ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 26.02.2026
CESTAT Chennai Dismisses Revenue Appeal Over Non-Issuance of Show Cause Notice: Upholds Principles of Natural Justice
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.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai, recently delivered its Final Order No. β 40284/2026 on February 23, 2026, concerning Customs Appeal No. 40943 of 2016 and Customs Cross Appeal No. β 40945 of 2016. β This case revolved around a dispute between the Commissioner of Customs, Chennai VII Commissionerate, and M/s. β Larsen & Toubro Ltd. regarding the classification and differential duty demand on imported goods. β
Background of the Case
The case originated from an Order-in-Appeal (C.Cus.I. No. 705/2015) dated October 30, 2015, issued by the Commissioner of Customs (Appeals-I). β The Revenue filed an appeal against this order, claiming that the Appellate Authority failed to consider the fact that a show cause notice had been issued within the stipulated time. β The Revenue argued that the Commissioner (Appeals) had set aside the lower authority’s order based on the alleged non-issuance of a show cause notice, which they claimed was a misrepresentation of facts by the importer. β
On the other hand, M/s. Larsen & Toubro Ltd. filed a cross-appeal, denying the allegations made by the Revenue. β They contended that no show cause notice was ever issued to them, and the Order-in-Original was issued in violation of the principles of natural justice. β They also argued that the differential duty demand was time-barred and that the imported itemβa specialized orthopedic tableβwas misclassified by the Department.
Key Issues in the Case
The primary issue before the Tribunal was whether a show cause notice was issued and served on M/s. β Larsen & Toubro Ltd. for re-determining the classification of the imported goods, which were described as “Operating Table Orthopaedics Hydraulic with Remote Model No. YSAMMITZ RC40 (Medical Equipment).” β The importer had classified the goods under CTH No. β 90189099 as “other Medical Equipment and Appliances,” while the Department argued that the goods should be classified under CTH 9402, resulting in a differential duty demand of Rs. β 4,89,431.
Tribunal’s Observations and Findings
- Absence of Show Cause Notice: The Tribunal noted that the Department failed to produce any evidence of the issuance or service of a show cause notice, despite asserting its existence. β Section 28(1) of the Customs Act mandates the issuance of a notice within one year of the relevant date if the classification is proposed to be revised, which was not adhered to in this case. β
- Misapplication of Section 28(2): The Original Authority had invoked Section 28(2) of the Customs Act, which provides for the waiver of a show cause notice under specific conditions, such as the payment of duty and interest by the importer. β However, the Commissioner (Appeals) found that these preconditions were not met, and the invocation of Section 28(2) was incorrect. β
- Violation of Principles of Natural Justice: The Tribunal emphasized that the absence of a show cause notice was a clear violation of the principles of natural justice. β The Respondent was not given an opportunity to present their case, which is a fundamental requirement under Section 28(1) of the Customs Act. β
- Failure to Provide Evidence: Despite being given ample timeβnearly ten yearsβthe Department failed to produce the alleged show cause notice, even during the hearing before the Tribunal. This failure undermined the Revenue’s appeal and confirmed the absence of the notice. β
Final Decision
After thoroughly examining the records and hearing arguments from both sides, the Tribunal concluded that the Revenue’s appeal lacked merit. β The absence of a show cause notice was deemed fatal to the case, and the Tribunal upheld the Order-in-Appeal issued by the Commissioner (Appeals). Consequently, the Revenue’s appeal was dismissed. β
Key Takeaways
- Importance of Adhering to Legal Procedures: The case highlights the critical importance of following legal procedures, such as issuing and serving a show cause notice, to ensure compliance with the principles of natural justice. β
- Burden of Proof: The burden of proving the issuance and service of a show cause notice lies with the Department. β Failure to provide evidence can lead to the dismissal of the appeal. β
- Timely Action: The Tribunal emphasized the importance of adhering to statutory timelines, as the notice for personal hearing was issued beyond the one-year limitation period prescribed under Section 28(1). β
- Misapplication of Legal Provisions: The case underscores the need for authorities to correctly apply legal provisions, as the misapplication of Section 28(2) weakened the Department’s position. β
Conclusion
The Final Order No. β 40284/2026 serves as a reminder of the significance of procedural compliance and the principles of natural justice in customs-related disputes. It also highlights the necessity for authorities to substantiate their claims with concrete evidence, especially when challenging decisions made by appellate bodies. β This case sets a precedent for similar disputes and reinforces the importance of transparency and accountability in the adjudication process.
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Source: CESTAT Chennai
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