In a recent ruling, the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) in Kolkata quashed the Revenue’s attempt to reclassify a consignment of imported goods and upheld that the imported items were correctly classified as “bed sheets.”
The case arose from a consignment imported by the appellant/ assessee, M/s. Punctual Sales Pvt. Ltd. The consignment, declared as “100% polyester bed sheets” in the Bill of Entry, contained 22,176 pieces. However, the Revenue contended that the consignment was actually “polyester woven fabrics” and should be classified under Customs Tariff Heading (CTH) 5407, which covers synthetic filament woven fabrics. The assessee had classified the goods under CTH 6304, which pertains to made-up textile articles such as bed sheets.
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To support its stance, the Revenue drew samples from the consignment and, following its investigation, issued a show cause notice alleging mis-declaration of the goods. As a result, the consignment was confiscated, and a penalty was imposed, along with a demand for customs duty amounting to ₹56,80,751, a redemption fine of ₹2,50,000, and a penalty of ₹1,00,000 under Section 112(a) of the Customs Act, 1962.
The assessee challenged the decision, arguing that the goods were indeed bed sheets, as declared. It was pointed out that the imported items were large sheets, roughly 14 feet by 7 feet, loosely stitched along two sides to facilitate separation into individual bed sheets. They argued that the goods were intended for use as bed sheets, with traders doing the final stitching if required, and that the test reports produced by the Revenue were inconclusive, failing to definitively prove that the goods were woven fabrics instead of bed sheets.
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The appellant further cited a previous CESTAT ruling involving a similar dispute over imported polyester quilt covers, where the tribunal had ruled that such loosely stitched items should be classified based on their intended use, not as mere fabrics. The company stressed that the size and nature of the product left no doubt that they were bed sheets.
During the hearin before the tribunal, the Revenue maintained that the goods lacked the necessary characteristics of “made-up” articles, as defined under Section XI, Note 7 of the Customs Tariff Act. Specifically, they argued that the goods did not meet the requirement of having finished edges, as no hemming or stitching was present on all sides.
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However, after reviewing the evidence and prior rulings, the bench of Mr R Muralidhar and Mr Rajeev Tandon disagreed with the Revenue’s stance. The tribunal noted that although the goods lacked complete stitching or hemming, their size and intended use clearly indicated that they were bed sheets, not mere fabric. They referenced a common parlance test, stating that the goods would be understood by consumers as bed sheets in the market, which was further supported by statements from the assessee- company’s proprietor. Additionally, the tribunal found that the test reports were inconclusive and did not definitively classify the goods as woven fabrics.
In its judgment, the tribunal ruled that Note 7(b) of Section XI, which allows certain textile products to be classified as “made up” if they only require separation by cutting or dividing threads, applied to the imported goods. Based on this, the tribunal upheld the classification of the goods under CTH 6304, as originally declared by the importer. The tribunal rejected the Revenue’s attempt to reclassify the goods under CTH 5407, dismissing the appeal and confirming that no penalty or redemption fine was due from the respondent.
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