The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that silver-content electrical contacts specifically designed for use in electrical apparatus are classifiable under Customs Tariff Heading (CTH) 8538 and not under Chapter 71 merely because they contain a high percentage of silver.
The bench of Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that an importer’s request for adjudication without a show cause notice or personal hearing does not, by itself, amount to surrender of the statutory right to challenge the classification in appeal.
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The dispute arose from five customs appeals concerning imports of “Rivet Mobile Contact” by the appellant. In the first consignment, covered by Bill of Entry No. 4887764 dated April 12, 2016, the goods were declared under CTI 85389000. During examination, Customs suspected that the rivets were made of silver. A sample was consequently sent to an Appraiser/Jewellery Expert for examination.
The expert opined that the goods contained 99.116% silver and recommended classification under Chapter Heading 7114. Based on this opinion, the adjudicating authority classified the goods under CTI 71141120, attracting 15% Basic Customs Duty. The goods were also confiscated under Section 111(m) of the Customs Act, 1962, with an option for redemption on payment of a ₹50,000 redemption fine, besides a ₹40,000 penalty under Section 112(a).
The importer had requested urgent adjudication, stating that production had been held up, and had sought disposal without issuance of a show cause notice or personal hearing. The Commissioner (Appeals) subsequently rejected the appeal, holding that after having waived the show cause notice and personal hearing, the importer could not challenge the classification subsequently.
The remaining appeals concerned subsequent imports of identical goods. To avoid clearance delays, the importer self-assessed the goods under CTI 71159010, treating them as other articles of precious metal or metal clad with precious metal, attracting 10% Basic Customs Duty.
The importer thereafter filed appeals seeking classification under CTH 8538. The Commissioner (Appeals), however, dismissed those appeals on the ground that an appeal under Section 128 of the Customs Act lies against a decision or order passed by a customs officer, whereas the importer had challenged its own self-assessment without any departmental reassessment. The appeals were therefore held to be non-maintainable.
The CESTAT identified four principal questions for determination: Whether appeals against self-assessed Bills of Entry are maintainable where there has been no departmental reassessment; Whether the importer’s request for adjudication without a show cause notice and personal hearing resulted in forfeiture of its statutory right of appeal; The appropriate tariff classification of the Rivet Mobile Contact; and Whether the confiscation, redemption fine and penalty were legally sustainable.
The Tribunal rejected the Commissioner (Appeals)’ view that an appeal could not be filed against a self-assessed Bill of Entry in the absence of reassessment.
The CESTAT relied upon the Supreme Court’s three-Judge Bench decision in ITC Ltd. v. Commissioner of Central Excise, Kolkata-IV, holding that a self-assessed Bill of Entry constitutes an order of assessment under Section 2(2) of the Customs Act and is appealable under Section 128.
The Tribunal noted that Section 128 does not restrict appeals only to reassessment orders. A decision or order under the Customs Act, including self-assessment, can be challenged by an aggrieved person. The absence of a dispute or a speaking order does not prevent such an appeal.
Accordingly, the Tribunal held that the appeals in C/40134 to 40137/2017 were maintainable and that the Commissioner (Appeals) had erred in refusing to examine the classification issue on merits.
The Tribunal also rejected the finding that the importer’s request to proceed without a show cause notice and personal hearing prevented it from subsequently challenging the classification.
According to the CESTAT, the right to procedural safeguards at the adjudication stage and the statutory right of appeal operate at different stages and serve different purposes.
The Tribunal held that: “A waiver of that procedural safeguard at the adjudication stage cannot, without more, be read as an implied surrender of the right of appeal.”
The Bench distinguished the decision in Vikas Spinners v. Commissioner of Customs, Lucknow, relied upon by the Revenue. That case involved acceptance of an enhanced valuation by an importer, whereas the present matter concerned waiver of procedural safeguards for expedited adjudication.
The Tribunal further observed that the Board’s Circular No. 290/6/97-CX dated January 20, 1997, directs that in matters involving serious offences, high stakes or legal questions, a show cause notice should not be permitted to be waived.
