Section 1(2) extra-territorial jurisdiction applies prospectively, barring penal proceedings against foreign entities for pre-2018 conduct.

Petitioner No. 1, a German company, sold warp knitting machines to Indian importers between June 2014 and May 2017

The Directorate of Revenue Intelligence (DRI) alleged that Indian importers mis-declared these as “fully fashioned high speed knitting machines” to illegally claim duty exemptions

Consequently, the Respondents issued show-cause notices (SCNs) to Petitioner No. 1 and its Indian subsidiary (Petitioner No. 2), proposing penalties under Sections 112 and 114AA of the Customs Act, 1962, for allegedly aiding and abetting the fraud

The Petitioners challenged these SCNs, asserting that the Customs Act did not have extraterritorial jurisdiction over foreign exporters for transactions occurring prior to the 2018 amendment of the Act

1. Whether the Customs Authorities possessed the jurisdiction to issue show-cause notices and impose penalties on a foreign exporter for transactions occurring prior to the amendment of Section 1(2) of the Customs Act on March 29, 2018

2. Whether a foreign exporter can be held liable under the Customs Act for mis-declarations made by an Indian importer in the absence of established evidence of aiding or abetting

The court examined Section 1(2) of the Customs Act, 1962, noting that extraterritorial application to offenses committed outside India was only introduced via the Finance Act, 2018, effective March 29, 2018

It relied on Article 20(1) of the Constitution of India, which prohibits the retrospective application of penal laws (ex post facto laws)

The court further applied Sections 17, 46, and 111(m) of the Customs Act, which place the primary legal burden of truthful declaration and self-assessment of duty upon the "importer"

Regarding penalties, the court applied Sections 112 and 114AA, which require proof of "abetment" or "knowing/intentional" use of false documents

Finally, it applied the doctrine of judicial discipline, holding that Division Bench precedents (such as Shri Ankur Agarwal v. Principal Commissioner) override Single Member Bench decisions (such as Prerna Singh v. Commissioner of Customs)

The court reasoned that since the subject transactions occurred between 2014 and 2017, the pre-amended version of Section 1 of the Customs Act applied, which did not grant the Respondents jurisdiction over entities in foreign territories

The court held that the 2018 amendment could not be applied retrospectively to foist penal liability for past conduct, as this would violate the constitutional protection under Article 20(1)

On the merits, the court observed that under the statutory scheme of Sections 17 and 46, the responsibility for the accuracy of declarations and the classification of goods rests solely with the importer once the goods enter Indian territory

The court found that the Revenue failed to provide material evidence to prove that the German exporter played an active role in the mis-declaration; hence, the essential ingredients for "abetment" under Section 112 or "intentional fraud" under Section 114AA were absent

The court also dismissed the Respondents’ reliance on Prerna Singh, noting it was a Single Member Bench decision that failed to consider the prospective nature of the 2018 amendment and was contradicted by subsequent Division Bench rulings

It held that the Customs Act cannot be applied extraterritorially to foreign exporters for periods prior to March 29, 2018, and that exporters cannot be held vicariously liable for the importer's statutory defaults without specific proof of abetment

The court made the Rule absolute, quashing and setting aside the impugned SCNs and any related recovery notices across all three Writ Petitions