𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Tag: #Imports

CESTAT Delhi Overturns Foreign Currency Confiscation Under Customs Act
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 24.01.2026

CESTAT Delhi Overturns Foreign Currency Confiscation Under 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.

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in New Delhi recently delivered a landmark judgment in the case of Salt Experiences & Management Pvt Ltd & Others vs. Commissioner of Customs (NS-V). This case revolved around the confiscation of foreign currency and travel cards under the Customs Act, 1962, and raised critical questions about the jurisdiction of customs authorities in handling alleged violations of the Foreign Exchange Management Act (FEMA), 1999. The judgment, delivered on January 21, 2026, provides significant insights into the interplay between the Customs Act and FEMA, and the limits of customs authorities’ powers in foreign currency-related cases.

Background of the Case

The case originated from an incident on August 20, 2018, at the international departure terminal of IGI Airport, New Delhi. Security operatives intercepted foreign currency worth ₹81,01,421 (comprising 50,409 USD, 30,745 EUR, and 25,030 GBP) carried by an employee of M/s Salt Experiences & Management Pvt Ltd. The investigation revealed that the foreign currency was intended for business expenses related to organizing travel and events for M/s Hero MotoCorp Ltd, a client of M/s Salt Experiences & Management Pvt Ltd. The company had a longstanding arrangement with Hero MotoCorp to manage international travel and promotional events.

The customs authorities initiated proceedings under Section 113(d) of the Customs Act, 1962, alleging contravention of FEMA regulations. The seized currency was confiscated absolutely, and penalties were imposed on the appellants under Section 114 of the Customs Act, 1962. The appellants challenged the confiscation and penalties, arguing that the proceedings were extra-jurisdictional and that the customs authorities lacked the competence to adjudicate alleged violations of FEMA.

Key Legal Issues

The case raised several critical legal questions:
1. Jurisdiction of Customs Authorities: The appellants argued that the customs authorities were not competent to adjudicate violations of FEMA, as the Foreign Exchange Regulation Act (FERA), 1973, which previously allowed customs authorities to act on foreign exchange violations, had been repealed and replaced by FEMA, 1999. Unlike FERA, FEMA does not contain provisions that deem violations of its regulations as prohibitions under the Customs Act, 1962.
2. Definition of “Goods” Under the Customs Act: The case also examined whether “currency” falls under the definition of “goods” in Section 2(22) of the Customs Act, 1962. The appellants contended that while “currency” is included in the definition of “goods,” it is not subject to the same prohibitions as other goods under the Customs Act.
3. Applicability of FEMA Regulations: The appellants argued that the foreign currency was procured legally and within the limits prescribed by the Reserve Bank of India (RBI) for business purposes. They contended that the carriage of foreign currency exceeding USD 3,000 was a technical oversight and did not warrant absolute confiscation or harsh penalties.
The Tribunal’s Findings 

The Tribunal’s judgment, delivered by Hon’ble Members Technical and Judicial, provided a detailed analysis of the legal framework governing foreign currency transactions and the jurisdiction of customs authorities. Key findings include:
1. Lack of Competence Under Customs Act: The Tribunal held that the Customs Act, 1962 does not provide the necessary jurisdiction for customs authorities to adjudicate violations of FEMA. The inclusion of “currency” in the definition of “goods” under Section 2(22) of the Customs Act does not automatically confer the authority to confiscate foreign currency or impose penalties for violations of FEMA regulations.
2. Absence of Deeming Provisions: The Tribunal emphasized that under FERA, customs authorities were empowered to act on foreign exchange violations through a deeming provision that treated certain prohibitions under FERA as prohibitions under the Customs Act. However, FEMA does not contain such deeming provisions, effectively rescinding the dual machinery of enforcement that existed under FERA.
3. Improper Invocation of Customs Act: The Tribunal found that the lower authorities had improperly invoked Section 113(d) of the Customs Act, 1962, which allows for the confiscation of goods exported or attempted to be exported contrary to prohibitions imposed by the Customs Act or any other law. Since FEMA does not deem its prohibitions as prohibitions under the Customs Act, the customs authorities lacked the legal basis to confiscate the foreign currency or impose penalties.
4. Technical Errors and Harsh Penalties: The Tribunal acknowledged that the foreign currency was legally procured for business purposes and that the excess cash carried by Shri Amit Bali was a technical oversight. It held that absolute confiscation and harsh penalties were unwarranted in this context.
Conclusion

The Tribunal’s judgment in this case underscores the importance of adhering to the legislative intent and the limits of statutory authority. It highlights the need for customs authorities to operate within the framework of the law and avoid overreach. The deliberate omission of deeming provisions in FEMA, 1999, signals a shift in legislative intent to centralize the regulation of foreign exchange under the exclusive jurisdiction of the Enforcement Directorate.

Source: CESTAT Delhi

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January 24, 2026
CESTAT Kolkata Ruling: Clarity on OPGW Cable Classification Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 23.01.2026

CESTAT Kolkata Ruling: Clarity on OPGW Cable Classification 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.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata, recently delivered a landmark judgment in the case of M/s. KEC International Limited vs. Commissioner of Customs (Port), Kolkata. This case revolved around the classification of Optical Ground Wire (OPGW) Fiber Optic Cable under the Customs Tariff Heading (CTH). The decision, pronounced on January 20, 2026, has brought clarity to a long-standing dispute regarding the classification of OPGW cables and the associated customs duty.

Background of the Case

M/s. KEC International Limited imported OPGW Fiber Optic Cables between June 16, 2016, and June 11, 2021, classifying them under CTH 8544 70 90. This classification was based on a Test Report issued by the Electronics Regional Test Laboratory (EAST) in 2014, which was accepted by the Customs Department in 2015. However, the Department of Revenue later alleged that the correct classification should be under CTH 9001 00 00, which would attract a higher customs duty.

On June 11, 2021, the Department issued a Show Cause Notice (SCN) demanding a differential duty of Rs. 2,38,07,593/- along with interest and penalties. The SCN also sought penalties against the DGM Taxation and Senior Manager Taxation of KEC International. The appellant contested the SCN, arguing that their classification was consistent with the earlier accepted Test Report and that the goods were identical to those previously imported.

Adjudicating Authority’s Decision 

The Adjudicating Authority reviewed the case and made the following decisions:
1. Dropped Demand for Extended Period: The demand of Rs. 2,23,22,087/- for imports made between June 16, 2016, and June 10, 2019, was dropped due to the absence of suppression and the expiration of the limitation period.
2. Confirmed Demand for Normal Period: The demand of Rs. 14,85,505/- for imports made between June 11, 2019, and June 11, 2021, was confirmed under the normal period.
3. No Penalties on Individuals: The proposed penalties against the DGM Taxation and Senior Manager Taxation were dropped.
Appeals Filed by Both Parties 

Both parties filed appeals before the Tribunal:
- KEC International: Challenged the confirmed demand of Rs. 14,85,505/-.
- Revenue: Appealed against the dropped demand of Rs. 2,23,22,087/- and sought penalties against the DGM Taxation and Senior Manager Taxation. However, the Tribunal clarified that the Revenue’s appeal against the individuals could not be considered as no specific appeal was filed against them.
Tribunal’s Observations and Final Decision 

The Tribunal carefully analyzed the arguments and evidence presented by both parties. Below are the key observations and findings:

1. Classification Dispute

The classification of OPGW Fiber Optic Cable under CTH 8544 70 90 or CTH 9001 00 00 has been a contentious issue for years. The Larger Bench of the Tribunal had previously ruled in 2017 that the cables should be classified under CTH 9001 00 00. However, this decision was stayed by the Supreme Court in 2020, and the matter remains unresolved.

2. Lack of Evidence from Revenue 

The Tribunal noted that the Revenue failed to provide concrete evidence, such as test reports, to support their claim that the goods imported between June 2019 and June 2021 should be classified under CTH 9001 00 00. The Revenue relied on assumptions and partial readings of letters from the Department of Telecommunication, which were insufficient to substantiate their case.

3. Importance of Sample Testing 

The Tribunal emphasized the necessity of sample testing for determining the classification of goods. It cited several case laws, including Stonex India Pvt Ltd vs Mundra Customs and Shalimar Paints Ltd. v. Commissioner, which established that test reports from one consignment cannot be applied to another and that each consignment must be assessed separately.

4. No Suppression Found 

The Tribunal agreed with the Adjudicating Authority that the issue was one of interpretation rather than suppression. The appellant had disclosed all relevant facts and had acted in accordance with the Test Report accepted by the Customs Department in 2015.

5. Final Decision

The Tribunal dismissed the Revenue’s appeal against the dropped demand of Rs. 2,23,22,087/- and upheld the Adjudicating Authority’s decision. Additionally, the Tribunal set aside the confirmed demand of Rs. 14,85,505/- against M/s. KEC International, allowing their appeal with consequential relief.

Key Takeaways

This judgment is a significant milestone in the ongoing debate over the classification of OPGW Fiber Optic Cables. It highlights several important principles:
- Evidence-Based Classification: The importance of sample testing and concrete evidence in determining the classification of goods.
- Consistency in Decision-Making: The binding nature of previously accepted test reports and finalized assessments.
- Interpretation vs. Suppression: The suppression clause cannot be applied in cases involving disputes over interpretation.
- Adherence to CBEC Instructions: The necessity of following CBEC guidelines for verification and classification.
Conclusion

The CESTAT Kolkata’s decision in this case is a testament to the importance of evidence-based decision-making in customs classification disputes. By dismissing the Revenue’s appeal and allowing the importer’s appeal, the Tribunal has reinforced the need for consistency, transparency, and adherence to established procedures. As the matter of classification remains sub judice before the Supreme Court, this judgment serves as a reminder of the complexities involved in customs classification and the critical role of due process in resolving such disputes.

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Source: CESTAT Kolkata

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January 23, 2026
CESTAT Chennai- DGFT Licence Cancellation Does Not Automatically Trigger Duty Demand on Transferee Importers
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 23.01.2026

CESTAT Chennai- DGFT Licence Cancellation Does Not Automatically Trigger Duty Demand on Transferee Importers

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) in Chennai recently delivered a significant judgment in the cases of M/s. Chandan Textiles and M/s. Gautam Silks, which has set a precedent in the realm of customs law. The judgment, delivered on January 22, 2026, addressed the issue of whether importers who had legitimately obtained Duty-Free Replenishment Certificate (DFRC) licenses for importing goods could be held liable for customs duties, interest, and penalties when the original licenses were later found to have been fraudulently obtained by the original license holders.

Background of the Case

The appellants, M/s. Chandan Textiles and M/s. Gautam Silks, were licensed to import raw silk yarn. Between 2006 and 2007, they imported multiple consignments of raw silk using DFRC licenses issued to Shree Kuberappa & Sons, Bangalore. These licenses were processed through the Directorate General of Foreign Trade (DGFT) and were duly transferred to the appellants for legitimate use.

However, in 2010, the DGFT canceled the original licenses issued to Shree Kuberappa & Sons, declaring them void ab initio due to fraudulent procurement. Consequently, the customs department deemed the Transfer Release Advices (TRAs) procured by the appellants invalid and denied customs duty exemptions for the imported goods. The department ordered the recovery of duties and interest and imposed penalties under the Customs Act, 1962. The appellants challenged this decision, arguing that they were innocent transferees and had no knowledge of the fraudulent activities of the original license holder.

Key Arguments Presented

Appellants’ Arguments:
1. Legitimate Use of Licenses: The appellants argued that they had lawfully acquired the DFRC licenses and utilized them for importing goods. They were not involved in the fraudulent procurement of the licenses by Shree Kuberappa & Sons.
2. Time-Barred Demand: The appellants contended that the Show Cause Notice (SCN) issued by the customs department was beyond the standard period stipulated under Section 28 of the Customs Act. They emphasized that no allegations of suppression or wrongdoing were made against them, making the demand time-barred.
3. Validity of Licenses: The appellants relied on several judicial precedents, including Titan Medical Systems Pvt Ltd v. Collector of Customs and East India Commercial Co. Ltd. v. Collector of Customs, which established that licenses obtained fraudulently by the original holder remain valid until canceled by the licensing authority. Since the licenses were valid at the time of import, the customs department could not retrospectively deny exemptions.
Respondent’s Arguments:
1. Cancellation of Licenses: The respondent argued that the licenses were declared void ab initio by the DGFT under the Foreign Trade (Development and Regulation) Act (FTDR Act) and its rules. Therefore, the imports made using these licenses were irregular, and the customs duty exemptions were invalid.
2. Void vs. Voidable Licenses: The respondent emphasized that the licenses were void ab initio, meaning they were invalid from the outset, and the appellants were liable for duties and penalties.
Tribunal’s Observations and Decision

The Tribunal carefully examined the arguments and referred to several landmark judgments, including Titan Medical Systems Pvt Ltd v. Collector of Customs and East India Commercial Co. Ltd. v. Collector of Customs. It concluded that:
1. Legitimacy of Licenses: The DFRC licenses were valid at the time of import and had not been canceled by the DGFT. The appellants, as innocent transferees, were entitled to rely on the validity of these licenses.
2. Fraud and Voidability: The Tribunal reiterated the principle that fraud does not render a transaction void ab initio but rather voidable at the instance of the defrauded party. Since the licenses were not canceled at the time of import, the customs department could not retrospectively deny exemptions.
3. Distinction from Forged Licenses: The Tribunal distinguished this case from situations involving forged or fake licenses, where the licenses were never legitimately issued by the licensing authority. In such cases, the imports would be considered invalid.
Based on these observations, the Tribunal set aside the impugned order, ruling that the demand for duty, interest, and penalties did not survive. The appeals were allowed, and the appellants were granted consequential relief as per the law.

