CESTAT Mumbai Sets Aside Extended Limitation Against boAt Maker In Bluetooth Earphones Customs Dispute

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the extended limitation period could not be invoked against Imagine Marketing Ltd., the company behind the boAt brand, in a dispute over the tariff classification of imported wireless Bluetooth earphones.

The tribunal found that the dispute was purely interpretational and that the Department had failed to establish collusion, wilful misstatement or suppression of facts

"There is no element of collusion or any willful mis-statement or suppression of facts inasmuch as the issue in hand entirely involves interpretation of the Customs Tariff," the tribunal held.

A bench of Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban noted that the Chennai Bench had referred the classification issue to the President of the tribunal for constitution of a Larger Bench in view of the conflicting decisions.

Imagine Marketing classified imported wireless Bluetooth earphones, earbuds, headphones and headsets as wireless communication apparatus and claimed exemption under a 2017 Customs notification. The Customs Department instead classified them as headphones and earphones. It denied the exemption and issued show cause notices by invoking the extended limitation period.

Before the tribunal, the company argued that the dispute was only about tariff classification and that the proceedings were barred by limitation. It relied on conflicting decisions of the Chennai and Delhi Benches and pointed out that the Chennai Bench had referred the issue to a larger bench.

The tribunal agreed that the dispute was confined to classification. It observed that issuing a show cause notice within the normal limitation period is the rule, while invoking the extended period is an exception.

The tribunal held that the Department had failed to establish collusion, willful misstatement, or suppression of facts. It consequently set aside the customs duty demands to the extent they were confirmed by invoking the extended limitation period.

The tribunal also set aside the consequent redemption fine and penalties. It left the question of the correct tariff classification to be decided by the Larger Bench.

For Appellant (Imagine Marketing Ltd.): Advocate T. Vishwanathan, along with Shri Akhilesh Kangsia and Ms. Madhura Khandekar,

For Respondent (Commissioner of Customs): Mahesh Patil, Authorized Representative.