𝐀𝐚𝐝𝐫𝐢𝐤𝐚𝐚 𝐋𝐞𝐠𝐚𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 (𝐀𝐋𝐒)

Tag: #TaxLitigations

CESTAT Delhi Quashes Gold Smuggling Penalties
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 09.02.2026

CESTAT Delhi Quashes Gold Smuggling Penalties

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.comor on his Mobile +91-9999005379.

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment in the case of Customs Appeal No. 50837 of 2024. This case, involving allegations of gold smuggling, highlights critical aspects of the Customs Act, 1962, particularly sections 108, 112(b)(i), 114AA, and 123, as well as the procedural requirements under section 138B. The judgment, pronounced on February 6, 2026, by Hon’ble Justice, sets a precedent for the admissibility of evidence and the burden of proof in customs-related cases.

Background of the Case

The appellant, a partner in M/s. S.R. & Co., filed an appeal to quash the order dated October 11, 2023, passed by the Commissioner (Appeals) Customs, CGST, Central Excise, Indore. The order had upheld penalties imposed on the appellant under sections 112(b)(i) and 114AA of the Customs Act, 1962, for alleged involvement in gold smuggling activities.

The case revolved around the seizure of 69 kg of gold bars by the Directorate of Revenue Intelligence (DRI) on March 20, 2021, from two individuals, who were transporting the gold to Indore. The DRI alleged that the gold was of foreign origin and smuggled into India, and accused the appellant of being a mastermind behind the smuggling operation.

Key Allegations Against the Appellant 

The show cause notice issued to the appellant alleged the following:
1. The appellant was involved in smuggling foreign-origin gold, converting it into bars resembling domestic origin gold, and supplying it to M/s. Pulak Ornaments LLP.
2. The appellant was aware of the smuggling activities and had telephonically received orders for foreign-origin gold on previous occasions.
3. The appellant failed to prove that the seized gold was not smuggled, as required under section 123 of the Customs Act.
4. The appellant allegedly fabricated backdated invoices to legitimize the possession of the smuggled gold.
Key Legal Issues

The case raised several important legal questions:
1. Admissibility of Statements Under Section 108 of the Customs Act: The appellant argued that the statements recorded under section 108 were inadmissible as the procedure under section 138B was not followed. Section 138B mandates that statements recorded during an inquiry are relevant only if the person who made the statement is examined as a witness and the adjudicating authority forms an opinion that the statement should be admitted in evidence in the interest of justice.
2. Burden of Proof Under Section 123 of the Customs Act: The appellant contended that the burden of proving the gold was not smuggled did not lie on him, as the gold was neither seized from his possession nor did he claim ownership of it.
3. Legitimacy of Invoices: The Commissioner (Appeals) rejected the invoices produced by the appellant, alleging they were fabricated and created after the seizure of the gold. The appellant argued that the invoices were valid and demonstrated legitimate purchase and sale of the gold bars.
Key Findings of the Tribunal 

The Tribunal made several critical observations in its judgment:
1. Non-Adherence to Section 138B: The Tribunal held that the statements recorded under section 108 of the Customs Act could not be relied upon as evidence because the mandatory procedure under section 138B was not followed. The Tribunal emphasized that the statements must be admitted in evidence only after the person making the statement is examined as a witness and the adjudicating authority forms an opinion on their admissibility.
2. Burden of Proof Under Section 123: The Tribunal clarified that the burden of proving the gold was not smuggled lies with the person from whose possession the goods were seized. Since the gold bars were not seized from the appellant’s possession, the burden of proof did not lie on him. The Tribunal also noted that the gold bars did not have foreign markings and their purity was below 99.9%, which further weakened the department’s case.
3. Validity of Invoices: The Tribunal observed that invoices produced at a later stage are permissible under the law and cannot be dismissed solely because they were not presented at the time of the search. The Tribunal cited previous judgments to support this view, emphasizing that the burden of proving the smuggled nature of goods lies with the department.
Final Decision

The Tribunal set aside the penalties imposed on the appellant under sections 112(b)(i) and 114AA of the Customs Act, 1962, and allowed the appeal. The judgment underscored the importance of adhering to procedural requirements under section 138B and clarified the application of section 123 in cases involving the seizure of goods.

Key Takeaways
1. Admissibility of Statements: Statements recorded under section 108 of the Customs Act are not automatically admissible as evidence. The procedure under section 138B must be strictly followed, including the examination of the person making the statement and providing an opportunity for cross-examination.
2. Burden of Proof: Section 123 of the Customs Act places the burden of proof on the person from whose possession the goods are seized. If the goods are not seized from the appellant’s possession, the burden does not lie on them.
3. Legitimacy of Documents: Invoices and other documents produced at a later stage are valid under the law and cannot be dismissed without proper verification.
Conclusion

The judgment in Customs Appeal No. 50837 of 2024 serves as a reminder of the importance of following due process in customs-related cases. It highlights the need for adjudicating authorities to adhere to statutory provisions and ensure fairness in proceedings. This case also reinforces the principle that the burden of proof lies with the department in cases where goods are not seized from the possession of the accused. As the legal landscape continues to evolve, this decision will undoubtedly serve as a guiding precedent for similar cases in the future.

Source: CESTAT Delhi

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February 9, 2026
CESTAT Hyderabad Sets Aside Export Valuation Order
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 07.02.2026

CESTAT Hyderabad Sets Aside Export Valuation Order

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.comor on his Mobile +91-9999005379.

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Hyderabad recently delivered a significant judgment in the Customs Appeal No. 20682 of 2015, which revolved around the valuation of export goods and the rejection of declared transaction values. This case highlights the importance of adhering to legal procedures and principles in determining export valuation under the Customs Act, 1962, and the Export Valuation Rules, 2007.

