGST and Compensation Cess along with applicable interest and claim refunds or ITC, subject to eligibility under GST laws.
6. Foreign Trade Policy (FTP) 2023:
- Paragraph 4.03: Governs the Advance Authorization Scheme, allowing duty-free import of inputs physically incorporated into export products.
- Paragraph 4.13: Empowers the Director General of Foreign Trade (DGFT) to impose pre-import conditions for specific inputs.
- Paragraph 4.14: Lists the duties exempted under the Advance Authorization Scheme, including IGST and Compensation Cess, subject to the pre-import condition.
- Paragraph 4.27: Permits exports in anticipation of authorization, allowing exporters to export goods before importing inputs under Advance Authorization.
7. Handbook of Procedures (HBP) 2023:
- Paragraph 4.27(d): States that duty-free authorizations for inputs subject to pre-import conditions cannot be issued.
- Appendix 4J: Lists specific inputs subject to pre-import conditions and their export obligation periods.
Supreme Court Judgment (April 28, 2023):

The Supreme Court upheld the Revenue’s appeal, ruling that the pre-import condition was valid and not arbitrary or unreasonable. Key points from the judgment include:
1. Legality of Pre-Import Condition:
  - The pre-import condition was within the powers of the DGFT under Paragraph 4.13(i) of the FTP and Section 5 of the FTDR Act.
  - The condition was introduced to align the Advance Authorization Scheme with the GST regime, which aimed to create a unified tax structure.
2. Impact of GST:
  - The GST regime introduced IGST and Compensation Cess, which were not part of the original Notification No. 18/2015-Customs. The pre-import condition was introduced to ensure compliance with the new tax framework.
3. Hardship to Exporters:
  - The court acknowledged the operational challenges faced by exporters due to the pre-import condition but emphasized that inconvenience does not render a policy arbitrary or unconstitutional.
4. Legislative Intent:
  - The court recognized the legislative intent behind the pre-import condition as part of broader fiscal reforms under GST.
How DGFT Clarifications Helped Address Discrepancies

The Directorate General of Foreign Trade (DGFT) issued several clarifications and circulars to address the challenges and discrepancies arising from the pre-import condition:

1. Trade Notice No.  07/2023-24 (June 8, 2023):
- In compliance with the Supreme Court judgment, this notice informed exporters that imports made under the Advance Authorization Scheme between October 13, 2017, and January 9, 2019, which could not meet the pre-import condition, may be regularized by making payments as prescribed in Customs Circular No.  16/2023 (dated June 7, 2023).
- Regional Authorities were instructed to guide exporters on the regularization process.
2. Trade Notice No.  27/2023 (September 25, 2023):
- Provided detailed clarifications for specific scenarios:
  - Imports after January 10, 2019: Not subject to the pre-import condition.
  - Imports under Advance Authorization on payment of IGST and Compensation Cess: Not subject to the pre-import condition, irrespective of the date of import.
  - Partially completed imports: Imports made after January 10, 2019, are not subject to the pre-import condition, even if some imports were made before this date.
3. Policy Circular No.  07/2025-26 (November 11, 2025):
- Clarified that the Export Obligation Discharge Certificate (EODC) shall not be withheld if all other requirements are fulfilled in the following cases:
  - IGST paid in cash during the specified period.
  - Non-availing of duty exemptions for IGST, Compensation Cess, or other levies (except Basic Customs Duty).
  - Compliance with pre-import condition and other procedural requirements under the scheme.
Addressing Deficiencies in Advance Authorization Applications

For exporters facing deficiencies due to non-compliance with the pre-import condition, the following steps can be taken:

1. Regularization of Imports:
- As per Trade Notice No.  07/2023-24, imports made between October 13, 2017, and January 9, 2019, which did not meet the pre-import condition, can be regularized by paying the applicable duties and interest to the Customs Authority.
- Exporters should approach the jurisdictional Customs Authority with the required documentation and make the necessary payments.
2. **Claim Refund or Input Tax Credit 

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Source: Supreme Court, DGFT, CBIC

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December 14, 2025
Delhi High Court Partially Allows Chillies Exporters Association’s Petition Against TMA Scheme Foreclosure

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 13.12.2025

Delhi High Court Partially Allows Chillies Exporters Association’s Petition Against TMA Scheme Foreclosure

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

In a significant judgment delivered on December 10, 2025, the Delhi High Court partially ruled in favor of the Chillies Exporters Association India in their petition challenging the foreclosure of the “Revised Transport and Marketing Assistance (TMA) for Specified Agricultural Products” scheme. The case, W.P. (C) 9463/2024, revolved around the retrospective withdrawal of export incentives under the TMA Scheme by the Directorate General of Foreign Trade (DGFT).

