The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld customs duty demand against telecom importers.

The bench of Dr. Rachna Gupta (Officiating President) and  Hemambika R. Priya (Technical Member) has observed that the adjudicating authority was justified in concluding that the importer had intentionally availed ineligible exemption benefits with an intent to evade customs duty.

The three appeals arose from a common Order-in-Original dated August 8, 2023, passed by the Principal Commissioner of Customs, ICD Tughlakabad, New Delhi. The order itself originated from three show cause notices issued following an investigation initiated on the basis of intelligence gathered by the Directorate of Revenue Intelligence (DRI), Kochi.

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According to the investigation, certain importers were bringing optical network terminals/units, home gateway units and MODAMs into India while classifying them under tariff headings applicable to subscriber and E&D equipment and other specified telecom equipment. The goods included ONTs/ONUs and OLTs, which were classified under different Customs Tariff Headings, including 85176950, 85176230 and 85176290.

The department alleged that such classification enabled the importer to avail nil or reduced rates of customs duty under Notification No. 24/2005-Cus dated March 1, 2005, and Notification No. 57/2017-Cus dated June 30, 2017, as amended.

The investigation involved recording statements of persons concerned and examination of documents and records relating to the imports.

Three separate duty demands were proposed through the show cause notices.

The first notice, dated May 9, 2022, alleged customs duty evasion of ₹43,04,294 in respect of imports made between April 2019 and August 2020.

The second notice, dated April 20, 2022, concerned clearance under Bill of Entry No. 8810257 dated September 14, 2020, and alleged duty evasion of ₹1,27,574.

The third notice, dated August 12, 2022, alleged evasion of ₹1,23,07,073 on imports made between February 26, 2020 and August 18, 2020.

Taken together, the three alleged duty liabilities amounted to approximately ₹1.67 crore.

The department also proposed recovery of applicable interest under the Customs Act and penalties under Sections 114A and 114AA. A penalty was separately proposed against the customs broker, M/s A.M. Express Worldwide Logistics, under Section 112 of the Customs Act, 1962. The proposals were subsequently confirmed by the adjudicating authority.

Before CESTAT, the appellant did not dispute that the issue concerning classification of the subscriber equipment and MODAMs had already been decided against it. Instead, the principal argument advanced was that the demands were barred by limitation.

The appellant contended that it had bona fide adopted the disputed classification while importing the goods. According to the appellant, the department had raised a classification query only in relation to a Bill of Entry dated September 20, 2019, after the three Bills of Entry forming the subject matter of the proceedings had already been objected to.

On this basis, the appellant argued that the department was not entitled to invoke the extended period of limitation. It therefore sought setting aside of the demand on the technical ground that the relevant show cause notices were time-barred.

The Departmental Representative opposed the argument, maintaining that the case involved a larger pattern in which importers allegedly misclassified goods and wrongly availed exemption benefits, resulting in customs duty evasion. The department also relied upon the detailed findings recorded by the adjudicating authority on the issue of limitation.

A significant factor considered by the Tribunal was the adjudicating authority’s detailed examination of the importer’s conduct.

The authority noted that the importer had imported the goods through different ports and adopted different classifications. According to the findings reproduced in the CESTAT order, the technical features of the products were found to conform to CTH 85176290, whereas ONTs were projected as “Subscriber End Equipment” and classified under CTH 85176950 to obtain nil-rate duty under the relevant exemption notification.

The adjudicating authority also pointed out that ONTs and OLTs performed similar functions, yet the importer classified them under different tariff items. In certain instances, the importer itself had classified ONTs, ONUs and OLTs under 85176290/85176990 and paid customs duty at rates of 10% and 20%.

This inconsistency was considered significant in assessing whether the disputed classification was merely a bona fide interpretational error or part of a deliberate attempt to obtain an exemption.

Another factor relied upon by the adjudicating authority was the department’s provisional reassessment of Bill of Entry No. 8927060 dated September 24, 2020.

The department changed the classification of the ONTs from the declared CTH 85176950 to CTH 85176290. According to the adjudicating authority, the importer should thereafter have demonstrated bona fides by voluntarily paying the differential duty.

However, the authority found that the importer did not do so and continued to classify the goods under the earlier tariff heading and avail the corresponding exemption benefit.

The adjudicating authority further relied upon the Equipment Type Approval certificate issued by the Wireless Planning and Coordination Wing (WPC), Department of Telecommunications, Ministry of Communications.

The certificate uploaded on e-Sanchit described the equipment as a GPON ONT and did not refer to it as “subscriber end equipment.” The authority also noted that the application for the approval appeared to have been made for a GPON ONT rather than for subscriber end equipment or customer premises equipment.

This evidence was considered relevant to determining whether the importer was aware of the actual nature and classification of the goods while claiming the exemption.

The adjudicating authority also held that the importer had failed to exercise the requisite diligence while making self-assessment of customs duty under Section 17 of the Customs Act, 1962.

According to the findings reproduced by the Tribunal, where there was an ambiguity concerning classification, the importer could have sought provisional assessment under Section 18(1). Instead, it continued to classify the goods under CTH 85176950 and avail the resulting exemption.

The authority concluded that, had the department not intervened, the importer would have continued with the disputed classification and exemption claim. It therefore treated the conduct as evidence of mala fide intent to evade customs duty.

CESTAT found that the appellant’s contention that the classification issue had never previously been raised was not sufficient to displace the findings recorded by the adjudicating authority.

The Tribunal specifically noted that the adjudicating authority had examined the role of both the importer and the customs broker in detail. It further observed that the documentary findings contradicted the appellant’s oral submission regarding the absence of an earlier classification dispute.

The Tribunal held that the findings were sufficient to establish that the exemption benefit had been intentionally availed with an intent to evade customs duty.

On the basis of these findings, CESTAT upheld the adjudicating authority’s conclusion and rejected the appellant’s limitation-based challenge.

The Tribunal concluded that the adjudicating authority had correctly arrived at the finding regarding intentional availment of exemption benefits with intent to evade customs duty. Consequently, all three appeals—Customs Appeal Nos. 50718, 50719 and 50720 of 2025—were dismissed.

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