Bombay High Court
Karl Mayer Stoll … vs Union Of India on 15 April, 2026
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2026:BHC-AS:17704-DB 405.WP.7882.2023.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.7882 of 2023
1. Karl Mayer STOLL Textilmaschinenfabrik GmbH
(formerly known as Karl Mayer Textilmaschinenfabrik GmbH)
having its registered office at Industriestrabe 1,
63179 Obertshausen Germany,
through Mr.Raja Poptani, Rajkot, Gujarat.
2. M/s.Karl Mayer India Private Limited,
43, Dr.V.B.Gandhi Marg, Fort, Mumbai-400 023
through Mr.Raja Poptani,
Rajkot, Gujarat. Petitioners
versus
1. Union of India
2. The Deputy Commissioner of Customs,
Customs Commissionerate, Nhava Sheva-V,
JNCH, Tal.Uran, Dist.Raigad-400 707. Respondents
WITH
WRIT PETITION NO.10561 OF 2023
1. Karl Mayer STOLL Textilmaschinenfabrik GmbH
(formerly known as Karl Mayer Textilmaschinenfabrik GmbH)
having its registered office at Industriestrabe 1,
63179 Obertshausen Germany,
through Mr.Raja Poptani, Rajkot, Gujarat.
2. M/s.Karl Mayer India Private Limited,
43, Dr.V.B.Gandhi Marg, Fort, Mumbai-400 023
through Mr.Raja Poptani,
Rajkot, Gujarat. Petitioners
versus
1. Union of India
2. The Deputy Commissioner of Customs,
Digitally signed by
MANISH
SURESHRAO
MANISH
SURESHRAO
THATTE
Customs Commissionerate, Nhava Sheva-V,
THATTE Date: 2026.04.16
09:55:13 +0530 JNCH, Tal.Uran, Dist.Raigad-400 707. Respondents
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WITH
WRIT PETITION NO.316 OF 2024
1. Karl Mayer STOLL Textilmaschinenfabrik GmbH
(formerly known as Karl Mayer Textilmaschinenfabrik GmbH)
having its registered office at Industriestrabe 1,
63179 Obertshausen Germany,
through Mr.Raja Poptani, Rajkot, Gujarat.
2. M/s.Karl Mayer India Private Limited,
43, Dr.V.B.Gandhi Marg, Fort, Mumbai-400 023
through Mr.Raja Poptani,
Rajkot, Gujarat. Petitioners
versus
1. Union of India
2. The Deputy Commissioner of Customs,
Customs Commissionerate, Nhava Sheva-V,
JNCH, Tal.Uran, Dist.Raigad-400 707. Respondents
_______
Mr.Abhishek A.Rastogi, with Ms.Pooja M.Rastogi, Ms.Meenal Songire, Ms.Aarya
More, Mr.Chayank Bohra for Petitioner.
MsNitee Punde with Ms.Mamta Omle for the Respondents.
_______
CORAM: G. S. KULKARNI &
AARTI SATHE, JJ.
Date of Reserving the Judgment : 20th February 2026 Date of Pronouncing the Judgment : 15th April 2026 JUDGMENT - (Per : Aarti Sathe, J.) :-
1. Heard learned counsel for the parties. With the consent of the parties,
the petitions are taken up for hearing and final disposal.
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2. These are three Writ Petitions which raise a common issue with regard
to the jurisdiction of the Designated Officer to issue show-cause notices to the
Petitioners, who are foreign exporters, primarily on the ground that the Customs
Act, 1962 (hereinafter referred to as the ‘Act’) would not be applicable to the
transactions which have taken place in a foreign territory.
3. The impugned show-cause notices have been issued to the Petitioner
no.1 which is an entity constituted in Germany, who had sold to Indian importers
the allegedly mis-declared goods and that too prior to the amendment of the Act
i.e. the amendment incorporating Sub-Section (2) of Section 1 of the Act by
Finance Act, 2018 (Act No.XIII of 2018) with effect from 29 th March 2018, and to
Petitioner No. 2, which is incorporated under the Companies Act, 1956 which
provides technical and support services to the Karl Mayer Group of Companies in
relation to the installation, start-up and warranty cover, for machines delivered to
India by the Karl Mayer Group. Considering that the facts and the issues are
similar in all the three petitions. It is convenient to dispose of all the three writ
petitions by this common judgment.
4. Earlier these petitions have been heard on several occasions, when
substantive interim orders were passed by the co-ordinate Bench of this Court. By
an order dated 25th September 2023 passed on the first two petitions (Writ Petition
Nos. 7882 of 2023 and 10561of 2023) Rule was issued and a detailed order was
passed by a co-ordinate Bench of this Court of which one of us (G.S.Kulkarni, J.)
was a member, which is reproduced below:
“1. The primary issue as raised in these petitions is in regard to the jurisdiction of
the Designated Officer to issue show cause notices to the petitioners who arePage 3 of 24
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foreign exporters, primarily on the ground that the Customs Act would not be
applicable to the transactions which have taken place in a foreign territory.
Admittedly a show cause notice as to the petitioners are against the entities
situated in Germany who had sold goods which were subject matter of export and
that too prior to the amendment of the Customs Act that is the amendment
incorporating sub-section (2) of Section 1 of the Customs Act by the Finance
Act,2018 (Act No.13 of 2018 with effect from 29 March 2018).
