S L Lumax Limited vs CHENNAI- PORT IMPORT
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Customs Appeal No. 40884 of 2023
(Arising out of order in Original No.103068/2023, dated 15.09.2023 passed by
Commissioner of Customs, Chennai II Import, Custom House, NO.60, Rajaji Salai, Chennai
600 001).
S L Lumax Limited …. Appellant
G-15, SIPCOT Industrial Park
Irrungattukottai, Sriperumbudur
Kacheepuram 602 105
VERSUS
Commissioner of Customs ...Respondent
Chennai II Commissionerate
Custom House, No.60, Rajaji Salai
Chennai 600 001
WITH
Customs Appeal No. 40981 of 2025
(Arising out of Order in Appeal Seaport C.Cus.II No.491/2025 dated 29.05.2025 passed
by Commissioner of Customs, (Appeals II), 60, Rajaji Salai, Custom House, Chennai 600
001).
S L Lumax Limited …. Appellant
G-15, SIPCOT Industrial Park
Irrungattukottai, Sriperumbudur
Kacheepuram 602 105
VERSUS
Commissioner of Customs ...Respondent
Chennai II Commissionerate
Custom House, No.60, Rajaji Salai
Chennai 600 001
AND
Customs Appeal No. 40982 of 2025
(Arising out of Order in Appeal Seaport C.Cus.II No.490/2025 dated 29.05.2025 passed
by Commissioner of Customs, (Appeals II), 60, Rajaji Salai, Custom House, Chennai 600
001).
S L Lumax Limited …. Appellant
G-15, SIPCOT Industrial Park
Irrungattukottai, Sriperumbudur
Kacheepuram 602 105
2
VERSUS
Commissioner of Customs ...Respondent
Chennai II Commissionerate
Custom House, No.60, Rajaji Salai
Chennai 600 001
APPEARANCE :
Shri Rohan Muralidharan, Advocate for the Appellant
Ms. O.M. Reena, Authorised Representative for the Respondent
CORAM :
HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE MR. AJAYAN T.V, MEMBER (JUDICIAL)
FINAL ORDER NOs.41120-41122/2026_
DATE OF HEARING: 29.05.2026
DATE OF DECISION:28.10.2026
Per Mr. Ajayan T.V.
These three appeals are preferred by M/s S L Lumax
Limited, Sriperumbudur, the appellant herein, which is engaged, inter
alia, in the manufacture of automotive lamp assemblies, chassis,
mirrors and other parts and accessories of motor vehicles. Customs
Appeal No. 40884/2023 assails Order in Original No. 103068/2023
dated 15.09.2023 of the Commissioner of Customs, Chennai II
(Import). Customs Appeal No. 40982/2025 and Customs Appeal No.
40981/2025 assail Orders in Appeal Seaport C.Cus.II Nos. 490/2025
and 491/2025, both dated 29.05.2025, of the Commissioner of
Customs (Appeals II), Chennai, which affirmed Order in Original No.
108979/2024 dated 05.09.2024 of the Additional Commissioner of
Customs (Chennai SEZ and FTWZ) and Order in Original No.
108732/2024 dated 26.08.2024 of the Deputy Commissioner of
Customs (Chennai SEZ and FTWZ) respectively. Since all three appeals
concern the same goods, they were heard together and are disposed
of by this common order.
Relevant Facts
2. The goods are flexible or metal core printed circuit boards
populated with light emitting diodes, referred to in the record as LED
3
strips, which are specifically shaped for particular models of motor
vehicles. After import they are assembled with a plastic bezel, lens and
housing, fastened with screws, into head lamps, tail lamps, daytime
running lamps, logo puddle lamps and other lighting equipment of
motor vehicles. The dispute in all three appeals concerns their
classification within Heading 8512 of the First Schedule to the Customs
Tariff Act, 1975, as between CTI 8512 2010 or 8512 2020, which cover
lighting or visual signalling equipment of a kind used on motor vehicles,
and CTI 8512 9000, which covers parts of such equipment. As will be
seen, the two positions, in turn, have been taken by the Revenue
against the very same importer.
3. The facts of Customs Appeal No. 40884/2023 are that on
intelligence developed by the Directorate of Revenue Intelligence
(DRI), the import data of the appellant for the period from October
2017 to January 2021, covering 701 Bills of Entry filed at Chennai
Seaport, Air Cargo Complex Chennai, Kattupalli Port and ICD
Irungattukottai, was examined. It was found that the appellant had
classified the goods under different tariff items at different ports,
namely 8512 2010, 8512 2020, 8512 2090, 8512 9000, 8539 2120,
8539 9020 and 8708 9900, and had described them in the Bills of Entry
as parts of automobile lighting equipment. By letter dated 29.01.2020,
the DRI called for import documents for the preceding five years. The
appellant furnished sample Bills of Entry, invoices, CEPA certificates
and photographs of the goods by letter dated 13.02.2020. By letter
dated 11.03.2020, it intimated its understanding that the goods
merited classification under CTI 8512 2010 and, by demand drafts
dated 11.03.2020, paid differential duty of Rs. 1,49,78,688/- with
interest of Rs. 22,88,943/-, aggregating Rs. 1,72,67,631/-, realised
under challans dated 17.03.2020 and 20.03.2020. Summons were
issued on 12.08.2021 and 31.08.2021, and the statements of Shri R.
Murali, Chief Financial Officer, and Shri V. Sathiyanarayanan, Assistant
General Manager, were recorded under Section 108 of the Customs
Act, 1962 (the Act) on 27.08.2021 and 08.09.2021.
