ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 03.02.2026
CESTAT Chennai Sets Aside Duty Demand on Nagarjuna Hospital Ltd. for Import of Medical Equipment
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) 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.comor on his Mobile +91-9999005379.
In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has set aside the demand for differential duty and penalties imposed on Nagarjuna Hospital Ltd. for the import of medical equipment. β The case revolved around the classification of a Linear Accelerator system, imported by the hospital for cancer treatment, and whether the demand raised by the Customs Department was time-barred. β
Background of the Case
Nagarjuna Hospital Ltd., based in Vijayawada, Andhra Pradesh, imported medical equipment described as a “True Beam” Linear Accelerator system under two Bills of Entry (BE) dated March 18, 2016. β The hospital claimed duty exemption under Customs Notifications No. β 012/2012 (Sl. β No. 473) and 021/2012 (Sl. β No. 95), declaring the goods under Customs Tariff Heading (CTH) 9022 9030 as “Radiation Beam Delivery Unit/Equipment.” β However, the Customs Department alleged that the correct classification should have been under CTH 9022 1490 as “Cancer Therapy System,” which did not qualify for the claimed exemption. β
Following an investigation, the Commissioner of Customs issued a Show Cause Notice (SCN) on September 26, 2017, alleging misclassification and demanding differential duty of Rs. 1,57,71,212/- along with interest and penalties under Sections 111(m), 112(a), and 114A of the Customs Act, 1962. The imported goods were also confiscated, with an option to redeem them on payment of a fine of Rs. β 15 lakhs. β Nagarjuna Hospital Ltd. challenged the order, leading to the present appeal before the CESTAT. β
Key Issues in the Case
The appeal raised two primary issues:
- Time Barred Demand: The appellant argued that the SCN was issued beyond the permissible time limit under Section 28(4) of the Customs Act, 1962, which allows an extended period for issuing SCNs only in cases of fraud, collusion, or willful misstatement. β The appellant contended that the goods were subjected to a “First Check” examination by Customs officials before clearance, and the classification declared by the hospital was accepted after scrutiny. β Therefore, the SCN issued more than a year later was time-barred. β
- Classification Dispute: The appellant maintained that the imported equipment functioned as a single system for targeted radiation beam therapy and was correctly classified under CTH 9022 9030. The Customs Department argued that the equipment should be classified under multiple headings based on its components, as per the Accessories (Condition) Rules, 1963.
Tribunal’s Observations and Decision
The Tribunal, comprising Honβble Member – Technical and Honβble Member – Judicial, examined the submissions made by both parties and delivered its final order on February 2, 2026. β
Time Barred Demand β
The Tribunal emphasized that the SCN was issued beyond the normal period of limitation under Section 28(4) of the Customs Act. β It noted that the goods were subjected to a “First Check” examination, during which Customs officials physically inspected the consignments and reviewed the catalogs and documents. β The goods were assessed and duty paid on May 8, 2016, as per the proper officer’s order. β The SCN issued on September 26, 2017, was therefore time-barred. β
The Tribunal rejected the Customs Department’s argument that SCNs under Section 124 of the Customs Act are not bound by strict timelines. It held that the SCN is the foundation for levy and recovery of duty, penalty, and interest, and all allegations must be clearly stated in the notice. β Raising new legal points at the appellate stage was deemed impermissible. β
Classification Dispute
While the Tribunal acknowledged the submissions on classification, it refrained from examining the merits of the case, citing precedents from the Honβble Supreme Court. β It held that once a demand is found to be time-barred, there is no need to delve into the merits of the classification dispute. β
Conclusion
The Tribunal concluded that the Customs Department failed to prove fraud or willful misstatement on the part of the appellant. It noted that the appellant’s actions, including seeking clarification and subjecting the goods to a “First Check,” demonstrated transparency and good faith. β The SCN was deemed invalid due to being time-barred, and the impugned order was set aside. β
Implications of the Ruling
This judgment underscores the importance of adhering to statutory timelines for issuing SCNs under the Customs Act. β It also highlights the need for Customs authorities to exercise due diligence during the examination and assessment of imported goods. β Importers are encouraged to maintain transparency and comply with procedural requirements to avoid disputes.
The decision provides clarity on the interpretation of classification rules under the Indian Customs Tariff and reinforces the principle that SCNs must be specific and detailed to allow the respondent to prepare an adequate defense.
Conclusion
The CESTAT’s ruling in favor of Nagarjuna Hospital Ltd. is a significant development in the realm of customs law, particularly concerning the interpretation of classification rules and the application of limitation periods for issuing SCNs. The judgment serves as a reminder to both importers and Customs authorities to ensure compliance with legal and procedural requirements to avoid unnecessary litigation.
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Source: CESTAT Chennai
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