Background of the Case 

The TMA Scheme was introduced by the Government of India in February 2019 to provide assistance for the international transportation and marketing of specified agricultural products. The scheme aimed to mitigate the higher costs of transportation and promote brand recognition for Indian agricultural products in overseas markets. Initially, the scheme was applicable for exports from March 1, 2019, to March 31, 2020, and was later extended until March 31, 2021.

In September 2021, the government issued a revised TMA Scheme notification, making it applicable retrospectively for exports from April 1, 2021, to March 31, 2022. However, this notification was withdrawn on March 25, 2022, effectively foreclosing the scheme. The Chillies Exporters Association India challenged the retrospective withdrawal, arguing that it unfairly denied exporters the incentives they were entitled to under the scheme.

Key Arguments

The petitioners contended that the notification dated March 25, 2022, was ultra vires as it retrospectively rescinded the benefits of the TMA Scheme, which had been operational from April 1, 2021, to March 31, 2022. They argued that the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), under which the scheme was introduced, does not empower the government to issue notifications with retrospective effect. The petitioners also invoked the principle of legitimate expectation, stating that exporters had relied on the scheme to make business decisions and that the retrospective withdrawal of benefits was arbitrary and unfair.

The respondents, represented by the DGFT, argued that the notification was issued to revamp and redesign the scheme for better outcomes. They emphasized that the government has the authority to amend or rescind policies in the public interest, especially in complex economic matters, and that such decisions should not be subject to judicial review unless malice or arbitrariness is established.

The Court’s Decision

The Delhi High Court ruled that the government does not have the authority under Sections 3 and 5 of the FTDR Act to issue notifications with retrospective effect. The court held that the notification dated September 9, 2021, which introduced the revised TMA Scheme, could only operate prospectively. Therefore, the court concluded that chilli exporters who made exports between September 9, 2021, and March 24, 2022, are eligible to claim incentives under the scheme, provided they meet the eligibility criteria.

However, the court also ruled that no rights had accrued to chilli exporters for exports made between April 1, 2021, and September 8, 2021, as the scheme was not in operation during that period. The retrospective application of the September 9, 2021, notification was deemed impermissible under the FTDR Act.

Implications of the Judgment

This judgment is a landmark decision in the realm of foreign trade policy and government schemes. It reinforces the principle that delegated or subordinate legislation cannot have retrospective effect unless explicitly authorized by the governing statute. The ruling also highlights the importance of the principle of legitimate expectation, emphasizing that public authorities must act in a consistent, transparent, and predictable manner.

For chilli exporters, the judgment provides partial relief, allowing them to claim incentives for exports made between September 9, 2021, and March 24, 2022. However, it also underscores the limitations of retrospective policy changes, which can disrupt business planning and create uncertainty for exporters.

Conclusion

The Delhi High Court’s decision in W.P. (C) 9463/2024 serves as a reminder of the legal boundaries within which government policies must operate. While the government has the right to amend or rescind policies in the public interest, such actions must comply with statutory provisions and cannot infringe upon the legitimate expectations of stakeholders. This case is a significant development for exporters and policymakers alike, setting a precedent for the treatment of retrospective policy changes in India’s foreign trade framework.

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Source: Delhi High Court

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December 13, 2025
CESTAT Ahmedabad Clarifies Auction Purchasers Liability for Pre-Liquidation Tax Dues
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 13.12.2025

CESTAT Ahmedabad Clarifies Auction Purchasers Liability for Pre-Liquidation Tax Dues

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

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, has provided clarity on the liability of auction purchasers concerning pre-liquidation dues of a company. The decision, delivered on December 8, 2025, in the case of Customs Appeal No. 12564 of 2014-DB, has set a precedent for similar cases involving the sale of assets during the liquidation of companies.

