Classification Of SEZ Supplies as Dutiable Goods For Personal Use Unsustainable: CESTAT Sets Aside ₹82.78 Cr Demand on Dell India [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai Bench has set aside a demand of ₹82.78 crore observing that the supply of laptops, desktops, and monitors from a Special Economic Zone (SEZ) to Domestic Tariff Area (DTA) customers cannot be considered as dutiable goods for personal use.

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The appellant Dell International Services India Pvt. Ltd engaged in manufacturing and sale of IT products through their SEZ unit at Tamil Nadu had supplied goods to individual customers within DTA by paying IGST.

The Department after the audit had raised a case of misclassification, alleging that such goods ought to have been classified under CTH 9804 which relates to goods imported for personal use.

The assessee’s contention was that goods falling under CTH 8471 and 8528 attract basic exemption on payment of basic customs duty and therefore cannot be considered dutiable goods.

Further,It was also contended that IGST is different from customs duty. Sales to customers in the ordinary course of business cannot constitute personal use imports.The Department’s contention was that SEZ to DTA clearances constitute deemed imports. Since the goods were supplied to individuals, they constitute personal imports under CTH 9804.

The Tribunal comprising P. Dinesha (JudicialMember) and Vasa Seshagiri Rao (Technical Member) held that in order to classify under CTH 9804 three circumstances must be satisfied which are that the goods must be dutiable, imported, and intended for personal use.

The Tribunal has further observed that inasmuch as the goods attract nil customs duty or exemption, the same cannot be classified as dutiable goods. The levy of IGST does not alter the position in any way.

Furthermore, the Bench has also clarified that personal use does not include supplies to customers in the course of business. The Tribunal has also not accepted the Department’s contention of customers being importers and has held that classification has to be determined at the time of import, not at the time of consumption.

Accordingly,the Tribunal has also held that the Department has not been able to prove misclassification which led it to allow the appeal.

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