Implications of the Judgment

This landmark decision has significant implications for importers and the customs department. It reinforces the principle that licenses obtained fraudulently by the original holder remain valid until canceled by the licensing authority. Innocent transferees who acquire such licenses in good faith cannot be penalized for the fraudulent actions of the original license holder.

The judgment also highlights the importance of adhering to the stipulated time limits under Section 28 of the Customs Act for issuing Show Cause Notices. It serves as a reminder to the customs department to act promptly and within the legal framework when investigating and penalizing alleged violations.

Conclusion

The CESTAT’s decision in the cases of M/s. Chandan Textiles and M/s. Gautam Silks underscores the need for a balanced approach in customs enforcement. While it is crucial to address fraudulent activities, it is equally important to protect the rights of innocent parties who act in good faith. This judgment serves as a guiding precedent for similar cases in the future, ensuring that justice is served while upholding the principles of fairness and legality in customs law.

Source: CESTAT Chennai

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January 23, 2026
CESTAT Delhi Rejects Re-Classification Under CTH 8708; Aluminium Tubes & Profiles Held Under Chapter 76
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 22.01.2026

CESTAT Delhi Rejects Re-Classification Under CTH 8708; Aluminium Tubes & Profiles Held Under Chapter 76

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently delivered a significant judgment in the case of Hanon Climate Systems India Pvt. Ltd. vs. Commissioner of Customs (Customs Appeal No. 51748 of 2021). This case revolved around the classification of imported goods and the applicability of exemption notifications under the Customs Tariff Act, 1975. The decision, pronounced on January 21, 2026, has set a precedent for determining the classification of goods based on their description at the time of import rather than their end-use.

Background of the Case

Hanon Climate Systems India Pvt. Ltd., a manufacturer of engine cooling modules, radiators, and condensers, imported three types of goods—aluminium tubes, aluminium pipes, and aluminium profiles—between April 2015 and March 2016. The appellant classified these goods under Chapter 76 of the Customs Tariff Act, specifically under Customs Tariff Items (CTI) 7604, 7608, and 7616, and claimed exemption from Basic Customs Duty (BCD) under Notification No. 152/2009-Cus dated December 31, 2009, and Notification No. 046/2011-Cus dated June 1, 2011.

However, following an audit in November 2019, the customs department raised objections regarding the classification of the goods. The department argued that the goods should be reclassified under CTI 8708, which pertains to “Parts and Accessories of Motor Vehicles.” A show-cause notice was issued in July 2020, proposing the reclassification and demanding customs duty under Section 28(4) of the Customs Act, 1962, along with interest and penalties under Sections 114A and 114AA.

Key Issues in the Case

The primary issue in this case was the classification of the imported goods. The appellant argued that the goods were raw aluminium inputs that required further processing before being used in the manufacture of radiators, condensers, and charge air coolers. Therefore, they should be classified under Chapter 76, which covers “Aluminium and Articles Thereof.” The department, on the other hand, contended that the goods were specifically designed and cut to size for use in motor vehicle assemblies, making them classifiable under Chapter 87 as “Parts and Accessories of Motor Vehicles.”

Tribunal’s Observations and Decision 

The Tribunal examined the relevant provisions of Chapter 76 and Chapter 87, as well as the Explanatory Notes to Section XVII of the Customs Tariff Act. It concluded that the goods in question—aluminium tubes, pipes, and profiles—did not meet the criteria for classification under CTI 8708. The key observations were:
1. Goods in Imported Condition: The Tribunal emphasized that the classification of goods should be determined based on their condition at the time of import, not their end-use. The imported goods were simple aluminium articles that required significant processing before they could be used in motor vehicle assemblies. Therefore, they could not be considered as identifiable parts of motor vehicles at the time of import.
2. Specific vs. Generic Classification: The Tribunal noted that the goods were more specifically covered under Chapter 76, which includes aluminium profiles, tubes, and pipes, rather than the generic classification under Chapter 87 for motor vehicle parts.
3. Explanatory Notes to Section XVII: The Tribunal highlighted that for goods to be classified under CTI 8708, they must meet three conditions: (a) not being excluded by Note 2 to Section XVII, (b) being suitable for use solely or principally with motor vehicles, and (c) not being more specifically included elsewhere in the Nomenclature. The imported goods did not meet these conditions.
4. Exemption Notifications: The Tribunal ruled that the appellant was entitled to claim the benefits of the exemption notifications, as the goods were correctly classified under Chapter 76 and originated from eligible countries.
5. Extended Period of Limitation: The Tribunal held that the extended period of limitation under Section 28(4) of the Customs Act could not be invoked, as there was no evidence of suppression of facts or intent to evade duty. The appellant had made complete declarations in the Bills of Entry and had informed the department about the classification issue during the audit stage.
6. Penalties and Interest: Since the extended period of limitation was not applicable, the Tribunal also set aside the penalties under Sections 114A and 114AA and the demand for interest under Section 28AA.
Implications of the Judgment

This judgment has far-reaching implications for importers and the customs department. It reinforces the principle that the classification of goods should be based on their description at the time of import rather than their intended use. The decision also highlights the importance of adhering to the specific descriptions provided in the Customs Tariff Act and the Explanatory Notes.

Moreover, the Tribunal’s ruling on the extended period of limitation and penalties provides clarity on the distinction between misclassification and misrepresentation. Importers can take solace in the fact that genuine classification disputes, arising from differing interpretations, do not automatically imply intent to evade duty.