Background of the Case

The appeals were filed by FMN Enterprise and Roshanlal & Sons Pvt. Ltd., who had purchased assets of M/s. Varun Seacon Ltd., a 100% Export Oriented Unit (EOU) that ceased operations in 1998 and was declared a sick industrial unit by the Board of Industrial and Financial Reconstruction (BIFR) in 2000. The Gujarat High Court ordered the winding up of the company in 2002 and appointed an official liquidator to oversee the sale of its assets.

The appellants acquired the assets of the company through an auction conducted by the official liquidator. However, the Customs Department sought to recover excise and customs duties from the auction purchasers, claiming that the bonded goods in the EOU could not be removed without payment of duty.

Key Arguments

The appellants contended that:
1. Taxes and duties for the pre-liquidation period cannot be recovered from auction purchasers, as per Section 457 of the Companies Act, 1956.
2. The sale of assets does not transfer the liability for pre-liquidation dues to the purchaser unless the unit is sold as a running concern.
3. Auction purchasers cannot be considered importers and are not liable for duties incurred by the previous owner.
The appellants supported their arguments with various case laws, including Collector of Customs Vs. Dytron (India) Ltd., M/s. Dollar Industries Vs. Assistant Commissioner, and others, which established that auction purchasers are not liable for the arrears of the previous owner unless explicitly stated in the statute.

On the other hand, the respondent argued that bonded goods in an EOU cannot be removed without payment of duty, citing case laws such as Sundaram Finance Ltd Vs. CC, Chennai and Kiran Spinning Mills Vs. CC.

Tribunal’s Observations and Decision

The Tribunal carefully examined the submissions and referred to the Gujarat High Court’s orders during the liquidation process. It noted that the High Court had explicitly stated that statutory dues for the pre-liquidation period would be settled under the provisions of the Companies Act, 1956, and only sales tax on the sold assets would be payable by the purchaser.

The Tribunal emphasized that no non-obstante clause in the Customs or Excise laws was presented to override the provisions of the Companies Act, 1956. It also highlighted that the assets were sold, not the entire unit as a running concern, which further negated the liability of the auction purchasers for pre-liquidation dues.

Relying on various judgments, including M/s. Dollar Industries Vs. Assistant Commissioner and Rana Girders Limited v. Union of India, the Tribunal concluded that auction purchasers cannot be held liable for the arrears incurred by the previous owner unless explicitly stated in the statute.

Final Verdict

The Tribunal ruled that the notices issued to the appellants demanding arrears of tax or duty foregone by the previous owner were without jurisdiction. It held that the recovery provisions of the Customs and Excise Acts for pre-liquidation dues were subsumed under the Companies Act, 1956, and could not be enforced against the auction purchasers. Consequently, the appeals were allowed with consequential relief.

Key Takeaways

This landmark decision reinforces the principle that auction purchasers of assets during the liquidation of a company cannot be held liable for pre-liquidation dues unless explicitly stated in the statute. It also highlights the importance of adhering to the provisions of the Companies Act, 1956, in such cases.

The ruling provides much-needed clarity for businesses and individuals involved in purchasing assets from liquidated companies, ensuring that they are not burdened with liabilities that are not legally theirs. It also underscores the need for clear statutory provisions to avoid ambiguity in such matters.

Source: CESTAT Ahmedabad

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December 13, 2025
CESTAT Mumbai- Absence of BIS Marking on Imported Goods Not Grounds for Confiscation Under Section 111(d) of Customs Act
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 12.12.2025

CESTAT Mumbai- Absence of BIS Marking on Imported Goods Not Grounds for Confiscation Under Section 111(d) of Customs Act

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

In a recent judgment by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, a significant decision was made regarding the confiscation of imported goods due to the absence of Bureau of Indian Standards (BIS) marking. The case, Voestalpine High Performance Metals India Pvt Ltd vs. Commissioner of Customs, Nhava Sheva-III, sheds light on the legal nuances surrounding BIS compliance and the import of goods into India.

Background of the Case

The appellant, Voestalpine High Performance Metals India Pvt Ltd, imported “Alloy Tool Steel” under two Bills of Entry dated 27.09.2023 and 30.09.2023. These goods fall under the purview of BIS standard IS 3748:2022, which mandates that imported goods must bear BIS marking as per Para (6) of Scheme (1) of BIS Notification dated 04.06.2018. While the goods conformed to BIS standards and were accompanied by BIS certificates, some items lacked the required BIS marking.