4. Show Cause Notice F.No. S.Misc.54/2022-Gr.5A dated
10.10.2022 was thereafter issued. It alleged that the goods were
4
complete and ready to use, required no further manufacture, were
unique to particular vehicle models and imparted to the lamps their
essential character, so that even if incomplete they were classifiable as
complete lighting equipment under CTI 8512 2010 or 8512 2020 by
virtue of Rule 2(a) of the General Rules for the Interpretation of the
First Schedule (GRI). It further alleged that the appellant, having
classified the same goods under various headings over time, was aware
of the correct classification and had deliberately misstated it to evade
duty. It accordingly proposed reclassification and reassessment,
demand of differential duty of Rs. 11,31,18,616/- under Section 28(4)
with interest under Section 28AA, appropriation of the amount
voluntarily paid, confiscation under Section 111(m) of goods valued at
Rs. 239,12,02,832/-, and penalties under Sections 112(a) and 114A.
The appellant paid a further sum of Rs. 8,60,30,343/- under protest on
10.11.2022.
5. The appellant replied to the aforesaid SCN contending that the
goods were parts classifiable under CTI 8512 9000 and contesting the
invocation of the extended period, confiscation and penalties. By the
Order in Original No.10368/2023 dated 15.09.2023, the Commissioner
held the goods classifiable under CTI 8512 2010 or 8512 2020 by
application of GRI 2(a). Finding that Rs. 1,21,09,604/- had already
been discharged through MEIS scrips at the time of clearance, he
redetermined the differential duty at Rs. 10,10,09,012/-, comprising
basic customs duty of Rs. 7,78,19,049/-, social welfare surcharge of
Rs. 77,81,538/- and integrated tax (IGST) of Rs. 1,54,08,445/-, and
confirmed it with interest under Section 28AA, holding at paragraphs
39 and 40 that the appellant had deliberately suppressed the true
classification which it had itself earlier adopted and had fraudulently
classified the goods under various tariff items. He appropriated the
amounts paid, held the goods liable to confiscation under Section
111(m), imposed a redemption fine of Rs. 23,90,00,000/- under
Section 125 although the goods had admittedly been cleared, imposed
under Section 114A a penalty equal to the differential duty along with
interest with the option of the reduced penalty under the proviso, and
refrained from imposing penalty under Section 112(a). Within thirty
days of receipt of the order, the appellant paid the balance interest of
5
Rs. 4,38,99,077/- and twenty five per cent of the penalty, namely Rs.
2,52,52,253/-, on 01.11.2023. On the appellant's own reckoning it has
thus paid duty of Rs. 10,10,09,031 and interest of Rs. 4,61,88,020/-,
of which Rs. 70,45,631/- is interest on the IGST component.
6. The two later appeals relate to clearances from the Free Trade
and Warehousing Zone of M/s J. Matadee Free Trade Zone, Chennai,
into the Domestic Tariff Area, under one Bill of Entry each. In both, the
appellant classified the goods under CTI 8512 2010 and claimed the
preferential rate under Serial No. 812 of Notification No. 152/2009-Cus
dated 31.12.2009, the goods being of Korean origin. In the matter
giving rise to Customs Appeal No. 40982/2025, concerning Bill of Entry
No. 2005616 dated 08.03.2022, post clearance audit took the view that
the goods were parts classifiable under CTI 8512 9000, to which the
notification did not extend. An audit consultative letter dated
28.04.2023 proposed a demand of Rs. 12,60,161/-. The appellant
replied on 23.06.2023 that the very goods stood proposed for
classification under CTI 8512 2010 in the notice dated 10.10.2022. Two
items covered by that notice were excluded, and Show Cause Notice
No. 08/2024 dated 07.03.2024 demanded Rs. 11,06,652/- under
Section 28(1) with interest, proposing confiscation under Section
111(m) and penalty under Section 112(a). Pursuant to the appellant’s
reply and after hearing the counsel for the appellant, by Order in
Original No. 108979/2024 dated 05.09.2024, the Additional
Commissioner confirmed the classification under CTI 8512 9000, the
demand and interest, held the goods liable to confiscation with a
redemption fine of Rs. 11,06,650/-, and imposed a penalty of
Rs.1,10,665/- under Section 112(a).
7. In the matter pertaining to Customs Appeal No. 40981/2025,
an audit consultative letter dated 25.07.2023 proposed a demand of
differential duty of Rs. 20,46,707/- on two Bills of Entry. The appellant
pointed out, in reply to the pre notice consultation letter dated
10.01.2024, that Bill of Entry No. 2026346 dated 07.11.2022 belonged
to its sister concern M/s S L AP Private Limited. Excluding that portion,
Show Cause Notice No. 24/2024 dated 01.05.2024 demanded Rs.
1,85,861/- on Bill of Entry No. 2026965 dated 14.11.2022 under
6
Section 28(1), with interest, confiscation and penalties under Sections
112(a) and 114A. Pursuant to the appellant’s reply and after according
a personal hearing, the Deputy Commissioner, vide Order in Original
No. 108732/2024 dated 26.08.2024 confirmed the demand with
interest, held the goods liable to confiscation with a redemption fine of
Rs. 1,50,000/- and imposed a penalty of Rs. 18,000/- under Section
112(a)(ii). In both matters the adjudicating authorities rejected the
contention that the Special Economic Zones Act, 2005 (the SEZ Act)
and the Special Economic Zones Rules, 2006 (the SEZ Rules) contain
no machinery for interest, confiscation or penalty, holding that the Act
applied to such clearances by force of the notifications issued under
Section 22 of the SEZ Act. By the impugned Orders in Appeal dated
29.05.2025, the Commissioner (Appeals) affirmed both orders,
observing in Order in Appeal No. 491/2025 that inconsistent
departmental views in prior matters, while undesirable, do not negate
the correctness of the present classification.
