M/S CHIRIPAL POLY FILMS LTD vs COMMISSIONER OF CUSTOMS LUDHIANA

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I


Customs Appeal No. 61188 of 2025

[Arising out of Order-in-Original No. Pr.Commr/NA/LDH/Customs/08/2025 dated
19.08.2025 passed by the Principal Commissioner of Customs, Sahnewal,
Ludhiana]


M/s Chiripal Poly Films Ltd.
4, SIDCO Industrial Estate, Bhagthali,
Kathua, Jammu, J&K-184102
……Appellant

ERSUS
V


Commissioner of Customs, Ludhiana
Customs House, ICD GRFL Complex,
G.T. Road, Sahnewal, Ludhiana-141120
……Respondent

APPEARANCE:

Shri Paresh M. Dave, Advocate for the Appellant
Shri Maheswar Maji and Ms. Amita Gupta, Authorized Representatives
for the Respondent

CORAM: HON’BLE MR. SOMESH ARORA, MEMBER (JUDICIAL)
HON’BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL)


FINAL ORDER NO. 60591/2026

DATE OF HEARING: 15.10.2026
DATE OF DECISION: 05.11.2026


P. ANJANI KUMAR:

M/s. Chiripal Poly-Films Ltd. have imported 60 number of
‘Spools’ for rolling mill under EPCG Authorization and have filed Bill
of Entry No.6542707 classifying the same under CTH 8455 9000 as
other parts of rolling mills and claimed exemption under Notification
No. 26/2023-Cus. Revenue was of the opinion that the spools

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imported were made of steel and, therefore, were correctly
classifiable under CTH 7326 9099 and thus, the appellant resorted to
mis-declaration and misclassification with a view to avail the benefit
of EPCG scheme in an unlawful manner. The goods were seized on
04.12.2024. A show cause notice was issued and was confirmed
vide the impugned order reclassifying the goods under CTH 7326
9099 ; denying the exemption claimed under the notification
claimed; demanding differential duty of Rs.3,07,21,816; imposing
penalty of equal amount under Section 114A and a redemption fine
of Rs.50,00,000. Hence, this appeal.

2. Learned counsel for the appellant submits that the imported
goods are spools for rolling mills and are capital goods for the
appellant, as notified under EPCG scheme and Foreign Trade Policy.
Spools are not excluded from capital goods irrespective of their
classification under heading 8455 or heading 7326 of the Tariff, as
the case may be. He submits that paragraph 5.1 of the Foreign
Trade Policy allows import of capital goods, other than those
specified in Appendix-5F for pre-production, production and post-
production. Similarly, paragraph 11.08 of the FTP defines capital
goods to mean any plant, machinery, equipment or accessories
required for manufacture or production, either directly or indirectly,
and includes packaging machinery and equipment. The customs
notification also specifies in Explanation (A) that capital goods has
the same meaning as assigned to it in paragraph 11.08 of the
Foreign Trade Policy. He submits that it is noteworthy that the
above provisions do not refer to HS classification of the goods in

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order to classify the as capital goods; the provisions referred to
functionality test in manufacture or production, directly or indirectly,
and nature of capital goods does not depend on their description or
classification; the spools are not excluded under Appendix-5F of the
FTP; the spools in question were tailor made to the requirement of
rolling mills and are crucial part for manufacture of aluminium foils.
This aspect is neither denied nor disputed by Revenue. He relies on
the following cases: -

(i) JSW Steel Ltd. [2016 (340) ELT 262]
(ii) Cosmic Ferro Alloys Ltd. [2024 (8) TMI – CESTAT
Kolkata]
(iii) Jindal Stainless Ltd. [2025 (3) TMI 855]
(iv) Ratna Mani Metal and Tubes Ltd. [2022 (9) TMI 1170 –
CESTAT Ahmedabad]
(v) KGN Enterprises Ltd. [2013 (293) ELT 39 (T-Mum)]
(vi) Karnataka Power Corporation Ltd. [2016 (337) ELT 104
(T.-Chennai)]
(vii) Needle Roller Bearing Co. Ltd. [2000 (124) ELT 577]
(viii) Delhi Cloth Mills [1995 (78) ELT 685 (T)]
(ix) Mahindra Engineering and Chemical Products Ltd.
[1999 (111) ELT 464 (T)] .