Conclusion

The CESTAT’s decision in the Hanon Climate Systems India Pvt. Ltd. case is a landmark ruling that underscores the importance of accurate classification and the limitations of the customs department in reclassifying goods based on their end-use. It serves as a reminder to importers to ensure proper documentation and compliance with customs regulations while also providing a precedent for challenging unjustified reclassifications and penalties. This case is a testament to the importance of understanding the nuances of customs law and the need for a fair and transparent adjudication process.

Source: CESTAT Delhi

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January 22, 2026
Supreme Court Clarifies Legal Validity of Government Notifications
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 22.01.2026

Supreme Court Clarifies Legal Validity of Government Notifications

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.

On January 21, 2026, the Supreme Court of India delivered a landmark judgment in the case of Viraj Impex Pvt. Ltd. vs. Union of India & Anr.  (2026 INSC 80), addressing a critical issue regarding the interpretation of the term “date of this Notification” in the context of a government-imposed Minimum Import Price (MIP) on certain steel products. This judgment has significant implications for importers, exporters, and policymakers, as it clarifies the enforceability of notifications under the Foreign Trade (Development and Regulation) Act, 1992.

Background of the Case 

The appellants, private limited companies engaged in the import and trading of steel products, challenged a Notification issued by the Directorate General of Foreign Trade (DGFT) on February 5, 2016. The Notification introduced a Minimum Import Price (MIP) for specified steel products under Chapter 72 of the Indian Trade Clarification (Harmonized System), 2012. While the Notification was uploaded on the DGFT website on February 5, 2016, it was officially published in the Official Gazette on February 11, 2016.

The appellants had entered into firm sale contracts with exporters from China and South Korea between January 29, 2016, and February 4, 2016, and opened irrevocable Letters of Credit (LCs) on February 5, 2016. Anticipating restrictions, they applied for registration of their LCs under transitional protection provided by paragraph 1.05(b) of the Foreign Trade Policy (FTP) on February 8, 2016.

The appellants argued that the Notification, published in the Official Gazette on February 11, 2016, could not be applied retroactively to imports covered by LCs opened before its publication. They sought to quash the Notification or, alternatively, a declaration that the Notification did not apply to their LCs.

High Court Judgment 

The High Court of Delhi dismissed the appellants’ writ petitions on December 21, 2018. While the High Court acknowledged that the Notification became effective on February 11, 2016, it held that the uploading of the Notification on February 5, 2016, constituted sufficient notice to bind importers whose LCs were not opened before that date. The High Court also ruled that the Notification was not an act of delegated legislation.

Supreme Court’s Analysis

The Supreme Court examined the central issue: whether the term “date of this Notification” in paragraph 2 of the Notification referred to February 5, 2016 (the date of uploading) or February 11, 2016 (the date of publication in the Official Gazette). The Court’s analysis focused on the statutory framework and the legal principles governing the enforceability of delegated legislation.

Key Points from the Judgment:
1. Publication in the Official Gazette is Mandatory: The Court emphasized that delegated legislation, unlike parliamentary enactments, is framed without open legislative debate. Therefore, publication in the Official Gazette is essential to ensure accessibility, notice, accountability, and legal enforceability. The Notification itself acknowledged its incompleteness by stating it was “to be published in the Gazette of India.”
2. Legal Consequences of Publication: The Court held that a Notification acquires the force of law only upon its publication in the Official Gazette. Until such publication, the Notification remains an intention and does not impose legal obligations or curtail rights.
3. Interpretation of “Date of Notification”: The Court ruled that the expression “date of this Notification” in paragraph 2 of the Notification must be construed as the date of its publication in the Official Gazette, i.e., February 11, 2016.
4. Relevance of FTP Paragraph 1.05(b): The Court clarified that paragraph 1.05(b) of the FTP, which provides transitional protection for imports under LCs established before the imposition of restrictions, is integral to paragraph 2 of the Notification. The appellants, having opened their LCs before February 11, 2016, were entitled to the benefit of this transitional provision.
5. Rule of Law and Commercial Confidence: The Court underscored that imposing trade restrictions based on an unpublished Notification would undermine commercial confidence and violate the Rule of Law. Transparency and predictability are essential in regulating foreign trade.
Conclusion

The Supreme Court’s judgment in Viraj Impex Pvt. Ltd. vs. Union of India & Anr.  sets a significant precedent in the interpretation of delegated legislation under the Foreign Trade (Development and Regulation) Act, 1992. By holding that a Notification becomes enforceable only upon its publication in the Official Gazette, the Court reaffirmed the importance of transparency, legal certainty, and adherence to statutory requirements in the exercise of delegated legislative power.

This decision is a victory for importers and exporters, as it ensures that trade restrictions cannot be imposed retroactively based on unpublished Notifications. It also serves as a reminder to policymakers and regulatory authorities to strictly comply with statutory publication requirements to uphold the principles of the Rule of Law and protect commercial interests.

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Source: Supreme Court

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January 22, 2026
CESTAT Chandigarh- Import Duty Demand on Bicycle Parts Dropped After Procedural Lapse Under Section 28
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 21.01.2026

CESTAT Chandigarh- Import Duty Demand on Bicycle Parts Dropped After Procedural Lapse Under Section 28

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, and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a landmark judgment in the case of M/s Gursam International and Appellant vs. Commissioner of Customs, Ludhiana. This case revolved around the evasion of customs duty by misdeclaring the country of origin of imported bicycle parts to avail undue benefits under Notification No. 46/2011-Cus dated 01.06.2011, issued under the Preferential Trade Agreement between ASEAN member states and India.

The case, which spanned several years, involved complex legal questions surrounding the interpretation of Section 28 of the Customs Act, 1962, and its amendments. The final judgment, delivered on January 20, 2026, was based on a majority decision following a difference of opinion between the two members of the original Division Bench.

Background of the Case

The appellants, M/s Gursam International and its manager, were accused of evading customs duty by routing bicycle parts of Chinese origin through Malaysia and falsely declaring Malaysia as the country of origin. This allowed them to claim exemption under Notification No. 46/2011-Cus, which provides preferential treatment to goods originating from ASEAN countries.

The Directorate of Revenue Intelligence (DRI) conducted an investigation and issued show cause notices on October 7, 2016, alleging misdeclaration and evasion of customs duty. The notices were adjudicated on May 28, 2019, by the Commissioner of Customs, Ludhiana, who confirmed the demand for duty along with interest and imposed penalties on the appellants.

