Supreme Court Annual Digest 2025: Central Excise, Customs, CGST & Finance Laws

Distinction between 'Levy' (Section 3) and 'Measure of Tax' (Section 4)– Valuation cannot determine Excisability- Held, Section 3 creates the charge and defines the nature of the levy (manufacture of excisable goods), whereas Section 4 provides the measure (value) for the levy- The Revenue Court erred by conflating the two- The "transaction value" under Section 4 is relevant only after the taxable event (manufacture of excisable goods) is established- The measure of tax cannot be invoked to prove that what has been produced is excisable. [Relied on Union of India v. Bombay Tyre International Ltd., (1984) 1 SCC 467; Paras 39-43] Lipi Boilers Ltd. v. Commissioner of Central Excise, 2025 LiveLaw (SC) 1092 : 2025 INSC 1297

Factories Act, 1948 - Section 2 (k) and (m) - Interpretation of "Factory" and "Manufacturing Process" - Washing and Cleaning as Manufacturing - Welfare Legislation - Applicability of Definition under Central Excise Act – Held, the definition of "manufacturing process" under Section 2(k) of the Factories Act, 1948, clearly encompasses "washing and cleaning" of any article or substance with a view to its delivery. The Act is a welfare legislation aimed at protecting workers' health and safety, and therefore, its provisions must be interpreted liberally to give effect to the legislative intent. The Court rejected the High Court's reliance on the definition of "manufacture" under the Central Excise Act, 1944, stating that the Factories Act provides its own specific definition, which must be applied. The Court underscored that the inclusion of "washing and cleaning" in the 1948 Act, absent in the 1934 Act, was a deliberate expansion to include previously excluded undertakings. Thus, a laundry business involving cleaning and washing clothes, including dry cleaning, using power and employing more than ten workers, falls within the definition of "factory" under Section 2(m) of the Act. (Paras 30, 36, 38 & 42) State of Goa v. Namita Tripathi, 2025 LiveLaw (SC) 276 : 2025 INSC 306

Section 11A(1) Proviso – Extended Period of Limitation – Suppression of Facts- Supreme Court set aside the invocation of the extended period of limitation (5 years)- It held that mere failure to declare does not amount to wilful suppression- There must be a positive act with an intent to evade payment of duty. Since the assessee held a bona fide belief regarding non-inclusion and had filed returns, no suppression was established- Appeals allowed. [Relied on Pahwa Chemicals Private Limited v. Commissioner of Central Excise, (2009) 4 SCC 658; Continental Foundation Joint Venture Holding v. CCE, (2007) 10 SCC 337; Paras 74-80] Lipi Boilers Ltd. v. Commissioner of Central Excise, 2025 LiveLaw (SC) 1092 : 2025 INSC 1297

Section 11D – Excess Collection of Duty – Does not confer Excisability- Rejected the Revenue's argument that because the assessee allegedly collected excise duty on the total value from the buyer, the goods are excisable- If excess duty was collected, the Revenue should have invoked Section 11D for recovery of that amount, but such collection does not render an immovable product excisable. [Paras 72-73] Lipi Boilers Ltd. v. Commissioner of Central Excise, 2025 LiveLaw (SC) 1092 : 2025 INSC 1297

Section 2(d) – Excisability – Test of Movability – Erection and Installation of Plant- Supreme Court held that a steam generating plant/boiler, assembled and erected at site using civil engineering materials (concrete, grouting, etc.), which cannot be dismantled without substantial damage, is "immovable property" and not "goods."- Therefore, it is not excisable- The mere size and weight of the boiler made it impossible to assemble before erection- The final product (steam generating plant) emerging at the site is immovable; hence, the contract price cannot be treated as the assessable value for excise purposes. [Relied on Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, (1995) 2 SCC 372; Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, (1997) 1 SCC 203; Sirpur Paper Mills Ltd v. Collector of Central Excise, (1998) 1 SCC 400; Paras 59-64] Lipi Boilers Ltd. v. Commissioner of Central Excise, 2025 LiveLaw (SC) 1092 : 2025 INSC 1297