2.1 Learned counsel for the appellant submits further that the
impugned goods are specified in EPCG authorization as other parts.
If the exemption is dependent on the classification, the EPCG
authorization becomes redundant. Learned Commissioner wrongly
relies on KGN Enterprises Ltd. (supra) and denies the exemption on
the basis that ITCHS Code does not match with the classification
given in the authorization. The facts oof the cases are different, in
as much as the appellant therein imported items under CTH 8437
1000, i.e. machines for cleaning, sorting or grading seed, grain or
dried leguminous vegetables whereas the actual goods imported
were galvanized sheets with holes in pellets, nut bolts in bulk

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packing, angles and frames of GI sheet with holes. There was no
electrical or mechanical or thermal equipment. Learned counsel
submits that, therefore, facts of the case are different. The
argument of Revenue that in terms of Section Note 1(c) of Section
16 of the Customs Tariff Act does not cover spools, is incorrect. The
section does not cover bobbins, spools, cops, cones, cores, reels or
similar supports of any material. He submits that by applying the
principles of ejusdem generis , the spools etc which only act as
support for other materials are excluded and not the parts which are
essential in a machine or equipment for the purpose of manufacture.
He submits that further under Explanation (I)(A) of Section 16, the
section covers all machinery and Note (I)(B) clarifies that the goods
of this section may be of any material. He submits that in view of
this note, parts which are suitable for use solely and principally with
particular machines are classified in the same heading as machines.
He further submits that Chapter 73 does not refer to parts of rolling
mills like spools. CTH 73.26 wrongly arrived at by the
Commissioner is a residual classification which cannot be preferred
over a specific heading for parts of metal rolling mills. Further, as
per the Explanatory Notes, heading 73.26 covers all iron or steel
articles obtained by forging or punching, by cutting or stamping or
by other processes such as folding, assembling, welding, turning,
milling or perforating other than articles more specifically covered
elsewhere. The impugned goods manufactured by technically
complicated processes involving precision, sophistication or not
obtained by the processes referred to under heading 73.26. He
submits that even going by the General Rules for Interpretation of

5 C/61188/2025
st
the 1 Schedule to the Customs Tariff Act, i.e. Rule3(a), the heading
which provides the most specific description is preferred. In the
instant case, heading 8455 9000 is the most specific description
and, therefore, requires to be followed.

3. Learned Authorized Representative appearing for Revenue
submits that for legal requirement, the authorization is valid only for
the specific CTH mentioned. The department’s position is legally
superior as it adheres to the strict terms of the license. It is not the
case of the appellant that the claim of CTH is merely procedural.
This principle has been followed in the case of KGN Enterprises
relied upon by the Commissioner. Learned AR submits further that
the evidence relied upon by the appellant is an expert opinion which
contradicts the statutory provisions. Section Note 1(c) of Section 16
specifically excludes the spools of any material from Chapter 84.
This provision is binding and absolute. Learned AR relies on
Videocon Industries Ltd. [(2023) 5 Centax 108 (SC)] . Learned AR
further submits that the appellant’s claim that there was no
misdeclaration with intent to evade payment of duty is not well
founded. The appellant knowingly declared the goods under CTH
8455 9000 despite the clear exclusion in Section Note 1(c) and,
therefore, case for invocation of Section 28(4) of the Customs Act,
1962 is well established. Learned AR submits that the penalty
imposed the direct result of the proven evasion established under
Section 28(4). The appellant’s reliance on Hindustan Steel is of no
help as the facts are different. Learned AR submits that, therefore,
the extended period was rightly invoked and the goods were rightly

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confiscated and thus, penalties were imposed while confirming the
duty.

