The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that customs authorities cannot reclassify imported goods and deny concessional duty benefits merely on assumptions without producing scientific or technical evidence.
The bench of R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) set aside a differential customs duty demand of ₹39.12 lakh, along with interest and penalties, after finding that the Revenue failed to establish that the imported textile fabrics were wrongly classified.
The dispute arose from imports of textile fabrics declared as “Mixed Lot of Polyester Warp Knitted Fabrics” originating from China. The importer had filed five Bills of Entry covering goods with a cumulative assessable value of approximately ₹3.38 crore and classified them under Customs Tariff Item (CTI) 6005 9000, claiming the benefit of concessional Basic Customs Duty (BCD) at 10% under Notification No. 82/2017-Customs.
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Customs authorities later alleged that the imported fabrics were actually warp knitted fabrics made of synthetic fibres and should have been classified under tariff entries 6005 3500 to 6006 3900, attracting a higher duty rate of 20%. Based on this view, the department issued a show cause notice proposing recovery of differential customs duty amounting to ₹39.12 lakh along with interest and penalties.
The adjudicating authority confirmed the demand and imposed penalties under Sections 114A and 114AA of the Customs Act, 1962. The Commissioner (Appeals) subsequently upheld the order, prompting the importer to approach the Tribunal.
The importer contended that classification under Chapter 60 of the Customs Tariff depends upon factors such as fibre composition, predominance, textile construction and weight, which cannot be determined through visual examination or invoice descriptions alone. It was argued that the department had failed to obtain any laboratory report, textile committee opinion, CRCL analysis or expert evidence to establish that the fabrics consisted exclusively of synthetic fibres.
The importer further maintained that the goods consisted of mixed fibre fabrics and therefore could not automatically be treated as products made entirely of synthetic fibres. It also argued that customs authorities at other ports had accepted similar goods under tariff heading 6005 9000.
The Tribunal noted that customs authorities had accepted the classification and concessional duty benefit at the time of import and clearance of the goods. No objection had been raised during assessment.
Relying on Supreme Court precedents, CESTAT reiterated that the burden of proving incorrect classification rests squarely on the Revenue. The Bench observed that a classification dispute cannot be decided merely on suspicion or assumptions and must be supported by tangible technical evidence.
A crucial factor in the Tribunal’s decision was the complete absence of any scientific testing. The Bench found that no samples had been drawn, no fibre composition analysis had been conducted and no laboratory reports were produced to establish the alleged misclassification.
The Tribunal observed that classification of textile fabrics requires examination of fibre content, textile construction and other technical characteristics, which cannot be conclusively determined through invoices or visual inspection alone.
CESTAT accepted the importer’s argument that the description “Polyester Warp Knitted Fabrics” does not necessarily mean the goods are made entirely of polyester. According to the Bench, polyester may constitute the warp portion of the fabric while the weft could contain other materials. Therefore, the description by itself could not establish that the fabric was composed exclusively of synthetic fibres.
The Tribunal further held that if customs authorities intended to reject the importer’s classification, it was incumbent upon them to produce corroborative evidence such as test reports, technical literature and expert opinions. Since no such evidence was produced, the proposed reclassification could not survive judicial scrutiny.
Another important aspect highlighted by the Tribunal was that the original assessments had attained finality after examination and clearance by the proper officer. The Bench held that classification could not subsequently be altered without bringing fresh evidence indicating suppression or misdeclaration by the importer.
The Tribunal found that the department had failed to produce any new material capable of justifying a reassessment of the classification originally accepted by customs authorities.
Concluding that the Revenue had failed to discharge its burden of proof, the Tribunal upheld classification of the imported fabrics under Customs Tariff Item 6005 9000 and confirmed the importer’s eligibility for concessional Basic Customs Duty at 10% under Notification No. 82/2017-Customs.
CESTAT quashed the differential customs duty demand of ₹39.12 lakh, set aside the corresponding interest liability and also struck down penalties imposed under Sections 114A and 114AA of the Customs Act.
The appeal was consequently allowed with all consequential reliefs available under law.
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