The Bench considered the present dispute to fall within that category because it involved technical composition, competing Chapter Notes, HSN Explanatory Notes and a duty differential resulting from proposed reclassification from Chapter 85 to Chapter 71.
The Tribunal also noted that the request for waiver was couched in standard terms and did not contain any informed indication that the importer intended to surrender its future right to dispute classification.
It referred to the Delhi High Court decision in Sai Kiran Goud Tirupathi v. Commissioner of Customs, which had deprecated the waiver of a show cause notice and personal hearing through a standard format. The CESTAT therefore concluded that the appellant could not be treated as having forfeited its statutory right of appeal.
Turning to the substantive classification issue, the Tribunal emphasised that where the Revenue seeks to classify imported goods under a heading different from the classification claimed by the importer, the burden lies on the Revenue to establish the proposed classification.
The Bench referred to Supreme Court decisions including Hindustan Ferodo Ltd., HPL Chemicals Ltd., Commissioner of Customs and Central Excise, Amritsar v. D.L. Steels, and the more recent Hamdard (Wakf) Laboratories v. Commissioner, Commercial Tax, U.P., decided on February 25, 2026.
The Tribunal observed that mere nomenclature or regulatory material cannot substitute for cogent evidence establishing the tariff classification asserted by the Revenue.
The CESTAT found that the Revenue’s case for classification under CTI 71141120 rested primarily on the Jewellery Expert’s finding that the goods contained 99.116% silver.
However, the Tribunal held that the expert opinion established only the composition of the goods and did not determine their legal tariff classification.
The Bench observed that classification remained a matter for the customs authorities and appellate forums after applying the relevant Section Notes, Chapter Notes and HSN Explanatory Notes. A technical expert conducting compositional analysis could not determine the legal classification of the product.
The Tribunal particularly noted that neither the original adjudication order nor the appellate orders had properly considered Chapter Note 3(k) or the exclusion contained in the HSN Explanatory Note to Heading 71.15 concerning electrical goods and identifiable parts falling under Section XVI.
The appellant had explained that the imported rivets were custom manufactured according to a specific drawing and were not standard articles capable of general use.
The foreign supplier manufactured the rivets according to the customer-specific specification. After importation, the rivets were assembled with phosphor bronze and brass components to make a Moving Contact, which was supplied for use in connectors, switches and relays.
The Tribunal found that this evidence of dedicated design and electrical end use had not been controverted by the Revenue.
It held that the silver served as the electrically conductive material of the contact and did not change the essential character of the product as an electrical contact. Therefore, the presence of silver could not, by itself, result in classification under Chapter 71.
The Tribunal relied upon its earlier decisions in Collector of Central Excise, Surat v. Modison Metals Pvt. Ltd. and Modison Metals Ltd. v. Commissioner of Central Excise, Surat.
Those decisions had held that silver alloy and other metal contacts used for switching, protecting circuits or making electrical connections could be classified under Heading 85.38 as parts of electrical apparatus, notwithstanding the precious-metal content of the contacts.
Following those rulings, the Chennai Bench held that the Rivet Mobile Contact was excluded from Chapter 71 by Chapter Note 3(k) and the relevant HSN Explanatory Note and was classifiable under CTH 8538.
Having settled the classification in favour of CTH 8538, the Tribunal also set aside the confiscation, redemption fine and penalty.
The confiscation under Section 111(m), the ₹50,000 redemption fine under Section 125(1) and the ₹40,000 penalty under Section 112(a) were all founded on the classification under CTI 71141120, which the Tribunal had rejected.
The Tribunal further observed that, independently, there was no allegation that the importer had misdeclared the description, quantity or value of the goods. The dispute was essentially a classification dispute between competing tariff entries based on material available to the adjudicating authority at the time of import.
The Bench held that confiscation under Section 111(m) does not automatically follow merely because Customs and an importer take different views on classification where the goods have been honestly declared.
The Chennai CESTAT ultimately set aside all the impugned appellate orders and allowed the appeals, with consequential relief in accordance with law.
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