ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 20.03.2026
CESTAT Kolkata Sets Aside Customs Duty and IGST Demand
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 idΒ intelconsul@gmail.com or on his Mobile +91-9999005379.
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has delivered a judgment in favor of M/s. β Imperial Fragrance & Flavours Pvt. β Ltd. in Customs Appeal No. β 75890 of 2023. β The case revolved around the import of βGurjon Oilβ and βPatchouli Oilβ from Indonesia, where the appellant sought exemption from Basic Customs Duty (BCD) under Notification No. β 46/2011-Cus., as amended by Notification No. β 82/2018-Cus., and faced a demand for differential Integrated Goods and Services Tax (IGST).
Background of the Case
M/s. Imperial Fragrance & Flavours Pvt. β Ltd. imported βGurjon Oilβ and βPatchouli Oilβ from Indonesia and filed Bill of Entry No. β 4012164 dated 11.07.2019, claiming exemption from BCD under the aforementioned notifications. β The goods were assessed, examined, and granted Out-of-Charge on 19.07.2019 after the submission of all required documents, including the certificate of origin and invoice. β
However, during an audit in 2021, the Audit team raised objections, alleging that the appellant had paid IGST at 12% instead of the applicable rate of 18%. β The appellant acknowledged the error and expressed willingness to pay the differential IGST, requesting permission to file a supplementary Bill of Entry to claim input tax credit for the additional IGST paid. β This request was denied. β
Subsequently, a Show Cause Notice (SCN) was issued on 09.07.2021, challenging the classification of the imported goods and asserting that the appellant was ineligible for the concessional BCD rate. β The SCN also demanded the differential IGST. β The adjudicating authority confirmed the demand for BCD, SWS, and IGST, which was upheld by the Commissioner of Customs (Appeals). β Aggrieved by the decision, the appellant approached the Tribunal. β
Key Arguments Presented
Appellantβs Submissions
- Proper Documentation and Classification: The appellant argued that the Bill of Entry was assessed and cleared after thorough examination by Customs authorities, who were satisfied with the classification and documentation provided. β
- Eligibility for BCD Exemption: The appellant contended that the imported goods fell under Chapter Heading 3301, which qualifies for concessional BCD rates under the relevant notifications. β
- IGST Payment Error: The appellant admitted to a genuine error in paying IGST at 12% instead of 18%. β They emphasized their willingness to pay the differential IGST and requested permission to file a supplementary Bill of Entry to claim input tax credit, which was denied. β
- Revenue Neutrality: The appellant argued that the differential IGST payment would result in a revenue-neutral situation, as they would be eligible to claim input tax credit for the additional IGST paid. β
Revenueβs Submissions
- Incorrect Classification: The Revenue argued that the classification adopted by the appellant was incorrect, making them ineligible for the concessional BCD rate. β
- IGST Payment Error: The Revenue contended that the appellant had admitted to paying IGST at an incorrect rate, justifying the demand for differential IGST. β
Tribunalβs Observations and Decision β
After hearing both sides and reviewing the appeal papers and supporting documents, the Tribunal made the following observations:
- BCD and SWS Demand: The Tribunal noted that the Customs authorities had assessed and cleared the goods after verifying the classification and documentation, including the certificate of origin. β The relevant notifications provide BCD exemption for goods under Chapter Heading 3301, irrespective of sub-headings. β Therefore, the Tribunal found no merit in the confirmed demand for BCD and SWS and set it aside. β
- Differential IGST Demand: The Tribunal acknowledged the appellantβs genuine error in paying IGST at 12% instead of 18%. β It emphasized that the appellant had demonstrated their bona fides by agreeing to pay the differential IGST and requesting permission to file a supplementary Bill of Entry to claim input tax credit. β The Tribunal highlighted that input tax credit is an indefeasible right of the appellant, and the denial of this request was unjustified. β
- Revenue Neutrality: Citing multiple case laws, including M/s. β Chiripal Polyfilms Ltd. v. Commissioner of C.Ex. β & S.T., Vadodara-I, the Tribunal reiterated that when differential duty or tax results in a revenue-neutral situation, the demand is not legally sustainable. β The Tribunal emphasized that the appellantβs case was revenue-neutral, as the differential IGST paid would have been available as input tax credit. β
Final Order
The Tribunal set aside the impugned order, allowing the appeal filed by M/s. β Imperial Fragrance & Flavours Pvt. β Ltd. The appellant was granted consequential relief as per law. β
Key Takeaways
- Importance of Proper Documentation: The Tribunalβs decision underscores the significance of maintaining accurate and complete documentation during imports to substantiate claims for exemptions and concessions. β
- Revenue Neutrality Principle: The judgment reaffirms the principle that demands for differential duty or tax are not sustainable in cases where the payment results in a revenue-neutral situation. β
- Right to Input Tax Credit: The Tribunal emphasized that input tax credit is an indefeasible right of the assessee, and authorities should consider requests to facilitate its utilization. β
This ruling serves as a precedent for similar cases, highlighting the importance of procedural fairness and adherence to established legal principles in customs and tax disputes.
Source: CESTAT Kolkata
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