Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Bom) 999

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. Kulkarni, Aarti Sathe, JJ.
Karl Mayer STOLL Textilmaschinenfabrik GmbH - Petitioner
Versus
Union of India - Respondent
Writ Petition No.7882 of 2023, Writ Petition No.10561 of 2023, Writ Petition No.316 of 2024
Decided On : 15-04-2026
Advocates Appeared :
For the Petitioner : Mr.Abhishek A.Rastogi, with Ms.Pooja M.Rastogi, Ms.Meenal Songire, Ms.Aarya More, Mr.Chayank Bohra
For the Respondent : Ms. Nitee Punde with Ms.Mamta Omle

Advocates:
For the Appellants/Petitioners: Abhishek A. Rastogi, Pooja M. Rastogi, Meenal Songire, Aarya More, Chayank Bohra
For the Respondents: Nitee Punde, Mamta Omle

Regulatory authorities cannot exercise extra-territorial jurisdiction without explicit legislative authorization. Foreign entities are not vicariously liable for the regulatory mis-declarations of importers absent evidence of active participation or abetment, and retrospective application of jurisdictional amendments is impermissible.

Headnote:(A) Customs Act, 1962 - Section 1(2) - Extra-territorial jurisdiction - Challenge to show-cause notices issued to foreign entities for acts occurring outside territorial limits - Jurisdiction of statutory authorities must be explicitly traceable to legislative authorization - Amendment extending territorial reach of the statute effective from 29th March 2018 is prospective in nature and cannot validate prior proceedings. (Paras 14, 15)

(B) Liability of foreign exporters - Imposition of penalties for alleged mis-declaration by importers - Requirement of proven active role or abetment - Absence of statutory mandate to foist liability on foreign entities for independent acts of local importers - Provisions regarding penal consequences must be strictly construed. (Paras 13, 17, 19, 20)

(C) Judicial Discipline - Precedential hierarchy - Quasi-judicial and administrative authorities are obligated to follow binding rulings of Division Benches and cannot selectively rely upon contrary single-member bench decisions. (Paras 10, 21)

Facts of the case:
The petitioners, a foreign entity engaged in manufacturing and a domestic entity providing technical support, challenged show-cause notices issued by the customs department for alleged mis-declaration of imported goods. The notices sought to impose penalties for actions occurring prior to an amendment of the governing statute that introduced extra-territorial applicability. The petitioners contended that the authority lacked jurisdiction over a foreign entity for such acts and that no evidentiary link established their involvement in the alleged fraud committed by local importers.

Findings of Court:
The court held that the statutory framework at the material time did not confer extra-territorial jurisdiction on the authorities. It found no evidence of an active role played by the petitioners in the alleged mis-declaration, emphasizing that the primary responsibility for declaration during import rests with the importer. The court concluded that in the absence of specific evidence supporting the charge of abetment, the imposition of penalties was invalid.

Issues: Whether the regulatory authority possessed the jurisdiction to issue show-cause notices to a foreign entity for acts committed outside the country prior to the 2018 legislative amendment; whether a foreign exporter can be held liable for mis-declarations made by an importer; and whether the authorities were bound by specific hierarchical judicial precedents.

Ratio Decidendi: The court ruled that the statute lacked extra-territorial applicability prior to the 2018 amendment, and that retrospective penal application is constitutionally prohibited. Furthermore, a foreign entity cannot be held vicariously liable for the statutory non-compliance or mis-declarations of importers in the absence of established personal participation or abetment.

Result: Petitions allowed.

Table of Content
1. procedural history and factual background of the dispute regarding jurisdiction over foreign exporters. (Para 1 , 2 , 3 , 4 , 5 , 5 , 6 , 7 , 8 , 8 , 9 , 11)
2. arguments challenging extraterritorial jurisdiction and retrospective application of the customs act. (Para 10)
3. determining that the customs act, prior to 2018, lacked extraterritorial reach for penalizing foreign exporters for importers' mis-declarations. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22)
4. formal quashing of impugned show-cause notices for lack of jurisdiction. (Para 23 , 24)

JUDGMENT :

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.

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 29th 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 are 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 th

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