𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

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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
CESTAT Chandigarh- Inconclusive Test Reports Cannot Justify Reclassification or Penalties in Customs Disputes
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 16.03.2026

CESTAT Chandigarh- Inconclusive Test Reports Cannot Justify Reclassification or Penalties in Customs Disputes

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, and Service Tax Appellate Tribunal (CESTAT), Chandigarh, recently delivered a significant judgment in a series of appeals concerning the classification of imported goods. The case revolved around whether the imported goods declared as “Pressed Distillate Oil” (PDO) could be classified as “Base Oil” based on inconclusive test reports from the Central Revenue Control Laboratory (CRCL). This decision has far-reaching implications for importers and the customs authorities, particularly in cases involving disputes over product classification and valuation.

Background of the Case

The appeals stemmed from two separate cases:
1. Appeals by M/s S.K. Petrochem and Shri Jeevan Jain M/s S.K. Petrochem imported consignments of “Pressed Distillate Oil” and filed four Bills of Entry for clearance. The CRCL test report indicated that the samples had characteristics of “Base Oil,” leading to the seizure of goods and issuance of a Show Cause Notice proposing reclassification, penalties, and fines. The adjudicating authority confirmed the proposals, imposing penalties under Section 114A of the Customs Act, 1962. M/s S.K. Petrochem and Shri Jeevan Jain challenged the order.
2. Appeals by Revenue Against M/s Om Udyog M/s Om Udyog imported similar consignments and filed two Bills of Entry, declaring the goods as “Pressed Distillate Oil.” The CRCL test report suggested the goods had characteristics of “Base Oil,” leading to their seizure and reclassification. However, the Commissioner (Appeals) set aside the original order, dropping the proceedings against M/s Om Udyog. The Revenue challenged this decision.
Key Issues in the Case 

The primary issue was whether the goods declared as “Pressed Distillate Oil” could be conclusively classified as “Base Oil” based on the CRCL test reports. The tribunal also examined whether the adjudicating authority’s refusal to allow cross-examination of the chemical examiner constituted a violation of natural justice.

Arguments Presented
- Appellants’ Arguments: The appellants argued that the CRCL test reports were inconclusive, as they merely stated that the samples had characteristics of “Base Oil” without definitively classifying the goods as such. They contended that the denial of cross-examination of the chemical examiner was a violation of natural justice. The appellants cited previous judgments, including the CESTAT Chandigarh’s decision in the case of M/s Golden Enterprises, which held that inconclusive test reports could not be the basis for reclassification and penalties.
- Revenue’s Arguments: The Revenue defended the original orders, reiterating that the CRCL test reports were sufficient to classify the goods as “Base Oil” and justify the penalties and fines imposed.
Tribunal’s Observations and Findings 

After hearing both sides and reviewing the case records, the tribunal made the following observations:
1. Inconclusive Test Reports: The CRCL test reports merely indicated that the samples had characteristics of “Base Oil” but did not categorically classify the goods as such. The tribunal noted that the chemical examiner’s report lacked definitive findings and failed to address whether the goods were “Base Oil” or “Pressed Distillate Oil.”
2. Violation of Natural Justice: The tribunal emphasized that the adjudicating authority’s refusal to allow cross-examination of the chemical examiner constituted a serious violation of the principles of natural justice. Cross-examination would have provided clarity and potentially resolved the ambiguity in the test reports.
3. Precedents: The tribunal referred to its earlier decision in the case of M/s Golden Enterprises, which was upheld by the Supreme Court. In that case, the court ruled that inconclusive test reports could not be the basis for reclassification or allegations of misdeclaration.
4. Benefit of Doubt: Given the lack of conclusive evidence, the tribunal decided to give the benefit of the doubt to the importers. It held that the Revenue had failed to establish that the goods were “Base Oil” and not “Pressed Distillate Oil.”
Final Decision

The tribunal delivered its final order on March 9, 2026:
1. The appeals filed by M/s S.K. Petrochem and Shri Jeevan Jain were allowed, with consequential relief as per the law.
2. The appeals filed by the Revenue against M/s Om Udyog were dismissed, upholding the Commissioner (Appeals)’ decision to drop the proceedings.
Implications of the Judgment

This landmark decision underscores the importance of adhering to the principles of natural justice in adjudication processes. It highlights the need for conclusive evidence when alleging misdeclaration or reclassification of imported goods. The judgment also sets a precedent for future cases involving disputes over product classification, emphasizing that inconclusive test reports cannot be the sole basis for imposing penalties or fines.

Conclusion

The CESTAT Chandigarh’s decision in these appeals serves as a reminder to customs authorities to ensure thorough investigations and adherence to procedural fairness. For importers, the judgment provides reassurance that they will not be penalized based on inconclusive evidence. As global trade continues to grow, such decisions play a crucial role in maintaining a fair and transparent customs framework.

Source: CESTAT Chandigarh

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March 16, 2026
Delhi High Court Dismisses Customs Appeal in Customs Broker License Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 16.03.2026

Delhi High Court Dismisses Customs Appeal in Customs Broker License 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.

