The Hon’ble Supreme Court in the case of Commissioner of Customs, Ahmedabad v. Adani Enterprises Ltd. [Civil Appeal No. 32471/2025, order dated October 10, 2025], after condoning the delay and uphold the CESTAT Ahmedabad judgement that the imports of gold and silver bars made by Adani Enterprises Ltd. under the Duty-Free Credit Entitlement (“DFCE”) licenses issued by DGFT were valid, rejecting allegations of fraudulent entitlement and circular trading.
Facts:
Adani Enterprises Ltd. (“the Appellant”), formerly Adani Exports Ltd., engaged in exports under the Incremental Export Promotion Scheme through DFCE licenses issued by DGFT.
The Commissioner of Customs, Ahmedabad (“the Respondent”) challenged the Appellant’s import of gold and silver bars claiming these imports lacked nexus with exported Cut and Polished Diamonds (CPD), alleging fraudulent obtaining of DFCE licenses and circular trading of CPDs resulting in wrongful duty exemption.
The Appellant contended that all imports and exports were genuine with requisite processing (boiling, sieving, sorting) conducted in bonded warehouses adding value to the CPDs before export and held valid DFCE licenses.
The Respondent contended that exports were overvalued, imports were of goods not eligible under the scheme due to lack of nexus (gold and silver bars considered inputs not related to CPD), and alleged circular trading in diamonds to inflate export benefits.
The Appellant’s grievance included the Respondent’s show cause notices alleging duty evasion and misuse of the incremental export promotion scheme, resulting in penalties and proposed confiscation. The Appellant approached the CESTAT, which dismissed the demands, and the Revenue filed appeals culminating in the Civil Appeal before the Supreme Court.
Issue:
Whether the imports of gold and silver bars under DFCE licenses by Adani Enterprises Ltd. were valid without nexus violation to export goods and whether the allegations of overvaluation and circular trading of CPDs were sustainable to deny benefits and impose duty demands, confiscation, and penalties?
Held:
The Hon’ble Supreme Court in Civil Appeal No. 32471/2025 held as under:
- Noted that, CESTAT extensively examined the facts including processing done in bonded warehouses and found that activities such as boiling, sieving, and sorting of CPDs were indeed carried out, resulting in value addition, as supported by consistent statements of company personnel.
- Observed that, the FOB values declared, duly verified by Customs officers on export, were accepted as correct without evidence of overvaluation or manipulation under Section 14 of the Customs Act.
- Noted the absence of evidence to prove circular trading in CPDs and alleged identical lots varied in quality, weight, and size. Further noted that the sequence of import-export transactions disproved reuse of same goods, and financial transactions did not correspond to circular trading.
- Held that, the DGFT did not cancel or revoke the DFCE licenses issued to the Appellant; therefore, the Customs authorities could not question the validity of these licenses or deny benefits based on invalidity claims.
- Rejected Revenue’s attempt to impose duty demands, penalties, or confiscation based on unsubstantiated allegations, emphasizing that licensing authorities’ decisions on export benefits under DFCE scheme are final unless successfully challenged.
- Set aside the impugned order of the Commissioner of Customs demanding duty and penalties, dismissing appeal filed by Revenue and upholding CESTAT orders.
- Held that, penalties imposed mechanically without ascribing specific acts of commission or omission were set aside as per Section 114 of the Customs Act.
Our Comments:
The judgment reflects a thorough factual and legal inquiry into the misuse of the DFCE scheme allegations, clarifying the limits of Customs authorities’ jurisdiction vis-à-vis licensing authorities under the Export Promotion Scheme framework. Reliance on detailed evidence including admitted processing activities and corroborated statements negated the Revenue’s claims. The Court’s reliance on the distinction between FOB value (as per Section 14) and value addition under the Foreign Trade Policy underscored the importance of procedural and substantive evidence rather than presumptions. The precedence set by the Hon’ble Bombay High Court in the case of Pradip Polyfils Pvt. Ltd. vs The Union Of India [2004 (173) E.L.T. 3 (Bom.)] reinforces that Customs cannot pierce the validity of licenses issued by DGFT unless license cancellation or legal infirmity is established.
Reliance has been placed in the case of Omprakash Bhatia v. CC [2003 (155) E.L.T. 423 (S.C.)], the Supreme Court held that whether Section 113(d) was applicable or not is based on the facts as to whether the exporter had lead any evidence to show that the export value mentioned in the shipping bill was the true sale consideration, and accepted the lower value ascertained on market inquiry even at the time of hearing, while giving up the claim of drawback.
Relevant Provisions:
Section 28 of the Customs Act, 1962:
“28. Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded. –
(1) Where any duty has not been levied or not paid or short-levied or short-paid or erroneously refunded, or any interest payable has not been paid, part-paid or erroneously refunded, for any reason other than the reasons of collusion or any willful mis-statement or suppression of facts,-
(a) the proper officer shall, within two years from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;
Provided that before issuing notice, the proper officer shall hold pre-notice consultation with the person chargeable with duty or interest in such manner as may be prescribed ;
(b) the person chargeable with the duty or interest, may pay before service of notice under clause (a) on the basis of,-
(i) his own ascertainment of such duty; or
(ii) the duty ascertained by the proper officer, the amount of duty along with the interest payable thereon under section 28AA or the amount of interest which has not been so paid or part-paid….”
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