ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 04.11.2025
L&T granted relief by CESTAT Chennai as it Sets Aside Customs Duty Demand Over Procedural Lapses and Limitation Issues
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
In a significant judgment, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has ruled in favor of M/s Larsen & Toubro Ltd. (L&T Construction) in a series of appeals challenging the Order-in-Original No. 35511/2015 dated 27.02.2015 issued by the Commissioner of Customs, Chennai-II. β The case revolved around allegations of suppression of freight and other charges during the importation of used machinery from M/s Sharaf Foundations, Dubai, and the subsequent demand for differential duty, interest, penalties, and confiscation under various provisions of the Customs Act, 1962. β
Background of the Case
The dispute originated from a Show Cause Notice (SCN) issued on 08.10.2014, alleging that M/s L&T Ltd. had misdeclared freight and other charges paid to their overseas supplier, M/s Sharaf Foundations, Dubai. β The SCN proposed reassessment of the declared value under Rule 9 and Rule 10 of the Customs Valuation Rules, 2007, read with Section 14 of the Customs Act, 1962. β It also sought to invoke Section 28 for the demand of differential duty, interest, and penalties under Sections 112(a), 114A, and 114AA. β
M/s L&T Ltd. contested the allegations, submitting a detailed explanation and a worksheet to justify their stand. β They argued that they had paid duty on freight, overhead expenses, and yard charges, and that the proceedings under the SCN should have been terminated as per Section 28(5) of the Customs Act. β They also raised objections to the issuance of the SCN beyond the normal period of limitation and the non-issuance of a mandatory notice under Section 28(6). β
Tribunalβs Observations
Tribunal noted several key points in their judgment:
- Non-Issuance of Mandatory Notice: The Tribunal observed that Section 28(6) of the Customs Act mandates the issuance of a notice if the proper officer believes there is a short payment of duty or penalty. β The failure to issue this notice rendered the provision ineffective and undermined the legal process. β
- Extended Period of Limitation: The Tribunal highlighted that the SCN was issued beyond the normal period of limitation, and the allegations of suppression were not substantiated with evidence of intent to evade duty. β The Tribunal emphasized that the conditions for invoking the extended period under Section 28 were not met. β
- Interpretational Issues: The Adjudicating Authority itself admitted that the difference in duty calculation was not solely due to factual discrepancies but also involved interpretational issues. β This further weakened the allegation of suppression. β
Final Order
In light of these observations, the Tribunal set aside the impugned Order-in-Original and allowed the appeals filed by M/s Larsen & Toubro Ltd. with consequential benefits as per law. The Tribunal also disposed of the Departmentβs appeal and the cross-objections filed by the importer, stating that the Revenueβs grievance merged with the impugned order, which was deemed unsustainable. β
Key Takeaways
This judgment underscores the importance of adhering to procedural requirements under the Customs Act, particularly the issuance of mandatory notices under Section 28(6). β It also highlights the significance of proving intent to evade duty when invoking the extended period of limitation. β The decision serves as a reminder to both importers and the Revenue to ensure compliance with legal provisions and procedural mandates.
The ruling is a major victory for M/s Larsen & Toubro Ltd., reaffirming the principle that procedural lapses and unsubstantiated allegations cannot form the basis for imposing demands and penalties. β This case sets a precedent for similar disputes and reinforces the need for transparency and fairness in customs adjudication processes.
Source: CESTAT Chennai
Handy Download:
Write to us at office@aadrikaalaw.com
Tel: +91-11-4999 2707 I +91-9999005379