Rs. 3.2 Crore Customs Demand Duty Against Vivo Quashed: Delhi HC Cites This Fault Of Customs Dept.

The Delhi High Court has quashed a ₹3.20 crore customs duty demand raised against Vivo Mobile India Pvt. Ltd., holding that the Customs Department cannot fasten tax liability on an assessee without following the statutory adjudication mechanism prescribed under Section 28 of the Customs Act, 1962. The bench of Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul while simultaneously holding that the company would not be entitled to an immediate refund of the amount already deposited during the investigation process and clarified the legal position regarding payments made during customs investigations and the necessity of following the statutory adjudication mechanism under the Customs Act, 1962. The petitioner, Vivo Mobile India Pvt. Ltd., a major smartphone manufacturer operating in India, regularly imports various mobile phone components, including screw washers and gaskets used in the manufacture of Printed Circuit Board Assemblies (PCBAs). The Customs Department initiated an investigation alleging that Vivo had incorrectly classified certain imported components, namely screw washers/gaskets, resulting in a short payment of customs duty. During the course of the investigation, statements of Vivo's authorized representative were recorded on April 7, 2025 and December 4, 2025. According to the department, the representative stated that the screw washer was not an essential component in the manufacturing process and expressed willingness to pay the differential duty amount. Subsequently, customs authorities issued communications dated December 12, 2025 and January 14, 2026 indicating differential customs duty liabilities of ₹3.20 crore and ₹3.57 crore respectively for different periods. Vivo challenged these communications before the Delhi High Court. Vivo argued that the impugned communications effectively operated as demand notices without complying with the mandatory provisions of Section 28 of the Customs Act, 1962. The company contended that the Assistant Commissioner who issued the communication lacked pecuniary jurisdiction to raise such a substantial demand. No proper show cause notice had been issued as required under Section 28 of the Customs Act. The amount of ₹3.20 crore had been deposited "under protest" during the investigation. Any recovery or appropriation of such amounts without adjudication was contrary to law. The petitioner relied upon the Supreme Court's judgment in Radhika Agarwal v. Union of India (2025) and the Karnataka High Court decision in Suretex Prophylactics (India) Pvt. Ltd. v. Union of India to argue that recoveries obtained during investigations without formal adjudication cannot be sustained. The Customs Department disputed Vivo's characterization of the communications as demand notices. Government counsel submitted that the impugned communication was merely a letter issued during investigation. It was only suggestive of the differential duty amount and not a formal demand under Section 28. Vivo had voluntarily recalculated and deposited the duty amount. The communication had been issued after obtaining approval from the competent authority. The department maintained that the payment was voluntary and not the result of any coercive action. The Court accepted the department's contention that the December 12, 2025 communication could not be treated as a formal demand notice. The Bench observed that the communication was issued after Vivo's own authorized representative had expressed willingness to pay the differential duty and had requested issuance of an appropriate letter quantifying the amount. Therefore, the Court held that the communication was not a statutory demand notice under Section 28 of the Customs Act. However, the Court also emphasized an important principle of tax administration: payment during investigation does not deprive an assessee of the right to a proper adjudication process. The Bench noted: "This admission does not bar the petitioner from its entitlement to the statutory process of adjudication of its liability, if any." The Court further observed that amounts paid during investigation, whether under protest or otherwise, may ultimately be appropriated only against liability determined through a valid adjudicatory order. While refusing Vivo's request for an immediate refund of the ₹3.20 crore already deposited, the Court granted substantial relief by quashing the impugned communication dated December 12, 2025. Recording the department's undertaking that a formal show cause notice would be issued within four weeks. Directing that the deposited amount could only be appropriated against any liability determined through the adjudication process. Restraining the department from making any further recovery or raising fresh demands in the interim period. The judgment strikes a balance between protecting taxpayer rights and preserving the Revenue's ability to investigate potential duty shortfalls. The Court made it clear that the customs authorities must follow the statutory adjudication procedure before determining liability. Deposits made during investigations are not automatically refundable merely because adjudication has not yet occurred. Such amounts remain subject to adjustment against any liability that may ultimately be determined through due process. The order does not decide whether Vivo is actually liable to pay any additional customs duty. Case Details Case Title: Vivo Mobile India Pvt Ltd Versus Assistant Commissioner Citation: JURISHOUR-1500-HC-2026(DEL) Case No.: W.P.(C) 2341/2026 & CM APPL. 11289/2026 Date: 20/05/2026 Counsel For Petitioner: Kishore Kunal Counsel For Respondent: Gibran Naushad Click Here To Read Order Read More: GST on Online Gaming: Does the Supreme Court Judgment Leave Unanswered Questions?

Rs. 3.2 Crore Customs Demand Duty Against Vivo Quashed: Delhi HC Cites This Fault Of Customs Dept.

Membership Required

Latest articles

Parliamentary Panel Urged to Fill 1,588 Vacant Assistant/Deputy Commissioner Posts in CBIC; SC/ST Association Flags Delay in Reservation Implementation

Service Tax Demand Quashed as Dept. Fails to Prove Service of SCN: CESTAT

JURISHOUR | TAX LAW DAILY BULLETIN : 16 JULY, 2026

JURISHOUR | TAX LAW DAILY BULLETIN : 15 JULY, 2026

More like this

Parliamentary Panel Urged to Fill 1,588 Vacant Assistant/Deputy Commissioner Posts in CBIC; SC/ST Association Flags Delay in Reservation Implementation

Service Tax Demand Quashed as Dept. Fails to Prove Service of SCN: CESTAT

JURISHOUR | TAX LAW DAILY BULLETIN : 16 JULY, 2026

About us

Company

Categories