Customs Can’t Enhance Value Solely on Market Survey and Reclassify ‘Walking Stick with Torch’ as Lighting Equipment: CESTAT

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside the enhancement of assessable value and consequential penalties imposed on importer, while also holding that “walking stick with torch” is correctly classifiable under Customs Tariff Item (CTI) 6602 0000 and not under CTI 9405 4900 as determined by the department. The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that BIS standard for walking sticks covered under IS:5150-1969 (as amended) cover those walking sticks manufactured from Malabar cane, wood or aluminum tubes subjected to certain processes specified therein and not to the type of walking sticks referred in the present case. Since, the impugned order or the order of original authority, have not dealt with these aspects of BIS requirements under this category, we do not find it necessary to address the same here. Thus, the requirement of a BIS certificate for walking sticks classified under CTI 9405 4900 as electric luminaires does not stand the legal scrutiny. The appellant/assessee, M/s Jilani Traders had filed a Bill of Entry dated 16.08.2023 for clearance of assorted consumer goods imported from China, declaring a total assessable value of ₹14.08 lakh. Acting on specific intelligence alleging mis-declaration and undervaluation, the Special Intelligence and Investigation Branch (SIIB) conducted a 100% examination of the consignment. During examination, certain discrepancies were noted in the description of a few items, including “Kitchen knife set (5 pieces)” found to include a chopping board, “Laser pointer pen” found in two types, “Glue 300G” found to be waterproofing glue, and “Party Halloween Gift Item” found to consist of 14 different varieties. Further, the department alleged undervaluation and conducted a market survey on 20.10.2023 in the presence of the proprietor. Based on this survey, the assessable value was re-determined at ₹39.30 lakh under Rule 7 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR), resulting in differential duty demand of ₹9.20 lakh. Additionally, 1600 pieces of “walking stick with torch” were reclassified under CTI 9405 4900 (lighting fittings), treated as falling under BIS norms, and confiscated with an option for re-export. The Tribunal framed the key issue as whether the enhancement of value based solely on market survey was sustainable under Section 14 of the Customs Act, 1962 and the CVR, 2007. While the adjudicating authority claimed to have applied Rule 7 (deductive value method), the Tribunal found that no data of contemporaneous imports of identical or similar goods was produced. The re-determined value was based merely on three invoices obtained during market enquiry and an average/median price was adopted. There was no demonstration that the goods compared were identical or similar in terms of origin, manufacturer, brand, or quality. The requirements of Rule 7, including sale at the greatest aggregate quantity and at the same commercial level, were not satisfied. The sequential application of Rules 4 to 9 of the CVR was not properly followed. The Tribunal observed that when National Import Data Base (NIDB) data did not reveal comparable imports, reliance solely on domestic market prices without satisfying the statutory conditions was legally unsustainable. Accordingly, the enhancement of assessable value and consequential differential duty demand were set aside. On the allegation of mis-declaration, the Tribunal examined the comparative table of “declared” and “found” descriptions. The CESTAT held that a kitchen knife set including a chopping board did not alter the essential character of the set. Laser pointer pens of two types did not change the product category. Waterproof glue remained glue. Halloween items, by nature, comprise multiple variants and did not amount to mis-declaration. The Tribunal concluded that the variations noted were minor and did not amount to deliberate mis-declaration under Sections 111(d) or 111(m) of the Customs Act. A major issue was the classification of “walking stick with torch.” The department classified the item under CTI 9405 4900 (other electric lamps and lighting fittings), treating it as subject to BIS norms. The importer had classified it under CTI 6602 0000, covering walking sticks. The Tribunal undertook a detailed analysis of the General Rules for Interpretation (GIR), relevant Chapter Notes and Section Notes, and the Harmonized System (HS) framework. It held that classification must be determined based on the essential character of the product. The addition of a torch as an ancillary feature did not alter the essential character of the goods as a walking stick. The Tribunal accepted the appellant’s contention that enhancements meant to increase utility or aesthetic appeal do not shift classification from Chapter 66 (walking sticks) to Chapter 94 (lighting fittings). Consequently, it ruled that the correct classification is under CTI 6602 0000 and not 9405 4900. Since the valuation enhancement was unsustainable, the allegation of mis-declaration failed, the reclassification of walking sticks was incorrect, the Tribunal held that confiscation under Sections 111(d) and 111(m), imposition of redemption fine, and penalties under Sections 114A and 114AA could not survive. The order of the Commissioner (Appeals) was set aside, and the appeal was allowed in favour of M/s Jilani Traders. Case Details Case Title: Jilani Traders Versus Commissioner of Customs (Import-II) Citation: JURISHOUR-176-CESTAT-2026(Mum) Case No.: Customs Appeal No. 86195 of 2024 Date: 27.02.2026 Counsel For Appellant: Anil Balani, Advocate Counsel For Respondent: Dinesh Nanal, Authorized Representative Click Here To Read Order Read More: 1.329 Kg Gold Seized at IGI Airport; 2 Myanmar Nationals Held for Concealment

Customs Can’t Enhance Value Solely on Market Survey and Reclassify ‘Walking Stick with Torch’ as Lighting Equipment: CESTAT

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