Section 2(f) – Manufacture - Continuous Manufacturing Process/Clubbing of Activities – Held, the CESTAT erred in focusing on the distinct legal identities of two units while ignoring the fact that they were together involved in an integral and continuous process of manufacture - The conversion of grey fabrics into cotton fabrics involved a series of distinct, interlinked processes - Since all these activities were integral processes in the conversion of grey fabrics into cotton fabrics, the separate legal/operational identity of the Units (distinct partners, machinery, separate job work bills, and payments) was held to be immaterial - The entire activity amounted to "manufacture" for the purposes of Section 2(f) of the Act of 1944 - Manufacturers cannot claim central excise duty exemption for processed cotton fabrics if power is used at any stage of the manufacturing chain, even when the work is carried out through separate units - To claim excise duty exemption for 'cotton fabrics' processed without the aid of power or steam, the manufacturing stages must be completely independent; if the final product cannot emerge without each interlinked process, including those involving power, the exemption cannot be availed - Appeal allowed. [Relied on Standard Fireworks Industries, Sivakasi and another Vs. Collector of Central Excise (1987) 1 SCC 600; CCE Vs. Rajasthan State Chemical Works (1991 INSC 235); Impression Prints Vs. CCE (2005 INSC 377); Paras 9-14] Commissioner of Customs v. Narsibhai Karamsibhai Gajera, 2025 LiveLaw (SC) 1161 : 2025 INSC 1374

Section 2(f)(i) – Held, converting imported gas-generating sets (Gensets) into containerized 'Power Packs' by placing them in stell containers and fitting them with essential components amounts to 'manufacture' under the 1944 Act, making the final product liable to excise duty - the process of placing the Genset within steel container and fitting that container with additional, integral components brings into existence a new, distinct and marketable commodity - This process would thus amount to 'manufacture' under Section 2(f)(i) of the 1944 Act - Appellant is liable to pay excise duty on the goods manufactured - Two-fold test is laid down by Supreme Court for the purpose of determining whether an activity amounts to 'manufacture' - i. Transformation test (Whether a distinct product with a new name, identity, character or use emerges) and ii. Marketability Test (Whether the transformed product is marketable as such) - the transformation test and marketability test were fulfilled as the imported product was transformed into a new product with a distinct identity, name and character and is capable of being brought and sold in the market - Both the tests must be cumulatively satisfied for a process to constitute manufacture - Distinction between 'parts' and accessories' was discussed and additional components were held to be 'parts' necessary for the product's functioning, not mere accessories - Appeals dismissed. [Paras 24-25, 33, 41, 45, 46, 50, 52] Quippo Energy Ltd. v. Commissioner of Central Excise Ahmedabad – II, 2025 LiveLaw (SC) 926 : 2025 INSC 1130

Section 4(1)(a), 11A(1) and 11AC - Whether the price fixed under the Memorandum of Understanding (MOU) between Oil Marketing Companies (OMCs) was the sole consideration for the sale of petroleum products, as required under Section 4(1)(a) of the Central Excise Act, 1944? Whether the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944, could be invoked by the Revenue? Whether the penalty imposed under Section 11AC of the Central Excise Act, 1944, was justified? The appellant, Bharat Petroleum Corporation Ltd. (BPCL), along with other OMCs (Indian Oil Corporation Ltd. (IOCL) and Hindustan Petroleum Corporation Ltd. (HPCL)), entered into an MOU on March 31, 2002, to ensure the smooth supply and distribution of petroleum products across India. The MOU stipulated that petroleum products would be sold among OMCs at the Import Parity Price (IPP), which was lower than the price at which OMCs sold products to their own dealers. The Revenue issued show-cause notices to BPCL and other OMCs, alleging that the transaction value for excise duty should be based on the price at which OMCs sold products to their own dealers, rather than the IPP. The Revenue invoked the extended period of limitation under Section 11A(1) and imposed penalties under Section 11AC, alleging suppression of facts. Held, the price under the MOU was not the sole consideration for the sale. The MOU was primarily aimed at ensuring uninterrupted supply and distribution of petroleum products across India, and the arrangement was not a commercial sale but a mutual agreement for product sharing. Therefore, the transaction value for excise duty could not be based on the IPP, and Section 4(1)(a) of the Central Excise Act, 1944, was not applicable. The extended period of limitation under Section 11A(1) could not be invoked. The Revenue was aware of the MOU, and there was no suppression of facts by BPCL. The MOU was executed at the behest of the Ministry of Petroleum and Natural Gas, and the Revenue had knowledge of its existence through various circulars and tribunal decisions. The penalty under Section 11AC was not justified as there was no evidence of fraud, collusion, or wilful mis-statement by BPCL. The invocation of the extended period of limitation was itself found to be invalid, and thus, the penalty could not be sustained. BPCL's appeal was allowed, and the demand for excise duty, along with the penalty, was set aside. Other appeals involving IOCL and HPCL were remanded to the Tribunal for fresh adjudication in light of the findings in this judgment. The Supreme Court clarified that the MOU between OMCs was not a commercial transaction but a mutual arrangement to ensure the smooth supply of petroleum products. The price under the MOU was not the sole consideration for the sale, and the Revenue could not invoke the extended period of limitation or impose penalties under Section 11AC. The judgment emphasizes the importance of examining the true nature of transactions and the conditions under which the extended period of limitation can be invoked. Bharat Petroleum Corporation Ltd. v. Commissioner of Central Excise Nashik Commissionerate, 2025 LiveLaw (SC) 86

