Madras High Court
M/S. Zf Wind Power Coimbatore Private ... vs The Principal Commissioner Of Customs, on 28 April, 2026
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
WP No.16003 of 2026
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 28-04-2026
CORAM
THE HON'BLE MR.JUSTICE MOHAMMED SHAFFIQ
WP No.16003 of 2026
and
WMP No.17244 of 2026
M/s. ZF Wind Power Coimbatore Private Limited,
Authorized Signatory,
Mr.Karnam Sreenivas Naidu,
Plot No. 3, Aspen Park Infra Coimbatore Pvt Ltd.,
SEZ,
Karumathampatty, Annur Road,
Coimbatore -641659.
..Petitioner
Vs
The Principal Commissioner of Customs,
Adjudication (SEZ & FTWZ),
Chennai IIII,
Customs House, Chennai -600001.
..Respondent
Prayer :Writ Petition filed under Article 226 of the Constitution of India, for the
issuance of a writ of Certiorari, calling for the records relating to the impugned
order 117732/2026 dated 16.02.2026 having DIN. 20260273MY000000BCFA
and quash the same.
For Petitioner : Mr.R.Parthasarathy
For Respondent : Mr.S.M.Deenadayalan,
Senior Standing Counsel
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WP No.16003 of 2026
ORDER
The present writ petition has been filed challenging impugned order dated 16.02.2026 insofar as the levy of penalty under Section 114AA of the Customs Act, 1972, primarily on the premise that impugned order fails to apply its mind to the objections filed inter alia which includes jurisdictional aspects and thus stands vitiated.
2. Learned counsel for petitioner would submit that petitioner is an authorised SEZ unit for manufacture of gearboxes used in Wind Operated Electrical Generators (WOEG), axles and transmissions for off-highway vehicles. The items so manufactured are exported and also sold in the Domestic Tariff Area (DTA), after complying with the provisions of SEZ Act and Rules by paying appropriate customs duty in respect of sales to DTA buyers.
2.1. During the period 01.04.2020 to 31.03.2020, petitioner had sold gearboxes and oil cooling systems manufactured in SEZ unit to buyers in DTA. He would submit that DTA sales by SEZ are treated as imports and bill of entry came to be filed by petitioner on behalf of DTA buyers which is permissible in terms of SEZ Act and Rules. The bill of entry was filed on behalf of buyers, who paid IGST at 5% or 12 % depending on items and its classification. Apparently, there has been investigation and as a result of such investigation, it __________ Page2 of 8 https://www.mhc.tn.gov.in/judis WP No.16003 of 2026 was found by Revenue that appropriate duty ought to be 18% inasmuch as DTA buyers were not manufacturers of Wind Operated Electrical Generators but instead were engaged in providing services and thus may not be entitled to concessional rate of 5% or 12%. Show cause notice dated 19.03.2025 came to be issued proposing to recover the differential IGST from DTA buyers and in the said notice, penalty under Section 114AA of the Customs Act was proposed to be imposed on petitioner. Petitioner submitted its objections to the said notice on 28.04.2025 inter alia highlighting the following :
i) That the proposal to levy penalty under Section 114AA of the Customs Act, is not warranted and is without jurisdiction inasmuch as Section 114AA of the Customs Act, introduced with effect from 13.07.2006 was intended to check frauds relating to paper exports in other words, where there was no actual movement of goods but only export on paper.
ii) Reliance was sought to be placed in support of the above contention on the observations of the Ministry in the Twenty Seventh Report of the Standing Committee on Finance (2005-06).
iii) In support of the above submission, reliance was also placed on a judgment of the CESCAT, Chennai in the case of Commissioner of Customs, Sea, Chennai-II vs Sri Krishna Sounds and Lightings reported in 2019 (370) ELT 594, wherein it was held that Section 114AA may not get attracted except in cases of paper transactions.
iv) Reliance was also placed on the judgement of the CESTAT, __________ Page3 of 8 https://www.mhc.tn.gov.in/judis WP No.16003 of 2026 Bangalore, in the case of Interglobal Aviation Ltd., vs The Principal Commissioner, Custom Bangalore reported in 2022 (379) ELT 235, for the very same proposition.
v) Reliance was also placed on Section 21 of SEZ Act, which provides that Central Government may by notification specify any act of omission made punishable under any Central Act as notified offence for the purposes of SEZ Act.
