ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 03.11.2025
CESTAT Kolkata- Differential Customs Duty Demand and Confiscation Order Declared Unsustainable
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata, has set aside the demand for differential Customs Duty (CVD) imposed on M/s Reach Infocom Tech Pvt. Ltd. and its Director. โ The case revolved around allegations of undervaluation of imported goods, specifically mobile phones and laptops, due to discrepancies in the declared Retail Sale Price (RSP) at the time of import and the RSP found during a subsequent investigation. โ
Background of the Case
M/s Reach Infocom Tech Pvt. โ Ltd. (RITPL) is engaged in the import and sale of mobile phones and laptops under the brand name “REACH.” โ The company had imported goods from China between 2015 and 2017, paying the appropriate Customs Duty, including Countervailing Duty (CVD), based on the declared RSP. โ However, during a search conducted by the Directorate of Revenue Intelligence (DRI) in 2019, discrepancies were allegedly found between the declared RSP and the RSP displayed on goods seized during the investigation. This led to the issuance of two Show Cause Notices (SCNs) and a subsequent demand for differential CVD amounting to Rs. โ 2,92,54,340, along with interest, penalties, and redemption fines. โ
Key Arguments by the Appellant โ
The appellants, represented by their legal counsel, raised several critical points challenging the demand:
- Jurisdictional Overreach: The appellants argued that Customs authorities lacked jurisdiction to demand differential CVD for goods that had already been assessed and cleared for home consumption. โ They contended that any subsequent activity, such as affixing new MRP stickers, constituted “manufacture” under Section 2(f)(iii) of the Central Excise Act, 1944, and any duty liability arising from such activities should fall under the purview of Central Excise authorities, not Customs. โ
- Lack of Evidence: The appellants highlighted that the demand was based on assumptions and generalizations rather than concrete evidence. โ The Department failed to provide proof of any single transaction where goods were sold at a price higher than the declared MRP.
- Non-compliance with Legal Procedures: The appellants pointed out that the statements relied upon by the Department were recorded under Section 108 of the Customs Act but were not subjected to the mandatory procedure under Section 138B, which requires examination and cross-examination of witnesses before admitting their statements as evidence. โ
- Time-Barred Demand: The appellants argued that the extended period of limitation could not be invoked for the second SCN issued in 2020, as the facts of the case were already known to the Department when the first SCN was issued in 2019. โ
- Finality of Self-Assessed Bills of Entry: The appellants contended that the self-assessed Bills of Entry for the imported goods were not challenged by the Department, and as per the Supreme Court’s ruling in the ITC Ltd. case, the Department cannot reassess the original assessments indirectly. โ
Tribunal’s Observations and Ruling โ
After hearing both sides, the Tribunal made the following key observations:
- No Provision for Re-Determination of CVD: The Tribunal held that Section 3(2) of the Customs Tariff Act, read with Section 4A of the Central Excise Act, does not provide any mechanism for re-determining the CVD when it is paid based on the declared RSP at the time of import. โ
- Activity Constitutes “Manufacture”: The Tribunal agreed with the appellants that affixing new MRP stickers on goods listed under the Third Schedule of the Central Excise Act amounts to “manufacture.” โ As such, any duty liability arising from this activity should be under the Central Excise Act, not Customs Law. โ
- Non-Admissibility of Statements: The Tribunal emphasized that the Department failed to follow the mandatory procedure under Section 138B of the Customs Act, rendering the recorded statements inadmissible as evidence. โ
- Erroneous Quantification of Duty: The Tribunal found that the Department’s method of calculating differential duty was flawed, as it relied on RSPs from unrelated e-commerce websites without corroborating evidence. โ
- Time-Barred Demand: The Tribunal ruled that the extended period of limitation could not be invoked for the second SCN, as the facts were already within the Department’s knowledge when the first SCN was issued. โ
- Confiscation and Redemption Fine Unsustainable: The Tribunal held that confiscation and redemption fines were not legally sustainable, as the goods were not available for confiscation and had been cleared without any bond. โ
Final Verdict
The Tribunal set aside the impugned order in its entirety, both on merits and on account of time-bar. โ The appeals filed by M/s Reach Infocom Tech Pvt. โ Ltd. and its Director were allowed, and they were granted consequential relief as per law.
Connected Matter
Source: CESTAT Kolkata
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