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CESTAT Kolkata Ruled on Excise Duty Valuation for Steel Scrap Clearance
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 21.03.2026

CESTAT Kolkata Ruled on Excise Duty Valuation for Steel Scrap Clearance

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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 M/s Steel Authority of India Limited (SAIL) vs. Commissioner of CGST & Central Excise, Bolpur. This case revolved around the valuation of steel scraps cleared by SAIL’s Durgapur Steel Plant (DSP) to its sister unit, Alloy Steel Plant (ASP), and independent buyers, and whether Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, was applicable in this scenario.

Background of the Case 

SAIL, a leading manufacturer of iron and steel products, operates several integrated steel plants across India, including the Durgapur Steel Plant (DSP) in West Bengal. DSP is registered under the Central Excise Act, 1944, and the Finance Act, 1994, for manufacturing and other activities. During the manufacturing process, steel scraps such as processed steel scraps, steel turnings, borings, and rejected wheels are generated. These scraps are cleared to external customers and sister units, including ASP, upon payment of appropriate excise duty.

The dispute arose when the Commissioner of Central Excise, Bolpur, issued a show-cause notice to SAIL on May 3, 2005, alleging that the company had undervalued the steel scraps cleared to its sister unit, ASP, during the financial years 2001-02 to 2003-04. The notice claimed that SAIL had contravened Rule 8 of the Valuation Rules, Section 4(1)(b) of the Central Excise Act, and other related provisions, resulting in an alleged duty evasion of ₹1,27,02,287. The Commissioner demanded recovery of the duty along with interest and imposed an equivalent penalty under Section 11AC of the Act.

SAIL contested the allegations, arguing that the valuation of the steel scraps was correctly determined under Rule 4 of the Valuation Rules, which applies to goods sold to independent buyers. The company maintained that the scraps were cleared to both external customers and sister units, and therefore, Rule 8, which applies only when goods are exclusively sold to sister units, was not applicable.

Key Issues in the Case 

The case raised several critical questions:
1. Applicability of Rule 8 of the Valuation Rules: Whether Rule 8, which mandates valuation based on 110%/115% of the cost of production, applies when goods are cleared to both independent buyers and sister units.
2. Revenue Neutrality: Whether the duty paid by SAIL was available as CENVAT credit to its sister unit, making the entire exercise revenue-neutral.
3. Limitation Period: Whether the extended period of limitation under the Proviso to Section 11A(1) of the Central Excise Act was applicable, given that the show-cause notice was issued beyond the prescribed one-year period.
Tribunal’s Observations and Judgment 

The Tribunal, comprising Hon’ble Mr. Ashok Jindal (Judicial Member) and Hon’ble Mr. K. Anpazhakan (Technical Member), made the following key observations:
1. Rule 8 Applicability: The Tribunal held that Rule 8 of the Valuation Rules is applicable only when the entire quantity of goods is cleared to sister units. Since SAIL had cleared steel scraps to both independent buyers and sister units, Rule 8 was not applicable. Instead, the transaction value should be determined under Rule 4, which is based on the price at which goods are sold to independent buyers.
2. Revenue Neutrality: The Tribunal noted that the duty paid by SAIL on the steel scraps cleared to its sister unit was available as CENVAT credit to the sister unit. This made the entire exercise revenue-neutral, as there was no loss of revenue to the government.
3. Limitation Period: The Tribunal observed that the show-cause notice was issued beyond the prescribed one-year period under Section 11A of the Act. The extended period of limitation could not be invoked as the Commissioner (Appeals) had already found that SAIL acted on a “bona fide belief” and did not have any intention to evade duty. The Tribunal emphasized that the condition precedent for invoking the extended limitation period under the Proviso to Section 11A(1) was not satisfied.
Tribunal’s Decision

Based on the above observations, the Tribunal concluded that:
- Rule 8 of the Valuation Rules was not applicable to the facts of the case.
- SAIL had correctly paid the duty on the steel scraps cleared to its sister unit.
- The demand for duty and penalty was unsustainable.
- The extended period of limitation could not be invoked.
The Tribunal set aside the impugned order and allowed SAIL’s appeal, granting consequential relief.

Key Takeaways

This judgment is a landmark decision that clarifies the applicability of Rule 8 of the Valuation Rules in cases where goods are cleared to both independent buyers and sister units. It also reinforces the principle of revenue neutrality, emphasizing that no duty demand can be sustained if the duty paid is available as CENVAT credit to the recipient unit. Additionally, the judgment highlights the importance of adhering to the limitation period under Section 11A of the Central Excise Act, especially in cases where there is no evidence of suppression or intent to evade duty.

Conclusion

The case of M/s Steel Authority of India Limited vs. Commissioner of CGST & Central Excise, Bolpur serves as a crucial precedent for manufacturers and tax practitioners dealing with valuation disputes under the Central Excise Act. It underscores the need for proper interpretation of valuation rules and the significance of revenue neutrality in excise duty matters. This judgment is a testament to the importance of adhering to established legal principles and ensuring fair treatment of taxpayers.

Source: CESTAT Kolkata

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March 21, 2026
CESTAT Chennai Quashes Customs Order Over Coerced Statements and Invalid Valuation
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 21.03.2026

CESTAT Chennai Quashes Customs Order Over Coerced Statements and Invalid Valuation

Adv Ravi Shekhar Jha

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

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai Regional Bench, recently delivered a significant judgment on Customs Appeal No. 40724 of 2024 and related appeals. The case revolved around allegations of undervaluation, misdeclaration, and misuse of Importer Exporter Codes (IECs) by the appellant, and other co-appellants. The judgment, pronounced on March 19, 2026, by Hon’ble Justice and Hon’ble Member – Technical, set aside the impugned order passed by the Commissioner of Customs, Chennai-II, and allowed all five appeals.

Background of the Case

The case originated from an order dated June 11, 2024, issued by the Commissioner of Customs, Chennai-II, which rejected the declared value of imported goods under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007). The Commissioner re-determined the value under Rule 9 of the CVR, 2007, and imposed penalties and interest under Sections 114A and 114AA of the Customs Act, 1962. The goods were imported through Chennai Port, Nhava Sheva Port, Mumbai, and Kolkata Port, allegedly using dummy IECs controlled by the appellant.

The appellant, Mr. Sachdeva, challenged the order, claiming that the statements used against him were obtained under coercion and physical abuse by the Directorate of Revenue Intelligence (DRI) officers. He also argued that the rejection of declared value and re-determination of the value were based on inadmissible evidence.