Submissions on behalf of the appellant
8. Shri Rohan Muralidharan, learned Advocate for the appellant,
filed a written synopsis and, by a miscellaneous application filed sought
to make additional submissions. At the outset, he stated that in
Customs Appeal No. 40884/2023 the appellant does not contest the
classification under CTI 8512 2010 or 8512 2020, which it has followed
in all its imports from 2022, and confines its challenge to the invocation
of the extended period of limitation, the confiscation and redemption
fine, the penalty under Section 114A and the interest and penalty on
the IGST component. He urged that the Revenue, having accepted the
Order in Original dated 15.09.2023 without appeal, has in the two later
matters taken a diametrically contrary view that identical goods are
mere parts under CTI 8512 9000, and demonstrated by reference to
part numbers and model designations that the goods in Customs
Appeal No. 40981/2025 are identical to, and those in Customs Appeal
No. 40982/2025 pari materia with, goods covered by the notice of
2022. Reliance was placed on Gujarat State Fertilizers Co v. CCE, 1997
(91) E.L.T. 3 (S.C.), Greaves Cotton and Co Ltd v. Union of India, 1989
(43) E.L.T. 263 (Bom.), Marsons Fan Industries v. CCE, 2008 (225)
7
E.L.T. 334 (S.C.), CCE v. Bigen Industries Ltd, 2006 (197) E.L.T. 305
(S.C.) and Jayaswals Neco Ltd v. CCE, 2006 (195) E.L.T. 142 (S.C.) .
9. On limitation, counsel argued that the earlier classification was
a bona fide and inadvertent position, corrected as soon as the
Department's view was known, that the dispute is interpretative, and
that the Revenue cannot allege wilful misstatement when it is itself
unclear on the classification, as its own later orders show. He cited
Northern Plastic Ltd v. Collector of Customs and Central Excise, 1998
(101) E.L.T. 549 (S.C.), CCE v. Standard Niwar Mill, 2013 (296) E.L.T.
164 (All.), Midas Fertchem Impex Pvt Ltd v. Principal Commissioner of
Customs, 2023 (384) E.L.T. 397 (Tri. Del.), Secure Meters Ltd v.
Principal Commissioner of Customs, 2025 (1) TMI 1383, and K. Sankar
v. Commissioner of Customs, 2026 (2) TMI 1031-CESTAT Chennai .
Without prejudice, he contended that Section 114A provides for a
penalty equal to the duty or the interest and not both, relying on Xiaomi
Technology India Pvt Ltd v. Principal Commissioner of Customs, 2025
(11) TMI 1120-CESTAT Chennai and CC and ST v. Sony Sales
Corporation, 2021 (376) E.L.T. 472 (Kar.), and that, the duty, interest
and twenty five per cent penalty having been paid within thirty days,
the balance penalty stands waived under the proviso .
10. On confiscation, it was urged that a claim of classification,
accompanied by a full and true description and value, is not a
misdeclaration under Section 111(m), relying on Northern Plastic,
supra and Commissioner of Customs v. Gaurav Enterprises, 2006 (193)
E.L.T. 532 (Bom.), and that no redemption fine can be imposed on
goods cleared long ago and neither available nor released under bond,
relying on Mahindra Aerostructures Pvt Ltd v. Commissioner of
Customs, 2025 (6) TMI 690 -CESTAT Chennai and MIOT Hospitals Pvt
Ltd v. Commissioner of Customs, 2023 (9) TMI 464 -CESTAT Chennai .
On the IGST component, counsel submitted that Section 3(12) of the
Customs Tariff Act, 1975 did not, during the relevant period, borrow
the provisions of the Act relating to interest, penalty or confiscation,
relying on A.R. Sulphonates Pvt Ltd v. Union of India, 2025 (4) TMI
578 (Bom.), Flextronics Technologies Pvt Ltd v. Commissioner of
Customs, 2024 (2) TMI 1509 -CESTAT Chennai and Suryadev Alloys
8
and Power Pvt Ltd v. Principal Commissioner of Customs, 2025 (8) TMI
1356 -CESTAT Chennai .
11. In the two later appeals, besides defending CTI 8512 2010 on
the strength of GRI 2(a) and the decisions in Bharat Heavy Electricals
Ltd v. Collector of Customs, 1987 (28) E.L.T. 545 (Tri.), Polar
Appliances Ltd v. Commissioner of Customs, 2001 (127) E.L.T. 448
(Tri. Del.) and CCE v. Phoenix International Ltd, (2007) 10 SCC 114 ,
and contending that the burden to reclassify lay on the Revenue under
Commissioner of Customs v. D.L. Steels, 2022 (381) E.L.T. 289 (S.C.),
Union of India v. Garware Nylons Ltd, (1996) 10 SCC 413 and Warner
Hindustan Ltd v. CCE, 1999 (113) E.L.T. 24 (S.C.) , counsel urged in
the alternative that the goods, being LED assemblies on printed circuit
boards, fall under CTI 8541 4100 by virtue of Note 2(a) to Section XVI,
relying on Collector of Central Excise v. Delton Cables Ltd, 2005 (181)
E.L.T. 373 (S.C.), Vareli Weaves v. Union of India, 1996 (83) E.L.T.
255 (S.C.) and the decision of the Harmonized System Committee at
its 54th Session in September 2014. By the miscellaneous application
he raised the purely legal ground that Section 30 of the SEZ Act,
though it charges duty on goods removed from a Special Economic
Zone to the Domestic Tariff Area, provides no machinery for recovery
of duty short levied, and that Rule 47(5) of the SEZ Rules confers on
the jurisdictional authorities powers limited to refund, demand,
adjudication, review and appeal, without importing Section 28 of the
Act or the provisions for interest, confiscation and penalty. For this he
relied on the decision of this Tribunal in Dell International Services
India Pvt Ltd v. Principal Commissioner of Customs, Final Order No.
40372/2026 dated 17.03.2026 in Customs Appeal No. 40646 of 2023,
2026 (3) TMI 934 , and, in support of penalty being unwarranted in an
interpretative dispute, on International Merchandising Company LLC v.