Service Tax - Exemption - Ministry of Finance in 2012 Notification - Clause 2(t) - Healthcare services - Cord blood Banking Services – Whether stem cell banking services constitute 'Health care Services” and are exempted from service tax – Held, stem banking service including enrolment, collection, processing and storage of umbilical cord blood cells, constitute “healthcare services” which are exempted from service tax as per notification issued by the Ministry of Finance in 2012 and 2014 under the Finance Act, 1994 - Appellant is involved in post-transplant monitoring, clinical trials and collaborations with international medical experts, these services are preventive and curative in nature - Healthcare services include preventive services - Demand for service tax, interest and penalties was unsustainable and arbitrary, as appellant's conduct was bonafide. [Relied on M. Satyanarayana Raju Charitable Trust v. UOI, 2017 SCC Online Hyd. 168; Para 10-13] Stemcyte India Therapeutics Pvt. Ltd v. Commissioner of Central Excise and Service Tax, 2025 LiveLaw (SC) 707 : 2025 INSC 841

Central Excise Tariff Act, 1985

Central Excise Rules, 1944; Rule 56(2) and 56(4) - Test reports justifying reclassification under the Act must be disclosed to manufacturer. Test reports forming the basis for reclassification of petrochemical products under the Central Excise Tariff Act, 1985, leading to higher duty demands, must be disclosed to the manufacturer-taxpayer. The Court set aside a ₹2.15 crore duty demand finding that the revenue authorities violated natural justice by failing to share critical test reports used to reclassify Benzene and Toluene. The non-disclosure breached Rule 56(2) and Rule 56(4) depriving the manufacturer of the right to seek a re-test. Withholding such documents, relied upon for adverse decisions, constitutes a clear breach of natural justice principles. Appeal allowed. (Para 37 & 39) Oswal Petrochemicals Ltd. v. Commissioner of Central Excise, 2025 LiveLaw (SC) 500 : 2025 INSC 578

Central Goods and Services Tax Act, 2017 (CGST Act)

A penalty or prosecution mechanism for the levy and collection of GST, and for checking its evasion, is a permissible exercise of legislative power. The GST Acts, in pith and substance, pertain to Article 246-A of the Constitution and the powers to summon, arrest and prosecute are ancillary and incidental to the power to levy and collect goods and services tax. In view of the aforesaid, the vires challenge to Sections 69 and 70 of the GST Acts must fail and is accordingly rejected. Radhika Agarwal v. Union of India, 2025 LiveLaw (SC) 255 : 2025 INSC 272 : (2025) 6 SCC 545