Key Allegations Against the Appellant
1. Undervaluation of Imported Goods: The appellant allegedly declared only 50% of the actual value of imported goods and sent the remaining amount through hawala channels.
2. Misuse of Dummy IECs: The appellant was accused of using proxy IECs to import goods and evade customs duties.
3. Fabrication of Invoices: The appellant was alleged to have submitted manipulated invoices to customs authorities, which did not match the actual transaction value of the imported goods.
Appellant’s Defense

The appellant, represented by Advocate, denied all allegations and presented the following arguments:
1. Coercion and Physical Abuse: The appellant claimed that his statements were obtained under duress, physical assault, and psychological pressure by DRI officers. Medical reports from Tihar Jail and Deen Dayal Upadhyay Hospital corroborated his claims, documenting multiple bruises and injuries.
2. Retraction of Statements: The appellant retracted his statements recorded under Section 108 of the Customs Act, stating they were involuntary and obtained through coercion. The retraction was submitted to the Chief Metropolitan Magistrate immediately after the alleged forced statement.
3. Inadmissibility of Evidence: The appellant argued that the statements recorded under Section 108 of the Customs Act could not be considered relevant unless the procedure under Section 138B of the Customs Act was followed, which was not done.
4. Manipulation of Emails: The appellant contended that the DRI officers used his email account and Wi-Fi connection to send emails and fabricate evidence during his custody.
Key Findings of the Tribunal 

After hearing arguments from both sides, the Tribunal made the following observations:
1. Statements Recorded Under Coercion: The Tribunal found that the appellant’s claims of physical and psychological abuse were supported by medical reports from Tihar Jail and Deen Dayal Upadhyay Hospital. The statements recorded under Section 108 of the Customs Act were deemed involuntary and inadmissible.
2. Non-Compliance with Section 138B: The Tribunal emphasized that statements recorded under Section 108 of the Customs Act cannot be considered relevant unless the procedure under Section 138B is followed. This includes examining the person who made the statement as a witness and providing an opportunity for cross-examination.
3. E-mails and Attachments: The Tribunal noted that the emails and attachments relied upon by the Commissioner were received while the appellant was in DRI custody, and the laptop was in the possession of DRI officers. The Tribunal found no justification for considering these emails as valid evidence.
4. Rejection of Transaction Value: The Tribunal held that the rejection of the declared transaction value under Rule 12 of the CVR, 2007, was not sustainable as it was based on inadmissible evidence.
5. Re-determination of Value: The Tribunal found that the re-determination of value under Rule 9 of the CVR, 2007, was based on unreliable evidence, including purported price lists and parallel invoices that lacked authenticity.
Final Judgment

The Tribunal set aside the impugned order dated June 11, 2024, and allowed all five appeals. The demand for differential duty, interest, and penalties imposed on the appellant and co-appellants were quashed. The Tribunal emphasized the importance of adhering to the mandatory provisions of the Customs Act, particularly Sections 108 and 138B, to ensure fair and just adjudication.

Significance of the Judgment

This landmark judgment underscores the importance of following due process in customs investigations and adjudications. It highlights the need for transparency, impartiality, and adherence to legal procedures to prevent misuse of authority and ensure justice. The Tribunal’s decision serves as a reminder that evidence obtained through coercion or without following mandatory legal provisions cannot be relied upon in adjudication proceedings.

This case also sheds light on the complexities of customs valuation and the importance of maintaining the integrity of the process. It reinforces the principle that transaction values cannot be arbitrarily rejected or re-determined without valid and admissible evidence.

Conclusion

The CESTAT Chennai’s judgment in Customs Appeal No. 40724 of 2024 and related appeals is a significant development in the realm of customs law. It not only provides clarity on the admissibility of evidence under the Customs Act but also sets a precedent for ensuring fair and lawful adjudication processes. This case serves as a crucial reference for legal practitioners, importers, and customs authorities in understanding the nuances of customs valuation and the importance of adhering to statutory provisions.

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Source: CESTAT Chennai

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March 21, 2026
CESTAT Ahmedabad Set Aside Confiscation and Penalties in Aluminum Scrap Import
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 20.03.2026

CESTAT Ahmedabad Set Aside Confiscation and Penalties in Aluminum Scrap Import

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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), West Zonal Bench, Ahmedabad, recently delivered a significant judgment in the case of M/s. Palco Recycle Exchange Limited & Others vs. Commissioner of Customs, Mundra. This case revolved around the import of aluminum scrap and the submission of allegedly invalid Pre-Shipment Inspection Certificates (PSICs). The tribunal’s decision, pronounced on March 18, 2026, has set a precedent for similar cases involving the import of metallic scrap and the interpretation of customs regulations.

Background of the Case

The case originated from the import of 25.175 MT of aluminum scrap “Terse” by M/s. Palco Recycle Exchange Limited from M/s. RKG International FZE, UAE. The consignment was accompanied by two PSICs issued by M/s. Worldwide Logistics Survey and Inspection Group and Affiliates (WLSI), New Delhi and M/s. Geo Chem Middle East, Dubai. These certificates are mandatory under the Foreign Trade Policy to ensure that imported metallic scrap does not contain hazardous materials or radiation levels exceeding natural background levels.

However, based on intelligence reports, the Directorate of Revenue Intelligence (DRI) investigated the matter and found that both PSICs were allegedly issued without proper inspection of the cargo at the port of loading. This led to the issuance of a Show Cause Notice proposing the confiscation of the aluminum scrap and the imposition of penalties under Sections 112(a) and 114AA of the Customs Act, 1962.

Lower Authorities’ Findings 

The Additional Commissioner of Customs adjudicated the matter and passed an order on April 26, 2014, confiscating the seized goods under Section 111(d) of the Customs Act, 1962. The importer was given the option to redeem the goods upon payment of a redemption fine of Rs. 4 lakh. Penalties were also imposed on the appellants, including M/s. Palco Recycle Exchange Limited, its Director and Vice President of M/s. Vistas Trading. The Commissioner (Appeals) upheld the confiscation and penalties, leading the appellants to file appeals before the CESTAT.