2. On 17 July 2022, we had passed a detailed order referring to the contentions
as raised by the petitioners. For convenience, we refer to the said order which reads
thus:-
1. We have heard Mr. Rastogi, learned counsel for the petitioners
and Ms. Omle, learned counsel for the respondent/revenue.
2. Learned counsel for the revenue seeks time to take
instructions as also she has not received a copy of the proceedings
from her Department.
3. The challenge in this petition is to the six show cause notices
annexed at Exhibit “A” to the petition. The contention as urged by
the petitioners is that it is a foreign entity. It is contended that the
petitioners have no idea of the transaction/invoice in question and
that in no manner whatsoever, it was involved in the capacity as a
foreign entity having exported its goods from Germany. The
petitioners’ contention is that the petitioners were engaged in any
conspiracy as alleged in the show cause notice is on the face of it
untenable, as the role of the petitioners is stated to be only as a
supplier of the machinery from Germany, and as such it could not be
that the petitioners are involved in any activity as alleged.
4. The petitioners have referred to the provisions of Section 1 of
the Customs Act to contend that such a show cause notice cannot be
issued to the petitioners, as the Commissioner of Customs, being the
authority who has issued such show cause notice, completely lacks
jurisdiction, as the Act itself Liberty to the parties to apply for final
hearing after the pleadings are complete, would not have any extra-
territorial operation so as to become applicable to the foreign entity in
Germany.
5. Mr. Rastogi, learned counsel for the petitioners in support of
his contention has brought to our notice that in a similar case where
show cause notice was issued to the petitioners by the Commissioner
of Customs (NS-V), Jawaharalal Nehru Custom House, Custom
Zone-II, Mumbai and to another noticee, namely, M/s. Maruti Knit
Tex, the show cause notice against the petitioners was dropped by an
Order-in-Original dated 30 December, 2020. It is submitted that in
responding to such show cause notice, the petitioners had urged
similar contentions as been urged in the present petition that the
Commissioner of Customs inter alia did not have jurisdiction and
hence there was no question of any order levying penalty being passed
against the petitioners, which was merely a foreign exporter based in
Germany. It was thus urged that the petitioner being situated outside
India, there was no question of any penalty being imposed or in such
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context the show cause notice would be valid. Mr. Rastogi would
hence submit that the position in the present proceedings is not
different from the proceedings in regard to the show cause notice
being dropped against the petitioners vide order dated 30 December,
2020.
6. In the context of the present case, Mr. Rastogi would submit
that the petitioners are required to face unwarranted litigation, when
the petitioners even remotely are not involved in regard to any
allegations as made in the show cause notice. He, therefore, submits
that once the authority has acted without jurisdiction in issuing the
show cause notice to the petitioner, this Court by applying the well
settled principles of law, needs to hold that the show cause notice is
void ab initio, illegal, null and void.
7. Having perused the record as also the order passed on a
similar show cause notice, we are of the opinion that the authority
needs to take a position whether the show cause notice in question
against the petitioner on such reasons would be invalid and whether
ultimately the show cause notice would attain the same fate as in the
case of the show cause notice being dropped against the petitioners by
an order dated 30 December, 2020 in case of M/s. Maruti Knit Tex.
8. Learned counsel for the respondent shall take instructions on
this issue. If the authority is of the opinion that the case of the
petitioners in the present petition are covered by the observations of
the authority in the case of M/s. Maruti Knit Tex subject matter of
order dated 30 December, 2020, in that case, further adjudication of
this petition would not be called for.
9. Let copy of this order be forwarded by the learned counsel for
revenue to the concerned authority.
10. Stand over to 24 July, 2023 (H.O.B.).”
3. Thereafter, the proceedings were taken up for hearing on 4 September 2023
and being dis-satisfied with the approach on behalf of the department, we passed
the following order:-
1. Mr. Ramalingeswara Rao, IRS, who is stated to have given
instructions to the learned advocate for the respondent/revenue, a copy
of which is placed on record, we are of the clear opinion that either the
concerned officer has not understood the purport of our order dated
17 July, 2023 or he is intending to misguide the Court. We,
accordingly, direct the officer to remain present before the Court on 11
September, 2023 at 2.30 p.m.
2. Learned counsel for the revenue has also fairly stated that it
would be appropriate that the officer himself addresses the Court on
this issue.
3. The above directions would not preclude the concerned officer
in taking appropriate position as directed by us in paragraph 7 of our
order dated 17 July, 2023.
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4. Stand over to 11 September, 2023 at 2.30 p.m.”
4. However, what was observed in the order was completely overlooked when
we set down the proceedings to be heard on 11 September 2023, when the Court
has passed the following order:-
The State of Affairs is thoroughly disappointing. On 4 th September 2023, we
had passed an order that the officer who was issuing instructions to the learned
counsel for Respondent Nos.2 and 3 and who had not given appropriate
instructions to Respondent Nos.2 and 3 be called to remain present in the
Court which was fairly agreed by the learned counsel for the Revenue when
she stated that it would be appropriate that the officer himself addresses the
Court.
2. In pursuance of such order, today, Mr. Ramlingeshwar Rao is present in the
Court, who stated that he is the Assistant Commissioner of Customs. Mr.