Key Legal Issues

The case raised three critical legal questions:
1. Timely Adjudication of Show Cause Notices: Whether the show cause notices issued on October 7, 2016, and adjudicated on May 28, 2019, should stand vacated in terms of Explanation 4 to Section 28 of the Customs Act, 1962.
2. Reassessment Without Challenging Self-Assessment: Whether the show cause notice for recovery under Section 28 of the Customs Act, 1962, can be issued without challenging the self-assessment under Section 17 of the Customs Act, 1962.
3. Admissibility of Electronic Evidence: Whether the documents relied upon by the adjudicating authority, which were retrieved from email accounts, are admissible in the absence of compliance with Section 138C of the Customs Act, 1962.
The Tribunal’s Decision 

Issue 1: Timely Adjudication of Show Cause Notices 

The Member (Judicial) relied on the decision of the Hon’ble Punjab & Haryana High Court in M/s Prabhat Fertilizers & Chemical Works (CWP No. 23433 of 2019), which held that the amendment to Section 28(9) of the Customs Act, 1962, is retroactive, not retrospective. According to this judgment, show cause notices issued prior to March 29, 2018, are deemed to have been issued on that date and must be adjudicated within one year unless extended under Section 28(9A). Since the show cause notice in this case was adjudicated beyond the prescribed timeline, the Member (Judicial) held that the notice stood vacated.

The Member (Technical), however, disagreed, arguing that Explanation 4 to Section 28 explicitly states that show cause notices issued between May 14, 2015, and March 29, 2018, are governed by the old law, not the new one. He also contended that the delay in adjudication was caused by the appellants’ non-cooperation, making the defense of “lapsed notice” inequitable.

The Third Member, Hon’ble, resolved the difference by affirming the view of the Member (Judicial). He emphasized that the decision of the jurisdictional High Court in M/s Prabhat Fertilizers & Chemical Works was binding on the Tribunal, especially since the Hon’ble Supreme Court had upheld the High Court’s decision.

Issue 2: Reassessment Without Challenging Self-Assessment 

The Member (Technical) addressed this issue, holding that Section 28 of the Customs Act serves as the machinery provision for reassessment and recovery of duty. He relied on the Supreme Court’s judgment in Virgo Steel (2002) and Jain Shudh Vanaspati Ltd. (1996), which clarified that the power to recover duty that has escaped collection arises from Section 12 of the Customs Act, and Section 28 provides the procedural framework for such recovery. Therefore, the Revenue was within its rights to issue the show cause notice without challenging the self-assessment under Section 17.

Issue 3: Admissibility of Electronic Evidence 

The Member (Technical) also addressed the admissibility of electronic evidence, holding that the emails retrieved from the appellants’ accounts were primary evidence and did not require a certificate under Section 138C of the Customs Act. He cited the Supreme Court’s judgment in Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal (2020), which clarified that the requirement for a certificate under Section 65B(4) of the Indian Evidence Act is not mandatory when the electronic evidence is primary and has been tendered by the party itself.

Majority Decision

The Third Member’s opinion aligned with the Member (Judicial), leading to a majority decision to allow the appeals. The Tribunal set aside the impugned order and quashed the show cause notices, granting consequential relief to the appellants.

Key Takeaways
1. Timely Adjudication: The case underscores the importance of adhering to statutory timelines for adjudicating show cause notices under Section 28 of the Customs Act, 1962.
2. Binding Precedent: The Tribunal reaffirmed the principle of judicial discipline, emphasizing that decisions of jurisdictional High Courts must be followed, especially when upheld by the Supreme Court.
3. Electronic Evidence: The judgment clarified the distinction between primary and secondary electronic evidence, providing guidance on the applicability of Section 138C of the Customs Act and Section 65B of the Indian Evidence Act.
4. Reassessment Powers: The Tribunal upheld the Revenue’s authority to issue show cause notices under Section 28 without challenging self-assessment under Section 17, relying on established Supreme Court precedents.
Conclusion

The case of M/s Gursam International and Appellant vs. Commissioner of Customs, Ludhiana is a significant judgment that clarifies key aspects of customs law, including the retroactive application of amendments, the interplay between self-assessment and reassessment, and the admissibility of electronic evidence. It serves as a reminder of the importance of adhering to statutory timelines and the binding nature of jurisdictional High Court decisions. This case will undoubtedly serve as a reference point for future disputes involving similar legal issues.

Source: CESTAT Chandigarh

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January 21, 2026
CESTAT Delhi Sets Aside Customs Undervaluation Order for Non-Compliance with Sections 138B & 138C
ALO Law Office- IDT Tax I Arbitration I Litigation

Date:21.01.2026

CESTAT Delhi Sets Aside Customs Undervaluation Order for Non-Compliance with Sections 138B & 138C

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), Principal Bench, New Delhi, recently delivered a significant judgment on January 20, 2026, in the case of Aashna Mercantile Pvt. Ltd. & Others vs. Principal Commissioner of Customs (Import). This case revolved around allegations of misdeclaration and undervaluation of imported goods, leading to the imposition of differential duty and penalties under the Customs Act, 1962. The judgment, which set aside the impugned order dated April 23, 2020, has brought to light critical aspects of the Customs Act, particularly sections 108, 138B, and 138C.

Background of the Case

The appeals were filed by Aashna Mercantile Pvt. Ltd. and four co-noticees—Appellants—challenging the order passed by the Principal Commissioner of Customs, ICD-TKD, New Delhi. The order was based on two show-cause notices issued in 2017 and 2018, alleging misdeclaration and undervaluation of imported furniture and furniture parts. The Principal Commissioner had relied on statements recorded under section 108 of the Customs Act and invoices retrieved from the email of the supplier to confirm the demand for differential duty and impose penalties under sections 112, 114A, and 114AA of the Customs Act.

Key Legal Issues Addressed

The Tribunal focused on two critical legal provisions of the Customs Act:

1. Section 138B: Relevancy of Statements 

Section 138B outlines the conditions under which statements recorded under section 108 of the Customs Act can be considered relevant evidence. The Tribunal emphasized that such statements are admissible only if:
- The person who made the statement is examined as a witness before the adjudicating authority.
- The adjudicating authority forms an opinion that the statement should be admitted in evidence in the interest of justice.
- The person against whom the statement is made is given an opportunity to cross-examine the witness.
The Tribunal highlighted that these provisions are mandatory and must be strictly followed. Failure to comply with this procedure renders the statements inadmissible as evidence. In this case, the appellants had retracted their statements made under section 108, and the adjudicating authority did not follow the mandatory procedure under section 138B. As a result, the Tribunal ruled that the statements could not be relied upon to reject the transaction value or impose penalties.