Grounds of Appeal 

The appellants argued that the goods were cleared after 100% examination by Customs, ensuring compliance with all regulations. They contended that the PSICs submitted were valid at the time of import and that any discrepancies in the inspection process were the responsibility of the inspection agencies, not the importer or indenter. They cited several judicial precedents to support their case, including:
1. Alang Metal Exim Pvt. Ltd vs. CC (2015): This case established that importers who submit PSICs from authorized agencies and follow prescribed procedures are not liable for confiscation or penalties if the inspection agency fails to perform its duties.
2. Commissioner of Customs vs. Senor Metals Pvt. Limited (2009): The Gujarat High Court ruled that non-compliance with import policy conditions may lead to 100% inspection but does not constitute improper import under Section 111 of the Customs Act.
3. CMA CGM Agencies (I) Pvt. Ltd vs. Commissioner of Customs (Port-Import), Chennai (2016): The tribunal held that non-compliance with PSIC requirements does not automatically render goods liable for confiscation if no prohibited items are found during inspection.
CESTAT’s Final Decision 

After hearing the arguments from both sides, the tribunal concluded that there was insufficient evidence to prove that the appellants had abetted the production of invalid PSICs or contravened the Foreign Trade Policy. The tribunal emphasized that the responsibility for ensuring the validity of PSICs lies with both the importer and the supplier, as per the Hand Book of Procedure 2015-20.

The tribunal relied on the aforementioned judicial precedents and ruled that the confiscation of goods, imposition of redemption fines, and penalties on the appellants were not sustainable. Consequently, the appeals filed by M/s. Palco Recycle Exchange Limited, its Director were allowed, and the impugned order was set aside.

Key Takeaways
1. Importance of PSIC Compliance: The case highlights the critical role of Pre-Shipment Inspection Certificates in ensuring the safe import of metallic scrap. Both importers and suppliers must ensure the validity of these certificates to avoid legal complications.
2. Judicial Precedents Matter: The tribunal’s reliance on previous judgments underscores the importance of established legal principles in resolving disputes.
3. Shared Responsibility: The ruling clarifies that both importers and suppliers are jointly responsible for compliance with PSIC requirements, as per the Foreign Trade Policy.
4. 100% Inspection as a Safeguard: The tribunal reiterated that non-compliance with PSIC requirements does not necessarily lead to confiscation if the goods pass a thorough inspection and are found to be free of prohibited materials.
Conclusion

The CESTAT’s decision in this case serves as a reminder of the importance of adhering to import regulations while also recognizing the limitations of importers in verifying the actions of third-party inspection agencies. This landmark ruling not only provides relief to the appellants but also sets a precedent for similar cases in the future, ensuring a balanced approach to the enforcement of customs laws.

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Source: CESTAT Ahmedabad

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March 20, 2026
CESTAT Kolkata Sets Aside Customs Duty and IGST Demand
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 20.03.2026

CESTAT Kolkata Sets Aside Customs Duty and IGST Demand

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has delivered a judgment in favor of M/s. Imperial Fragrance & Flavours Pvt. Ltd. in Customs Appeal No. 75890 of 2023. The case revolved around the import of ‘Gurjon Oil’ and ‘Patchouli Oil’ from Indonesia, where the appellant sought exemption from Basic Customs Duty (BCD) under Notification No. 46/2011-Cus., as amended by Notification No. 82/2018-Cus., and faced a demand for differential Integrated Goods and Services Tax (IGST).

Background of the Case

M/s. Imperial Fragrance & Flavours Pvt. Ltd. imported ‘Gurjon Oil’ and ‘Patchouli Oil’ from Indonesia and filed Bill of Entry No. 4012164 dated 11.07.2019, claiming exemption from BCD under the aforementioned notifications. The goods were assessed, examined, and granted Out-of-Charge on 19.07.2019 after the submission of all required documents, including the certificate of origin and invoice.

However, during an audit in 2021, the Audit team raised objections, alleging that the appellant had paid IGST at 12% instead of the applicable rate of 18%. The appellant acknowledged the error and expressed willingness to pay the differential IGST, requesting permission to file a supplementary Bill of Entry to claim input tax credit for the additional IGST paid. This request was denied.

Subsequently, a Show Cause Notice (SCN) was issued on 09.07.2021, challenging the classification of the imported goods and asserting that the appellant was ineligible for the concessional BCD rate. The SCN also demanded the differential IGST. The adjudicating authority confirmed the demand for BCD, SWS, and IGST, which was upheld by the Commissioner of Customs (Appeals). Aggrieved by the decision, the appellant approached the Tribunal.

Key Arguments Presented

Appellant’s Submissions
1. Proper Documentation and Classification: The appellant argued that the Bill of Entry was assessed and cleared after thorough examination by Customs authorities, who were satisfied with the classification and documentation provided.
2. Eligibility for BCD Exemption: The appellant contended that the imported goods fell under Chapter Heading 3301, which qualifies for concessional BCD rates under the relevant notifications.
3. IGST Payment Error: The appellant admitted to a genuine error in paying IGST at 12% instead of 18%. They emphasized their willingness to pay the differential IGST and requested permission to file a supplementary Bill of Entry to claim input tax credit, which was denied.
4. Revenue Neutrality: The appellant argued that the differential IGST payment would result in a revenue-neutral situation, as they would be eligible to claim input tax credit for the additional IGST paid.
Revenue’s Submissions
1. Incorrect Classification: The Revenue argued that the classification adopted by the appellant was incorrect, making them ineligible for the concessional BCD rate.
2. IGST Payment Error: The Revenue contended that the appellant had admitted to paying IGST at an incorrect rate, justifying the demand for differential IGST.
Tribunal’s Observations and Decision 

After hearing both sides and reviewing the appeal papers and supporting documents, the Tribunal made the following observations:
1. BCD and SWS Demand: The Tribunal noted that the Customs authorities had assessed and cleared the goods after verifying the classification and documentation, including the certificate of origin. The relevant notifications provide BCD exemption for goods under Chapter Heading 3301, irrespective of sub-headings. Therefore, the Tribunal found no merit in the confirmed demand for BCD and SWS and set it aside.
2. Differential IGST Demand: The Tribunal acknowledged the appellant’s genuine error in paying IGST at 12% instead of 18%. It emphasized that the appellant had demonstrated their bona fides by agreeing to pay the differential IGST and requesting permission to file a supplementary Bill of Entry to claim input tax credit. The Tribunal highlighted that input tax credit is an indefeasible right of the appellant, and the denial of this request was unjustified.
3. Revenue Neutrality: Citing multiple case laws, including M/s. Chiripal Polyfilms Ltd. v. Commissioner of C.Ex. & S.T., Vadodara-I, the Tribunal reiterated that when differential duty or tax results in a revenue-neutral situation, the demand is not legally sustainable. The Tribunal emphasized that the appellant’s case was revenue-neutral, as the differential IGST paid would have been available as input tax credit.
Final Order

The Tribunal set aside the impugned order, allowing the appeal filed by M/s. Imperial Fragrance & Flavours Pvt. Ltd. The appellant was granted consequential relief as per law.

