Even Peripheral Question on Customs Duty Rate Takes Appeal to Supreme Court: Bombay HC

The Bombay High Court has held that even a peripheral question touching the rate of customs duty can fall outside the High Court's appellate jurisdiction under Section 130 of the Customs Act, 1962. Such an appeal must be filed directly before the Supreme Court under Section 130E.

A Division Bench of Justice B.P. Colabawalla and Justice Farhan P. Dubash dismissed the Revenue's appeals against a December 2024 order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in favour of J M Baxi & Co. and others. The core dispute concerned whether salvage equipment imported under transshipment permits qualified as "stores" exempt from duty when deployed on vessels other than the distressed foreign-going ship MSC Chitra .

Salvage Operation and the Dispute

The case arose from a collision between the MSC Chitra and the MV Khalija II in Bombay Harbour. The MSC Chitra began listing, cargo spilled into the water, and the navigation channel became blocked. The respondents imported equipment described as "stores" to conduct salvage operations. The Revenue initially accepted that the goods were "stores" but later argued otherwise before the CESTAT. The CESTAT held in favour of the importers, ruling that the goods were either "stores" exempt under Section 88 or, alternatively, goods lawfully transshipped for salvage.

The Revenue challenged the CESTAT order on four substantial questions of law, but two questions— A and C —proved decisive on the issue of jurisdiction.

Revenue's Challenge and the Jurisdictional Objection

Question A asked whether the salvage equipment could be treated as "stores" under Section 88 when deployed on coastal vessels rather than on the MSC Chitra itself. Question C questioned whether vessels used in the salvage operation could be considered an "extension" of the foreign-going vessel, thus extending the exemption under Sections 86 and 88.

At the hearing, the respondents immediately raised a preliminary objection: these questions related directly to the determination of a question having a relation to the rate of customs duty. Under Section 130E(b) of the Customs Act, such appeals lie exclusively to the Supreme Court, not the High Court. The respondents pointed out that the Revenue had conceded before the court that the imported goods were indeed "stores," reinforcing that the real issue was the applicability of the exemption—a question of duty rate.

High Court's Reasoning: Wide Sweep of "Any" and "Among Other Things"

The High Court examined the language of Sections 130 and 130E. Section 130(1) grants the High Court jurisdiction over appeals involving substantial questions of law , but expressly excludes orders "relating, among other things , to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment."

The court interpreted the word "any" as giving the exclusion a wide sweep. It stated that "even peripheral questions touching a question pertaining to rate or valuation can attract such exclusion." The phrase "among other things" was held to be illustrative, not exhaustive, indicating that the listed exclusions are part of a broader category.

Relying on the Supreme Court's recent decision in Alupro Building Systems Pvt. Ltd. v. Commissioner of Central Excise, Bangalore II (2026), the High Court observed that the language of Section 35G of the Central Excise Act—nearly identical to Section 130—had been similarly interpreted. The Supreme Court had held that the exclusion is not triggered only by a direct question on rate or value; even questions that go to the root of assessment, such as excisability of goods, fall within the exclusion.

Applying that reasoning, the High Court found that Questions A and C were intrinsically linked to the rate of duty. If the salvage equipment were not "stores" or if the other vessels could not be treated as an extension of the MSC Chitra , the exemption would not apply, and duty would be payable. Thus, the determination of these questions would directly affect the rate of duty.

Pan-India Ramifications

The court also noted that the questions had ramifications beyond the parties. "Answering these questions would not only affect the Assessees in the present case but would affect every salvager who imports 'stores' to carry out salvage operations in India." This broader impact reinforced the need for a uniform decision by the Supreme Court.

Decision: Appeals Dismissed, Revenue Free to Approach Supreme Court

The High Court concluded that it had no jurisdiction to entertain the appeals. It dismissed the Revenue's appeals and clarified that the Revenue was free to approach the Supreme Court to challenge the CESTAT order.

The judgment serves as a clear reminder of the jurisdictional boundaries under the Customs Act. Any question, even if peripheral, that relates to the rate of duty or the value of goods for assessment must be taken directly to the Supreme Court under Section 130E. This ruling ensures that fiscal questions with wide implications are decided uniformly at the highest level.