CESTAT Quashes Rs 3.47 Crore Duty Demand On Myntra Jabong, Says No Wilful Suppression

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on Friday set aside a Rs 3.47 crore customs duty demand against Myntra Jabong India Pvt Ltd, holding that the extended limitation period under Section 28(4) of the Customs Act could not be invoked in a classification dispute.

Allowing the appeal, The Tribunal noted that the company had deposited the entire differential duty along with interest before issuance of the show cause notice and that its failure to mention the zipper length in the imported jackets did not amount to wilful suppression with intent to evade duty.

It ruled that the case involved an interpretative issue of tariff classification and not deliberate concealment of material facts.

“The classification of goods is a matter of belief and it cannot be said that facts have been suppressed merely because the department believes that the goods should have been classified under a different Customs Tariff Item,” a coram of Judicial Member Binu Tamta and Technical Member Hemambika R. Priya observed

The Principal Commissioner had confirmed a differential customs duty demand of Rs 3,47,37,530 under Section 28(4), held the goods liable to confiscation under Section 111(m), and imposed penalty under Section 114A. The demand related to imports made between August 2017 and October 2019.

Myntra Jabong India Pvt Ltd, an online fashion and lifestyle retailer, imports apparel and related products for sale through its e-commerce platform.

In the present case, it had classified certain knitted men's jackets under tariff entries attracting basic customs duty at 20 percent. Customs, however, proposed reclassification under different tariff items, which led to a differential duty demand of Rs 3.47 crore.

Customs authorities took the view that the jackets were wrongly classified and required reclassification.

The department contended that the garments had full front openings with slide-fastening zippers and these were not mentioned in the Bills of Entry.

According to Customs, this feature was relevant for determining the correct classification under Chapter 61 of the Customs Tariff, which classifies garments based on their construction and design characteristics, including whether they have full front openings secured by zippers or similar fastenings. On that basis, the department alleged wilful suppression of material facts and invoked the extended five-year limitation period under Section 28(4).

The tribunal noted that the appellant had deposited the entire differential duty along with interest prior to issuance of the show cause notices. It further observed that the goods had been physically examined by Customs authorities and that classification disputes based on interpretation of tariff entries cannot automatically be treated as suppression.

“In the instant case, the appellant had deposited the entire amount of duty with interest prior to the issuance of the show cause notice and the appellant also had a bona fide belief regarding the description and classification of the goods imported by the appellant. It cannot, therefore, be alleged that there was any intention of the part of the appellant to evade payment of customs duty, even if it is assumed that there was suppression of material facts by the appellant in the Bills of Entry. The extended period of limitation, therefore, could not have been invoked in the facts and circumstances of the case.,” the Tribunal said.

Relying on apex court's rulings on the requirement of intent for invoking the extended limitation period, the bench held that willful misstatement or suppression must involve a deliberate act aimed at evading duty. Mere misclassification or omission in description, without intent, would not satisfy that threshold.

The tribunal also followed its earlier decision in a similar classification dispute involving Benetton India, where it had held that an error in classification based on interpretative issues could not justify invocation of the extended period.

Holding that the extended limitation period was wrongly invoked, the Tribunal set aside the confiscation under Section 111(m) and the penalty under Section 114A, and allowed the appeal.

For Appellant: Advocates Kishore Kunal, Ankita Prakash, Anuj Kumar

For Respondent: Mr. Shiv Shankar (Authorised Representative)