Key Takeaways
1. Importance of Proper Documentation: The Tribunal’s decision underscores the significance of maintaining accurate and complete documentation during imports to substantiate claims for exemptions and concessions.
2. Revenue Neutrality Principle: The judgment reaffirms the principle that demands for differential duty or tax are not sustainable in cases where the payment results in a revenue-neutral situation.
3. Right to Input Tax Credit: The Tribunal emphasized that input tax credit is an indefeasible right of the assessee, and authorities should consider requests to facilitate its utilization.
This ruling serves as a precedent for similar cases, highlighting the importance of procedural fairness and adherence to established legal principles in customs and tax disputes.

Source: CESTAT Kolkata

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March 20, 2026
CESTAT Bangalore Allows Exemption for Electronic Components
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 19.03.2026

CESTAT Bangalore Allows Exemption for Electronic Components

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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), Bangalore, recently delivered a landmark judgment in the case of M/s Bharat Electronics Ltd. vs. The Principal Commissioner of Customs (Customs Appeal No. 20124 of 2021). This case revolved around the classification of imported technical documents and reports under the Customs Tariff Act, 1975, and the eligibility for exemption under specific customs notifications. Below is a detailed analysis of the case and the final judgment.

Background of the Case

M/s Bharat Electronics Ltd. (BEL), a public sector undertaking engaged in manufacturing defense equipment, filed three Bills of Entry (BOEs) for the clearance of technical documents and reports imported from M/s Israel Aerospace Industries Ltd., Israel. These documents pertained to the upgradation and operation of defense equipment, including the Schilka Battle Tank (SBT), Long Range Surface to Air Missile (LRSAM), and Multi-Function Surveillance and Threat Alert Radar (MFSTAR).

The appellant classified the imported goods under Customs Tariff Headings (CTH) 49070030 and 49019900, claiming exemptions under Sl. No. 268 of Notification No. 12/2012-Cus. dated 17.03.2012 and Sl. No. 302 of Notification No. 50/2017-Cus. dated 30.06.2017. However, the Commissioner of Customs reclassified the goods under CTH 49119990, denied the exemptions, and imposed a differential customs duty of ₹15.40 crores along with interest and penalties.

Key Issues in the Case 

The primary issue before the Tribunal was whether the imported technical manuals, specification handbooks, and reports were correctly classifiable under CTH 49019900, as claimed by BEL, or under CTH 49119990, as determined by the Commissioner.

Arguments by the Appellant 
1. Nature of Imported Goods: BEL argued that the imported documents were technical materials integral to the proper functioning, installation, and operation of defense equipment. These documents included user handbooks, system engineering management reports, and management activities reports, all containing technical details, diagrams, and instructions.
2. Classification Under CTH 49019900: BEL contended that the imported goods were printed materials containing textual matter and diagrams, which are correctly classifiable under CTH 49019900. They argued that the Commissioner erred in reclassifying the goods under CTH 49119990, which pertains to “other printed matter including printed pictures and photographs.”
3. Exemption Notifications: BEL claimed that the imported goods were eligible for exemptions under Notification No. 12/2012-Cus. and Notification No. 50/2017-Cus., as they were related to defense equipment.
4. Retrospective Effect of Notification No. 02/2025-Cus.: BEL argued that the amendment to Notification No. 19/2019-Cus. by Notification No. 02/2025-Cus. should be given retrospective effect, as it clarified the inclusion of systems, sub-systems, equipment, and technical documents related to LRSAM and MFSTAR.
5. Extended Period of Limitation: BEL contended that the invocation of the extended period of limitation was unwarranted, as the classification was based on a bona fide belief and there was no misdeclaration.
Arguments by the Respondent 

The Revenue argued that the imported goods were not printed books or manuals meant for general public use but were confidential technical documents containing sensitive information. As such, they were correctly classified under CTH 49119990, which is a residual entry for “other printed matter.” The Revenue relied on the judgment in CC vs. Parasrampuria to support their stance.

CESTAT’s Analysis and Judgment 

The Tribunal analyzed the case in detail, referring to previous judgments, HSN explanatory notes, and the principles of classification under the Customs Tariff Act. The key points of the judgment are as follows:
1. Classification of Imported Goods: The Tribunal concluded that the imported technical documents, manuals, and reports were correctly classifiable under CTH 49019900, as they consisted of textual matter and diagrams integral to the operation and maintenance of defense equipment. The Tribunal emphasized that the specific entry under CTH 4901 should be preferred over the residual entry under CTH 4911.
2. Eligibility for Exemptions: Since the goods were classified under CTH 49019900, the Tribunal held that BEL was entitled to the benefits of Notification No. 12/2012-Cus. and Notification No. 50/2017-Cus.
3. Retrospective Effect of Notification No. 02/2025-Cus.: The Tribunal did not delve into this argument, as the primary issue of classification was resolved in favor of BEL.
4. Extended Period of Limitation and Penalties: The Tribunal did not address these issues, as the classification and exemption were already decided in favor of the appellant.
5. Precedents Considered: The Tribunal relied heavily on its previous judgment in Hindustan Aeronautics Limited vs. Principal Commissioner of Customs, Bangalore and the Supreme Court’s judgment in CC vs. Gujarat Perstorp Electronics Ltd., which emphasized the preference for specific tariff entries over residual ones.
Final Order

The Tribunal set aside the impugned order passed by the Commissioner of Customs and allowed the appeal with consequential relief to BEL. The judgment reaffirmed the classification of technical documents under CTH 49019900 and the eligibility for exemption under the relevant notifications.