Ramlingeshwar Rao had addressed before us everything, except what the
Revenue was called upon to address and as specifically set out in Paragraph
Nos.6 and 7 of our order dated 17th July 2023.
3. Learned counsel for the Revenue has fairly pointed out that the show cause
notice in question and which in our prima-facie, opinion is without
jurisdiction, was issued by Deputy Commissioner of Customs, Nhava Sheva-V,
Jawaharlal Nehru Customs House, Nhava Sheva, Tal-Uran, District Raigad,
Maharashtra by Mr. Shreyansh Mohan, who is stated to be no more occupying
the said position. The
officer issuing show cause notice is supposed to first ascertain, whether, he has
jurisdiction to issue show cause notice. Thus, asking
Mr. Ramlingeshwar Rao to give instructions to the learned Advocate for
Respondent Nos.2 and 3 was totally incorrect and unjustified. We are also at a
loss to understand as to how Mr. Ramlingeshwar Rao can justify the show
cause notice issued by his senior officer, Deputy Commissioner of Customs
and he is unable to assist the Court in totality. In these circumstances, we
would, therefore, require the Deputy Commissioner of Customs, who has
issued the impugned notice to justify the said action by placing on record an
affidavit. Let such affidavit be placed on record on or before the adjourned
date of hearing.
4. Accordingly, stand over to 25 th September 2023, High on Board.
5. Reply affidavit, if any, be served on the Advocate for the Petitioner before
21st September 2023.”
5. Today when the proceedings are listed before us on the backdrop of such
prior orders, Mr. Mishra, learned Counsel appearing for the respondents would
submit that in issuing the impugned show cause notice, the department has
basically relied on the decision of the learned Single Judge of the CESTAT in the
case Prerna Singh Vs. Commissioner of Customs (Import-II), Mumbai, hence, the
respondents were justified in issuing the show cause notice to a foreign party.
Prima facie we are not satisfied with the stand of the department even assuming
that the provisions of the amended sub-section (2) of Section 1 of the Customs Act
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are taken into consideration as applicable to the facts and circumstances in the
present case.
6. Accordingly, as purely an issue of law arises for consideration in the present
proceedings which goes to the root of the authority and jurisdiction of the
designated officer to issue the impugned show cause notices to a foreign entity, we
would be required to hear the parties on the merits of their respective contentions,
at the final hearing of the petition. Hence, Rule. Respondents waive service.
7. In the light of the above discussion and considering the provisions of Section
1(2) of the Customs Act prior to its amendment by Finance Act,2018 (w.e.f.
29.3.2018) as also considering the effect of the said amendment, in our opinion,
the petitioners have made out a prima facie case for grant of interim reliefs. Hence,
pending the hearing and final disposal of the petitions, the impugned show cause
notices shall stand stayed. Ordered accordingly.
8. Liberty to the parties to apply for final hearing after the pleadings are
complete.
5. As similar reliefs are prayed for, it would further be convenient to
reproduce the prayers in the lead petition (Writ Petition No.7882 of 2023), which
are reproduced below :
“a. Issue a writ, order or direction in the nature of Mandamus, or any other
appropriate writ, order or direction declaring that the Respondent no.2, 3 and 4, as
the case may be, have issued the impugned SCNs (Exhibit A), as set out at
pargraph 5 of this Writ Petition, illegally, arbitrarily and without jurisdiction;b. issue a writ, order or direction in the nature of Certiorari, or any other other
appropriate writ, order or direction calling for the record and proceedings of the
impugned SCNs (Exbibit A), as set out at paragraph 5 of this Writ Petition, and all
other records pertaining thereof, to consider the validity, legality and propriety
thereof, and whereafter, be pleased to quash and/or set aside the impugned SCNs
(Exhibit A);
c. direct Respondents that pending final hearing and disposal of this Writ
Petition, to not proceed with the adjudication proceedings in relation to the
impugned Show Cause Notices, as set out at paragraph 5 of this Writ Petition;d. stay passing of any final orders in relation to the impugned SCNs (Exhibit A),
as set out in paragraph 5 of this Writ Petition;
e. grant ex-parte and/or ad-interim reliefs in terms of prayer clauses (c) and/or
(d); and
f. grant such other reliefs as this Hon’ble Court may deem fit, proper, just,
and/or necessary in the interest of complete justice.”Page 7 of 24
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6. Briefly, the facts which are common in these three petitions are as
follows:
(i) Petitioner No. 1 is a company incorporated under the laws of
Germany and is, inter alia, engaged in the manufacturing and selling of textile
machinery in Germany and internationally, including India;
(ii) Petitioner No. 2 is a private limited company incorporated
under the Companies Act, 1956. It is, inter alia, engaged in providing technical and
support services to the Karl Mayer Group of Companies in relation to installation,
start-up and warranty cover for the machines delivered to India by the Karl Mayer
group. Petitioner No. 2 is also engaged in assembling creels for warping machines
and also has a production facility for the said purpose at Ahmedabad;
(iii) During June-2014 to May-2017 Petitioner No. 1 sold warp
knitting machines to certain Indian importers. The Directorate of Revenue
Intelligence, Ludhiana (`DRI-L’ for short) started an investigation based on
intelligence that certain importers in India were engaged in importing “high speed
warp knitting machines” manufactured by Petitioner No. 1 and the said importers
were mis-declaring the machines as “fully fashioned high speed knitting machines”,
and claiming exemption under Notification No.12/2012-CE dated 17th March
