Disagreement With Dept Regarding Classification of Goods for Customs Duty Levying Not Amount to 'Suppression of Facts': Delhi HC [Read Order]
The bench found that there was no concealing of the pertinent information because the Petitioner fully disclosed the items it imported, which raised doubts about the classification of the goods
![Disagreement With Dept Regarding Classification of Goods for Customs Duty Levying Not Amount to Suppression of Facts: Delhi HC [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/Customs-Duty-Disagreement-With-Dept-Goods-for-Customs-Duty-taxscan.jpg "Disagreement With Dept Regarding Classification of Goods for Customs Duty Levying Not Amount to Suppression of Facts: Delhi HC [Read Order]")
The Delhi High Court has held that merely because there is disagreement between the Customs department and a trader regarding the classification of the latter's goods for the purpose of levying duty, it does not mean that the trader has indulged in 'suppression of facts' from the Department. Ismartu India Pvt. Ltd, the petitioner challenged the Show Cause Notice dated 01 September...
The Delhi High Court has held that merely because there is disagreement between the Customs department and a trader regarding the classification of the latter's goods for the purpose of levying duty, it does not mean that the trader has indulged in 'suppression of facts' from the Department.
Ismartu India Pvt. Ltd, the petitioner challenged the Show Cause Notice dated 01 September 2023 issued under Section 28(4) of the Customs Act, 1962 by Respondent No. 2 and seeks a suitable writ quashing the same relying on various grounds inter alia, as follows:
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The impugned SCN dated 01 September 2023 is a subsequent (second) SCN and since a prior SCN, dated 25 July 2023, was already issued under Section 28(1) of the Act, the subsequent SCN (the impugned SCN‖) is bad in Law and not maintainable particularly since the previously issued SCN dated 25 July 2023 was on a similar factual matrix relating to the importation of similar goods. S
The importer herein imported the parts designed and manufactured by a foreign entity as per their contracts resulting in merely assembling the parts at the site. Therefore, the operation undertaken by them can be termed a simple assembly operation falling within the scope of Rule 2(a) of the Interpretative Rules. The imported goods can be used to assemble a mobile device that can be used to communicate or can also be used as a different layout to create a complete set without a camera module.
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Ismartu contended that it was merely importing mobile phone components. As a result, it assigned Customs Tariff Heading 85171219 to its goods. The Department said that Ismartu had misclassified its products by failing to disclose that they were entire mobile sets. In order to classify the items under CTH 8517140 and recoup differential duty, it argued that Ismartu had willfully omitted important information about the description of the contested commodities from the Bills of Entry.
However, the petitioner argued that an inaccurate classification or declaration made by it could not serve as the foundation for a SCN under Section 28(4) because it would not satisfy the requirements set forth by the section with regard to any alleged (a) collusion, (b) willful misrepresentation, or (c) withholding of material information.
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The importer has been found to have incorrectly classified the products by concealing the fact that they are a complete mobile set in CKD condition. The importer purposefully concealed the facts and avoided paying the applicable customs duty, which led to the short payment of Rs. 5,30,87,373/-, as shown in Annexures A and B. This is recoverable under Section 28(1) of the Customs Act, 1962, along with interest under Section 28AA of the act, as the investigation agency's prompt action brought to light the aforementioned fact ibid.
The High Court agreed that for the impugned SCN to survive, it would have to independently satisfy the requirements of Section 28(4). However, from the records, the Court noted that Ismartu had disclosed all the relevant invoices and other important details to the Department in support of the classification of its goods. The Court further noted that the Department also got the goods examined by a Chartered Engineer for his opinion. The Chartered Engineer gave his opinion and followed it up with a further opinion.
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The court said that reflected that there existed ambiguity in the mind of the Department with respect to the correct classification of the goods, which itself negates any 'suppression'.
A division bench of Justices Yashwant Varma and Harish Vaidyanathan Shankar observed that there was no concealing of the pertinent information because the Petitioner fully disclosed the items it imported, which raised doubts about the classification of the goods. According to Section 28(4), the Respondents have not used "collusion" or "wilful misstatement of facts" to bolster the SCN's argument. However, since all of the imported items with their descriptions were in front of the Respondent and the whole dispute centered on their classification, it is clear that there is no "collusion" and that there cannot even be a "wilful misstatement of facts."
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While allowing the appeal, the Court also cautioned the Department against mere incantation of the provisions of the Section without any substance to back it up and quashed the impugned SCN.
To Read the full text of the Order CLICK HERE
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