Sangeetha Prathap

The Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has delivered a significant ruling in favour of Soni E Vehicle Pvt. Ltd., holding that extended limitation under the Customs Act cannot be invoked merely because the Customs Department disagrees with an importer on the classification of goods. The Tribunal set aside the entire customs duty demand of nearly ₹5.54 crore, along with penalties imposed on the company, its Managing Director, customs broker Professional Exim, and its G-Card holder. The dispute stemmed from the import of e-rickshaw parts, which the Department had attempted to treat as complete e-rickshaws in completely knocked down or semi-knocked down condition.

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The case originated when the Principal Commissioner of Customs (Preventive), New Delhi, passed an order in August 2020 alleging that Soni E Vehicle had misclassified nineteen consignments by declaring them as parts of e-rickshaws instead of unassembled complete vehicles. The Commissioner held that the quantities and ratios of imported components matched the number required to assemble full e-rickshaws and, therefore, the goods had the “essential character” of complete vehicles under Rule 2(a) of the General Interpretative Rules. On this basis, differential duty of ₹1.96 crore was imposed on six live Bills of Entry, and an additional ₹3.58 crore was demanded for thirteen earlier consignments, along with confiscation of goods and penalties under Sections 112 and 114A of the Customs Act.

However, the Tribunal noted that the Department’s conclusion was contrary to the official classification guidelines issued through an Office Order dated March 12, 2014, by a committee of senior Customs officers. According to this directive, imports can be considered as complete e-rickshaws in CKD or SKD condition only if the motor is imported along with fewer than two other essential components. Since Soni E Vehicle had not imported any motor at all, the Tribunal held that the goods could not be treated as complete vehicles and must be correctly classified as parts under Tariff Heading 8708. The motor, the Bench emphasized, is the most critical and defining element of an electric rickshaw, and without it, the goods cannot be said to possess the essential character of a finished vehicle.

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CESTAT also found serious flaws in the evidentiary foundation of the Commissioner’s order. The Department had relied on the Managing Director’s recorded statement, but the Tribunal ruled that such a statement could not be treated as evidence in the absence of compliance with Section 138B of the Customs Act, which requires procedural safeguards, including cross-examination. Similarly, the Chartered Engineer’s report, used by the Department to argue that the differential axle included the transmission, was rejected because the engineer was never examined or presented for cross-examination despite a specific request from the importer. As a result, the Tribunal found that the Department had not produced a single piece of admissible evidence proving that the goods were imported in CKD or SKD form.

A major aspect of the ruling concerned the limitation period for issuing duty demands. The Tribunal held that the extended limitation period cannot be applied where the dispute is purely about classification and there is no allegation or proof of deliberate suppression, misdeclaration, or intent to evade duty. Classification disputes, by their nature, involve interpretational differences and cannot be elevated to the level of fraud or wilful misstatement. Consequently, all thirteen past consignments were held to be time-barred, which independently nullified a substantial portion of the demand.

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Ultimately, the Tribunal set aside the entire duty demand, quashed the confiscation orders, and annulled all penalties imposed on Soni E Vehicle Pvt. Ltd., its Managing Director, the customs broker, and the G-Card holder. It held that none of the imports fell within the definition of complete e-rickshaws in CKD or SKD condition and reaffirmed that mere disagreement over classification cannot justify invoking extended limitation or penal provisions.

Appearance

Counsel For  Appellant: Sanjeev Kumar, Consultant and Ms. Priyanka Goel

Counsel For Respondent: Nikhil Mohan Goyal and Shri Rajesh Singh

Cause Title: M/s. Soni E Vehicle Pvt. Ltd. Versus Principal Commissioner of Customs (Preventive)

Case No: Customs Appeal No. 51367 Of 2025

Coram: Justice Dilip Gupta (President), Hemambika R. Priya (Technical Member)