2012 and/or Notification No.16/2015, dated 1st April 2015, as the case may be
(hereinafter referred to as the exemption notifications);
(iv) On the basis of the above, the DRI-L initiated an inquiry
against several importers who had imported the said machines. Further, statements
of authorized representatives of these importers were recorded with respect to the
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import of the said machines under bills of entry and it was alleged that the
importers had allegedly mis-declared the description of said machines;
(v) On the basis of the investigation carried out, in so far as the
importers were concerned, Petitioner No. 2’s office at Ahmedabad was visited by
the officers of DRI-L. A summons dated 11 th October 2017 bearing Sr. No.949
was served on Petitioner No. 2. Mr. Piyush Pathak, the representative of Petitioner
No. 2 at the Ahmedabad office, submitted a letter to the DRI-L officials setting out
the business details carried out at Ahmedabad and his incapacity to assist the DRI-
L officials in technical matters. Consequently, the DRI-L again issued a summons
to Petitioner No. 2’s Mumbai office for appearance and submission of brochure/
literature of machines manufactured by Petitioner No. 1, which have been
imported into India. It is the Petitioners’ contention that the said summons was
fully complied with;
(vi) By letter dated 12th October 2017, the Chief Executive Officer
of Petitioner No. 2, recorded that Petitioner No. 2 was not connected with the
imports in question, and that the machines are imported directly by various
importers from foreign suppliers, i.e., Petitioner No. 1 in the present case. It was
stated that the brochures of the machines are available in India and can be
downloaded from the Internet;
(vii) On 30th October 2017, the statement of Mr. Kevin Socha,
Managing Director of Petitioner No. 2 was recorded under Section 108 of the Act
by the officers of DRI-L. Consequently, a summons dated 16 th January 2019 was
issued to the Managing Director of Petitioner No. 2;
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(viii) On 29th January 2019, Petitioner No. 2 submitted a reply,
once again highlighting its inability in joining the investigation, inasmuch as it was
its stand that Petitioner No. 2 does not have any information in respect of the
transactions in question. It is the contention of Petitioners’ that between the
period 11th June 2019 to 18th May 2021, the Petitioners were in receipt of 111 show-
cause notices, which are the subject matter of challenge before the Punjab &
Haryana High Court on similar grounds in CWP-2905-2023. The Punjab and
Haryana High Court by an order dated 14 th February 2023 stayed the passing of a
final order pertaining to the 111 show-cause notices;
(ix) On 1st July 2020, Petitioner No. 1 was rebranded as “Karl
Mayer STOLL Textilmaschinenfabrik GmbH” after its merger with STOLL. The
sale of Petitioner No. 1’s machines in India is exclusively handed over to M/s.
A.T.E Enterprises Private Limited;
(x) Further, on 30th December 2020, 31st December 2020, and 5th
March 2021 Orders-in-Original have been passed in case of 9 Indian importers, to
whom Petitioner No. 1 sold the machines, wherein the show-cause notices against
Petitioners were dropped on the ground that there was no jurisdiction for
imposition of penalty against the Petitioners.
7. On the basis of the DRI-L investigation for the period between 31 st
December 2020 and 18th May 2021, the Respondents issued show-cause notices
under Section 124 read with Section 28 of the Act to the Petitioners, alleging that
the Petitioners had aided/abetted the main noticees, i.e., Indian importers, to
perpetuate the import fraud. The main noticees were different importers situated
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in India. Besides the main noticees, the show-cause notices were also issued to
Petitioner No. 1 through Petitioner No. 2. Further, summons in this regard was
also issued to Petitioner No. 2, seeking information relating to the imports in
question, despite Petitioner No. 2’s non-involvement in sales of Petitioner No. 1’s
machines in India. Further, by way of aforesaid show-cause notices, penalties under
Sections 112 and 114AA of the Act were proposed to be levied on the Petitioners.
8. Being aggrieved by the aforesaid show-cause notices, the present
petition has been filed by the Petitioners.
9. We have heard learned counsels for the parties. Mr. Abhishek A.
Rastogi along with Ms. Pooja M. Rastogi and Ms. Meenal Songire along with Ms.
Aarya More and Mr. Chayank Bohra appeared for the Petitioners, and Ms. Nitee
Punde along with Ms. Mamta Omle appeared for the Respondents. With the
assistance of learned counsel for the parties, we have perused the record and the
impugned show-cause notices, and we proceed to decide the present petitions.
10. Learned counsel for the Petitioners have submitted that the aforesaid
show-cause notices are liable to be quashed and set aside, in as much as the same
are completely without jurisdiction and without authority of law. The submissions
made on behalf of the Petitioners can be summed up as follows :
i. It was contended that the impugned show-cause notices are ex facie
without jurisdiction in so far as they purport to exercise adjudicatory and penal
authority over Petitioner No. 1, an exporter situated outside India, for a period
prior to 29th March 2018. At the relevant time, the statutory framework under the
Act did not confer extraterritorial jurisdiction upon Indian customs authorities to
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initiate penal proceedings against persons located beyond the territorial limits of
India. Jurisdiction of a statutory authority must be traceable to express legislative
authorization; in the absence of such conferment, any exercise of coercive or
adjudicatory power is void ab initio. It is a settled principle of public law that
jurisdiction cannot be assumed by implication, equity, or administrative
convenience, and any action taken without jurisdiction is a nullity in the eyes of
law.
