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  • CESTAT Chennai: Vitamin Feed Premixes Classifiable as Animal Feed Preparations Under CTH 2309

    CESTAT Chennai: Vitamin Feed Premixes Classifiable as Animal Feed Preparations Under CTH 2309

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 25.09.2026

    CESTAT Chennai: Vitamin Feed Premixes Classifiable as Animal Feed Preparations Under CTH 2309

    This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .  

    In a significant ruling concerning the customs classification of feed-grade vitamins and animal nutrition preparations, the CESTAT Chennai has set aside a Customs order seeking to classify imported Vitamin E 50% Feed Grade, Vitamin B2 80% Feed Grade and Vitamin C 35% Feed Grade under CTH 2936 instead of CTH 2309.

    The Tribunal held that, in the absence of a chemical examiner’s report establishing that the imported products were pure chemicals or separate chemically defined organic compounds falling under Chapter 29, the Department had failed to discharge the burden necessary to sustain its proposed classification. Consequently, the benefit of classification was required to go to the importer, Provimi Animal Nutrition India Pvt. Ltd.

    The Classification Dispute: CTH 2309 vs CTH 2936

    Provimi imported goods described as:

    • Vitamin E 50% Feed Grade
    • Vitamin B2 80% Feed Grade
    • Vitamin C 35% Feed Grade
    • The importer classified these products under CTH 2309, covering β€œpreparations of a kind used in animal feeding.”
    • Customs disagreed. The Department considered CTH 2309 to be general in nature and took the view that CTH 2936, covering provitamins, vitamins and their derivatives, was the more specific heading under Rule 3(a) of the General Rules for Interpretation (GRI).
    • According to Revenue, CTH 2309 applies to products presented in a form suitable for use as animal food supplements, whereas the imported vitamins were essentially inputs or raw materials requiring further processing before being incorporated into aquatic, poultry or cattle feed.
    • The Department therefore proposed classification under CTH 2936, attracting 7.5% Basic Customs Duty under Sl. No. 185 of Notification No. 50/2017-Customs and 18% IGST under Sl. No. 40 of Schedule III of Notification No. 1/2017-IGST.

    Customs Raises β‚Ή58.83 Lakh Differential Duty Demand

    • A Show Cause Notice dated 8 March 2024 proposed rejection of Provimi’s classification, reclassification under CTH 2936, denial of the relevant notification benefits and recovery of β‚Ή58,83,019 as short-levied duty, along with confiscation and penalties.
    • The Commissioner of Customs (Audit), Chennai subsequently confirmed the proposals through Order-in-Original No. 108625/2024 dated 16 August 2024, leading Provimi to approach CESTAT.

    Provimi: Products Are Specifically Formulated for Animal Feed

    • Provimi argued that the imported goods were essentially animal-feed preparations and appropriately fell under Chapter Heading 2309.
    • The company relied upon the WCO’s HSN Explanatory Notes to Heading 23.09, particularly the category covering preparations used in making complete feeds or supplementary feeds.
    • It also argued that the goods were designed exclusively for animal use, contained specifically tailored additives, were labelled accordingly and were supplied only to businesses engaged in animal feed and animal husbandry.
    • The importer further contended that Chapter 29 primarily covers separate chemically defined compounds, whereas its imported products were not pure vitamins and contained additives intended to make them suitable specifically for animal nutrition.

    Department: High-Concentration Vitamins Are Raw Materials, Not Animal Feed

    • Revenue countered that the imported products contained vitamins in concentrations ranging from 35% to 80% and could not themselves be directly consumed by animals.
    • The Department argued that they were merely inputs/raw materials for manufacturing animal feed, rather than animal feed or feed supplements themselves.
    • It relied particularly on Commissioner of Customs CGO v. Sonam International Shop No. 9, 2020 (10) TMI 120 – Allahabad High Court, where the High Court considered high-concentration vitamins in the context of classification under Heading 2309.
    • Revenue also referred to the Constitution Bench decision in Commissioner of Customs (Import) v. Dilip Kumar and Company & Ors., AIR 2018 SC 3606 in support of its position concerning the interpretation of exemption/classification jurisprudence and earlier reliance on Sun Export Corporation.

    CESTAT Applies Supreme Court’s 2026 Welkin Foods Ruling

    • A major feature of the Tribunal’s analysis was the Supreme Court’s recent judgment in Commissioner of Customs (Import) v. Welkin Foods, 2026 INSC 19.
    • CESTAT noted that Welkin Foods comprehensively examined customs classification principles, including the role of:
    • GRI 1, tariff headings and statutory notes, HSN Explanatory Notes, the common/trade parlance test, and the relevance of end use.
    • The Supreme Court had emphasised that GRI 1 is the fundamental starting point for customs classification. Classification must first be determined according to the terms of the headings and the relevant Section and Chapter Notes.
    • Only where goods cannot be classified through GRI 1 and the applicable legal notes should the subsequent rules be considered sequentially.

    Common Parlance Test Cannot Override Technical Tariff Provisions

    • Provimi had argued that, in common and trade parlance, the products were understood as animal-feed supplements.
    • CESTAT, applying Welkin Foods, held that the common or trade parlance test has to be applied restrictively in the modern HSN-based classification system.
    • The Tribunal observed that the terminology employed in Chapters 23 and 29 is scientific and technical. Consequently, the tariff provisions must primarily be interpreted technically rather than simply according to the manner in which the goods are marketed or commercially described.
    • It further observed that an importer relying on a trade-parlance meaning must produce satisfactory evidence supporting that meaning.

    End Use, However, Was Relevant

    • While limiting the common-parlance argument, CESTAT found that end use could legitimately be considered in the present classification dispute.
    • Heading 2309 itself refers to preparations β€œof a kind used in animal feeding,” while Heading 2936 deals with vitamins and their derivatives used primarily as vitamins.
    • The language of the competing headings therefore permitted consideration of use or adaptation as part of the classification exercise.

    Chapter 23 Does Not Exclude Products Merely Because They Are of Chemical Origin

    • Revenue also argued that Heading 2309 covered products obtained from the processing of vegetable or animal materials, whereas Provimi’s products were chemicals.
    • CESTAT rejected a blanket exclusion on that basis.
    • The Tribunal held that the relevant Chapter Note is inclusive and does not exclude products of chemical origin if they otherwise satisfy the description compatible with Chapter 23.
    • This finding is important because it prevents the mere chemical origin of a product from automatically determining classification under Chapter 29.

    Crucial Evidentiary Gap: No Chemical Examiner’s Report

    The decisive weakness in Revenue’s case was the absence of technical evidence.

    CESTAT observed that it did not have the benefit of an expert chemical test report prepared at the time of import to establish whether the products were:

    separate chemically defined organic compounds, capable of classification under Chapter 29; or

    preparations of a kind used in animal feeding, falling under Chapter 23.

    • The Certificates of Analysis submitted by Provimi also did not contain the considered opinion of a technical expert capable of conclusively resolving this question.
    • Provimi maintained that the imported vitamins were not pure vitamins but were formulated with various additives specifically for animal-feed applications, altering their suitability and making them intended for animal nutrition.

    HSN Notes Recognise Premixes Under Heading 2309

    CESTAT then examined the HSN Explanatory Notes because it found the HSN and Customs Tariff entries under Chapter 23 to be sufficiently aligned.

    The HSN Notes divide the relevant Heading 23.09 preparations into three broad categories:

    HSN categoryDescription
    AComplete feed
    BPreparations supplementing/balancing farm-produced feeds
    CPreparations used in making complete or supplementary feeds
    • The Tribunal observed that the disputed goods were not complete feed or feed supplements falling within categories A or B. However, category C specifically concerns β€œpreparations” used in making such feeds, commonly known in trade as premixes.
    • This was significant because a product need not necessarily be directly fed to an animal in order to fall within the broader scope of Heading 2309.

    Government Circular Identified Products as β€œVitamin Premixes (Feed Grade)”

    • Provimi also relied upon a circular dated 21 December 2022 issued by the Department of Animal Husbandry and Dairying, Ministry of Fisheries, Animal Husbandry and Dairying.
    • The Tribunal recorded that the very products involved in the disputeβ€”Vitamin E 50% Feed Grade, Vitamin B2 80% Feed Grade and Vitamin C 35% Monophosphate Feed Gradeβ€”were expressly mentioned as β€œVitamin Premixes (Feed Grade)” in that document.

    CESTAT Also Examines Meaning of β€œPremix”

    • The Tribunal referred to the Customs Advance Ruling in In Re: BASF India Ltd., (2024) 24 Centax 401 (A.A.R.-Cus.-Mum.).
    • That ruling discussed premixes as complex mixtures of vitamins, minerals, trace elements and other feed additives incorporated into compound feed, and explained that such premixtures are not themselves intended for direct feeding to animals.
    • This was relevant to Revenue’s argument that the products could not fall under Heading 2309 merely because they were not capable of being directly consumed by animals.

    Burden to Establish Reclassification Lies on Customs

    • CESTAT ultimately treated the burden of proof as decisive.
    • Referring to Union of India v. Garware Nylons Ltd., 1996 (87) E.L.T. 12 (S.C.) and HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh, 2006 (197) E.L.T. 324 (S.C.), the Tribunal reiterated that when Revenue seeks a particular classification, it must establish that the goods are taxable under the classification proposed by it.
    • Because there was no Chemical Examiner’s certificate establishing whether the goods were pure chemicals, mixture concentrates or premixes, Revenue had failed to discharge that burden.
    • CESTAT therefore held that the benefit of classification must go to the appellant.

    B.V. Bio Corp Decision Supports Classification Under CTH 23099090

    • The Tribunal also relied on its coordinate-bench ruling in B.V. Bio Corp Private Limited v. Commissioner of Customs (NS-I), 2024 (4) TMI 1173 – CESTAT Mumbai.
    • That case concerned imported products containing vitamins and provitamins in concentrations ranging from 2.7% to 100%.
    • The Mumbai Bench had concluded that the goods were classifiable under Tariff Item 23099090 and that classification under Heading 2936 was not legally sustainable.
    • The judgment further records that the B.V. Bio Corp position was affirmed, with the goods being treated as animal-feed preparations appropriately classified under Tariff Item 23099090, having regard to Circular No. 188/22/96-CX dated 26 March 1996.

    Duty, Interest, Confiscation and Penalty Fall with Classification Demand

    • Once Revenue failed to sustain the proposed classification under CTH 2936, CESTAT held that the consequential duty demand, interest, fine and penalty could not survive.
    • Provimi had separately challenged confiscation and penalty under Sections 111, 125 and 114A of the Customs Act, 1962, arguing inter alia that a bona fide classification claim did not amount to misdeclaration.

    Final Decision: Provimi’s Appeal Allowed

    • CESTAT set aside the impugned Order-in-Original and allowed Provimi’s appeal to the limited extent decided in the classification proceedings, with consequential relief as available under law.
    • The Tribunal, however, made an important qualification regarding Provimi’s separate refund claim. Issues such as refund that were not part of the original proceedings were not adjudicated in this appeal and would have to be pursued separately in accordance with law.
    • Thus, while Provimi succeeded in overturning the Department’s reclassification and consequential demand, the order should not be read as having independently sanctioned the refund claimed by the company.

    Key Takeaway

    The ruling reinforces an important principle in customs classification disputes: Customs cannot sustain reclassification merely by asserting that an alternative tariff heading is more specific. When the proposed classification depends upon the chemical composition and technical character of imported goods, Revenue must produce adequate technical evidence to discharge its burden of proof.

    For feed-grade vitamins and premixes, the decision also recognises that Heading 2309 is not confined to products directly consumed by animals.

    Preparations used in making complete or supplementary feeds can fall within its scope, subject to their objective characteristics, composition, HSN guidance and supporting technical evidence.

    Connected Matter

    CESTAT Chennai: Customs Cannot Reclassify 226 Auto Parts Without Product-Wise Evidence

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Chennai

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    Ravi Shekhar Jha – Advocate, Bar Council of Delhi

  • Bombay High Court Condones 143-Day Delay in Homebuyers’ RERA Appeal; Says Tribunal Adopted Rigid Approach

    Bombay High Court Condones 143-Day Delay in Homebuyers’ RERA Appeal; Says Tribunal Adopted Rigid Approach

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 25.09.2026

    Bombay High Court Condones 143-Day Delay in Homebuyers’ RERA Appeal; Says Tribunal Adopted Rigid Approach

    This Short Article has been prepared & written by Advocate Narendra Singh. The views expressed are based on his interpretation of the law. He can be reached at his email id amitnaren@outlook.com .  