Background of the Case

The appellant, M/s S.K. Sarawagi & Co. Pvt Ltd, engaged in the export of iron ore fines, filed two shipping bills for exporting 10,500 WMT of iron ore fines with 61% Fe content to a buyer in Hong Kong, China. The declared unit price was USD 115 PDMT FOB, and the moisture content was declared at 9%. However, the Visakhapatnam Customs House adopted a moisture content of 3% and provisionally assessed the declared price, pending finalization based on test results and submission of final documents.

Upon finalization, the Original Authority rejected the declared price and adopted USD 128 PDMT FOB, citing contemporaneous export prices of M/s Rungta Sons Pvt Ltd. Additionally, the Original Authority imposed a duty on 3.4% of the export goods, considering the lumps exceeding the tolerance limit of 5% as per Notification No. 56/2010-Cus. Consequently, the appellant was ordered to pay Rs. 2,97,081/- along with applicable interest.

The appellant challenged this decision before the Commissioner (Appeals), who upheld the Original Authority’s order. Dissatisfied with the outcome, the appellant filed an appeal with the CESTAT.

Key Issues in the Case

The primary dispute in this case revolved around the rejection of the declared transaction value of USD 115 PDMT FOB and the adoption of USD 128 PDMT FOB as the assessable value. The appellant argued that the Original Authority failed to provide valid reasons for rejecting the declared transaction value and did not follow the prescribed procedures under Rule 8 of the Export Valuation Rules, 2007.

The appellant contended that the adjudicating authority had chosen the highest price from the contemporaneous export prices without considering adjustments for differences in export dates, commercial levels, quantity levels, composition quality, and domestic freight charges. Furthermore, the appellant emphasized that the transaction value, supported by the Bank Realization Certificate (BRC), should be accepted unless there is substantive evidence to prove that the declared value is not genuine.

Legal Framework for Export Valuation 

Section 14(1) of the Customs Act, 1962, and the Export Valuation Rules, 2007, provide the legal framework for determining the value of export goods. According to Section 14(1), the transaction value, i.e., the price actually paid or payable for the goods, is the basis for valuation, provided the buyer and seller are not related, and the price is the sole consideration for the sale.

Rule 4(2) of the Export Valuation Rules outlines the factors that must be considered when determining the value of export goods, including differences in export dates, commercial levels, quality, and domestic freight charges. Additionally, Rule 8 mandates that the proper officer must issue a query memo, provide reasons for doubting the declared transaction value, and offer a personal hearing before rejecting the declared price.

CESTAT’s Observations and Judgment

After hearing both sides and reviewing the records, the CESTAT found that the adjudicating authority had failed to provide valid reasons for rejecting the declared transaction value. The authority did not raise any doubts about the transaction value or the BRC, nor did it follow the procedures prescribed under Rule 8 of the Export Valuation Rules.

The tribunal emphasized that the rejection of transaction value without substantive evidence is legally untenable. It cited several landmark judgments, including CC, Mumbai Vs Vishal Exports Overseas Ltd and Century Metal Recycling (P) Ltd Vs UOI, which established that transaction value corroborated by sale/purchase contracts and BRC cannot be rejected without valid reasons and evidence.

The CESTAT concluded that the impugned order of the Commissioner (Appeals) was not proper, legal, or correct. It set aside the order and remanded the case to the Assessing Officer for finalization of the assessment based on the transaction value as reflected in the BRC.

Key Takeaways from the Case
1. Adherence to Legal Procedures: The case underscores the importance of following the prescribed procedures under the Customs Act and Export Valuation Rules when rejecting declared transaction values. Proper officers must issue query memos, provide reasons for doubt, and offer personal hearings before making a decision.
2. Transaction Value as the Basis for Valuation: The transaction value, supported by valid documentation such as the BRC, is the primary basis for export valuation. It cannot be rejected without substantive evidence proving its inaccuracy or lack of genuineness.
3. Contemporaneous Prices: When comparing declared transaction values with contemporaneous export prices, adjudicating authorities must consider all relevant factors, including differences in export dates, quality, and commercial levels. Arbitrarily choosing the highest price is not permissible.
4. Legal Precedents: The judgment highlights the significance of legal precedents in export valuation disputes. Decisions by higher courts, such as the Supreme Court, provide clear guidelines for assessing transaction values and rejecting declared prices.
Conclusion

The CESTAT’s decision in Customs Appeal No. 20682 of 2015 serves as a reminder of the importance of transparency, adherence to legal procedures, and reliance on substantive evidence in export valuation cases. It reinforces the principle that transaction value, supported by valid documentation, should be the primary basis for valuation unless there are compelling reasons to reject it. This case is a valuable reference for exporters, customs authorities, and legal professionals dealing with valuation disputes under the Customs Act, 1962.

Source: CESTAT Hyderabad

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February 7, 2026
CESTAT Mumbai Quashes Anti-Dumping Duty
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 07.02.2026

CESTAT Mumbai Quashes Anti-Dumping Duty

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.comor on his Mobile +91-9999005379.

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has set aside the Order-in-Original No. 305/2023-24/Commr/NS-I/CAC/JNCH dated 29.03.2024, passed by the Commissioner of Customs (NS-I), Jawaharlal Nehru Customs House (JNCH), Nhava Sheva. This decision comes as a significant relief for the appellants, including Surbhit Impex Pvt. Ltd. (SIPL) and its associated entities, who were facing allegations of overvaluation of imported goods and evasion of Anti-Dumping Duty (ADD).

Background of the Case

The case revolved around the import of 38 consignments of melamine by SIPL and B.M. Jain & Sons Pvt. Ltd. (BMJSPL), which had merged with SIPL as per an NCLT order dated 06.05.2022. The Directorate of Revenue Intelligence (DRI), Mumbai Zonal Unit, initiated an investigation based on intelligence reports, alleging that the appellants had deliberately inflated the declared value of imported melamine to evade ADD. The Commissioner of Customs subsequently passed an order confirming the rejection of the assessable value, imposing ADD, penalties, and redemption fines.

