Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 449

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
D.M. Misra, Judicial Member, Pullela Nageswara Rao, Technical Member
Indra Sistemas India Private Limited – Appellant
Versus
Commissioner of Customs – Respondent
Customs Appeal No. 20882 of 2019 | Customs Appeal No. 20834 of 2019 | Customs Appeal No. 20835 of 2019

Advocates:
For the Appellants/Petitioners: Ravi Raghavan, Purvi Asati, Ashwini Nag, Rajat, Shohini
For the Respondents: M. Sreekanth

An exemption from customs duty for road construction equipment, when available to sub-contractors, cannot be denied merely on the ground that the sub-contractor is not explicitly named in the primary contract, provided the appointment is effectively recognized by project authorities and the goods are utilized for the intended project.

Headnote:(A) Customs Act, 1962 - Section 111(o), 112, 125(2) - Customs Tariff - Exemption Notification No. 12/2012-Cus - Duty exemption for goods imported for construction of roads - Conditions for sub-contractor eligibility - Non-mention of a sub-contractor's name in the primary contract between the project authority and the main contractor does not invalidate eligibility where the project authority acknowledges the sub-contractor's role and the sub-contractor genuinely performs the work - Exemption should not be denied based on hyper-technical interpretations of contract naming requirements. (Paras 11, 13, 14)

(B) Interpretation of Statutes - Beneficial exemption notifications - Where ambiguity exists regarding eligibility or procedural compliance, a liberal and harmonious construction should be applied to uphold the object and purpose of the exemption - Exemption is not to be denied for alleged procedural lapses that do not violate the substantive intent of the law. (Paras 5.5, 13, 15)

(C) Customs Duty - Seizure and Penalty - Where the conditions of an exemption notification are substantively satisfied and goods are used exclusively for the permitted project, there is no justification for confiscation under Section 111(o) or the imposition of penalties, especially where bonds/undertakings have been discharged. (Paras 5.8, 15, 16)

Facts of the case:
Appellants imported toll management equipments claiming exemption under a specific notification meant for road construction. The revenue authorities denied the benefit, alleging that the sub-contractor was not explicitly named in the master contract between the project authority and the main contractor, and that the goods were disposed of/transferred upon project completion. The adjudicating authority ordered confiscation, duty recovery, and imposed penalties.

Findings of Court:
The documents, including the sub-contractor agreement and formal communications with the project authority, collectively established the bona fide status of the sub-contractor. The court held that the non-mention of a sub-contractor in the primary agreement is not a fatal defect, and the transfer of equipment post-project completion does not constitute an unauthorized disposal violating the exemption conditions. Conditions were effectively met.

Issues: The main issues were whether the non-mention of a sub-contractor in the primary contract disqualifies them from claiming duty exemption, and whether the transfer of equipment post-completion violates the conditions of the exemption notification.

Ratio Decidendi: An exemption for road construction must be read harmoniously with related project documents; as long as the sub-contractor is duly appointed and authorized to perform project work, the lack of explicit naming in the master agreement does not preclude benefit. Furthermore, a contractor cannot be expected to retain equipment indefinitely after the project ends, and such transfer of equipment does not violate the substantive purpose of the exemption.

Result: Appeals allowed.

Table of Content
1. procedural background of appeals and initial adjudication. (Para 1 , 2)

PER : DR. D.M. MISRA

Two miscellaneous applications are filed; the first one No.C/20495/2025 is for change of cause title from M/s. GMR Ose Hongund Hospet Highways Private Limited to M/s. Ose Hongund Hospet Highways Private Limited pursuant to the issuance of incorporation certificate dated 09.09.2019 by the Registrar of Companies. Consequently, the miscellaneous application is allowed and the cause title be changed from M/s. GMR Ose Hongund Hospet Highways Private Limited to M/s. Ose Hongund Hospet Highways Private Limited.

The second application No. C/20532/2025 has been filed to include certain additional documents viz. Share Purchase Agreement dt. 23.03.2016 and other documents, for which the learned AR for the Revenue has no objection. Consequently, the said miscellaneous application is also allowed and the documents are taken on record.

2. The present three appeals are filed against the Order-in-Original No.BLR-CUSTM-AIR-342/2019 dated 21.05.2019 passed by the Commissioner of Customs, Airport & Air Cargo Complex, Bangalore.

3.1. Briefly stated the facts of the case are that on the basis of intelligence that the appellant M/s. Indra Sistemas India Pvt. Ltd. (appellant-1) imported “Toll collection and traffic control equipments’ during the period 2012 claiming benefit of exemption Notification No.12/2012-Cus dated 17.03.2012 from payment of duty which is not admissible to them, investigation was initiated by recording statements of various persons connected with the said import and installation of the goods. On completion of the investigation, it was alleged that Indra Sistemas had imported various items of toll management systems against 11 Bills of Entry during the period 2012-13 claiming exemption under Sl.No.368 of Notification No.12/2012-Cus dated 17.03.2012. It was found by the investigating officers that the conditions mentioned under the said notification particularl Sl.No.9(a)(iii) and clause (b) are not fulfilled. During the course of investigation on the reasonable belief that the appropriate applicable duty has not been paid on the imported goods as part of the toll management system, installed at various locations by wrongly availing benefit of Notification No.12/2012-Cus. dated 17.03.2012 which were handed over to the main contractors before expiry of a period of 5 years without compliance of the said notification, the toll collection and traffic control equipments located at various places were placed under seizure and for safe custody, handed over to the authorised persons under supratnama during the pendency of the adjudication.

3.2. Consequently, show-cause notice was issued to them on 07.06.2018 with proposal for confiscation of the goods seized under Section 111(o) of the Customs Act, 1962, recovery of the total duty of Rs.1,59,07,360/- along with interest and penalty in terms of provisions of Notification No.12/2012-Cus dated 17.03.2012 as amended read with Section 125(2) of the Customs Act, 1962. On adjudication, the learned Commissioner confirmed the duty demanded in terms of Section 125 of the Customs Act, 1962; confiscated the goods seized under Section 111(o) and Section 120(2) of the Customs Act, 1962 with a proposal for redemption of the same on payment of fine; imposed penalties on all the appellants under various provisions of Customs Act, 1962. Hence, the present appeals.

4.1. At the outset, the learned advocate appearing for the appellant-1 has submitted that the appellant is engaged in carrying out projects such as Toll Management System (TMS), transport and traffic, air traffic management, Defence and security. Pursuant to its business activities in India, the appellant-1 had entered into contracts for supply and installation of TMS for road construction projects executed by main contractors viz. M/s. GMR OSE Hongund Hospet Highways Private Limited and M/s. GMR Hyderabad Vijayawada Expressway Private

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2026 Supreme(Online)(CESTAT) 449

Cases Referred (4)