Commissioner of Service Tax, 2022 (67) G.S.T.L. 129 (S.C.).
Submissions on behalf of the respondent
12. Ms. O.M. Reena, learned Authorised Representative, reiterated
the findings of the Order in Original and of the Orders in Appeal. No
submission was advanced to distinguish the decision in Dell
International Services, to dispute the identity of the goods
9
demonstrated by the appellant, or to explain the opposite
classifications adopted by the Revenue in respect of them.
Analysis
13. We have heard the rival submissions and perused the materials
available on record.
14. The merits of the classification in Customs Appeal No.
40884/2023 are not in issue, the appellant having accepted CTI 8512
2010 or 8512 2020.The issues that arise for decision are:
i.Whether the goods covered by Customs Appeal No. 40884/2023
were liable to confiscation under Section 111(m) and whether
the redemption fine of Rs. 23,90,00,000/- is sustainable?
ii.Whether interest and penalty could be levied on the IGST
component of the demand?
iii.Whether, in the subsequent appeals, the demand of duty,
interest, confiscation, redemption fine and penalty could be
raised in respect of goods cleared from a Special Economic Zone
to the Domestic Tariff Area?
iv.Whether the extended period of limitation under Section 28(4)
was validly invoked in Customs Appeal No. 40884/2023 and, if
not, what survives of the demand? and
v.Whether the penalty under Section 114A is sustainable?
Discussion and findings
A. Confiscation and the redemption fine of Rs. 23,90,00,000/-
15. The largest single imposition in these appeals is the redemption
fine, which exceeds twice the differential duty. Section 111(m) renders
liable to confiscation goods which do not correspond in respect of value
or in any other particular with the entry made under the Act. The
Commissioner has not found that any Bill of Entry misdescribed the
goods, misstated their value, quantity or origin, or misrepresented any
physical attribute. The case of the Revenue, from the notice to the
order, is that the appellant claimed the wrong tariff item. The goods
were described by part number and as parts of automobile lighting
equipment, a description which, as will presently be seen, the Revenue
has itself treated as correct in respect of identical goods.
10
16. The Hon’ble Supreme Court in Northern Plastic Ltd v. Collector
of Customs and Central Excise, 1998 (101) E.L.T. 549 (S.C.) , held that
a declaration of this kind is in the nature of a claim made on the basis
of the belief entertained by the importer and cannot be said to be a
misdeclaration as contemplated by Section 111(m), where full and
correct particulars of the goods have been furnished. A coordinate
Bench of this Tribunal at Chennai, in Sankhla Industries v.
Commissioner of Customs, Final Order No. 40134/2025 dated
29.01.2025, 2025 (1) TMI 1459 , applied the same principle to the
regime of self assessment, holding that a classification adopted on the
importer's understanding, with the goods correctly described, is not a
misdeclaration and that confiscation and penalties could not survive.
The Principal Bench took the same view in Midas Fertchem Impex Pvt
Ltd v. Principal Commissioner of Customs, 2023 (384) E.L.T. 397 (Tri.
Del.) . This Bench has applied the principle to claims of classification
made in self assessed Bills of Entry in Johnson Lifts Pvt Ltd v.
Commissioner of Customs, 2026 (1) TMI 535 – CESTAT CHENNAI,
observing, noticing Aureole Inspecs India Pvt Ltd v. Principal
Commissioner of Customs, (2023) 11 Centax 211 (Tri. Del.) , which
held that classification is a matter of opinion and that an importer
cannot be expected to anticipate the heading which the proper officer
may later prefer. It did so again in Toyota Kirloskar Motor Pvt Ltd v.
Commissioner of Customs, 2026 (9) TMI 1680- CESTAT CHENNAI , a
case which also concerned parts and accessories of motor vehicles. The
introduction of self assessment by the amendment of Section 17 in
2011, on which the Commissioner placed emphasis, casts on the
importer the duty to self assess with care. It does not convert the
choice of a tariff item, which remains subject to verification and
reassessment by the proper officer, into a particular of the goods that
has failed to correspond with them and hence a misdeclaration, merely
for the reason that the proper officer has come to a different conclusion
as to the tariff item. We therefore hold that the goods were not liable
to confiscation under Section 111(m).
17. That conclusion is sufficient to set aside the redemption fine,
since a fine in lieu of confiscation under Section 125 presupposes goods
11
liable to confiscation. We are conscious that the Commissioner, after
extracting the decision of the Supreme Court in Weston Components
Ltd v. Commissioner of Customs, 2000 (115) E.L.T. 278 (S.C.) , rested
the fine on the decision of the jurisdictional High Court in Visteon
Automotive Systems India Ltd v. CESTAT, 2017 (9) TMI 138-MADRAS
HIGH COURT , which held that the physical availability of the goods is
not necessary for imposing a redemption fine. The High Court,
however, reasoned that the power to impose the fine springs from the
authorisation of confiscation under Section 111. Whenever, as in the
instant case, the goods were never liable to confiscation, Visteon is not
attracted at all, and our conclusion does not depart from it. That is the
course this Bench took in Toyota Kirloskar supra , where it held that
Weston Components, Synergy Fertichem and Visteon each proceed on
the footing that confiscation was authorised, and address only the
different question whether a fine may be levied when the goods are
not available.
18. It is nonetheless necessary to record the other line of authority
urged before us, since the Commissioner did not so much as notice it.
The Bombay High Court in Commissioner of Customs (Import), Mumbai
v. Finesse Creation Inc, 2009 (248) E.L.T. 122 (Bom.) , held that the
concept of redemption fine arises only where the goods are available
to be redeemed, and that once goods cannot be redeemed no fine can
be imposed. The special leave petition of the Revenue against that
judgment was dismissed, as reported in 2010 (255) E.L.T. A120 (S.C.) .
