CESTAT New Delhi Sets Aside Duty Demand Of Criticallog India, Holds BIS Not Required For Spare Parts

On Wednesday 18 February, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, set aside the duty demand, confiscation, and penalties that the authorities imposed on Criticallog India Pvt. Ltd. for imported “Memory” and “Power Supply” items. The Tribunal held that a BIS registration does not apply to spare parts imported for warranty replacement.

A Bench comprising President Justice Dilip Gupta and Technical Member Ms. Hemambika R. Priya, ruled that the appellate authority erred in treating the import as misdeclared and clarified that spare parts do not require BIS registration. The Bench noted:

“The Commissioner (Appeals) failed to examine this issue and, therefore, committed an error in holding that there was a misdeclaration regarding the quantity of goods imported by Criticallog India Pvt. Ltd.”

Criticallog India, a technology-powered logistics company, imported 'Memory' and 'Power Supply' items through a Bill of Entry dated 8 March 2024. The Department alleged that the company misdeclared the quantity of 'Memory' and questioned the classification. For certain 'Power Supply' items, the authorities claimed that the company did not hold a valid BIS licence.

The Deputy Commissioner rejected the declared value, confirmed a duty demand of Rs. 3,13,372 with interest, ordered confiscation with a redemption fine of Rs. 3,00,000, and imposed penalties. The Commissioner (Appeals) partly reduced the redemption fine but upheld the remaining findings, prompting the present appeal.

Before the Tribunal, the Department claimed that the company imported 59 items instead of the 21 declared, based on a Chartered Engineer's report that counted individual memory sticks as separate items.

Criticallog India explained that multiple memory sticks together form a single part and that the Engineer had incorrectly counted component pieces separately. Its supplier also clarified:

“The parts are our memory modules. They are packed in one box, however the parts are comprised of multiple memory sticks. Photo examples are attached and should be counted as one part.”

The Tribunal noted that photographs and the supplier's detailed clarification supported the company's explanation. The Bench observed that the Commissioner (Appeals) failed to examine this evidence. It further stated:

“If the errors are accepted then there would be no difference in the quantity of 'Memory' imported by Criticallog India Pvt. Ltd.”

The Tribunal set aside the rejection of value, the duty demand with interest, and the confiscation with the option to redeem, in respect of the 'Memory' items.

For one 'Power Supply' item, authorities had ordered confiscation, claiming that Criticallog India did not hold a valid BIS certificate under the Electronics and IT Goods (Requirement for Compulsory Registration) Order, 2012.

The company relied on FAQ No. 35 issued by the Ministry of Electronics and Information Technology, which clarifies that the Compulsory Registration Order applies to finished goods, not spare parts.

The Tribunal examined FAQ Nos. 35 and 47 and held:

“Serial no. 47 is for standalone UPS/inverters and not for spares which is covered by serial no. 35. Thus, there is no registration required for spares.”

On this basis, the Bench concluded:

“The Commissioner (Appeals), therefore, committed an error in ordering for confiscation of one 'Power Supply' with penalty of Rs. 837.50 under section 112(a)(i) of the Customs Act.”

Accordingly, the Tribunal set aside the order of the Commissioner (Appeals), except where it had already granted relief for certain Power Supply items, and allowed the appeal.

For the Appellant: Ms. V. Pramila, advocate 

For the Respondent: Shri Rakesh Kumar, authorised representative