4. Heard both sides and perused the records of the case.

5. In the instant case, the appellant has imported spools for
rolling mill as required by them for the rolling mill as capital goods
and as authorized by the DGFT under EPCG license. Revenue seeks
to deny the exemption for the reason that the impugned goods are
classifiable under CTH 7326 9099 and the same CTH is not
mentioned in the authorization and the exemption is not accordingly
available. Revenue also contends that there is misdeclaration and
the goods are rendered liable for confiscation and the appellant has
rendered themselves for penalty. Two questions that arise for
consideration in the impugned case are as to whether
(1) The difference in nomenclature and tariff heading given in the
EPCG authorization and Customs Tariff shall disentitle the importer-
appellant for the benefit due to them; and
(2) Whether the impugned goods are classifiable under CTH 7326
9099 as contended by Revenue or under CTH 8455 9000.

5.1 Coming to the first question as to whether the exemption is
not applicable because of the difference in classification, we find that
the goods are described as spools for rolling mill, both in the
authorization given by DGFT as well as the Bill of Entry filed by the
appellants. We find that para 5.1(a) of the Foreign Trade Policy
specifies that EPCG scheme allows import of capital goods (except
those specified in negative list in Appendix (5F) for pre-production,

7 C/61188/2025
production and post-production at zero customs duty. Para 5.1(a)(i)
states that capital goods as defined in Chapter 11 including in
CKD/SKD condition are eligible for exemption. Para 11.08 defines
capital goods to be in any plant, machinery, equipment or
accessories required for manufacture or production, either directly
or indirectly, of goods or for rendering services, including those
required for replacement, modernisation, technological up-gradation
or expansion. It includes packaging machinery and equipment,
refrigeration equipment, power generating sets, machine tools,
equipment and instruments for testing, research and development,
quality and pollution control. We also find that it is further clarified
that Capital goods may be for use in manufacturing, mining,
agriculture, aquaculture, animal husbandry, floriculture, horticulture,
pisciculture, poultry, sericulture and viticulture as well as for use in
services sector.

5.2 We also find that Appendix-5F of the Handbook of Procedures
lists capital goods which are not permitted or which are permitted
for import subject to specific conditions under the EPCG scheme. It
is not the case of Revenue that the spools imported by the appellant
are under the non-permissible capital goods under Appendix-5F. We
find that there is no definition given under the Customs Act for
capital goods. Therefore, we are of the considered opinion that
when the authority issuing EPCG license considers the impugned
goods as capital goods as per the definition given in the FTP and the
Handbook of Procedures, Customs have no reason to disbelieve the
same to be capital goods depending on the classification that is be

8 C/61188/2025
arrived at under the Customs Tariff Act. It is pertinent to note that
Exemption Notification No.26/2003-Cus, under Explanation (A) to
the notification, provides that the capital goods have the same
meaning as assigned to it in paragraph 11.08 of the Foreign Trade
Policy. We find that there is no definition of capital goods given
under the Customs Act. The authorization given by the DGFT and
the Customs notification, issued in this regard refer to the definition
given at paragraph 11.08 of the Foreign Trade Policy, at Appendix-
5F of the FTP. Under the circumstances, we find that the Customs
cannot take a view that the impugned goods are not capital goods
as they are classified under a different heading. If at all the
Customs were to deny the exemption, they were required to make a
reference to the DGFT authorities to seek a clarification or request
them to change the classification. We find that the Customs
authorities have neither sought a clarification from the DGFT
authorities nor got the authorization modified, rectified or annulled.
With out doing so, they could not have disputed the eligibility of the
goods, imported by the appellant-importer, for exemption under
Notification No.26/2003-Cus, irrespective of the classification that
may have been arrived at by the Customs. We find that our opinion
gets support from the decision of the coordinate Bench at Chennai in
the case of JSW Steel Ltd. [2016 (340) ELT 262 (Tri.-Chennai)]
wherein the bench has observed as follows: -

“6. We have carefully considered the submissions of both
sides. The short issue in this Revenue appeal is whether the
respondents are eligible for clearance of the imported goods
under SHIS Scheme as per Customs Notification No.
104/2009, dated 11-9-2009. The adjudicating authority has

