CESTAT Delhi Sets Aside ₹3.77 Crore Penalty Against Maruti Suzuki In Customs Classification Dispute

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside a ₹3.77 crore penalty imposed on Maruti Suzuki India Ltd. over the classification of imported Glow Plug Control Units (GCUs).

It held that customs authorities had accepted the company's classification of imported Glow Plug Control Units (GCUs) since 2015. The tribunal, however, ruled that the products are classifiable as components of electrical ignition or engine-starting equipment used in diesel engines.

Explaining why, the tribunal observed, "The HSN Explanatory Notes to 85.11 extend this heading to electronic control units that regulate ignition/glow-plug operation based on sensor inputs, which is precisely the GPCU's function."

A bench of Officiating President Dr. Rachna Gupta and Technical Member Hemambika R. Priya partly allowed Maruti Suzuki's appeal against an order confirming a customs duty demand of ₹3.77 crore and imposing an equivalent penalty under Section 114A of the Customs Act.

While the tribunal upheld the customs duty demand for the normal limitation period, it set aside the demand for the extended period and the equivalent penalty.

The dispute centred on the classification of Glow Plug Control Units imported by Maruti Suzuki. The company classified the products as automatic regulating or controlling instruments.

The Department, however, argued that they formed part of glow plugs and belonged under the tariff heading covering electrical ignition or engine-starting equipment, resulting in a differential duty demand.

Before the tribunal, Maruti Suzuki argued that the department had produced no technical evidence or supporting material to justify reclassification. It maintained that the GCU regulates the current supplied to glow plugs and alternatively claimed that it should be classified as electrical control equipment.

The Department, on the other hand, argued that the unit has no independent function outside the glow plug system and forms an integral part of engine-starting equipment. It relied on the functional unit principle under Section Notes 3 and 4 of Section XVI of the Customs Tariff.

After examining the product's function, the tribunal observed that the GCU regulates the current, voltage and heating duration supplied to glow plugs and forms an integral part of the overall glow plug system in modern diesel engines. It also held that goods more specifically covered under Chapter 85 are excluded from Chapter 90.

The tribunal rejected Maruti Suzuki's alternative classification, holding that the product did not satisfy the structural requirements of that tariff entry. It further observed that the Harmonized System of Nomenclature (HSN) and the General Rules for Interpretation supported classification under the heading covering electrical ignition or engine-starting equipment.

On limitation, however, the tribunal agreed with Maruti Suzuki. It noted that the company had imported the goods under the same classification since 2015 and that the Bills of Entry had been assessed by the Department without objection.

In those circumstances, the tribunal held that there was no suppression or wilful misstatement to justify invoking the extended limitation period or imposing a penalty under Section 114A.

For Appellant: Advocates B.L. Narasimhan, Ms. Anjali Gupta and Shri Ashwani Bhatia,

For Revenue: N.M. Goyal, Authorised Representative.