ii. It was further submitted that the amendment to Section 1(2) of
the Act, which came into effect on 29th March 2018, expanded the territorial reach
of the enactment. However, such enlargement of jurisdiction cannot operate
retrospectively so as to validate proceedings for prior periods. Unless a statute
expressly provides for retrospective application, and particularly where penal
consequences ensue, the provision must be construed prospectively. Penal statutes
are subject to strict interpretation, and any ambiguity must be resolved in favour of
the person sought to be penalised. Therefore, in the absence of explicit legislative
intent granting retrospective extra-territorial operation, the Respondents could not
rely on the amended provision to sustain proceedings relating to an earlier period.
iii. It is next submitted that this position is constitutionally
reinforced by Article 20(1) of the Constitution of India, which prohibits conviction
or imposition of penalty under an ex post facto law. The constitutional safeguard is
not confined merely to criminal convictions but extends to all proceedings that are
penal in nature or impose civil consequences of a punitive character. The
Respondents’ attempt to invoke a post-2018 statutory enlargement ofjurisdiction
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to penalize conduct alleged to have occurred earlier directly offends this
constitutional prohibition. Any interpretation permitting such retrospective penal
exposure would render Article 20(1) otiose and must therefore be rejected.
iv. It is next submitted on behalf of the Petitioners that Article
245 of the Constitution circumscribes legislative competence territorially and
mandates that laws of Parliament may have extra-territorial operation only where
the statute expressly or by necessary implication so provides. In the absence of such
explicit conferment prior to 29th March 2018, authorities functioning under the
statute could not have assumed jurisdiction over foreign entities situated outside
India. Administrative or quasi-judicial authorities derive their powers strictly from
the statute and cannot exercise a wider jurisdiction than that contemplated by the
legislature itself. Consequently, proceedings initiated against a foreign exporter for
a pre-amendment period are ultra vires the parent enactment.
v. It is submitted that the impugned show-cause notices suffer from a
fundamental jurisdictional defect that strikes at their very root. The defect is not
procedural but substantive and incurable, rendering the entire proceedings non-est.
The Respondents’ assumption of authority over a person situated outside India, for
a period when the statute did not extend to such persons, amounts to an
impermissible exercise of power and is liable to be quashed on this ground alone.
vi. It was further submitted that the Respondents have committed a
manifest error of law in placing exclusive reliance upon the decision rendered by a
Single Member Bench in Prerna Singh, CEO M.s Seville Products Ltd, vs.
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Commissioner of Customs1, while disregarding binding precedents rendered by
Division Benches of coordinate jurisdiction. The Doctrine of Judicial Discipline
and hierarchical precedent mandates that decisions of benches of superior
numerical strength prevail over those delivered by benches of lesser strength. A
Single Member Bench decision, even if subsequent in time, cannot override or
dilute the binding force of a Division Bench ruling. The Respondents, being quasi-
judicial authorities, were duty-bound to follow the law laid down by Division
Benches and could not selectively rely upon a contrary Single Member decision
merely because it suited their case.
vii. It was therefore contended that it is settled principle that
coordinate benches must follow earlier decisions of benches of equal or larger
strength and further Supreme Court has consistently emphasized that judicial
propriety requires authorities and tribunals to adhere to binding principles and that
deviation therefrom amounts to judicial indiscipline.
viii. It was submitted that the impropriety is compounded by the
fact that subsequent Division Bench authorities, including the decision in Shri
Ankur Agarwal, Director vs. Principal Commissioner 2, reaffirmed the legal position
contrary to that adopted in Prerna Singh (supra). Once a Coordinate Bench of
greater strength has reiterated the governing principle, any contrary Single
Member view stands impliedly eclipsed and cannot be treated as good law for
precedential purposes. Administrative or adjudicating authorities cannot choose
between conflicting precedents based on preference; they must apply the binding
1 (Import-III)-Mumbai [C/89693/2018] – CESTAT, Mumbai
2 [C/50079/2020] – CESTAT, Delhi
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one as determined by the settled rules of precedent. Failure to do so renders the
impugned action arbitrary and violative of Article 14 of the Constitution of India,
as similarly situated persons would otherwise be subjected to inconsistent legal
standards. It was therefore submitted that the Respondents’ reliance solely upon
Prerna Singh (supra) is legally untenable and contrary to the settled hierarchy of
precedential authority. The impugned action suffers from a jurisdictional and legal
infirmity insofar as it is founded upon a non-binding precedent, while ignoring
binding Division Bench rulings.
ix. It was further contended that since the decisions of the
division benches of the Tribunal which have decided the issue in favour of the
taxpayers have not been challenged by the Revenue by Appellate proceedings, the
same have attained finality and cannot be disputed in other cases/ proceedings.
Administrative authorities cannot circumvent this finality by re-agitating the same
question in other proceedings involving identical facts and issues. It was therefore
contended that in the present case the Respondent’s attempt to question territorial
jurisdiction despite earlier division bench ruling in favour of the Petitioner,
accepted by the revenue without appeal, constitutes a clear abuse of the process of
law and is legally impermissible. It was therefore submitted that the issue stands
settled and is no longer res integra.
