ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 17.11.2025
High Court of Karnataka Upholds CESTAT Ruling and Dismisses Revenue Appeals in Customs Duty Dispute
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.
On September 16, 2025, the High Court of Karnataka at Bengaluru delivered a significant judgment in the Customs Appeals (CSTA No. โ 4 of 2021, CSTA No. โ 1 of 2022, and CSTA No. โ 2 of 2022) filed by the Commissioner of Customs, Bengaluru, against M/s. 3M India Limited and its representatives. โ The appeals challenged the common Final Order Nos. โ 20343-20345/2020, dated March 20, 2020, passed by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bengaluru. โ
Background of the Case
The case revolved around the import of surgical and medical products, including Micropore surgical tapes, by M/s. โ 3M India Limited. โ The Directorate of Revenue Intelligence (DRI) alleged that the company had misdeclared these products as “Skin Barrier Micropore Surgical Tapes” to avail the concessional customs duty under Notification No. 21/2002-Cus, dated March 1, 2002. โ The notification provides a reduced duty rate for certain goods used in ostomy surgery cases. โ
The Revenue issued a show-cause notice under Section 28 of the Customs Act, 1962, invoking the extended limitation period under sub-section (4) of Section 28, which applies in cases of collusion, willful misstatement, or suppression of facts. โ The order-in-original imposed penalties and interest on M/s. โ 3M India Limited and its representatives, holding them liable for misdeclaration and ineligible duty exemptions. โ
M/s. 3M India Limited challenged the order before the CESTAT, which ruled that the imported products were not eligible for exemption under the notification but also held that the extended limitation period was not applicable due to the lack of evidence of willful misstatement or suppression of facts. The Revenue subsequently filed appeals before the High Court. โ
Key Questions of Law
The High Court addressed several substantial questions of law, including:
- Whether the Tribunal erred in accepting additional evidence during the appeal. โ
- Whether the extended limitation period under Section 28(4) of the Customs Act was applicable. โ
- Whether penalties under Section 114A of the Customs Act were justified. โ
- Whether the judgment of the CESTAT Chennai Bench in a similar case was correctly decided. โ
- Whether the respondent’s earlier consignments were cleared under self-assessment or physical examination. โ
High Court’s Findings
The High Court dismissed the appeals, providing detailed reasoning for its decision:
- Acceptance of Additional Evidence: The Court found no merit in the Revenue’s objection to the Tribunal accepting additional evidence, as the evidence ultimately supported the Revenue’s case. โ
- Extended Limitation Period: The Court upheld the CESTAT’s finding that the extended limitation period under Section 28(4) was not applicable. โ It emphasized that the threshold for invoking extended limitation is high and requires evidence of deliberate and willful misstatement or suppression of facts. โ The Court noted that the respondent had been importing similar products for years, and the Revenue had previously cleared these goods without objection, creating a reasonable belief that the exemption was valid. โ
- Penalty Under Section 114A: Since the extended limitation period was not applicable, the corresponding penalty under Section 114A was also deemed unjustified. โ
- Judgment of CESTAT Chennai Bench: The Court declined to comment on the correctness of the CESTAT Chennai Bench’s decision, as it was not under appeal in this case. โ
- Self-Assessment vs. โ Physical Examination: The Court found no evidence of perversity in the CESTAT’s factual finding that earlier consignments were physically examined and cleared by the Revenue. โ It rejected the Revenue’s claim that the goods were cleared under self-assessment. โ
Conclusion
The High Court’s judgment underscores the importance of adhering to procedural requirements and evidentiary standards when invoking extended limitation periods under the Customs Act. It also highlights the significance of consistent past practices by the Revenue in determining the applicability of exemptions. โ This case serves as a reminder to both importers and the Revenue to ensure clarity and accuracy in declarations and assessments, as well as the need for robust evidence when alleging willful misstatement or suppression of facts. โ The dismissal of the Revenue’s appeals reinforces the principle that a mere change in interpretation or classification cannot retroactively constitute willful misstatement or suppression of facts.
Source: Karnataka High Court
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