Key Takeaways
1. Importance of HSN Notes: The judgment highlights the significance of HSN explanatory notes in determining the correct classification of goods under the Customs Tariff Act.
2. Specific vs. Resid ual Entries: The Tribunal reiterated the principle that specific tariff entries should be preferred over residual entries when classifying goods.
3. Defense Sector Imports: The judgment underscores the importance of technical documents in the defense sector and their classification under CTH 4901.
4. Precedential Value: The judgment in Hindustan Aeronautics Limited played a crucial role in shaping the outcome of this case, demonstrating the importance of consistent judicial interpretation.
Conclusion

The CESTAT Bangalore’s judgment in Customs Appeal No. 20124 of 2021 is a significant decision that clarifies the classification of technical documents under the Customs Tariff Act. It provides valuable insights into the application of HSN notes, the preference for specific tariff entries, and the eligibility for exemptions under customs notifications. This judgment will serve as a guiding precedent for similar cases in the future, particularly those involving imports related to the defense sector.

Source: CESTAT Bangalore

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March 19, 2026
Gujarat High Court Quashes DRI Show Cause Notices in Customs Tariff Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 19.03.2026

Gujarat High Court Quashes DRI Show Cause Notices in Customs Tariff Dispute

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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 High Court of Gujarat, in a landmark judgment delivered on February 3, 2026, has quashed a series of show cause notices issued by the Directorate of Revenue Intelligence (DRI) in a case involving alleged mis-declaration of export goods under the Customs Tariff Act, 1975. The judgment, delivered by Honourable Justices, marks a significant development in the interpretation of customs law and the powers of the DRI.

Background of the Case

The case involved M/S. S.J.S. International & Anr., a company engaged in the export of nuts, bolts, washers, hand tools, and allied products. The goods were classified under Chapter Headings 7318, 8205, and 3926 of the Customs Tariff Act, 1975, and exported to Gulf and Upper Gulf regions. On January 8, 2015, Respondent No. 2 detained certain export consignments belonging to the petitioner, citing discrepancies in the declared weight and alleged misclassification of goods under Tariff Heading 7318 instead of 7308.

A seizure memo was issued on January 20, 2015, and provisional release of the goods was granted after the petitioners complied with revised conditions set by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). However, the duty drawback for the consignments was withheld, prompting the petitioners to approach the High Court. The Court ruled in favor of the petitioners on August 13, 2015, leading to the release of the duty drawback amount.

Subsequently, on January 12, 2016, the DRI issued a show cause notice proposing confiscation of goods and recovery of differential duty drawback, alleging mis-declaration of weight, classification, and value of the export goods. The petitioners challenged the notice, citing the lack of authority of the DRI to issue such notices, relying on the Supreme Court’s decision in M/s. Canon India Private Limited v. Commissioner of Customs (Civil Appeal No. 1827 of 2018).

Key Issues in the Case 

The primary issues in the case revolved around:
1. Mis-declaration of Goods: Whether the exported goods were correctly classified under Chapter Headings 7318, 8205, and 3926, or if they should have been classified under Heading 7308.
2. Authority of DRI: Whether the DRI had the legal authority to issue the show cause notice, as per the Supreme Court’s ruling in M/s. Canon India Private Limited v. Commissioner of Customs.
Court Proceedings and Judgment 

During the hearing, counsel for the petitioners argued that the show cause notices were issued in 2016, and no stay had been granted on further proceedings. He cited previous judgments, including Siddhi Vinayak Syntex Pvt. Ltd. v. Union of India [2017 (352) ELT 455 (Guj.) ], to support the contention that the notices should be quashed.

Senior Standing Counsel for the Respondent, informed the Court that the Customs Department had accepted the legal position established in an identical matter, Union of India and Anr. v. M/s. JBS Exports and Anr. , decided by the Supreme Court on September 22, 2025 (Special Leave Petition (Civil) Diary No. (s). 44987/2025). He submitted that the present petitions could be allowed in light of the Apex Court’s decision.

Taking into account the submissions and the legal precedents, the High Court ruled in favor of the petitioners and quashed the show cause notices issued by the DRI. The Court also noted that the department had accepted the legal position in similar cases, further strengthening the petitioners’ case.

Implications of the Judgment

This judgment has significant implications for exporters and the interpretation of customs law in India. Key takeaways include:
1. Clarification on DRI’s Authority: The judgment reinforces the Supreme Court’s decision in M/s. Canon India Private Limited v. Commissioner of Customs, which questioned the DRI’s authority to issue show cause notices under the Customs Act.
2. Relief for Exporters: The decision provides relief to exporters who face allegations of mis-declaration and misclassification, ensuring that their rights are protected under the law.
3. Precedent for Future Cases: The acceptance of the legal position by the Customs Department in similar cases, as highlighted by the respondents, sets a precedent for future disputes involving the DRI’s authority.
Conclusion

The High Court’s decision to quash the show cause notices is a significant victory for M/S. S.J.S. International & Anr. and other exporters facing similar issues. It underscores the importance of adhering to legal precedents and ensures that government agencies operate within the bounds of their authority. This judgment is expected to have a far-reaching impact on customs-related disputes and the role of the DRI in adjudicating such matters.

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Source: Gujarat High Court

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March 19, 2026
High Court of Gujarat Upholds Supreme Court Precedent: Exemption of Biodegradable Packaging from Plastic Waste Rules
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 18.03.2026

High Court of Gujarat Upholds Supreme Court Precedent: Exemption of Biodegradable Packaging from Plastic Waste Rules

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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 delivered on February 25, 2026, the High Court of Gujarat dismissed Tax Appeal No. 22 of 2020 filed by the Principal Commissioner of Customs against M/s R.M. Dhariwal (HUF). The case revolved around the interpretation of Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011, in conjunction with Sections 113(d) and 118(b) of the Customs Act, 1962. The court upheld the decision of the Customs, Excise, & Service Tax Appellate Tribunal (CESTAT), which had ruled in favor of the respondent company.

Background of the Case

The appellant, the Principal Commissioner of Customs, sought to challenge the Tribunal’s judgment dated October 8, 2018, which allowed the export of goods by M/s R.M. Dhariwal (HUF). The goods in question were pan masala, gutkha, and tobacco products packaged in materials alleged to be prohibited under the Plastic Waste (Management and Handling) Rules, 2011. The appellant argued that the packaging material violated Rule 5(d) and 5(g) of the Rules, which prohibit certain types of plastic usage.

The appellant contended that the Tribunal erred in its interpretation of the Rules, 2011, and sought to quash the judgment. The appellant also argued that the provisions of Sections 113(d) and 118(b) of the Customs Act, 1962, were applicable, as the goods were allegedly prohibited for export due to their packaging material.

