Shree Grotex Trade Links Pvt Ltd vs Cc Sea Ch - Iii

IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI

Customs Appeal No. 40098 and 42096 of 2017

(Arising out of Order in Original No. 51626/2016 dated 24.11.2016 passed
by the Principal Commissioner of Customs – III, Chennai)

M/s. Shri Grotex Trade Links Pvt. Ltd. Appellant
13/77-78, Chandra Market, Pashupatheshwar
Varanasi – 221 001, Uttar Pradesh.

And

Shri Lalit Kumar Jagadish Grover Appellant
Director, M/s. Shri Grotex Trade Links Pvt. Ltd.
13/77-78, Chandra Market, Pashupatheshwar
Varanasi – 221 001, Uttar Pradesh.


Vs.

Commissioner of Customs Respondent
Chennai – III Commissionerate
Customs House, 60, Rajaji Salai,
Chennai – 600 001.

APPEARANCE:

Shri V.M. Doiphode, Advocate for the Appellants
Shri Sanjay Kakkar, Authorised Representative for the Respondent

CORAM

Hon’ble Shri P. Dinesha, Member (Judicial)
Hon’ble Shri M. Ajit Kumar, Member (Technical)

FINAL ORDER NOS. 40983 & 40984/2026

Date of Hearing: 04.03.2026
Date of Decision: 03.09.2026

Per M. Ajit Kumar,

Both these appeals arise out of Order in Original No. 51626/2016
dated 24.11.2016 passed by the Principal Commissioner of Customs –
III, Chennai.
Factual Matrix
2. Brief facts are that the appellant imports silk yarn and fabrics
and exports sarees and luxury fabrics. Acting on specific information
that the appellant had mis-declared woven cut-pile fabrics as mulberry

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silk fabrics and wrongly classified them under CTH 5007/5408 instead
of CTH 5801, the DRI initiated investigation. Seven consignments
declared as “mulberry silk fabrics – Art. No. 65111”, imported through
seven Bills of Entry dated 30.08.2011, were examined and
representative samples were tested by the Textile Committee,
Chennai. The test reports revealed that the fabrics predominantly
comprised viscose (rayon) exceeding 75%, with polyamide (11–12%)
and mulberry silk (8–10%). Analysis of the appellant’s imports from
May 2010 to August 2011 revealed 73 consignments of fabrics bearing
Art. No. 65111, imported through Chennai Seaport (64) and Mumbai
Air Cargo (9), under various tariff items, including CTH 5408, 5407,
5007 etc. Of the 66 consignments imported through Chennai, 27 were
provisionally assessed. The goods were imported from M/s. Huzhou
Jishuo Silk Trading Co. Ltd. and M/s. Zhejiang Cathaya International,
China. The DRI accordingly issued Show Cause Notice dated
06.05.2015, proposing rejection of the declared classification and
reclassification of the goods under CTH 5801 3500, along with
differential duty of Rs.1,50,79,977/- on the Chennai consignments and
Rs.8,61,295/- on the Mumbai consignments, with applicable interest
and penalties. After due process, the learned Principal Commissioner
rejected the description as declared in the bills of entry, both at
Chennai and Mumbai and held them to be "Rayon mixed with
polyamide and silk warp cut pile fabric”, classifiable under CTI 5801
3500 up to 31.12.2011 and under CTI 5801 3720 from 01.01.2012. He
further confirmed the differential duty with interest and enforced the
available Bank Guarantees, confiscated the impugned goods but
refrained from imposing any fine on the goods that were not available.
Penalties were also imposed on the noticee’s.