Constitutional Law – Taxation - Sales Tax - Purchase Tax - Validity of Provisions Imposing Purchase Tax on Exempted Transactions - In a reference to resolve conflicting views on the interpretation of "levy" in sales tax exemptions, the Supreme Court (3 Bench) upheld the constitutional validity of Section 5A, Kerala General Sales Tax Act, 1963 (KGST Act), and the pari materia Section 7A, Tamil Nadu General Sales Tax Act, 1959 (TNGST Act). The provisions impose purchase tax on purchasers who acquire goods from sellers exempted from sales tax under notifications issued pursuant to Section 10, KGST Act (or equivalent), and subsequently dispatch such goods outside the state via stock transfer (not constituting inter-state sale). Facts: The appellants, registered dealers, purchased voltage stabilizers from small-scale industrial (SSI) units and charitable institutions within Kerala, which were exempt from sales tax liability under Section 10 notifications. The goods were then dispatched outside Kerala by way of branch/stock transfer. The revenue authorities levied purchase tax under Section 5A, KGST Act, treating the purchases as "liable to tax." The appellants contended that the exemption under Section 10 rendered the transactions non-liable to tax altogether, excluding the operation of Section 5A. A 2009 Division Bench of Supreme Court, in a lead case, distinguished between "leviability" (imposition of tax liability) and "payability" (actual payment), holding the goods liable but exempt from payment. Due to a contrary view in Peekay Re-rolling Mills (P) Ltd. v. Assistant Commissioner, (2007) 4 SCC 30 (interpreting "levy" to include collection/payment), the matter was referred to a larger Bench. Issues Referred: 1. Whether purchases from tax-exempt dealers under the KGST/TNGST Acts constitute purchases "liable to tax" within the meaning of Section 5A/7A. 2. Whether such purchasers are liable to pay purchase tax under Section 5A/7A despite the exemption. 3. Whether the purchase tax under Section 5A/7A is ultra vires the Constitution, being in the nature of a manufacture tax, consignment tax, or inter-state levy beyond state legislative competence. Held, Issues (i) and (ii) answered in the affirmative; issue (iii) in the negative. Appeals dismissed; judgments of Kerala and Madras High Courts affirmed. Held, Sections 5A/7A are independent charging provisions levying purchase tax solely where no sales tax is payable on the underlying sale, ensuring the transaction is not taxed twice. Such tax is triggered in three scenarios: (a) goods used in manufacture without sales tax payment; (b) goods dispatched outside the state (other than inter-state trade/commerce); or (c) goods disposed of otherwise than by intra-state sale. The charge remains a tax on purchase, with satisfaction of these conditions merely delineating its applicability. "Levy" denotes the imposition or exigibility of tax liability (authorization to tax), distinct from assessment (quantification) and collection/payment. An exemption under Section 10 affects only payability, not the underlying leviability; goods remain "liable to tax" in principle, though payment is deferred or waived. The provisions do not encroach on Union powers under Entries 52/54, List I (inter-state sales) or Entry 52A, List II (declared goods), as they target intra-state purchases followed by non-sales dispositions or out-of-state dispatches that do not qualify as inter-state sales. Inter-state movement of goods (sans sale) falls within state legislative domain under Entry 54, List II. States retain prerogative to levy such taxes for revenue generation, warranting interpretive leeway absent clear constitutional overreach. Peekay Re-rolling Mills, (2007) 4 SCC 30 distinguished as pertaining to declared goods under Entry 52A, List II, where exemption impacts the charge itself; the ratio in Kandaswami, (1975) 4 SCC 745; Hotel Balaji, 1993 Supp (4) SCC 536 and Devi Dass, (1994) Supp 2 SCC 59 (upholding similar provisions) prevails, overruling Goodyear, (1990) 2 SCC 71 to the extent of conflict. (Para 30 - 33) C.T. Kochouseph v. State of Kerala, 2025 LiveLaw (SC) 554 : 2025 INSC 661

Goods and Services Tax - GST Exemption - Renting of Residential Dwelling - Hostel Accommodation - Entry 13 of Notification No. 9/2017 - Integrated Tax (Rate) dated 28.06.2017 – Held, the service of leasing residential premises as a hostel to students and working professionals qualifies for GST exemption as "renting of residential dwelling for use as resident the term "residential dwelling" is not defined under GST laws - Relying on normal trade parlance and the CBIC Education Guide (2012), it held that "residential dwelling" means any residential accommodation intended for long-term stay, excluding places meant for temporary stay like hotels or inns - A hostel is a "house of residence" and does not lose its residential character merely because the owner charges a fee - clarified that Entry 13 does not mandate that the lessee must use the dwelling as their own residence; it only requires that the dwelling be used for residence - Since the ultimate occupants (students/working professionals) used the property for eating, drinking, and sleeping, the condition of "use as residence" stood satisfied - adopted the principle of 'Purposive Interpretation,' stating that the legislative intent was to ensure that rented properties used for residential purposes do not suffer the burden of 18% GST - Narrowing the exemption to only cases where the service recipient is the resident would defeat this objective and pass costs onto students - While an exemption notification must be construed strictly at the threshold, once the subject falls within the ambit of the notification, it must be construed liberally to give full effect to the benefit - Appeal dismissed. [Relied on Bandu Ravji Nikam v. Acharyaratna Deshbushan Shikshan Prasark Mandal; Kishore Chandra Singh Deo v. Babu Ganesh Prasad Bhagat AIR 1954 SC 316; Union of India v. Wood Papers Limited 1990 4 SCC 256; Paras 42-64] State of Karnataka v. Taghar Vasudeva Ambrish, 2025 LiveLaw (SC) 1167 : 2025 INSC 1380