Respondent’s Argument 

The respondent, represented by Senior Advocate, argued that the substantial question of law proposed by the appellant was not applicable in this case. The respondent pointed out that the Supreme Court had already ruled in similar cases, such as M/s Baba Global Limited, M/s Harsh International & Anr, and M/s R.M. Dhariwal 100% EOU, exempting exporters of pan masala, gutkha, and tobacco products using biodegradable plastics from the application of the Rules, 2011.

The respondent further argued that the provisions of Section 113(d) and Section 118(b) of the Customs Act, 1962, were not applicable. Section 113(d) pertains to goods that are prohibited from export under the Customs Act or any other law, while Section 118(b) deals with the confiscation of prohibited goods and their packaging. Since the goods in question were not prohibited for export, these provisions did not apply.

Court’s Observations and Judgment 

The High Court carefully examined the arguments presented by both parties and reviewed the relevant legal provisions and precedents. The court noted the following key points:
1. Adherence to Supreme Court Precedent: The court emphasized that it could not take a different view from the Supreme Court, which had already exempted similar exporters from the application of the Rules, 2011. The Supreme Court had ruled that the use of biodegradable plastics for packaging pan masala, gutkha, and tobacco products was permissible.
2. Non-Applicability of Customs Act Provisions: The court held that Sections 113(d) and 118(b) of the Customs Act, 1962, were not applicable in this case. These provisions apply to goods that are prohibited under the Customs Act or any other law. Since the goods being exported were not prohibited, the provisions did not apply.
3. Chemical Analysis Reports: The court relied on chemical analysis reports from government institutions, which confirmed that the packaging material used by the respondent was made of biodegradable plastic. This further supported the Tribunal’s decision to allow the export of the goods.
4. No Substantial Question of Law: The court concluded that the appeal did not raise any substantial question of law, as the issue was primarily based on the appreciation of facts, particularly the chemical analysis of the packaging material.
Legal Principle Established

The judgment underscores the importance of adhering to judicial precedents, especially those set by the Supreme Court. The High Court reiterated that it could not deviate from the Supreme Court’s rulings, which had already addressed similar cases and provided exemptions to exporters using biodegradable plastics. Additionally, the court clarified the scope of Sections 113(d) and 118(b) of the Customs Act, emphasizing that these provisions apply only to goods that are explicitly prohibited under the law.

Conclusion

The High Court’s decision in this case highlights the significance of judicial consistency and the role of chemical evidence in determining compliance with environmental regulations. By dismissing the tax appeal, the court reinforced the principle that lower courts must follow the precedents set by higher courts, ensuring uniformity and predictability in the application of the law.

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Source: Gujarat High Court

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March 18, 2026
Delhi High Court Grants Bail to Foreign National in Cocaine Smuggling
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 18.03.2026

Delhi High Court Grants Bail to Foreign National in Cocaine Smuggling

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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.

On March 17, 2026, the High Court of Delhi delivered a significant judgment in the case of BAIL APPLN. 4689/2025, granting bail to Appellant, a foreign national accused of smuggling narcotic drugs under the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act). The case has garnered attention due to its implications on procedural compliance, the use of artificial intelligence tools in legal proceedings, and the balance between individual rights and statutory restrictions under the NDPS Act.

Case Background

Appellant, a foreign national, was intercepted by Customs officials at Terminal-3 of Indira Gandhi International Airport on July 2, 2024, based on secret information suggesting she was carrying narcotic drugs. Initially, no contraband was found during the scanning of her baggage and personal search. However, upon further investigation, eight capsules containing cocaine were discovered concealed in her undergarments. Maria admitted to having ingested additional capsules and consented to undergo medical procedures for their extraction.

She was subsequently admitted to Safdarjung Hospital, where 34 more capsules were egested, bringing the total recovery to 42 capsules containing approximately 503 grams of cocaine—a quantity classified as “commercial” under the NDPS Act. Maria was discharged from the hospital on July 6, 2024, and formally arrested on July 7, 2024. A complaint was filed against her on December 25, 2024, and charges were framed on February 21, 2025. The trial is ongoing, with only one of the 26 prosecution witnesses having testified so far.

Key Arguments

Petitioner’s Arguments

Maria’s counsel raised several points in favor of granting bail:
1. Violation of Constitutional Rights: The petitioner was detained by Customs officials without being produced before a Magistrate within 24 hours of her interception, as mandated by Article 22(2) of the Constitution of India and Section 58 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023. The counsel argued that the 24-hour period should be calculated from the moment her liberty was curtailed, not from the formal arrest on July 7, 2024.
2. Improper Communication of Legal Rights: The petitioner, who primarily speaks Portuguese and French, was served notices under Section 50 of the NDPS Act and Sections 102 and 103 of the Customs Act in English. Customs officials used an artificial intelligence tool, Google Translator, to translate the notices into her native language. However, the translated copies did not include her responses, raising questions about whether she was adequately informed of her legal rights.
3. Trial Delays: The trial was still in its early stages, with only one prosecution witness having testified. The counsel argued that there was no likelihood of the trial concluding in the near future, making the petitioner eligible for bail.
Respondent’s Arguments

The Customs department opposed the bail plea, presenting the following points:
1. Compliance with Procedures: The respondent argued that all statutory procedures and mandatory safeguards were followed, including serving notices under Section 50 of the NDPS Act and Sections 102 and 103 of the Customs Act. The petitioner’s willingness to undergo medical procedures was duly recorded.
2. Flight Risk: As a foreign national with no permanent roots in India, the petitioner was deemed a flight risk. The respondent contended that liberal approaches in cases involving commercial quantities of contraband are not permissible under the NDPS Act.
3. Transparency in Recovery: The Customs department emphasized that the recovery process was transparent, with independent panch witnesses present at every stage.
Court’s Observations

Justice carefully evaluated the arguments and made the following observations:
1. Violation of Legal Procedures: The court noted that the petitioner was not produced before a Magistrate within 24 hours of her interception at the airport, despite the recovery of contraband. The court emphasized that once the contraband was recovered, the petitioner should have been arrested immediately and produced before the Magistrate, even if further recovery was anticipated. The delay in formal arrest and detention at the hospital without judicial authorization constituted a violation of her constitutional rights.
2. Improper Use of AI Tools: The court found that the translated notices generated through Google Translator were incomplete and did not include the petitioner’s responses. This raised doubts about whether she was adequately informed of her legal rights, as required under Section 50 of the NDPS Act.
3. Precedents: The court referred to similar cases, including Kitoko Ngiembo Alain v. Customs and Habiob Bedru Omer v. Customs, where bail was granted due to procedural lapses and violations of constitutional rights.
4. Balancing Rights and Statutory Restrictions: While acknowledging the restrictions under Section 37 of the NDPS Act, the court emphasized that the right to life and liberty under Article 21 of the Constitution must prevail in cases of procedural violations.
Judgment