    In an important ruling concerning condonation of delay in appeals under the Real Estate (Regulation and Development) Act, 2016 (RERA), the Bombay High Court has set aside an order of the Maharashtra Real Estate Appellate Tribunal which had refused to condone a 143-day delay by two homebuyers in filing their appeal.

    Justice N.J. Jamadar held that the Appellate Tribunal had adopted a β€œslightly rigid approach” and failed to apply the justice-oriented principles governing the expression β€œsufficient cause”. The Court emphasised that the requirement of explaining each day’s delay cannot be stretched to demand β€œmathematical precision and exactitude”.

    The High Court accordingly condoned the 143-day delay, subject to payment of β‚Ή20,000 as costs, and directed the Appellate Tribunal to decide the homebuyers’ substantive appeal in accordance with law.

    Homebuyers Purchased Two Flats in β€˜Sodah Sadan’ Project

    • The appellants, Atul Hiralal Shah and another, had entered into two registered agreements on 4 October 2016 for purchase of two flats in a project known as β€œSodah Sadan”, promoted by the respondents.
    • Under the agreements, possession was to be delivered by 31 December 2018. According to the appellants, despite repeated extensions, the promoters failed to perform their obligations.
    • The homebuyers consequently approached the Maharashtra Real Estate Regulatory Authority seeking possession, interest, compensation and other reliefs.

    MahaRERA Grants Delayed-Possession Interest but Rejects Possession Claim

    • By an order dated 30 June 2025, MahaRERA partly allowed the complaint.
    • Although the Authority rejected the claim for possession, it directed the promoters to pay interest for delayed delivery of the flats from 1 January 2019 until the date of offer of possession with Occupancy Certificate (OC).
    • The interest was directed to be calculated on the actual amount paid by the homebuyers towards the flat consideration at the rate of SBI’s Marginal Cost Lending Rate (MCLR) plus 2%, as prescribed under Section 18 of RERA and the applicable Rules.
    • However, the Authority further directed that the interest amount would become payable after the promoters obtained the full Occupancy Certificate. The promoters were also permitted to adjust the interest against outstanding consideration and interest thereon, if any.
    • This condition ultimately became important in the High Court’s consideration of why the homebuyers had delayed filing their appeal.

    Homebuyers Waited for Promoter to Obtain Occupancy Certificate

    • The appellants explained that after the MahaRERA order they genuinely believed that the promoters would obtain the full OC and comply with the direction for payment of delayed-possession interest.
    • They therefore continued pursuing the promoters for the Occupancy Certificate.
    • According to them, it eventually became apparent that there was no meaningful progress at the project site and no immediate possibility of obtaining the OC. They then decided to challenge the MahaRERA order before the Appellate Tribunal.
    • This resulted in a delay of 143 days, for which they sought condonation through Miscellaneous Application No. 117 of 2026.

    Appellate Tribunal Refuses to Condon 143-Day Delay

    • On 6 April 2026, the Maharashtra Real Estate Appellate Tribunal rejected the delay-condonation application.
    • The Tribunal acknowledged that a liberal and justice-oriented approach is ordinarily adopted in such matters, but held that this principle could not defeat the substantive law of limitation contained in Section 3 of the Limitation Act, 1963.
    • It concluded that the reasons advanced by the homebuyers did not amount to β€œsufficient cause”. It further held that the appellants had failed to account for each and every day’s delay and appeared negligent in not pursuing their appellate remedy within the prescribed time.
    • The homebuyers consequently approached the Bombay High Court in Second Appeal.

    Substantial Question of Law Before Bombay High Court

    • The High Court formulated the following substantial question of law:
    • β€œWhether the Appellate Tribunal did not apply correct principles in deciding the application for condonation of delay in preferring the appeal, and, thereby misdirected itself in rejecting the application for condonation of delay?”
    • Considering the nature of the controversy, the Court proceeded to finally decide the Second Appeal with the consent of the parties.

    Homebuyers: Tribunal Adopted an Unduly Rigid Approach

    • Senior Advocate Naushad Engineer, appearing for the appellants, argued that MahaRERA had placed the homebuyers in a peculiar position.
    • Although the Authority granted them delayed-possession interest, actual payment of that interest was deferred until the promoter obtained the Occupancy Certificate.
    • The homebuyers therefore had a legitimate reason to pursue the promoter for obtaining the OC so that the relief granted by MahaRERA could become enforceable.
    • It was further argued that 143 days was not an inordinate delay and that the Tribunal had adopted an excessively rigid standard instead of examining the explanation in the context of the object of RERA and the circumstances faced by the allottees.

    Promoter: Non-Compliance With an Order Cannot Justify Delayed Appeal

    • The promoters opposed the appeal.
    • They argued that non-compliance with the MahaRERA order might possibly explain delay in seeking its enforcement, but could not constitute sufficient cause for delaying an appeal against that very order.
    • According to the promoters, unless a satisfactory cause was shown for not approaching the appellate forum within limitation, neither the Tribunal nor the Court could exercise the power of condonation.
    • They also objected to documents which the homebuyers sought to rely upon before the High Court on the ground that those documents had not been produced before the Appellate Tribunal.

    High Court: Explanation Must Be Assessed in Context of Real-Life Circumstances

    • Justice Jamadar acknowledged that, viewed in a very strict sense, non-compliance with the MahaRERA order might not by itself constitute a satisfactory explanation for delay in appealing.
    • But the Court held that the explanation could not be assessed in isolation.
    • It had to be considered β€œin the light of the attendant facts of the case and the situation in life of the parties.”
    • This contextual approach became central to the High Court’s reasoning.

    β€˜Sufficient Cause’ Is Elastic and Cannot Be Put in a Straitjacket

    • The Court examined the principles underlying limitation law and noted that limitation statutes are sometimes described as β€œstatutes of peace” because public policy requires finality in litigation.
    • At the same time, the expression β€œsufficient cause” governing condonation of delay has traditionally received a liberal construction where doing so advances substantial justice and the party is not guilty of negligence, inaction or lack of bona fides.
    • The High Court observed that β€œsufficient cause” cannot be confined in a straitjacket and that no universal formula can determine whether a particular explanation is sufficient.

    Supreme Court Principles on Condonation of Delay Considered

    • The High Court relied upon Pundlik Jalan Patil v. Executive Engineer, Jalgaon Medium Project, (2008) 17 SCC 448, concerning the public-policy rationale underlying limitation statutes.
    • It also extensively referred to the Supreme Court’s decision in Shivamma (Dead) by LRs. v. Karnataka Housing Board & Ors., 2025 SCC OnLine SC 1969, which in turn considered Pathapati Subba Reddy (Died) by LRs. v. Special Deputy Collector (LA), 2024 SCC OnLine SC 513.
    • The principles extracted by the Court recognise that while Section 3 of the Limitation Act must be applied strictly, Section 5 requires a more liberal construction. At the same time, a justice-oriented approach cannot be used to condone inordinate delay accompanied by negligence, lack of diligence or want of bona fides.
    • The Court emphasised that the inquiry must ultimately consider whether the explanation is real, bona fide and free from negligence, viewed contextually and having regard to the totality of circumstances.

    Appellate Tribunal Adopted a β€˜Slightly Rigid Approach’

    • Applying those principles, the High Court found that the Appellate Tribunal had been too rigid.

    The sufficiency of the explanation ought to have been examined on the touchstones of:

    reasonableness, bona fides and diligence, coupled with the necessary degree of justice-oriented flexibility.

    The High Court clarified that delay should not be condoned where there is gross negligence, deliberate inaction or blatant indifference to statutory timelines. But it expressly found:

    β€œThat is not the case at hand.”

    Waiting for Occupancy Certificate Was Not Wholly Unreasonable

    • A particularly important aspect of the judgment concerns the practical predicament faced by the allottees.
    • Possession had originally been promised by 31 December 2018, yet even when the matter reached the High Court, the promoters had neither offered possession nor obtained the full Occupancy Certificate.
    • The Court held that the allottees’ expectation that the promoter would comply with its statutory and contractual obligations and the MahaRERA order could not be described as wholly unreasonable.

    MahaRERA Order Made Interest Dependent on an Event Beyond Allottees’ Control

    • The High Court found the structure of the MahaRERA order itself significant.
    • Although delayed-possession interest had been granted, payment was deferred until the promoter obtained the Occupancy Certificate.
    • Thus, enforcement of the monetary relief granted to the allottees had effectively been made contingent upon an event which was outside their control and dependent upon the acts of the promoter.
    • In these circumstances, the allottees’ decision to pursue the promoter in the bona fide expectation that the OC would shortly be obtained could not properly be treated as negligence.

    β€˜Every Day’s Delay’ Rule Cannot Be Applied With Mathematical Precision

    The Bombay High Court then made an important observation concerning the frequently invoked requirement that a litigant explain β€œeach and every day’s delay”.

    The Court held that:

    • The principle that a party seeking condonation must account for each and every day’s delay cannot be stretched to the point of mathematical precision and exactitude.
    • It also found that a delay of 143 days was neither huge nor inordinate in the circumstances of the case.
    • This observation is likely to be particularly relevant in future delay-condonation disputes where tribunals adopt an overly mechanical day-by-day approach despite a coherent overall explanation.

    Occupancy Certificate Still Not Obtained

    • During the hearing, counsel for the promoters fairly informed the High Court that, according to his instructions, the Occupancy Certificate had still not been obtained.
    • The Court observed that if the allottees attempted to enforce the MahaRERA order in that situation, such proceedings could be termed premature because the liability to pay interest had itself been deferred until the uncertain future event of obtaining the OC.
    • Whether such a condition in the MahaRERA order was legally justified would therefore need to be examined by the Appellate Tribunal once the appeal was restored.

    Bombay High Court Allows Appeal and Condones Delay

    The High Court answered the substantial question of law in favour of the appellants and allowed the Second Appeal.

    It consequently:

    • quashed and set aside the Appellate Tribunal’s order dated 6 April 2026;
    • allowed the application seeking condonation of delay;
    • condoned the 143-day delay in filing the RERA appeal;
    • imposed β‚Ή20,000 costs, payable by the appellants to the respondents within four weeks from uploading of the order; and
    • requested the Maharashtra Real Estate Appellate Tribunal to decide the substantive appeal in accordance with law.

    Important: High Court Did Not Finally Decide the Homebuyers’ RERA Claims

    • The judgment must be understood within its procedural limits.
    • The Bombay High Court did not finally decide whether the homebuyers are entitled to possession, whether the manner in which MahaRERA deferred payment of interest until receipt of the OC is legally valid, or what substantive relief should ultimately be granted.
    • The Court’s ruling concerns the rejection of the delay-condonation application. Those substantive RERA issues will now be examined by the Maharashtra Real Estate Appellate Tribunal after restoration of the appeal.

    Why the Judgment Is Significant

    • The ruling reinforces that limitation law must strike a balance between finality of proceedings and substantial justice. Courts and tribunals cannot disregard statutory limitation periods, but neither should the concept of β€œsufficient cause” be applied through an excessively mechanical formula.
    • In RERA disputes particularly, the surrounding circumstances faced by homebuyersβ€”including dependence upon the promoter for completion, possession and Occupancy Certificatesβ€”may be relevant while assessing whether their conduct reflects negligence or a bona fide attempt to secure compliance.
    • The judgment also sends a clear message that the requirement to explain delay does not necessarily mean that a litigant must produce a mathematically precise explanation for every individual day where the overall conduct demonstrates reasonable diligence and bona fides.

    Key Takeaway

    A 143-day delay in filing a RERA appeal cannot be rejected through an excessively rigid application of limitation principles where the allottees acted bona fide and their explanation is consistent with the surrounding circumstances.

    The requirement to explain β€œeach and every day’s delay” cannot be stretched to mathematical precision.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Bombay High Court

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  • Supreme Court: Arbitrator Cannot Award Pre-Reference Interest When Contract Expressly Bars It

    Supreme Court: Arbitrator Cannot Award Pre-Reference Interest When Contract Expressly Bars It

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 25.09.2026

    Supreme Court: Arbitrator Cannot Award Pre-Reference Interest When Contract Expressly Bars It

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    In an important ruling concerning interest in arbitration arising from public works contracts, the Supreme Court has held that where the parties have expressly agreed to a contractual clause barring interest on delayed payments, an Arbitral Tribunal cannot award pre-reference interest contrary to that bargain.

    Allowing the appeal filed by North Eastern Electric Power Corporation Limited (NEEPCO) against Astra Construction Private Limited, the Supreme Court set aside the Meghalaya High Court judgment to the extent that it had restored pre-reference interest awarded by the Arbitral Tribunal.