2.2. He would submit that in the absence of any specific provision incorporating Section 114AA of the Customs Act, it may not be permissible for the authorities to invoke the said provision inasmuch as penal provision are substantive in nature and in the absence of an express provision, it may not be permissible to levy penalty, in this regard he would submit that reliance was sought to be placed on the judgment of the Bombay High Court in the case of Mahindra & Mahindra vs Union of India reported in (2022 (10) TMI 212, which has since been affirmed by the Hon’ble Supreme Court in SLP (Civil) Diary No(s) No.18824 of 2023 dated 28.07.2023. He would submit that while confirming the proposal for levy of penalty impugned order except setting out the role of petitioner and thereafter concluding that petitioner is liable for penalty under Section 114AA of the Customs Act, does not deal with the above aspects, which has a bearing on the jurisdiction to invoke Section 114AA of the Customs Act.
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3. Learned Senior Standing Counsel for respondent would initially submit that this is an order against which appeal can always be preferred and therefore, this Court ought not to be entertaining writ petition and instead ought to direct petitioner’s to prefer a statutory appeal.
4. While this Court is conscious that whenever there is a statutory remedy, this Court would be loathe in interfering with orders of adjudication, however, the rule of alternative remedy has exceptions which are fairly well settled and some of them being viz.,
a) Order is in violation of natural justice;
b) Lack of jurisdiction ;
c) Error apparent on the face of the record.
5. Learned counsel for petitioner would submit that the challenge to the impugned order is both on the ground of violation of natural justice inasmuch as the opportunity that was extended was a mere empty formality inasmuch as objections have not been dealt with and more importantly, objections also touches on the jurisdiction to invoke penalty under Section 114AA.
6. This Court wanted to find from learned Senior Standing Counsel if the __________ Page5 of 8 https://www.mhc.tn.gov.in/judis WP No.16003 of 2026 above objections have been dealt with and also point out the passages in the impugned order, however learned Senior Standing Counsel had difficulties in pointing out that as a matter of fact the above objections has in fact been dealt with and he would only place reliance upon paragraph 27 of impugned order, which also set outs the role of the companies including petitioner, but does not deal with the objections raised by petitioner.
7. In the circumstances, this Court is of the view that impugned order does suffer from non-application of mind to the objections raised inasmuch as duty is cast on the adjudicating authority once objections are raised to deal with the same, however, perusal of impugned order does not indicate application of mind to the objections.
8. In that view of the matter, this Court is inclined to set aside the impugned order and remand the matter back to the respondent authority for fresh consideration. Therefore, this Court is inclined to dispose of the writ petition with following directions:
i) Impugned order dated 16.02.2026 is set aside;
ii) The matter is remanded back to the respondent authority for fresh consideration;
iii) The above exercise shall be completed within a period of eight weeks from the date of receipt of a copy of this order, after affording petitioner a __________ Page6 of 8 https://www.mhc.tn.gov.in/judis WP No.16003 of 2026 reasonable opportunity of hearing.
9. Writ petition stands disposed of accordingly. No costs. Consequently, connected miscellaneous petition is closed.
28-04-2026 Index: Yes/No Speaking/Non-speaking order Neutral Citation: Yes/No MRN To The Principal Commissioner of Customs, Adjudication (SEZ & FTWZ), Chennai IIII, Customs House, Chennai -600001.
__________ Page7 of 8 https://www.mhc.tn.gov.in/judis WP No.16003 of 2026 MOHAMMED SHAFFIQ, J.
MRN WP No.16003 of 2026 28-04-2026 __________ Page8 of 8 https://www.mhc.tn.gov.in/judis