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3. The Ld. Advocate Shri V.M. Doiphode appeared for the appellant
and Ld. Authorized Representative Shri Sanjay Kakkar appeared for
the respondent.
Submissions made by the Appellant
3.1 Shri V.M. Doiphode the Ld. Counsel for the appellant submitted
as follows:
A. Limitation and prior departmental knowledge:
The Appellants had imported identical goods from China since 2008.
Customs had obtained Textile Committee reports in March, July and
August 2008, which identified the goods as viscose (rayon)-silk woven
velvet, yet accepted the declared classification under CTH 5408. This
practice continued until 2011, including 32 finally assessed Bills of
Entry at Chennai and 10 at ACC Sahar. Since the SCN was issued only
on 06.05.2015, demands relating to these finally assessed
consignments are time-barred, except for the seven provisionally
assessed consignments.
B. No suppression or misdeclaration:
The Principal Commissioner erred in questioning the Appellants’
declaration despite the fact that the earlier Textile Committee test
reports had been obtained by Customs itself and were disclosed to the
Appellants only with the SCN. A subsequent change in the
Department’s view on classification cannot, in these circumstances,
establish misdeclaration with intent to evade duty. At the highest, the
demand could survive only for the seven provisionally assessed Bills of
Entry.
C. Departmental knowledge:
The rejection of the Appellants’ plea of prior departmental knowledge,
on the ground that the earlier consignments were not part of the

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present investigation, is untenable. The relevant fact is that Customs
possessed identical Textile Committee test reports concerning the
same Art. No. 65111 goods from the same supplier and nevertheless
accepted the declared classification.
D. Contemporaneous Imports:
The Principal Commissioner rejected the Appellants’ submission
regarding similar imports by other importers for want of evidence. The
Department, however, could have verified contemporary import data,
which would have established the prevailing classification practice.
E. Co-noticees’ statement:
Reliance on the co-noticee’s statement regarding classification is
misplaced. Classification is to be determined by the proper officer on
examination/testing of the goods. The Appellants had consistently
declared Art. No. 65111 in all Bills of Entry, a fact acknowledged in the
impugned order.
F. Classification:
The goods, being composite fabrics predominantly comprising rayon
(over 75–80%), are appropriately classifiable under CTH 5408 in terms
of Rules 3(a) and 3(b) of the General Rules for Interpretation and
Section XI Note 2(A), which requires mixed textile materials to be
classified according to the material predominating by weight. Rayon
being predominant, classification under Chapter 54 is warranted.
G. Alternative claim for duty benefits:
The Principal Commissioner failed to consider the Appellants’
alternative claim regarding exemption from CVD and SAD. The benefits
under Notification No. 30/2004-CE dated 09.09.2004 and Notification
No. 20/2006-Cus. dated 01.03.2006, as applicable, were required to
be considered. The Appellants’ entitlement to a benefit otherwise

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available in law cannot be denied merely because it was not initially
claimed, as recognised by the Supreme Court in Share Medical Care
v. Union of India , 2007 (209) E.L.T. 321 (S.C.).
I. Penalties and Confiscation:
The dispute essentially concerns interpretation of the classification
provisions. In view of Customs’ prior knowledge of identical test reports
and its consistent acceptance of the declared classification, no
suppression or intent to evade duty is established. Consequently,
confiscation, redemption fine and penalties under Sections 112(a),
114A and 114AA are unsustainable.
The ld. Counsel prayed that the appeals be allowed.
Alternatively, if the classification is held against them, the demand may
be confined to Rs.21,26,125.18 relating to the seven provisionally
assessed Bills of Entry.
Submissions made by Respondent-Revenue
3.2 Shri Sanjay Kakkar, Ld. Authorized Representative, submitted
the following on behalf of the Revenue.
A. Validity of the impugned order
The impugned order is a reasoned and comprehensive order, based on
the test reports, statements, HSN notes, relevant literature and the
Appellants’ submissions. The adjudicating authority considered and
distinguished the case law relied upon by the Appellants and gave
reasons for rejecting their request for cross-examination. The
allegation of non-application of mind is therefore untenable.
B. Misdeclaration and prior knowledge of the Appellants
The Textile Committee reports of 27.03.2008, 08.09.2010 and
09.09.2010, admittedly known to the Appellants, identified the goods
as warp cut-pile fabrics. Despite this, the Appellants continued to