The appellant admitted the lapse and requested permission to affix the BIS marking prior to clearance. However, the adjudicating authority rejected this request and ordered the confiscation of the goods under Section 111(d) of the Customs Act, 1962, with an option to redeem them for home consumption upon payment of a redemption fine and penalty. The appellant challenged this decision before the Commissioner of Customs (Appeals), who modified the penalty but upheld the confiscation. Dissatisfied, the appellant approached the CESTAT.

Key Legal Issue

The primary issue in this case was whether the absence of BIS marking on the imported goods, despite their conformity to BIS standards and the appellant’s willingness to affix the marking under customs supervision, rendered the goods liable for confiscation under Section 111(d) of the Customs Act, 1962.

Tribunal’s Observations and Decision

The Tribunal, presided over by Hon’ble Member Judicial, examined the facts and legal precedents. It was noted that the foreign manufacturer held a valid BIS license for the imported goods, and the goods conformed to the prescribed BIS standards as per the test certificate. The appellant had also affixed the required BIS marking under customs supervision prior to clearance.

The Tribunal referred to previous judgments, including Ganesh Benzoplast Ltd. vs. UOI and Prostarm Info Systems Ltd. vs. UOI, where similar issues were addressed. In these cases, the courts held that the absence of BIS marking was a curable defect and that confiscation was unjustified if the marking was affixed prior to clearance.

Applying the same legal principles, the Tribunal concluded that the absence of BIS marking was a procedural lapse that had been rectified. Since the goods conformed to BIS standards and the marking was affixed under customs supervision, the confiscation was deemed unsustainable. The Tribunal set aside the impugned order to the extent of the challenge and allowed the appeal with consequential relief.

Key Takeaways
1. BIS Compliance is Mandatory: Imported goods falling under BIS standards must bear the required marking as per the applicable regulations.
2. Curable Defects: The absence of BIS marking can be considered a curable defect if the goods conform to BIS standards and the marking is affixed under customs supervision prior to clearance.
3. Legal Precedents Matter: Previous judgments, such as Ganesh Benzoplast Ltd. and Prostarm Info Systems Ltd., play a crucial role in shaping decisions in similar cases.
4. Prohibited Goods Definition: Section 2(33) of the Customs Act, 1962, excludes goods from being classified as prohibited if the conditions for their import are complied with.
Conclusion

This case highlights the importance of adhering to BIS standards while importing goods into India. However, it also emphasizes that procedural lapses, such as the absence of BIS marking, can be rectified under customs supervision, ensuring compliance with regulations without resorting to confiscation. Importers must remain vigilant about regulatory requirements to avoid legal complications, but this judgment provides a precedent for addressing curable defects in a fair and reasonable manner.

Source: CESTAT Mumbai

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December 12, 2025
CESTAT Chennai Ruled in Favor of HDFC Bank on Gold Import Valuation

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 12.12.2025

CESTAT Chennai Ruled in Favor of HDFC Bank on Gold Import Valuation

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, recently delivered a significant judgment in favor of HDFC Bank Ltd. in a case concerning the valuation of imported gold bars. The case revolved around the interpretation of transaction value under Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 2007.

Background of the Case

HDFC Bank, a nominated bank for importing gold, had imported gold bars on a consignment basis during the disputed period. The bank declared the value of the gold bars in the Bills of Entry at the time of import, which was based on the internationally prevailing gold price. However, the Revenue authorities raised concerns about the declared value, citing a change in the rate of duty from specific duty to ad valorem duty as per Customs Notification No. 02/2012 dated 16.01.2012. They alleged that the actual remittances made to the foreign supplier were higher than the declared value, leading to a short payment of customs duty.

The Revenue issued a Show Cause Notice under Section 28(1) of the Customs Act, 1962, demanding differential duty along with applicable interest. The Adjudicating Authority upheld the demand, and the First Appellate Authority dismissed HDFC Bank’s appeal, prompting the bank to approach the CESTAT.

Key Arguments

HDFC Bank contended that the gold bars were imported on a consignment basis, meaning the ownership remained with the foreign supplier until the goods were sold in India. The bank argued that the transaction value should be determined based on the price prevailing at the time of import, as per Section 14 of the Customs Act, 1962. They emphasized that the sale of the gold bars occurred after the import, and the subsequent sale price should not be considered for determining the transaction value.

