Lumax’s SEZ-to-DTA Duty Demands Fail: CESTAT Applies Supreme Court-Affirmed Ruling That SEZ Act Lacks Recovery Machinery

S L Lumax Limited imported LED strips for motor-vehicle lighting equipment.

In the first appeal, Customs classified the goods as complete lighting equipment under CTI 8512 2010 or 8512 2020, confirmed differential duty, invoked the extended limitation period, ordered confiscation and redemption fine, and imposed a penalty under Section 114A. The appellant accepted the classification but challenged those consequences.

In two later appeals concerning goods removed from a Free Trade and Warehousing Zone into the Domestic Tariff Area, Customs instead classified the goods as parts under CTI 8512 9000 and confirmed demands, interest, confiscation, fines and penalties. The appellant challenged those orders, including on the ground that the SEZ Act and Rules did not provide the machinery for those actions.

The appeals were heard together because they concerned the same or similar goods.

Section 111(m) of the Customs Act, 1962 applies where imported goods do not correspond, in value or another particular, with the entry made; a bona fide classification claim, where the goods are otherwise fully and correctly described, does not by itself constitute misdeclaration (Northern Plastic Ltd v. Collector of Customs and Central Excise).

A redemption fine under Section 125 presupposes liability to confiscation; its quantum must also comply with the statutory market-price cap and be supported by reasoned determination.

For periods before 16 August 2024, Section 3(12) of the Customs Tariff Act, 1975 did not incorporate the Customs Act’s provisions on interest, penalty or confiscation into the IGST levy under Section 3(7); the 2024 amendment adding those matters was prospective.

Under Section 28(4), collusion, wilful misstatement or suppression must be deliberate and intended to evade duty; the Revenue bears the burden of establishing mala fides (Cosmic Dye Chemical, Pushpam Pharmaceuticals and Uniworth Textiles).

Where those elements are not established, Section 28(10B) deems the notice to have been issued under Section 28(1), limiting recovery to the normal period.

Section 114A likewise requires the statutory grounds of collusion, wilful misstatement or suppression.

For DTA clearances from an SEZ, the Tribunal followed Dell International Services India Pvt Ltd v. Principal Commissioner of Customs: Section 30 of the SEZ Act, 2005 imposes a duty on such removals, but the SEZ Act and Rule 47(5) of the SEZ Rules, 2006 do not supply or import the Customs Act’s machinery for recovery under Section 28, or for interest, confiscation and penalties.

The appellant had correctly described the goods and the Revenue’s case in the first appeal was that the tariff classification was wrong, not that the goods’ description, value or other particulars were inaccurate. The classification dispute therefore did not establish misdeclaration under Section 111(m), and the confiscation and consequential redemption fine could not stand.

Because the relevant imports pre-dated the 2024 amendment to Section 3(12), interest on the IGST component was not authorised.

The Commissioner’s findings of wilful suppression were unsupported by identified concealed facts: the Bills of Entry disclosed the goods, and the appellant supplied documents and paid differential duty and interest after the DRI’s inquiry. Further, the Revenue later advanced the opposite classification for identical or similar goods, reinforcing that the dispute was interpretative rather than a deliberate evasion.

The extended period was therefore unavailable, although duty for Bills of Entry falling within the normal two-year period remained payable. Since the statutory basis for the Section 114A penalty also failed, that penalty could not survive.

In the two SEZ appeals, the absence of statutory recovery and enforcement machinery under the SEZ framework was dispositive; the Tribunal therefore did not decide the competing classification arguments.

The extended-period demand, confiscation, redemption fine, interest on IGST and Section 114A penalty were set aside.

The matter was remanded solely to quantify the surviving duty and interest, adjust payments and grant consequential relief, including refund of the IGST interest and penalty paid; the treatment of the amount paid voluntarily in March 2020 was left to be decided in accordance with law.

Appeals Nos. 40982 and 40981 of 2025 were allowed, and the impugned appellate orders were set aside, with consequential relief in accordance with law.