The Punjab and Haryana High Court took the same view in
Commissioner of Customs, Amritsar v. Raja Impex (P) Ltd, 2008 (229)
E.L.T. 185 (P&H) , as did the Larger Bench of this Tribunal in Shiv Kripa
Ispat Pvt Ltd v. Commissioner of C.Ex. and Cus., Nasik, 2009 (235)
E.L.T. 623 (Tri. LB) . This Bench, in J Uthaman v. Commissioner of
Customs, 2025 (11) TMI 1652 , upheld the discretion of the
adjudicating authority in declining to impose a redemption fine on
goods which were neither physically available nor covered by any
subsisting bond or bank guarantee, noticing that the Supreme Court in
Union of India v. Raj Grow Impex LLP, 2021 (6) TMI 778 , while
distinguishing Finesse Creation on facts, did not disapprove it. This
bench in Mukesh Kumar v. Commissioner of Customs , 2026 (2) TMI
12
916 , declined to interfere where the adjudicating authority had refused
to impose a fine on unavailable goods after considering Visteon . In the
present case the goods were cleared for home consumption between
2017 and 2021, were never seized, and were not released under any
bond. Since we have held that the goods were not liable to confiscation
at all, the imposition of the redemption fine was decidedly untenable.
19. We cannot, however, pass over the manner in which this fine
came to be imposed. A fine of Rs. 23,90,00,000/- was levied on a
declared value of about Rs. 239 crores without a sentence of reasoning
on its quantum, on goods which had passed into home consumption
years earlier, on the strength of an extract from a judgment whose
foundation, namely the liability of the goods to confiscation, the
Commissioner did not pause to examine. The quantum is, moreover,
governed by the proviso to Section 125(1), which caps the fine at the
market price of the goods less the duty chargeable on them. The
Supreme Court held in Commissioner of Customs, Mumbai v. Mansi
Impex, 2011 (270) E.L.T. 631 (S.C.) , that the determination of the
market price is a prerequisite prescribed by the statute itself, and this
Bench applied that requirement in Toyota Kirloskar supra . No such
determination was even attempted here. The discretion under Section
125 is, as the Supreme Court reminded in Raj Grow Impex supra , to
be guided by law and by reason, and to be exercised on relevant
considerations. A quasi judicial authority which treats a figure of that
magnitude as an incident of a classification dispute does not exercise
that discretion. It abdicates it. The confiscation and the redemption
fine in Customs Appeal No. 40884/2023 are set aside.
B. Interest and penalty on the IGST component
20. Integrated tax on imported goods is levied under Section 3(7)
of the Customs Tariff Act, 1975, and not under Section 12 of the Act.
During the period in dispute, Section 3(12) of the Customs Tariff Act
provided that the provisions of the Act and the rules and regulations
made thereunder, including those relating to drawbacks, refunds and
exemption from duties, shall, so far as may be, apply to the duty or
tax chargeable under that section. It did not borrow the provisions
13
relating to interest, penalty or confiscation. Those words were added
only by the Finance (No. 2) Act, 2024 with effect from 16.08.2024.
21. The Bombay High Court in Mahindra and Mahindra Ltd v. Union
of India, (2023) 3 Centax 261 (Bom.) , following the Constitution Bench
in J.K. Synthetics Ltd v. CTO, (1994) 4 SCC 276 , held that interest and
penalty are substantive liabilities which can be levied only if the statute
that charges the tax makes a substantive provision for them, and that
Section 3 of the Customs Tariff Act made none. The challenge of the
Revenue to that judgment was not entertained by the Supreme Court,
(2023) 9 Centax 361 (S.C.) , and its review petition was dismissed on
09.01.2024, (2025) 392 ELT 675 (S.C.) . In A.R. Sulphonates Pvt Ltd
v. Union of India, 2025 (4) TMI 578 (Bom.) : 2025 (393) E.L.T. 246
(Bom.) , the same High Court, in a case concerning IGST, set aside the
demand of interest, confiscation, redemption fine and penalty and
declared that the amendment of Section 3(12) is prospective and
applies only from 16.08.2024. Most recently, in Leben Laboratories Pvt
Ltd v. Union of India, 2026 (9) TMI 211 (Bom. ), the High Court directed
refund of interest collected on IGST for the period therein which was
prior to 16.08.2024. This Bench, in Kobelco Construction Equipment
India Pvt Ltd v. Commissioner of Customs, 2025(11)TMI 1736-CESTAT
CHENNAI , after considering the contention of the Revenue founded on
the interdependence of the two enactments and the decision of the
Delhi High Court in Interglobe Aviation, followed Mahindra and
Mahindra and A.R. Sulphonates. We see no reason to take a different
view.
22. The imports in Customs Appeal No. 40884/2023 relate to the
period from October 2017 to January 2021. The interest charged on
the IGST component of Rs. 1,54,08,445/- cannot be sustained, and the
amount of Rs. 70,45,631/- paid by the appellant towards it is liable to
be refunded, subject to verification of the figure. Any penalty to the
extent it is referable to IGST would equally fail, though, for the reasons
in Part E below, the penalty under Section 114A fails in its entirety.
14
C. The clearances from the Special Economic Zone to the
Domestic Tariff Area
23. We take up the two later appeals on the ground raised by the
miscellaneous application, since it is a pure question of law, goes to
the root of the jurisdiction to raise the demands, and disposes of both
appeals in their entirety. The goods were warehoused in a Free Trade
and Warehousing Zone, which Section 2(n) of the SEZ Act defines as a
Special Economic Zone wherein mainly trading, warehousing and
related activities are carried on, and were removed to the Domestic
Tariff Area. Section 30 of the SEZ Act makes goods so removed
chargeable to duties of customs as leviable on such goods when
imported. Rule 47(5) of the SEZ Rules provides that refund, demand,
adjudication, review and appeal with regard to matters relating to
authorised operations, transactions, and goods and services related
thereto shall be made by the jurisdictional Customs and Central Excise
authorities in accordance with the relevant provisions of the Act.