2. Section 138C: Admissibility of Computer Printouts 

Section 138C deals with the admissibility of microfilms, facsimile copies, and computer printouts as evidence. The provision requires specific conditions to be met, including the issuance of a certificate identifying the document and verifying its authenticity. The Tribunal noted that the Principal Commissioner had relied on emails and invoices retrieved from the supplier’s email without ensuring compliance with section 138C. There was no evidence of a Panchnama being drawn for the printouts, nor was there a certificate as required under section 138C. Consequently, the Tribunal held that the emails and invoices could not be relied upon as evidence.

Precedents Cited

The Tribunal referred to several landmark judgments to support its decision, including:
- M/s Surya Wires Pvt. Ltd. vs Principal Commissioner, CGST, Raipur (2025): This case emphasized the mandatory nature of section 138B and the need for cross-examination of witnesses before admitting statements as evidence.
- Ambika International vs. Union of India (2016): The Punjab and Haryana High Court highlighted the importance of following the procedure under section 9D of the Central Excise Act, which is similar to section 138B of the Customs Act.
- Hi Tech Abrasives Ltd. vs. Commissioner of C. Ex. & Cus., Raipur (2018): The Chhattisgarh High Court reiterated the mandatory nature of section 9D and the need for strict compliance.
- Additional Director General (Adjudication) vs. Its My Name Pvt. Ltd. (2020): The Delhi High Court held that statements recorded under section 108 of the Customs Act must undergo the process outlined in section 138B before being considered relevant.
- Additional Director General, Adjudication, Directorate of Revenue Intelligence vs. Suresh Kumar and Co. Impex Pvt. Ltd. & Ors. (2025): The Supreme Court discussed the compliance requirements under section 138C and the evidentiary value of statements recorded under section 108.
Tribunal’s Final Decision 

After a detailed examination of the legal provisions and precedents, the Tribunal concluded that the Principal Commissioner had failed to comply with the mandatory requirements of sections 138B and 138C of the Customs Act. The statements recorded under section 108 and the emails retrieved from the supplier’s account were deemed inadmissible as evidence. Consequently, the Tribunal set aside the impugned order dated April 23, 2020, and allowed all five appeals.

Implications of the Judgment

This judgment underscores the importance of adhering to procedural requirements under the Customs Act when relying on statements and electronic evidence in adjudication proceedings. It serves as a reminder to authorities that failure to comply with mandatory provisions can lead to the rejection of evidence and the setting aside of orders. For importers and businesses, this case highlights the significance of understanding their rights under the law, particularly the right to cross-examine witnesses and challenge the admissibility of evidence.

Conclusion

The CESTAT’s decision in Aashna Mercantile Pvt. Ltd. & Others vs. Principal Commissioner of Customs is a landmark ruling that reinforces the importance of procedural compliance in customs adjudication. By setting aside the impugned order, the Tribunal has upheld the principles of natural justice and due process, ensuring that appellants are not penalized based on inadmissible evidence. This case will undoubtedly serve as a precedent for future disputes involving the admissibility of statements and electronic evidence under the Customs Act.

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Source: CESTAT Delhi

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January 21, 2026
CESTAT Chennai Sets Aside Revocation of Customs Broker Licence
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 20.01.2026

CESTAT Chennai Sets Aside Revocation of Customs Broker Licence

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, and Service Tax Appellate Tribunal (CESTAT), Chennai, has delivered a favorable judgment for M/s. Kripa Absa Jus Cargo Handling Pvt. Ltd., a Customs Broker, by setting aside the revocation of their license, forfeiture of security deposit, and penalty imposed by the Principal Commissioner of Customs (Preventive), Tiruchirappalli. The case, which revolved around alleged violations of the Customs Broker Licensing Regulations (CBLR), 2018, has brought clarity to the obligations and responsibilities of Customs Brokers under the law.

Background of the Case 

The appeal arose from an incident involving an attempted import by M/s. Petrolube Industry, where undeclared Arecanut/Betel Nut was found concealed behind Bitumen drums. The consignment was intercepted at Nhava Sheva before transshipment to ICD Tughlakabad. Following this, the Principal Commissioner of Customs (Preventive), Tiruchirappalli, issued a Show Cause Notice (SCN) to M/s. Kripa Absa Jus Cargo Handling Pvt. Ltd., alleging violations of Regulations 10(e) and 10(n) of CBLR, 2018. Despite a favorable Inquiry Report exonerating the Customs Broker, the Principal Commissioner revoked their license, forfeited their security deposit of ₹5,00,000, and imposed a penalty of ₹50,000.

Aggrieved by this decision, the Customs Broker filed an appeal before the CESTAT, Chennai.

Key Issues Addressed by the Tribunal 

The Tribunal identified three critical issues for determination:
1. Whether the Appellant violated Regulations 10(e) and 10(n) of CBLR, 2018? 
  - Regulation 10(e) requires Customs Brokers to exercise due diligence in verifying the correctness of information related to cargo clearance.
  - Regulation 10(n) mandates verification of the Importer Exporter Code (IEC), GST Identification Number (GSTIN), identity, and functioning of the client at the declared address using reliable and authentic documents.
The Tribunal found that the Appellant had fully complied with KYC requirements, including obtaining and verifying IEC, GST registration, PAN, Aadhaar, bank details, lease agreements, and conducting address verification via postal confirmation. The Inquiry Officer had already concluded that the Appellant exercised reasonable due diligence and did not violate the regulations. The Tribunal emphasized that Customs Brokers are not investigative agencies and are not required to conduct continuous surveillance or anticipate future misconduct by their clients.
1. Whether the revocation of the license, forfeiture of security deposit, and penalty were justified? 
  - The Tribunal highlighted that punitive actions under CBLR must be proportionate and supported by evidence of misconduct. In this case, the Appellant had not filed a Bill of Entry for the intercepted consignment, and the alleged smuggling occurred before their assignment commenced. Furthermore, there was no evidence of connivance or mens rea on the part of the Appellant.
  - The Tribunal referred to the Delhi High Court judgment in Shakti Cargo Movers v. CC, which held that Customs Brokers cannot be penalized for subsequent misconduct by importers if reasonable verification was conducted at the time of onboarding.
Based on these findings, the Tribunal ruled that the penalties imposed were grossly disproportionate and unjustified.
1. Whether the proceedings were barred by limitation under Regulation 17 of CBLR, 2018? 
  - Regulation 17(1) mandates that a Show Cause Notice must be issued within 90 days from the receipt of the offence report. In this case, the offence report was received on 23.07.2024, but the SCN was issued on 25.10.2024, exceeding the 90-day limit.
  - The Tribunal held that the mandatory timeline under Regulation 17(1) was violated, rendering the proceedings time-barred and legally unsustainable.
Final Decision

After carefully considering the submissions, evidence, and legal precedents, the Tribunal concluded that the Appellant had not violated Regulations 10(e) or 10(n) of CBLR, 2018. It also found that the penalties imposed were disproportionate and the proceedings were vitiated due to the breach of mandatory timelines under Regulation 17(1).