11. An affidavit-in-reply dated 21st September 2023 has been filed on
behalf of the Respondents, and also written submissions have been submitted in
support of the contentions raised by the Respondents. The submissions made on
behalf of the Respondents can be summarized as follows-
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i. The Respondents submit that Petitioner No. 1 is a supplier and does
business with importers pan India, and further that Petitioner No. 1 along with its
selling agent in India, M/s A.T.E Enterprises Private Limited has aided and abetted
the importers in commission of the import fraud.
ii. The Respondents have also sought to place reliance on the statement
of Mr. Kevin Socha, Managing Director of India Operations of Petitioner No. 2,
recorded under Section 108 of the Act, wherein he deposed that several Indian
importers have emailed M/s A.T.E. Enterprises Private Limited to change the
description of the machines being imported from HKS3M Tricot Machine to
HKS3M High-Speed Fully-Fashioned Machine. In turn, the said M/s A.T.E.
Enterprises emailed the German manufacturer, i.e. Petitioner No. 1 to change the
description of the aforesaid machines, which according to the Respondents,
Petitioner No. 1 has done. It is therefore the Respondents’ contention that
Petitioner No. 1 has aided and abetted the Indian importers knowingly by
changing the description of the machines which were to be imported and thereby
helped them in claiming the benefit of the exemption notifications.
iii. The Respondents have also submitted that Petitioner No. 1,
though situated outside India is liable for the penalties under the Act and insofar as
the issue of territorial jurisdiction is concerned, the agent of Petitioner No. 1, i.e.,
Petitioner No. 2 has been provided documents, who in turn provided the
documents to the Indian importers for filing before the customs authorities and
claimed the benefit of the exemption notifications. In view thereof, the same was to
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be treated as an offence committed in India, and hence, the provisions of the Act
imposing penalties on Petitioner No. 1, who is situated outside India, are justified.
iv.The Respondents also sought to place reliance on the decisions of the
Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case of
Prerna Singh (supra). In view thereof, the Respondents submitted that the DRI-L
had reasons to believe that for the purposes of Sections 112 and 114AA of the Act,
penalties would be imposable on Petitioner No. 1 since they aided and abetted in
the evasion of customs duty in India.
ANALYSIS AND FINDINGS :
12. Considering the rival contentions, we proceed to render our findings on
the present petitions.
13. After perusal of the records and looking at the factual conspectus of the
case, we are of the view that in the present petition, liability is sought to be foisted
on the Petitioners merely because the importers of goods are situated in India, and
they had allegedly mis-declared the warp knitting machines imported from
Petitioner No. 1 as “fully-fashioned high-speed knitting machines” and claimed the
benefit of the exemption notifications. This liability has been foisted without
attributing any role to the Petitioners. This to our mind, is certainly not the scheme
of the Act, where a foreign exporter cannot be made liable for the wrongs of the
importer, whose privity qua the goods being exported from a foreign country qua
such export would end on the goods being shipped to the satisfaction of the Indian
importer. The liability qua the goods on their arrival at the Indian port, would be
totally of the importer to pay the custom duty including to bear any additional
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duty on classification etc. In the context of Section 1 of the Act (post 2018
amendment), in the facts of the present case, the Department has not supported its
case on any material evidence to establish that the Petitioner/foreign exporter in
law could be held liable on the issue of any purported mis-declaration.
14. Further, the foreign exporter, i.e., Petitioner No. 1 is admittedly situated
outside India, hence qua the Petitioner, the applicability of the Act did not extend
to the territory outside India at the relevant point of time. The amendment to
Section 1 of the Act, in so far as the applicability of the Act is concerned, was made
in the year 2018, with effect from 29th March 2018. The said amendment provides
that save as otherwise provided in this Act, it applies also to any offence or
contravention thereunder committed outside India by any person. This
amendment, therefore, would apply with effect from 29th March 2018, and
specifically in cases where there is a contravention or any offence which is
committed outside India by any person. Therefore, the extraterritorial applicability
of the Act has been introduced by way of this amendment only post-2018 and to
such limited extent. The Court is not concerned on any criminal action/issue in
the present proceedings.
15. In the facts of the present case, even otherswise, the alleged
misdeclaration of the imports was much prior to 2018 and hence the provisions, if
at all, of the amended Section 1 of the Act would not apply in the facts of the
present case. Aso the alleged acts of the importer, as held above, the foreign
exporter cannot be foisted with any liability within the framework of the law qua
the lack of jurisdiction of the customs oficers.
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16. At this juncture it would be pertinent to examine the other provisions
of the Act which stipulate the importer’s obligation, insofar as import of goods in
India is concerned. The provisions of Section 111(m) of the Act provide that if any
goods do not correspond in respect of value or in any other particular with the
entry made under this Act, or in the case of baggage, with the declaration made
under Section 77 of the Act, and in respect of goods under trans-shipment, the
declaration for trans-shipment referred to in proviso to Section 54(1) is not correct,
then the said goods are liable for confiscation. Further, Section 46 of the Act
stipulates the conditions which an importer has to fulfil for entry of goods on the
importation thereof in India. Further, Section 17(1) of the Act deals with
assessment of duty, and the said Section casts a duty on any importer entering any
imported goods under Section 46, or an exporter entering any goods to be
exported under Section 60, to self-assess the duty, if any, leviable on the goods. The
provisions of Sections 17, 46, and 111(m) of the Act are reproduced below:
17. Assessment of duty.–(1) An importer entering any imported goods under
section 46, or an exporter entering any export goods under section 50, shall, save
as otherwise provided in section 85, self-assess the duty, if any, leviable on such
goods.