24. In Dell International Services India Pvt Ltd v. Principal
Commissioner of Customs, 2026 (3) TMI 934 , a coordinate Bench of
this Tribunal held, at paragraph 31, that although Section 30 of the
SEZ Act provides for the levy, it does not provide any mechanism for
collection, since the SEZ Act does not borrow the relevant provisions
of the Act, so that recovery is barred by Article 265 of the Constitution,
and that Rule 47(5) confers no power to recover duties not levied or
short levied in the manner set out in Section 28 of the Act. At paragraph
32 it held that the SEZ Act does not provide for levy of interest, penalty
or confiscation, the authorisation under Rule 47(5) being limited to
refund, demand, adjudication, review and appeal, and that the levy of
interest, the order of confiscation and the penalty were beyond the
powers of the adjudicating authority. The Civil Appeal of the Revenue
against that decision, Diary No. 41487 of 2026, was dismissed by the
Supreme Court by order dated 09.10.2026, the Court recording, after
condoning the delay, that no grounds were made out to interfere with
the judgment of the Tribunal.
25. That dismissal was of a statutory appeal under Section 130E of
the Act. A Bench of three Judges of the Supreme Court held in
15
Kunhayammed v. State of Kerala, (2000) 6 SCC 359, also reported in
2001 (129) E.L.T. 11 (S.C.) , that once the appellate jurisdiction of the
Supreme Court has been invoked, the order passed in appeal attracts
the doctrine of merger, whether it be one of reversal, of modification
or merely of affirmation. The principle was applied by a coordinate
bench in Motonic India Automotive Pvt Ltd, 2025(5)TMI 638 . The view
taken in Dell International Services thus stands affirmed. It is, besides,
a decision of a coordinate Bench which judicial discipline obliges us to
follow. The reasoning accords with the decision of the High Court of
Andhra Pradesh in GMR Aerospace Engineering Ltd v. Union of India,
2019 (31) G.S.T.L. 596 (A.P.), which held that the SEZ Act and the
SEZ Rules constitute a self contained code, that Section 51 gives them
overriding effect, and that Rule 47(5) applies only to the matters it
enumerates and cannot be read to import what the SEZ Act does not
provide. The special leave petition of the Union against that judgment
was dismissed on 26.07.2019, 2019 (7) TMI 1975- SC Order .
26. We have noticed the earlier decision of the Principal Bench in
Prestige Polymers Pvt Ltd v. Commissioner of Customs, 2025 (3) TMI
15-CESTAT NEW DELHI , which held that the Commissioner had
jurisdiction to demand duty under Section 28 of the Act on goods
cleared from a Special Economic Zone. That decision preceded Dell
International Services , and the view taken in the latter has since been
affirmed by the Supreme Court. We are bound to follow it. It is also
not material that the noticee in Dell International Services was the unit
in the zone whereas the appellant here is the importer in the Domestic
Tariff Area who filed the Bills of Entry. The ratio rests on the absence
in the SEZ Act of any machinery for recovery, interest, confiscation or
penalty, which is a feature of the statute and not of the person
proceeded against. The Revenue has not suggested otherwise.
27. It follows that the demands of Rs. 11,06,652/- and Rs.
1,85,861/-, raised under Section 28(1) of the Act, together with the
interest, the confiscation, the redemption fines of Rs. 11,06,650/- and
Rs. 1,50,000/- and the penalties of Rs. 1,10,665/- and Rs. 18,000/-,
cannot be sustained.
16
28. The contentions of the appellant on the classification of the
goods under CTI 8512 2010, on the alternative classification under CTI
8541 4100 and on the burden of proof were fully argued, and it is right
that we should say why we do not answer them. The infirmity we have
found is not one of degree or of quantum. It goes to the root of the
proceedings, for the adjudicating authorities had no machinery under
the SEZ Act to raise the demand, to charge interest, to confiscate the
goods or to impose a penalty at all. Where a proceeding fails for want
of authority of law, the forum is not called upon to pronounce on merits
which can no longer affect the result, and the Tribunal has the
discretion to dispose of the appeal on the shortest point that is decisive
of it. The Supreme Court in Municipal Corporation of Greater Mumbai
v. Pankaj Arora, Criminal Appeal No. 164 of 2018 , held that once a
court concludes that the proceeding before it is not maintainable, it has
no jurisdiction to make further observations on the merits, and that
observations so made are not binding. The Court approved the test,
stated in Mulla, of whether the court considers the adjudication of the
issue material and essential for its decision. The High Court of Madras
in Australian Foods Ltd v. CCE, Chennai II, 2010 (254) E.L.T. 392
(Mad.), similarly regarded jurisdiction, when challenged, as the prime
and basic issue to be dealt with before the others.
29. A close parallel is furnished by the settled position where a
demand fails on limitation, which equally goes to the authority to raise
it. The Supreme Court in Commissioner of Customs, Mumbai v. B.V.