The Tribunal set aside the impugned Order-in-Original No. 02/2025 dated 25.04.2025, directed the Licensing Authority to restore the Customs Broker license, and quashed the forfeiture of the security deposit and penalty imposed.

Key Takeaways from the Judgment
1. Clarification on Customs Broker Obligations: The Tribunal clarified that the obligations under Regulations 10(e) and 10(n) of CBLR, 2018 are limited to reasonable professional diligence and do not require Customs Brokers to act as investigative agencies or conduct continuous surveillance of their clients.
2. Proportionality of Punishment: The judgment emphasized that punitive actions such as license revocation, forfeiture, and penalties must be proportionate and based on established misconduct. Mere suspicion or conjecture cannot justify such severe actions.
3. Adherence to Timelines: The Tribunal reinforced the mandatory nature of timelines prescribed under Regulation 17(1) of CBLR, 2018, ensuring that Customs Brokers are not subjected to prolonged uncertainty or arbitrary deprivation of their rights.
Conclusion

The decision by CESTAT Chennai is a significant victory for M/s. Kripa Absa Jus Cargo Handling Pvt. Ltd. and sets an important precedent for Customs Brokers across the country. It underscores the importance of adhering to statutory timelines, exercising proportionality in punitive actions, and recognizing the limited scope of a Customs Broker’s obligations under the law. This judgment serves as a reminder that regulatory authorities must act within the bounds of the law and ensure fairness in their decisions.

Source: CESTAT Chennai

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January 20, 2026
CESTAT Delhi Allows Exemption for Oxygen Concentrators
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 20.01.2026

CESTAT Delhi Allows Exemption for Oxygen Concentrators

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

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, delivered a judgment on January 19, 2026, in the case of M/s Aspen Diagnostics Pvt Ltd vs. Commissioner of Customs, New Delhi (ICD TKD). This case revolved around the interpretation of a customs notification and the eligibility of oxygen concentrators for exemption under Notification No. 20/2020-Cus dated April 9, 2020.

Background of the Case 

The dispute arose when M/s Aspen Diagnostics Pvt Ltd imported oxygen concentrators during the COVID-19 pandemic under Bill of Entry No. 7630674/11.05.2020. The company claimed exemption from customs duty under Notification No. 20/2020-Cus, which provided a ‘nil’ rate of duty for certain medical equipment, including “artificial respiration or other therapeutic respiration apparatus (ventilators).” However, the customs authorities denied the exemption, arguing that oxygen concentrators did not fall under the category of “ventilators” as specified in the notification.

The appellant challenged this decision, arguing that the notification was intended to provide broad relief during the pandemic and should not be narrowly interpreted to exclude oxygen concentrators. The case was first heard by the Commissioner of Customs (Appeals), who upheld the original decision, leading the appellant to approach the CESTAT.

Key Arguments Presented
1. Appellant’s Contention:
  - The appellant argued that the term “artificial respiration or other therapeutic respiration apparatus (ventilators)” should not be narrowly interpreted to mean only conventional ventilators. Instead, it should encompass all apparatus performing therapeutic respiration functions, including oxygen concentrators.
  - The appellant highlighted the urgency of the pandemic situation, which necessitated broad interpretation of the notification to provide relief to the public.
  - They criticized the reliance on subsequent notifications and press releases to interpret the intent of the original notification, stating that these were not credible instruments for determining the scope of the earlier notification.
  - The appellant also pointed out that the first appellate authority failed to comply with Section 17(5) of the Customs Act, 1962, which mandates a “speaking order” to justify the denial of exemption.
2. Respondent’s Argument:
  - The respondent argued that the exemption was specifically intended for ventilators, as indicated by the parenthetical description in the notification.
  - They relied on a press release issued by the Ministry of Finance and subsequent notifications that explicitly distinguished between ventilators and oxygen concentrators.
  - The respondent also emphasized the technical differences between ventilators and oxygen concentrators, asserting that the latter does not assist respiration through an external source, which is the essence of a ventilator.
The Tribunal’s Observations

The Tribunal made several critical observations while delivering its judgment:
1. Broad Interpretation of Notification:
  - The Tribunal emphasized that the notification under Section 25 of the Customs Act, 1962, should be read holistically. The description of goods eligible for exemption should not be narrowly confined to the parenthetical term “ventilators.”
  - It noted that the term “ventilator” is not explicitly enumerated in the First Schedule to the Customs Tariff Act, 1975, and the description in the notification was designed to cover a broader range of apparatus for artificial or therapeutic respiration.
2. Context of the Pandemic:
  - The Tribunal acknowledged the extraordinary circumstances of the COVID-19 pandemic, which required governments to provide relief in the broadest terms to address the acute respiratory distress faced by the population.
  - It criticized the lower authorities for their narrow interpretation of the notification, which failed to consider the broader intent of the government to provide relief during a public health crisis.
3. Technical and Legal Analysis:
  - The Tribunal analyzed the technical aspects of oxygen concentrators and ventilators, concluding that the source of oxygen supply does not determine whether an apparatus qualifies as one for artificial or therapeutic respiration.
  - It also referred to judicial precedents, including decisions by the High Courts of Bombay and Chhattisgarh, which emphasized the importance of interpreting tax-related notifications in a broader context.
Final Judgment

The Tribunal ruled in favor of M/s Aspen Diagnostics Pvt Ltd, setting aside the impugned order and allowing the appeal. It held that the lower authorities had erred in restricting the benefit of the notification to conventional ventilators and that oxygen concentrators, being apparatus for therapeutic respiration, were eligible for the exemption.

