Interpretational Classification Dispute Cannot Trigger Extended Limitation: CESTAT Quashes ₹3.47 Crore Customs Demand on Myntra Jabong
Interpretational Classification Dispute Cannot Trigger Extended Limitation: CESTAT Quashes ₹3.47 Crore Customs Demand on Myntra Jabong
Introduction
The Customs, Excise and Service Tax Appellate Tribunal (Delhi Bench) has set aside a ₹3.47 crore customs duty demand raised against Myntra Jabong India Pvt Ltd, holding that the extended limitation period under Section 28(4) of the Customs Act, 1962 cannot be invoked in a tariff classification dispute absent evidence of wilful suppression. A Bench comprising Judicial Member Binu Tamta and Technical Member Hemambika R. Priya allowed the company’s appeal, observing that classification of goods often involves interpretative issues and cannot automatically be treated as concealment of material facts.
Factual Background
Myntra Jabong India Pvt Ltd, an online fashion and lifestyle retailer, imports apparel and related products for sale through its e-commerce platform. Between August 2017 and October 2019, the company imported certain knitted men's jackets and classified them under tariff entries attracting basic customs duty at 20 percent.
The Customs Department subsequently took the view that the garments had been incorrectly classified. According to the Department, the jackets had full front openings with slide-fastening zippers, a feature that had not been mentioned in the Bills of Entry. The Department considered this feature relevant for classification under Chapter 61 of the Customs Tariff, which differentiates garments based on structural characteristics such as front openings and fastening mechanisms. On this basis, the authorities proposed reclassification of the imported jackets, resulting in a differential duty demand of ₹3.47 crore.
Procedural Background
The Principal Commissioner confirmed the differential customs duty demand of ₹3,47,37,530 under Section 28(4) of the Customs Act, invoked the extended limitation period, held the goods liable to confiscation under Section 111(m), and imposed a penalty under Section 114A. Challenging this order, Myntra Jabong filed an appeal before the Tribunal.
Issues
1. Whether the extended limitation period under Section 28(4) of the Customs Act could be invoked in a tariff classification dispute.
2. Whether omission of certain product features in the Bills of Entry amounted to wilful suppression with intent to evade duty.
3. Whether confiscation and penalty imposed by the Department were legally sustainable.
Contentions of the Parties
The Department contended that the appellant had failed to disclose that the jackets had full front openings with zipper fastenings. According to Customs authorities, this feature directly affected classification under Chapter 61 of the Customs Tariff. The Department argued that the omission constituted suppression of material facts, thereby justifying invocation of the extended five-year limitation period under Section 28(4).
The appellant argued that the dispute was purely interpretative and related to classification of goods. It submitted that the imported goods had been physically examined by Customs authorities at the time of import and that there was no deliberate attempt to conceal any material fact. The company also highlighted that it had deposited the entire differential duty along with interest before issuance of the show cause notice, demonstrating the absence of any intention to evade duty.
Reasoning and Analysis
The Tribunal observed that tariff classification is often a matter of interpretation and belief and that differences in classification between the importer and the Department cannot automatically be treated as suppression of facts.
It noted that the appellant had voluntarily deposited the entire differential duty along with interest prior to issuance of the show cause notice. This conduct, according to the Tribunal, indicated a bona fide belief regarding the classification and description of the imported goods.
The coram of Judicial Member Binu Tamta and Technical Member Hemambika R. Priya further found that the goods had been physically examined by Customs authorities during import clearance. In such circumstances, the omission of specific descriptive details in the Bills of Entry could not be equated with wilful suppression aimed at evading duty. Relying on judicial precedents, the Bench reiterated that invocation of the extended limitation period requires proof of deliberate misstatement or suppression with intent to evade duty. Mere misclassification or interpretational disagreement regarding tariff entries does not satisfy this requirement. The Tribunal also referred to its earlier decision in a classification dispute involving Benetton India, where it had similarly held that interpretative errors in classification cannot justify invoking the extended limitation period.
Decision
The Tribunal held that the extended limitation period under Section 28(4) of the Customs Act had been wrongly invoked as the case involved an interpretational dispute rather than deliberate suppression of facts. It consequently set aside the confiscation under Section 111(m) and the penalty imposed under Section 114A. Accordingly, the ₹3.47 crore customs duty demand against Myntra Jabong India Pvt Ltd was quashed and the appeal was allowed.
In this case the appellant was represented by Advocates Kishore Kunal, Ankita Prakash and Anuj Kumar. Meanwhile the respondent was represented by Mr. Shiv Shankar (Authorised Representative).
