CESTAT Kolkata- Lemoneez is rightly classifiable under CTH 20093100

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, delivered a landmark decision on 8th May 2025, resolving a long-standing customs classification dispute involving Dabur India Limited. The case revolved around the classification of “Lemoneez,” a lemon juice concentrate imported from Nepal.

Background of the Dispute

Dabur India Ltd., represented along with their Custom House Agent (CHA), had classified Lemoneez under Tariff Item 2202 99 20, attracting IGST @12%, while importing from Nepal. However, a revenue alert triggered by DGARM alleged underpayment of duty and contended that the product was incorrectly classified. The Department claimed the product should fall under Heading 2106, which attracts IGST @18%. A Show Cause Notice followed, culminating in the Order-in-Original dated 29.11.2024 by the Commissioner of Customs (Preventive), Patna, confirming a differential tax demand of ₹1.05 crores, interest, and penalties.

Key Legal Contentions by the Appellant

Dabur India Ltd. challenged the classification and argued that:

Lemoneez is reconstituted lemon juice made by blending frozen lemon concentrate with treated water, followed by pasteurization and addition of minimal preservatives.
The product closely mimics natural lemon juice and is used in food preparation, not directly consumed like a beverage.
As per the HSN Explanatory Notes and Customs Tariff Heading 2009, such reconstituted fruit juices fall under CTH 2009 31 00, not under Heading 2106 meant for soft drink concentrates or other edible preparations.
There was no mens rea or intent to evade tax, especially as the applicable GST rates for 2202 and 2009 were the same, resulting in no revenue loss.

Tribunal’s Findings

CESTAT carefully evaluated the classification criteria and processes involved:

It held that the method of manufacturing Lemoneez aligned with processes envisaged under HSN Explanatory Notes to Heading 2009, including pasteurization and preservation.
The Tribunal rejected the Department’s claim that the product’s usability in food preparation converts it into an edible preparation under Heading 2106.
It observed that classification should be based on composition and processing, not end-use.
The Tribunal also rejected the Revenue’s assertion that the product was a soft drink concentrate, stating that such concentrates are typically flavored syrups or preparations with added citric acid and synthetic sweeteners, which Lemoneez does not contain.

Relief Granted

In a strongly reasoned order, the Tribunal:

Allowed both appeals and set aside the demand for differential IGST.
Held that Lemoneez is correctly classifiable under CTH 2009 31 00.
Quashed penalties imposed on Dabur India and its CHA, citing lack of suppression or fraudulent intent.
Set aside the order of confiscation and redemption fine, citing precedent that once goods are cleared for home consumption, such actions are untenable.

Legal Significance

This ruling reinforces the principle that classification must be based on objective parameters, not speculative inferences based on usage. It also reiterates judicial restraint on imposing penalties where no malafide intent or revenue loss is established, particularly under the self-assessment regime.

Conclusion

The Dabur India ruling by CESTAT Kolkata is a significant victory for importers, particularly those dealing in natural food products, and will likely influence future disputes over product classification under the Customs Tariff Act. The detailed reliance on HSN Explanatory Notes, statutory interpretation principles, and judicial precedents adds robust clarity to a complex classification landscape.

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Source: CESTAT Kolkata

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