Jewels, 2004 (172) E.L.T. 3 (S.C.), observed that if the Tribunal found
that the action taken by the departmental authorities was beyond the
period of limitation, “it could have disposed of the appeals before it
only on that ground without examining the merits”. The High Court of
Allahabad, speaking through D.Y. Chandrachud, C.J., held in
Commissioner of Customs, Central Excise and Service Tax v. Monsanto
Manufacturer Pvt Ltd, 2014 (35) S.T.R. 177 (All.) , following State Bank
of India v. B.S. Agricultural Industries (I), (2009) 5 SCC 121 , that once
the demand is held to be time barred there is no occasion for the
Tribunal to enquire into the merits, and that in doing so it acts outside
its jurisdiction. The jurisdictional High Court, in E.T.A. General Pvt Ltd
v. Additional Commissioner of Central Excise, Chennai, 2016 (44)
17
S.T.R. 409 (Mad.) , applied the same principle to set aside an order of
this Tribunal which, having held the appeal to be time barred, had
proceeded to decide the merits, describing that course, in the words of
the Supreme Court, as an illegality. This Bench has followed these
decisions in Nobel King Purchase Solutions Pvt Ltd v. Commissioner of
GST and Central Excise , 2025 (5) TMI 2163- CESTAT CHENNAI , and in
Billion Honour Accounting Services Pvt Ltd v. Commissioner of GST and
Central Excise , 2025 (6) TMI 14 – CESTAT CHENNAI , refraining from
any finding on merits once the demand was found to be wholly barred
by limitation. The principle applies with greater force where, as here,
the defect is not a bar of time but the absence of the very power to
make the demand. A finding by us that the goods are complete lighting
equipment, or parts, or light emitting diodes would decide nothing
between the parties in these two appeals. It would be obiter and would
bind no one. Nor does leaving the question open prejudice either side.
In Customs Appeal No. 40884/2023 the appellant has accepted
classification under CTI 8512 2010 or 8512 2020, and the Revenue has
accepted the Order in Original of 2023 to that effect, given that no
appeal preferred by the Revenue has been brought to our notice. Our
finding on limitation in that appeal rests on the fact that the Revenue
has itself taken the contrary view in the later matters, and not on any
view of ours as to which of the two is correct. We therefore express no
opinion on the classification of the goods in Customs Appeal No.
40981/2025 and Customs Appeal No. 40982/2025, and the question is
left open.
30. We would be failing in our duty, however, if we did not record
our disquiet at the course the Revenue has followed. The Commissioner
of Customs, Chennai II (Import), in a notice of 2022 and an order of
2023 which the Revenue has accepted without appeal, held these
goods to be complete lighting equipment under CTI 8512 2010 or 8512
2020 and visited the appellant with a demand for the extended period,
a penalty and a fine of over Rs. 23 crores for having treated them as
parts. Within a year, the authorities at the Special Economic Zone held
the same and similar goods, imported by the same appellant, to be
parts under CTI 8512 9000, and penalised the appellant for having
treated them as complete equipment. The Order in Appeal No.
18
490/2025 compounded the matter by describing the earlier notice as
one issued to a related entity, when it was issued to the appellant itself,
and the Order in Appeal No. 491/2025 dismissed the contradiction as
merely undesirable. A taxpayer is entitled to expect that the State,
speaking through its several officers, speaks with one voice on the
same goods. When it does not, the least that may be expected of an
appellate authority is that it confronts the contradiction and instructs
course correction. We trust that the appropriate authorities concerned
will take note.
D. Extended period of limitation in Customs Appeal No.
40884/2023
31. Section 28(4) of the Act permits a demand within five years
only where the short levy is by reason of collusion, any wilful
misstatement or suppression of facts. In Cosmic Dye Chemical v.
Collector of Central Excise, 1995 (75) ELT 721 (SC) , the Supreme Court
held, in the context of the identically worded proviso to Section 11A of
the Central Excise Act, 1944, that misstatement or suppression of facts
must be wilful, that is, with intent to evade duty. Suppression, as
explained in Pushpam Pharmaceuticals Company v. CCE, 1995 (78)
E.L.T. 401 (S.C.) , means the deliberate withholding of information
which the assessee knew it was bound to disclose, and the Supreme
Court in Aban Loyd Chiles Offshore Ltd v. Commissioner of Customs,
2006 (200) E.L.T. 370 (S.C.) , read the proviso to Section 28 of the Act
in the same way. In Uniworth Textiles Ltd v. Commissioner of Central
Excise, (2013) 9 SCC 753 , the Apex Court held that the conclusion that
mere non payment of duty is equivalent to collusion, wilful
misstatement or suppression of facts is untenable, adding that the
burden of proving mala fides lies on the Revenue which alleges it and
not on the assessee to prove its bona fides. This Bench applied that
decision to a classification dispute in Johnson Lifts supra . In Secure
Meters Ltd v. Principal Commissioner of Customs, 2025 (393) E.L.T. 93
(Tri. Del.) , the Principal Bench held that, classification being part of self
assessment subject to reassessment by the proper officer, an importer
cannot be held guilty of wilful suppression for not anticipating the
classification later adopted by the DRI. The appeal of the Revenue was
19
dismissed by the Supreme Court, which recorded its complete
agreement with that view, (2025) 34 Centax 351 (S.C.) .
32. Evaluated on these principles, the findings at paragraphs 39 and
40 of the Order in Original cannot stand. They consist of conclusions.
The Supreme Court has reiterated in Tata Steel Ltd v. Union of India,
2026 INSC 920: 2026 (8) TMI 1587-Supreme Court , in the context of
Section 74 of the Central Goods and Services Tax Act, 2017, that the
foundational facts for an inference of fraud, wilful misstatement or
suppression must be evident from the notice itself, and that those
words are not to be recited mechanically to secure recovery beyond
the normal period. This Bench applied that principle in Toyota Kirloskar
supra . The Commissioner did not identify any fact that was concealed.
The Bills of Entry disclosed the goods by part number and description,
the value and the origin, and the DRI built its case from the import
data and from documents which the appellant itself furnished on
13.02.2020. The classification under CTI 8512 2010 or 8512 2020 was
reached by applying GRI 2(a) and the test of essential character, which
is an exercise of interpretation on which reasonable minds can and, as
the record shows, did differ. The only circumstance relied upon as
evidencing intent is that the appellant used different tariff items at
different times and ports. A variance of that kind may warrant enquiry.