    The Court held that Clause 54 of the General Conditions of Contract (GCC) constituted an express contractual prohibition against such interest and therefore restricted the Tribunal’s power under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996.

    Background of the Dispute

    • NEEPCO had invited tenders on 12 June 1995 for civil works relating to the main plant and auxiliary building of a Gas Turbine Power Project at Ram Chandra Nagar, Tripura. Astra Construction’s tender was accepted and the parties executed a formal agreement on 23 May 1996.
    • The estimated contract value was approximately β‚Ή17.09 crore, and the work was stipulated to be completed by 26 March 1997.
    • Disputes subsequently arose and were referred to arbitration. By an award dated 5 June 2015, the Arbitral Tribunal found that the delay in execution of the project was attributable to NEEPCO.

    Four claims raised by Astra Construction were allowed and a principal amount of β‚Ή3.30 crore was awarded. In addition, the Tribunal granted:

    ComponentInterest awarded
    Pre-reference interest12% per annum
    Pendente lite interest9% per annum
    Future interest9% per annum

    The pre-reference interest at 12% was awarded on each of the claims allowed by the Tribunal.

    Commercial Court Interferes with Interest Component

    • NEEPCO challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.
    • The Commercial Court, by its judgment dated 15 February 2024, relied upon the Supreme Court’s decision in Sayeed Ahmed & Company v. State of U.P. and concluded that Clause 54 barred the grant of interest.
    • Accordingly, the Commercial Court set aside the grant of pre-suit and pendente lite interest on Claim Nos. 2, 3, 4 and 5, while otherwise upholding the award.

    Meghalaya High Court Restores Arbitral Award

    • Astra Construction challenged the Commercial Court’s decision under Section 37 of the 1996 Act.
    • The Meghalaya High Court relied upon the Supreme Court’s earlier judgment in State of U.P. v. Harish Chandra & Co., (1999) 1 SCC 63.
    • It held that the contractual bar under Clause 54 was confined to interest claimed on money or balances withheld because of a dispute and did not extend to every other head of claim.
    • On that reasoning, the High Court restored the Arbitral Tribunal’s award in its entirety.
    • NEEPCO consequently approached the Supreme Court.

    NEEPCO Confines Supreme Court Challenge to Pre-Reference Interest

    • Before the Supreme Court, NEEPCO confined its challenge to the High Court’s restoration of pre-reference interest.
    • NEEPCO argued that the High Court had wrongly relied upon Harish Chandra, which arose under the Arbitration Act, 1940, without properly appreciating the later jurisprudence under the Arbitration and Conciliation Act, 1996.
    • NEEPCO relied particularly upon Sayeed Ahmed, Jai Prakash Associates Ltd. v. Tehri Hydro Development Corporation Ltd., Ferro Concrete Construction (India) Pvt. Ltd. v. State of Rajasthan and ONGC v. G & T Beckfield Drilling Services Pvt. Ltd.
    • Astra Construction, on the other hand, argued that NEEPCO had not raised the Clause 54 objection before the Arbitral Tribunal and had therefore waived its right to raise the issue. It relied upon Union of India v. Susaka Pvt. Ltd. & Ors., (2018) 2 SCC 182.

    Supreme Court Explains Major Difference Between 1940 and 1996 Arbitration Laws

    • A significant part of the judgment explains the evolution of the law governing an arbitrator’s power to award interest.
    • Under the Arbitration Act, 1940, there was no express statutory provision empowering an arbitrator to award interest. The Supreme Court’s Constitution Bench in Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508 developed the principle that where an agreement did not prohibit interest and the claim was referred to arbitration, interest could be treated as an implied term of the agreement.
    • The position changed materially under the 1996 Act.
    • Section 31(7)(a) expressly begins with the words β€œUnless otherwise agreed by the parties”. The Supreme Court held that these words give primacy to party autonomy: the statutory power of an arbitrator to award interest is subject to what the contracting parties have agreed.

    Contract Can Restrict Arbitrator’s Power to Award Interest

    • Referring to Pam Developments Private Limited v. State of West Bengal, (2024) 10 SCC 715, the Court explained that under the 1996 Act an express contractual bar can restrict the arbitrator’s power to award pre-reference and pendente lite interest.
    • Unlike the position under the 1940 Act, it is not necessary that the contractual provision specifically state that the β€œarbitrator” has no power to award interest. If the agreement itself bars payment of interest, Section 31(7)(a) respects that contractual arrangement.
    • The Court reiterated that Section 31(7)(a) reflects a deliberate legislative shift toward party autonomy.

    Pre-Reference and Pendente Lite Interest Are Legally Distinct

    The judgment also draws an important distinction between pre-reference interest and pendente lite interest.

    The Court reaffirmed that pendente lite interest is a matter of procedural law governed by Section 31(7)(a), whereas pre-reference interest is governed by substantive law.

    Consequently, entitlement to pre-reference interest cannot be derived solely from Section 31(7)(a). It must have a basis in:

    • an express or implied agreement between the parties;
    • a statutory provision such as Section 3 of the Interest Act, 1978; or
    • established mercantile usage.

    Clause 54 Was the Decisive Contractual Provision

    • Clause 54 of the NEEPCO contract was titled β€œNo Claim for Delayed Payment due to Dispute Etc.”
    • It provided that no claim for interest or damages would be entertained in respect of money or balances lying with NEEPCO because of a dispute, difference or misunderstanding, or in respect of delay by the Engineer-in-Charge in making periodical or final payments, or in any other respect whatsoever.
    • The central question was whether this clause resembled the provision interpreted in Harish Chandra or the broader contractual bars considered in Sayeed Ahmed and the later THDC decisions.

    Supreme Court’s Important Comparison of Contract Clauses

    • The Supreme Court itself provided a comparative table on page 13 of the judgment, placing Clause 54 alongside the clauses considered in Harish Chandra, Sayeed Ahmed and THDC-II.
    • The Court found an important drafting difference.
    • In Harish Chandra, the contractual restriction essentially dealt with money withheld because of a dispute. It did not create a separate and independent prohibition concerning money simply paid late where no underlying dispute existed.
    • That was why the Harish Chandra Bench had concluded that the provision did not generally prevent an arbitrator from awarding interest for delayed payment.

    Clause 54 Goes Further Than Harish Chandra Clause

    Clause 54 in the NEEPCO contract was materially different.

    The Supreme Court found that it covered two independent situations:

    1. money or balances lying with the Corporation because of a dispute, difference or misunderstanding; and
    2. delay by the Engineer-in-Charge in making periodical or final payments.

    The second limb was decisive.

    • By separately and expressly covering delayed payment, Clause 54 prohibited an interest claim arising from delay even where there was no dispute about the underlying payment.
    • The Court therefore concluded that the High Court had erred in treating Clause 54 as equivalent to the clause considered in Harish Chandra.

    Sayeed Ahmed and THDC Line of Cases Applies

    • The Supreme Court instead found Clause 54 materially similar to the clauses considered in Sayeed Ahmed and THDC-II.
    • In those cases, separate language dealing with delayed payment was treated as a complete contractual restriction on the arbitrator’s authority to grant interest for the relevant periods.
    • The Supreme Court expressly agreed with that reasoning and held that the Sayeed Ahmed line of decisionsβ€”not Harish Chandraβ€”governed the NEEPCO dispute.

    NEEPCO Had Not Waived the Contractual Objection

    • The Supreme Court also rejected Astra Construction’s contention that NEEPCO had waived its right to rely upon Clause 54 because the objection had allegedly not been taken before the Arbitral Tribunal.
    • The record showed that NEEPCO had specifically raised the plea in its Statement of Defence dated 23 August 2012 before the Tribunal. The waiver argument therefore failed on facts.

    Supreme Court’s Final Decision

    • The Supreme Court ultimately held that Clause 54 barred the grant of pre-reference interest.
    • It further held that the Arbitral Tribunal, by granting such interest despite the contractual prohibition, exceeded the bounds of its jurisdiction under Section 31(7)(a).
    • Accordingly, the Meghalaya High Court judgment was set aside to the extent it had restored pre-reference interest, and NEEPCO’s appeal was allowed without any order as to costs.
    • Importantly, NEEPCO had confined its Supreme Court challenge to the restoration of pre-reference interest. The judgment should therefore not be read as the Supreme Court setting aside the entire arbitral award or the β‚Ή3.30 crore principal amount.

    Why This Judgment Is Important for Government and Infrastructure Contracts

    • The judgment has considerable significance for EPC contracts, construction contracts, power projects, infrastructure agreements and government/public-sector works contracts containing β€œno-interest” clauses.
    • Its central message is that Section 31(7)(a) does not give an arbitrator an unrestricted power to award interest. The statutory power operates subject to the parties’ agreement.
    • The precise drafting of the contractual clause becomes critical. A clause limited merely to amounts withheld because of a dispute may have a different legal effect from a clause that independently and expressly prohibits interest for delayed periodical or final payments.
    • The decision therefore reinforces both party autonomy and the importance of carefully construing the actual words of the contract before determining whether pre-reference interest is legally recoverable.

    Key Takeaway

    Where a contract governed by the Arbitration and Conciliation Act, 1996 expressly bars interest on delayed payments, an Arbitral Tribunal cannot override that bargain and award pre-reference interest under Section 31(7)(a). The wording of the contractual bar is decisive.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Supreme Court

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  • Karnataka High Court: Criminal Antecedents Alone Cannot Justify Rejection of Bail

    Karnataka High Court: Criminal Antecedents Alone Cannot Justify Rejection of Bail

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 25.09.2026

    Karnataka High Court: Criminal Antecedents Alone Cannot Justify Rejection of Bail

    This Short Article has been prepared & written by Advocate G Sridharamurthy. The views expressed are based on his interpretation of the law. He can be reached at his email id sriadv3@gmail.com . 

    The Karnataka High Court has granted regular bail to a 23-year-old accused in a case concerning alleged preparation to commit dacoity, reiterating the Supreme Court’s principle that criminal antecedents cannot, by themselves, be the sole ground for rejecting bail when an accused is otherwise entitled to release.

    Justice S. Vishwajith Shetty allowed the petition after taking into account that the investigation had been completed, the charge sheet had already been filed, the petitioner had been granted bail in his earlier criminal cases, and he had undertaken to cooperate with the Trial Court for speedy disposal of the proceedings.

    Background of the Case

    • The petitioner, Sudeep, was arrayed as Accused No. 1 in S.C. No. 156/2025, pending before the VI Additional District and Sessions Judge, Tumakuru.
    • The proceedings arose from Crime No. 87/2025, registered by Hebburu Police Station, Tumakuru District, for offences punishable under Sections 310(4) and 310(5) of the Bharatiya Nyaya Sanhita, 2023.
    • Sudeep approached the Karnataka High Court seeking regular bail under Section 483 of the BNSS, 2023.
    • The criminal petition itself records the corresponding reference to Section 439 of the erstwhile Code of Criminal Procedure while seeking bail under the current BNSS framework.

    FIR Initially Registered Against Unknown Persons

    • The case originated from information received on 20 May 2025 from Byregowda G.S., a police officer attached to Hebburu Police Station.
    • On the basis of the information, the FIR was initially registered against four to five unknown persons.
    • Sudeep was arrested on the same day, 20 May 2025, and was thereafter remanded to judicial custody. Following completion of the investigation, police filed a charge sheet against five persons, with Sudeep shown as Accused No. 1.
    • His earlier bail application before the Trial Court in Criminal Miscellaneous No. 630/2026 was rejected on 20 May 2026, following which he approached the High Court.

    Allegation: Accused Were Preparing to Commit Dacoity

    • According to the prosecution case recorded in the order, the accused persons had allegedly prepared themselves to commit dacoity and were armed with weapons.
    • The first informant, acting upon credible information, registered the case against unknown persons. A raid was subsequently conducted at the location where the accused were allegedly preparing to commit the offence.
    • Five persons were apprehended during the raid, and Sudeep was one of them.
    • These allegations remain part of the pending criminal prosecution; the High Court’s bail order does not constitute a finding on their truth or otherwise.

    Investigation Completed and Charge Sheet Filed

    • An important consideration for the High Court was that the investigation had already been completed and the charge sheet filed.
    • The order also records that the petitioner had previous criminal cases against him. However, in those earlier cases, he was stated to have already been enlarged on bail.
    • The existence of those antecedents therefore led the High Court to consider the Supreme Court’s decision in Prabhakar Tewari v. State of Uttar Pradesh and Another, (2020) 11 SCC 648.

