Legal principle

Interest on a levy under the Customs Tariff Act (such as the IGST under Section 3) can be demanded only if the legislature has specifically provided for it, so the substituted Section 3(12) of the Customs Tariff Act, 1975 renders interest leviable only from 16.08.2024 and not on earlier imports; likewise, a residuary heading cannot be applied where the goods are specifically covered under a particular heading.

Court decision

The Tribunal largely allowed the appellants. It set aside the impugned classification of nine sensors and declared the appellants' classifications; set aside the Section 28 reclassification of 36 sensors on which no differential duty was demanded (without precluding classification at the assessment stage of subsequent Bills of Entry); remanded the FTA exemption claims for four goods to the Original Authority for fresh consideration within 90 days; set aside the Rs. 18,474 differential IGST demand on two goods; accepted the limitation plea for four sensors and set aside the extended-period demand as time-barred; set aside all confiscation, fine and penalties on the appellants and co-appellants; and held that no interest is payable on the IGST portion for imports prior to 16.08.2024, with consequential relief to the appellants.

Facts

M/s. Toyota Kirloskar Motors Pvt. Ltd. (TKML), the Indian subsidiary of Toyota Motor Corporation, imported various automotive sensors (Exhaust Gas Temperature, Water Temperature, Nitrogen Oxide, Oxygen and Air-Fuel Ratio sensors) from its group companies through various ports and ICDs. The DRI, Bangalore Zonal Unit, investigated alleged mis-declaration/mis-classification, finding that identical components with the same part numbers had been classified under different Customs Tariff Headings at different times, allegedly causing short-payment of duty. A Show Cause Notice dated 27.09.2023 covering January 2019 to June 2023 proposed reclassification, recovery of duty with interest, and penalties under Sections 112(a), 114A and 114AA of the Customs Act, 1962. The Commissioner of Customs (Import), Chennai-II, by OIO No. 108828/2024 dated 30.08.2024, confirmed differential duty of about Rs. 53.77 crore, dropped Rs. 1.38 crore, and imposed confiscation, fine and penalties, prompting these appeals by the company and two of its officials.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 128, Customs Act, 1962 — Appeal to Commissioner (Appeals)
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 3(12), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 9A(8), Customs Tariff Act, 1975 — Anti- dumping duty on dumped articles
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 129D, Customs Act, 1962 — Powers of Committee of Principal Commissioner of Customs or Chief Commissioners of Customs or Principal Commissioner of Customs or Commissioner of Customs to pass certain orders
• Section 3(12), Customs Act, 1962 — Classes of officers of customs