On March 12, 2026, the High Court of Delhi delivered a significant judgment in the case of Commissioner of Customs Airport and General vs. M/S Entire Logistics Pvt Ltd. The case revolved around the revocation of the Customs Broker License of M/S Entire Logistics Pvt Ltd by the Commissioner of Customs, which was subsequently overturned by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). The High Court upheld the decision of CESTAT, dismissing the appeal filed by the Commissioner of Customs.

Background of the Case

The dispute originated from a show cause notice issued to M/S Entire Logistics Pvt Ltd on December 30, 2022, alleging violations of Regulations 10(a), 10(d), 10(e), and 10(n) of the Customs Brokers Licensing Regulations (CBLR), 2018. The Commissioner of Customs passed an Order-in-Original on February 14, 2024, revoking the Customs Broker License of the respondent. However, this order was challenged before CESTAT, which quashed the revocation on August 28, 2024, citing procedural lapses and lack of clarity in the show cause notice.

The Commissioner of Customs subsequently filed an appeal under Section 130 of the Customs Act, 1962, before the High Court of Delhi, seeking to overturn the CESTAT decision.

Arguments Presented
1. Appellant’s Arguments:
  - The appellant argued that the show cause notice clearly outlined the violations of Regulations 10(a), 10(d), 10(e), and 10(n) of CBLR, 2018.
  - The appellant contended that the show cause notice referred to specific material from another notice issued under the Customs Act, 1962, which substantiated the alleged violations.
  - It was claimed that the inquiry report and Order-in-Original provided sufficient notice to the respondent regarding the violations.
2. Respondent’s Arguments:
  - The respondent argued that the show cause notice was vague and lacked specific allegations, making it difficult to understand the exact nature of the violations.
  - The respondent contended that the Order-in-Original went beyond the scope of the show cause notice, relying on material not explicitly mentioned in the notice.
  - The respondent emphasized that the lack of clarity in the show cause notice violated the principles of natural justice.
High Court’s Observations

The High Court carefully examined the arguments and the relevant legal provisions. Key observations included:
1. Vagueness of the Show Cause Notice:
  - The Court noted that the show cause notice failed to specify how the alleged violations fell within the ambit of the cited regulations. This lack of clarity made it difficult for the respondent to prepare an adequate defense.
2. Violation of Principles of Natural Justice:
  - The Court emphasized that the show cause notice is the foundation of any legal proceedings. If the notice is vague or lacks specific details, it violates the principles of natural justice, as the noticee is not given a fair opportunity to respond to the allegations.
3. Order-in-Original Exceeding Scope:
  - The Court agreed with CESTAT’s finding that the Order-in-Original had relied on material not included in the show cause notice, thereby exceeding its scope.
4. No Substantial Question of Law:
  - The Court concluded that the appeal did not involve any substantial question of law, as the issues raised were factual and procedural rather than legal.
Judgment

The High Court dismissed the appeal, upholding the CESTAT’s decision to quash the revocation of the Customs Broker License. The Court reiterated the importance of adhering to the principles of natural justice and ensuring that show cause notices are clear and specific.

Key Takeaways
1. Importance of Clarity in Show Cause Notices:
  - This case highlights the critical role of clarity and specificity in show cause notices. Authorities must ensure that notices provide sufficient details to enable the noticee to respond effectively.
2. Adherence to Principles of Natural Justice:
  - The judgment underscores the importance of adhering to the principles of natural justice in administrative proceedings. Any deviation from these principles can render the proceedings invalid.
3. Scope of Orders:
  - Authorities must ensure that orders are confined to the scope of the show cause notice and do not rely on extraneous material.
Conclusion

The High Court’s decision in this case serves as a reminder to regulatory authorities to exercise due diligence while issuing show cause notices and passing orders. It also reinforces the judiciary’s commitment to upholding the principles of natural justice and ensuring fairness in administrative proceedings.

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Source: Delhi High Court

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March 16, 2026
CESTAT Mumbai Overturns Duty Demand in SAD Exemption Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 14.03.2026

CESTAT Mumbai Overturns Duty Demand in SAD Exemption 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 Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, recently delivered a landmark judgment in favor of India Steel Works Limited and its General Manager, in the Customs Appeal Nos. 86427 and 86428 of 2016. The appeals challenged the Order-in-Original No. 21/2015-16/RT-13/NS-GEN dated February 29, 2016, issued by the Principal Commissioner of Customs (NS-GEN), Jawaharlal Nehru Custom House (JNCH), Nhava Sheva. The case revolved around the eligibility of India Steel Works Limited to claim exemption from the Special Additional Duty of Customs (SAD) under Notification No. 45/2005-Customs dated May 16, 2005.