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declare them merely as mulberry silk fabrics. The goods contained only
about 10% silk, nearly 80% viscose and also polyamide, which was not
declared. As an experienced importer and trader, the Appellants could
not reasonably plead ignorance of the nature and composition of the
goods.
C. Effect of Customs’ earlier acceptance
The fact that Customs possessed earlier Textile Committee test reports
does not absolve the Appellants of their statutory obligation under
Section 46(4) of the Customs Act to make a truthful declaration. Each
import is independently assessable, and past acceptance of an
incorrect declaration cannot operate as an estoppel against the statute.
The earlier reports, in fact, reinforce the Appellants’ knowledge of the
true nature of the goods.
D. Classification
The test reports establish that the goods are warp cut-pile fabrics and
are accordingly classifiable under CTH 5801, having regard to the HSN
Notes, GIR 3(a) and Section XI Note 2(A). The plea that the dispute is
merely one of interpretation is untenable in view of the deliberate
suppression of the essential characteristic of the goods. Past
assessments or alleged contemporaneous imports cannot create an
estoppel against the correct statutory classification.
E. Evidentiary value of the Director’s statement
The Director, in his statement dated 29.09.2011, admitted the mistake
in description and acknowledged the predominance of rayon and the
incorrect classification. His un-retracted statement under Section 108
constitutes material evidence and corroborates the test reports and the
finding of suppression.

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F. Cross-examination
Cross-examination is not an absolute right where sufficient
documentary and corroborative evidence is available. In the present
case, the admitted test reports and the Director’s un-retracted
statement provided adequate evidence, and the Appellants neither
demonstrated prejudice nor furnished sufficient grounds for cross-
examination.
G. Exemption from CVD
The Appellants cannot claim the benefit of Notification No. 30/2004-CE
retrospectively merely because the goods are now proposed to be
classified under CTH 5801. The exemption is conditional, including the
requirement regarding non-availment of CENVAT credit, and was not
claimed at the time of import. Reliance on Share Medical Care is
therefore misplaced.
H. Confiscation and redemption fine
The seized goods were released against bond and bank guarantee.
Once the goods were liable to confiscation and were provisionally
released, imposition of redemption fine was legally permissible. The
redemption fine of Rs.30 lakh imposed in the impugned order is
therefore sustainable.
I. Penalties
The allegations concerning the addendum to the SCN and imposition
of penalties are supported by the findings recorded in the impugned
order. The Respondent accordingly relies upon the findings of the
adjudicating authority and submits that the remaining grounds of
appeal merit rejection.

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Submissions filed by the Appellant after the hearing held on
04.03.2026
3.3 Subsequent to the public hearing the Appellant was permitted to
file its rejoinder to the Respondent’s submissions, which is
summarised, as follows:
A. It was submitted during hearing that, apart from the seven
provisionally assessed Bills of Entry covered by the present demand,
13 other Bills of Entry referred to in paragraph 15 of the SCN were also
provisionally assessed. On verification, however, no demand or
proposal for finalisation in respect of these 13 Bills of Entry was made
in the SCN or addendum, nor has any SCN or intimation for their
finalisation been received. The present appeal, therefore,
concerns only the seven provisionally assessed Bills of Entry
cleared against bond and bank guarantee.
B. Customs possessed several Textile Committee test reports,
including 13 reports dated between 29.02.2010 and 25.02.2011, as
well as the report dated 27.03.2008, identifying Article No. 65111 as
woven warp cut-pile fabric. Paragraph 21 of the SCN itself records that
the impugned goods had been tested by Customs. Despite possessing
these reports from 2008 onwards, Customs continued to assess the
goods as declared by the Appellants until the DRI investigation
commenced in September 2011.
C. It was submitted that the Revenue’s own contention that textile-
fabric classification is complex supports the Appellants’ case that the
dispute is one of bona fide interpretation of the tariff and not
misdeclaration with intent to evade duty. The fact that Customs
continued to accept the declared classification despite repeated test
reports further negatives any allegation of suppression. Consequently,

