Incorrect Tariff Classification Not Enough To Invoke Extended Limitation Or Penalty: CESTAT Delhi

On 23 February, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi held that mere misclassification of imported goods in a Bill of Entry cannot automatically lead to invocation of the extended period of limitation, confiscation of goods, or imposition of penalty in the absence of intent to evade duty.

A Bench comprising the President Justice Dilip Gupta and Technical Member P.V. Subba Rao, partly allowed the appeal by iValue Infosolutions Private Limited, and set aside the demand raised for the extended period, along with confiscation, redemption fine and penalty imposed under Section 114A of the Customs Act.

The Bench noted that:

“Claiming the wrong CTI in the Bill of Entry is only a part of its self-assessment. Even if self-assessment is incorrect, it cannot be a ground for confiscating the imported goods.”

The appellant had imported Forcepoint security appliances and classified them under Customs Tariff Item (CTI) 8471 50 00 (covering certain computers and data-processing equipment) claiming exemption under Notification No. 24/2005-CUS (a customs duty exemption for specified goods).

The Department alleged that the goods were correctly classifiable under CTI 8517 69 90 (covering certain communications and networking devices) and were not eligible for exemption.

Before the Tribunal, the importer did not contest the revised classification or the duty demand within the normal period. It challenged only the invocation of the extended limitation period, confiscation, and penalty.

The Tribunal observed that the extended period under Section 28(4) can be invoked only when short payment of duty arises from collusion, wilful misstatement, or suppression of facts with intent to evade duty.

It found no sufficient evidence of such intent, particularly as the goods were imported on a Delivery Duty Paid (DDP) basis and the Bill of Entry was filed by a customs broker appointed by the overseas supplier.

Regarding confiscation, the Tribunal held that incorrect self-assessment of tariff classification does not by itself make goods liable to confiscation under Section 111(m). The discrepancy was only in the claimed CTI, not in the physical nature or value of the goods.

Consequently, the Tribunal set aside the confiscation and redemption fine and ruled that the penalty under Section 114A could not survive, since the conditions for the penalty mirror those required for invoking the extended period.

Accordingly, the Tribunal upheld the duty demand with interest for the normal period of limitation and granted consequential relief to the appellant.

Appearance for the Appellant: Shri R. Parthasarathy and Ms. S.S. Vidhya, Advocates

Appearance for the Respondent: Shri Nikhil Mohan Goyal, Authorized Representative for the Department