    Criminal Antecedents Cannot Be Sole Ground for Refusing Bail

    The Karnataka High Court specifically relied on Prabhakar Tewari for the proposition that:

    • a person’s criminal antecedents cannot be the sole ground to reject bail if the person is otherwise found entitled to it.
    • The principle was directly applied while considering Sudeep’s bail application.
    • The ruling is significant because it reiterates that the mere existence of earlier criminal cases does not automatically create an absolute bar against bail.
    • Criminal antecedents may remain a relevant consideration in deciding a bail application, but the High Court’s order makes clearβ€”following the Supreme Court precedentβ€”that they cannot operate as the sole reason for rejection where the overall circumstances otherwise justify release.

    Petitioner Undertakes to Cooperate With Trial

    • The High Court further recorded Sudeep’s undertaking that he would cooperate before the Trial Court for speedy disposal of the case.
    • Considering this undertaking along with the completion of investigation, filing of the charge sheet and the principle concerning criminal antecedents, Justice Shetty concluded that the petitioner’s prayer for regular bail deserved to be answered in the affirmative, subject to appropriate safeguards.
    • The petition was accordingly allowed.

    β‚Ή1 Lakh Personal Bond and Two Sureties

    • The High Court directed Sudeep to be released on regular bail in S.C. No. 156/2025, subject to several conditions.
    • He was required to execute a personal bond of β‚Ή1,00,000 with two sureties for the like amount to the satisfaction of the jurisdictional court.
    • The petitioner was also directed to appear regularly on all dates of hearing before the Trial Court unless his appearance was specifically exempted for valid reasons.

    Monthly Police Station Attendance for One Year

    • The High Court imposed additional safeguards while granting bail.
    • Sudeep was prohibited from directly or indirectly threatening or tampering with prosecution witnesses and was directed not to involve himself in similar offences in the future.
    • He was further prohibited from leaving the jurisdiction of the Trial Court without its permission until disposal of the criminal case.
    • Importantly, the Court directed him to appear before the Station House Officer, Hebburu Police Station, on the third Sunday of every month between 10:00 AM and 1:00 PM, and mark his attendance for one year from the date of his release.

    Supreme Court Judgment Relied Upon

    The principal judicial precedent expressly relied upon in the order is:

    • Prabhakar Tewari v. State of Uttar Pradesh and Another, (2020) 11 SCC 648 β€” cited for the proposition that criminal antecedents cannot be the sole basis for refusing bail where the accused is otherwise entitled to bail.

    Why the Decision Matters

    • The Karnataka High Court’s order reinforces an important principle in bail jurisprudence: criminal antecedents are relevant, but they are not necessarily determinative.
    • A bail court must examine the circumstances of the case as a whole. In the present matter, the Court considered the completion of investigation, filing of the charge sheet, the petitioner’s bail status in earlier cases and his undertaking to cooperate with the trial.
    • At the same time, the Court balanced the petitioner’s liberty against the interests of the prosecution by imposing stringent conditions concerning attendance, witnesses, territorial movement and monthly reporting to the police station.
    • The order should therefore not be read as holding that previous criminal cases are irrelevant to bail. Its narrower principle, drawn directly from Prabhakar Tewari, is that antecedents cannot constitute the sole ground for rejection when the accused is otherwise found entitled to bail.

    Key Takeaway

    The Karnataka High Court has reiterated that previous criminal antecedents, standing alone, cannot justify denial of regular bail. Where investigation is complete, the charge sheet has been filed and other circumstances support release, the accused may be granted bail subject to appropriate conditions designed to secure attendance and protect the trial.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Karnataka High Court

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  • Supreme Court: Accused Must Be Clearly and Individually Informed of Section 50 Right Before Personal Search

    Supreme Court: Accused Must Be Clearly and Individually Informed of Section 50 Right Before Personal Search

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    Supreme Court: Accused Must Be Clearly and Individually Informed of Section 50 Right Before Personal Search

    This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .  

    In an important judgment governing search and seizure under the NDPS Act, the Supreme Court held that the statutory right available to an accused under Section 50(1) must be communicated clearly, unambiguously and individually to each person who is about to be searched.

    The Court ruled that a joint notice to multiple accused is insufficient. It further held that an investigating officer cannot offer an accused a β€œthird option” of being searched before a gazetted officer who is himself a member of the raiding party, because Section 50 contemplates a search before the nearest Magistrate or nearest gazetted officer and the safeguard is intended to provide an element of independence.

    Upholding the Rajasthan High Court’s acquittal of Parmanand and Surajmal, the Supreme Court dismissed the State’s appeal and held that the breach of Section 50 had vitiated the search and consequently the conviction.

    Background of the Case

    • The prosecution case arose from information received by a Narcotics Department officer on 13 October 1997 that Parmanand and Surajmal would deliver approximately 10 kg of opium the following morning at Nangdi-Tiraha, Iklera, Chhipabaraud Road.
    • A raiding party headed by Superintendent J.S. Negi was constituted. At approximately 4:25 a.m., the two accused arrived and were intercepted. Parmanand was carrying a white gunny bag.
    • Before conducting the search, the officers purported to inform the accused about their rights under Section 50. A single written notice was issued to both accused.
    • Surajmal gave written consent not only for himself but purportedly also on behalf of Parmanand. Parmanand himself did not independently sign the notice or provide independent consent. The officers thereafter searched Parmanand’s bag and recovered 9.6 kg of opium.

    Trial Court Convicted the Accused

    • The Special Judge convicted Parmanand under Section 8 read with Section 18 of the NDPS Act, while Surajmal was convicted under Section 8 read with Section 28.
    • Each was sentenced to 10 years’ rigorous imprisonment and a fine of β‚Ή10 lakh, with a further two years’ rigorous imprisonment in default of payment of the fine.
    • The accused appealed to the Rajasthan High Court, which acquitted them. The State of Rajasthan thereafter approached the Supreme Court challenging that acquittal.

    Central Question Before the Supreme Court

    • The central issue was whether the search complied with the mandatory safeguards contained in Section 50 of the NDPS Act.
    • The State argued that the accused had been informed of their right to be searched before a Magistrate or gazetted officer and that a written notice had been given. The respondents countered that the notice was a joint notice, whereas each accused was entitled to an individual communication of his statutory right.

    Does Section 50 Apply When Drugs Are Recovered From a Bag?

    • The case raised an important preliminary issue because the opium was recovered from the bag carried by Parmanand, rather than from his body.
    • The Supreme Court distinguished between two situations.
    • Where only a bag, briefcase or container carried by a person is searched, without searching the person’s body, Section 50 does not apply. The Court referred to Kalema Tumba v. State of Maharashtra and State of Himachal Pradesh v. Pawan Kumar in support of this principle.
    • However, where both the bag and the person’s body are searched, Section 50 applies.
    • The Court relied upon Dilip & Anr. v. State of Madhya Pradesh and Union of India v. Shah Alam, where personal searches conducted in addition to searches of vehicles or bags brought Section 50 into operation.
    • In the present case, the officers searched Parmanand’s bag and also conducted personal searches of both accused. The Supreme Court therefore held that Section 50 was applicable.

    Joint Section 50 Notice Is Not Sufficient

    • The most significant principle emerging from the judgment concerns joint notices under Section 50.
    • The Supreme Court found that there had been no individual communication of the statutory right. A common notice was issued, and Surajmal purported to sign both for himself and Parmanand. Parmanand did not sign the notice.

    The Court held:

    • β€œA joint communication of the right available under Section 50(1) of the NDPS Act to the accused would frustrate the very purport of Section 50.”
    • The Court explained that communication of the Section 50 right is not an empty formality. Given the stringent punishments prescribed by the NDPS Act, statutory search safeguards must be meticulously observed.

    Right Must Be β€œClear, Unambiguous and Individual”

    • The Supreme Court laid down an important standard for communicating Section 50 rights:
    • β€œThe communication of this right has to be clear, unambiguous and individual.”
    • Each accused must therefore be independently informed that he or she has a right under Section 50(1) to be searched before the nearest gazetted officer or nearest Magistrate.
    • The Court reasoned that a joint communication could create confusion and dilute the statutory safeguard. It expressly approved the similar approach adopted by the Punjab & Haryana High Court in Paramjit Singh and by the Bombay High Court in Dharamveer Lekhram Sharma.

    One Accused Cannot Exercise Section 50 Right for Another

    • The Court also rejected the prosecution’s reliance on Surajmal’s purported consent on behalf of Parmanand.
    • Parmanand had neither signed the written communication nor independently consented to the proposed search. Accepting the prosecution case would require an assumption that he had authorised Surajmal to consent on his behalf.
    • The Supreme Court refused to proceed on such a presumption and concluded that the Section 50 right had not been properly communicated to the respondents.
    • This aspect of the judgment reinforces that Section 50 confers a personal procedural safeguard which must be communicated to the individual who is to be searched.

    Supreme Court Rejects β€œThird Option” During Section 50 Search

    The Court found another serious defect in the search procedure.

    The investigating officer told the accused that they could choose to be searched:

    1. before the nearest Magistrate;
    2. before the nearest gazetted officer; or
    3. before Superintendent J.S. Negi, who was himself part of the raiding party.
    4. The Supreme Court held that offering this third option amounted to another breach of Section 50(1).
    5. The statutory purpose of taking an accused before a Magistrate or gazetted officer, the Court explained, is to provide an opportunity for the search to take place in the presence of an independent officer.
    6. Superintendent Negi, being a member of the raiding party, could not be treated as an independent officer for this purpose.
    7. The Court accordingly held that the searching officer could not introduce a third option which Section 50 itself does not provide. Such an option would frustrate the statutory safeguard.

    Section 50 Safeguards Must Be Meticulously Followed

    • The judgment draws heavily upon the Constitution Bench decision in State of Punjab v. Baldev Singh, (1999) 6 SCC 172.
    • The Constitution Bench had held that an empowered officer acting on prior information must inform the person to be searched of the existence of his right to be taken before the nearest gazetted officer or Magistrate. Failure to properly communicate that right can render the recovery suspect and vitiate a conviction founded upon such recovery.
    • In Parmanand, the Supreme Court applied that principle to emphasize that the protection must be meaningful rather than merely formal.

    Cases Referred by the Supreme Court

    • The judgment discusses several important authorities on Section 50, including State of Punjab v. Balbir Singh, (1994) 3 SCC 299; State of Himachal Pradesh v. Pirthi Chand, (1996) 2 SCC 37; State of Punjab v. Baldev Singh, (1999) 6 SCC 172; Kalema Tumba v. State of Maharashtra, (1999) 8 SCC 257; State of Himachal Pradesh v. Pawan Kumar, (2005) 4 SCC 350; Dilip & Anr. v. State of Madhya Pradesh, (2007) 1 SCC 450; and Union of India v. Shah Alam, (2009) 16 SCC 644.
    • The Court also approved the approach in Paramjit Singh & Anr. v. State of Punjab, 1997 (1) CRIMES 242, and Dharamveer Lekhram Sharma & Anr. v. State of Maharashtra & Ors., 2001 (1) CRIMES 586, on the requirement of individual communication.

    Final Decision: Acquittal Upheld

    • The Supreme Court concluded that there were two material violations of Section 50:
    • First, the accused were not individually informed of their statutory rights and were instead served with a joint communication.
    • Second, the investigating officer improperly offered the additional option of being searched before a Superintendent who was himself part of the raiding party.
    • The Court consequently held that the search was vitiated and the resulting conviction was illegal. It upheld the Rajasthan High Court’s acquittal and dismissed the State’s appeal.

    Why the Judgment Matters in NDPS Cases

    State of Rajasthan v. Parmanand is an important authority on the procedural safeguards surrounding personal searches under the NDPS Act. It establishes that Section 50 compliance cannot be reduced to obtaining a signature on a standard notice.

    The decision makes three principles particularly clear: each accused must individually understand the Section 50 right; a joint notice is insufficient; and the searching officer cannot create a third search option involving a member of the raiding party. At the same time, the judgment should not be read as holding that Section 50 applies to every search of a bag or container. The Court specifically clarified that where only a bag is searched and no personal search takes place, Section 50 does not apply. It applied in Parmanand because both the bag and the persons of the accused were searched.

    Connected Matter

    Calcutta HC: Unexplained Increase in Seized Drug Weight Raises Doubt Over NDPS Investigation

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Supreme Court

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    Ravi Shekhar Jha – Advocate, Bar Council of Delhi

  • Delhi HC Expands Protection for Well-Known Marks: Formal Declaration Not a Precondition Under Section 11(2)

    Delhi HC Expands Protection for Well-Known Marks: Formal Declaration Not a Precondition Under Section 11(2)

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    Delhi HC Expands Protection for Well-Known Marks: Formal Declaration Not a Precondition Under Section 11(2)

    This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .  