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demands relating to Bills of Entry other than the seven provisionally
assessed consignments are barred by limitation.
D. The submission that the Appellants failed to avail the
opportunities of hearing is incorrect. The Appellants attended the
personal hearing on 30.12.2015 and filed additional submissions
thereafter. A reminder was submitted on 29.03.2016. Following the
corrigendum dated 05.04.2016, adding further Bills of Entry, the
Appellants filed their reply and again requested disposal of the matter
on merits. The impugned order was thereafter passed on 24.11.2016.
E. The Director, Shri Lalit Grover, did not admit deliberate
misdeclaration. His statement records that the description was based
on the suppliers’ commercial invoices, which did not specify the
composition, while paragraph 12.5 refers to the classification as having
been wrongly declared. Thus, the statement at best admits an incorrect
classification and not suppression of the description with intent to
evade duty. It is settled that merely claiming a particular tariff
classification or exemption, in the absence of suppression of material
facts, does not by itself constitute misstatement or misdeclaration, as
the proper officer is required to determine the correct classification and
eligibility to exemption.
4. We have carefully perused the appeal memorandum along with
connected documents and heard the rival parties. The following issue
have been raised by the Appellant:

A. There was no suppression or misdeclaration hence
extended time limit cannot be invoked.

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B. Classification of the goods has been adopted as per
the assessment done by the Department, after obtaining
Textile Committee test reports.

C. No penalties were imposable nor were the goods liable
for confiscation
We take up the issues for consideration.
5. It is the Appellants averment that there was prior knowledge with
the departmental about the actual constituents of the goods and hence
the extended period of limitation cannot be invoked. The Appellants
had imported identical goods from China since 2008. Customs had
obtained Textile Committee reports in March, July and August 2008,
which identified the goods as viscose (rayon)-silk woven velvet, yet
accepted the declared classification under CTH 5408. This practice
continued until 2011, including 32 finally assessed Bills of Entry at
Chennai and 10 at ACC Sahar. Since the SCN was issued only on
06.05.2015, demands relating to these finally assessed consignments
are time-barred, except for the seven provisionally assessed
consignments.
5.1 We find that the goods covered by the seven ‘live’ Bills of Entry,
all dated 30.08.2011, as also the 32 consignments imported through
Chennai Port and 10 consignments imported through Mumbai Air Cargo
during the period May 2010 to August 2011, were declared as
“Mulberry silk fabrics without dyed and printed with metallic yarn,
Article No. 65111”, with minor variations in description over time, and
were classified under CTH 5408 2120. Significantly, the Department
had obtained Textile Committee test reports in March, July and August
2008, which had identified the goods as viscose (rayon)-silk woven
velvet, etc. Despite being in possession of this material, the

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Department accepted the declared classification under CTH 5408,
including during the pre-self-assessment regime. The combined Show
Cause Notice is dated 06.05.2011. In these circumstances, the
allegation that the Appellant deliberately suppressed the material facts
with intent to evade payment of duty cannot be sustained and the
extended period of limitation is therefore not invocable.
5.2 Revenue has stated that the fact that Customs possessed earlier
test reports does not absolve the Appellants of their statutory
obligation under Section 46(4) of the Customs Act to make a truthful
declaration. Each import is independently assessable, and past
acceptance of an incorrect declaration cannot operate as an estoppel
against the statute. While it is true that the Appellants is bound by the
statutory obligation under Section 46(4), the majority of the
assessments pertain to the period prior to the introduction of self-
assessment by the Finance Act, 2011 under which importers and
exporters are mandatorily required to self-assess the duty in terms of
Section 17 of the Customs Act, 1962. As per the ‘Customs Manual on
Self-Assessment – 2011’, self-assessment has become the norm of
assessment of Customs duty in respect of imported/ export goods with
effect from 8-4-2011. The Appellant cannot be blamed for self-
assessing the goods as earlier assessed by the Department, during the
subsequent period.
5.3 The principle is well settled. The Supreme Court, in Pushpam
Pharmaceuticals Company v. Collector of Central Excise,
Bombay , [1995 (78) E.L.T. 401 (S.C.)], while interpreting the
analogous proviso to Section 11A of the Central Excise Act, 1944, held
that “suppression” does not mean any omission and that the act must
be deliberate. The Court observed that, in the context of taxation,