The court granted bail to Appellant, subject to the following conditions:
1. She must furnish a personal bond of Rs. 25,000/- with one local surety of the same amount.
2. She must disclose her residential address in advance, which the trial court may verify.
3. She must report to the Investigating Officer on the first Sunday of every month at 10:00 AM until the trial concludes.
4. She must not leave the National Capital Region of Delhi without prior permission from the trial court.
5. She must not contact or influence any witnesses directly or indirectly.
6. She must provide a mobile number to the Investigating Officer and ensure it remains active until the trial concludes.
The court also clarified that its observations should not be construed as a final opinion on the merits of the case.

Conclusion

The judgment in BAIL APPLN. 4689/2025 underscores the importance of adhering to procedural safeguards and constitutional rights, even in cases involving serious offenses like drug trafficking. It also highlights the challenges of using artificial intelligence tools in legal proceedings, particularly when dealing with foreign nationals who may not fully understand the language or legal processes. This case serves as a reminder that the principles of justice and due process must be upheld, regardless of the gravity of the allegations.

Source: Delhi High Court

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March 18, 2026
CESTAT Kolkata Sets Aside Penalties in SEIS Scrip Misclassification
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 17.03.2026

CESTAT Kolkata Sets Aside Penalties in SEIS Scrip Misclassification

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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 M/s. Amity Software Systems Ltd. & Appellant vs. Commissioner of Customs (Port), Kolkata. This case revolved around the classification of exported services under the Service Export from India Scheme (SEIS) and the imposition of penalties under Section 114AA of the Customs Act, 1962. The Tribunal’s decision has set a precedent for cases involving disputes over service classifications and penalties.

Background of the Case

M/s. Amity Software Systems Ltd., a company engaged in providing Information Technology Software Services and implementation of IT services, claimed SEIS scrip benefits from the Directorate General of Foreign Trade (DGFT). These scrips, which are transferable, were sold to buyers. However, the Directorate of Revenue Intelligence (DRI), Ahmedabad, initiated an investigation into the company’s export activities.

The investigation revealed that the services exported by the appellant fell under Group/Division 84 of Annexure 1 of the Explanatory Notes to Provisional CPC issued by DGFT, rather than Group/Division 86, as claimed by the appellant. This distinction was crucial because services under Group 84 are not eligible for SEIS scrip benefits. Consequently, a Show Cause Notice was issued on June 27, 2022, alleging suppression of facts and improper claim of SEIS scrips.

Following due process, the Adjudicating Authority confirmed a customs duty demand of ₹1,08,14,291, along with a penalty of ₹25,00,000 against the appellant company and ₹5,00,000 against its Managing Director. Aggrieved by this decision, the appellants approached the Tribunal.

Arguments Presented by the Appellants 

The appellants, represented by their counsel, argued that:
1. Bonafide Belief in Classification: The company believed that the services rendered fell under Group 86, which includes legal, accounting, auditing, market research, management, and consulting services. They contended that the services were provided exclusively to foreign entities, with payments received in foreign exchange.
2. No Suppression of Facts: The appellants argued that all relevant details were disclosed to the DGFT and customs authorities, and there was no willful suppression of facts as alleged.
3. Payment of Confirmed Demand: To avoid prolonged litigation, the company paid the entire confirmed demand of ₹1,08,14,291 along with interest of ₹51,81,981. They also paid a penalty of ₹20,00,000 imposed by the DGFT under Section 11 of the Foreign Trade (Development and Regulation) Act, 1992.
4. Request for Penalty Waiver: The appellants contested only the penalties imposed under Section 114AA of the Customs Act, 1962, arguing that the issue was one of interpretation and no malafide intent could be attributed to them.
Arguments Presented by the Respondent

The respondent justified the confirmed demand and penalties, stating:
1. Admission of Suppression: The appellants did not contest the DGFT’s findings and paid the penalty imposed, which indicated an admission of suppression.
2. Incorrect Classification: The services exported by the appellants clearly fell under Group 84, making them ineligible for SEIS scrip benefits.
Tribunal’s Observations and Final Order 

After hearing both sides and reviewing the appeal papers, the Tribunal made the following observations:
1. Thin Line Between Group 84 and Group 86: The Tribunal noted that the difference between the descriptions under Group 84 and Group 86 was minimal, making it a matter of interpretation.
2. Bonafide Belief: The Tribunal acknowledged that the appellants could have reasonably believed their services fell under Group 86, given the thin line of distinction between the two groups.
3. Acceptance of DGFT’s Decision: The Tribunal observed that the appellants had accepted the DGFT’s decision and paid the penalty imposed without contesting it further.
4. Penalty Waiver: Considering the appellants’ bonafide belief, their payment of the confirmed demand and interest, and the penalty imposed by the DGFT, the Tribunal set aside the penalties of ₹25,00,000 on the appellant company and ₹5,00,000 on the Managing Director under Section 114AA of the Customs Act, 1962.
5. Consequential Relief: The Tribunal held that the appellants would be eligible for any consequential relief as per the law.
Key Takeaways

This judgment highlights several important aspects of customs and trade law:
1. Importance of Accurate Classification: The case underscores the criticality of correctly classifying services under the DGFT’s Explanatory Notes to Provisional CPC for claiming SEIS scrip benefits.
2. Bonafide Belief and Interpretation: The Tribunal’s decision demonstrates that penalties may be waived in cases where the issue arises from a genuine difference in interpretation and no malafide intent is established.
3. Acceptance of Liability: The appellants’ decision to pay the confirmed demand and interest without contesting it played a significant role in the Tribunal’s decision to waive the penalties.
4. Role of DGFT: The DGFT’s authority in determining the eligibility of services for SEIS scrip benefits was reaffirmed.
Conclusion

The CESTAT Kolkata’s decision in this case is a landmark ruling that provides clarity on the interpretation of service classifications under the DGFT’s Explanatory Notes to Provisional CPC. It also emphasizes the importance of transparency and good faith in dealings with customs and trade authorities. By setting aside the penalties, the Tribunal has reinforced the principle that genuine errors in interpretation should not be penalized harshly, provided there is no evidence of willful suppression or malafide intent. This judgment will serve as a guiding precedent for similar cases in the future.