It does not, without more, establish an intent to evade, and the
Commissioner did not attempt to show that the choice of tariff item
tracked the incidence of duty by design. The reliance on Eastern Silk
Industries , that fraud is fraud, presupposes the very finding of fraud
which the order never arrives at.
33. The decisive circumstance is the conduct of the Revenue itself.
The appellant's classification during the period in dispute was, in
substance, that the goods are parts under CTI 8512 9000. Within a
year of the impugned order, the Revenue's own adjudicating and
appellate authorities held goods which the appellant has shown,
without contradiction, to be identical or pari materia, to be precisely
that. A view which the Revenue itself adopts and defends before this
very Tribunal cannot be characterised as a wilful misstatement made
with intent to evade duty. Add to this that the appellant, on being asked
20
for documents by the DRI in January 2020, intimated its understanding
and paid differential duty with interest in March 2020, more than two
and a half years before the notice. That is not the conduct of an
importer bent on evasion. As this Bench observed in Toyota Kirloskar
supra , conduct of that kind is the antithesis of an intent to evade. The
emphasis on self assessment does not alter the position, for the duty
of correct self assessment does not dispense with the requirement that
the misstatement be wilful, as Secure Meters makes clear.
34. We accordingly hold that the extended period of limitation was
not validly invoked. The consequence is prescribed by Section 28(10B),
inserted by the Finance Act, 2018, under which a notice issued under
sub-section (4) is deemed to have been issued under sub-section (1)
where it is held unsustainable for the reason that collusion, wilful
misstatement or suppression of facts has not been established, and the
duty and interest are to be computed accordingly. This Bench confined
a demand in a classification dispute to the normal period on the same
basis in Johnson Lifts supra. The demand is therefore sustainable only
in respect of the Bills of Entry whose relevant date, namely the date of
the order for clearance under Explanation 1(a) to Section 28, falls
within two years preceding the service of the notice dated 10.10.2022.
As the appellant has accepted the classification, the differential duty
for that period is payable with interest under Section 28AA, save that
no interest is payable on the IGST component for the reasons recorded
in Part B. The record before us does not permit that computation, which
must be undertaken by the adjudicating authority on the basis of the
annexures to the notice. Since the demand for the earlier period fails
on limitation, the amounts appropriated or paid towards it are liable to
be dealt with in accordance with law. Whether the amount of Rs.
1,72,67,631/- paid voluntarily in March 2020, before the notice and
without protest, stands on the same footing as the amounts paid under
protest and after adjudication was not argued before us, and we leave
that question open, to be decided in accordance with law.
E. Penalty under Section 114A
35. A penalty under Section 114A is attracted only where the short
levy is by reason of collusion, wilful misstatement or suppression of
21
facts. Our finding in Part D removes its foundation, and the penalty,
including the twenty five per cent paid under the proviso, cannot
survive. Penalty is not, in any event, to be imposed on conduct that
flows from a bona fide belief, as the Supreme Court laid down in
Hindustan Steel Ltd v. State of Orissa, (1969) 2 SCC 627 , and as this
Bench applied to a classification dispute in Toyota Kirloskar supra . The
alternative submissions that the penalty could not extend to the
interest and that the balance seventy five per cent stood waived do
not, in consequence, arise, and we express no opinion on them. The
Commissioner refrained from imposing a penalty under Section 112(a)
and the Revenue has not appealed, so that no question of penalty
remains for the period within limitation.
36. To sum up, the appellant has accepted the classification
determined in Customs Appeal No. 40884/ 2023, and the differential
duty within the normal period, with interest on the basic customs duty
and social welfare surcharge, is payable. The extended period was
invoked without any finding of wilful intent that the record could
support, the goods were never liable to confiscation for a claim of
classification, and interest on IGST could not be charged for the period
in question. The Order in Original is therefore sustained only to the
extent of the demand within the normal period. The two later demands
were raised in respect of clearances from a Special Economic Zone
without any machinery in the SEZ Act for their recovery, or for interest,
confiscation or penalty, as held in Dell International Services , which
now stands affirmed by the Supreme Court. Those demands fail in their
entirety.
37. In the result, the Customs Appeal No. 40884 of 2023 is partly
allowed. The Order in Original No. 103068/2023 dated 15.09.2023 is
set aside insofar as it confirms the demand for the period beyond two
years preceding the service of the Show Cause Notice dated
10.10.2022, holds the goods liable to confiscation under Section
111(m), imposes a redemption fine of Rs. 23,90,00,000/-, demands
interest on the IGST component, and imposes penalty under Section
114A.The classification of the goods under CTI 8512 2010 or 8512
2020, which the appellant does not contest, and the demand of
22
differential duty in respect of the Bills of Entry whose relevant date falls
within two years preceding the service of the Show Cause Notice dated
10.10.2022, with interest under Section 28AA on the basic customs
duty and social welfare surcharge components, are upheld. The matter
in Customs Appeal No. 40884/2023 is remanded to the adjudicating
authority for the limited purpose of quantifying the duty and interest
payable under clause (ii), adjusting the amounts already paid by the
appellant, and granting the consequential refund of the balance,
including the interest paid on the IGST component and the penalty paid
under Section 114A, in accordance with law. The question whether the
amount voluntarily paid in March 2020 is refundable shall be decided
in accordance with law. The appellant shall be heard before any such
order is passed, and the exercise shall be completed within three
months of the receipt of this order. Customs Appeal No. 40982 /2025
and Customs Appeal No. 40981 /2025 are allowed. The Orders in
Appeal Seaport C.Cus.II Nos. 490/2025 and 491/2025, both dated
29.05.2025 are set aside, with consequential relief in accordance with
law.
(Order pronounced in open court on 28.10.2026)
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
Member (Judicial) Member (Technical)
ra