CESTAT Kolkata Quashes IGST Demand on Tea Pruning Machines

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 20.04.2026

CESTAT Kolkata Quashes IGST Demand on Tea Pruning Machines

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Tea Spares (India), a Kolkata-based importer of agricultural machinery, recently secured a significant legal victory before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata. The case revolved around the correct classification and assessment of Integrated Goods and Services Tax (IGST) on imported tea pruning machines and their spare parts. This article provides a detailed overview of the dispute, the legal arguments, and the final outcome, offering valuable insights for importers and stakeholders in the agricultural machinery sector.

Background of the Case

Sumitra Devi Kejriwal, proprietor of Tea Spares (India), imported tea plucking/pruning machines and their spare parts in 2017, filing two Bills of Entry for clearance. The goods were self-assessed and classified under Customs Tariff Heading (CTH) 8432, which covers agricultural, horticultural, or forestry machinery for soil preparation or cultivation. IGST was paid at 12% as per the applicable entry in Schedule-II of IGST Notification No.1/2017.

The Dispute: IGST Rate and Classification

During a post-clearance audit, customs authorities claimed that IGST should have been levied at 18% (Schedule-III, Entry 453) instead of 12%. A Demand cum Show Cause Notice was issued in 2021, nearly four years after the import, seeking recovery of the alleged short levy along with interest and penalties. The authorities invoked the extended period of limitation, alleging suppression of facts.

Legal Arguments

Appellant’s Position

• No Suppression or Misstatement: The appellant argued that all facts were disclosed, and the goods were classified and assessed transparently.
• Correct Classification: The machines were classified under CTH 8432, and the corresponding IGST rate was paid.
• Jurisdictional Challenge: The appellant contended that IGST recovery under Section 28(4) of the Customs Act was beyond jurisdiction, as IGST is not a ‘duty’ specified under the Act.

Department’s Position

• Residual Classification: Customs authorities argued that the goods did not have a specific entry in the IGST schedules and should be classified under the residual entry, attracting 18% IGST.
• Extended Limitation: The department invoked the extended period for issuing the show cause notice, citing suppression.

Tribunal’s Findings and Decision

The Tribunal examined the classification and the legal basis for the IGST rate:

• Classification Accepted: The adjudicating authority had accepted the classification under CTH 8432, and the department did not challenge this in the show cause notice.
• No Evidence of Suppression: There was no evidence of misstatement or suppression by the importer, making the extended limitation period inapplicable.
• Jurisdictional Clarity: The Tribunal clarified that the same tariff entry must apply for both Basic Customs Duty and IGST, and the department’s attempt to use a different entry for IGST was unsustainable.
• Appropriate IGST Rate Paid: The importer had paid the correct IGST rate as per the classification.

Outcome

The Tribunal set aside the order of the Commissioner (Appeals), upheld the adjudicating authority’s decision, and allowed the appeal. The demand for additional IGST, interest, and penalties was dropped.

Key Takeaways for Importers

• Transparent Classification Matters: Accurate self-assessment and classification can protect importers from retrospective demands.
• Timely Action by Authorities: Authorities must issue show cause notices within the prescribed limitation period and provide evidence for any allegations of suppression.
• Consistency in Tariff Application: The same tariff heading should be used for both customs duty and IGST, ensuring legal consistency.

Conclusion

This case sets an important precedent for importers of agricultural machinery, especially those dealing with specialized equipment like tea pruning machines. It underscores the importance of correct classification, transparent documentation, and timely action by customs authorities. Importers should ensure their goods are properly classified and assessed to avoid disputes and retrospective demands.

Source: CESTAT Kolkata

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