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Dated: 18.02.2025

CESTAT Delhi clarifies key aspects of customs classification, duty assessment, and exemptions with regards to parts import by Automobile makers

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi delivered a ruling on February 17, 2025, in Customs Appeal No. 51790 of 2022, concerning a customs duty dispute between M/s. Battre Electric Mobility Pvt. Ltd. and the Principal Commissioner of Customs, ICD Tughlakabad (Import), New Delhi.

Background of the Case:

• Battre Electric Mobility Pvt. Ltd. imported spare parts of e-scooters and classified them under Customs Tariff Item (CTI) 8708 99 00 (automobile parts), attracting 15% Basic Customs Duty (BCD).
• During a post-clearance audit, customs authorities reclassified the imports under CTI 8711 60 20 (complete electric scooters in disassembled form), which attracted a 100% BCD.
• The customs department demanded a differential duty of ₹55.2 crore (₹5,52,09,099), along with a penalty of ₹50 lakh, citing misclassification and duty evasion.

Key Issues Addressed:

1. Classification of Imported Goods:

• The customs department argued that Battre Electric imported all essential components of e-scooters in equal numbers, making them complete e-scooters in disassembled form under CTI 8711 60 20.
• The company countered that the shipments contained only spare parts, not full e-scooters, and that several critical components, like batteries, were procured locally.

2. Assessment of Multiple Bills of Entry Together:

• Customs authorities combined 26 different Bills of Entry to justify their reclassification.
• CESTAT ruled this approach invalid, stating that each Bill of Entry must be assessed independently as per the Customs Act.

3. Applicability of Exemption Notification:

• The company argued that even if the reclassification under CTI 8711 60 20 was correct, BCD should still be 15% due to exemption under Notification No. 50/2017-Cus (as amended).
• The customs department denied this exemption because Battre had not claimed it in the Bill of Entry.
• CESTAT ruled in favor of the appellant, stating that unconditional exemptions must be granted even if not explicitly claimed.

4. Confiscation & Penalty Under Section 111(m) & 112(a)(ii):

• Customs officials imposed confiscation and penalties for alleged misclassification.
• CESTAT overturned the decision, ruling that classification disputes do not justify confiscation or penalties unless there is deliberate misdeclaration.

Final Judgment by CESTAT:

• CESTAT set aside the customs demand of ₹55.2 crore and the ₹50 lakh penalty.
• Reaffirmed that each Bill of Entry should be assessed separately.
• Declared that unconditional exemptions cannot be denied for procedural lapses.
• Ruled that misclassification does not automatically imply fraud or misdeclaration.

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Source: CESTAT Delhi

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