CESTAT Rejects Revenue’s Appeal, Upholds Classification of ‘Martech DHA’ as Final: No Justification for Re-litigation, Rules Tribunal [Read Order]

In a recent ruling, the Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) dismissed an appeal filed by the Revenue against Vasta Biotech Pvt. Ltd., holding that the classification of the product “Martech DHA” had already been settled in an earlier binding judgment.

The appeal, filed by the Principal Commissioner of Customs, Chennai Air Cargo Commissionerate, challenged an order passed by the Adjudicating Authority, the Principal Commissioner of Customs, Chennai, which had dropped duty demands raised against the importer on the basis of the product's classification. The department alleged that the adjudicating authority failed to determine the classification independently and wrongly relied on a prior CESTAT ruling.

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Vasta Biotech Pvt. Ltd., an importer based in Chennai, had previously faced classification disputes over the product “Martech DHA,” a nutritional supplement. The issue revolved around whether the product should be classified under Customs Tariff Item (CTI) 1302, 2106, or 2916.

In July 2024, CESTAT ruled in Final Order No. 40930/2024 that “Martech DHA” is rightly classifiable under CTI 2916 1590. The Revenue had accepted that ruling and formally communicated it to the importer via a letter dated November 12, 2024.

Despite this, the Revenue filed a fresh appeal against a subsequent adjudication on the same product and identical facts. The Commissioner, in this order, had dropped the demands raised under two show cause notices, citing the settled classification issue and invoking the doctrine of constructive res judicata.

The Revenue challenged the Commissioner’s order on the grounds of Non-determination of the classification on merits and the Non-applicability of case laws cited in the adjudication. Terming these objections “strange,” the Bench observed that the classification of the product had already been conclusively determined by the Tribunal and accepted by the department. Hence, there was no scope to reopen the matter.

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The Bench comprising M. Ajit Kumar (Technical Member) and P. Dinesha (Judicial Member) heard the matter and rejected the Revenue’s contention, dismissing the appeal in its entirety. The Tribunal took strong exception to the Revenue’s attempt to re-litigate a settled issue.

Quoting from the Supreme Court’s ruling in Union of India v. Kamalakshi Finance Corporation, the Bench emphasised that appellate orders bind subordinate officers and cannot ignore or reinterpret decisions of higher authorities, even if they have reservations.

The bench noted that in this particular case, there were no reservations at all and that the revenue accepted the earlier CESTAT ruling without challenging it before the Supreme Court. The court asserted that in that case, the case had attained its finality.

Referring to the doctrine of res judicata, the Bench cited Dr. Subramanian Swamy v. State of Tamil Nadu to assert that litigation must come to an end and parties cannot be subjected to repeated litigation on the same issue. “Even an erroneous decision, if not challenged, becomes final between the parties,” the Bench observed.

The Tribunal concluded that once the classification was settled, and no appeal was preferred against it, the adjudicating authority was correct in dropping the demands. The objection that case laws were wrongly relied upon became “redundant,” as the finality of the Tribunal’s earlier order rendered all subordinate discussion academic. As a result, the tribunal dismissed the appeal filed by the Principal Commissioner of Customs and confirmed the relief granted to the assessee.

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