    In a significant ruling on the protection of well-known trademarks against dilution, the Delhi High Court has cancelled the registration of the mark ZORA in Class 24 after finding it deceptively similar to the globally recognised ZARA trademark.

    Justice Jyoti Singh held that the Registrar of Trade Marks had applied an incorrect test by dissecting the rival marks into β€œZA/ZO” and β€œRA”, rather than comparing ZARA and ZORA as a whole.

    The Court further delivered an important interpretation of Section 11(2) of the Trade Marks Act, 1999, holding that an earlier trademark need not have first obtained a formal declaration as a β€œwell-known trademark” from a court or the Registrar before its proprietor can invoke Section 11(2). What matters is whether evidence establishes that the mark satisfies the statutory requirements for protection as a well-known mark.

    The High Court ultimately allowed ZARA owner Industria De Diseno Textil S.A.’s appeal, quashed the Registrar’s order dated 8 February 2024, cancelled ZORA’s registration and directed the Trade Marks Registry to remove the mark from the Register.

    Dispute Between ZARA and ZORA

    • Industria De Diseno Textil S.A. (Inditex) approached the Delhi High Court under Section 91 of the Trade Marks Act, 1999, challenging the Registrar’s decision dismissing its opposition to registration of ZORA.
    • Inditex asserted that it conceived and adopted the trademark ZARA in 1975 and subsequently developed it into an internationally recognised fashion and lifestyle brand.
    • In India, the company stated that ZARA had been used through contract manufacturers since 1986-87. Its Indian registrations included ZARA in Class 25 from 1993 and Class 24 from 2003, along with registrations covering several other classes and products.
    • Significantly, the Delhi High Court had earlier held in Industria De Diseno Textile S.A. v. Oriental Cuisines Pvt. Ltd. & Ors., 2015 SCC OnLine Del 9565 that ZARA was a well-known mark based on its sales, advertising, reputation in India and transborder reputation.

    Aggarwal Bag House Obtained Registration for ZORA

    • Respondent No. 2, trading as Aggarwal Bag House, applied on 30 October 2019 for registration of ZORA, claiming use since 3 June 2016.
    • The application covered fabrics, including plain, coated, laminated, impregnated and waterproof fabrics falling under Class 24.
    • After the application was advertised in the Trade Marks Journal, ZARA opposed the registration. However, by an order dated 8 February 2024, the Registrar rejected the opposition and permitted ZORA to proceed to registration. A registration certificate was issued the following day.

    Registrar Found ZARA and ZORA Dissimilar

    • The Registrar’s reasoning rested substantially on the view that ZARA and ZORA were neither phonetically nor visually similar.
    • For phonetic comparison, the Registrar separated the marks and compared β€œZO” with β€œZA”, reasoning that the β€œo” and β€œa” sounds were different.
    • For visual comparison, the Registrar again focused on the prefixes β€œZO” and β€œZA”, despite both marks sharing the suffix β€œRA”.
    • The Registrar also considered the parties’ trade channels different. ZORA was being used for raw laminated fabric sold in rolls to bag manufacturers, whereas ZARA sold finished products through its stores and websites.
    • The absence of evidence of actual confusion was also taken into consideration.
    • ZARA challenged each of these findings before the High Court.

    Delhi HC: Section 11(2) Does Not Require a Prior Formal Declaration of Well-Known Status

    • One of the most significant aspects of the judgment concerns the meaning of a well-known trademark under Section 11(2).
    • Respondent No. 2 argued that ZARA could not claim the expanded protection available to well-known trademarks because it had not been formally declared a well-known mark or included in the Registrar’s list.
    • The High Court rejected this argument.
    • Justice Singh noted that Section 11(2) uses the expression that the earlier mark β€œis a well-known trade mark in India”. It does not say that the mark must have already been formally β€œdeclared” well-known by a court or entered in the Registrar’s list.
    • The Court held that the relevant enquiry is whether the mark satisfies the statutory requirements of Section 2(1)(zg) and the factors contemplated under Section 11(6).
    • Accordingly, the right to oppose registration under Section 11(2) flows from the well-known nature and reputation of the earlier mark, rather than from the existence of a prior formal declaration.

    Registrar Can Determine Well-Known Status in Opposition Proceedings

    • The High Court further clarified that the Registrar is empowered, while deciding an opposition, to determine whether an earlier mark qualifies for protection as a well-known trademark.
    • This determination can be based on factors such as the duration and extent of use, promotion, recognition among the relevant public, registrations and previous enforcement of rights.
    • The Court therefore held that there is no statutory requirement under Section 11(2) that the proprietor must first obtain a separate declaration of well-known status before invoking the provision in opposition proceedings.
    • The Court found support for this interpretation in the Madras High Court’s decision in Lego Juris A/S v. Gurumukh Singh and Another, 2024 SCC OnLine Mad 4858, where similar protection had been considered in the context of the LEGO mark.

    ZARA Satisfies Requirements of a Well-Known Mark

    • Turning to the evidence, the High Court found substantial material establishing ZARA’s reputation.
    • The Court noted the brand’s large international retail and online presence, extensive sales, manufacturing expenditure, advertising, diversified product portfolio and recognition among consumers.
    • It also relied upon the earlier Delhi High Court decision recognising ZARA’s reputation and transborder goodwill.
    • The Court concluded that ZARA satisfied the statutory factors under Section 11(6) read with Section 2(1)(zg) and was therefore entitled to protection as a well-known trademark under Section 11(2), irrespective of the absence of a separate formal declaration.

    ZARA and ZORA Must Be Compared as a Whole

    • The High Court next found a fundamental error in the Registrar’s method of comparing the rival marks.
    • Justice Singh reiterated the settled anti-dissection principle: competing trademarks must ordinarily be compared as a whole, rather than being broken into individual syllables or components.
    • The Court relied upon the Supreme Court’s decision in Corn Products Refining Co. v. Shangrila Food Products Ltd., which held that similarity must be judged by considering the marks in their entirety.
    • The Registrar, however, had separated ZARA into β€œZA-RA” and ZORA into β€œZO-RA” and then focused on the distinction between β€œZA” and β€œZO”.
    • The High Court held that this approach was contrary to settled trademark law.

    Difference of One Vowel Does Not Save ZORA

    • Comparing the marks as a whole, the Court found that ZARA and ZORA are phonetically deceptively similar.
    • Both are four-letter word marks. Both begin with β€œZ”, end with β€œRA”, and possess the same overall consonantal structure. The principal difference is the substitution of the vowel β€œA” with β€œO”.
    • The Court reasoned that while ZARA is pronounced β€œZA-RA” and ZORA as β€œZO-RA”, both end with the same β€œRA” sound and carry a similar rhythm. To a consumer of average intelligence and imperfect recollection, their overall sound would be almost alike.
    • The Court therefore held that the Registrar had erred in finding the marks dissimilar.

    Dissimilar Goods Do Not Defeat Protection Under Section 11(2)

    • Another important question concerned the nature of the competing goods.
    • ZORA argued that it dealt with polyester fabric used as inner lining for bags, whereas ZARA’s business involved fashion, bags and home products sold through a very different retail network.
    • The High Court held that this argument was ultimately irrelevant for the purpose of Section 11(2).
    • Unlike Section 11(1), which deals with confusion arising from identical or similar marks in relation to identical or similar goods or services, Section 11(2) specifically extends protection to a well-known earlier mark even where the later mark is sought to be registered for dissimilar goods or services.
    • The essential question is whether use of the later mark without due cause would take unfair advantage of, or be detrimental to, the distinctive character or reputation of the earlier well-known mark.

    Court Finds Trade Connection Between ZARA and ZORA Goods

    • Although it was unnecessary to conclusively establish similarity of goods for Section 11(2), the Court nevertheless found that the competing commercial activities were not wholly disconnected.
    • Both marks were registered or sought to be registered in Class 24, which covers textiles and fabrics.
    • ZARA’s commercial activities extended beyond finished clothing to bags, home products and interactions with manufacturers, suppliers and traders dealing in textiles and related products. ZORA’s polyester fabric was used in bags.
    • The Court therefore found a connection in the course of trade, rejecting the argument that the parties operated in entirely unrelated commercial spheres.

    Actual Consumer Confusion Not Required Under Section 11(2)

    • The High Court also found that the Registrar had applied the wrong test by looking for evidence of actual consumer confusion.
    • The Court drew a clear distinction between Sections 11(1) and 11(2).
    • Under Section 11(1), likelihood of confusion and association between marks is central. Section 11(2), however, focuses on protecting the reputation and distinctive character of a well-known trademark against dilution, unfair advantage and detriment, including where the goods are dissimilar.
    • Accordingly, absence of evidence that consumers had actually been confused by ZORA did not defeat ZARA’s opposition.

    Court Finds ZORA Would Dilute ZARA’s Distinctiveness

    • The Court further found that ZARA had acquired extensive reputation well before ZORA’s claimed adoption in 2016.
    • It concluded that ZORA had no honest reason or due cause for adopting a deceptively similar mark and that its use could take unfair advantage of ZARA’s reputation.
    • The judgment also considered evidence concerning the commercial growth of ZORA after adoption of the mark and the manner in which ZORA appeared prominently on packaging of polyester rolls.
    • In the Court’s assessment, such use could lead customers and traders to believe that the polyester rolls were supplied by, associated with, or commercially connected to ZARA, thereby diluting the distinctive character and reputation of the earlier mark.

    ZORA Registration Cancelled; Registry Directed to Remove Mark

    • The Delhi High Court ultimately found that the Registrar’s rejection of ZARA’s opposition was legally flawed.
    • Accordingly, the Court quashed and set aside the Registrar’s order dated 8 February 2024 and cancelled registration No. 4310686 for ZORA in Class 24.
    • The Registrar of Trade Marks was directed to remove ZORA’s entry from the Register and rectify the Register within two months, with the Court specifically referring to maintaining the β€œpurity of the Register”.
    • The appeal filed by Industria De Diseno Textil S.A. was accordingly allowed, along with disposal of the pending application.

    Key Legal Takeaways

    The judgment establishes an important distinction in India’s trademark-registration regime: formal inclusion in the Registrar’s list of well-known trademarks is not a prerequisite for invoking Section 11(2). A proprietor may establish through evidence in opposition proceedings that its earlier mark possesses the statutory attributes of a well-known trademark.

    The ruling also reinforces the anti-dissection rule. Trademark comparison cannot ordinarily be reduced to identifying isolated differences in individual vowels or syllables. The marks must be assessed from the standpoint of their overall visual, structural and phonetic impression.

    Most importantly, where Section 11(2) applies, the enquiry moves beyond conventional consumer confusion. The provision protects the distinctiveness and reputation of well-known marks from dilution and unfair advantage even in relation to dissimilar goods or services.

    For trademark owners, the decision substantially reinforces the ability to oppose later marks that come too close to established brands, even where a formal well-known-mark declaration has not previously been obtained.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Delhi High Court

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  • Bombay HC Upholds Developer’s Cancellation of Flat Allotment After Buyer Failed to Pay Stamp Duty; Orders Refund With Interest

    Bombay HC Upholds Developer’s Cancellation of Flat Allotment After Buyer Failed to Pay Stamp Duty; Orders Refund With Interest

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    Bombay HC Upholds Developer’s Cancellation of Flat Allotment After Buyer Failed to Pay Stamp Duty; Orders Refund With Interest

    This Short Article has been prepared & written by Advocate Narendra Singh. The views expressed are based on his interpretation of the law. He can be reached at his email id amitnaren@outlook.com .  

    In a significant ruling concerning the obligations of homebuyers and promoters under the Real Estate (Regulation and Development) Act, 2016 (RERA), the Bombay High Court has held that a developer was justified in terminating a flat allotment where the allottee failed to actually pay the requisite stamp duty and registration charges despite repeated opportunities to execute the Agreement for Sale.

    Justice Sandeep V. Marne held that MahaRERA and the Maharashtra Real Estate Appellate Tribunal had erred in directing JP Builders and Developers to execute a registered Agreement for Sale in favour of the allottee, Santosh Amarsingh Sandhu. The Court found that the promoter was ready and willing to execute the agreement, whereas the allottee had failed to complete the stamp-duty and registration formalities.