9 C/61188/2025
denied the benefit of Customs Notification pertaining to SHIS
Scheme for clearance of goods covered under 7 Bills of Entry
imported and cleared by the respondent and also ordered for
classifying the goods under respective chapter headings
instead of capital goods under Chapter 84. The LAA in his
impugned order has set aside the OIO and held the goods as
capital goods and allowed the SHIS benefit under the said
notification and allowed respondent’s appeal. Revenue in the
grounds of appeal seeks to set aside the impugned order
and pleads to restore the OIO contending that the goods
imported by the respondents are not “capital goods” and not
covered under SHIS Scheme. On a perusal of the OIA of the
LAA, we find that he has discussed and recorded a detailed
findings and also discussed the definition of “capital goods”
provided under the policy governing SHIS Scheme at Paras 7
to 11 and examined the contract agreements with the
foreign supplier for arriving at his conclusion as ‘capital
goods’. On a perusal of copy of the agreement dated 23-2-
2011, we find the respondents had entered into agreement
with M/s. JFE Shoji Trade Corporation, Japan for supply of
capital goods of Continuous Annealing Line (CAL) and for
Continuous Galvanizing Line (CGL) for Cold Rolling Mill
Complex. Respondents also entered into agreement with the
supplier for providing technical advisory for erection and
testing and definition of the capital goods.
7. The preamble of the agreement at (A) & (B) is
reproduced as under :-
A. The Purchaser has decided to purchase the Equipment
for Continuous Annealing Line#1, (CAL#1) and Continuous
Galvanizing Line (CGL) for Cold Rolling Mill Complex#2
Project which will be located at Vijayanagar, Toranagallu,
District Bellary, Karnataka, India; and
B. The Seller has agreed to sell the Equipment for
Continuous Annealing Line#1 (CAL#1) and Continuous
Galvanizing Line (CGL) for Cold Rolling Mill Complex#2
Project in accordance with the terms and conditions of the
contract.
From the above agreement, it is very clear that the contract
is for the supply of CAL & CGL for the project which is set up
at Vijayanagar, Toranagallu, District Bellary, Karnataka. On
a perusal of the Article 4.0 of the Agreement, the
consideration of the entire plant and machinery has been
quoted single price which is known as “Contract Price”. We
also find that the entire contract is also covered under EPCG
licence and majority of the goods were cleared as “capital
goods” under EPCG. The Revenue’s contention is that these
are only individual parts and articles consisting of bolts, nuts
etc. and they cannot be considered as ‘capital goods’ and
same is not covered under SHIS Scheme.

10 C/61188/2025
8. In this regard, we find the Notification No. 104/2009-
Cus., dated 14-9-2009 clearly allows exemption of capital
goods imported into India against Duty Credit Scrip issued
under SHIS Scheme. As per Para 3.16 of Foreign Trade
Policy the definition of “capital goods” and the definition of
“capital goods” as provided in the Explanation under the
Notification 104/2009-Cus. are identical to the definition
given in the FTP and covers capital goods “plant, machinery,
equipment or accessories required for manufacture,
production, either directly or indirectly, of goods and
includes those required replacement, modernization,
technological upgradation or expansion etc. On a perusal of
the contract, it is abundantly clear that respondents are
setting up the plant and machinery of the Expansion Project
for CAL & CGL in the Cold Rolling Mill Complex. It is
pertinent to state that respondent has set up integrated
steel plant at Vijayanagar, Karnataka. The contract clearly
shows the import of entire supply of equipments of plant and
machinery of CAL & CGL. Obviously when the respondents
are to import as per the contract the whole plant and
machinery for CAL & CGL, the entire goods cannot be
imported in one lot under single Bill of Entry. The LAA has
brought out a detailed findings on this issue and we find that
equipments imported under the invoices are nothing but CAL
& CGL and also considering the price, it is a single contract
price and the goods are rightly to be considered as capital
goods. The definition of “capital goods” given in Foreign
Trade Policy are one and the same for EPCG licence or for
SHIS Licence. The department cannot take a different stand
for the same goods as ‘capital goods’ in EPCG scheme and
not capital goods under SHIS Scheme. Revenue’s contention
is that the goods imported are general purpose items i.e.
Bolts & Nuts is not justified. Obviously, continuous annealing
line has various sections as detailed in the impugned order.
After assembly, it becomes a single Annealing Line. It is not
the case of the department that respondent has placed
orders for only spares or bolt and nuts and claimed as
‘capital goods’ under SHIS Scheme.
9. Revenue’s relying Hon’ble Supreme Court decision in the
case of Sony India (supra) which relates to import of
components of Colour TVs in CKD condition and the same
cannot be made applicable to this case. The Hon’ble
Supreme Court in that case held that those goods which are
brought not having essential character of Colour TV, it
cannot be taken as Colour TVs whereas in the present case,
it is the plant & machinery for setting up of new CAL/CGL for
Cold Rolling Mill and as per the contract respondent set up
expansion project of Cold Rolling Mill Complex where entire
plant and machinery including technical advice for
installation has been obtained from the supplier as per their