The appellants challenged the order before the CESTAT, arguing that the transaction value of the imported goods was rejected without valid reasons. They contended that the declared value was higher than the international market price and that the Department had relied on questionable evidence, including electronic data and rubber stamps, without proper verification or cross-examination.

Key Arguments by the Appellants
1. Rejection of Transaction Value: The appellants argued that the rejection of the declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 was impermissible. They highlighted that the declared value was higher than the international market price, and the Department failed to provide valid reasons for rejecting the transaction value.
2. Admissibility of Electronic Evidence: The appellants challenged the admissibility of electronic evidence retrieved during the investigation, citing procedural lapses in its seizure and examination. They argued that the evidence was in editable format and could have been tampered with, and that the necessary compliance under Section 138B and 138C of the Customs Act was not met.
3. High Sea Sales Transactions: The appellants emphasized that 27 out of the 38 consignments were purchased on a legally valid High Sea Sale basis, and there was no evidence to suggest that the declared value was manipulated to evade ADD.
4. Purpose of ADD: The appellants argued that the sole purpose of ADD is to counteract unfair international trade practices and protect domestic industries, not to generate revenue. They contended that the Department’s reliance on the ICIS price list was flawed, as it did not represent actual transaction values.
Key Arguments by the Respondent 

The Respondent, represented by Additional Commissioner, argued that the investigation revealed a deliberate attempt to evade ADD through artificial inflation of CIF value, use of a dummy intermediary, and fabrication of invoices. The Respondent relied on electronic evidence, including email communications and editable invoices, to substantiate the allegations.

CESTAT’s Observations and Final Order 

After a detailed examination of the case, the CESTAT bench comprising Hon’ble (Member Judicial) and Hon’ble (Member Technical) found several flaws in the order passed by the Commissioner of Customs. The key observations included:
1. Improper Application of Rule 12: The Tribunal noted that Rule 12 of the Customs Valuation Rules does not empower the proper officer to reduce the declared value to a lower level for imposing ADD. The rejection of the transaction value was deemed impermissible as the declared value was higher than the alleged international market price.
2. Lack of Evidence: The Tribunal observed that the Department failed to provide cogent evidence to substantiate the allegations of overvaluation and evasion of ADD. The electronic evidence presented was deemed inadmissible due to procedural lapses in its seizure and examination.
3. Purpose of ADD: The Tribunal emphasized that ADD is a remedial measure designed to protect domestic industries from unfair trade practices, not a tool for revenue generation. The reliance on the ICIS price list was found to be inconsistent with the principles of Customs Valuation under the General Agreement on Tariffs and Trade (GATT).
4. Extended Period of Investigation: The Tribunal noted that the extended period of investigation was not justified, as the Department was aware of the transactions and had assessed the Bills of Entry at the first check.
Based on these findings, the CESTAT set aside the order passed by the Commissioner of Customs and allowed the appeals with consequential relief.

Implications of the Judgment

This judgment is a significant win for importers, as it reinforces the principles of fair valuation under the Customs Valuation Rules and GATT guidelines. It highlights the importance of adhering to procedural requirements for the admissibility of evidence and underscores the need for the Department to provide concrete proof when alleging evasion of duties.

The decision also serves as a reminder that ADD is not a revenue-generating tool but a measure to protect domestic industries from unfair trade practices. Importers can take solace in the fact that the Tribunal has upheld the importance of transaction value and rejected arbitrary valuation methods.

Conclusion

The CESTAT Mumbai’s decision in favor of Surbhit Impex Pvt. Ltd. and other appellants sets a precedent for similar cases involving allegations of overvaluation and evasion of ADD. It underscores the need for transparency, adherence to legal procedures, and the importance of evidence in quasi-judicial proceedings. This judgment is a testament to the robust legal framework that governs customs valuation and anti-dumping measures in India, ensuring fairness and justice for all stakeholders.

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Source: CESTAT Mumbai

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February 7, 2026
Delhi High Court Sets Aside Customs Advance Ruling on SFP Classification and Grants Exemption
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 06.02.2026

Delhi High Court Sets Aside Customs Advance Ruling on SFP Classification and Grants Exemption

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.comor on his Mobile +91-9999005379.

Case Title: Nokia Solutions and Networks India Private Limited vs. Customs Authority for Advance Rulings, New Delhi & Others

Case Number:
CUSAA 40/2025 & CM APPL. 4834/2025
CUSAA 41/2025 & CM APPL. 4835/2025

Case Summary:

The case involved two appeals filed by Nokia Solutions and Networks India Private Limited under Section 28KA of the Customs Act, challenging the rulings of the Customs Authority for Advance Rulings dated 26th September 2024. The primary issue was the classification of Small Form Factor Pluggable (SFP) modules—whether they should be classified as parts of machinery under Customs Tariff Heading (CTH) 8517 7990 or as apparatus/machines under CTH 8517 6290. The appellant argued that the issue was already settled by previous rulings of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) and the Supreme Court, which classified SFP modules as parts under CTH 8517 7990. The High Court reviewed the previous rulings and held that the impugned rulings were unsustainable, allowing the appeals.

Legal Principles Considered:
1. Principle of Res Judicata:
The court acknowledged that res judicata does not apply to taxation matters but emphasized that the classification of SFP modules had already been settled in previous rulings and accepted by the Department.
1. Consistency in Classification:
The court stressed that differential classification of identical goods at different locations would undermine the purpose of the Customs Tariff Act and lead to unnecessary litigation.