    At the same time, the High Court held that the developer could not retain the allottee’s booking amount of β‚Ή12.30 lakh despite the valid termination. It directed that the amount be refunded with interest at SBI MCLR + 2%, calculated from 12 July 2016 until actual repayment.

    Background: Flat Originally Booked in Proposed A-Wing

    • The dispute arose from a residential development at Airoli, Navi Mumbai. JP Builders and Developers had undertaken development of land belonging to Airoli Cooperative Housing Society Ltd.
    • The project involved issues concerning additional FSI. The developer initially contemplated a ground-plus-30-storey building, but the additional FSI expected by the society did not fully materialise. The construction plans were eventually scaled down to a ground-plus-19-floor building.
    • Flat No. A-502 had originally been allotted to Vandana Nagendra Kharatmol and Nagendra Piraji Kharatmol for β‚Ή48.75 lakh. They paid β‚Ή12.30 lakh but later lost interest in the purchase because construction could not commence while litigation concerning FSI remained pending.
    • Thereafter, a fresh allotment letter dated 11 July 2013 was issued in favour of Santosh Sandhu for the same flat at a consideration of β‚Ή48.75 lakh, recording payment of β‚Ή12.30 lakh by him.

    Original Flat Could Not Be Constructed

    • The originally contemplated Flat A-502 ultimately could not be constructed because the proposed 30-storey structure had to be reduced to 19 floors.
    • After receiving a revised Commencement Certificate on 26 April 2019, the developer asked Sandhu to select another flat. He selected Flat No. 1208 on the 12th floor, which the developer agreed to allot subject to floor-rise charges of β‚Ή1.75 lakh.
    • The developer then called upon him to pay stamp duty and registration charges so that the Agreement for Sale could be executed. The allottee, however, said he was facing financial difficulty and asked the promoter to bear the stamp duty, with a proposal to reimburse it through the home-loan disbursement.
    • The developer eventually terminated the transaction by notice dated 30 July 2019.

    MahaRERA Directed Developer to Execute Agreement for Sale

    • The allottee approached MahaRERA in November 2019.
    • By an interim order dated 6 March 2020, MahaRERA relied upon Section 13 of RERA, noting that more than 10% of the agreed consideration had been paid without execution of a registered Agreement for Sale. It directed the developer to execute an agreement for another flat of equal area as chosen by the allottee.
    • That direction was effectively confirmed by MahaRERA’s final order dated 8 October 2020.
    • The Maharashtra Real Estate Appellate Tribunal subsequently dismissed the promoter’s appeal and partly allowed the allottee’s appeal. In addition to maintaining the direction concerning the flat, it ordered JP Builders to pay interest on β‚Ή12.30 lakh at SBI MCLR + 2% from 12 July 2016 until possession, with the interest to be adjusted against the balance consideration.
    • The Tribunal also restrained the developer from creating third-party rights in the flat and from charging floor-rise charges.
    • Both sides therefore approached the Bombay High Court in cross-appeals.

    Key Question: Was Stamp Duty Actually Paid?

    • A central issue before the High Court was whether the allottee had actually paid the stamp duty and registration charges required for execution of the Agreement for Sale.
    • The allottee claimed that he had paid β‚Ή4.35 lakh towards stamp duty and β‚Ή30,000 towards registration charges and relied upon an email dated 9 July 2019, through which he claimed to have forwarded proof of payment to the developer.
    • However, the documentary record revealed a crucial problem.
    • The Court found that although β‚Ή4.65 lakh had been transferred to a Punjab National Bank account for the purpose of making the statutory payment, the amount was never actually credited to the Stamp Authority or Registration Authority.
    • A letter subsequently written by the allottee to the bank on 18 January 2020 itself indicated that the required challan and e-payment receipt had not been generated. The bank eventually reversed the amount and returned β‚Ή4.65 lakh to the allottee.

    Transferring Money to Bank Is Not Payment of Stamp Duty: Bombay HC

    • The High Court drew an important distinction between merely making funds available to a bank and actually paying statutory stamp duty.
    • Justice Marne observed that making provision for stamp duty and transferring money to the banker did not mean that the statutory charges had actually been paid.
    • There was no evidence showing that β‚Ή4.65 lakh was transferred to the accounts of the concerned government authorities. Nor were the necessary challans generated.
    • The Court consequently held that the allottee had not paid the stamp duty and registration charges before 30 July 2019, when the developer terminated the transaction.

    Developer Sent Repeated Notices for Registration

    • The High Court also examined the chronology leading to cancellation.
    • After the revised plans were sanctioned on 26 April 2019, JP Builders issued communications dated 3 May 2019, 28 May 2019 and 24 June 2019, asking the allottee to complete payment of stamp duty and registration charges and execute the registered Agreement for Sale.
    • In an email dated 30 June 2019, the allottee expressly stated that he did not then have the necessary cash to pay the stamp duty. He proposed either that the developer wait three months for him to arrange the funds or that the developer initially bear the statutory charges and recover them through his proposed home loan.
    • Further communications followed on 2 July and 9 July 2019. When no proof of actual statutory payment was produced, the developer terminated the allotment on 30 July 2019.

    MahaRERA Mechanically Applied Section 13: High Court

    • The High Court found fault with the approach adopted by MahaRERA and the Appellate Tribunal.
    • According to the Court, both authorities had mechanically relied upon Section 13 of RERA to hold the promoter responsible for non-execution of the Agreement for Sale without adequately examining the events preceding the termination.
    • The Court noted that once the revised construction plans became clear in April 2019, the promoter promptly asked the allottee to execute the registered agreement. It was the allottee who did not complete the necessary stamp-duty and registration formalities.
    • The Court therefore concluded that the promoter could not be blamed merely because an Agreement for Sale had not ultimately been registered.

    β€œPromoter Is Not Expected to Wait Endlessly”

    • The judgment records that even after the termination, the allottee did not promptly establish payment of the statutory charges. The β‚Ή4.65 lakh that had remained with the bank was eventually refunded to him, and the record did not show that he thereafter paid the stamp duty.
    • The Court held that the allottee himself was responsible for the failure to execute the Agreement for Sale and that the developer was ready and willing to execute it.
    • Accordingly, the Court found the termination dated 30 July 2019 to be valid, observing that the promoter was not expected to wait endlessly.
    • The High Court consequently held that MahaRERA and the Appellate Tribunal had erred in directing the developer to execute the registered Agreement for Sale.

    Buyer Still Entitled to Refund of Entire β‚Ή12.30 Lakh

    • The validity of termination, however, did not permit the promoter to retain the buyer’s money.
    • JP Builders had earlier sought to refund β‚Ή11.07 lakh after deducting β‚Ή1.23 lakh as earnest money deposit.
    • The High Court held that despite the valid termination, the promoter was not entitled to retain the β‚Ή12.30 lakh booking amount or deduct any amount towards EMD.
    • Accordingly, the entire β‚Ή12.30 lakh was required to be returned to the allottee.

    Interest at SBI MCLR + 2% Maintained

    • The Court also balanced the equities on interest.
    • Although the allottee was responsible for the failure of the transaction after 30 July 2019, he had been made to wait for a considerable period for construction of the flat.
    • The High Court therefore maintained the interest rate fixed by the Appellate Tribunal β€” SBI MCLR + 2% β€” but altered the nature of the relief. Instead of interest continuing until possession and being adjusted against the balance consideration, the interest would run on the refundable booking amount of β‚Ή12.30 lakh from 12 July 2016 until the date on which the amount is actually returned.

    Claim for Adjustment of Earlier Buyers’ β‚Ή12.30 Lakh Rejected

    • Sandhu separately contended that amounts paid by the original allottees, the Kharatmols, should also be treated as part of his payment to the developer.
    • The Appellate Tribunal had rejected this claim after finding that the Kharatmols’ β‚Ή12.30 lakh had been returned to them and that there was no sufficient documentary evidence to establish that Sandhu had paid the promoter more than his own booking amount of β‚Ή12.30 lakh.
    • The High Court agreed.
    • It noted that the fresh allotment letter dated 11 July 2013 recorded a total consideration of β‚Ή48.75 lakh and payment of only β‚Ή12.30 lakh by Sandhu. It contained no provision for adjusting the earlier allottees’ consideration.
    • The allottee’s own email of 30 June 2019, in which he stated that approximately β‚Ή33 lakh remained payable out of the β‚Ή48.75 lakh consideration, also undermined the assertion that β‚Ή28.75 lakh had already been paid.

    Significance of the Judgment

    The ruling is significant because it demonstrates that Section 13 of RERA cannot be applied in isolation from the conduct of the parties and the factual circumstances preventing execution of the Agreement for Sale.

    Where a promoter is demonstrably ready to execute the agreement and repeatedly calls upon an allottee to complete necessary statutory formalities, an allottee’s own failure to pay stamp duty and registration charges can become material in determining whether subsequent termination is justified. At the same time, the judgment makes an equally important distinction between valid termination of an allotment and entitlement to retain the buyer’s money. Even though JP Builders succeeded on the legality of the cancellation, the High Court did not permit it to forfeit the β‚Ή12.30 lakh booking amount and preserved interest in favour of the allottee.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

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    Source: Bombay High Court

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  • Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    Supreme Court: State Cannot Raise New Defence at Award-Challenge Stage When It Was Never Taken Before Arbitrator

    This Short Article has been prepared & written by Arbitrator Shobhit Mallik. The views expressed are based on his interpretation of the law. He can be reached at his email id shobhit.Ica23@gmail.com .

    The Supreme Court of India, while deciding a dispute arising from the construction and operation of the Bharatpur bypass in Rajasthan, held that an arbitral tribunal cannot travel beyond its terms of reference and that a contractor cannot recover toll-based compensation for expenditure it never incurred.

    The Court recognised the contractor’s contractual right to collect tolls on the Bharatpur–Deeg section of the project. However, it also found that the contractor had failed to execute the second phase of the project and that this failure was material to determining its financial entitlement.

    Accordingly, the Supreme Court referred two issues back to the arbitral tribunal for reconsideration. It limited the contractor’s immediate entitlement to β‚Ή26.34 lakh, with 10% interest, for the delay in issuing the traffic-restriction notification, subject to adjustment or prior payment.

    Background: The Bharatpur Bypass BOT Project

    • The dispute originated in September 1997, when the Public Works Department of Rajasthan decided to construct a bypass connecting Bharatpur and Mathura to divert traffic away from the congested market area of Bharatpur.
    • The project was awarded on a Build, Operate and Transfer (BOT) basis. It covered approximately 10.85 kilometres, comprising 9.6 kilometres of new construction and 1.25 kilometres of widening and strengthening of the existing Bharatpur–Deeg Road.
    • MSK Projects submitted a bid of β‚Ή13.25 crore, which the State accepted in February 1998. The parties subsequently entered into a concession agreement on 19 August 1998, granting the contractor the right to collect tolls during a concession period of 111 months, including construction.
    • The contractor completed the bypass on 10 April 2000 and began collecting tolls on 28 April 2000. However, agitation by local residents and difficulties in diverting commercial vehicles through the bypass affected toll collection.
    • The State issued a notification dated 1 September 2000 restricting the entry of vehicles into Bharatpur city, with effect from 1 October 2000. The contractor subsequently invoked arbitration, alleging delay in issuing and implementing the notification and disputing its entitlement to collect tolls from vehicles using the Bharatpur–Deeg section.

    Arbitral Tribunal Awarded β‚Ή9.90 Crore With 18% Interest

    • On 1 December 2003, the arbitral tribunal ruled in favour of MSK Projects.
    • It held that the State had delayed issuing and implementing the traffic-restriction notification and that the contractor was entitled to collect tolls from vehicles using the Bharatpur–Deeg portion of the road.
    • The tribunal directed the State to pay approximately β‚Ή9.90 crore for losses assessed up to 31 December 2003, together with interest at 18% from that date.
    • The State challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The District Judge set it aside, holding, among other things, that the concession agreement did not expressly require the State to issue a notification prohibiting vehicles from entering Bharatpur city. The District Judge also reduced the interest rate from 18% to 10%.
    • On appeal, the Rajasthan High Court recognised the contractor’s right to collect tolls on the Bharatpur–Deeg section but rejected compensation based on an alleged obligation to issue the traffic-diversion notification. It maintained the reduced interest rate. Both parties subsequently approached the Supreme Court.