The bank also referred to the Customs Valuation Rules, 2007, and the Reserve Bank of India’s Master Circular on Import of Goods and Services, which supports the concept of consignment-based imports. They argued that the rejection of the declared transaction value was unwarranted and that the demand for differential duty was unjustified.

On the other hand, the Revenue argued that the higher remittances made to the foreign supplier should be considered as the correct transaction value, as they reflected the actual cost of the imported goods.

CESTAT’s Observations and Final Order 

After hearing both sides, the Tribunal analyzed the provisions of Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 2007. It observed that the declared transaction value was based on the supplier’s invoice and the prevailing international gold price at the time of import. The Tribunal noted that the Revenue had not provided evidence of identical goods being imported at a higher value during the same period.

The Tribunal also rejected the Revenue’s argument that the subsequent sale price should determine the transaction value, emphasizing that the taxable event for customs duty occurs at the time of import when the goods cross the customs barrier. The Tribunal concluded that the rejection of the declared transaction value was unwarranted and that the demand for differential duty was unjustified.

In its final order, the Tribunal set aside the impugned Order-in-Appeal and allowed HDFC Bank’s appeal, granting consequential benefits as per the law.

Key Takeaways

This judgment highlights the importance of adhering to the principles of customs valuation as laid down in the Customs Act, 1962, and the Customs Valuation Rules, 2007. It reinforces the concept that the transaction value at the time of import is the basis for determining customs duty, and any subsequent changes in the sale price cannot alter the taxable event.

The ruling is a significant win for HDFC Bank and provides clarity on the treatment of consignment-based imports under Indian customs law. It also underscores the need for Revenue authorities to provide concrete evidence when challenging declared transaction values.

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Source: CESTAT Chennai

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December 12, 2025
CESTAT Bangalore Sets Aside Penalty and Dismisses Revenue Appeal in Boric Acid Import
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 11.12.2025

CESTAT Bangalore Sets Aside Penalty and Dismisses Revenue Appeal in Boric Acid Import

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

In a significant legal development, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, has delivered its final verdict on two appeals concerning the import of boric acid by M/s. Maliakkal Industrial Enterprises. The judgment, pronounced on December 5, 2025, by Hon’ble Member (Technical), marks a crucial milestone in the ongoing legal battle between the appellant and the Commissioner of Customs, Cochin.

Background of the Case

The case revolves around the import of 29 consignments of boric acid/boric acid anhydrate by M/s. Maliakkal Industrial Enterprises between October 2005 and June 2013. As per Notification No. 2 (RE 06)/2004-2009 dated April 7, 2006, the import of boric acid for non-insecticidal purposes required an Import Permit issued by the Central Insecticide Board and Registration Committee under the Ministry of Agriculture. However, the appellant did not furnish the requisite permit at the time of import, leading to the goods being withheld by customs authorities.

The appellant challenged this requirement in the Hon’ble High Court of Kerala, which initially ruled in their favor, stating that the condition to obtain a registration certificate under the Insecticides Act, 1968, was arbitrary and unsustainable. However, this decision was later overturned by the Division Bench of the High Court, which upheld the necessity of the registration certificate for such imports.

The Appeals

Following the Division Bench’s decision, the Revenue issued a show-cause notice alleging that the imported goods were liable for confiscation under Section 111(d) of the Customs Act, 1962, and imposed a penalty of Rs. 4,00,000 under Section 112(a). The appellant contested this decision, arguing that the goods were provisionally cleared based on the High Court’s directions and were used solely for industrial purposes, as required by the bond executed under Section 18 of the Customs Act, 1962.

The Revenue also filed a separate appeal, challenging the Commissioner’s decision to set aside the redemption fine and impose a lower penalty.

The Tribunal’s Decision 

After hearing both sides, the Tribunal ruled in favor of M/s. Maliakkal Industrial Enterprises, setting aside the penalty imposed under Section 112(a) of the Customs Act, 1962. The Tribunal noted that the goods were cleared provisionally under the directions of the Hon’ble High Court of Kerala, and the appellant had complied with the condition that the boric acid would be used solely for industrial purposes. Furthermore, the Tribunal observed that the show-cause notice issued under Section 124 and 143 of the Customs Act was not in accordance with the provisions of Section 18, under which the bond was executed.

The Tribunal also dismissed the Revenue’s appeal, stating that there was no basis for imposing redemption fines or additional penalties, as the goods were cleared under judicial directions and the appellant had adhered to the stipulated conditions.

