Classification Dispute Cannot Justify Extended Limitation: CESTAT Quashes ₹3.47 Crore Duty Demand Against Myntra Jabong
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside a differential customs duty demand of ₹3.47 crore against Myntra Jabong India Pvt. Ltd., holding that the extended limitation period under Section 28(4) of the Customs Act could not be invoked in a classification dispute. Allowing the appeal, the Tribunal held that the alleged non-disclosure regarding zipper features of imported jackets did not amount to wilful suppression with intent to evade duty.
The appeal was filed by Myntra Jabong India Pvt. Ltd. challenging the order of the Principal Commissioner of Customs, ICD Tughlakabad, which had confirmed differential duty of ₹3,47,37,530 with interest, ordered confiscation of goods under Section 111(m), and imposed penalty under Section 114A. The demand related to imports made between August 2017 and October 2019. The appellant, an online fashion and lifestyle retailer, imports apparel and related products for sale through its e-commerce platform.
The dispute concerned classification of various types of knitted men’s jackets imported by the appellant. The goods were classified by the appellant under tariff entries attracting basic customs duty at 20 percent. Customs authorities proposed reclassification on the ground that the jackets had full front openings with slide-fastening zippers, a feature that was not specifically mentioned in the Bills of Entry and which according to the department was relevant for determining the correct classification.
During investigation, the goods were examined and the department formed a view that the classification adopted by the appellant was incorrect. The appellant deposited the differential duty and interest prior to issuance of the show cause notices and informed the department of such payment. Despite this, three show cause notices were issued invoking the extended limitation period on the allegation that the appellant had wilfully suppressed material facts by not fully describing the imported goods.
The Tribunal held that the dispute essentially related to interpretation of tariff entries and that classification differences could not by themselves establish suppression of facts. The Bench observed: “The classification of goods is a matter of belief and it cannot be said that facts have been suppressed merely because the department believes that the goods should have been classified under a different Customs Tariff Item.” The Tribunal also noted that the description of goods in the Bills of Entry was based on the invoices and packing lists provided by the overseas suppliers and that the goods had been physically examined by Customs authorities. The appellant had deposited the entire differential duty along with interest before issuance of the show cause notices and had a bona fide belief regarding the classification adopted.
Relying on judicial precedents on the requirement of intent for invoking the extended limitation period, the Tribunal held that wilful misstatement or suppression must involve a deliberate act intended to evade duty. Mere omission or misclassification would not satisfy the statutory requirement. The Tribunal observed that the appellant had deposited the entire duty with interest prior to issuance of the show cause notice and that it could not be alleged that there was any intention to evade payment of customs duty. It held that even assuming suppression of facts, the extended period of limitation could not be invoked in the absence of intent to evade duty.
Since the extended limitation period was held to be wrongly invoked, the Tribunal also set aside the confiscation of goods under Section 111(m) and the penalty imposed under Section 114A. Accordingly, the Tribunal set aside the order of the Principal Commissioner and allowed the appeal, holding that the demand raised by invoking the extended limitation period was not sustainable.
Cause Title: Myntra Jabong India Pvt Ltd vs. Principal Commissioner of Customs ACC (imports)
Case Number: Customs Appeal No. 55846 of 2023
Coram: Hon’ble Mr. Justice Dilip Gupta, President Hon’ble Ms. Hemambika R. Priya, Member (Technical)