Section 6(2)(b) - Two-fold test – Held, the bar under Section 6(2)(b) is attracted immediately when any two proceedings initiated by the Department aim to assess or recover an identical or partially overlapping tax liability, deficiency or obligation for a specific contravention - If proceedings involve distinct infractions, they do not constitute the 'same subject matter' and the bar under Section 6(2)(b) is not attracted - The two-fold test to determine if a subject matter is the 'same' involves - i. checking if an authority has already proceeded on an identical tax liability or alleged offence by the assesses based on the same facts; ii. Determining if the demand or relief sought is identical. [Paras 87, 88] Armour Security v. Commissioner, CGST, Delhi East Commissionerate, 2025 LiveLaw (SC) 805 : 2025 INSC 982

Section 6, 70, 73, 74 - 'Initiation of any proceedings' and 'subject matter' – Held, CGST Act prohibit the initiation of “any proceedings” on the “same subject matter” - Term 'any proceedings' refers to the formal commencement of adjudicatory proceedings through the issuance of a show cause notice and it does not include the issuance of summons or conduct of a search or seizure - 'Subject matter' relates to any tax liability, deficiency or obligation arising from a specific contravention that the department wants to assess or recover - Issuance of a summons cannot be equated with initiation of proceedings barred by the Act - Mere presence of an overlapping aspect under investigation does not automatically make the subject matter “same”. [Relied on K.P. Mohammed Salim v CIT 2008 11 SCC 573; G.K. Trading v. Union Of India & Ors. 2020 SCC Online All 1907; Paras 21, 23, 54-56, 86, 87] Armour Security v. Commissioner, CGST, Delhi East Commissionerate, 2025 LiveLaw (SC) 805 : 2025 INSC 982

Sections 69 and 70 - Constitutionality of - Power to Arrest and Summon - Legislative Competence under Article 246A - Incidental Powers for Tax Evasion. The constitutional validity of Sections 69 (power to arrest) and 70 (power to summon) of the CGST Act, and analogous provisions in State GST Acts, was challenged. Petitioners contended that Article 246A, which empowers Parliament and State Legislatures to levy and collect GST, does not authorize criminalization of violations, such as through arrest and summons. They argued these powers fall outside legislative competence, being neither ancillary to GST levy nor covered by Entry 93 of List I (offences against laws of the Union) in the Seventh Schedule. Whether Sections 69 and 70 of the CGST Act are constitutionally valid and within Parliament's legislative competence under Article 246A. Held, Provisions upheld as constitutionally valid. Challenge to vires rejected; provisions do not violate constitutional limits. (Para 75) Radhika Agarwal v. Union of India, 2025 LiveLaw (SC) 255 : 2025 INSC 272 : (2025) 6 SCC 545

Section 129 - Detention, seizure and release of goods in transit - Section 107 - Central Goods and Services Tax Rules, 2017 - Rule 142 - High Court dismissed appeal, holding that payment under Section 129(1) deemed the matter concluded under Section 129(5) – Held, even if tax and penalty are paid by an assesses following a notice of detention under section 129(3) of the CGST Act, the assesses cannot be held to waive the right to file a statutory appeal - Mere payment of penalty for the release of goods detained during transit under GST regime does not conclude proceedings unless a formal, reasoned order is passed under Section 129(3) of CGST Act - The proper officer is mandatorily required to pass a reasoned final order in Form GST MOV-09, upload its summary in Form GST DRC-07 - Every show-cause notice must culminate in a final, reasoned order to enable the taxpayer to avail statutory remedies under Section 107 of GST Act, 2017 - The failure to pass such an order frustrates the statutory right to appeal and violates Articles 265 of the Constitution. Set aside order of High Court. Appeal allowed. [Paras 9, 12, 15, 16.1, 19] ASP Traders v. State of Uttar Pradesh, 2025 LiveLaw (SC) 739 : 2025 INSC 890