    Arbitrator Cannot Decide Matters Beyond the Reference

    • One of the principal questions before the Supreme Court concerned the limits of an arbitral tribunal’s jurisdiction.
    • The Court explained that an arbitral tribunal derives its authority from the reference made to it. It cannot materially enlarge that reference or decide matters outside its jurisdiction.
    • At the same time, the Court distinguished between an error in interpreting a contract, which may fall within an arbitrator’s jurisdiction, and deciding a matter that the parties never referred to arbitration, which constitutes a jurisdictional error.
    • Applying those principles, the Supreme Court noted that Rajasthan had not raised, during arbitration, the defence that it had never agreed to issue the traffic-restriction notification. The dispute framed before the tribunal concerned the delay in issuing and implementing that notification.
    • The District Judge and the High Court had therefore erred in deciding the case on a defence that the State had not taken before the arbitral tribunal.

    Contractor Entitled to Collect Toll on Bharatpur–Deeg Section

    • The State separately argued that the 1.25-kilometre Bharatpur–Deeg stretch was not part of the tollable project because it was an existing road rather than a newly constructed bypass.
    • The Supreme Court rejected that argument.
    • It examined the bid documents, traffic-survey data, pre-bid clarifications and concession agreement. These established that the Bharatpur–Deeg stretch formed an integral part of the composite project.
    • The Court also noted that the contractor had widened and strengthened the existing road. It was not a temporary service road intended to provide free passage during construction.
    • Consequently, the contractor’s right to collect tolls from vehicles using this section was upheld.

    Toll Collection Must Remain Compensatory

    • The judgment also examined the legal character of toll collection.
    • Referring to the Indian Tolls Act, 1851 and the applicable statutory notification dated 10 February 1997, the Supreme Court explained that tolls are compensatory in nature. They are intended to recover the costs of constructing and maintaining infrastructure, together with permissible interest and collection expenses.
    • The Court emphasised that toll collection cannot become an unrestricted source of revenue unrelated to the costs of the project.
    • This distinction was particularly important because MSK Projects had undertaken to execute the project in two phases, but the second phase had never been completed.

    Failure to Execute Second Phase Was Material to Compensation

    • The project documents contemplated an investment of approximately β‚Ή10.45 crore in Phase I and β‚Ή3.55 crore in Phase II.
    • The second phase involved repairs, maintenance and laying an additional bitumen layer over the road. The Supreme Court noted that MSK Projects had admittedly not executed this phase.
    • The Court further observed that the contractor had recovered its first-phase investment, together with some profit, although the precise amount of toll revenue collected had not been disclosed.
    • In these circumstances, the contractor could not claim compensation calculated on the entire projected investment of β‚Ή13.25 crore when it had not actually incurred the expenditure contemplated for Phase II.
    • The State had raised the non-execution of Phase II in its counter-affidavit before the Supreme Court. The contractor responded that the issue had not formed part of the original arbitration proceedings. The Court noted that there was no specific denial of the underlying allegation that the second phase remained unexecuted.
    • Although the issue arose after the original arbitral award and could not have been determined within that reference, the Supreme Court considered it necessary to examine its financial consequences to avoid awarding compensation disconnected from the contractor’s actual investment.

    Interest Reduced From 18% to 10%

    • The contractor also challenged the reduction of interest from 18% to 10%, arguing that the contractual arrangements contemplated a higher interest rate.
    • The Supreme Court declined to interfere with the reduced rate.
    • Referring to the Interest Act, 1978 and its earlier decisions, the Court explained that interest must be determined with regard to the circumstances of the case and the prevailing economic environment. It noted that interest rates had changed substantially following economic reforms.
    • The Court therefore maintained the 10% interest rate fixed by the courts below.

    Supreme Court’s Final Decision

    The Supreme Court did not restore the original arbitral award of β‚Ή9.90 crore. Instead, it directed the arbitral tribunal to reconsider two specific questions:

    1. What amount could the contractor legitimately have recovered from vehicles using the Bharatpur–Deeg section?
    2. What was the effect on the concession agreement as a whole of the contractor’s failure to execute Phase II?

    The Court requested the tribunal to decide these questions expeditiously after giving both parties an opportunity to be heard.

    It further held that MSK Projects was entitled to β‚Ή26.34 lakh for the delay in issuing the traffic-restriction notification, together with 10% interest, unless already paid. The amount could also be adjusted in the final accounts.

    Both appeals were disposed of without costs.

    Legal Significance

    The judgment addresses two distinct principles relevant to infrastructure contracts and commercial arbitration.

    First, an arbitral tribunal must remain within the scope of the dispute referred to it. Equally, a party cannot ordinarily introduce an entirely new defence at the judicial challenge stage and seek to overturn an award on that basis.

    Second, compensation under a BOT concession must be examined in light of the governing contract, statutory framework and expenditure actually incurred. A contractor’s entitlement to collect tolls does not, by itself, establish entitlement to recover the cost of contractual works that were never executed.

    The decision also illustrates the distinction between recognising a contractor’s contractual right and determining the amount ultimately payable under that right. In this case, the Supreme Court upheld the right to collect tolls on the disputed road section while leaving the financial consequences of the unexecuted second phase for further adjudication.

    Connected Matter

    Karnataka HC: Courts Cannot Re-Appreciate Evidence to Find Patent Illegality in Arbitral Award

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    Source: Supreme Court

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  • Karnataka High Court Grants Bail to Accused Who Missed Trial Dates; Says He Was β€œSufficiently Punished” by Return to Custody

    Karnataka High Court Grants Bail to Accused Who Missed Trial Dates; Says He Was β€œSufficiently Punished” by Return to Custody

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    Karnataka High Court Grants Bail to Accused Who Missed Trial Dates; Says He Was β€œSufficiently Punished” by Return to Custody

    This Short Article has been prepared & written by Advocate G Sridharamurthy. The views expressed are based on his interpretation of the law. He can be reached at his email id sriadv3@gmail.com . 

    The Karnataka High Court has granted regular bail to an accused who had earlier been released on bail but was subsequently taken back into judicial custody after failing to appear before the Trial Court on regular hearing dates.

    Justice S. Vishwajith Shetty observed that the accused had already been granted bail on the merits of the criminal case and had no other criminal antecedents. Noting that he had remained in custody after his presence was secured before the Trial Court, the High Court held that β€œfor the mistake committed by the petitioner, he has been sufficiently punished” and ordered his release on bail subject to stringent conditions.

    Background of the Case

    • The petitioner, Mohammed Shahid, is Accused No. 8 in S.C. No. 5065/2025, pending before the IV Additional District and Sessions Judge, Shivamogga, sitting at Bhadravathi.
    • The prosecution arose from Crime No. 12/2025 registered by Paper Town Police Station, Shivamogga for offences punishable under Sections 132, 121(1), 109(1), 61 and 58(b) of the BNS, 2023, along with Sections 3 and 25(1B) of the Arms Act, 1959.
    • The present petition was filed under Section 483 of the BNSS, 2023, seeking regular bail. The petition’s introductory portion also records the proceeding as one under Section 439 CrPC, filed under Section 483 BNSS.

    Accused Had Already Been Granted Bail in 2025

    • A crucial factor in the High Court’s decision was that this was not the petitioner’s first application for bail on the merits.
    • Mohammed Shahid had been arrested at the crime stage on 27 February 2025. He subsequently approached the Karnataka High Court and was granted regular bail in Criminal Petition No. 9948/2025 by an order dated 20 August 2025.
    • Thus, his entitlement to bail on the merits of the underlying criminal case had already been considered by the High Court.

    Failure to Appear Before Trial Court Led to Fresh Custody

    • After obtaining bail, however, the petitioner failed to appear before the Trial Court on the regular dates fixed for hearing.
    • Consequently, coercive steps were initiated against him. His presence was ultimately secured before the Trial Court on 13 July 2026, following which he was remanded to judicial custody.
    • The petitioner then filed another bail application before the Trial Court in S.C. No. 5065/2025. That application was rejected on 11 August 2026, prompting him to once again approach the Karnataka High Court.

    No Other Criminal Antecedents

    • During the hearing, counsel appearing for Mohammed Shahid submitted that the petitioner had no other criminal antecedents.
    • Significantly, the High Court Government Pleader appearing for the State did not dispute this assertion.
    • The absence of other criminal antecedents became relevant when the Court considered whether continued incarceration was necessary merely because of the petitioner’s earlier non-appearance.

    Bail on Merits Had Already Been Granted

    • The High Court emphasised that Mohammed Shahid had already secured regular bail on the merits of the criminal case through the Court’s earlier order dated 20 August 2025.
    • His return to custody was therefore not because the Court had subsequently found him undeserving of bail on the substantive allegations. Rather, the immediate reason was his failure to attend the Trial Court regularly.

    Justice Shetty recorded:

    • β€œOnly for the reason that petitioner had not appeared before the Trial Court on the regular dates of hearing, he has now been arrested and remanded to judicial custody…”
    • The Court therefore distinguished the underlying merits of the bail claim from the petitioner’s subsequent breach concerning his appearance before the Trial Court.

    β€œFor the Mistake Committed, He Has Been Sufficiently Punished”: Karnataka HC

    • The central observation in the order came while considering whether the petitioner should continue to remain in judicial custody for his failure to appear.

    The High Court observed:

    • β€œFor the mistake committed by the petitioner, he has been sufficiently punished.”
    • On that basis, and taking into account the earlier grant of bail on merits and the absence of disputed criminal antecedents, the Court allowed the petition and directed that Mohammed Shahid be released on regular bail.
    • The ruling therefore does not excuse the petitioner’s previous failure to attend the Trial Court. Instead, the Court considered the period of renewed custody sufficient in the circumstances and restored his liberty subject to conditions specifically designed to ensure his future attendance and compliance.

    High Court Imposes β‚Ή1 Lakh Bond and Two Sureties

    • The grant of bail was accompanied by several conditions.
    • The petitioner was directed to execute a personal bond of β‚Ή1,00,000 with two sureties for the like sum, to the satisfaction of the jurisdictional court.
    • Given that his earlier non-appearance had resulted in his return to custody, the High Court expressly directed him to appear regularly on every date of hearing before the Trial Court, unless his personal appearance is exempted for valid reasons.
    • The Court further restrained him from directly or indirectly threatening or tampering with prosecution witnesses and directed that he should not involve himself in similar offences in the future.
    • Finally, he was prohibited from leaving the jurisdiction of the Trial Court without its permission until disposal of the criminal case.

    What the Order Means

    • The ruling is important in the context of bail cancellation, non-appearance and subsequent applications for restoration of liberty.
    • The order indicates that failure to attend trial dates can legitimately result in coercive steps and renewed custody. At the same time, where an accused had already been granted bail on merits, has no other criminal antecedents, and has undergone further incarceration because of the default, continued detention is not necessarily required indefinitely.
    • The High Court’s approach also shows that the consequences of earlier non-appearance can be addressed through stricter bail conditions, particularly a specific obligation to attend future hearings, restrictions on leaving the Trial Court’s jurisdiction and safeguards against witness intimidation.
    • Importantly, the order does not decide the guilt or innocence of Mohammed Shahid in the pending criminal case. The prosecution under the BNS and Arms Act continues before the Sessions Court; the High Court’s ruling is confined to his entitlement to regular bail.

    Final Order

    The Karnataka High Court allowed Criminal Petition No. 13175 of 2026 and directed that Mohammed Shahid be enlarged on bail in S.C. No. 5065/2025 arising from Crime No. 12/2025 of Paper Town Police Station. His release is subject to the β‚Ή1 lakh personal bond with two sureties and the conditions concerning regular attendance, witnesses, future conduct and restriction on leaving the Trial Court’s jurisdiction.

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: Karnataka High Court

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  • CESTAT Chennai: Customs Cannot Reclassify 226 Auto Parts Without Product-Wise Evidence

    CESTAT Chennai: Customs Cannot Reclassify 226 Auto Parts Without Product-Wise Evidence

    Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

    Date: 24.09.2026

    CESTAT Chennai: Customs Cannot Reclassify 226 Auto Parts Without Product-Wise Evidence

    This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .  

    In a significant ruling on customs classification, self-assessment, extended limitation and evidentiary standards in adjudication, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai has allowed the appeal of Toyota Kirloskar Motor Pvt. Ltd. and set aside in entirety an adjudication order that had confirmed a differential customs duty demand of β‚Ή23.17 crore, imposed a β‚Ή17 crore redemption fine, and levied an equivalent penalty under Section 114A of the Customs Act, 1962.

    The Tribunal held that the Customs Department had β€œwholly failed” to discharge the burden of proving its proposed reclassification of 226 imported automobile parts. It further held that a quasi-judicial authority cannot proceed on a presumption of guilt or use material that was never properly placed on record and disclosed to the importer.