(2) The proper officer may verify [the entries made under section 46 or section 50
and the self-assessment of goods referred to in sub-section (1)] and for this
purpose, examine or test any imported goods or export goods or such part thereof
as may be necessary.
[Provided that the selection of cases for verification shall primarily be on
the basis of risk evaluation through appropriate selection criteria.]
(3) For [the purposes of verification] under sub-section (2), the proper officer may
require the importer, exporter or any other person to produce any document or
information, whereby the duty leviable on the imported goods or export goods, as
the case may be, can be ascertained and thereupon, the importer, exporter or such
other person shall produce such document or furnish such information.]
(4) Where it is found on verification, examination or testing of the goods or
otherwise that the self- assessment is not done correctly, the proper officer may,
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without prejudice to any other action which may be taken under this Act, re-assess
the duty leviable on such goods.
(5) Where any re-assessment done under sub-section (4) is contrary to the self-
assessment done by the importer or exporter 8 *** and in cases other than those
where the importer or exporter, as the case may be, confirms his acceptance of the
said re-assessment in writing, the proper officer shall pass a speaking order on the
re-assessment, within fifteen days from the date of re-assessment of the bill of entry
or the shipping bill, as the case may be.
Explanation.–For the removal of doubts, it is hereby declared that in cases where
an importer has entered any imported goods under section 46 or an exporter has
entered any export goods under section 50 before the date on which the Finance
Bill, 2011 receives the assent of the President, such imported goods or export
goods shall continue to be governed by the provisions of section 17 as it stood
immediately before the date on which such assent is received.]
46. Entry of goods on importation.–(1) The importer of any goods, other than
goods intended for transit or transhipment, shall make entry thereof by presenting
[electronically] [on the customs automated system] to the proper officer a bill of
entry for home consumption or warehousing [in such form and manner as may be
prescribed]:
[Provided that the [Principal Commissioner of Customs or Commissioner
of Customs] may, in cases cases where it is not feasible to make entry by presenting
electronically [on the customs automated system], allow an entry to be presented
in any other manner:
Provided further that] if the importer makes and subscribes to a declaration
before the proper officer, to the effect that he is unable for want of full information
to furnish all the particulars of the goods required under this sub-section, the
proper officer may, pending the production of such information, permit him,
previous to the entry thereof (a) to examine the goods in the presence of an officer
of customs, or (b) to deposit the goods in a public warehouse appointed under
section 57 without warehousing the same.
(2) Save as otherwise permitted by the proper officer, a bill of entry shall include
all the goods mentioned in the bill of lading or other receipt given by the carrier to
the consignor.
[(3) The importer shall present the bill of entry under sub-section (1) before the
end of the next day following the day (excluding holidays) on which the aircraft or
vessel or vehicle carrying the goods arrives at a customs station at which such
goods are to be cleared for home consumption or warehousing:
Provided that a bill of entry may be presented 10[at any time not
exceeding thirty days prior to] the expected arrival of the aircraft or vessel or
vehicle by which the goods have been shipped for importation into India:
Provided further that where the bill of entry is not presented within the
time so specified and the proper officer is satisfied that there was no sufficient
cause for such delay, the importer shall pay such charges for late presentation of the
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(4) The importer while presenting a bill of entry shall 11*** make and subscribe to
a declaration as to the truth of the contents of such bill of entry and shall, in
support of such declaration, produce to the proper officer the invoice, if any, 1
[and such other documents relating to the imported goods as may be prescribed].
[(4A) The importer who presents a bill of entry shall ensure the following, namely:
—
(a) the accuracy and completeness of the information given therein;
(b) the authenticity and validity of any document supporting it; and
(c) compliance with the restriction or prohibition, if any, relating to the
goods under this Act or under any other law for the time being in force.](5) If the proper officer is satisfied that the interests of revenue are not prejudicially
affected and that there was no fraudulent intention, he may permit substitution of
a bill of entry for home consumption for a bill of entry for warehousing or vice
versa.
111. Confiscation of improperly imported goods, etc.–The following goods
brought from a place outside India shall be liable to confiscation:–
(m) [any goods which do not correspond in respect of value or in any other particular]
with the entry made under this Act or in the case of baggage with the declaration made
under section 77 [in respect thereof, or in the case of goods under transhipment, with the
declaration for transhipment referred to in the proviso to sub-section (1) of section 54]”
17. On a conjoint reading of the above provisions, it is clear that the
responsibility post importation of goods in India rests with the importer and the
foreign exporter cannot be made liable for the violation in respect thereof. In the
facts of the present case, there was no role played by such exporter, i.e., Petitioner
No. 1, with regard to the alleged mis-declaration of the imported machines and
therefore, the show-cause notices could not be issued to Petitioner No. 1.