Section 129(5) - Upon payment, proceedings are deemed to be concluded – Interpretation - “Deemed to be concluded” - the deeming fiction in Section 129(5) of the CGST Act, which states that “all proceedings shall be deemed to be concluded” upon payment of specified amount, does not absolve the proper officer from passing formal order - The term “conclusion” in this context merely signifies that no further proceedings for prosecution will be initiated, but it does not imply that the assesses has waived their right to challenge the levy or that adjudication is dispensed with - It becomes imperative for authorities to pass a speaking order justifying the demand of tax and penalty. [Paras 13, 17, 18] ASP Traders v. State of Uttar Pradesh, 2025 LiveLaw (SC) 739 : 2025 INSC 890

Section 132 – Bail should be normally granted for offences u/s. 132 CGST Act unless extraordinary circumstances exists. Vineet Jain vs Union of India, 2025 LiveLaw (SC) 513

The Supreme Court issued guidelines to be followed in cases where, after the commencement of an inquiry or investigation by on authority, another inquiry or investigation on same subject matter is initiated by a different authority- i. An assessee must comply with a summons or show cause notice as its mere issuance does not confirm that an investigation has been formally initiated; ii. If an assessee discovers an overlapping inquiry, they must immediately inform the authority that started the subsequent investigation; iii. Tax authorities must communicate with each other to verify the assessee's claim to avoid redundant proceedings and optimize resources; iv. If the investigations are on different "subject matters," the authorities must inform the assessee in writing, explaining the reasons and specifying the distinct subjects; v. Authorities can proceed with their inquiry until it is confirmed that a duplicate investigation or show cause notice for the same liability already exists, in which case the subsequent show cause notice will be quashed; vi. When an overlap is confirmed, the authorities must decide which one will continue the investigation, and the other must forward all relevant materials, as the assessee has no legal right to choose; vii. If authorities cannot agree, the investigation will be handled by the one that started it first, and courts can order the transfer; viii. If authorities do not follow these guidelines, the assessee may file a writ petition with the High Court under Article 226 of the Constitution of India. [Para 97] Armour Security v. Commissioner, CGST, Delhi East Commissionerate, 2025 LiveLaw (SC) 805 : 2025 INSC 982

Central Provinces Laws Act, 1875 (Act of 1875)

Section 6 – Principles of Equity, Justice and good conscience - Held - that the term “justice, equity and good conscience” finds statutory recognition in section 6 of 1875 Act - The Repeal Act of 2018 includes a saving clause in section 4 which preserves rights accrued prior to repeal - hence, section 6 of 1875 Act applies in present case since the parties are governed neither by Hindu nor Muslim laws – Held, justice, equity and good conscience applied where there is a void or absence of governing law. [Relied on Niemla Textile Finishing Mills Ltd. v. 2nd Punjab Tribunal, 10 1957 SCC Online SC 64; Superintendent and Remembrancer of Legal Affairs v. Corpn. Of Calcutta, 1966 SCC Online SC 42; Paras 15-19] Ram Charan v. Sukhram, 2025 LiveLaw (SC) 717 : 2025 INSC 865

Customs Act, 1962

Section 110 – Held, provisional release of seized object won't extend time limit for issuing show cause notice in Pre-2018 cases - Where goods are seized under Section 110 of Customs Act and no notice under Section 124(a) is issued within prescribed or extended period, the consequence mandated by Section 110(2) is unconditional release to the person from whom the goods were seized - the existence or exercise of provisional release under Section 110A does not affect the statutory consequence mandated under Section 110(2) - when the statutory period for issue of show-cause notice under Section 124 of Customs Act lapses and extension is neither granted nor the conditions for further extension met, unconditional release of seized goods is mandatory under Section 110(2) - Provisional release orders under Section 110A do not override this consequence - Section 110A functions as an interim arrangement to allow release of goods, including perishable or fast-moving items, but does not in any way impede or limit the mandatory time limit in Section 110(2) - Appeal dismissed. [Paras 11, 20-24] Union of India v. Jatin Ahuja, 2025 LiveLaw (SC) 922