Source: CESTAT Kolkata

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March 17, 2026
CESTAT Mumbai Sets Aside Enhanced Valuation and Penalty on Flipkart
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 17.03.2026

CESTAT Mumbai Sets Aside Enhanced Valuation and Penalty on Flipkart

Adv Ravi Shekhar Jha

This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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), Mumbai, recently delivered a landmark judgment in the case of Flipkart India Private Limited vs. Commissioner of Customs (Import), setting aside the enhanced valuation, confiscation, redemption fine, and penalty imposed on Flipkart India Private Limited by the Commissioner of Customs (Appeals), Mumbai Zone-III. The case revolved around the alleged undervaluation of imported goods and the subsequent re-determination of their assessable value by the customs authorities.

Background of the Case 

Flipkart India Private Limited filed Customs Appeal No. 89472 of 2018, challenging the Order-in-Appeal dated January 19, 2018, which upheld the original authority’s decision to enhance the assessable value of imported goods, confiscate them, and impose penalties. The goods in question were 28,600 units of “Power Bank 5200mAH” (part number VXN4062IN) imported from M/s Xiaomi Singapore PTE Limited, Singapore. The declared unit value of the goods was US $3.64, which the customs authorities rejected, citing alleged undervaluation based on contemporaneous import data.

The original authority had re-determined the assessable value of the goods at Rs. 454.50 per unit, based on the import value of similar goods supplied to M/s Beetel Teletech Limited at Rs. 454.50 per unit. The customs authorities also imposed a redemption fine and penalty under Sections 125(1) and 112(a) of the Customs Act, 1962, and confiscated the goods under Section 111(m) of the Act.

Key Issues in the Case 

The Tribunal was tasked with determining two critical issues:
1. Whether the enhancement of the value of imported goods based on the value of similar goods was sustainable under Section 14 of the Customs Act, 1962, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR).
2. Whether the consequential actions of confiscation, imposition of redemption fine, and penalty were legally justified under the Customs Act, 1962.
Arguments Presented

Arguments by Flipkart India Private Limited 

The learned advocate for Flipkart India Private Limited argued that:
1. The declared transaction value of US $3.64 per unit was accurate and should have been accepted under Rule 3 of the CVR, as it was based on a valid supply agreement with the foreign supplier, M/s Xiaomi Singapore PTE Limited.
2. The customs authorities failed to consider the value of identical goods imported by Flipkart from the same supplier during the same period, which were cleared without dispute at the declared value.
3. The re-determined value of Rs. 454.50 per unit was based on a single transaction of 10,000 units imported by M/s Beetel Teletech Limited, which was not comparable to Flipkart’s wholesale-level import of 28,600 units as part of a larger purchase order for 2,00,000 units.
4. The customs authorities did not follow the sequential application of Rules 4 to 9 of the CVR, as mandated by law, and failed to provide evidence of mis-declaration or flowback of additional consideration.
5. The alleged undervaluation was based on a misinterpretation of the INCO terms in the proforma invoice, which was later clarified by the supplier.
Arguments by the Revenue 

The learned authorized representative for the Revenue justified the impugned order, arguing that:
1. The enhancement of the value was based on contemporaneous import data of similar goods, which was valid under Rule 5 of the CVR.
2. The mis-declaration of INCO terms and undervaluation empowered the customs authorities to reject the declared value and impose penalties and fines.
Tribunal’s Observations and Findings 

After carefully examining the submissions and evidence presented by both sides, the Tribunal made the following observations:
1. Rejection of Declared Value: The Tribunal noted that the customs authorities had failed to consider the transaction value of identical goods imported by Flipkart from the same supplier during the same period. The declared value of US $3.64 per unit for 1,71,400 units of identical goods was accepted by the same Customs Commissionerate without dispute. The authorities instead relied on a single transaction of 10,000 units imported by M/s Beetel Teletech Limited at Rs. 454.50 per unit, which was not comparable in terms of commercial level and quantity.
2. Sequential Application of CVR Rules: The Tribunal emphasized that the customs authorities did not follow the sequential application of Rules 4 to 9 of the CVR, as required by law. The authorities directly invoked Rule 5 without considering the transaction value under Rule 3 or the value of identical goods under Rule 4.
3. Mis-declaration of INCO Terms: The Tribunal found that the alleged mis-declaration of INCO terms was adequately explained by the supplier’s letter dated March 9, 2015, which clarified that the terms of sale were on a “CIP” basis. The customs authorities failed to provide evidence to support their claim that the declared value was incorrect.
4. Confiscation, Fine, and Penalty: The Tribunal held that the confiscation of goods under Section 111(m) of the Customs Act, 1962, and the imposition of redemption fine and penalty were not justified, as the customs officers who examined the goods did not report any mis-declaration, and the mandatory requirements for labeling were complied with.
5. Judicial Precedents: The Tribunal relied on several judicial precedents, including Suyog Extrusions, Sarto Electro Equipment Ltd., Agarwal Foundries (P) Ltd., and South India Television (P) Ltd., to conclude that the transaction value cannot be rejected without evidence of contemporaneous imports of identical or similar goods at higher prices.
Final Decision

The Tribunal set aside the impugned order dated January 19, 2018, and allowed the appeal filed by Flipkart India Private Limited. The Tribunal ruled that the re-determination of the assessable value, confiscation of goods, and imposition of redemption fine and penalty were not sustainable under the Customs Act, 1962, and the CVR, 2007.

Key Takeaways
1. Importance of Transaction Value: The judgment reinforces the principle that the transaction value declared by the importer should be accepted unless there is concrete evidence to prove undervaluation or mis-declaration.
2. Sequential Application of CVR Rules: Customs authorities must follow the sequential application of Rules 4 to 9 of the CVR when determining the assessable value of imported goods.
3. Burden of Proof: The onus is on the customs authorities to prove that the declared value is incorrect, supported by evidence of contemporaneous imports of identical or similar goods at higher prices.
4. Commercial Level and Quantity: The price of imported goods at the wholesale level cannot be compared to the price of goods
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Source: CESTAT Mumbai

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March 17, 2026