    The Dispute: Classification of Toyota’s Imported Automobile Parts

    • Toyota Kirloskar Motor Pvt. Ltd., the Indian subsidiary of Toyota Motor Corporation, Japan, imported various parts and accessories for passenger and multi-utility vehicles from Thailand, Indonesia and the Philippines during 2017–2022.
    • The goods included items such as Guard Propeller Shaft, Panel Assy Instrument Panel Finish Lwr, Frame Assy RR, Tank Assembly Fuel and Battery Door Control. Toyota declared the goods principally under Customs Tariff Item (CTI) 87089900 and availed a concessional 5% Basic Customs Duty under S. No. 1478 of Notification No. 46/2011-Customs on the strength of Certificates of Origin under the ASEAN-India Free Trade Agreement (AIFTA). Significantly, Customs did not question the genuineness of those certificates.
    • Following an investigation by the Special Intelligence and Investigation Branch (SIIB), Customs proposed reclassification of 226 parts, principally under CTI 87082900 as β€œparts and accessories of bodies” of motor vehicles, along with certain other headings.

    Commissioner Confirmed β‚Ή23.17 Crore Demand

    The Commissioner rejected Toyota’s self-assessment and ordered reassessment of the disputed goods. As a consequence of the reclassification, the benefit of Notification No. 46/2011-Customs was denied.

    The Commissioner confirmed:

    ParticularsAmount / Action
    Differential Customs Dutyβ‚Ή23,17,45,224
    InterestUnder Section 28AA
    Value of goods held liable to confiscationβ‚Ή170,37,12,914
    Redemption Fineβ‚Ή17,00,00,000
    PenaltyEquivalent to duty plus applicable interest under Section 114A
    ConfiscationSections 111(m) & 111(o)
    • The Department invoked the extended period under Section 28(4) on allegations of collusion, wilful misstatement and suppression of facts.
    • Toyota challenged the order before CESTAT.

    Revenue Bears the Burden of Proving Reclassification

    • The Tribunal placed considerable emphasis on the fundamental principle that where Customs seeks to reject an importer’s declared classification and substitute another tariff entry, the burden of establishing the proposed classification lies upon Revenue.
    • Referring to Supreme Court precedents including Hindustan Ferodo Ltd. v. Collector of Central Excise, H.P.L. Chemicals Ltd., Hindustan Lever Ltd. and D.L. Steels, CESTAT observed that the burden does not shift merely because an importer does not rebut the Department’s material. Revenue must first produce sufficient evidence capable of displacing the declared classification.
    • The Tribunal also reiterated that classification must begin with Rule 1 of the General Rules for Interpretation, by examining the terms of the tariff headings together with the relevant Section and Chapter Notes. HSN Explanatory Notes provide important guidance in resolving classification disputes.

    Examining 15 Parts Cannot Justify Reclassification of 226 Parts

    • A crucial defect identified by CESTAT was the manner in which the Department dealt with the 226 disputed articles.
    • According to the Tribunal, the adjudicating authority examined only about 15 articles and effectively extended those conclusions across the entire list of 226 goods.
    • CESTAT found no article-specific determination identifying the objective characteristics of each imported product, matching those characteristics with CTI 87082900 and explaining why the particular article constituted a β€œpart or accessory of a body” rather than a part or accessory of a motor vehicle generally.
    • The Tribunal memorably observed that merely listing parts against a proposed tariff item, placing them alongside technical write-ups and stating that their usage had been read on Toyota’s website amounted to a statement of the chargeβ€”not proof of the charge and not a substitute for adjudication.

    β‚Ή23 Crore Demand Cannot Rest on Website Material Never Placed on Record

    • CESTAT was particularly critical of the Department’s reliance on information allegedly appearing on Toyota’s website.
    • Neither the show-cause notice nor the adjudication order reproduced even a single line of the relied-upon website material. No screenshot, printout or certified copy was placed on record or included among the relied-upon documents.
    • Relying on the principle of natural justice laid down in Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income Tax, the Tribunal held that a quasi-judicial authority must disclose material gathered against a person and give that person an opportunity to meet it.

    The Tribunal stated:

    • β€œA demand of Rs.23.17 crore cannot be founded upon a document which the authority has not reproduced, not exhibited and not put to the noticee.”
    • It further held that treating Toyota’s alleged failure to rebut undisclosed material as proof effectively inverted the legal burden resting upon Revenue.

    Quasi-Judicial Authority Cannot Begin With Presumption of Guilt

    • The Tribunal also objected to observations in the adjudication order concerning Toyota’s alleged non-appearance during investigation and the relationship between Toyota and its overseas supplier.
    • It held that no provision of the Customs Act treats non-appearance during investigation as an admission of the allegations.

    More importantly, CESTAT stated that:

    • β€œA quasi judicial authority is not at liberty to begin with a presumption of guilt and then treat the absence of exculpation as proof.”
    • The Tribunal emphasized that a person must be proceeded against on evidence and not suspicion.

    Toyota’s CTI 87089900 Classification Allowed to Stand

    • Having found that Revenue failed to establish its proposed classification, CESTAT held that Toyota’s declared classification under CTI 87089900 for the 226 articles in Annexure A would continue to hold the field.
    • The Tribunal clarified that it was not itself determining whether some third tariff heading might theoretically be more appropriate. On the evidentiary record before it, undertaking classification of 226 individual products for the first time at the appellate stage would amount to creating a case that had never been properly made by the Department.
    • CESTAT relied on the principle that where Revenue’s proposed alternative classification fails, the importer’s classification continues to operate in the absence of a properly established alternative.

    AIFTA Concessional Duty Benefit Restored

    • Since denial of the concessional rate under S. No. 1478 of Notification No. 46/2011-Customs dated 1 June 2011 was merely consequential to the Department’s proposed reclassification, that denial also collapsed.
    • Accordingly, CESTAT held that Toyota was entitled to the notification benefit in respect of the 226 Annexure A articles covered by its findings.
    • The Tribunal did not find it necessary to decide Toyota’s alternative arguments concerning the procedure under the AIFTA Rules of Origin or revenue neutrality of the IGST component.

    CESTAT Flags Judicial Indiscipline by Customs

    • Another significant aspect of the decision concerns judicial discipline within the Customs administration.
    • CESTAT noted that in an earlier dispute involving the same importer and the same tariff heading, it had already held that the burden of proving reclassification rested upon Revenue.
    • The impugned order was nevertheless passed by the same Commissionerate without distinguishingβ€”or even referring toβ€”the earlier Tribunal ruling.
    • Referring to the Supreme Court’s decision in Union of India v. Kamalakshi Finance Corporation Ltd., CESTAT reiterated that orders of appellate authorities are binding upon subordinate Revenue authorities. Ignoring such orders can lead to harassment of assessees and uncertainty in tax administration.
    • The Tribunal observed that independence of mind in adjudication β€œis not a licence to disregard a declaration of law by the forum to which one’s orders are amenable in appeal.”

    Extended Limitation Under Section 28(4) Rejected

    • The Department had invoked the extended limitation period alleging collusion, wilful misstatement and suppression.
    • CESTAT held that Section 28(4) is not a general recovery mechanism. Its extended period becomes available only when the statutory ingredientsβ€”such as collusion, wilful misstatement or suppressionβ€”are actually established.
    • The Tribunal found the Department’s case internally contradictory. The allegations were based substantially on technical write-ups and photographs supplied by Toyota itself and information said to have been published on Toyota’s own website. Material voluntarily furnished or publicly disclosed could not simultaneously be characterised as having been suppressed from Customs.
    • The Tribunal also held that where the goods are correctly described in the Bill of Entry, merely choosing a tariff classification subsequently disputed by Customs does not, by itself, constitute suppression or misdeclaration.

    Voluntary Duty Payment Cannot Be Treated as Evidence of Evasion

    • The Tribunal also criticised the adjudicating authority’s treatment of approximately β‚Ή3.84 crore voluntarily paid by Toyota.
    • Instead of appropriately reconciling and crediting the payments while quantifying the liability, the adjudicating authority had treated Toyota’s voluntary payment as further supporting the Department’s allegations.
    • CESTAT rejected this approach, observing that treating voluntary payment of duty as corroboration of an intention to evade would undermine the self-assessment system under Sections 17 and 46 of the Customs Act.

    Corrigendum Cannot Be Used to Enlarge a Show-Cause Notice

    • The dispute also involved a corrigendum dated 4 July 2024, which replaced Annexure C, altered invoice and product serial numbers, revised the demand and introduced 14 additional articles spread across 81 Bills of Entry.
    • CESTAT held that a corrigendum is intended to correct clerical or arithmetic mistakes; it cannot be used to enlarge the scope of a show-cause notice to the detriment of the noticee.
    • Where the corrigendum effectively introduces a fresh case, limitation must be reckoned from the date of the corrigendum. Consequently, clearances of the newly introduced articles before 4 July 2019 fell outside even the five-year outer limit.

    Confiscation Under Sections 111(m) and 111(o) Set Aside

    • CESTAT also rejected confiscation of the imported goods.
    • It held that Section 111(m) was not attracted because neither the description nor the value of the goods was alleged to be false. The dispute concerned the selection of the tariff item.
    • Similarly, Section 111(o) could not apply merely because Customs considered the goods ineligible for the exemption. The Certificates of Origin were never alleged to be non-genuine, and no specific condition of the exemption notification was shown to have been violated.

    β‚Ή17 Crore Redemption Fine Also Falls

    • Once the legal basis for confiscation disappeared, the β‚Ή17 crore redemption fine under Section 125 could not survive because redemption fine is imposed in lieu of confiscation.
    • The Tribunal additionally observed that even if confiscation had otherwise been valid, the quantum of β‚Ή17 crore was indefensible because the statutory ceiling under Section 125 depends upon the market price of the confiscated goods, whereas there had been no market-price enquiry.

    Section 114A Penalty and Section 28AA Interest Quashed

    • The penalty under Section 114A, equivalent to the duty determined together with interest, was also set aside.
    • Since CESTAT found that the demand itself could not survive and that the ingredients necessary for invoking the extended period were absent, the corresponding penalty necessarily failed.
    • The consequential interest demand under Section 28AA was also set aside.

    What About the 114 Articles in Annexure B?

    • The Tribunal drew an important distinction regarding another 114 articles listed in Annexure B.
    • For those goods, Toyota itself had proposed revised classification, Customs had accepted it, and Toyota had already paid differential duty with interest for part of the relevant period. Accordingly, CESTAT did not disturb their classification.
    • The surviving issue was essentially one of limitation, quantification and adjustment of amounts already paid.
    • While setting aside the existing demand, the Tribunal left it open to the proper officer to determine, subject to limitation, whether any short payment survives after verification and appropriation of amounts already paid and after giving Toyota an opportunity of hearing.

    Final Decision: Toyota Wins the Appeal

    CESTAT ultimately set aside Order-in-Original No. 109978/2024 dated 22 October 2024 in its entirety and allowed Toyota’s appeal with consequential reliefs in law.

    The principal consequences are:

    • Toyota’s declared CTI 87089900 classification for the 226 Annexure A articles holds the field, subject to the qualification recorded by the Tribunal;
    • Benefit of S. No. 1478 of Notification No. 46/2011-Customs is available for those imports;
    • β‚Ή23,17,45,224 differential duty demand set aside;
    • Section 28AA interest set aside;
    • confiscation under Sections 111(m) and 111(o) set aside;
    • β‚Ή17 crore redemption fine under Section 125 set aside; and
    • Section 114A penalty set aside.

    For the 114 Annexure B articles, however, the Department may determine any surviving short payment strictly in accordance with law and limitation after verifying and appropriating Toyota’s earlier payments.

    Why This Ruling Is Significant for Importers

    The decision reinforces several important principles governing customs adjudication. Self-assessment cannot be displaced merely by assertion; the burden of proving reclassification remains with Revenue. Technical evidence must be analysed product-by-product where classification depends upon individual characteristics. Material gathered from websites or elsewhere cannot be relied upon without putting it on record and giving the importer an opportunity to respond.

    Equally significant is CESTAT’s treatment of limitation: a classification dispute does not automatically become suppression, particularly when the description of the imported goods has been correctly declared and the Department’s own case rests on information supplied by the importer. The ruling also sends a clear message on judicial discipline: adjudicating authorities cannot simply disregard binding appellate decisions concerning the same issue and the same assessee.

    Connected Matter

    CESTAT Chennai: Vitamin Feed Premixes Classifiable as Animal Feed Preparations Under CTH 2309

    Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

    Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

    Source: CESTAT Chennai

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    Ravi Shekhar Jha – Advocate, Bar Council of Delhi