Special Economic Zone (SEZ) Act, 2005 - Whether export duty can be imposed on goods supplied from the Domestic Tariff Area (DTA) to SEZ units under the provisions of the Customs Act or SEZ Act – Held, export duty on goods moved from DTA to SEZ units is not justified under the prevailing law, such goods are not subjected to export duty - It is a domestic supply and not an export outside India - SEZ Act creates a self-contained legal framework where the movement of goods from the DTA to an SEZ is defined as a form of 'export' for the purposes of entitlements and benefits under that Act, but it is not an export that would trigger a levy under the Customs Act - Section 12 of Customs Act is a charging provision which levies duty only on goods physically exported out of India - Section 26 of the SEZ Act, power is reserved to grant an exemption or a concession if under the provisions of the Customs Act, 1962, a duty is leviable as per the charging sections. [Paras 4, 6, 7] Union of India v. Adani Power, 2025 LiveLaw (SC) 932

Whether LG watch W7 imported by the appellant is classifiable under CTH 9102 19 00 (as claimed by appellant) or under CTH 8517 62 90 (as affirmed by department), eligibility for concessional basic customs duty and confiscation/ penalty liability - Supreme Court allows customs duty exemption to LG Electronics for Smart watch import from Korea - Held that the goods imported- smart watches- are classifiable under CTH 8517 62 90 and not under CTH 9102 19 00 - Tribunal erred denying the benefit of exemption notification no. 152/2009- on ground of lack of Certificate of Origin; Certificate of Origin as per notification requirements - There was no mala fide or dishonest intent by the appellant in making the customs declaration - Mere wrong classification or claim of exemption does not attract Section 111 or penalty provisions - Appeal allowed. [Paras 20-22, 28] L.G. Electronics v. Commissioner of Customs, 2025 LiveLaw (SC) 916

The appellant imported crude degummed soybean oil and claimed exemption from customs duty under a notification excluding "agricultural produce." The Assistant Commissioner denied the benefit, classifying it as a manufactured product. The High Court upheld this, ruling the oil retained its agricultural character as an unfinished, non-consumable derivative of soybeans. The appellant appealed to the Supreme Court. Whether crude degummed soybean oil, processed from soybeans, qualifies as an "agricultural product" exempt from customs duty, or if the processing constitutes "manufacture" stripping it of agricultural character. Held, crude degummed soybean oil is a manufactured product, not agricultural produce, and is eligible for the customs duty exemption. The High Court's order is set aside. Noble Resources and Trading v. Union of India, 2025 LiveLaw (SC) 570 : 2025 INSC 684 : (2025) 8 SCC 518

Absent a statutory definition of "agricultural product," the Court adopted the High Court's formulation in P. Narayanan Nair v. Dr. Lokeshan Nair (AIR 2014 Ker 141): an agricultural product must be the direct result of cultivation in its natural, unmanufactured state. Applying the SC's test for "manufacture" from Union of India v. Delhi Cloth & General Mills Co. Ltd. AIR 1963 SC 791 and Deputy CST v. Pio Food Packers, 1980 Supp. SCC 174, the Court held that manufacture involves a transformation yielding a new, commercially distinct commodity with a different name, character, or use. The process of extracting crude degummed soybean oil from soybeans satisfies this: (i) it involves a series of processes (crushing, solvent extraction, degumming); (ii) the raw soybean undergoes fundamental transformation; (iii) a new commodity emerges; (iv) it has a distinct identity (marketable as "crude degummed soybean oil"); and (v) it is trade-recognized as separate from soybeans. The High Court erred in focusing on edibility post-refining; consumability is irrelevant—the test is transformation to a distinct product. While soybeans are agricultural, the oil is not "the same thing." Thus, it falls outside the notification's exclusion for agricultural produce. Processed derivatives of agricultural raw materials lose their "agricultural" status if they emerge as new, commercially viable products via manufacturing processes. Appeal allowed. Noble Resources and Trading v. Union of India, 2025 LiveLaw (SC) 570 : 2025 INSC 684 : (2025) 8 SCC 518

Sections 14(1) and 14(1A) – Customs Valuation (Determination of Price of Imported Goods) Rules, 1988; Rule 9(1)(a) and 9(1)(e) - Assessable Value – Inclusion of Engineering and Technical Service Fees - Whether engineering and technical service fees paid by the importer have a direct nexus with the import of goods and should be included in the assessable value for customs duty under the Customs Act, 1962. The Supreme Court upheld that engineering and technical service fees (8% of Free on Board (FOB) value) paid by the appellant (Coal India) to the Indian distributor (M/s Voltas Limited) for imported spare parts have a direct nexus with the value of the goods imported. Such fees are includible in the assessable value for computing customs duty under Sections 14(1) and 14(1A) of the Customs Act, 1962, read with Rule 9(1)(e) of the Customs Valuation Rules. The payments were a condition of sale, not linked to specific services rendered by the distributor, but directly related to the import of goods as product support services. The Orders of the lower authorities, including the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), were affirmed, and the appeal was dismissed. (Paras 25.1, 33 & 34) Coal India v. Commissioner of Customs, 2025 LiveLaw (SC) 517 : 2025 INSC 609