Statutory Provisions Considered:
1. Section 28KA of the Customs Act: Governs appeals against rulings of the Customs Authority for Advance Rulings.
2. Customs Tariff Act, 1975: Specifically, the classification under CTH 8517 7990 and CTH 8517 6290.
3. Customs Notifications: Notification Nos. 24/2005 and 57/2017, which provide exemptions for goods classified under certain headings.
Case Citations Referred with Summary:
1. Commissioner of Customs-Mumbai (Air Cargo Import) vs. Reliance Jio Infocomm Ltd. (CESTAT Order dated 29th July 2022):
  - The CESTAT Mumbai Bench upheld the classification of SFP modules as parts under CTH 8517 7090 (now 8517 7990). It emphasized that the goods were exempted from Basic Customs Duty under relevant notifications and rejected the Department’s attempt to classify them as “Other Machines” under CTH 8517 6290.
  - The Supreme Court dismissed the Department’s appeal against this order on 27th February 2023, confirming the classification.
2. IBM India Private Limited vs. Commissioner of Customs (Import):
  - The CESTAT Mumbai Bench ruled that SFP modules are classifiable under CTH 8517 7090 (now 8517 7990) and eligible for duty exemption under Notification No. 57/2017.
  - The Supreme Court dismissed the Department’s appeal against this order on 6th January 2025.
Order Passed:

The High Court of Delhi set aside the impugned rulings of the Customs Authority for Advance Rulings dated 26th September 2024. It held that SFP modules are classifiable under Entry 8517 7990 and entitled to applicable exemptions. Both appeals were allowed, and all pending applications were disposed of.

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Source: Delhi High Court

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February 6, 2026
Bombay High Court Sets Aside CAAR and Adjudication Orders in Apple Watch Bands Classification Dispute
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 06.02.2026

Bombay High Court Sets Aside CAAR and Adjudication Orders in Apple Watch Bands Classification 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.comor on his Mobile +91-9999005379.

Case Title: Apple India Pvt Ltd vs. Customs Authority for Advance Rulings & Ors.

Case Number: Writ Petition (L) No. 13340 of 2025

Case Summary:

The case revolves around the classification of Apple Watch Bands imported by Apple India Pvt Ltd. The petitioner challenged two orders:
1. CAAR Order (10 March 2025): Declined to entertain the renewal application for the Advance Ruling of 2016, which classified Apple Watch Bands under CTH 8517 7090, citing the pendency of a show cause notice issued by the 2nd Respondent on 27 December 2024.
2. Adjudication Order (25 March 2025): Issued by the Additional Commissioner of Customs, reclassifying the Apple Watch Bands under CTH 9113 2010 for the period 1 April 2021 to 22 December 2021, contrary to the 2016 Advance Ruling.
The petitioner argued that the 2016 Advance Ruling was valid and binding until 30 March 2025, and the show cause notice issued on 27 December 2024 was without jurisdiction. The petitioner also contended that the CAAR’s refusal to entertain the renewal application was based on an incorrect interpretation of Section 28-I(2)(a) of the Customs Act, 1962.

Legal Principles Considered:
1. Binding Nature of Advance Rulings: The court emphasized that an Advance Ruling remains valid and binding for the specified period unless explicitly revoked or modified.
2. Jurisdictional Challenges: The court examined whether the CAAR could decline to entertain a renewal application based on proceedings initiated after the application was filed.
3. Principles of Natural Justice: The court reiterated the importance of considering all contentions raised by the parties and providing a reasoned order.
Statutory Provisions Considered:
1. Section 28-I of the Customs Act, 1962: Governs the procedure for receiving and deciding applications for Advance Rulings, including renewal applications.
2. Section 28-I(2)(a): Specifies that the CAAR shall not allow an application where the question raised is already pending before any officer of customs, the Appellate Tribunal, or any court.
Case Citations Referred:
1. Hyosung Corporation vs. Authority for Advance Rulings (2016) 382 ITR 371: The Delhi High Court held that the question raised in an application for Advance Ruling must be pending before the relevant authority as of the date of filing the application, not the date of its consideration.
2. SRICO Projects Pvt Ltd vs. Telangana State Authority for Advance Ruling (2022) 106 G.S.T.R. 247 (Tel): The Telangana High Court ruled that proceedings initiated after the filing of an application for Advance Ruling cannot bar the authority from considering the application.
3. General Motors India Private Limited vs. State of Maharashtra (2024) 12 TMI 728 BHC: This Court held that the pendency of proceedings must be determined as of the date of filing the application for Advance Ruling.
4. Mohinder Singh Gill & Anr vs. The Chief Election Commissioner, New Delhi & Ors (1978) 1 SCC 405: The Supreme Court held that the validity of a statutory order must be judged based on the reasons mentioned in the order itself and cannot be supplemented by fresh reasons later.
Order Passed:
1. The CAAR’s order dated 10 March 2025, concerning the Apple Watch Bands, was quashed and set aside. The CAAR was directed to decide the petitioner’s renewal application dated 14 November 2024 afresh on its merits and in accordance with the law, ensuring compliance with the principles of natural justice.
2. The adjudication order dated 25 March 2025 was quashed and set aside. The matter was remanded to the 2nd Respondent for fresh disposal of the show cause notice dated 27 December 2024. The adjudicating authority was directed to consider all contentions raised by the petitioner, including the binding effect of the 2016 Advance Ruling and the impact of the decision in Isha Exim (2023 SCC OnLine Bom 2700).
3. All contentions of all parties were left open for consideration by the CAAR and the 2nd Respondent.
This case highlights the importance of adhering to statutory provisions governing Advance Rulings and the necessity of considering all contentions raised by parties in adjudication proceedings. It also underscores the principle that statutory orders must be judged based on the reasons explicitly stated within the order itself.

Source: Bombay High Court

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February 6, 2026
CESTAT Mumbai Protects Importers Using Transferable Duty Scrips
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 05.02.2026

CESTAT Mumbai Protects Importers Using Transferable Duty Scrips

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 significant judgment in a series of appeals concerning the validity of duty credit scrips/licenses obtained fraudulently by original license holders and their subsequent impact on bona fide transferees. This decision, encapsulated in Final Order No. A/85228-85240/2026, has far-reaching implications for importers and the customs framework in India.