Key Takeaways
1. Judicial Precedence: The case highlights the importance of judicial directions in customs matters, especially when there is ambiguity in the interpretation of import policies.
2. Compliance Matters: The Tribunal emphasized that the appellant’s adherence to the condition of using the imported goods for industrial purposes was a critical factor in the decision to set aside the penalty.
3. Legal Framework: The judgment underscores the significance of following the correct legal provisions when issuing show-cause notices and imposing penalties.
Conclusion

The decision by CESTAT Bangalore is a landmark ruling that reinforces the importance of judicial oversight in customs disputes. It also serves as a reminder to importers and authorities alike to ensure compliance with legal provisions and conditions while dealing with imports. For M/s. Maliakkal Industrial Enterprises, this judgment is a vindication of their stance and a testament to the power of legal recourse in resolving complex regulatory issues.

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Source: CESTAT Bangalore

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December 11, 2025
CESTAT Kolkata Sets Aside Penalties Imposed on Customs Broker Under Sections 114(i) and 114AA of the Customs Act, 1962
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 11.12.2025

CESTAT Kolkata Sets Aside Penalties Imposed on Customs Broker Under Sections 114(i) and 114AA of the Customs Act, 1962 

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

In a significant judgment, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has set aside penalties imposed on M/s. Seaking Agencies, a Customs Broker, under Sections 114(i) and 114AA of the Customs Act, 1962. This decision, delivered on December 9, 2025, highlights the importance of evidence-based adjudication and the role of Customs Brokers in export processes.

Background of the Case

The case revolved around the export of a container (No. TCKU 2571904) under Shipping Bill No. 6092170 dated February 25, 2016, which was intercepted by the Directorate of Revenue Intelligence (DRI) at Kolkata Port. The container, declared to contain sanitary ware accessories, was found to contain Red Sanders—a prohibited item for export. Investigations linked the Customs Broker, M/s. Seaking Agencies, to two earlier consignments under Shipping Bill Nos. 3134799 dated June 5, 2014, and 3690980 dated July 4, 2014, which were alleged to have been part of fraudulent exports.

The Principal Commissioner of Customs (Port) imposed penalties of ₹50 lakhs under Section 114(i) for failure to verify the Know Your Customer (KYC) details and ₹1 crore under Section 114AA for allegedly using forged documents to facilitate fraudulent exports.

Key Arguments by the Appellant

M/s. Seaking Agencies challenged the penalties, arguing that:
1. No Evidence of Misconduct: The containers under the two shipping bills were duly sealed and cleared by customs authorities without any misdeclaration or concealment of Red Sanders. The Appellant had no authority to inspect the contents of the sealed containers.
2. No Proven Violation of KYC Norms: A separate action under the Customs Brokers Licensing Regulations (CBLR), 2013, had already been adjudicated by the Commissioner of Customs (Airport & Admin), who dropped the charges against the Appellant in 2017, confirming that the allegations of improper KYC verification were unsubstantiated.
3. No Proof of Forged Documents: The investigation failed to provide concrete evidence to establish that the Appellant had submitted forged or fabricated documents. The Appellant had relied on documents provided by the exporter and intermediary, and there was no indication of connivance or monetary benefit.
4. Conjecture-Based Allegations: The adjudicating authority’s findings were based on assumptions and lacked concrete evidence to prove the Appellant’s involvement in fraudulent activities.
CESTAT’s Observations and Judgment

After hearing both sides, the Tribunal made the following observations:
1. No Evidence of KYC Violation: The Tribunal noted that the Commissioner of Customs (Airport & Admin) had already dropped charges against the Appellant in 2017, confirming that the allegations of KYC violations were not proven. Therefore, imposing penalties on the same grounds was legally unsustainable.
2. No Proof of Forged Documents: The Tribunal found no evidence to substantiate the claim that the Appellant had submitted forged or fabricated documents. The containers were sealed under Central Excise supervision, and the Appellant had no authority to examine the contents.
3. Lack of Concrete Evidence: The Tribunal highlighted that the allegations against the Appellant were based on conjectures and surmises, with no concrete evidence to establish their involvement in fraudulent exports.
4. Precedent Case: The Tribunal referred to the case of Pallab Mitra v Commissioner of CGST & CX, Kolkata [(2024) 22 Centax 383 (Tri-Cal)], where penalties on a Customs Broker under similar circumstances were set aside.
Final Decision

The Tribunal set aside the penalties imposed under Sections 114(i) and 114AA of the Customs Act, 1962, and allowed the appeal filed by M/s. Seaking Agencies. The judgment emphasized the need for evidence-based adjudication and recognized the limited role of Customs Brokers in verifying the contents of sealed containers.