18. As a corollary thereto, the penalties which have been imposed under Section
112 and 114AA of the act also have no legs to stand on, inasmuch as there is no role
that is attributable to the Petitioners making them liable for penalty under Section
112 of the Act. The provisions of Section 112 of the Act are reproduced below:
112. Penalty for improper importation of goods, etc.–Any person,–
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(a) who, in relation to any goods, does or omits to do any act which act or omission
would render such goods liable to confiscation under section 111, or abets the doing
or omission of such an act, or
(b) who acquires possession of or is in any way concerned in carrying, removing,
depositing, harbouring, keeping, concealing, selling or purchasing, or in any other
manner dealing with any goods which he knows or has reason to believe are liable to
confiscation under section 111, shall be liable,–
(i) in the case of goods in respect of which any prohibition is in force under this Act
or any other law for the time being in force, to a penalty [not exceeding the value of
the goods or five thousand rupees], whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, subject to the
provisions of section 114A, to a penalty not exceeding ten per cent. of the duty
sought to be evaded or five thousand rupees, whichever is higher:
Provided that where such duty as determined under sub-section (8) of section 28
and the interest payable thereon under section 28AA is paid within thirty days from
the date of communication of the order of the proper officer determining such duty,
the amount of penalty liable to be paid by such person under this section shall be
twenty-five per cent. of the penalty so determined;]
[(iii) in the case of goods in respect of which the value stated in the entry made
under this Act or in the case of baggage, in the declaration made under section 77
(in either case hereafter in this section referred to as the declared value) is higher
than the value thereof, to a penalty [not exceeding the difference between the
declared value and the value thereof or five thousand rupees], whichever is the
greater;
(iv) in the case of goods falling both under clauses (i) and (iii), to a penalty 4 [not
exceeding the value of the goods or the difference between the declared value and
the value thereof or five thousand rupees], whichever is the highest;
(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty [not
exceeding the duty sought to be evaded on such goods or the difference between the
declared value and the value thereof or five thousand rupees], whichever is the
highest.]
19. On a plain reading of the aforesaid Section, it is clear that the Department
has not made out a case or established that there was any act or omission on the
part of Petitioner No. 1 making the said goods liable for confiscation under Section
111 of the Act, nor has Petitioner No. 1 carried, removed, deposited, harboured,
kept, concealed, sold, or purchased any goods which it knew or had reason to
believe were liable for confiscation under Section 111 of the Act. The Department,
in fact, on an alleged mis-declaration of imports by Indian importers, has sought to
penalize the Petitioners, which is against the mandate of law and does not fulfil
conditions as envisaged in Section 112 of the Act. The charge of abetment and
aiding the Indian importers has also not been established by the Department.
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Neither has any evidence been adduced by the Department to show the active role
played by the Petitioners in perpetrating the alleged mis-declaration of the
imported goods. We are therefore of the view that in the absence of any ingredients
which are prescribed in Section 112 of the Act, the Petitioners cannot be made
liable for the penalty as sought to be imposed by the impugned show-cause notices.
20. As we have held that the Petitioners are not liable for penalty under section
112 of the Act, they will also not be liable for penalty under section 114AA of the
Act as the same is in respect of penalty for use of false and incorrect material and is
imposable if a person knowingly or intentionally makes, signs, or uses, or causes to
be made, signed or used, any declaration, statement or document which is false or
incorrect in any material particular, in the transaction of any business. In the facts
of the present case neither Petitioner No. 1, nor Petitioner No. 2 have submitted or
caused submission of false information in as much as the entire importation and
the related compliance was the responsibility of the Indian importers. For ease of
reference, Section 114AA of the Act reads as under:-
114AA. Penalty for use of false and incorrect material.–If a person knowingly or
intentionally makes, signs or uses, or causes to be made, signed or used, any
declaration, statement or document which is false or incorrect in any material
particular, in the transaction of any business for the purposes of this Act, shall be
liable to a penalty not exceeding five times the value o f goods.
21. We are also not inclined to accept the submission made on behalf of the
Respondents that the issue regarding applicability of extra-territorial jurisdiction of
Section 1 of the Act has been considered by the CESTAT in the case of Prerna
Singh (supra), inasmuch as the same has been rendered on a different facts. Even
otherwise, the decision of Prerna Singh (supra) has been distinguished by the
Division Bench of the CESTAT in the case of Ankur Agarwal, Director vs.
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Principal Commissioner (supra), wherein it was held that the decision rendered in
the case of Prerna Singh (supra) had failed to consider that the amendment made
in Section 1(2) of the Act came into effect from 29 th March 2018 was applicable
only prospectively. Hence reliance made by the Respondent on the decision in
Prerna Singh (supra) is misplaced and does not assist the Department to canvas its
contentions further.
22. In so far as the contention of the Department that the Orders-in-original
dated 30th December 2020, passed in the case of certain other Indian importers, to
whom Petitioner No. 1 had sold similar machines, dropping the show-cause notices
issued against the Petitioners have been appealed by the Department before the
CESTAT, the same would not assist the Respondents inasmuch as there is no final
outcome in the said appeals and the same are pending adjudication.
23. Thus looked from any angle, we are of the considered view that the
impugned show-cause notices in all the three petitions, ought not to have been
issued to the Petitioners, and therefore the same are liable to be quashed and set
aside, including any recovery notices that may have been issued in pursuance
thereto.
24. In terms thereof, Rule made absolute in terms of prayer clause (a) and (b).
The companion Writ Petition No.10561 of 2023 and Writ Petition No.316 of
2024 are also allowed in the similar terms. No costs.
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