Revenue cannot reclassify mixed-fibre fabrics without corroborative scientific evidence establishing their composition.

The appellant imported five consignments of Chinese-origin “Mixed Lot of Polyester Warp Knitted Fabrics” from suppliers in the United Kingdom and Hong Kong. The goods had a cumulative assessable value of ₹3,38,71,839 and were declared under Customs Tariff Item (CTI) 6005 9000, with the benefit of 10% Basic Customs Duty under Serial No. 166 of Notification No. 82/2017-Customs. The goods were assessed and cleared on payment of ₹56,05,789 duty.

Subsequently, the Department alleged that the goods were fabrics of synthetic fibres and ought to have been classified under CTIs 6005 3500 to 6005 3900, attracting 20% Basic Customs Duty. A show cause notice proposed reclassification, recovery of differential duty of ₹39,12,198 with interest, and penalties under Sections 114A and 114AA of the Customs Act, 1962.

The adjudicating authority confirmed the demand and imposed penalties equivalent to the differential duty under Section 114A and ₹5,00,000 under Section 114AA. The Commissioner (Appeals) upheld that order. The appellant thereafter approached the Tribunal.

Whether the Department established, on the basis of cogent technical or scientific evidence, that the imported mixed-lot polyester warp-knitted fabrics were classifiable under the tariff entries for warp-knitted fabrics of synthetic fibres instead of CTI 6005 9000?

Whether the appellant was entitled to the concessional Basic Customs Duty under Serial No. 166 of Notification No. 82/2017-Customs?

Whether the differential duty demand, interest, and penalties under Sections 114A and 114AA of the Customs Act, 1962 were sustainable?

The Tribunal applied the principle that the burden of proving that an importer’s declared classification is incorrect lies upon the Revenue, as recognised in H.P.L. Chemicals Ltd. v. Commissioner of Central Excise, 2006 (197) E.L.T. 324 (S.C.), and Commissioner of Central Excise v. Wockhardt Life Sciences Ltd., 2012 (277) E.L.T. 299/239 (S.C.).

Classification must be based on the tariff wording and reliable material such as composition, product literature, technical evidence, and the character of the goods; a classification cannot be altered merely on assumptions.

A specific tariff entry prevails over a residuary entry, but the Revenue must first establish that the goods satisfy the requirements of the specific entry.

Under Heading 6005, warp-knitted fabrics are separately classified according to whether they are of cotton, synthetic fibres, artificial fibres, or “other” materials; the Tribunal treated CTI 6005 9000 as applicable where the goods were not shown to fall within the preceding material-specific entries.

The Tribunal further held that, in a textile-classification dispute involving mixed fibres, sampling and laboratory or other technical evidence are necessary to establish fibre composition.

Penalties under Sections 114A and 114AA require a sustainable finding of misdeclaration or deliberate incorrect documentation.

The Department’s case rested principally on the description “Polyester Warp Knitted Fabrics” and the inference that the goods were made exclusively of synthetic fibres. The Tribunal held that this description did not establish that the entire fabric was composed of polyester; it could indicate that polyester was used in the warp while other materials could form part of the fabric.

Since the consignments were described as “mixed lot” fabrics, their classification depended upon their actual fibre composition and construction. However, the Department neither drew samples nor produced a Textile Committee report, CRCL or NABL test report, technical literature, manufacturer’s specifications, fibre or yarn composition, GSM analysis, or other corroborative material.

Consequently, the Revenue failed to discharge its burden of proving that the goods fell within the synthetic-fibre tariff entries. The Tribunal also noted that the goods had initially been examined, assessed, and cleared under CTI 6005 9000, without objection, and that similar goods had been accepted under the same classification at other Customs Houses.

Further, the adjudicating authority’s broad reclassification across multiple tariff entries—CTIs 6005 3500 to 6006 3900—was itself legally unsustainable because goods must be assigned to a specific tariff entry on the basis of evidence.

The differential duty demand of ₹39,12,198 with interest was set aside, and the penalties imposed under Sections 114A and 114AA of the Customs Act, 1962 were also annulled because misclassification and misdeclaration were not established.