Background of the Case

The appellants in these cases had imported goods using transferable Duty Credit Scrips/Licenses such as Duty Entitlement Passbook Scheme (DEPB) and Duty-Free Import Authorization (DFIA). These scrips/licenses were purchased from original license holders for valuable consideration and were valid at the time of import. However, the competent licensing authorities later canceled these scrips/licenses, citing that the original license holders had obtained them fraudulently by submitting forged export documents.

Following the cancellation, the customs authorities issued Show Cause Notices (SCNs) to the importers (transferees of the scrips/licenses), demanding duty under Section 28(1) of the Customs Act, 1962. The SCNs also proposed confiscation of goods under Section 111(m) and (o) and the imposition of penalties under Sections 114A/112 of the Customs Act, 1962.

The appellants contested the SCNs, arguing that the scrips/licenses were valid at the time of import and clearance of goods. They contended that the subsequent cancellation of the scrips/licenses should not affect their prior importation activities, as they were bona fide transferees who had purchased the licenses without knowledge of any fraud.

Key Issue for Consideration

The primary issue before the Tribunal was whether goods imported by bona fide transferees under valid Duty Credit Scrips/Licenses could be denied duty exemption due to the subsequent cancellation of the scrips/licenses on the grounds of fraud committed by the original license holders.

Tribunal’s Observations and Decision 

The Tribunal examined the case records and heard arguments from both sides. It noted that the Government of India issues export incentive schemes, such as DEPB and DFIA, to encourage exports and earn foreign exchange. These scrips/licenses are transferable and can be used by importers to import goods duty-free.

The Tribunal emphasized that as long as the scrips/licenses were valid and issued by the competent licensing authority at the time of import, the subsequent cancellation due to fraud by the original license holder should not affect the bona fide transferee. The Tribunal clarified that a license obtained by fraud is not void ab initio but merely voidable. Therefore, if the transferee purchased the license in good faith without knowledge of the fraud, they should not be penalized for the actions of the original license holder.

The Tribunal referred to previous judgments, including the case of Apar Industries Limited vs. Commissioner of Customs (Export Promotion), Mumbai, which established that a license obtained by fraud is not void ab initio and remains valid until canceled. It also distinguished cases where licenses were forged or fake, stating that in such instances, the exemption would not be available as the documents were never valid in the first place.

Final Verdict

After thorough deliberation, the Tribunal concluded that the impugned orders confirming the demands against the appellants lacked merit. It held that the goods imported by the appellants were not liable for confiscation under Section 111 of the Customs Act, and the penalties imposed under Section 112 were not sustainable. Consequently, the Tribunal set aside the impugned orders and allowed the appeals in favor of the appellants.

Implications of the Judgment

This landmark decision has significant implications for importers and the customs framework in India:
1. Protection for Bona Fide Transferees: The judgment reinforces the principle that bona fide transferees of valid duty credit scrips/licenses cannot be penalized for fraudulent actions committed by the original license holders.
2. Clarity on Fraudulent Licenses: The Tribunal has drawn a clear distinction between licenses obtained through fraud (which are voidable) and forged or fake licenses (which are void ab initio). This distinction is crucial for importers relying on transferable licenses for duty-free imports.
3. Encouragement for Trade: By upholding the validity of licenses at the time of import, the judgment supports the government’s objective of promoting exports and facilitating international trade.
4. Legal Precedent: The decision sets a precedent for similar cases, providing clarity and consistency in the interpretation of customs laws related to duty credit scrips/licenses.
Conclusion

The CESTAT’s decision in these appeals is a significant development in the realm of customs law. It underscores the importance of protecting bona fide importers who rely on valid licenses for their transactions while ensuring that fraudulent activities by original license holders are addressed appropriately. This judgment not only provides relief to the appellants but also serves as a guiding principle for future cases involving duty credit scrips/licenses and fraudulent practices. Importers and legal practitioners should take note of this decision to better understand their rights and obligations under the Customs Act, 1962.

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Source: CESTAT Mumbai

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February 5, 2026
CESTAT Ahmedabad Ruled on Import Restrictions and Compliance with Customs Act
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 04.02.2026

CESTAT Ahmedabad Ruled on Import Restrictions and Compliance with Customs Act

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.comor on his Mobile +91-9999005379.

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, delivered a judgment on February 4, 2026, in the case of Commissioner of Customs, Mundra Customs vs. Shree Khatu Shyam Steel & Tubes LLP. This case revolved around the import of Cold Rolled Stainless Steel (CRSS) Coils Grade J2 and raised critical questions about import restrictions, procedural compliance under the Customs Act, 1962, and the legal validity of circulars issued by the Ministry of Steel.

Background of the Case

The dispute originated when Shree Khatu Shyam Steel & Tubes LLP imported CRSS Coils Grade J2 from China under House Bill of Lading No. FS241205001 dated December 3, 2024, and filed Bill of Entry No. 8109186 on January 31, 2025, at Mundra Port. The Ministry of Steel had issued a one-time NOC (No Objection Certificate) for shipments where the Bill of Lading was generated on or before December 3, 2024. However, the Customs Department alleged that the Master Bill of Lading for the shipment was issued on January 4, 2025, after the cutoff date, making the goods prohibited for import under the Ministry of Steel’s circular dated October 20, 2023.

The goods were seized on February 27, 2025, under Section 110(1) of the Customs Act, 1962, and the importer requested a waiver of the Show Cause Notice (SCN) and personal hearing to expedite the adjudication process. Despite the waiver, the adjudication order was not passed within the mandatory six-month period stipulated under Section 110(2) of the Customs Act, leading to the seizure becoming illegal.