Key Takeaways

This judgment is a landmark decision for Customs Brokers and the export-import community. It underscores the importance of adhering to legal principles and evidence-based findings in adjudication processes. The case also highlights the limited scope of a Customs Broker’s responsibilities, emphasizing that they cannot be held liable for the contents of sealed containers unless concrete evidence of misconduct is presented.

Source: CESTAT Kolkata

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December 11, 2025
Madras High Court Quashes Customs Inquiry Report for Breach of Mandatory Timelines Under CBLR, 2018
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 10.12.2025

Madras High Court Quashes Customs Inquiry Report for Breach of Mandatory Timelines Under CBLR, 2018

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

The Madras High Court, in a significant judgment delivered on September 18, 2025, quashed an inquiry report issued by the Deputy Commissioner of Customs under Regulation 17 of the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018). The case, titled M/s. Sea Queen Shipping Services Private Limited vs. The Commissioner of Customs & Anr. , was presided over by Honourable Justice.

Background of the Case

The petitioner, M/s. Sea Queen Shipping Services Private Limited, challenged the inquiry report dated June 27, 2025, issued by the second respondent, the Deputy Commissioner of Customs. The report alleged violations of Regulation 10(q) of the CBLR, 2018, and recommended further proceedings. The petitioner contended that the report was illegal, arbitrary, and issued beyond the mandatory timeline prescribed under Regulation 17(5) of the CBLR, 2018.

The case stemmed from an investigation into an importer, M/s. Anomsoft Solutions Private Limited, which revealed discrepancies between the imported goods and the business activities mentioned in the GST numbers of the importer. The petitioner, acting as the customs broker, filed the Bills of Entry for the importer. Following the investigation, the Principal Commissioner of Customs suspended the petitioner’s customs broker license on December 21, 2024, under Regulation 16(1) of the CBLR, 2018. Subsequent inquiry proceedings under Regulation 17 were initiated, leading to the issuance of a show-cause notice on January 17, 2025.

Key Issues Raised

The petitioner raised two primary issues in the writ petition:
1. The inquiry report was submitted beyond the mandatory 90-day timeline prescribed under Regulation 17(5) of the CBLR, 2018, thereby vitiating the proceedings.
2. The petitioner was not afforded an opportunity to cross-examine witnesses, violating the principles of natural justice as per Regulation 17(4) of the CBLR, 2018.
Court’s Observations and Judgment

The Court examined the arguments presented by both parties and referred to multiple precedents, including judgments from the Madras High Court and the Delhi High Court. It reiterated that the 90-day timeline under Regulation 17(5) of the CBLR, 2018, is mandatory and not directory. The Court emphasized that exceeding this timeline results in the abatement of proceedings, as established by previous judicial pronouncements.

The respondents argued that the delay in submitting the inquiry report was due to the petitioner’s repeated requests for time during the personal hearing. However, the Court noted that the 90-day period had already expired by the time the first hearing was scheduled on April 28, 2025. Therefore, any subsequent delays could not justify the violation of the mandatory timeline.

The Court also addressed the issue of estoppel, stating that the petitioner’s participation in the proceedings does not negate the mandatory nature of the timeline under Regulation 17(5). Furthermore, the Court found that the inquiry report was not communicated to the petitioner within the stipulated time, further violating the regulations.

Conclusion

In its judgment, the Madras High Court allowed the writ petition and set aside the impugned inquiry report dated June 27, 2025. The Court held that the proceedings stood abated due to the violation of the mandatory timeline under Regulation 17(5) of the CBLR, 2018. The Court also deemed it unnecessary to address the second issue regarding the alleged violation of natural justice.

This judgment underscores the importance of adhering to mandatory timelines in regulatory proceedings and reinforces the principle that procedural lapses can vitiate the entire process. It serves as a reminder to authorities to strictly comply with statutory requirements to ensure fairness and transparency in administrative actions.

Source: Madras High Court

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December 10, 2025