Section 27 – Doctrine of Unjust Enrichment – Refund of Bank Guarantee – Held, Section 27 of the Customs Act, which mandates proof that the duty burden was not passed on to consumers for a refund, does not apply to refunds of bank guarantees encashed coercively, as such encashment does not constitute payment of customs duty. The doctrine of unjust enrichment is inapplicable to coercive recoveries. The Court allowed the appeal, set aside the High Court's decision, and directed the Customs Department to refund the encashed bank guarantee amount with 6% interest within four months. [Followed: Union of India v. Param Industries Ltd., (2016) 16 SCC 692, Para 30] Patanjali Foods v. Union of India, 2025 LiveLaw (SC) 634 : 2025 INSC 733

Customs Tariff Act, 1975

Central Excise Rules, 2002; Rules 18, 19(2) - Held, the Central Board of Excise and Customs (CBEC) Circular dated 17.09.2010, clarifying All Industry Rate (AIR) duty drawback under earlier notifications, applies retrospectively. Being explanatory, the Circular does not create a new fiscal regime but resolves ambiguities in prior Notifications, notably Notification No. 81/2006 dated 13.07.2006. The decision ensures uniform application of the 1% AIR customs duty drawback benefit for merchant-exporters, including those dealing in Soyabean Meal (SBM), without imposing new obligations. The Supreme Court set aside the High Court's ruling, which had held the Circular prospective, allowing retrospective benefits from 2008 onwards. The Court emphasized fairness, holding that clarificatory provisions should not be restricted unless arbitrary or unfair. (Para 15, 17, 18) Suraj Impex (India) Pvt. Ltd. v. Union of India, 2025 LiveLaw (SC) 635 : 2025 INSC 755

Finance Act, 1994

Section 65(88) read with Section 65(105)(v)– Real Estate Agent– Service Tax Liability– Held, the definition of 'Real Estate Agent' is service-centric and requires a contract of agency– Where a developer acquires land and transfers title to a corporate entity based on a 'fixed average rate' as per an MOU, acting on a principal-to-principal basis, the activity constitutes trading in land/transfer of title and not a taxable service– The profit or loss arising from the difference between the negotiated land price and the fixed rate is not a commission or consultancy charge – Transfer of title in immovable property is expressly excluded from the definition of 'Service' under Section 65B(44)(a)(i) of the Finance Act, 1994. [Para 34, 38-44] Commissioner of Service Tax v. Elegant Developers, 2025 LiveLaw (SC) 1088 : 2025 INSC 1299

Section 73(1) Proviso– Extended Period of Limitation– Suppression of Facts– Mere non-payment of service tax or failure to file returns without an element of intent or deliberate suppression is insufficient to invoke the extended period of limitation– Where transactions are conducted through valid banking channels and duly recorded in books of account, no wilful suppression can be inferred- Appeals dismissed. [Relied on Stemcyte India Therapeutics Pvt. Ltd. v. CCE & ST, 2025 SCC OnLine SC 1412; Para 48-53, 49] Commissioner of Service Tax v. Elegant Developers, 2025 LiveLaw (SC) 1088 : 2025 INSC 1299

Section 73(1) - Extended Period of Limitation - A show-cause notice must ordinarily be issued within 1 year from relevant date - Whether show cause notices issued by Respondent are barred by limitation and can extension under Section 73 Finance Act be invoked – Held, to invoke extended period of limitation, there must be an active and deliberate act on part of assesses to evade payment of tax - There is absence of fraud, collusion or wilful misstatement of facts on part of assesses - mere non-payment of service tax does not justify the invocation of the extended limitation period - The show cause notice issued by Respondent-department is set aside. Set aside order of CESTAT. Appeals allowed. [Relied on Padmini Products v. CCE (1989) 4 SCC 275; Paras 8, 9, 9.3, 9.4] Stemcyte India Therapeutics Pvt. Ltd v. Commissioner of Central Excise and Service Tax, 2025 LiveLaw (SC) 707 : 2025 INSC 841