Key Legal Issues

The case raised several important legal questions:
1. Validity of the Ministry of Steel’s Circulars: The department relied on circulars issued by the Ministry of Steel, which mandated importers to obtain NOCs for steel grades not covered under the Steel and Steel Products (Quality Control) Order, 2024. The respondent argued that these circulars imposed restrictions without statutory authority, as the imported goods were not covered under the Quality Control Order.
2. Procedural Compliance Under Section 110(2): The respondent contended that the department failed to issue an SCN or adjudicate the seizure within the mandatory six-month period, rendering the seizure illegal and necessitating the unconditional release of the goods.
3. Distinction Between House Bill of Lading and Master Bill of Lading: The department argued that the one-time NOC applied exclusively to shipments where the Master Bill of Lading was issued on or before December 3, 2024, and not to House Bills of Lading with earlier dates.
Key Findings of the Tribunal

1. Procedural Compliance Under Section 110(2): 

The Tribunal emphasized the mandatory nature of Section 110(2) of the Customs Act, which requires the issuance of an SCN within six months of the seizure. The Tribunal relied on the landmark judgment of the Delhi High Court in Shiv Shakti Trading Company vs. Commissioner of Customs (Preventive), which held that the waiver of an SCN does not absolve the department of its obligation to adjudicate within the statutory timeframe. The Tribunal ruled that the department’s failure to issue an SCN or adjudicate within six months rendered the seizure illegal, and the goods were liable for immediate release.

2. Validity of Ministry of Steel’s Circulars: 

The Tribunal noted that the circulars issued by the Ministry of Steel could not impose additional restrictions on imports without statutory authority. It relied on precedents such as Atul Commodities Pvt. Ltd. vs. Commissioner of Customs, Cochin and UOI vs. Inter continental India Pvt. Ltd., which established that substantive restrictions on trade must be imposed through legislation or statutory notifications, not through executive circulars.

3. Nature of the Imported Goods: 

The Tribunal found that the imported CRSS Coils Grade J2 were not covered under the Steel and Steel Products (Quality Control) Order, 2024, and were therefore not subject to BIS standards or restrictions. The goods were identified and verified through Positive Metal Identification (PMI) tests, confirming their compliance with the declared specifications.

Impact of the Judgment 

1. Procedural Safeguards for Importers:

The judgment reinforces the importance of procedural compliance under Section 110(2) of the Customs Act, ensuring that importers are not subjected to indefinite delays in adjudication. It underscores the statutory obligation of the department to act within the prescribed timeframe, balancing the State’s power of investigation with the rights of importers.

2. Limits on Executive Authority:

The ruling highlights the limitations of executive circulars in imposing trade restrictions. It reiterates that any change in the categorization of goods from “free” to “restricted” must be made through legislative amendments or statutory notifications, not through circulars.

3. Clarity on Import Restrictions: 

The judgment provides clarity on the legal status of goods not covered under BIS standards or Quality Control Orders. It establishes that such goods cannot be treated as restricted or prohibited unless explicitly stated in the law.

Conclusion

The CESTAT’s decision in this case is a landmark ruling that upholds the principles of procedural fairness and the rule of law in the realm of customs and trade regulations. It serves as a reminder to regulatory authorities to act within the bounds of their statutory powers and provides much-needed clarity to importers navigating complex regulatory frameworks.

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Source: CESTAT Ahmedabad

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February 4, 2026
CESTAT Kolkata Overturns Customs Duty Demand Over Disputed Chartered Engineer Certificate
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.02.2026

CESTAT Kolkata Overturns Customs Duty Demand Over Disputed Chartered Engineer Certificate

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.comor on his Mobile +91-9999005379.

In a significant judgment, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has ruled in favor of M/s. Sana Impex Private Limited, setting aside the demands for differential customs duty and interest. The case, which revolved around the import of old and used machinery, highlights critical issues regarding the validity of certificates issued by Chartered Engineers and the procedural lapses in customs assessments.

Background of the Case

M/s. Sana Impex Private Limited, a Kolkata-based importer, had imported four old and used color printing machines with standard accessories and a paper cutting machine with standard accessories under Customs Tariff Headings 84431200 and 84411010, respectively. The company filed two Bills of Entry (Nos. 5165104 and 5165044) on May 5, 2016, for the clearance of these goods. Along with the Bills of Entry, the importer submitted all requisite documents, including the Bill of Lading, Country of Origin certificate, Commercial Invoice, Packing List, and a Load Port Chartered Engineer Certificate.

The goods were examined by the shed officer, who ordered their release based on the Load Port Chartered Engineer Certificate. However, the Assessing Officer provisionally assessed the Bills of Entry based on the invoice value and marked them for further investigation by the Special Intelligence and Investigation Branch (SIIB). The consignments were allowed ‘out of charge’ after the importer submitted a PD Bond.

Six years later, in December 2022, the SIIB directed the assessing group to finalize the Bills of Entry based on a certificate issued by a local Chartered Engineer. The final assessment led to the confirmation of differential customs duty amounting to Rs. 6,14,034/- (Rs. 3,16,074/- + Rs. 2,97,960/-), along with interest. Aggrieved by this decision, the importer filed an appeal before the Commissioner of Customs (Appeals), who upheld the final assessment orders. Subsequently, the importer approached the CESTAT Kolkata to challenge the impugned order.

