The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, has held that a keyboard imported for personal use cannot be classified under Customs Tariff Heading (CTH) 9804, where the tariff specifically classifies keyboards under CTH 8471 with a ‘Free’ rate of customs duty.
The P. A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) has ruled that the levy of customs duty and IGST under the provisions applicable to dutiable articles imported for personal use was therefore not sustainable.
The dispute arose from the import of keyboards through courier for personal use. The customs authorities classified the goods under CTH 9804 9000, treating them as goods imported for personal use and consequently assessed 10% Basic Customs Duty (BCD) along with 28% IGST under Sl. No. 227 of Schedule IV to Notification No. 1/2017-Integrated Tax (Rate), dated June 28, 2017.
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The importer challenged the assessment, contending that keyboards are specifically covered under CTH 8471 6040, where the applicable customs duty rate is ‘Free’. According to the appellant, once the tariff itself specifically provides a nil or free rate for keyboards under CTH 8471, such goods cannot subsequently be brought within CTH 9804 merely because they were imported for personal use.
The Commissioner (Appeals), however, upheld the assessment under CTH 9804. The importer therefore approached the CESTAT challenging the classification and consequential duty liability.
The appellant relied heavily on the Supreme Court’s decision in Associated Cement Companies Ltd. v. Commissioner of Customs, 2001 (128) E.L.T. 21 (S.C.).
The central argument was that Chapter 98 applies to specified categories of goods, including dutiable articles imported for personal use. Therefore, goods that are expressly classified elsewhere in the Customs Tariff and carry a ‘Free’ rate cannot be treated as ‘dutiable goods’ merely because they are imported for personal use.
The appellant also argued that the same principle should apply to IGST because the relevant entry in Schedule IV of Notification No. 1/2017-Integrated Tax (Rate) covers “all dutiable articles intended for personal use” under heading 9804.
The department defended the assessment on the ground that the keyboard had been imported through courier for personal use and that the assessment arose after the introduction of the GST regime.
The Department argued that the Supreme Court decision relied upon by the appellant was distinguishable on facts and that, in view of Section 3(7) of the Customs Tariff Act, 1975 read with Section 5(1) of the IGST Act, 2017, imported goods were liable to integrated tax. On this basis, the Revenue sought to sustain the assessment made by the customs authorities.
The Tribunal examined the relevant provisions of Chapter 98 of the Customs Tariff.
Chapter 98 covers specific categories including project imports, laboratory chemicals, passengers’ baggage, personal importations by air or post and ship stores. The Tribunal particularly considered Note 6 to Chapter 98, which provides that Heading 9804 does not apply to articles imported under an import licence or Customs Clearance Permit.
More importantly, the Tribunal examined the tariff structure applicable to keyboards.
Under CTH 8471 60, input or output units for automatic data processing machines are covered. The specific tariff entry 8471 60 40 covers “Keyboard” and carries a customs duty rate of ‘Free’.
In contrast, CTH 9804 covers “All Dutiable Goods Imported for Personal Use”, with separate entries for drugs and medicines and other goods. The Tribunal noted that the wording of the heading itself restricts its operation to dutiable goods imported for personal use.
The Tribunal found that the keyboard had a specific classification under CTH 8471 and that the tariff rate applicable to that specific entry was ‘Free’.
The fact that the keyboard was imported for personal use did not, by itself, justify shifting its classification to CTH 9804.
The Tribunal observed that only dutiable goods imported for personal use can be classified under CTH 9804. Since keyboards under CTH 8471 6040 were freely importable and attracted no customs duty under the tariff, the conditions for classification under CTH 9804 were not satisfied.
The Tribunal also examined the corresponding IGST provisions.
Notification No. 1/2017-Integrated Tax (Rate), dated June 28, 2017, prescribes different IGST rates under six schedules. Schedule IV prescribes a 28% rate for specified goods and, at Sl. No. 227, covers “All dutiable articles intended for personal use” falling under heading 9804.
Accordingly, the Tribunal’s finding that the keyboard could not be treated as a dutiable article under CTH 9804 also removed the basis for applying the 28% IGST entry specifically covering dutiable articles under heading 9804.
The Supreme Court had distinguished between goods generally and goods that are actually chargeable to customs duty. The Court had observed that although all movable property may constitute ‘goods’ for purposes of the Customs Act, only goods that are chargeable to duty and on which duty has not been paid qualify as ‘dutiable goods’.
The Supreme Court had further held that where the Customs Tariff itself provides a ‘Free’ rate for imported goods, such goods are not chargeable to customs duty and consequently cannot be treated as dutiable articles for purposes of a Chapter 98 provision that specifically applies to dutiable goods.
The Bangalore Bench held that the keyboard was correctly classifiable under CTH 8471, since that heading specifically covers keyboards and provides a ‘Free’ rate of duty.
The Tribunal noted that although the keyboard was imported for personal use, its personal-use character could not override the specific tariff classification and convert a non-dutiable article into a dutiable article under CTH 9804.
The Bench therefore concluded that the question of charging customs duty on the keyboard merely because it was imported for personal use did not arise.
The CESTAT ultimately held that only dutiable goods are liable to discharge duty when imported for personal use and that keyboards covered by the specific tariff entry under CTH 8471, carrying a ‘Free’ rate, do not attract duty merely because of their personal-use nature.
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