Key Takeaways
1. Holistic Interpretation of Notifications:
  - The judgment underscores the importance of interpreting customs notifications in their entirety, rather than focusing on specific terms or parenthetical descriptions.
2. Context Matters:
  - The Tribunal highlighted the need to consider the broader context, especially during extraordinary circumstances like the COVID-19 pandemic, when government policies are aimed at providing maximum relief.
3. Compliance with Legal Obligations:
  - The judgment criticized the lower authorities for failing to comply with Section 17(5) of the Customs Act, 1962, which requires a detailed explanation for denying exemptions.
4. Precedents in Tax Law Interpretation:
  - The Tribunal relied on previous judicial decisions to support its stance on the interpretation of tax-related notifications, emphasizing the importance of consistency in legal reasoning.
Conclusion

This landmark judgment by the CESTAT serves as a reminder of the need for a fair and holistic approach in interpreting tax notifications, especially during times of crisis. It highlights the importance of considering the broader intent of government policies and adhering to legal obligations to ensure justice for taxpayers. The decision to allow the exemption for oxygen concentrators is a significant step in recognizing the evolving nature of medical technology and the necessity of adapting tax policies to address public health emergencies.

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Source: CESTAT Delhi

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January 20, 2026
Revenue’s Appeal Fails in Valuation & Classification Dispute on Electric Tricycle Controllers
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 19.01.2026

Revenue’s Appeal Fails in Valuation & Classification Dispute on Electric Tricycle Controllers

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata, recently delivered a significant judgment in the case of Commissioner of Customs (Port), Kolkata v. M/s Aahana Commerce Pvt. Ltd. (Customs Appeal No. 76000 of 2023). This case revolved around the classification and valuation of imported Motor Controllers and Electric Tricycle Spare Parts, and the decision has set a precedent for similar cases in the future. Here’s a detailed breakdown of the case and its implications.

Background of the Case

M/s Aahana Commerce Pvt. Ltd. imported Motor Controllers and various Electric Tricycle Spare Parts. Upon filing the Bills of Entry, the Assessing Officer reassessed the importation by enhancing the CIF value, rejecting the declared value of the goods, and changing the classification of the Motor Controller from Customs Tariff Heading (CTH) 8503 0090 to CTH 8708 9900.

To avoid delays and demurrage charges, the Respondent cleared the goods on payment of the enhanced customs duty under protest and requested the lower authority to issue assessment orders under Section 17(5) of the Customs Act, 1962. However, no such orders were issued.

Aggrieved by the assessment, the Respondent approached the Commissioner (Appeals), who set aside the assessment orders, accepted the declared value, and classified the Motor Controller under CTH 8503 0090. The Revenue, dissatisfied with this decision, filed an appeal before the CESTAT.

Key Issues in the Case

The case revolved around two primary issues:
1. Valuation of Imported Goods: The Revenue argued that the declared transaction value could not be accepted under Rule 3(1) of the Customs Valuation Rules, 2007, as the Respondent failed to provide substantive documents to support the declared value. The Revenue contended that the transaction value should be determined sequentially under Rules 4 to 9 of the Customs Valuation Rules, 2007, based on contemporaneous import data.
2. Classification of Motor Controller: The Revenue claimed that the Motor Controller should be classified under CTH 8708 9900, which covers parts and accessories of motor vehicles, as the controller is used in electric tricycles (e-rickshaws). The Respondent argued that the Motor Controller is a part of an electric motor and should be classified under CTH 8503 0090.
CESTAT’s Observations and Decision

After hearing both parties and reviewing the appeal papers, the Tribunal made the following observations:

Valuation of Imported Goods
- The assessing officer rejected the transaction values without valid reasons or evidence, failing to follow the procedures outlined in Section 14 of the Customs Act and the Customs Valuation Rules, 2007.
- There was no evidence to suggest that the declared transaction values were not the actual prices paid for the goods or that the buyer and seller were related.
- The Department did not provide any proof that the Respondent paid an amount over and above the invoice value to the foreign supplier.
- The Tribunal upheld the Commissioner (Appeals)’ decision to accept the transaction value declared by the Respondent.
Classification of Motor Controller 
- The Tribunal observed that the Motor Controller is principally used with electric motors to perform functions such as starting, stopping, regulating speed, and selecting forward or reverse rotation. These functions are directly connected to the motor, making the controller a part of the motor.
- The Tribunal rejected the Revenue’s argument that the controller is a separate device used for controlling various activities in an e-rickshaw. It emphasized that the controller cannot perform its functions without being attached to the motor.
- The Tribunal referred to the Customs Tariff Heading 8503, which covers “parts suitable for use solely or principally with the machines of heading 8501 or 8502.” Since the Motor Controller is principally used with electric motors, it was rightly classified under CTH 8503 0090.
- The Tribunal also noted that Note No. 2(f) to Section XVII specifically excludes electrical machinery or equipment falling under Chapter 85 from being classified under Chapter 87.
Precedents

The Tribunal relied on its previous decisions in similar cases, including Final Order No. 76829-76831/2024 and Final Order No. 77726-77729/2025, which upheld the classification of Motor Controllers under CTH 8503 0090. It also referred to the Supreme Court’s judgment in CCE, Aurangabad v. Videocon Industries Ltd. [2023 (384) E.L.T. 628 (S.C.)], which emphasized the importance of narrowly construing exclusions and classifications under the Customs Tariff Act.

Final Verdict

The CESTAT dismissed the Revenue’s appeal, upholding the Commissioner (Appeals)’ decision to classify the Motor Controller under CTH 8503 0090 and accept the declared transaction value. The Tribunal found no merit in the Revenue’s arguments and emphasized the importance of adhering to established procedures and providing substantive evidence when challenging declared values and classifications.

Implications of the Judgment

This landmark decision has significant implications for importers and the customs authorities:
1. Clarity on Classification: The judgment provides clarity on the classification of Motor Controllers, confirming that they fall under CTH 8503 0090 as parts of electric motors, rather than CTH 8708 9900 as parts of motor vehicles.
2. Adherence to Valuation Rules: The Tribunal reinforced the importance of following the Customs Valuation Rules, 2007, and providing valid reasons and evidence when rejecting declared transaction values.
3. Precedent for Future Cases: The decision sets a precedent for similar cases involving the classification and valuation of imported goods, ensuring consistency in the application of customs laws.
Conclusion

The CESTAT Kolkata’s decision in this case highlights the importance of adhering to established legal procedures and accurately interpreting customs tariff headings. It serves as a reminder to both importers and customs authorities to ensure compliance with the Customs Act and Valuation Rules while handling import transactions. This judgment is a significant step toward ensuring transparency and fairness in customs assessments, and it will undoubtedly guide future cases involving similar disputes.

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Source: CESTAT Kolkata

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January 19, 2026