Background of the Case 

India Steel Works Limited, a manufacturer of stainless steel products, imported goods such as waste and scrap of stainless steel, stainless steel billets, and ferro alloys through the Free Trade Warehousing Zone (FTWZ) operated by M/s Arshiya Supply Chain Management Limited. These goods were used in the production of stainless steel products, which were later sold in the Domestic Tariff Area (DTA) upon payment of applicable VAT/sales tax. The company availed the SAD exemption benefit under Notification No. 45/2005-Customs, which provides exemption from the whole of SAD for goods cleared from SEZ/FTWZ to DTA, provided the goods are not exempt from sales tax or VAT.

However, based on intelligence developed by the Directorate General of Central Excise Intelligence (DGCEI), Mumbai Zonal Unit, a Show Cause Notice (SCN) dated June 16, 2015, was issued to the appellants. The SCN alleged that India Steel Works Limited had wrongly availed the SAD exemption benefit and demanded Rs. 4,06,30,866/- in SAD along with interest under Section 28(4) of the Customs Act, 1962. The SCN also proposed the confiscation of goods under Section 111(o) and the imposition of penalties under Sections 112 and 114AA of the Customs Act.

The Principal Commissioner of Customs upheld the SCN, confirming the duty demands, confiscation of goods, and penalties. Aggrieved by this decision, the appellants filed appeals before the CESTAT.

Arguments Presented

Appellants’ Arguments 
1. Eligibility for SAD Exemption: The appellants argued that the issue of eligibility for SAD exemption on clearance from FTWZ to DTA had already been conclusively settled in favor of appellants in multiple decisions by the Tribunal. They contended that stock transfers from FTWZ to DTA cannot be equated with exemptions from sales tax/VAT.
2. Disclosure of Facts: The appellants maintained that they had made complete disclosures to the Department and followed all prescribed procedures. They argued that there was no suppression of facts or malafide intent.
3. Industry-Wide Issue: The appellants highlighted that the issue was subject to varying interpretations by different government wings, and they had acted in good faith based on assurances from the Development Commissioner of SEZ/FTWZ and the FTWZ unit.
4. Time-Barred Demand: The appellants contended that the demand for the disputed period (April 2012 to March 2013) was barred by the limitation period, as the SCN was issued beyond the normal period of one year.
Revenue’s Arguments 
1. Clarification from Ministry of Finance: The Revenue argued that Customs Circular No. 44/2013 dated December 30, 2013, clarified that SAD exemption was not available for goods cleared from SEZ/FTWZ to DTA on a stock transfer basis for self-consumption.
2. Misleading Undertaking: The Revenue alleged that the appellants had provided misleading undertakings and suppressed facts to avail the SAD exemption.
CESTAT’s Observations and Ruling 

After hearing both sides and reviewing the case records, the Tribunal made the following observations:
1. Judicial Precedents: The Tribunal referred to several previous rulings, including CRI Limited vs. Commissioner of Customs and Serum Institute of India vs. Commissioner of Central Excise, which had upheld the eligibility for SAD exemption under similar circumstances. The Tribunal noted that the facts of the present case were identical to those in the CRI Limited case, which was upheld by the Supreme Court.
2. Notification Interpretation: The Tribunal emphasized that Notification No. 45/2005-Customs exempts all goods cleared from SEZ/FTWZ to DTA, provided the goods are not exempt from sales tax/VAT. The nature of clearance—whether by sale or stock transfer—was not specified in the notification, and the proviso regarding exemption from VAT was not applicable in this case.
3. No Suppression of Facts: The Tribunal found that the appellants had acted in good faith, relying on assurances from the Development Commissioner of SEZ/FTWZ and the FTWZ unit. There was no evidence of malafide intent or suppression of facts.
4. Time-Barred Demand: The Tribunal ruled that the demand for the disputed period was time-barred, as the SCN was issued beyond the normal limitation period of one year. The extended period of limitation could not be invoked due to the absence of suppression or misstatement.
Final Order

The Tribunal set aside the impugned order on the grounds of limitation and ruled in favor of the appellants. The adjudged demands, confiscation of goods, and penalties were all quashed.

Key Takeaways
1. SAD Exemption: The judgment reinforces the principle that SAD exemption under Notification No. 45/2005-Customs is applicable to goods cleared from SEZ/FTWZ to DTA, even on a stock transfer basis, provided the goods are not exempt from sales tax/VAT.
2. Importance of Disclosure: The Tribunal highlighted the significance of full disclosure and compliance with prescribed procedures to avoid allegations of suppression or malafide intent.
3. Limitation Period: The ruling underscores the importance of adhering to the limitation period for issuing SCNs, and that extended periods cannot be invoked without evidence of suppression or misstatement.
4. Judicial Precedents: The judgment demonstrates the importance of consistency in judicial decisions, with the Tribunal relying on previous rulings to arrive at its conclusion.
This decision is a significant win for India Steel Works Limited and sets a precedent for similar cases involving SAD exemption claims under Notification No. 45/2005-Customs. It also serves as a reminder to both taxpayers and authorities about the importance of adhering to legal provisions and established judicial principles.

Source: CESTAT Mumbai

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March 14, 2026