AA Relied On Wikipedia Instead Of Expert Evidence To Classify Epoxy Resin Under DFIA: CESTAT Quashes Demand [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that reliance on Wikipedia instead of verified expert evidence to determine the classification of imported goods is unsustainable.

Lasco Chemie Pvt. Ltd., the appellant, imported epoxy resin under Duty-Free Import Authorization (DFIA) licences purchased from leather exporters based in Kanpur. The Directorate of Revenue Intelligence (DRI) alleged that the company misused the DFIA licences by declaring epoxy resin as impregnating resin, which was the only resin permitted for import under those licences.

A show cause notice was issued demanding customs duty of Rs. 33,29,154 along with penalties and proposing confiscation of the goods. The adjudicating authority confirmed the demand and imposed penalties, and the Commissioner (Appeals) upheld the decision. Aggrieved, the importer and its director, Shri Amit Kumar Jain, filed appeals before the CESTAT.

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The appellant’s counsel argued that epoxy resin was classifiable under Customs Tariff Heading 3907 and was covered under the DFIA licences. The counsel submitted that the Central Leather Research Institute (CLRI) report relied upon by the department was invalid because CLRI had not tested the appellant’s samples. They also produced a test report from the Central Revenue Control Laboratory (CRCL) in another case, where CRCL certified that epoxy resin finds use as an impregnation resin.

The counsel further argued that the exporters’ statements recorded under Section 108 of the Customs Act were not admissible as evidence since they were not verified in accordance with Section 135B and that the goods were properly examined and cleared by customs officers, and no misdeclaration had occurred.

The revenue counsel argued that epoxy resin was not an impregnating resin used in leather processing and that the CLRI report clearly supported this finding. It was contended that the appellant had misdeclared the goods to claim DFIA benefits and that the denial of exemption and imposition of penalties were justified.

The two-member bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) examined the records and observed that the adjudicating authority had placed heavy reliance on Wikipedia to conclude that epoxy resin and impregnating resin are distinct materials.

The tribunal observed that Wikipedia is an open-source platform subject to public editing and cannot be treated as expert or authoritative evidence for determining classification. It pointed out that while the CLRI’s letter stated that epoxy resin was not used in leather finishing, the CRCL’s test report in another case confirmed that epoxy resin finds use as an impregnation resin.

The tribunal explained that no samples of the appellant’s imported goods were tested by either CLRI or CRCL. In the absence of expert testing, the department failed to establish that the imported epoxy resin was not impregnating resin. The tribunal observed that findings based on assumptions and online sources without proper verification cannot sustain a duty demand.

The tribunal set aside the Commissioner’s order, holding that the demand, confiscation, and penalties were unsustainable. The appeals were allowed with consequential relief.

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