CESTAT New Delhi Sets Aside ₹25 Lakh Customs Demand Against Vanesa Cosmetics In Classification Dispute

The New Delhi Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 18 May set aside customs duty demands exceeding Rs. 25 lakh against Vanesa Cosmetics Pvt. Ltd. holding that customs authorities cannot invoke the extended limitation period under the Customs Act merely because they disagree with the tariff classification adopted by the importer.

President Justice Dilip Gupta and Technical Member P. Anjani Kumar allowed the company's appeal against an order passed by the Principal Commissioner of Customs, ICD Tughlakabad, New Delhi, and quashed the duty demand, penalties and confiscation proceedings. The Bench held:

“The appellant had indicated a particular Customs Tariff Item in the Bills of Entry and merely because the department believes that the goods should have been classified under a different Customs Tariff Item will not mean that the extended period of limitation contemplated under section 28(4) of the Customs Act can be invoked.”

Vanesa Cosmetics, which markets perfumes and deodorants under brands such as Denver, Envy, Force, Hamilton, Honour and Noir, imported items including empty perfume bottles, spray actuators, plastic caps, metal rings and cosmetic packaging materials.

The customs Department alleged that the company wrongly classified the imported products under multiple tariff headings instead of uniformly classifying them under CTI 96161020 applicable to scent sprays and similar toilet spray apparatus.

The Department invoked the extended limitation period under Section 28(4) of the Customs Act on allegations of wilful misstatement and suppression of facts. It confirmed differential customs duty demands along with interest and penalty under Section 114A. The adjudicating authority also ordered confiscation of the imported goods under Section 111(m).

Allowing the appeal, the Tribunal observed that the dispute essentially related to tariff classification and noted that the importer had disclosed all relevant particulars in the Bills of Entry. It also noted that customs authorities had physically examined the imported goods before clearance.

The Bench found no evidence establishing deliberate suppression of facts or intent to evade payment of duty. It also ruled that the Commissioner could not rely on allegations that the importer changed classifications after GST implementation to avail lower duty because the show cause notice did not contain those allegations. It observed:

“..the Commissioner has recorded a finding that the appellant had changed the classification as per the convenience to pay lesser duty as and when the duty changed. This was not even the allegation made in the show cause notice. It was, therefore, not open to the Commissioner to examine this fact when the show cause notice had not called upon the appellant to show cause on this aspect.”

Additionally, the Tribunal held that authorities could not rely on statements recorded under Section 108 of the Customs Act because they had not complied with the mandatory evidentiary procedure prescribed under Section 138B.

On confiscation, the Bench clarified that even if goods are wrongly classified or duty is incorrectly self-assessed, that alone does not amount to misdeclaration attracting confiscation under Section 111(m) of the Customs Act.

Accordingly, the CESTAT allowed the appeal.

For Appellant: Shri Karan Chandna, Advocate

For Respondent: Shri M.K. Shukla, Authorised Representative