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suppression can mean only a deliberate failure to disclose correct
information with the intent to evade payment of duty. Significantly, the
Court held that where the facts are known to both parties, an omission
by one party to do what it might have done does not amount to
suppression. The same principle applies to the proviso to Section 28 of
the Customs Act. In the present case, the relevant material was not
only available with the Department but had been generated through
its own Textile Committee reports well before the imports in question.
The subsequent invocation of the extended period on the allegation of
suppression is, therefore, unsustainable.
6. The Appellant has submitted that the goods, being composite
fabrics predominantly comprising rayon (over 75–80%), are
appropriately classifiable under CTH 5408 in terms of Rules 3(a) and
3(b) of the General Rules for Interpretation and Section XI Note 2(A),
which requires mixed textile materials to be classified according to the
material predominating by weight. Rayon being predominant,
classification under Chapter 54 is warranted. It had only followed the
assessment practice as adopted by the Department in the pre-self-
assessment era.
6.1 Per contra Revenue has submitted that the test reports establish
that the goods are made of silk and polyamide/ rayon with essential
characteristics of warp cut-pile fabrics and are accordingly classifiable
under CTH 5801, having regard to the HSN Notes, GIR 3(a) and Section
XI Note 2(A). The specific description for pile fabrics has to be preferred
against any other heading. Each import is independently assessable,
and past acceptance of an incorrect declaration, if any, cannot operate
as an estoppel against the statute. The goods are hence classifiable

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under CTI 5801 3500 up to 31.12.2011 and under CTI 5801 3720 from
01.01.2012.
6.2 Under GIR Rule 1, classification is determined according to the
terms of the headings and relevant Section/Chapter Notes. The Textile
Committee Test Reports dated 26.09.2011 identifies the goods as
woven warp cut pile fabrics. CTH 5801 specifically covers “woven pile
fabrics and chenille fabrics, other than fabrics of heading 5802 or
5806”. Accordingly, the goods merit classification under CTH 5801.
Under Rule 3(a) of the General Rules for Interpretation (GIR), CTH
5801, which specifically covers pile fabrics, is to be preferred over the
more general headings claimed by the importer. Further, being
composite fabrics of silk, polyamide and rayon, their essential
character is that of warp pile fabric; hence, Rule 3(b) also supports
classification under CTH 5801.
6.3 The Appellants classification of the impugned goods under CTH
5007, 5407, 5408 etc is not sustainable, as pile fabrics constitute a
specific category of woven fabrics covered by CTH 5801. Consequently,
the declared classifications under have been rejected correctly and the
question of predominance does not arise. The classification as finalised
in the impugned order is hence held to be proper.
6.4 The Appellant has stated that the Ld. Principal Commissioner did
not consider the alternative submission regarding the rate of duty
charged as 30/04-CE dated 09.09.2004. CVD was exempted in respect
of items falling under 58. Hon. Supreme Court in the case of SRF Ltd
Vs Commissioner of Customs, Chennai [2015 (318) ELT 607 (SC)],
has held that such exemption is applicable. Further, as per notification
no 20/2006-CUS dated 01.03.2006 and serial no. 50, all goods
specified in the first schedule to the Additional Duty of Exercise (Goods

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of Special Importance) Act 1957 carry nil date of duty, schedule one
lists such goods which are of special importance. Schedule one under
section 3(1) lists chapter heading 5801 as one of the items specified in
the first schedule to the said act, and therefore, SAD was not leviable.
The Appellants had filed a calculation sheet without taking into account
CVD, and SAD, however, the Ld. The Principal Commissioner did not
consider even these benefits of the notification, which can be
legitimately claimed at a later stage as held by Hon. Supreme Court in
Share Medical Care V/s. UOI [2007 (209) ELT 321 (SC)].
6.5 We find that the impugned order at para 20 has rejected the
Appellants request for eligibility for an alternative exemption on the
ground that the goods were cleared without claiming the benefit of the
said notification and cannot be claimed at adjudication stage. Further
both the notifications are conditional in nature and hence the benefit
cannot be extended at the time of clearance.
6.6 It is well settled that, other than a case of fraud, an assessee is
not debarred, prohibited or estopped from claiming, at a later stage,
the benefit of an exemption notification to which it is otherwise entitled.
In Unichem Laboratories Ltd. Vs Collector of Central Excise,
Bombay [(2002) 7 SCC 145], the Hon’ble Supreme Court held that,
where no time is prescribed for claiming the benefit of an exemption
notification, such benefit can be claimed subsequently and, if the
notification applies, the benefit thereunder must be extended. The
principle was reiterated in Share Medical Care Vs Union of India
[(2007) 4 SCC 573 / 2007 (209) E.L.T. 321 (S.C.)], wherein the
Supreme Court held that even if an applicant does not claim the benefit
under a particular notification at the initial stage, it is not thereby
precluded from claiming such benefit at a later stage. The Court further