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agreements. Therefore, the Hon’ble Supreme Court decision
relied by Revenue is distinguishable and not applicable to the
present case. Further, the present case relates to allowing
benefit of exemption under SHIS as per Notification No.
104/2009 and the policy allows import of ‘capital goods’
under SHIS scheme. Further, we find that on a perusal of
the Chartered Engineer certificate dated 31-3-2014 and 10-
10-2014 wherein he has categorically certified that entire
capital goods imported under SHIS scheme have been
installed and commissioned in the respective projects and
the department has also accepted as a fulfilment of towards
licence. We are of the considered view that the goods
imported are capital goods as per FTP Policy and the
respondents are eligible for benefit of Customs Notification
No. 104/2001 under SHIS Scheme for the clearance of the
imported goods covered under 7 Bills of Entry. The LAA has
given a clear finding on the issue and we do not find
infirmity in the order of LAA.”

We also find that this case has been relied upon consistently
and recently in the case of Jindal Stainless Ltd. [2025 (3) TMI 855
CESTAT Kolkata] . Therefore, we find that the appellant is eligible
for the exemption notification irrespective of the classification. We
find that though the dispute in the above case, was regarding
consideration of a particular item as capital goods for the purposes
of SHIS, we find that the principle enunciated covers the present
issue also.

5.3 Coming to the classification, we find that there is considerable
force in the argument of the appellant that Note 1(c) of Section 16
of the Tariff provides that the section does not cover bobbins,
spools, cops, cones, cores, reels or similar supports of any material.
We find that the expression ‘similar supports’ refers to such goods
which are supports for any material and not to parts which are
essential in a machine or equipment for manufacturing purpose.
Further we find that Revenue intends to classify under Chapter

12 C/61188/2025
73.26 for the reason that the Explanatory Notes clarify that the
heading covers all iron and steel or steel articles obtained by forging
or punching, by cutting or stamping or by other processes such as
folding, assembling, welding, turning, milling or perforating other
than articles more specifically covered elsewhere. It has not been
established by Revenue that the impugned spools have been
manufactured by the simple processes mentioned above. The
appellant’s contention that the spools used in the production of
aluminium foils are produced by more technically complicated
sophistication is not refuted by Revenue. However, at this juncture,
as we found that exemption notification is available irrespective of
the classification, we find that there is no need to discuss the
classification of the impugned goods. When the exemption is
available irrespective of classification, the allegation of
misdeclaration with intent to evade payment of duty is nullified and
accordingly demand of duty, penalty and redemption fine are not
warranted. Accordingly, we find that the impugned order is liable to
be set aside.

6. In view of above, the appeal is allowed.

(Order pronounced in the open court on 05/11/2026)


(SOMESH ARORA)
MEMBER (JUDICIAL)



(P. ANJANI KUMAR)
MEMBER (TECHNICAL)
PK