Key Arguments Presented by the Appellant 

During the hearing, the appellant, represented by Advocate and Consultant, raised several critical points:
1. Validity of the Chartered Engineer Certificate: The appellant argued that the certificate issued by Mr. Sajal Majumdar on May 7, 2016, was invalid as it was prepared five days before the goods were physically examined on May 11 and 12, 2016. The appellant contended that the certificate could not have accurately assessed the condition and value of the goods without a proper examination.
2. Reliance on Load Port Certificate: The appellant emphasized that the goods were released based on the Load Port Chartered Engineer Certificate, which was submitted at the time of filing the Bills of Entry. This certificate confirmed the goods were “old and used” and did not dispute their declared value.
3. Procedural Lapses: The appellant questioned the appointment of the local Chartered Engineer, asserting that they were not informed about who appointed him. They also highlighted that the shed officer had already conducted a thorough examination of the goods and referred to the Overseas Chartered Engineer Certificate during the investigation.
Observations and Judgment by CESTAT Kolkata

The Hon’ble Tribunal, comprising Member (Judicial) and Member (Technical), carefully examined the facts and arguments presented by both sides. The Tribunal observed the following:
1. The certificate issued by the Chartered Engineer, dated May 7, 2016, was prepared without physically examining the goods, as the container was opened and examined only on May 11 and 12, 2016. Therefore, the certificate lacked validity and could not be relied upon for enhancing the value of the imported goods.
2. The Load Port Chartered Engineer Certificate submitted by the appellant at the time of filing the Bills of Entry was valid and formed the basis for the initial release of the goods. The Tribunal noted that the lower authorities had ignored this certificate without providing sufficient justification.
3. The enhancement of the value of the goods based on an invalid certificate was deemed legally unsustainable.
Based on these observations, the Tribunal set aside the impugned order and allowed the appeal filed by M/s. Sana Impex Private Limited. The demands for differential customs duty and interest were quashed, and the appellant was granted consequential relief as per the law.

Conclusion

This judgment underscores the importance of adhering to proper procedures and relying on valid documentation during customs assessments. The decision by CESTAT Kolkata serves as a reminder that procedural lapses and reliance on invalid certificates cannot form the basis for imposing additional duties and interest on importers. The ruling is a significant victory for M/s. Sana Impex Private Limited and sets a precedent for similar cases in the future.

Source: CESTAT Kolkata

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February 3, 2026
CESTAT Hyderabad Overturns Customs Valuation Order
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.02.2026

CESTAT Hyderabad Overturns Customs Valuation Order

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.comor on his Mobile +91-9999005379.

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Regional Bench at Hyderabad recently delivered a significant judgment in the case of M/s Elkem South Asia Pvt Ltd vs. Commissioner of Customs Visakhapatnam. This case revolved around the rejection of transaction value and the re-determination of assessable value based on alleged contemporaneous prices. The final order, pronounced on January 30, 2026, provides valuable insights into the application of Customs Valuation Rules and the treatment of related parties in import transactions.

Background of the Case

M/s Elkem South Asia Pvt Ltd, a 100% subsidiary of Elkem AS Norway, acts as the exclusive dealer and reseller of Elkem Micro Silica (EMS) in South Asia, including India, Sri Lanka, and Nepal. The company imports EMS from its principal through various ports, including Visakhapatnam. Since the appellant is a wholly-owned subsidiary of the principal, it is considered a “related person” under customs regulations. This relationship was disclosed to the Special Valuation Branch (SVB) in Mumbai, which allowed the imports based on the transaction value (invoice value) since 2000.

However, for certain imports made through Visakhapatnam Port, the Appraising Officers assessed customs duty based on higher values derived from third-party imports by M/s Vesuvius India Pvt Ltd, an actual consumer of EMS. The appellant paid the duty under protest, and the assessments were finalized for 21 Bills of Entry (BoE) on May 2, 2016. While some amounts were refunded, the appellant challenged the assessment order before the Commissioner (Appeals), who upheld the decision. This led to the present appeal before the CESTAT.

Key Arguments Presented 

Appellant’s Arguments:
1. Transaction Value Validity: The appellant argued that their transaction value should not be rejected merely because they are a related party. The SVB had previously accepted their transaction value as the basis for customs duty, and the relationship between the appellant and the principal was deemed not to influence the price.
2. Contemporaneous Price: The appellant contended that the contemporaneous price adopted by the department was based on a single Bill of Entry from M/s Vesuvius India Pvt Ltd, which imported a significantly smaller quantity of EMS and was an actual user, not a reseller. This comparison was not valid under the Customs Valuation Rules.
3. Protest Payment: The appellant clarified that the duty was paid under protest, supported by submitted letters, and they did not agree to the enhancement of the unit price.
Respondent’s Arguments:

The department reiterated the findings of the Commissioner (Appeals), emphasizing the validity of the contemporaneous price and the rejection of the transaction value.

Tribunal’s Observations and Decision

After hearing both sides and reviewing the records, the Tribunal made the following observations:
1. Validity of SVB Orders: The SVB orders dated April 13, 2011, and January 30, 2015, were crucial in determining the transaction value. The Tribunal noted that the SVB had already examined the relationship between the appellant and the principal and concluded that it did not influence the price. The SVB order from 2011 was valid for three years, contrary to the department’s claim that it expired in 2013.
2. Contemporaneous Price: The Tribunal found that the adoption of the contemporaneous price from M/s Vesuvius India Pvt Ltd was flawed. The third party was an actual user, not a reseller, and imported a significantly smaller quantity of EMS. The Customs Valuation Rules require adjustments for differences in commercial levels, quantity, and other factors, which were not adequately demonstrated by the department.
3. Rejection of Transaction Value: The Tribunal held that the rejection of the transaction value by the Appraising Officer was not sustainable. The SVB had already determined that the declared value was not influenced by the relationship between the appellant and the principal. The discounts provided by the principal were deemed normal, considering the appellant’s role as a reseller.
4. Protest Payment: The Tribunal acknowledged that the appellant paid the duty under protest, further supporting their claim that the transaction value was valid.
Final Order

The Tribunal concluded that the Commissioner (Appeals) erred in upholding the rejection of the transaction value and the adoption of the contemporaneous price. The Tribunal set aside the impugned order and allowed the appeal with consequential relief as per the law.