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held that where the assessee is otherwise entitled to the benefit
under another applicable category of the exemption notification, such
benefit cannot be denied merely because exemption had earlier been
claimed under a different category.
6.7 Article 265 of the Constitution mandates that no tax shall be
levied or collected except by authority of law. Consequently, where, on
a proper application of the statutory provisions and the exemption
notification, the appellant is found to satisfy the conditions thereof and
is otherwise entitled to the benefit of the exemption, such benefit
cannot be denied merely because it was not claimed at the initial stage.
It is evident that the request made by the Appellant now are in the
light of the change in classification which was not the same at the time
of the initial clearance. Accordingly, the appellant's alternative claim
for exemption is required to be examined on its own merits. If the
appellant satisfies the substantive and procedural conditions
prescribed under the alternative exemption notification, the benefit
thereof cannot be denied merely because the notification was not
claimed at the time of import/clearance or in the initial proceedings.
6.8 Since the issue involves a mixed question of fact and law,
requiring examination of the relevant foundational facts. Such issues
are, therefore, appropriately considered by the Original Authority.
Recently, the Hon’ble Karnataka High Court in Assistant
Commissioner Vs Kapsons Online Pvt. Ltd., [2026:KHC:4310-DB,
dated 21.01.2026], held that an appellate forum should ordinarily
confine itself to examining the correctness of the order under appeal
and, where foundational facts remain undetermined, remit the matter
to the Original Authority for fresh adjudication. However, a pure
question of law may be decided for the first time in appeal where all

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facts necessary for its determination are already on record. This
principle is consistent with the observations of the Hon’ble Supreme
Court in Ramakant Ambalal Choksi Vs Harish Ambalal Choksi &
Ors. [2024 INSC 913] , relying, inter alia, on Shyam Sel & Power
Ltd. Vs Shyam Steel Industries Ltd., [(2023) 1 SCC 634] and
Monsanto Technology LLC Vs Nuziveedu Seeds Ltd., [(2019) 3
SCC 381 ]. Accordingly, where the foundational facts necessary to
determine the alternative exemption are not seen to be examined
properly by the Original Authority, it would be appropriate to remand
the matter for consideration of the Appellants’ claim in accordance with
law.
7. We find that the appellant had declared the goods under the
classification, which was accepted by the Department, despite the
Department having the benefit of Textile Committee test reports
obtained from time to time. In these circumstances, no deliberate or
blameworthy act can be attributed to the appellant in adopting the said
classification. Consequently, the goods are not liable to confiscation,
and the appellants cannot be held liable to penalty.
8. Accordingly, we set aside the demand for duty and interest for
the extended period. However, the classification as finalised in the
impugned order with respect to the seven ‘live’ Bills of Entry, merits to
be upheld. The issue of the eligibility of the said goods for the benefit
of the alternative exemption notifications claimed by the Appellant in
their appeal therefore requires to be remanded to the Original
Authority - limited to this issue - for determination on merits. The
duty, if any, shall thereafter be determined accordingly, along with
applicable interest, if any, for the normal period. The Appellants may
be given an opportunity to present their case both orally and in writing,

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before the matter is decided within 90 days of receipt of this Order.
The Appellants should also cooperate in the matter. The Appellants are
eligible for consequential relief as per law, if any. The appeals are
disposed of accordingly.
(Order pronounced in open court on 03.09.2026)



Sd/- Sd/-
( M. AJIT KUMAR ) ( P. DINESHA )
Member (Technical) Member (Judicial)




Rex