CESTAT Chennai Sets Aside ₹3.92 Cr. Demand Based On Compilations, Holds Re-Export Must Be Verified

On 1 July, the Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside a customs duty demand of Rs. 3.92 crore raised against Econship Tech Pvt. Ltd. and remanded the matter for fresh adjudication, holding that customs authorities cannot deny exemption under Notification No. 104/94-Cus. without independently verifying container-wise export compliance.

Judicial Member Ajayan T.V. and Technical Member Vasa Seshagiri Rao observed that the dispute required reconciliation and verification of export records rather than a mere assumption of non-re-export of imported containers. The Bench held:

“The Department cannot deny exemption under Notification No.104/94-Cus. merely because a container appears in a departmental compilation as non exported. It must establish, through proper verification, that the particular container was imported under the notification, was not re-exported within the prescribed or extended period and thereby violated the exemption conditions.”

Econship Tech Pvt. Ltd., a steamer agent and main line operator, imported durable containers availing exemption under Notification No. 104/94-Cus., which permits temporary import of containers subject to re-export within the prescribed period.

The Department issued a show cause notice after alleging that the company failed to furnish proof of re-export for 6,163 containers, and proposed recovery of duty along with confiscation and penalties. During adjudication, the authorities progressively reduced the number of disputed containers due to duplicate entries and verification discrepancies. They ultimately confirmed a duty demand of Rs. 3.92 crore, along with a redemption fine of Rs. 1.37 crore and penalty of Rs. 40 lakh for 3,886 containers.

The Tribunal noted that the Department repeatedly revised the disputed figures during adjudication, which reflected deficiencies in the factual basis of the demand. It further held that neither the adjudication order nor the appellate order carried out a complete container-wise analysis covering import details, expiry of the permissible period, alleged violation, and duty liability.

Further, the Bench held that customs authorities must independently verify whether each container was imported under the exemption notification and whether the importer failed to re-export it within the prescribed or extended period, rather than relying on departmental compilations. It also held that authorities cannot reject evidence solely because it was not submitted in a particular format, and they must give the importer a fair opportunity to produce additional documents. It observed:

“The impugned proceedings suffer from incomplete verification and inadequate examination of the evidence produced by the appellant. Since the resolution of the dispute essentially depends upon reconciliation and verification of the records placed before the authorities, the orders of the Lower Adjudicating Authority are not sustainable and so ordered to be set aside.”

The Members directed the authorities to examine vessel-wise export records, shipping bills, EGM particulars, LEO details, ICEGATE data, and all supporting documents submitted by the appellant, and kept all issues, including limitation, confiscation, redemption fine, and penalty, open for reconsideration.

Accordingly, the CESTAT set aside the impugned order and remanded the matter for fresh adjudication with

For Appellant: Stebin Mathew and Rohit Singh, Advocates

For Respondent: O.M. Reena, Authorised Representative