Key Takeaways
1. Importance of SVB Orders: The case highlights the significance of SVB orders in determining the transaction value for related parties. Once the SVB has validated the transaction value, it cannot be arbitrarily rejected without substantial evidence.
2. Contemporaneous Price: The judgment underscores the importance of adhering to the Customs Valuation Rules when adopting contemporaneous prices. Comparisons must be made between identical goods, similar quantities, and buyers of the same commercial class.
3. Protest Payments: Importers should ensure proper documentation when paying duties under protest, as it can strengthen their case during appeals.
4. Role of Resellers vs. Actual Users: The Tribunal emphasized the distinction between resellers and actual users in determining assessable value, as their commercial levels and cost structures differ significantly.
Conclusion

The judgment in the case of M/s Elkem South Asia Pvt Ltd vs. Commissioner of Customs Visakhapatnam serves as a precedent for importers dealing with related parties and facing challenges in the determination of transaction value. It reinforces the principle that transaction value should be accepted unless there is concrete evidence to prove that the relationship has influenced the price. Additionally, it highlights the need for proper application of Customs Valuation Rules when considering contemporaneous prices. This case is a reminder of the importance of transparency, documentation, and adherence to statutory provisions in customs assessments.

Source: CESTAT Hyderabad

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February 3, 2026
CESTAT Delhi Clarifies Limits of Aircraft Duty Exemptions and Personal Liability under Customs Law
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 03.02.2026

CESTAT Delhi Clarifies Limits of Aircraft Duty Exemptions and Personal Liability under Customs Law

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.comor on his Mobile +91-9999005379.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment on February 2, 2026, regarding the import and usage of a Robinson R-44 Raven II Helicopter by Indian Metal and Ferro Alloys Limited (IMFA). The case revolved around the alleged violation of customs duty exemption conditions under Notification No. 61/2007-Customs, which amended Notification No. 21/2002-Customs.

Background of the Case

IMFA, a company incorporated under the Companies Act, imported a Robinson R-44 Raven II Helicopter in October 2007 under the customs duty exemption provided by Notification No. 61/2007-Customs. The exemption was granted under Serial Number 347B of the notification, subject to compliance with Condition No. 104. This condition required the aircraft to be used exclusively for non-scheduled (passenger) services or non-scheduled (charter) services, as approved by the Ministry of Civil Aviation (MCA). Additionally, IMFA provided an undertaking to the customs authorities, agreeing to pay the applicable customs duty if the aircraft was not used for the specified purposes.

However, a show-cause notice was issued to IMFA and its officials, including Vice-Chairman and Senior Manager (Corporate Affairs), alleging that the helicopter was used for private purposes and business promotion, which violated the exemption conditions. The notice claimed that the company had misrepresented facts and evaded customs duties amounting to Rs. 48,58,948.

Key Issues in the Case

The case involved four appeals:
1. Customs Appeal No. 70 of 2010: Filed by IMFA to challenge the confiscation of the helicopter and the demand for customs duty.
2. Customs Appeal No. 72 of 2010: Filed by Vice-Chairman to contest the imposition of a Rs. 10 lakh penalty under Section 112(a) of the Customs Act.
3. Customs Appeal No. 73 of 2010: Filed by Senior Manager to challenge the imposition of a Rs. 2 lakh penalty under Section 112 of the Customs Act.
4. Customs Appeal No. 102 of 2010: Filed by the Department seeking enhancement of penalties imposed on IMFA officials.
Tribunal’s Observations and Findings
1. Violation of Condition No. 104: The Tribunal found that IMFA had violated Condition No. 104 of Serial No. 347B of the Exemption Notification. The helicopter was used for private purposes without generating revenue for approximately 80% of its flight hours, which did not qualify as non-scheduled (passenger) services or non-scheduled (charter) services. The Tribunal upheld the confiscation of the helicopter and the demand for customs duty based on the undertaking provided by IMFA.
2. Error in Undertaking: IMFA argued that it had mistakenly referred to Serial Number 347A with Condition No. 103 in its undertaking instead of Serial Number 347B with Condition No. 104. The Tribunal accepted this explanation, noting that the company intended to claim the exemption under Serial Number 347B, as it did not meet the criteria for Serial Number 347A.
3. Penalty on IMFA Officials: The Tribunal examined the penalties imposed on Vice Chairman and Senior Manager under Section 112 of the Customs Act. It concluded that penalties could not be imposed as there was no evidence to suggest that the officials had knowledge of the violation of the exemption conditions. The Tribunal emphasized that mere facilitation without knowledge does not amount to abetment under Section 112(a) of the Customs Act.
4. Department’s Appeal for Penalty Enhancement: The Tribunal dismissed the department’s appeal for enhancing the penalties, as it had already ruled that penalties could not be imposed on the IMFA officials.
Final Order

The Tribunal issued the following orders:
- Customs Appeal No. 70 of 2010: Dismissed. The confiscation of the helicopter and the demand for customs duty were upheld.
- Customs Appeal No. 72 of 2010: Allowed. The penalty of Rs. 10 lakh imposed on Vice Chairman was set aside.
- Customs Appeal No. 73 of 2010: Allowed. The penalty of Rs. 2 lakh imposed on Senior Manager was set aside.
- Customs Appeal No. 102 of 2010: Dismissed. The department’s request for enhancement of penalties was rejected.
Key Takeaways

This judgment highlights the importance of strict compliance with customs duty exemption conditions. Importers must ensure that their imported goods are used solely for the specified purposes outlined in the exemption notification. Any deviation from these conditions can lead to confiscation of goods and recovery of customs duties.

Additionally, the Tribunal clarified that penalties under Section 112 of the Customs Act require evidence of intentional abetment or knowledge of the violation. Mere facilitation without mens rea does not constitute abetment.

Conclusion

The CESTAT ruling in the IMFA case serves as a reminder for importers to exercise due diligence in adhering to customs regulations and exemption conditions. It also underscores the need for clarity and accuracy in documentation to avoid legal disputes and penalties.

Source: CESTAT Delhi

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February 3, 2026