Exported Goods Misdeclared as “Natural Abrasive Grain” Instead of Restricted “Natural Garnet”: CESTAT upholds DGFT Policy Violation [Read Order]

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Tirupati Enterprises misdeclared restricted goods as general abrasives to circumvent export restrictions under DGFT policy and upheld the penalties imposed.

Tirupati Enterprises, the appellant, exported goods described as “Natural Abrasive Grain” under tariff heading 25132090 through five shipping bills filed in July and August 2019. Upon laboratory testing by the Central Revenue Control Laboratory (CRCL), the goods were confirmed to be “Natural Garnet (Almandine),” which falls under heading 25132030.

As per DGFT Notification No. 26/2015-20 dated 21.08.2018, Natural Garnet is a restricted item that can only be exported through the government-designated agency, M/s Indian Rare Earths Limited.

The customs department alleged misdeclaration and imposed a redemption fine of Rs. 10,00,000 and a penalty of Rs. 42,00,000. The adjudicating authority and Commissioner (Appeals) upheld these charges. The appellant challenged the order before CESTAT, arguing that their product was inland garnet used as abrasive and not subject to the DGFT notification, which they claimed applied only to beach sand minerals.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The revenue argued that the classification change from restricted to unrestricted heading after the DGFT notification showed deliberate misdeclaration.

The two-member bench comprising Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) observed that the CRCL report confirmed the goods were Natural Garnet and not general abrasives. It found that the DGFT notification applied to all forms of garnet, regardless of source.

The tribunal also observed that the appellant’s change in classification from 25132030 to 25132090 after the notification indicated an intent to circumvent the export restriction. It further held that reliance on internal communications not mentioned in the show cause notice did not alter the fact that the export violated DGFT policy.

The tribunal upheld the reclassification under 25132030 and confirmed that the goods were rightly considered restricted under DGFT policy. It sustained the redemption fine of Rs. 10,00,000 and the penalty of Rs. 42,00,000. The appeal was dismissed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates